Have you recently been denied an insurance claim? Are you now looking into options when it comes to choosing a new insurance company? If this sounds like your situation right now, you might want to look into a captive insurance company.

Keep reading to learn more about what a captive insurance company is and who uses them to see if it’s a better fit for you.

What Is a Captive Insurance Company?

A captive insurance company is 100% owned and controlled by those it insures. The reason it is created is to make sure that the risk of its owners becomes less. Those that are being insured can benefit from the captive insurer’s underwriting profits.

Who Utilizes Captive Insurance?

People that want to put their own capital at risk by creating their own captive insurance company. Those that buy captive insurance have to invest their own financial resources.

They will have ownership in the company. Plus they will benefit from the insurance companies’ profitability.

Also, those that would rather work outside of the commercial insurance marketplace prefer captive insurance over traditional insurance. With traditional insurance, the insured is protected from the insurer. The main goal is to restrict what an insurer can and cannot do.

People that are ok with higher risks and bigger rewards choose captive insurance any day. They prefer this over having to pay to use the capital of commercial insurers. Because of not going the traditional route those that have captive insurance are known for being part of an alternative risk transfer market (ART) or an alternative market.

Fewer Government Regulations

A reason people prefer captive insurance over traditional insurance is to not deal with government interference and regulations. In most industrialized countries there are rigorous insurance regulations to adhere to.

Captive companies have the freedom to insure the risks it wants. It is able to customize the policy terms and conditions as needed. This, in turn, leads to improving loss control efficiency.

Price Stabilization

Because captive insurance is owned by the people putting up their own money those that are insured and risking their finances have the ability to price the coverage accordingly without huge markups.

The price volatility is almost non-existent when compared to conventional insurance companies. Traditional companies set their prices relative to broad industry classifications. In doing this they fail to reflect key differences in loss experience between hundreds if not thousands of those insured.

Captive or Not Captive: That Is the Question

Now that you are aware of what a captive insurance company is and the benefits you can make an informed decision whether to go with a captive insurance company or not. Make sure that you research the company to help you choose the best company for your specific needs.

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