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     A Look Inside: Is Your Company Spending Too Much on an Annual Insurance Program?
    Your company just renewed its annual casualty liability insurance for a premium of $200,000 because you have to prepare for the future. Well, what happens when you don’t have any claims, and the insurance company doesn’t have to pay out anything? Or, what if you only have a few claims? The answer is that an insurance company just made a large profit off of your hard work. They keep your premium and pocket the amount that you paid in.
    One way to reduce your annual spend on your insurance program is through a captive arrangement. If you’ve had relatively low insurance claims, and your safety practices are considered “best in class,” using a captive could reduce your insurance spending significantly.  
    There are many types of captives for casualty insurance, but for this example, we’ll discuss a Group Captive. A Group Captive is an insurance company owned and operated by captive members, strictly for the benefit of those members. Just like most Fortune 500 companies, it enables middle-market companies to increase their underwriting credibility through the benefit of collective purchasing power. Instead of an insurance company keeping the profits at the end of a policy term, a group captive divides the profits up and releases them in the form of a dividend to its members. Generally, in some Group Captives, up to 65 percent of your premium is YOUR loss fund. Whatever you don’t spend on claims is returned back to you.
    By using a Group Captive, you are still buying insurance to protect your company. Insurance is underwritten by an “A rated” insurance company. However, instead of your insurance company keeping all of your premiums, you have an opportunity to earn much of them back.
    Since you are the owner, you also have a say in how your claims are paid out.  No longer will the insurance company just tell you, “Let’s just pay this claim.”  If you don’t want to pay the claim, it is your prerogative to give your opinion. You have a lot more control and a voice to fight an incident that you don’t think is legitimate.  
    There are many aspects to consider before joining a captive. There could be tax benefits since you are now an owner, instead of just a buyer. However, one should not make the decision to join or not, based on a potential tax savings.
    Harmon, Dennis, Bradshaw can discuss all of the benefits and options with you to see whether or not your company is a good fit for a group captive.
    Britton Stutts, a shareholder at HDB, has worked in corporate insurance products for the past 12 years. Call Britton at 205-306-1749 or email him at bstutts@hdbinsurance.com.
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