Primary Benefits of Group Captive Insurance Versus Traditional Captive Insurance

Captive insurance is a form of self-insurance, where organizations choose to cover their own losses by forming an insurance company, that they wholly own and operate. Group captive insurance has three primary benefits over traditional captive insurance.

Lower Startup Costs

In a group captive insurance company the costs are shared among all of the owners in the group captive, thus lowering the capital outlay of each individual member of the group captive. This also makes captive insurance an option for organizations who would not be able to finance a captive insurer on their own. 

Lower Operating Costs

Operational costs of group captives are also lower than traditional captives. Large organizations enjoy cost savings because they make a lot of purchases and sellers often offer them lower prices to entice them to place large orders. Because of this, a group captive enjoys greater purchasing power than any of the group members would have on their own.

Group captives can also make the most out of that purchasing power by scaling their operations to take advantage of resources that can be shared among the group members at a reduced cost over individual purchases.

Peer Pressure

A traditional captive insurer doesn’t have much outside accountability to encourage cost-reducing measures. A group captive, on the other hand, introduces the element of peer pressure. Because the costs incurred by one member are shared by all, the members of a group captive are motivated to encourage all the other members to do what they can to control risks and reduce costs.

If your organization has been considering captive insurance but going it alone doesn’t seem like the best option, joining a group captive insurance company is a great way to combine the benefits of commercial insurance with the flexibility and cost savings of a captive insurer.