Group Captives May Be Contractors’ Solution to Rising Insurance Premiums

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Over the last few years, contractors have started to see rate increases on multiple lines of coverage within their insurance program. And, the difficulty insurance companies are having in the property market, especially here in California with the wildfire risk, has been pretty well publicized. We have seen both homeowners and commercial landlords forced away from the standard property market and into surplus lines, or, worst case scenario, the California Fair Plan. We are also seeing commercial auto policies come under pressure due to increases in litigation, costs to repair vehicles and social inflation. 

Believe it or not, workers’ compensation has been the lone outlier from these increases, until now.  In the last 6 months, we have started to see a shift in the market. Carriers’ combined ratios have been steadily creeping up and underwriters are cutting back on the amount of schedule credits they can apply.

As a result of the premium increases felt across the board, one alternative risk financing strategy contractors may want to consider is a member-owned group captive.

A member-owned group captive is an insurance company owned and operated by the captive members, strictly for the benefit of those members. This structure enables middle market companies the ability to increase their underwriting credibility through the collective purchasing power of the group. These groups can be related (what we call homogeneous like a trade group or association), or unrelated (which would be a heterogeneous group which could be companies similar in size).

There are real advantages of a group captive, like:

• Lower insurance costs over time

• Financial incentives for strong loss control

• Increased control over claims management

• Investment income

Who should consider a group captive?

• Companies that have shown long term financial strength

• Owners who are committed to safety and have strong safety programs in place

• Loss histories or experience modification rates that are significantly better than average in their respective trade

• Annual premiums of $150K or more for workers’ compensation and commercial auto

As we see the workers’ compensation market continue to harden, best-in-class contractors who are looking to control their costs and protect their bottom line may want to consider this alternative risk financing strategy. 

If you would like to learn more about captives, contact me at sclatyon@ranchomesa.com or (619) 937-0167.

Artisans Captive – Risk Control Workshop Recap

Author, Amber Webb, Account Executive, Rancho Mesa Insurance Services, Inc.

On January 20th and 21st of 2022, Captive Resources hosted the Artisans Captive Risk Control Workshop at The US Grant in San Diego, CA. The workshop was intended for all Artisans’ risk and/or safety mangers, human resources, claims managers, supervisors, owners, brokers and any others who wished to attend.

The workshop began with a brief introduction to the members of Captive Resources and Zurich Insurance Group, along with quick summaries of each of their responsibilities. Then, immediately following was an overview of how the captive is operated and how each member company can earn points which ultimately contribute towards the calculation of their year-end dividend. The group was able to hear from Rich McElhaney from The Real Cost of Safety, as the keynote speaker on the 20th. His story was captivating and eye opening to just how quick something can go wrong on a jobsite without the proper safety protocols in place. He stressed the importance of getting supervisors and employees to report their near misses. Each time a near miss is reported, it gives the company an opportunity to do a training and possibly make changes to their safety policies and procedures to avoid future incidents. Reporting near misses also gives companies a chance to look at areas where trends are taking place and make the appropriate adjustments.

The first day of the workshop ended with dinner and a tour of the USS Midway. This was a great time for member companies to network and chat about what each other are doing with regard to their risk control and safety programs.

The second day of the workshop on the 21st, we all met early for breakfast which also allowed for more networking and learning about different member companies. Immediately after breakfast, we all broke out into our different session groups to learn about specific topics. The first session focused on the, “Do’s & Don’ts of Accident Investigation.” In this session, we went over a twelve-step process for what to do when there is an accident on the job. We were given several great tips for what to do and what not to do. One recommendation was to take pictures of all four corners of your vehicle, then all four sides and repeat for all other vehicles at the scene. The presenter also encouraged not using the phrase, “no comment” if the media becomes involved. Instead, showing empathy and compassion while still not commenting can lead to a better outcome while the investigation is still ongoing. Another takeaway from this session was the importance of reviewing all of your policies to ensure they do not stress productivity over safety. Then, make sure to train your employees to understand that their wellbeing is top of mind, while actually enforcing a safety culture.

The second session we attended was “Driver Safety: Lucky vs. Good” where we learned that the highest auto expenses result from rear end accidents. Also, according to the Bureau of Labor Statistics’ national census of fatal injuries released in December of 2021, transportation incidents have the most workplace fatalities, followed by falls and struck by objects. We also learned with new vehicle technology, such as high-intensity headlights, forward automatic braking, forward collision alert, lane departure warning and rear vision cameras, employers can help reduce vehicle crashes. The speaker went on to explain the importance of utilizing the data given by fleet analytics to help with reducing collision and use as a tool for focusing on trends happening within your fleet.

The final keynote speaker was Sean Bott and he spoke on the “Safety Dance: Creating the Courage to Connect on Site through Three Simple Steps.” His session was not only comedic, but also entertaining. He was able to teach us the 3 steps of meaningful connection; 1) Interrupting, 2) Introducing and 3) Inquiring. We have to start by interrupting people’s defenses and fears and can do this simply by a genuine compliment, a smile, a wave, etc. Then, once the walls are down, we are able to introduce ourselves while slowly saying our name with a pause between our first and last name, all while using the triple nod technique. He also encouraged us to smile and even throw in a wave during this process of introduction. Finally, we were taught to inquire in a clear and meaningful way to get to know the other person on a deeper level. He related these skills back to how employers interact with their employees on all levels, but specifically when it comes to safety. He suggested that we all combine these three skills to make others feel seen, heard, felt and valued. He displayed the value in bringing the human element to safety and reminding the group that the ultimate goal is to make sure all employees go home safely.  

Overall, this workshop was very informative with some fun mixed in and ample time for networking to get to know the other companies involved in the Captive. As a Rancho Mesa broker attending with several of our clients, it allowed us to see the value of not only this workshop, but the additional benefits of being a member of the Artisans Captive and what it offers.

For those interested in learning more about Captives and their potential place within your organization, we will be hosting an informational Captive workshop for the Artisans Captive on April the 28th. Register online, today.

If you have any questions or would like to discuss this option further, you can contact me at awebb@ranchomesa.com or call me at (619) 486-6562.

Three Signs You’re Ready for Captive Insurance

Author, Kevin Howard, Account Executive, Rancho Mesa Insurance Services, Inc.

As a business owner, you might hear about group captive insurance but are unsure whether or not it would be a fit for your business model. With auto rates rising dramatically and property and casualty premiums poised to shift upwards over the next 5 years, exploring a group captive could benefit your business. A group captive could help you potentially recover more than 60% of your premiums, generating substantial returns on your investment in safety.

So, how do you know if a group captive would be the right fit for your business? Below are three signs it is time to consider a captive option.

1 . Combined Premiums – Your annual premiums for workers’ compensation and commercial auto combined exceeds $100,000.

Many group captives have minimum premiums in the $250,000 to $500,000 range; however, Rancho Mesa represents group captives with minimums as low as $100,000.

2. Risk Controls – You have invested in risk controls in order to prevent or reduce losses and you would like to maximize your return on that investment.

Some examples of controls could be fulltime safety coordinators, GPS/telematic systems installed in all owned autos, pre-employment physicals and/or drug testing, and mandatory stretching or ergonomics, to name a few.

3. Performance – Your business continues to operate as a profitable risk for your insurance company partners.

If the business’ loss ratio is lower than its peers in your industry and your track record looks great, a group captive may be the right fit.

If the above list describes your business, a group captive could be a great long term solution.

To learn more about a group captive option, listen to our StudioOne™ Podcast Episode 86 where Rancho Mesa’s President Dave Garcia discusses captive insurance with Doug Hayden, Senior Vice President of Captive Resources.

If you have questions about if group captive insurance is right for your business, please do not hesitate to contact me at (619) 438-6874 or khoward@ranchomesa.com.

Group Captive Insurance 101

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

The property and casualty market over the last decade has been what we consider “soft.” Overall, insurance premiums have remained relatively flat, or in the case of workers’ compensation rates have decreased considerably. However, we are seeing significant pricing pressure in commercial auto. In the next few years we expect to see the same pressure in workers compensation. One alternative risk financing strategy that you may want to consider before the coming hard market is a “Member-Owned Group Captive.”

A member-owned Group Captive is an insurance company owned and operated by captive members, strictly for the benefit of those members. This structure enables middle market companies the ability to increase their underwriting credibility through the collective purchasing power of the group. These groups can be related or homogeneous, like a trade group or association, or unrelated/heterogeneous which could be companies similar in size.

Advantages of a Group Captive

• Lower Insurance Premiums over time

• Financial Incentives for strong Loss Control

• Increased control over claims management

• Long term control of your Insurance Pricing

• Investment Income

Who should consider a Group Captive?

• Companies that have shown long term financial strength.

• Owners who are committed to safety and have strong safety programs in place.

• Loss histories that are significantly better than average in their respective industries.

• Annual insurance premiums of $150k or more for workers compensation, general liability, and commercial auto.

• Businesses that are seeking long term control over their risk financing costs.

To learn more about Captives, register for our workshop held on April 16, 2019 from 9:00 a.m. to 11:00 a.m. at the Boys & Girls Club of East County administrative offices in Santee, CA. Doug Hayden from Captive Resources, LLC will provide an informational presentation about Captives and if it is the right fit for your business.

For other insurance-related questions, please contact Rancho Mesa Insurance Services at
(619) 937-0164.