In a health insurance market beset by escalating healthcare costs and compliance requirements, captive insurance—a group health plan wholly owned and controlled by its self-insureds—is designed to bypass corporate insurance companies, lower coverage costs, and fine-tune coverage.
But what are the benefits of captive insurance compared to a traditional plan? Read on as we explore four reasons why captive insurance is an advantageous option for parent companies looking to take control over their finances, risks, and services.
#1 Increased Customization of the Captive Plan’s Benefits Design
Insurance plans within the commercial market often provide umbrella coverage. In other words, it’s designed for the average person, not the individual.
With captive insurance, owners have greater flexibility to tailor coverage to match their unique needs and risk tolerance profile. The owners making up the captive, not the insurance company, set the plan’s benefit design, including the policy terms and conditions.
This type of employee health insurance plan can cover emerging risks and fill insurance gaps. Or, a captive gives the owner the freedom to carve out key pieces of an insurance plan that they deem unnecessary or superfluous.
#2 A Better Employee Benefit Programs
The ability to design an insurance plan that matches the specific coverage needs of a parent company and its affiliates allows for superior employee health coverage and employee benefits packages. By bringing employee benefits plans into a captive, employers can:
- Offer more competitive health care options during recruitment
- Retain employees who are more satisfied with their coverage
- Foster a healthy workforce
- Lower claims experience and costs
- Enjoy exceptional ROI from their benefits
Because group risks are shared, individuals across all strata of a business are more motivated to embrace a long-term risk management strategy.
#3 Greater Control Over Risk and Risk Financing
Captive insurance is especially advantageous to companies that have robust risk management policies and a strong claims history. As the Insurance Risk Management Institute (IRMI) notes, “captives are an alternative risk transfer mechanism used to finance risk.”[1]
As such, companies have a better understanding of their risk profile than the traditional market. Therefore, instead of purchasing insurance at the lowest price available, businesses that proactively reduce their risk and exposure can take on greater levels of risk to capture underwriting profits.
If they can effectively control their losses, they’ll be financially rewarded since underwriting profits and gains are retained.
By controlling the type and level of risk a company retains, a captive can improve cash flow management and investment returns over time.
#4 Improved Visibility for Better Decision Making
Captives grant business owners greater transparency over real-time data regarding claims and expenses. You can centralize portfolio reviews surrounding:
- Claims data
- Types of service
- Medical diagnoses
- Provider usage
Similarly, components of premiums can be “unbundled” so that pricing and rates are visible from a granular perspective. This lets you see whether your risk management policies are having a direct impact on premiums or if adjustments need to be made.
Equipped with this increased awareness, knowledge, and accountability of risk, business owners can make strategic data-driven risk management decisions.
InCap®: Your Captive Insurance Solution
If you’re looking to take control, reduce costs, and balance your company’s risk, captives are the answer.
At Clark & Lavey, Hilb Group’s InCap® Solution is a healthcare captive program that distributes the profits between its member companies annually. With InCap®, you can control your plan’s benefit design, avoid unanticipated rate increases, and retain underwriting profits and investment income.
We also offer the lowest premium costs for employers and employees alike to ensure ample cost savings.
Tailor self-insured plans that check all the boxes with InCap®.