Are you tired of playing carrier ping-pong, constantly bouncing between underwriters, and struggling to get the right coverage for your clients? If you’re like most agents, you’ve probably seen how the traditional insurance model feels like a hamster wheel—clients are frustrated, premiums keep rising, and you’re stuck in the middle. You want to give your clients something better, but maybe you’re not sure how.
At Captive Coalition, we deeply understand alternatives such as the captive insurance model. They’re an effective insurance model that allows you and your best clients to escape traditional insurers' frustrations. Our sole purpose is to educate independent agents on captives and how they can be game changers. While they’ve been more prominent and accessible, not every agent knows about them. They’re an excellent alternative for your best clients who have low claims and are tired of seeing their premiums increase.
By the end of this article, you’ll know what captive insurers are, why they’re not as complicated as they seem, and how offering captives can help with client retention. You’ll also continue to maintain a trusted relationship with your clients.
Clients Want More: Why Traditional Insurance Isn’t Cutting It
Your clients aren’t blind to what’s going on. They know they aren’t getting value for their premiums. They’re frustrated by rising costs, lack of control over their coverage, and the constant feeling of being at the mercy of the insurance market. Here are a few pain points that hit hardest for your clients:
- Lack of Control: Clients feel powerless when insurance rates go up, even if they have a perfect loss history. They want more say in how their coverage is structured and how their money is spent.
- Transparency Issues: Business owners are tired of the opacity of traditional insurance. They want to know exactly where their money is going. Captives offer that transparency since you and your client can see where every cent is going.
- Rigid Coverage: Standard insurance policies are often too generic. Your client and their line of business have specific needs that require specific solutions. Your clients want customized solutions that fit their business risks—not a one-size-fits-all policy.
Talking to clients about captives can offer them solutions that alleviate their frustrations head-on. Captives provide more control, transparency, and customization.
Why Some Independent Agents Struggle With Captive Insurance
Many agents don’t talk about captives since they’re not entirely comfortable with the subject. Captive insurance is different from more traditional models. Not having a clear grasp of its benefits can make explaining captive insurance to clients daunting.
The thing is, no independent agent should feel at fault. The traditional insurance world isn’t set up to educate you on captives. Carriers push their own products, and captive insurance has historically been seen as something only big companies or specialized firms deal with.
Captives aren’t as mysterious as they seem. They’re an alternate way for businesses to manage their risks. Captive insurance allows clients to essentially “be their own insurance company.” Instead of paying premiums to carriers, they pool their resources, gaining more control over their coverage, claims, and costs.
So why don’t more independent agents talk about captives? Here are three main reasons:
- Lack of Confidence: Many agents feel uncomfortable discussing captives because they aren’t familiar with the details. This can lead to a fear of looking uninformed to clients.
- Comfort with the Status Quo: Agents often stick with traditional carriers because that’s what they know. There’s uncertainty about whether captives can deliver the same or better results than the insurance solutions they’re offering.
- Educational Gaps: Captive insurance isn’t a regular part of carrier-sponsored training sessions, leaving independent agents without the tools to explain captives clearly to clients.
Fear of Losing Clients to Other Agents Offering Captives
One of the biggest concerns agents have is losing clients to other competitors. After hearing about it from a colleague or another agency, you may have had a client come to you and ask about captives. We get it—it’s tough to feel like you’re missing out on something that could help you keep your best clients.
The reality is clients are starting to seek out insurance alternatives—especially in the age of the internet—because they’re tired of being beholden to carriers. They want more from their insurance and to stop playing the game of carrier ping pong.
But here’s the thing: you don’t need to be an expert on captives, right away. The first step is educating yourself to start the conversation with clients. You also have tools such as our Captive Insurance Assessment Tool to see if your best clients qualify in the first place.
How Captive Insurance Works
You might think, “But captives are so complicated!” They’re not as intimidating as you might imagine. Let’s break down some simple terms you can explain to your clients:
- Single Parent Captive: This is for a business that wants complete control over its insurance. They set up their own captive, fund it themselves, and use it to cover their own risks. This option works for businesses paying at least $1 million in premiums.
- Group Captive: This is where multiple businesses with similar risk profiles come together to share the costs and risks. This is an excellent option for businesses paying at least $250,000 annually in premiums.
- Cell Captive: This is a hybrid option where businesses get the benefits of a captive without having to set up their own full-fledged insurance company. Each participant has their own “cell” within the larger captive. This is also a great option for businesses spending at least $250,000 annually in premiums.
Captives provide a way to smooth out the highs and lows of the traditional insurance market. Instead of being at the mercy of carriers, your clients can have predictable costs and more control over their coverage. Plus, they earn back underwriting profits, which doesn’t happen in the traditional market.
Line of Business in Captives: What Can Go In?
Captives offer flexibility with lines of business. While you can technically place any risk in a captive, the coverages most often seen are general liability, workers’ compensation, and auto liability due to their predictability. Recently, property coverage has also gained popularity in captives because of hard market conditions.
Although property risks mean insureds must shoulder more risk; they can also gain when there are no catastrophic losses, allowing them to retain underwriting profit.
For property insurance, this setup becomes ideal for catastrophe-exposed areas (like regions with frequent hurricanes or wildfires) where traditional insurers tend to pull back. However, it’s essential to determine whether the size and premium justify the captive structure.
In low-risk areas with minimal exposure, captives may not provide the same benefit due to administrative costs and increased risk.
The Cost of Captives vs. Traditional Insurance
One concern clients might have is the cost of setting up a captive. While there’s an upfront investment, the long-term savings are what make it worth it. Captive insurance generally reduces premiums by 28% over 2-3 years for businesses that manage their risk well. That isn’t simple pocket change—those savings can be reinvested into their business or used to further lower their risk.
This can mean happier clients who see real value in what you’re offering them. Instead of scrambling yearly to find a better deal from carriers, you can provide a long-term solution that helps your clients save money and stay with you.
Learn More About Captives to Stay Ahead of the Curve
Captive insurance is becoming a more viable option for businesses of all sizes. If you’re not talking about captives, someone else will. Don’t let a lack of knowledge hold you back.
You have access to resources such as our Captive Insurance 101 Guide to help you understand the basics. You can also read about the financial advantages and disadvantages of captive insurance to see if it’s a good option for your best clients.
Finally, you can use the Captive Insurance Pricing Calculator tool to see how much your clients need to invest to join a captive, their underwriting profit, and the maximum out-of-pocket payment during a bad claims year.
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