Can establishing a captive insurance company save you money?
Captive insurance companies work for small and medium-sized businesses as well as Fortune 500 companies. There are both insurance and tax benefits to forming a captive insurance company.
Essentially, you can finance your insurance costs more efficiently by using your captive to insure your business — the profits stay in your insurance company.
You can finance traditional insurance, like workers’ compensation deductibles or insurance risks that are more complicated and hard (expensive) to purchase, such as pollution liability. An independent consultant can determine whether a captive insurance company will work for you and help you take advantage of this lower cost method of buying insurance.
How can a company assess whether its insurance provides enough protection at the best price?
All companies can benefit from the services of a risk manager to help figure out how to best purchase insurance. You may want to consider outsourcing to an independent risk manager who can evaluate your current policy and bid on competing policies. To be cost effective or to acquire higher-level expertise, you could bring in an independent consultant once each quarter or as needed to review your insurance plan.
Most companies don’t review their policies often enough. Even if you think you have a great insurance program and you trust your broker or provider, you don’t know what you don’t know.
I’ve never walked into a company and not found money lying on the table in this arena.
How can an independent risk manager work with a company’s CPA or accounting department during this process?
An independent risk manager can help your accounting department or CPA identify potential areas for insurance savings. The review will identify the low-hanging fruit that can reap immediate savings.
Engaging a risk manager will save your team time since he or she will know exactly where to look for unnecessary costs and how to execute a savings plan. With creative insurance structures, such as captive insurance companies, a business can realize significant savings.
Bill Goddard is director of insurance consulting at Brown Smith Wallace LLC. Reach him at (314) 983-1253 or [email protected].
