If you are considering captive insurance ownership, you will need to be prepared to answer a broad range of probing and comprehensive questions about your business. Considering and preparing the answers to those questions ahead of time benefits everyone: It helps the captive risk committee determine whether your business would be a profitable captive owner and—perhaps more importantly—it helps you to take a long hard look at whether the captive option is the best fit for your business.
The captive risk committee is going to ask multiple questions centered around the following three primary areas of interest:
- Is your business currently profitable to the insurance industry?
- Do you, as the business owner, have the right mindset to own an insurance company either alone or with other companies?
- Does your business have a good claims history, and if so, is it intentional or just based on luck?
The answers to these questions are best prepared by taking a close, systematic look at your overall business as it is, and as it could be. After reading this article, you will have a solid insight into what the risk committee will be looking for. Then, if you feel your company may be a good captive candidate, we’ll look at how ReNu can help you get ready to provide it.
How will I find/prepare the answers?
The best way for a business owner to find the answers to the captive risk committee’s questions is to:
- Carefully consider the outcome if the business joins a captive; and
- Conduct an audit of the business’s existing risk management program.
Question the outcome of becoming a captive owner
When a business joins a captive, the business is rewarded with ownership, transparency, and stability. Since the business owns the insurance carrier, the business gains more control. And with control comes responsibility—the business owner now owns the risk.
With captive insurance, a business moves from buying traditional insurance to investing in safety—from external coverage to loss control. Ultimately, when moving to a captive a business moves to a consistent culture of safety. But before a business owner makes that move, the captive risk committee will want to know if the business will grow there. This will mean demonstrating an appetite for best practices and a risk management mindset, rather than frequent claims and/or risky operations.
Conduct an audit of the existing risk management program
With captive ownership, profitability comes when a business applies a risk management program consistently and successfully. The best way to prepare for the captive risk committee’s questions on this aspect of the business is to conduct an audit of the existing risk management process.
The task of preparing for the captive underwriting process compels the business owner to take a deep and careful look at both the risks associated with their business and their claims history. Interestingly, this deep dive has the potential to transform how the business owner functions.
Having carefully considered the outcome of owning captive insurance, the business owner will typically notice a paradigm shift wherein their focus suddenly sharpens on such topics as, “How do I keep my people safe and my operations efficient? How does this affect where I am headed? How do I get there profitably without hemorrhaging money into preventable, avoidable claims?” And with these questions come more comprehensive answers to the committee’s questions.
As these and other topics come up and the business owner gathers the answers in preparation for the underwriting process, they also gain a broader perspective of just how big the shift will be if they proceed with captive insurance ownership.
Where do I start with the audit of our risk management program?
Preparing for the captive underwriting process compels the business owner to take a long hard look at the captive option from all angles before deciding to become a captive insurance owner. This effectively means performing a comprehensive audit of the company’s risk management program.
ReNu has taken this important piece of the equation to the next level with Flight Plan 365©, a risk management tool that organizes crucial questions into actionable phases, from audit through to success. To gain control and ownership over their insurance—and to prepare answers that the captive risk committee will want to see—the business owner follows up on the audit results with strategies, implementation, evaluation, and monitoring, while adjusting or strengthening a tight circle to contain the associated risk.
What is Flight Plan 365© all about?
The key to succeeding in the captive underwriting process is to be prepared, and that means having the answers at your fingertips when the questions come up. ReNu’s Flight Plan 365© offers a systematic method to help ensure that you consider all aspects, understand all the risks, and have all the answers prepared before entering into the captive underwriting process. To learn more about this dynamic tool, read:
Our insurance specialists are available to discuss any questions you might have.
Topics:
