Captives Lessen Reliance On Weak Commercial Insurers
Reasons To Form A Captive
Why are more and more middle-market companies forming captives in this economic environment? Here is list of commercial insurers' shortcomings, as echoed by many of our clients:
Uncertainty Regarding the Ongoing Existence of the Insurer
In this period of financial turmoil, many of the nation's largest conventional insurance companies are suffering because of poor investment decisions. Their stock values have declined significantly, and in some cases, insurers are now dependent on the U.S. government for their ongoing survival. Some companies are not even solvent. It may be unwise to depend on these insurance companies for protection when your business is sued, especially when the payment will be due years off. The insurer may be insolvent by then.
A captive provides the insureds greater influence over the financial health and well being of the insurer, rather than being at risk of having coverages effectively negated due to poor investment decisions by conventional insurers.
Commercial Insurers Unwillingness to Fund Claims
Conventional insurers enjoy a well-earned notorious reputation for not paying claims. Yet businesses depend on these same companies for coverage when they are sued and are in the throngs of litigation.
Commercial Insurers' Frequent Denial of Claims
Our clients are looking for more certainty from their insurance company when filing a bona fide claim. It is almost commonplace for conventional insurers to deny even bona fide claims, especially in the realm of 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 is found to be 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, captive policies 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.
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Control Of Claims' Payments
Captive insurance claims payments 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, verification, adjustments, and payments are all done expeditiously and efficiently though your Capstone team, your outsourced captive insurance turnkey provider.