When is captive insurance a good fit: Q&A with Stephani Manning
In this Q&A conversation with BenefitsPRO, Stephani Manning, senior vice president of Innovative Captive Strategies, discusses the ins and outs of captive insurance and when and where it's the best fit for an organization.
What are the advantages of captive insurance?
The core advantage of captive insurance is that it generally allows organizations to take greater control over health insurance expenses. This is especially important today as prices continue to inflate. In essence, instead of “rolling the dice” each year in the volatile traditional insurance market, a group captive can provide long-term stability and the opportunity to drive down premium costs. Through control, stability and opportunity, captive insurance has numerous ways of providing considerable value.
Why do certain companies choose to seek out captive insurance over others?
First, it’s important to understand that a “group captive” is just that — a group of companies who partner together to form their own insurance company. Captive insurance provides ownership over one of the largest business expenses — health insurance — while sharing resources with other like-minded employers who can often integrate best practices on health and wellness initiatives to enhance their companies collectively.
From a broker’s point of view, how is the captive process initiated?
The course of choosing captive insurance may seem like a difficult process, but it doesn’t have to be. If a company is currently in a fully insured or self-insured structure, you already pay a fixed amount of premium to the insurance carrier. The difference is that your premium rates fluctuate with the market rather than being based on your actual claims performance. With captive insurance, members are involved in the claims-handling process, allowing them greater guidance, transparency, and control.
How does captive insurance help profit growth?
By sharing risk with other companies, captive insurance members benefit from their positive claims’ performance years, yet have stability when claims tend to be more turbulent and uncertain. This allows for underwriting profit in good years, making an organization’s insurance strategy an opportunity instead of an expense.
What are factors for companies determine if they’re a good fit for captive insurance?
While the advantages are significant, it’s important to determine if a company is a good fit for captive insurance. Generally, there are six areas to consider when doing do so. An organization fit for a captive:
- Typically has a “good” claims performance
- Embraces “risk-for-reward” philosophy
- Desires control over business decisions
- Has an entrepreneurial spirit
- Has a consistent focus and commitment to improving employees’ health
- Has 50 or more enrolled employees
Any advice for companies who may be hesitant to make this change?
In all, those who are a great fit for a captive are committed to making health and wellness a priority in their business and aren’t afraid to do insurance differently. By viewing health insurance as a long-term business strategy rather than an annual expense, you can see the many rewards captive insurance can provide.
As Senior Vice President of Innovative Captive Strategies, Inc., Stephani Manning leads the Employee Benefits captive division, where she is responsible for educating, growing and managing existing employee benefits group captives.