Why Would You Place Your Insurance Through a Captive?

written by Michael Fragola, VP Business Development

Reason # 1 – Claim professionals that work for you!

If you currently write checks to an insurance company for Workers’ Compensation, Auto Liability or General Liability, you are supporting their claims unit.  In the event of a claim, the insurance company’s claim unit has some responsibility to protect your interests, but mostly the claims unit exists to protect the insurance company’s welfare.  This is not a slam on them – they’re in the business to make money and retaining the premiums you paid to them results in profit to them.

The captive model is a different world from your insurance carrier based claims experience.  Claims are reported to and managed by a Third Party Administrator (TPA).  The TPA is hired by (and can be fired by) the Captive and they are responsible to settle claims quickly, effectively and, whenever possible, in your favor.  This approach applies to closing out claim reserves (dollar amounts expected to be paid to the claimant in the future) as quickly as possible.  Often, clients of insurance companies have experienced unnecessary delays in closing claims just because of poor communications within the company.   Another reason they may not exhibit a sense of urgency is that the carrier benefits from the tax deduction on the claim reserve until it is paid or closed.  Keep in mind that a delay in closing out a reserve will have an adverse effect on your experience rating – something that occurs on all casualty business – not just Workers’ Compensation.

The “bottom line” is that retaining your own adjuster rather than relying on the insurance carrier’s means you have an advocate in your corner which results in a positive impact for controlling your claim expenses.

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