Captive Insurance Program for Trucking Companies
Are you a fleet manager or owner of a trucking company that takes safety seriously? Tired of experiencing double-digit rate increases each year—even though you’ve demonstrated a solid track record of safe driving?
Maybe it’s time you look at “captive” (or “alternative risk”) insurance programs for your trucking business. Here’s a quick introduction about captive programs and how they’re different from standard programs.
Standard vs. Captive Insurance Programs
Standard: You’re probably already familiar with how a standard program works in the trucking world. A couple months before your policy renews, you’re asked to provide a variety of information—such as driver and equipment lists—so that your agent can collect quotes for coverage. In today’s market, a 13% to 15% increase on liability coverage is considered “normal.” 11-pay, 10-pay, or 9-pay (plus an upfront deposit) are pretty standard payment schedules. This process repeats itself year after year, bringing with it an unpredictability in rates and coverage providers.
Captive: By contrast, a captive program usually encompasses a longer period, such as 36 months (although the policy itself is still usually for 12 months). An upfront pledge of collateral is made, which sits in an investment account and continues to grow. (Note: In some cases, this may represent a tax benefit. Talk to your CPA.) Part of your monthly premium goes to a “loss fund,” which you could potentially get back if your company performs as expected. Trucking companies need to stay in the captive program for a minimum of 36 months before realizing beneficial financial returns.
Potential Benefits of Captive Insurance Programs
So, why should your trucking company consider switching from a standard to a captive program? Here are a few good reasons:
Increased Predictability in Annual Premium Increases: In our experience, trucking companies in captive programs that perform well experience 40% to 50% lower increases in their annual premiums, compared to standard programs.
Loss Fund Reimbursement Opportunities: For example, if you pay $60,000 per year into the loss fund, you could potentially get $180,000 back after the first 36 months.
Flexibility: In some cases, captive insurance companies may allow you to roll over equity from your current policy as collateral in the captive program.
Learn More About Captive Insurance Programs
If you operate a trucking, towing, or fuel hauling business and would like to learn more about captive insurance programs, please contact our office. We’ll be happy to schedule an appointment to learn more about your needs.