Is a Group Captive Insurance Program Right for My Manufacturing Business?

Mike A. Dwyer | Apr 27, 2020 | minute read

Manufacturing businesses take on a lot of risks related to their operations, making the right insurance policies critical to their success. As a business owner, selecting these policies means carefully balancing the protection they offer with the need to control costs. This is especially critical for those in the manufacturing sector, as comprehensive coverage can cost upwards of 30 percent of your predicted gross sales.

That’s a significant chunk of your profits and no doubt has you curious about ways you might be able to cut down on your insurance costs without leaving yourself vulnerable. One option available to you is a group captive insurance program.

What Is Group Captive Insurance?

A group captive insurance program allows you to access the coverage you need without relying directly on traditional insurance providers. Think of a group captive insurance program as creating your own insurance company with other, like-minded companies. Membership is restricted and the program is crafted based on the needs of the collective.

You can be a founding member of the program or you can find one that’s already in existence and join with the permission of the other partners. These programs allow companies to pool their resources to lower their overhead costs and benefit from any unused premiums. In addition to reducing costs, the companies within the collective are given significant control over their insurance policies, which can be critical for those in the manufacturing field.

Why Group Captive Insurance Programs Work Well for Manufacturing Companies

Manufacturing is a high-risk industry. Liability is much higher than in most other sectors and is far-reaching. As such, traditional insurance policies are often prohibitively expensive and tend to require companies to take out more coverage than they can use to get the protections they need.

A group captive insurance program gives you the exact coverage your company requires. For this to work, you want to enter into a homogenous captive; this means the program members are companies within the same industry as yours, possibly manufacturing similar products. In working with companies similar to your own, you best align your risks, and as a result, your coverage needs.

The idea of creating your own insurance company sounds daunting, but when approached correctly, it’s pretty hands-off for you. A Captive Manager can manage most operations of the captive with you and the other parties having a say in any important decisions via the captive’s board of directors. So long as you carefully select your consulting firm and receive the right guidance, running a group captive profitably doesn’t need to become a second job.

Reasons Group Captive Insurance Might Be Right for Your Manufacturing Business

Group captive insurance programs solve common problems for manufacturing companies, but that doesn’t mean they are the best choice in every situation. You must carefully weigh the benefits of all options available to you. Some reasons to consider a group captive program include:

  • Your Profits First: Traditional insurance is designed to deliver profits to the insurance company, not to you. A group captive allows the collective to reap the profits of their policy.
  • Lower Costs: Much of the price of a traditional insurance policy is to cover the overhead for the company. Group captives don’t have the same overhead as a traditional company, reducing the cost of your coverage.
  • Stable Costs: Traditional insurance companies use arbitrary processes to determine what your premiums will be for a given year, and the costs can unexpectedly rise significantly. With a group captive, you always know what to expect.
  • Membership Control: As a member of a group captive, you get a say in who joins. You restrict membership to companies that demonstrate a commitment to safety and a financially stable history rather than absorbing the risk of anonymous companies through your premiums.
  • Claims Management Control: Adjusters work for you rather than a third-party insurance company. They approach their work with the goal of keeping you happy, typically seeing faster claims closure and reduced net costs.
  • Transparency: Paying a traditional insurance company means not knowing where the money goes beyond the coverage you are offered. As a group captive member, you know where every cent you pay is spent.

While these benefits are enough for most in the manufacturing industry to consider a group captive insurance program, keep in mind that the collective is only as strong as its members. Should you decide to opt for such a program, be picky about who you work with.

Your Guide to California Group Captive Insurance Policies

With decades of experience and countless customers in the manufacturing industry, we know how to navigate the group captive insurance program process. To learn more about what we can do for you, contact one of our knowledgeable agents at Leap | Carpenter | Kemps Insurance Agency today.

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About The Author

Mike Dwyer is a Commercial Insurance & Risk Advisor, who specializes in Group Captive Insurance, and specialty insurance and risk management solutions for businesses in the construction industry.

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