What is “The Uber Claim,” and why on earth is a Single-Parent Captive Insurance Company “Central” to mid-market or small businesses?
I routinely educate business owners, CEOs, CFOs and Risk Managers about captive insurance and the power of self-insurance and Alternative Risk Transfer (ART).
First, I explain the power of “owning your own insurance company,” and the benefits of avoiding the “sunk costs” – CLICK HERE TO LEARN MORE – of commercial insurance.
Second, I usually explain that their self-insurance through a captive insurance program is strongly backed by a reinsurance / risk pool or a commercial reinsurance carrier. The point is that self-insurance via a captive doesn’t have to expose the business to unnecessary risk. Meanwhile, self-insurance through a captive insurance arrangement enables a business or business owner to be rewarded for good risk management practices and capture insurance profits in an insurance company owned by the business owner or business – powerful!
Third, I’m usually asked the pivotal question or questions:
“What happens if my captive insurance claim is denied, or if my loss is not insured by my captive?”
It’s always worth noting that captive insurance policies may be written more broadly than many commercial policies. This can reduce the number of policy exclusions for which a claim may be denied. Nevertheless, captive insurance claims must still be administered at “arm’s length,” and this may result in the denial of a claim. Or, there may be unexpected losses that arise that simply aren’t addressed by an insurance policy – commercial or captive.
The very survival of the business may hinge on addressing an unexpected, uninsured loss.
Fourth, this is where I normally introduce “The Uber Claim.”
The ability to make an “Uber Claim” provides the ultimate peace of mind. The captive owner can:
- Take a dividend from the captive
- Take a loan from the captive
- Liquidate the captive by:
- Immediately cancelling all captive policies
- Surrendering the captive’s insurance license
- Selling off any remaining tail risk or liabilities
- Liquidating the captive and accessing all captive assets to address the unexpected loss
This is the “Uber Claim,” and it is the ultimate survival vehicle for mid-size and small businesses.
Finally, I often explain the benefits of a Single Parent Captive versus a Group Captive, and these are quite obvious. Group Captives have their place, but Single Parent Captives have far more flexibility to support the needs – even the immediate needs – of the business and business owners. Group Captives can’t execute the “Uber Claim.” Single-Parent Captives can. This is why Single Parent Captives may indeed be “Central” to the success and very survival of a business, while – at best – Group Captives help control costs and trickle back money over time for good performance and loss controls.
To discuss any questions you may have about risk management and captive insurance companies, contact the CIC team today!