If you look around the web for information about alternative structures for your agency’s Workers’ Compensation program, you’ll find plenty of information extoling the virtues of captives as a viable and creative option. Those posts will explain what a captive is and the possible financial benefits of captives, however, what you may not find is something explaining why members of captives have successful and rewarding experiences in these programs.
Members usually improve upon their already superior claim results and can increase their growth and profitability from being in a captive as a result of:
Peer Support, Mentorship and Partnership – At its core, a captive is a re-insurance company owned by like-minded employers. Members benefit from other members’ successful performance. What works for one, will likely work for others, so shared ideas and experiences lead to improvements in your own organization. Brainstorming and problem solving is accomplished at captive meetings and continued year-round outside of formal meeting formats.
Additionally, business opportunities for members arise as a result of networking with like-minded agency owners. Members create partnerships for the purpose of expansion of customer coverage and developing prospect opportunities due to niche expertise or geographical coverage, acquisition/sale opportunities, and other partnerships develop.
Enhanced Risk Management and Safety – Members gain access to risk management resources from the reinsurance company, captive manager, and if utilizing the right broker, from their broker’s specialized safety team. In addition to board meetings, captives offer regular safety workshops where members learn from staffing safety experts. These workshops are usually attended by agency owners, claim directors, and safety/risk managers.
The most impactful way to control costs is to prevent injuries. Captive members are typically better at prevention than others because of their continued process improvement.
Enhanced Claim Management – Losses are inevitable, so hiring the right partner to administer claims is key to controlling costs. Captives give members the ability to choose the right third-party claim administrator (TPA). The captive manager and broker provide continuous oversight for the TPA’s performance and the members’ experiences. Issues are addressed proactively and typically corrected before they become endemic.
Broker Support – If you choose the right insurance broker as your captive representative, that broker will have staffing and captive expertise. This expertise can further enhance your experience with additional risk management best-practices, access to staffing-specific resources, claim oversight and advocacy, and financial planning and modeling.
Those fortunate enough to be members of a captive can often times have a much better and more stable insurance experience than those that are not. We’ve seen this with our clients. Since joining a captive, our staffing captive-member clients have experienced:
- A 12% reduction in loss rates
- Decrease of 15% in premium
- Marsh McLennan Agency’s (MMA) client’s average loss rate is 15% below that of the general captive population.
A captive is not the answer for everyone, but for many it does provide a stable, rewarding, and profitable experience. Contact your MMA advisor today to determine if a captive could be a solution to your business.
