I am often asked, “In which industries, does it make sense for a business owner to own their own insurance company.” When I hear this question, the first thought that inevitably enters my mind is about a childhood experience at my dentist’s office. I remember asking, “which teeth should I floss?” His answer was to the point, “only the ones you want to keep.”
This advice is also relevant to many business owners in almost any industry. Question: Which businesses should be insured by a captive insurance company? Answer: The ones you want to keep.
Consider the two charts below from when we attended the CICA Conferences in 2013 and 2016. They demonstrate a remarkably wide range of industries that benefit from owning their own insurance company, also known as a captive. Notice that “Other” has grown from 6% in 2013 to 15% today. Also, the number of captive licenses has grown steadily from 5,745 in 2011 to 6,408 in 2016.
Source: CICA 2013
Source: CICA 2016
The 2013 chart demonstrates that Financial Institutions and Healthcare Providers were early adopters of captives, making up a disproportionate share of the industry. Their financial savvy aided them in grasping the tremendous benefits captives provide their owners. From 2013 to 2016, the percentage of Financial Institution Captives and Healthcare Provider Captives declined as other industries have caught on.
If you are an owner (or a CFO, Risk Manager, CPA, Insurance Agent or Advisor for an owner) of a business or businesses you want to keep, you owe it to yourself to learn more about owning your own insurance company.