Making sure you have the coverage your business needs is stressful, expensive, and taxing on your soul. You’ve dealt with the headache of paying higher premiums when renewal season hits. Looking to transition to another insurer in the traditional market is known for its annoyance of filling out more applications.
This is why we want to make your transition to being a captive owner as smooth as butter. Getting you on the track to owning your insurance, creating more robust safety and risk management programs, and having flexibility over your coverage will bring you peace of mind.
At ReNu Insurance Group, we’ve worked with over 130 businesses that have become captive owners. We’ve streamlined the transition into being a captive owner through our 5-5-5 program, eliminating the soul-sucking and time-consuming process of filling out applications.
In this article, we will lay out what the 5-5-5 program is and how each of these documents works for your process. That way, you can better understand how this program makes transitioning to being a captive owner much easier.
What is the 5-5-5?
If you’re going to own an insurance company, you’d want to know the performance of a business you’re considering insuring and how well they’ve done. On a preliminary level, looking at how well they performed in the past five years is a great indicator of predicting future success.
How do we measure your performance? By looking at your premiums, audits, and loss runs over the last five years.
Asking for less than five years doesn’t give us accurate data on your performance. Historically, we know every business is going to have a bad year. There’s no getting around it. That’s how it goes. And this usually happens one out of every five years. And that’s why we ask for five years of data. Anything less than that means missing that one bad year is possible.
All this information provides actual exposures and helps us identify and understand trends over the past five years.
The 5-5-5 provides actual data that justifies our actions so we can price everything correctly. You will have realistic expectations as we determine what the cost of your captive program will be.
It also helps reaffirm you are a good fit for captives. If you have a large number of losses, it brings into question your safety and risk management programs. Remember: being safety conscious is a large part of being a captive candidate.
What do each of these documents show?
Policies
The policies show who and what is insured, the specific coverage language in the policies we need to be aware of, any endorsements that might be required, etc.
And obviously, it shows that you have had continuous insurance.
They provide:
- What your coverages have been
- Your limits
- Accurate named insured and additional insured
- Estimated premium
- Deductibles
This information eliminates the need to fill out those tedious and monotonous applications.
Audits
These give the actual exposures once the policy has expired. They’re a final endorsement for each auditable policy, completed within 90 days after each policy expires.
Combining policies with the final audit endorsement provides the final number concerning exposures. This looks at things like the number of vehicles, number of employees, payroll, gross receipts, job costs, etc.
Your actual audited exposure numbers provide you – and us – with actual data we can take to the bank to understand and develop real trends about your expected losses and insurance costs.
Loss Runs
Your loss runs tell us:
- What real losses occurred
- If they’re still open
- If there’s a lawsuit open as a result of losses
- If there are there any reserves
Combined with the actual premiums from your audits, having these documents provides the loss ratio. So, this answers the question: what was the real premium compared to the losses that occurred?
These are the actual numbers–no guesswork. This provides information on all the claims, including what might be open.
Other benefits to having your policies, audits, and loss runs.
- If the IRS decides to audit you a day you least expect it, you need these documents.
- You’ll have centralized documentation of your insurance program.
- You will have easily accessible and reliable insurance-related financial data at your fingertips.
- They’ll help you understand and develop protocols to create more robust safety and risk management programs.
- You’ll want this data, even if you decide not to join a captive.
Do I have to fire my agent when moving to a captive?
Nope. So, if you desire to continue working with that person you’ve gone to for years, then more power to you!
However, you might have an uncomfortable agent discussion. They know there is potentially another option you’re looking at.
That’s why we created an email template for you to use to make the conversation less of a hassle. And less awkward.
How much time will it take to be a captive owner?
After you get these documents to us, it can be done as soon as 90 days. ReNu is moving at a constant pace to move you over and help you get the coverage you need.
Much of the pacing depends on how fast you can obtain the five years’ worth of documents. From that point forward, we can move efficiently toward your goal. You won’t have to go through the rigmarole of filling out applications.
Suppose you’re unsure how this is possible within a three-month timeframe. In that case, you need to download and read our free guide How to Self-Insure Your Business in 90 Days Without Sacrificing the Protection of an Insurance Carrier. The short book only takes 30 minutes to read. In that amount of time, you will have a more comprehensive look at how you’ll get into a captive.
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