Are you looking for the best health insurance plan for your business and its employees?
While you could shop around for traditional policies, a growing number of companies have turned to an alternative insurance policy that seeks to bypass and disrupt the corporate insurance market.
We speak, of course, about captive insurance. If you want to know how captive insurance stacks up against traditional group health plans, this guide is for you.
Difference #1 — Who’s In Charge of the Plan
With a traditional insurance plan, a third-party company creates and controls the employee health insurance plan. They charge a premium and require that companies pay a deductible.
Those premiums pool with premiums from various other parties and their insured risks. If a covered risk is incurred, the insurance will at least partially cover the claim.
With a captive insurance plan, the insurance company is controlled and owned by its insureds. Typically, it will either be created as a subsidiary of the company, or several unrelated companies may join a group health captive insurance program to disburse the risk. In either case, the captive program acts similar to a traditional policy by:
- Issuing policies
- Processing claims
- Abiding by regulations and compliance requirements
- Filing income tax returns
- Creating profits
Difference #2 — Ease of Getting Started
Traditional insurance has low start-up costs since there are no formation fees, legal fees, or capitalization requirements. You simply shop around for the ideal policy from an already established entity. Then, once purchased, companies don’t need to worry about the daily operations of the insurance company.
Captives are more hands-on. Because they’re tailored toward a business and its specific risks, they often take longer to set up. In addition, there may be increased initial fees and funding requirements. That said, joining a group captive plan mitigates many of these early costs.
Difference #3 — Risk and Reward
With a traditional insurance plan, the insurance carrier takes on all of the risks. Insurance companies calculate the probability of risk according to the large pool of insured risks in order to set a premium price. As a result, they and their shareholders retain all of the profits no matter the number of claims (or lack thereof).
Additionally, premiums can increase because of historic loss or increased perceived risk.
Herein lies the most significant difference between traditional insurance vs captive insurance.
With self-insured plans, the owners of the captive company can decide whether or not to reserve or distribute the company’s profits. In exchange for the additional risk, you have the potential reward of:
- Reduced costs
- Underwriting profits
- Investment incomes
This is especially advantageous for companies that have strong risk management policies and a positive claims history. Businesses that are able to control their losses are financially rewarded.
Difference #4 — Customization and Flexibility
Traditional insurance plans are designed to cover as many people as possible. But these plans tend to be generic and their coverage can be limited to only certain types of risk.
On the other hand, captive insurance provides increased flexibility and customization. As the self-insured, you have more control over the coverage design. You can select the terms and tailor the benefits to align with your company’s specific business risks and employee needs.
According to Captive Insurance Times, the top three most prioritized emerging risks include:
- Business interruption following a cyber event
- Loss of reputational value
- Failure of operational resilience
Captive Insurance Solution with Clark & Lavey
Captives are an attractive alternative to traditional, fully-insured health insurance plans. With a captive group program, premiums aren’t fixed and profits can be distributed to member companies.
So, if you’re searching for a plan that lets you control your benefits design, avoid unanticipated rate increases, and retention of underwriting profit and investment income, Clark & Lavey’s InCap® Solution was made for you. InCap provides low premium costs for both employers and employees.
Are you ready to ditch traditional insurance plans for a modern solution? Contact us today.