Trucking Companies Turn to Captives to Control Rising Insurance Costs
September 29, 2020
As we move into the final months of 2020, the pressures put on organizations across the country have increased, particularly for trucking companies. Never mind COVID-19, civil unrest, and the interesting dynamics a presidential election year provides, the challenges trucking companies are facing with organizational and cost pressures – on top of an already difficult liability insurance market – are unparalleled.
The overlap of the ongoing hard market that has seen rates increase for 39 straight quarters, and the fact that we are seeing a massive increase in the size and frequency of nuclear verdicts, is causing insurance premiums to rise and coverages to become more restrictive, requiring trucking companies to get resourceful and explore alternative risk transfer strategies, such as captives.
The right captive can provide advantages in any type of insurance market, but they’ve become increasingly more attractive now as they help provide best in class trucking companies obtain fair pricing that is warranted based on their individual performance, superior coverage terms, higher limits, and improve their cash flow and long-term stability.
A captive insurance program is different from traditional insurance in that it is owned and controlled by the individual members with the primary purpose being to insure the operating risks of each company and gain control over the claims process. The companies that choose to join a captive make a conscious decision to partner with best-in-class companies who share their same vision, and together achieve superior results and capitalize on the return of underwriting profit.
Cottingham & Butler, the U.S.’s largest transportation insurance broker, has been involved in captives for more than 25 years and has proven that group captives are a smart alternative risk strategy for savvy business owners. Chris Vogel, Senior Vice President of Cottingham & Butler’s Transportation Group, advocates that captives are a good fit for companies looking for more control over their insurance program and who want to be rewarded for their positive results.
“The goal of the captive is to help our members lower their total cost of risk,” Vogel adds. “A captive is not for every fleet, but it is absolutely ideal for those that want control and are looking to capitalize for operating better than their peers and making investments to achieve superior results. We work with many fleets who have seen their cost decrease over the last 10 years contrary to most in the industry that are seeing them skyrocket.”
Critical, though, to a company’s success in a captive program is the selection of their captive and risk-sharing partners. There are thousands of captive programs, but not all are built equally. When evaluating a captive partner, companies will want to ensure they are joining a group with similarly situated trucking companies and those that share common loss prevention and financial interests. It is also important to partner with a captive manager, claims administrator, and reinsurance partner that has extensive experience and a positive standing in the transportation industry.
The team at Cottingham & Butler has unmatched credentials and un-paralleled success in the captive arena. They have built a suite of businesses that includes a trucking claims administrator, safety consulting team, brokerage, and captive management, all with one goal in mind – to drive exceptional results for the trucking companies they work with.