Five Common Questions From Independent Agents

Captive insurance can seem complex, and many independent agents shy away from it for fear of making a mistake or losing their clients. But what if exploring captives could strengthen your role as a trusted advisor? By addressing agents' most common questions about captives, we’ll show how understanding this option can help you better serve your clients, build stronger relationships, and provide long-term value.

At Captive Coalition, we aim to equip independent agents with the knowledge, tools, and confidence to present captives as a viable solution. In this article, we’ll walk through the five most common questions agents ask about captives so you can be ready to offer clients the best options.

How Do I Get Trained?

The number one barrier agents face regarding captives is a lack of understanding. This isn’t surprising—most agents haven’t been exposed to captive insurance like they have with traditional markets. But that doesn’t mean you can’t learn.

Thankfully, there are several resources available that can help you build your knowledge base:

• Self-Directed Learning Tools: You can access articles and videos that break down the complexities, available whenever you need them.
  
  
• Calculators and Assessments: These can be useful when talking to a prospect or client. For example, you can quickly assess how much they could have saved or the potential risk they might face in a worst-case scenario.
  
• Webinars and Office Hours: For more interactive learning, join live sessions to ask specific questions and get real-time answers.
  
  
• Online Training Modules: These range from beginner to advanced levels and are designed to teach everything from what captives are to how to bring them up in client discussions.

Investing time into understanding captives will pay off in the long run. It will make you more confident and open new opportunities to serve your clients better.

How Do I Get Paid?

Worrying about how compensation works when you’re used to the traditional commission-based model is understandable. With captives, you’ll typically work on a fee arrangement. This means you’ll invoice your client quarterly alongside the premium payment.

Some agents are uneasy about this level of transparency, as clients will see exactly how much you’re earning. But remember, captive insurance thrives on openness. Clients appreciate the clarity, allowing you to demonstrate the value you bring to the table.

To handle this conversation, it’s essential to frame the fee as part of the overall value you provide. This includes finding them coverage but also helping them understand and manage risk in a more customized way. Once you’re comfortable with this approach, you’ll find that clients often appreciate the transparency rather than being put off by it.

How Do I Prevent Things from Going Wrong?

This is a common fear—no one wants to risk damaging a relationship with a valuable client. However, with the proper preparation, captives can be an excellent fit for many clients.

Here are three key points to assess before recommending a captive solution:

• Profitability: Is the client’s business profitable within their industry? Captives are most beneficial for businesses that consistently spend more in premiums than they receive in claims.
  
  
• Risk Tolerance: Is the business owner comfortable taking on more risk? Since captives assume greater responsibility for losses, they must understand this aspect.
  
  
• Commitment to Risk Management: Does the client believe investing in safety, training, and risk management can reduce claims? Captives may not be the right fit if they’re unwilling to improve in these areas.

Having these honest discussions with your clients will set clear expectations. Let them know the benefits and potential downsides so there are no surprises later. Clients appreciate your openness and will trust you more.

Can My Client Get Burned by This?

One of the biggest concerns is ensuring that the client doesn’t feel misled or disadvantaged by the captive solution. Captives aren’t a one-size-fits-all solution, and there are scenarios where clients could end up paying more than they would have with traditional insurance.

For instance, if the client has a bad claims year, it could trigger an additional assessment, which might cost them more money. They need to understand this possibility from the start. Again, transparency is the best way to prevent frustration down the road.

Help your clients fully understand the risks and rewards of captives. While the potential for savings is real, so is the potential for higher costs in some situations.

How Will This Help Me Face the Impending Hard Market?

With the hard market on the horizon, many agents are understandably worried about providing value to their clients. Rates are rising, underwriting is stricter, and clients may feel squeezed by increasing premiums. This is where captives can become an invaluable part of your strategy.

In a hard market, traditional insurance becomes more expensive and less flexible. Captives allow your clients to take control of their insurance costs. By allowing business owners to assume more risk and participate in their risk management, captives can provide more stability and predictability in pricing, even as the traditional market becomes more volatile.

Here’s how captives can help:

• Rate Stability: Since captives are self-insured structures, the client has more control over premiums and claims management. This means they’re less at the mercy of the traditional market’s rate hikes.
  
  
• Customized Coverage: Captives can offer more customized solutions that fit a client’s specific needs, which is particularly important when traditional carriers are tightening their underwriting standards.
  
  
• Long-Term Savings Potential: While captives involve more upfront risk, they also offer long-term rewards. Businesses that effectively manage their risk can accumulate savings over time, which is impossible in the traditional insurance market.

Captive insurance can be a useful tool in the hard market, providing your clients with a solution that can give them more control and stability.