It is usually the small business owner who feels the sucker punch of commercial insurance practice the most. On the one hand, there is no letup in regard to the annual tradition of increasing premiums. The list of ‘excuses’ for doing so is fairly long, so will not be presented here. Captive insurance practice, however, is offering the small business owner a fair approach to commercial insurance.
How does this come to be? Make a note at this point just so that you never forget this. If you do go into the captive insurance practice, still expect to pay higher premiums per annum. And immediately people to start walking away. Who can blame them? Because people are just sick and tired of paying for the losses and damages that others make, because that is essentially what happens through conventional short-term insurance practice.
The term applied, if you pardon these puns, is an interesting way of putting it. Because captive insurance practice, in actual fact, encourages the small business owner, even more, to take the long-term approach. The reasons why he is still required to increase his premiums under a captive insurance scheme make perfectly good and prudent sense. And no, the commercial consumer is not paying for the losses of others.
What is essentially happening here is that the captive insurance policy holder is creating a safety net for himself and no one else. And if his risk management of the company is solid, having to dip into this pool of available funds need not happen regularly. And by the time the financial year winds down, there will also be sufficient funds available to cater for other objectives, including new investments.
All for the long-term, of course. That’s just one of the ways to look at captive insurance.