EDUCATE
INSURANCE RECAPTURED
BY WILL ALLEN USING INSURANCE FUNDS TO INVEST IN YOUR COMPANY
I
nsurance is looked at as a necessary evil for many business owners—and rightly so. It's expensive and rarely used but is required for you to bid contracts and conduct business. The most frustrating part: Whether you file claims or not, your premium will probably increase the next year. The only question is by how much? There is a way to get up to 60 percent of your premium back each year without changing anything that you're already doing. It’s called a group captive program. A group captive program is simply a strategy in which likeminded business owners come together to form their own private insurance company. The main attraction is that it gives business owners more flexibility and direct control over insurance costs. Plus, getting up to 60 percent of the premium back each year. Let me explain. About 40 percent of every dollar of premium paid goes to pay for the insurance carrier's fixed expenses (profit, marketing, employee salaries, etc). The other 60 percent goes to sit in a loss fund to pay for expected losses. At the end of the policy period, whatever money is leftover in the loss fund (i.e. you did not file enough claims to equal 60 percent of your annual premium) the insurance carrier keeps as a bonus. Remember that the insurance carrier profit is already accounted for in the fixed expense side of the equation, so this leftover premium is a bonus the carrier receives thanks to your safe operating.
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A typical question is, "what if I have more losses than the 60 percent of premium in the loss fund? Does the insurance carrier lose money?" The simple answer is no. The insurance carrier purchases reinsurance (insurance for the insurance carrier). The worst-case scenario for the insurance carrier is that they don't get a bonus that year. As part of a group captive program, you as the business owner get to keep whatever is leftover in your loss fund each year. If you don’t have to file many claims, you can keep that bonus for your business (instead of giving the insurance carrier a bonus). There are also protections in place like reinsurance, so that you always know what your worst-case scenario is in any given year.
A B O U T G R E E N I N D U ST R Y
CAPTIVE
Green Industry Captive was created to help landscape companies stop getting taken advantage of by the insurance industry. We saw that as insurance premiums continued to rise, it made running a successful landscape business more difficult. Our belief is that landscape companies that make safety a priority should benefit when it comes to their insurance program and not be forced to subsidize the poor performers. www.greenindustrycaptive.com
Pro Landscaper USA South May/June 2022 55
