Why are more and more middle-market companies forming their own captive insurance companies, even in this uncertain economic environment?
Here are two of the top commercial insurers' shortcomings echoed by our clients:
Commercial Insurers' Frequent Denial of Claims
Conventional insurers enjoy a well-earned notorious reputation for not paying claims. Our clients tell us they are looking for more certainty from their insurance company when filing a bona fide claim. It is commonplace for conventional insurers to deny even bona fide claims, especially with large commercial claims where significant monies are involved. As a result, businesses are having to sue their insurance companies to recover unpaid claims. The certainty of payment from their captive often is a better alternative.
Commercial Insurers' Extensive Policy Exclusions
Insurance companies rely on policy exclusions, which create uncertainty among our clients regarding what is actually a "covered risk." In contrast, policies from captive insurance companies can be custom designed to supplement "holes" or "gaps" in existing commercial policies, or to provide cost-effective coverage not offered or unacceptably priced by conventional insurers.
A Captive Gives YOU Control of Your Claims
Forming your own captive insurance company can mean no more red tape and no more coverage litigation when it comes to claims handling. Because of the unique relationship between your captive insurer and its insureds, your claims handling will no longer be an adversarial relationship that many businesses have come to expect from their conventional liability carrier. Claims investigations, verifications, adjustments, and payments are all done expeditiously and efficiently though your Capstone team, your outsourced captive insurance turnkey provider.
Captives Provide Flexibility to Customize Coverages
Traditional insurers often rely on policy exclusions, which create uncertainty among insureds regarding whether the claim will be paid. In contrast, policies issued by captive insurers can be custom-designed to more clearly delineate coverage and to eliminate holes in conventional insurers' policies. A captive can provide cost-effective coverages which are not readily available in conventional markets. In some cases, the captive's policies are designed to specifically take over when the conventional carrier denies coverage on the underlying policy.
A captive insurer offers considerable flexibility. It may provide primary coverages, or it may just insure the policies' exclusions. The client often keeps much of its conventional insurance in one place, using the captive to cover the "expectation gap," that is, where the exposures that were thought to be covered by insurance, in fact, are not covered by the conventional carriers. Our middle-market clients want to protect their significant businesses with tailored, comprehensive insurance coverages. If the conventional markets are not providing the needed coverages, these are provided by the captives.
Capstone concentrates on the largest growing segment of alternative risk planning: captives for closely-held, non-public companies with substantial operations. Our clients' captives generally insure certain risks through their captive, and insure other risks through the conventional market. It is no surprise that up to half of the total property and casualty premiums paid in the U.S. are written through a captive or other alternative risk planning arrangement.