Five Conversations to Have With Clients About Captive Insurance

Many independent insurance agents hesitate to bring up captive insurance with clients due to a lack of confidence in explaining it. This keeps them tied to traditional insurance discussions, while competitors knowledgeable in captives can offer more appealing solutions.

At Captive Coalition, we’ve worked with many agents in this situation. Our main goal is to help educate independent agents like you so you can confidently present captives to your best clients.

By the end of this article, you’ll know the five critical conversations to have about captive insurance.

Conversation 1: How Captives Can Benefit A Business?

The first step is to understand better why captives could be a good fit for your clients. Captive insurance allows businesses to create their own insurance company or join other businesses to create their own insurance company, giving them more control over premiums, claims management, and coverage design. This structure offers greater flexibility and long-term cost savings, aligning insurance strategies with specific business needs. By gaining a more profound knowledge of captives, you'll be more comfortable presenting this option to clients as a valuable alternative to traditional insurance.

For businesses frustrated with traditional insurance, where they have little to no control over premiums and coverage, captive insurance allows clients to:

• Take control of their risk management.

• Recoup savings on premiums by retaining underwriting profit.
  
  
• Have transparency into how their insurance dollars are spent. 

It’s important to emphasize that captives aren’t for everyone. That said, they can be suitable for businesses that have robust safety and risk management programs.

Conversation 2: Knowing Which Business Captives Are Right For?

Clients will want to know: “Is this right for me?” Not every business is suited for a captive. As an agent, there are qualifying questions you’ll want to ask to see if captives would benefit them.

Key Questions to Ask:

• Are they profitable to the insurance industry? Clients paying more in premiums than receiving claims might benefit by keeping more profit in a captive.
  
  
• Are they willing to take risks on themselves? If they believe in their risk management, captives offer potential rewards for safety efforts.
  
  
• Do they understand the impact of safety and training? Captives reward businesses that reduce risk, unlike traditional models.

Once you’ve worked through these, you can determine if your client is ready to assume more risk for greater control and savings.

You can use this assessment tool to evaluate your best clients’ readiness for captive insurance.

Conversation 3: The Financials – What to Expect

Clients are often concerned about the cost of joining a captive, especially with the higher upfront investment. Be transparent about the financial expectations:

Explain that while captive first-year costs are higher, there are long-term benefits:

• Initial Costs: Clients should expect to pay more initially because they fund their claims. However, they also have the opportunity to reduce premiums over time. 
  
  
• Recouping Costs: If the business has low claims, it keeps the savings and can even earn investment income on its collateral. This can result in substantial savings over several years. 

Clients might be intimidated by the higher upfront costs. However, you can help them see the big picture—the long-term rewards can far outweigh the initial expense. 

Conversation 4: Overcoming Common Misconceptions

Many agents hesitate to bring up captives with their clients because they don’t feel confident in their knowledge. But that hesitation can cost you valuable relationships.

Here’s what often holds agents back:

• Fear of recommending something they don’t fully understand.

• Concerns that a captive could backfire, leading to liability or loss of clients.
  
  
• Uncertainty about how to explain captives in simple, clear terms.

Being more educated on captives, attending webinars, and using tools like pricing calculators to estimate premiums can help alleviate fear in these conversations. 

Agents who hesitate may lose clients to competitors who can clearly explain captives' benefits. Ensure you’re offering these options rather than letting them seek out other agencies. 

Conversation 5: The Long-Term Benefits for Clients

Captive insurance is a long-term play. It’s not about switching carriers every year to chase lower premiums. Captives offer businesses control, transparency, and the potential for significant financial benefits over time.

Consider framing it this way:

• Control: Clients have a say in how their premiums are used, how claims are handled, and what risks they insure.

• Transparency: Unlike traditional insurance, where much of the cost structure is opaque, captives offer clarity. Businesses can see precisely where their money is going. 
  
  
• Financial Benefits:  Over time, clients can reduce premiums, keep underwriting profits, and grow their capital by managing risk effectively. 

Helping clients see that this is not just about saving money in the short term but about a long-term strategy will help in establishing trust in your relationship.

While you want to talk about the long-term benefits, your clients should also know the risks and financial disadvantages. 

Will Captive Insurance Help Your Best Clients?

Captive insurance can seem intimidating. There is plenty of information agents are unfamiliar with. However, getting more education on captives and having these conversations can help establish trust and determine if captives suit your client.

For more education, read our Captive Insurance 101 guide for independent agents to understand the basics of captives. You’ll also want to read our article about the financial advantages and disadvantages of captive insurance to weigh their pros and cons and see if it’s the best fit for your clients.

Finally, schedule a call with Captive Coalition for any additional questions or a consultation.