Independent agents often find themselves in a bind when discussing alternative insurance options with clients. The same goes for captives since they want to know all the information first. The insurance industry usually reinforces traditional models, often perpetuating myths about captive insurance models. There are secrets the insurance industry tends to keep from independent agents so they don’t leave their models.
At Captive Coalition, our sole purpose is to educate independent agents about all things captive insurance. We know the secrets the insurance industry tends to keep to itself. We want you to understand this information the insurance industry tends to keep from agents like you. That way, agents like you can more confidently offer solutions that work for your best clients.
This article will reveal seven “secrets” the insurance industry keeps from agents. By the end, you’ll have a better view of captives, cutting through industry myths so that you can more confidently discuss captives with your clients.
Secret #1: Captive Insurance Isn’t as Risky as They Say
Traditional insurance often depicts captives as a financial gamble. They focus on rare cases where captives faced difficulties, making agents believe captive insurers leave clients unprotected.
Captives provide a reliable model, especially when structured with professional support. With captives, business owners control their insurance funds, often saving and even profiting over time by reducing losses and making safer choices for their business.
Secret #2: Commissions May Not Be As Transparent as You Think
The traditional insurance model keeps agents tied to commission structures that can limit transparency. While many agents think they know the full story of their commission, profit sharing, and complex contracts make it difficult to get a clear picture.
For instance, carriers may withhold profit-sharing bonuses unless agents hit specific growth targets, or they might penalize those who don’t meet certain quotas, even if loss ratios are low.
Secret #3: Captives Give Clients More Control Over Their Premiums
In a captive, clients have direct control over their premium allocation. This is a game-changer for businesses looking for more control and visibility.
Traditional insurance premiums go into a large pool without direct insight. Captives allow companies to manage claims more proactively and reinvest saved premiums into their business. It’s a way to put the client in the driver’s seat—a stark contrast to the limits of traditional insurance policies.
Secret #4: The “Risky” Reputation of Captives Comes from Old Myths
Decades ago, captives were considered last-resort options, created to help businesses that couldn’t find coverage elsewhere. Now, captives attract some of the best-run companies looking for control and savings.
By shifting from traditional to captive insurance, businesses take on greater risk management, giving them lower premiums and the potential to benefit financially from responsible behavior.
Secret #5: Traditional Insurers Use Growth, Not Profit, to Determine Agent Bonuses
Traditional insurance providers today are more interested in growth than the quality of business brought in. Agents may be pressured to write as much business as possible to earn bonuses rather than focusing on finding the right fit for each client.
This volume-based model can sometimes force agents into a difficult spot, making it harder to provide the best solutions for their clients.
Secret #6: Clients Can Exit a Captive, but It Requires a Strategy
Many agents mistakenly think captives lock clients in forever. In reality, businesses can exit a captive if it no longer serves them, though it does require a plan.
For example, collateral invested in the captive stays until all policy years close—typically up to seven years. If business owners know the exit strategy from the start, they’ll be more confident about entering the captive arrangement.
Secret #7: Captives Offer Flexible Coverage that Traditional Insurance Can’t Match
Captives allow for customized policies that cover unique risks and industry-specific needs. Traditional insurance policies often limit coverage, making it so clients pay for aspects they don’t need or leaving gaps in areas they do. A captive lets clients write policies customized to their requirements, leading to fewer claims and often better outcomes for the client’s overall business plan.
Are Captives Insurers a Better Option For Your Best Clients?
Now, you better understand how captive insurers work and why the traditional market often keeps this information low-key. As an independent agent, you’ve learned that captives are less risky than portrayed, and they give clients more control of their premiums, policy structure, and claims. You also know how commissions and bonuses work in the traditional market.
Next, read our Captive Insurance 101 Guide to understand captive insurers better. That way, you can be more confident when presenting that option to your best clients.
For any other questions or to schedule a consultation, click the button below to speak with one of Captive Coalition’s captive consultants.
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