Opinion: Captive insurance has its benefits

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When I was still trucking for a living, one of my biggest frustrations was insurance. This frustration reached epic proportions shortly after being honored at a glitzy reception as one of our insurance companies’ “top” fleets. Before we could find a spot in reception to hang the plaque, we were rewarded with a 20% premium increase!

Vividly, I recall losing my mind on their president as he tap danced around the fact that our increase was all about paying for the sins of other trucking companies. Let me understand, Mr. Prez: “Our premiums are rising because of all the lousy carriers that you choose to underwrite — and get commission from?”

That’s when I realized it was time for our fleet to put its money where its mouth was by applying to join an insurance captive.

Insurance captives are a way for best-in-class carriers (which apparently we were) to lower their costs by eliminating class underwriting while retaining profits and investment income. Simply put, when you join a captive you become a minority partner in an insurance company owned and managed by like-minded carriers.

Joining a captive proved to be an excellent return on our investment in safety while helping us become a better carrier. And I had no idea what a competitive weapon it would become during a hard insurance market like today.

Here’s what I learned while being a member of the exclusive Club Captive, where only the trucking industry’s finest and safest need apply.

Own an insurance company

There is more to a captive than writing an annual premium cheque. Being in a captive means you’re in the insurance industry. Committee time is expected as you and your partners manage the bottom line and screen new applicants. As a captive owner, the fastest way to lose money is to accept lousy carriers into the club.

However, many carriers told me that the ability to insulate themselves from the ups and downs of the private insurance market is the biggest advantage of being in a captive, and well worth the risk and time.

Membership is exclusive

Good captives are selective. They have to be, because members and business partners who aren’t up to snuff are bad for business.

Captive owners have a vested interest in their members’ success and safety. As a result, you have all these fabulous operators in one room willingly sharing their knowledge and best practices.

Cultural importance

Getting accepted by Club Captive requires a lot more than excellent safety and financial performance. Carriers that I spoke with stressed the applicant’s ability to work with the other partners and have a shared vision of how things should be done.

Like any good club, a captive will toss you out if your actions no longer align with the other members. That’s one of the beautiful things about being part of a captive. They are self-policing and hold their members to a higher safety standard.

Small carriers accepted

There is a misconception that Club Captive is only for the biggest carriers. In fact, there are lots of well-run small carriers that are turning to captives in this hard market.

Other than the fear of rejection, a carrier has nothing to lose by applying to join Club Captive. There is no better way to learn what it takes to be best in class than be judged by the best in class.

Membership really does have its privileges.

-Mike McCarron is the president of Left Lane Associates, a firm that creates total enterprise value for transportation companies and their owners. He can be reached at mike@leftlaneassociates.ca, 416-551-6651, or @AceMcC on Twitter.


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Mike McCarron is president of Rite Route Supply Chain Solutions and a partner in Left Lane Associates. You can reach Mike at mike@riteroute.ca

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