How To Start a Captive Insurance Company Program

Captive Insurance Company programs can help reduce operating costs and allow business owners to take more control of  their bottom line. For most, insurance for transportation companies are procured in a traditional manner. The business (insured) pays a premium to the insurance company, and the insurance company pays claims. Deductibles are sometimes added to reduce premium.  Deductibles allow the insurance company to charge less premium and the insured takes on some of the risk.

However, many don’t know about a third option to manage their transportation business, which is a Captive Insurance Company Program. Below are our Top 5 Reasons to consider a Captive Insurance Company Program through American Business Insurance.

1.      Personalized Insurance Coverage

One size does not fit all when it comes to insurance. This is especially true when you are a large company trying to meet the requirements of several entities. Whether that be municipalities, entities you contract with (other businesses) or multiple state requirements. Utilizing a Captive Insurance Company Program through ABI can help bring down the cost of premiums and provide your company with more control within the underwriting process. An example of this is hiring drivers, adding vehicles and paying claims. All of these make up the traditional structure of an insurance policy. With a Captive, your business can curate these items instead of being at the mercy of the insurance company.

2.      Reduced Operating Costs and Improved Cash Flow

For most businesses, premiums are paid to the insurance company who then pays claims. However, a captive insurance company is a strong option when a business does not incur claims or the amount they pay in premiums outweigh the claims that are being paid. Setting up a Captive Insurance Company Program will allow your business to be insured and pay claims out of your own pocket. This is beneficial because it rewards a strong safety culture and increases the overall profitability of your business.

3.      Investment Income to Fund Losses

The main difference between a Captive Insurance Company Program vs. a traditional insurance policy (with or without a deductible) is that the money collected and held by the Captive Insurance Company Program is not taxed. This means, the business can take the revenue they generate and give to the captive to pay claims, tax free. Captives aren’t for everyone; it takes a large risk with substantial cash flow to make it work. But if your business fits the criteria, it is truly the most freeing insurance option out there.

4.      More Control Over Claims Paid

As a broker, we hear regularly from clients that they don’t agree with a claim being paid. Whether that be for the amount that was paid, the reason or how the claims were handled in court – taking control over the claims (losses) your business incurs is vital to any successful business. No one knows more than you how your business works. Working with American Business Insurance to set up a Captive Insurance Company Program for your transportation company will link you together with A Rated paper and top notch, technology driven claims TPA. Working with the right insurance companies and claims adjusters is key to a profitable Captive Insurance Company Program.

5.      Negotiating Leverage with Underwriters

For those who have ever had trouble with their insurance company on adding vehicles, drivers or providing additional coverages know first hand Underwriters love to say NO. With a Captive Insurance Company Program, many of the underwriting decisions are left up to the business – not the carrier. Since the business is taking on the majority of the risk, they are free to add a younger driver if they feel that person is qualified. They can add a unit type that might otherwise not have been allowed under a traditional policy (higher seating capacity, electric or golf cart type units). With reinsurance options available, the program can be set up with a Stop Loss to protect your business. This structure allows your business to reduce costs, but still be protected by knowing you won’t lose your business to bankruptcy should a Shock Loss or Catastrophe Claim occur.

Captive Insurance Program with American Business Insurance

For years the past 35 years, American Business Insurance has assisted those in the Livery, Shared Economy, On Demand Delivery and Peer to Peer/ Business to Peer Car rental space set up Captive Insurance Programs. We partner with financially stable, technology driven carriers who want your business to succeed. We can assist in reviewing your current underwriting procedures and reduce costs greatly with a Captive Insurance Company Program.

With ABI, you get more than just an insurance program. You get a new business partner that will make sure your Captive Insurance Company Program is funded properly, prevents your business from bankruptcy due to severe claims and provide tools through our online portal to keep your business up and running.

Have questions or interested in learning more? Please contact us to discuss options. Brokers are available by phone during our regular business hours of Monday – Friday, 8 am to 5 pm PST. Or, contact us via email by clicking here.

Written by Laura Loftus who is the Executive Broker/Sales and Marketing Manager at American Business Insurance Services, Inc. She has more than 10 years of experience insuring business in the For-Hire, Livery, Transportation Network Company, On Demand Delivery & Shared Economy industries.