Captive insurance groups fall under many of the same favorable tax and accounting laws as do traditional insurance companies. Better yet, a captive program that is owned by its policy holders retains these profits for the benefit of its members, unlike a traditional insurance company that distributes profit to its outside stockholders. These advantages make it possible to accumulate a substantial profit.
In a captive program, the members have more control of the claims process, particularly in the area of workers' compensation. Assistance is given to the members to develop effective loss control programs to reduce the incidence of injuries. When there is a workers' compensation claim, there is closer communication between the claims personnel, medical providers, and the employer, and all parties work toward returning the injured worker back to productive employment. All of this improves employee productivity and contributes to higher profit margins.
In recent years, more and more organizations have begun expressing interest in taking novel approaches to traditional responsibilities and strategic needs, as evidenced by the widespread overhaul of various corporate functions. The modern business looks far different from that of the past, and the ubiquitous availability of new services, solutions, and technologies is leading to significant improvements in financial and operational performances.
Captive insurance has been a fast-moving trend in this regard, with organizations pushing beyond traditional coverage to establish far more efficient and optimal risk management strategies. General liability has been a common primary target for captive insurance programs because of how well the alternative approach to risk financing aligns with this particular need.
The risks and assets that are covered under general liability are evolving amid these revolutions in the private and public sectors, leading to a greater and more novel breadth of items that need to be protected. This is not contained within an industry or region, either. Consequently, captive insurance can be a useful tool for general liability coverage regardless of which business is being discussed, or where it is located. Especially looking towards the coming years, the need for agile, efficient, and tailored general liability coverage will likely continue to intensify, and captive insurance might just be the best solution out there.
Captive insurance programs are commonly used for general and umbrella liability, workers' compensation, employment practices liability, and a breadth of other risks. In a manufacturing firm, this would mean that equipment assets, human capital, and new processes would all be covered under the insurance program.
Taking this a step further, the real advantage contained within this approach to risk financing is the customizable nature of captive insurance programs. Rather than having general liability coverage from a traditional provider that would often have either extraneous costs or gaps in protection for certain assets, captive insurance will be structured to fit the specific needs of the manufacturer.
Forbes listed the ability to draft policies as one of the top benefits of using captive insurance over traditional coverage, and this remains true for general liability-related investments in alternative risk financing. The manufacturer will be able to ensure that the coverage fits perfectly into its scheme, not allowing a cookie-cutter approach to hinder their ability to reach optimal efficiency and effectiveness in risk management.
Traditional insurance simply does not oblige every corporate asset protection demand, both from a coverage standpoint and a management perspective. Captives grant organizations a level of control over their own destinies that is necessary to developing the most efficient and comprehensive general liability coverage possible.
Now, looking outside the manufacturing industry, the same types of truths will be consistent across the board. In fact, lean management has spread well outside this sector in the past few years – especially since the recession – as retailers, government agencies, and everyone in between works to eradicate waste and bolster the resilience of their financial performances. Captive insurance is an exceptional way to ensure that risk management investments are free from waste in the general liability arena, as well as others.
