How frustrated are you when your insurance company decides to make changes to your policies? Probably a good deal, because it makes you feel helpless against the large insurance conglomerates and the choices they make. And while you feel there may not be an alternative, there is. And it has been around for almost four decades. It is the concept known as captive insurance.
Captive insurance companies, Captive Resources is one example, allow the users of its policies to also be part of the decision process. This is not like full term insurance. With that type of policy, there is an investment into the company in return for quarterly or annual dividends. However, the only decisions you make are proxy votes for members of the board. Once you invest in a policy through a captive insurance company you become a direct part of the decision structure — not a proxy.
While this may sound like a scam, captive groups have been around since the mid-1970s. Business owners who were paying exorbitant premiums for their insurance, even more than today when you factor in inflation, got together to form these captive groups. Some of them continued on this path to become member-owned insurance companies in the 1980s. Today, over 7,000 of these organizations exist across the globe.
There are numerous positives to being a part of a captive group. Since significant capital is built up by those who invest in insurance programs, there is increased stability when it comes to pricing, coverage, and improved services. And because of the group’s investment, reinsurance and additional services can be obtained with more cost-effectiveness than if they were purchased by individuals.
How do you take advantage of this alternative insurance? You can either join an existing one or form your own. Should you decide to join an existing one do your research. Review a group’s prospectus to examine their capital growth and recent decisions related to changes in insurance programs. Even more research needs to be done in order to form a group captive. The first step is to talk with members of existing groups and find out the plusses and minuses as well as start-up costs.