What is a Captive Insurance Program for Trucking Operations?
In the traditional insurance market, insurance companies spread the risk around to all operations they insure. Basically, the top operations premium is affected by the bottom. While better performing operations may have a slightly better insurance premium, they are still subsidizing the under performing operations.
Think of a captive insurance program as a special club. In this club, like minded safety conscious trucking companies come together to create their own insurance company. This insurance company is called a "captive." In the captive, your operation is underwritten based on your operations performance.
Why Would Trucking Companies Do This?
You might wonder, "Why would trucking companies want to create their own insurance company?" Here are some good reasons:
1. **Control**: In a captive insurance program, trucking companies have more control over their insurance. They can decide what kind of coverage they need and how much it will cost.
2. **Cost Savings**: Because the trucking companies are in charge, they can often save money. Traditional insurance companies need to make a profit, but a captive doesn’t. This means lower costs for everyone in the club.
3. **Customization**: Every trucking operation is different. In a captive insurance program, companies can customize their insurance to fit their specific needs.
How Does It Work?
Here’s a simple way to understand how a captive insurance program works:
1. **Joining Forces**: A group of trucking companies decides to join forces and create a captive. They pool their money together to fund the captive.
2. **Creating the Captive**: The pooled money is used to start the captive insurance company. This company will now provide insurance coverage for the member trucking companies.
3. **Paying Premiums**: Just like with regular insurance, the trucking companies pay premiums to the captive. But because they own the captive, any profits made can be returned to them or used to lower future premiums.
4. **Handling Claims**: If something happens, like an accident, the captive insurance company handles the claims and pays out the money needed to cover the costs.
Is It Right for Every Trucking Company?
A captive insurance program can be a great option, but it’s not for everyone. It usually works best for larger trucking companies or groups of smaller companies that come together.
Conclusion
That is a very high level look at what a captive is. A captive insurance program is like a special club where trucking companies create their own insurance company. This gives them more control, can save them money, and lets them customize their coverage to fit their needs. It’s a smart way for some trucking operations to manage their insurance.
If your trucking operation wants to learn more about how a captive insurance program might work for you, feel free to reach out.