In a group benefits captive, employers retain the risk of providing certain benefits for employees such as health insurance, life insurance, disability insurance and retirement plans. Instead of paying premium dollars to a traditional insurance carrier, they contribute money into a fund which is used to pay out claims. This often lowers costs, offers more flexibility in benefits offerings and offers access to risk management and decision-making tools that organizations otherwise may not have access to.
Do I Have to Start My Own Captive?
Incorporating your own, single-parent captive insurance company (formed by one company for the sole purpose of retaining the risks of that organization, its subsidiaries and affiliated companies) is an option, and one that many large companies have already taken advantage of.
For mid-sized companies, a group captive is often a better fit. It allows them access to the benefits of captive ownership without having to fulfill the logistical challenges of running an insurance company. They also are able to diversify their risks by pooling similar risks with other trusted organizations that have similarly attractive loss histories.
There are existing group captives that welcome new members, as long as they are able to fulfill their requirements. The criteria depends on the captive, but generally speaking, they are looking for organizations with a good loss history and a similar commitment to risk management and claims management.
What’s the Difference Between a Captive and Self-Insuring?
The main difference is in structure, and the way that each option is organized and regulated.
When an organization self-insures, it is contributing money into a savings account which is used to pay out claims.
An employee benefits captive is a formally-licensed insurance company, formed to pay out claims for its member organizations. While the concept is similar to self-insuring, the organization (or organizations) establish a separate insurance entity.
Why Join a Captive?
An employee benefits captive can offer a faster return than a commercial insurance captive: many companies begin seeing returns after only 18 months, compared to the typical five-year period for commercial insurance captives.
Additional advantages include:
Increased visibility into health plan performance
More control over plan design
Clinical outreach options
Transparent vendor compensation
Increased control over risk
Fewer regulations
Lower administrative costs
Compared to self-funding, a group medical captive can help organizations looking to gain affordable stop-loss protection against the high cost of ongoing and catastrophic claims. When multiple organizations join together to retain similar risks, they are able to gain better protection against unpredictable claims volume instead of relying entirely on their stop-loss.
While both self-insuring and a captive arrangement give employers have greater control over plan design, a captive can offer additional flexibility and access to benefits that meet the unique needs of their workforce.
What Benefits Can Fit Within a Captive?
Depending on the captive, the following risks may be a fit for a group employee benefits captive:
Medical stop-loss
Health claims
Wellness / wellbeing programs
Dental
Vision
Because each captive is designed by its member-owners, it depends on the group and which risks they prefer to fit within the captive versus self-insuring or transferring to a traditional insurer.
A captive will also use some of the premium dollars to purchase stop-loss coverage, transferring a portion of the captive’s risk associated with large medical claims to a reinsurer, while still providing coverage for smaller (frequent) claims through the captive.
What Are the Benefits of an Employee Benefits Captive?
Risk pooling – as mentioned above, when organizations pool risk, they are less vulnerable to individual high cost claims.
Additional resources – in a captive arrangement, organizations have access to additional resources that help resolve claims and contain costs, such as:
Care coordination services
Surgical / imaging bundling solutions
Medicare advocacy programs
COBRA advocacy programs
Prescription drug consortium
Specialty prescription management
Fair premiums and stable renewals – average increases in stop-loss renewals can range from 7-9%, and can even max out as high as a 30% increase after unusually challenging claims years. A captive can stabilize these increases.
Access to data & insights – captives share insights from their analytics, offering valuable insights into the way employees are using their benefits and how your money is being spent. This can help inform future decisions about plan design.
No new laser at renewal – carriers can assign a higher specific deductible (a laser) to an individual with a known medical condition or an expectation of high claims. This additional risk is retained by the employer in exchanged for lower premiums, and if those claims do not materialize, the plan can benefit. A captive can eliminate the option for the carrier to carve out a potential claimant from the stop-loss policy, giving their employer the peace of mind of knowing they won’t be financially responsible for their medical expenses.
How Do I Get Started With a Captive?
If you are interested in learning more about employee benefits captives, understand that establishing and operating a captive requires expertise in insurance management. Employers who are considering this approach should consult with a knowledgeable broker who can provide expert consultation and guidance through the complexities of starting or joining a benefits captive.
This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.
Risk Retention Groups vs. Captives – What’s the Difference?
What is a Risk Retention Group?
A risk retention group (RRG) is a method of alternative risk transfer available in the United States, regulated under the Liability Risk Retention Act (LRRA).
An RRG is a state-chartered liability insurance company, formed for the purpose of providing coverage for members within the same industry or facing similar risks with shared insurance needs. Once it receives a license, it can operate in all 50 states.
These licensed companies share liability risks and exposures similar to a captive (and, in fact, could be considered a form of captive).
A Brief History of Risk Retention Groups
In 1981, U.S. Congress passed legislation (LRRA) allowing for the formation of risk retention groups for the purposes of retaining product liability risks. Five years later, they passed the Federal Risk Retention Act (RRA), expanding the coverages allowed within RRGs to include a wider variety of liability exposures.
Differences Between Risk Retention Groups and Captive Insurance
You may recognize some similarities between RRGs and captive insurance, and the truth is, there are far more similarities than differences. Here are a few key factors that distinguish RRGs from captives:
Domicile – a captive insurance company can be formed and regulated (domiciled) in a wide variety of locations all over the world, whereas a risk retention group must be domiciled in the United States.
Legal structure – an RRG is regulated under the LRRA, and must be licensed in at least one state; a captive is regulated under insurance laws specific to the jurisdiction in which it is domiciled (these can be overseas or in certain U.S. states).
Purpose – an RRG is typically formed to provide liability coverage to their members, who are focusing on a specific line of insurance or within a defined industry. A captive could be used for a wider range of risks including property, casualty and even employee benefits.
Ownership – an RRG is required to be owned by its members, whereas captives have varying methods of ownership. While many captives are also owned by their members, within some organizational structures such as rented captives, association captives or trade captives, they may be owned by a separate group.
The Benefits of Risk Retention Groups vs. Traditional Insurance
RRGs provide an alternative to traditional insurance options by enabling businesses to have more control over their insurance coverage and costs. By pooling risks between members who share similar liabilities, members of an RRG can collectively manage risk. Here are a few examples of how that benefits members:
More control over insurance programs – members of a risk retention group have a voice in how their insurance programs are structured, meaning they can influence the coverages, terms and conditions, limits and deductibles that best fit their needs.
Leverage and access to reinsurance – RRGs often have more collective leverage and purchasing power with reinsurers. As a group, they can gain direct access to reinsurance markets, purchasing reinsurance to help manage risks and provide long-term financial stability.
Long-term stability with pricing – owners have the ability to predict pricing more accurately because with larger risk pool than just their own exposures, losses are easier to forecast. Premiums are based on their actual loss history (and a prediction of future losses), instead of being subject to volatile market factors in the traditional market.
Potential return of dividends for good loss experience – in an RRG, there is potential for owners to receive an annual dividend in years when claims (and other expenses) are below projections. Traditional insurance, of course, does not offer this opportunity.
What Types of Risks Fit Best in Risk Retention Groups?
Risk retention groups are most commonly formed as risk-bearing entities for writing liability insurance, and are used by similar organizations facing similar risks. However, their exact use depends on the needs of the organizations in the risk retention group.
Some examples of common risks covered by RRGs include:
Professional liability – errors & omissions insurance, like legal or medical malpractice
Tech E&O – errors & omissions insurance related to technology-related professions or businesses
Product liability – coverage for liability that arises from the use of a product, such as manufacturing or design defects, or failure to issue warnings for safe use
General liability – such as bodily injury or property damage caused by a member organization’s operations
Directors and officers liability – risks arising from an organization’s management or decision-making processes
Auto liability – coverage for risks arising from the use of company vehicles, such as bodily injury and property damage
A risk retention group can include a variety of coverages, but is limited to liability coverage. While the above list gives you an idea of the types of risks which are often included, it depends on the organizations, what risks they share and whether there is a shared interest in retaining these risks collectively.
Where Can I Learn More About Captives?
If you are interested in learning more about captives, take a look at this deep dive into the types of captives, the advantages of forming or joining a captive, and what you need to know before considering this alternative risk solution.
Should I Consider a Risk Retention Group?
If your organization has been dealing with hard markets, and you’ve been seeing your premiums for liability insurance rise in recent years, a risk retention group could be one solution that provides relief from rising insurance costs.
This should not be done as a short-term solution – as with any method of alternative risk, this is a long-term solution. However, if you have spent more on premiums than claims over the last five years, and have liability exposures that could fit into an RRG, you should consider a RRG or captive.
This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.
What is Group Captive Insurance?
A group captive is an alternative to traditional insurance in which a group of organizations provide coverage for their own risks by forming their own licensed insurance company instead of buying insurance from a third-party.
There are multiple types of group captives, and different captives exist to finance a variety of risks. A member-owned group captive is owned by multiple, separate organizations* who join together to buy insurance as a group, retaining and sharing risk.
*In this blog, we’ll be referring to member-owned group captives, which are owned by the participating member organizations.Another structure, called rented captives, owned by a third-party but allows other businesses to participate.
How Does Member-Owned Group Captive Insurance Work?
Think of it like a group fund, which each member pays premiums into which are used to pay claims and to operate the insurance company. Each group shares risks, but because the members of a group captive are carefully selected, only like-minded members who are carefully managing their claims and risk management are included.
This means that instead of being lumped together with organizations that have frequent claims, you are isolating yourself from the rest of the market. A prospective member with poor loss experience would not be included in the captive.
If you’re feeling lost, take a look at our deep-dive on captives, which explains the overall concept and structure of captives and will explain the variety of different types of captives.
I Have To Pay Someone Else’s Claims?
It is possible that your premium dollars could be used to pay out claims for other member-owners, but understand that this is already happening in the traditional market. When you have a good year in a captive, you could actually experience lower premiums, and members can also receive a return on underwriting profits in the form of dividends.
If you’re tired of your premiums going up year after year with little to no explanation, and you feel like you are controlling your claims without any benefit, a captive may be the right fit for you.
Are Overall Costs Lower in a Captive?
While there is no guarantee that you’ll see a short-term difference, most of our clients experience lower costs after about 3-5 years. In fact, in our experience, it’s very rare for a client who enters a group captive to ever consider leaving. Here are some of the reasons why overall costs tend to be lower in a captive:
Premiums are based on your loss experience
You partner with other risk-conscious organizations, insulating you from the wider insurance market
Many captives offer loss control resources, risk workshops and opportunities for shared learning
Some member-owners receive a return on unused loss funds (premium dollars)
Should I Consider Joining a Group Captive?
A group captive is not a fit for everyone: we tend to steer our clients toward the idea when they meet the following criteria:
Spent more in premium dollars than they spent on claims over the past five years
Great loss history over the past five years
Safety-conscious and are committed to minimizing future claims
Comfortable collaborating with other business leaders and making decisions as a team
Focused on long-term organizational goals and have healthy financial history
When it comes to group captives, we find the best fit is a mid-market organization who fulfills the above criteria, though there are captives for organizations of all shapes and sizes. It will not be a fit if you experience frequent liability claims.
What Are the Benefits of Joining a Group Captive?
In addition to the advantages listed above (premiums based on loss experience, improved risk pool, access to risk management resources, return on premiums), here are some reasons to consider joining a group captive:
Insulated from market conditions – there’s value in partnering with other safety-conscious organizations, but there’s also value in not partnering with organizations experiencing frequent claims. When your premiums are dictated by the performance of other companies anyway, why not join a smaller pool full of other organizations with great claims history?
Control over policies – every group captive is different, and there are parameters that dictate what lines of insurance and what risks are included. That being said, a captive provides greater control over program design, terms and conditions, and gives member-owners the ability to make decisions together instead of being at the discretion of the insurance company.
Control over claims – in a group captive, you are encouraged to manage claims in a way that will allow premiums to decrease over time, and you are given access to resources that allow you to do so.
Improved safety & risk management – group captives provide direct access to risk control resources and services.
What Are the Disadvantages of Joining a Group Captive?
Joining a captive requires time and effort, though in our experience, the juice is well worth the squeeze. Do not think of a captive simply as insurance solution, because it’s so much more than that – active participation in a captive provides access to risk management resources, networking and benchmarking that you just won’t find in the traditional market.
However, here are some of the costs of joining a captive:
Time – with a long-term commitment such as a captive comes additional investment. There’s up front work involved in joining a captive, like compiling your five-year loss history. You may not see an immediate return on your investment (for many of our clients it takes 3-5 years). However, most understand that this time commitment offers so many advantages it’s an investment worth making.
Administration and overhead – even though you aren’t purchasing insurance through the traditional market, you still need people to perform the day-to-day functions of the captive. Yet the overall costs still tend to be lower in a captive, due to their streamlined structure and efficiency. And keep in mind these costs exist in the traditional market, too.
Capitalization – joining a captive will involve collateral, paid to the captive to ensure its ability to pay out claims. The minimum requirement varies based on the domicile (location where it’s based), among other factors, and these costs are shared by each member-owner. Capitalization requirements are usually lower in a group captive than a single-parent captive.
Captives for Employee Benefits
Group captives also exist to retain risks related to employee benefits. At Gregory & Appel, we have extensive experience – and great results – with clients who have moved medical stop-loss to a group captive. Captives also exist to cover health claims, dental, vision and wellness programs.
Am I Ready to Join a Group Captive?
If the advantages seem attractive to you, and you feel you may meet the criteria discussed in this blog, you may be a fit for a member-owned group captive. The next step would be:
Find the right broker to provide the appropriate guidance and help you make the right connections. We’re here to help.
Information gathering – working with an actuary to review your five-year claims history, relative to your exposure, to calculate your premiums
Timing – scheduling your captive proposal as close to 30 days before your existing expiration is ideal, as it will give you time to talk to captive members about their experiences and to consider your overall insurance program structure.
At Gregory & Appel, we have extensive experience working with clients as they navigate through this phase of their risk management journey and beyond. We’re eager to help, so if you are ready to learn more, contact us.
This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.
What is Captive Insurance?
Introduction and Overview
A captive is an alternative to traditional insurance in which a company – or group of companies – provide coverage for their own risks by forming their own licensed insurance company instead of buying insurance from a third-party.
This guide will explain how captives work, the benefits of captive insurance and explain how they are structured. It will also discuss how this alternative model could help you control insurance costs. If you’re interested in taking control of your risk in a way that saves your company time and money in the long run, continue reading.
History of Captives
The term “captive” originated in the 1950s, when an engineer turned insurance broker named Frederic Reiss founded the first captive insurance company in Bermuda in 1962. Responding to increasingly high premiums, he was interested in a method of retaining and sharing risk.
He based his newly formed captive insurance company in Bermuda, the first country to formally establish legislation and oversight procedures for captives. Today, Bermuda remains the world’s leading offshore captive domicile. However, captives are quickly rising in popularity – there are also 30 captive domiciles in the United States, according to the Insurance Information Institute, and in 2022, the state of Vermont overtook Bermuda as the world’s leading captive domicile.
Today, about 90% of Fortune 500 companies have their own captive subsidiaries, with this alternative form of risk management continuing to grow in popularity each year. But they’re not just for large companies – captives come in all shapes and sizes and span across many different industries, including non-profit groups.
What Exactly is a Captive?
As we mentioned earlier, a captive is a special type of licensed insurance company, controlled by its owners, that provides coverage for their own risks. This is still insurance, and most captive members still utilize traditional insurance markets to transfer certain risks, or to provide excess coverage. It is also common for an organization to place certain lines of insurance within a captive, with others covered by traditional insurance.
The general concept is that instead of buying insurance directly from a third party, members of a captive retain costs and certain risks by contributing premiums into a fund, usually at lower cost than within the traditional market, later covering their own losses.
If there are leftover funds after each organization’s claims have been paid out, each member could receive a share of the underwriting profits. And because much of the money in the captive is being invested, including your premium dollars, the return on these investments can be significant.
Other Advantages to Captive Membership
Other advantages include the many options for self-insuring risks, particularly standard casualty lines of insurance like general liability, product liability, professional liability, commercial auto and workers’ comp. Captives can sometimes provide coverage that is not available in the private market, while also offering cost savings and more control over claims decisions. There are opportunities to lower premiums, which in a captive structure are based on your actual loss history, and to receive significant dividends on funds invested within the captive.
In the current insurance market, many organizations are finding their premiums rising year after year, and are in need of a more consistent, cost-saving solution. Rates are increasing, and underwriting is becoming more difficult. This hardened market results in smaller coverage limits and higher premiums. Forming a captive, or joining an existing one, can be a way to insulate an organization from these market factors.
Types of Captive Insurance
There are many different types of captives; they truly come in all shapes and sizes.
Here’s a helpful way to think about the basic structure of captives:
Single-Parent or Group Captives
A single-parent captive is owned entirely by one organization to insure risks of their parent company, subsidiaries and directly-affiliated businesses. We mentioned earlier that 90% of Fortune 500 companies have their own captives; the majority of these are single-parent captives. Some do provide coverage for other, non-related organizations; the term “pure captive” is used to describe single-parent captives that do not insure risks of other organizations.
An owned captive is entirely owned by any participating organizations, who serve as the exclusive policyholders. They are fully responsible for the administrative operations of the captive, including paying out claims. An owned captive could be a single-parent or group captive.
A rented captive is a licensed insurer owned by on outside organization that provides many of the administrative functions of the captive. In this system, a captive allows members to enter into contractual agreements to pay a fee, share risks and “rent” the captive.
There are a variety of other structures and special purpose captives. Below are descriptions of a few important ones.
Protected Cell Captives – Also known as segregated-cell captives, these rental captives provide insurance to organizations but their assets and liabilities remain are legally separated, and members do not share risks (or claims). Each organization has a separate underwriting account.
Risk Retention Groups – an alternative risk transfer method created under the Liability Risk Retention Act in 1981. RRGs are domiciled in the United States, licensed to write liability insurance and regulated as a captive insurance company. They may operate nationwide, but must register in each U.S. state in which they will write insurance. They are treated as multi-state insurance companies. To learn more about RRGs, check out our Risk Retention Groups blog.
Industrial Insured Captives – a captive that provides coverage for multiple large companies, either as pure captives or group captives. (An industrial insured is a commercial insurance buyer which can negotiate contracts with insurers without the protection of insurance regulators.) The captive insures the risks of each organization, as well as any affiliated companies.
Micro Captives – a small captive insurance company with a small annual written premium. Premiums are placed in an investment account and as long as the captive stays under the premium threshold, they do not pay tax on their underwriting income.
Branch Captives – a unit of an existing offshore captive, licensed to operate in a U.S. state. This allows it to operate through a branch in the location where the insured risk is located, allowing companies to extend their coverage territories without establishing a separate captive in each legal jurisdiction, while also streamlining management.
Association Captives – a group captive sponsored by a specific trade association within a defined industry that predates the formation of the captive by at least one year. It insures risks of members, and of the association itself. There are notable advantages to participating in a captive with industry peers. Take a manufacturing captive, for example – you are paired with organizations that have similar risks and exposures. In addition to gaining the typical advantages of captive membership, you would be paired with other safety-minded organizations and have opportunities to share knowledge that can prevent future losses.
As you’ve just read, there are many types and structures of captives.
According to the Insurance Information Institute (Triple-I), in 2018 about 200,000 companies in the United States met the definition of a mid-sized company, with revenues between $10 million and $1 billion. These companies are best-suited to establishing a new group captive or joining an existing group captive.
Some member-owned group captives use a captive management company to manage the daily operations of the captive, but the members who serve as the captive’s board of directors are the true decision-makers. At board meetings, they vote on rules and regulations, and dictate the standards under which new members would be included in the captive.
How Captive Insurance Companies Are Formed and Regulated
You’ve just read about a variety of different captive structures, each of which may be the appropriate selection for an organization’s needs. While all have a few shared characteristics in common, the standards for forming a new captive, as well as the way they are regulated, depend on the type of captive as well as the location of its domicile.
Any captive would meet the following definitions:
Risks are financed within a separately incorporated and managed entity
There is a separation between the captive and its insureds, meaning the captive truly exists as its own insurance company
Those purchasing the insurance, or reinsurance, must have sufficient resources to buy an alternative risk financing program
They must be capitalized and domiciled in a jurisdiction that legally allows them to operate as licensed insurers
Creating or joining a captive requires discussion and preparation from your leadership team. These are some of the considerations for an organization considering joining a group captive:
Information gathering: an actuary will look at your claims history from the past five years, relative to your exposure such as payroll, sales and number of vehicles to calculate your premiums. Their job is simply to make sure the group will be able to finance every member’s claims.
Financial review: most captives will have an independent consultant review your company’s audited financials. Since the captive is taking a risk with each new member, the established members want to make sure every company they admit will be able to pay premiums and weather the group’s financial requirements.
Risk profile assessment: understanding the advantages and disadvantages of retaining risk – and sharing other member organizations’ risks – is very important. Prepare for questions about your organization’s safety and risk control efforts, which may be a large determining factor in whether you are accepted into the captive or not. Existing members will not want to include an organization that does not make risk management a priority, they want a partner who will mitigate risk and avoid a high frequency of claims.
This is a condensed list of the steps that would be involved in forming a new captive. This is a much more complicated process than joining a group captive and should be reserved for large organizations with the resources to operate their own insurance company, which will likely entail hiring professionals to fulfill the responsibilities usually performed by an existing insurance company.
Assessing the varied insurance needs of each organization is vital. It is possible that the captive can address some, but not all risks and that traditional coverages will still be needed. If a captive cannot actually improve the members’ ability to control risk, it may not be the best solution. Keep in mind that even many single-parent captives retain the risks of their subsidiaries and affiliated companies.
Feasibility study: the members assess the potential benefits and risks involved in forming the captive, namely the captive’s financial projections. This includes an actuarial analysis of each organization’s risk profile, loss history and past claims (which would also be a step for an organization planning to join an existing captive). This includes looking at models of various loss scenarios – including catastrophic ones – and how they would impact short-term and long-term costs. Can the captive adequately protect against these losses?
Operations analysis: is it realistic to run your own insurance company? There’s a reason why many small and mid-size organizations rely on existing, sponsored captives or rent-a-captives. This alternative could be a better fit if the member organizations are not able to operate the captive themselves. Remember – you are essentially forming a new insurance company, which isn’t going to run itself.
Domicile selection: depending on the type of captive being formed or joined, the location where the captive will be incorporated may vary. Factors that impact this decision would include:
Regulatory environment and legal standards
Solvency (capitalization) requirements
Tax laws and benefits
Investment restrictions
Underwriting requirements
Geography (accessibility of the location itself)Overseas domiciles may, for better or for worse, require travel to that location for board meetings. (Though, many could see why a trip to the Caymans for a board meeting or risk control workshop could be a positive!) According to Triple-I, offshore domiciles often have lower capitalization requirements, as well as more favorable regulatory requirements, though this depends on the domicile in question.
Incorporation: the captive insurance company must be established as a legal entity, which requires filing establishing documentation with the authorities of the respective domicile. Quite literally, you are starting a new insurance company.
Capitalization: the captive must meet minimum requirements, which vary depending on where the captive is domiciled. This requires those forming the captive to put up collateral to fund operation and its ability to pay out claims. Not only is this legally required, the success of the captive is dependent on this financing in order to pay out claims with certainty.
Key Differences Between Traditional Insurance and Captive Insurance
We’ve already gone over many of the advantages of starting or joining a captive, but here are some of the basic differences between a captive and traditional insurance.
Traditional Insurance
Offered by traditional, third-party insurance companies.
Risks are transferred to the insurer.
Premiums are paid to the insurance company.
No opportunity to gain investment income on premium dollars.
Limited control over policy terms.
Insurer assumes the risk and pays claims.
Premiums are nonrefundable.
Broader risk pool with unrelated policyholders.
No insulation from organizations posing high levels of risk or frequent claims.
Captive Insurance
Formed by a single parent company or a group of companies.
Risks are retained, shared and self-insured.
Premiums are paid to the captive insurer and invested.
Member-owners can receive distributions of invested income.
Customizable policy terms and coverages.
Members can earn premium dollars back.
Members assume the risk and pay claims.
Offers greater control and flexibility in risk management strategies.
Opportunity to join captive with organizations that have good loss history.
More Benefits of Captive Insurance
There are several ways a group captive could lower your overall insurance costs.
Premiums based on loss experience – premiums paid to the captive are based on your actual claims history and loss experience, meaning organizations that can control these factors stand to benefit.
Insulation from market conditions – instead of being lumped in with organizations that don’t control their losses, in a group captive you are associating yourself with other risk-conscious organizations, as only good risks are accepted into the captive. Separating your organization from bad risks helps you avoid rising premiums in the traditional market, as well as the factors contributing to them, such as economic inflation, large jury awards and tort reform.
Control over insurance policies – a captive provides greater control over their unique needs and concerns. A group captive offers more flexibility in program design and terms, and gives members a voice in the decision making process when it comes to coverage options, policy limits, deductibles and retentions.
Saving on third-party costs – a captive can be more cost-efficient because you’re no longer paying for hidden costs in your premiums, such as a third-party insurer’s payroll, marketing and other expenses.
Return on underwriting profits and investment income – members are rewarded for avoiding claims because they receive dividends when they are able to reduce their losses, as well as investment returns on money paid into the captive (premiums, capitalization funds and collateral).
Access to reinsurance markets – Because a captive is an insurance company, they can buy reinsurance coverage directly from reinsurers, essentially buying it wholesale and bypassing the traditional market. And because the price is directly related to the organization’s loss record, captives generally get more cost-effective rates for reinsurance due to their superior risk profiles.
Improved safety – Improving an organization’s overall safety is a common byproduct of entering a captive as most require every member to have their own safety committee. Also, since it’s their own money at stake, companies typically nominate someone internally to be their dedicated safety contact in addition to other roles.
Benefits of Improved Safety
Sound safety practices and claims management both protect the wellbeing of your employees and are good for your business. Research and industry experience suggest businesses that invest in health and safety programs realize a tangible return. These returns stem from:
Decreased lost time – avoiding workplace accidents due to enhanced safety programs can help your organization decrease expenses related to medical care, PTO, litigation, LTD and disaster mitigation.
Compliance with regulation, laws and standards – non-compliance can be disastrous to an organization, not just financially but also consider the reputational cost of legal fees and fines from OSHA.
Increased efficiency – a focus on safety leads to higher productivity, which drives short-term revenue growth and supports long-term sustainability.
Improved employee satisfaction – recruiting and retaining top talent is easier for organizations that provide safe, comfortable workplaces and who care for employee wellbeing and take steps to protect the environment.
In a group captive, you’ll have access to webinars and risk control workshops that help reduce your overall risk and lower your audit factor, which in turn will help lower your premiums.
What Are The Costs of Captive Membership?
There are some cost factors involved in forming or joining a captive.
Time – this is a big one. You are not buying traditional insurance, you are joining a captive, which is a long-term commitment and goes deeper than an insurance solution. It requires time for consideration, you will want to talk to other captive members about their experiences and you will need to consider the impact on your overall insurance and risk management program. However, you’ll find this investment of time is well worth it in the long run.
Administration and overhead – remember that a captive is still an insurance company, and that there are costs involved in operating and maintaining this structure. However, these can be mitigated by the cost savings and benefits of being part of a captive. And joining a group captive can help, as you are sharing these costs with other organizations, creating economies of scale.
Capitalization – the minimum capitalization requirements of a captive vary by size, risk profile and domicile, but they are important in order to fund the captive’s operations and ability to pay out claims. These costs are shared among the member companies, allowing for reduced individual financial burden and potential for cost savings in the long run. They tend to be lower in a group captive.
Collateral – Before joining a captive, collateral money is put up in advance. Because members are retaining and sharing underwriting risk, this collateral serves to eliminate credit risk between members.
Customization and Flexibility
Captive insurance offers more control over insurance costs, with the flexibility to tailor risk management approaches to meet the needs of the group captive. That includes the lines of insurance the captive underwrites, how money is used and its investment strategy.
There are also opportunities for captive members to access loss control and risk management resources, which may otherwise be inaccessible due to cost or availability. Because the group captive model incentivizes reducing the frequency and severity of claims, this focus on reducing losses is a constant priority. All organizations stand to benefit from improving safety and reducing claims.
Common Misconceptions About Captives
Here are some of the common misconceptions we’ve heard about captives. If you’ve had these thoughts, you’re not alone, but here we’ll address some of these concerns and explain why they may not be barriers, after all.
My company is too small for a captive.
Group captives come in all sizes and span across different industries, so your insurance spend really shouldn’t be the deciding factor. Additionally, micro captives are a form of single-parent insurance company that provides smaller organizations with the opportunity to take advantage of the benefits a captive can offer.
In the group captive structure, the funding system separates and accounts for both the frequency and severity of losses. A loss forecast is developed by an independent actuary, generally using a member’s previous five years of loss history, with that forecast being split between the two layers. Losses are shared and absorbed through the captive’s funding, but reinsurance still protects the captive against catastrophic losses.
I’ll get stuck paying for everyone else’s claims.
While it’s true that you may share risks with other businesses, depending on the type of captive you’re in, that won’t necessarily cost you more. The beauty of a captive is that you’re paired with like-minded peers who are all trying their best to minimize their own risk and work their own claims as efficiently as possible. Every business has bad claims now and then, but in a group captive you can be confident sharing risk for the potential rewards.
I’m worried about regulations and compliance.
Remember that a captive is an insurance company, as as you can probably imagine, this does involve some complex legal and regulatory requirements. However, this isn’t a reason to avoid considering a captive. While familiarizing yourself with these regulations is important, in a group captive, day-to-day management including regulatory compliance, audit and tax prep is supported by captive management, leaving members free to focus on what they do best. In a single-parent captive, bringing in an expert to support this function would be necessary.
Joining a captive will be expensive, and they don’t seem accessible.
In the case of a group captive arrangement, companies considering joining may need to contribute capital to the captive to help cover the risks assumed by the group, and these initial costs can be significant. However, less capital is required in order to join a group captive, and keep in mind that if you do leave the captive in the future, collateral is returned when the last policy year the organization participated in is closed. A captive is a long-term approach to risk management, and should be thought of as a full commitment.
Is a Captive Right for My Business?
Here are some of the factors that would determine whether you may be the right fit for a captive.
Best-in-class loss history, or close to it
History of long-term financial stability
Management team and organizational culture committed to safety
Can think long-term, not near an ownership transition or financial restructuring
Balance sheet can support collateral requirements
Additional considerations include:
Annual spend on premiums – There isn’t an exact formula to tell you whether or not you’ll be successful in a captive. However, we’ve found a good rule of thumb is that your company should be spending at least $100,000 annually on workers’ compensation, general liability and auto coverage for this type of insurance to be beneficial.
Capital commitment – Captives are built for the long haul. Typically, distributions don’t begin until 3-5 years after the end of a policy year for commercial insurance captives, though the return can be quicker for employee benefits captives. It’s unlikely that you will see an immediate return after joining a captive. This is a long-term strategy.
Risk of adverse underwriting results – It’s important for captive members to have a strong commitment to risk prevention. If loss control programs are not in place, the likelihood of claims increases and will negatively impact the captive as a whole, because you are retaining and sharing risks. And if risks are not accurately accounted for in underwriting, the captive may not be prepared to pay out claims. That’s why captive members are required to provide a detailed loss history before being accepted into the captive – a group arrangement will not accept poor risks.
Time commitment and related costs – While there is an investment of time and resources related to participating in a captive, if you’re thinking along those lines you are asking the wrong question. What you should be wondering is what benefits this investment will have for your organization. The answer is an increased focus on risk management and loss prevention, savings on lost time claims, fewer worksite accidents, and over time, lower overall insurance costs.
Tax treatment – This is NOTan investment or a way of receiving tax benefits. Captives are strictly an insurance product. Whether or not they offer tax benefits for your organization should be determined by a CPA or qualified tax attorney.
Captive Insurance Frequently Asked Questions
To recap what you’ve just read, here are some of the questions we get most often, answered in simplified terms.
How does captive insurance work?
A captive is an insurance company that provides insurance to, and is controlled by, its owners. There are many ways to structure captive insurance companies, and they come in all shapes and sizes. A captive insurance company retains the cost of risk through the captive that is usually transferred to traditional insurance companies.
What are the disadvantages of captive insurance?
Captive insurance is a long-term risk management strategy which is unlikely to provide financial benefits within the first 3-5 years. There are starting costs involved in capitalization, with collateral being required to start or join a captive. Some risks are a better fit for a captive arrangement than others.
What are the benefits of captive insurance?
Captive insurance can result in lower premiums, because they are based on a projection of future losses based on your five-year loss history, not on the variety of factors outside your control that impact traditional insurance premiums. Being part of a captive can provide more control over claims, access to risk management resources and more customization and flexibility than traditional insurance. You can also earn money on premiums and other funds which have been invested, whereas in a traditional arrangement you’ll never see those dollars again, no matter how well you can avoid claims.
What is the purpose of a captive insurance company?
A captive insurance company exists as an alternative to traditional insurance. Instead of transferring risks to an insurance company, in a captive, certain risks are retained by the captive. Premiums are calculated based on loss projections, using historical claims data to predict potential future losses, among other factors. Captives also provide opportunities to share retained risks with other captive members, so each member’s risk exposure and loss experience impacts the captive.
Why do companies form captives?
Captives allow companies to have more control over their risk management strategy and insurance costs, improved cash flow and greater flexibility in coverages. They can also directly benefit from having favorable loss experience, as their premiums are determined by their future loss projections, among other factors. With high premiums in the traditional market, and organizations feeling like they have little to no control over the market factors causing the rise in costs, a captive is a solution that provides protection, while also offering an opportunity for members to gain back premiums in the form of investment income.
What types of coverage do captives provide?
Captives exist to insure a wide variety of risks, most often for conventional coverages like general liability, product liability, professional liability, commercial auto and workers’ compensation.
Captives also can be used for specialty risks that are hard to find coverage for. Examples include:
Almost every time one of our clients gets into a captive, they tell us they wish they would have done it sooner because the captive’s structure actually makes them a better company from a lot of perspectives – not just from an insurance standpoint.
Think about it. If you’re with a group of like-minded peers and everybody’s trying to get better, you’re sharing all of these ideas and best practices that can help transform you into a better company. And that’s just one of many examples of how captives can help elevate your business.
This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.
Employer Healthcare Spend Expected to Rise in 2024
The largest increase in U.S. employer healthcare spend may be coming in 2024, according to an article from Reuters. Citing multiple industry studies, average costs paid by employers are set to increase over 8 percent with medical inflation, demand for weight loss drugs and availability of other costly therapies among the factors driving these costs.
In this article, we’ll take a look at some of the trends in healthcare spending that are driving these rising costs, as well as ways to mitigate them.
Mental Health
41% of U.S. adults experienced high levels of psychological distress at some point during the pandemic, according to four Pew Research Center surveys conducted between March 2020 and September 2022.
And an NPR report from last week reported that roughly two-thirds of Americans with a diagnosed mental health condition were unable to access treatment in 2021, even though they had health insurance.
It is essential that we continue to address mental health by increasing access to treatment, promoting awareness and supporting initiatives that prioritize mental wellbeing. Employers are expected to continue expanding access to mental health support and services while reducing barriers to care.
Pharmacy Spending
An uptick in speciality drugs, especially those meant to treat diabetes and support weight loss, is the lead factor in growing pharmacy costs. GLP-1s (glucagon-like peptide-1 receptor agonists) have had a significant impact on healthcare costs for many U.S. employers, a trend which is sure to continue in 2024. These drugs, designed for patients with type 2 diabetes, improve blood sugar control by stimulating the body to produce insulin after eating.
They can also lead to weight loss. As GLP-1s become approved as weight loss medications without a Type-2 diabetes requirement, employers should be actively considering how they will approach these prescription drugs.
Most employers are looking for more transparency when it comes to pharmacy benefit management (PBM) pricing. According to The Business Group on Health’s survey, 92% of employers are concerned about high-cost drugs in the pipeline, and 73% say finding more transparency when working with pharmacy benefits managers is a priority.
Health Care Delivery
The popularity of on-site clinics and access to virtual care is likely to be another continuing trend, which can also be a cost saver for employers.
By reducing the number of trips to urgent care facilities or even visits to a primary care physician, employers can reduce costs. The emphasis on preventative care and removing barriers to healthcare through on-site clinics and virtual health platforms can result in earlier intervention and prevention of chronic conditions. By encouraging regular screenings, vaccinations and wellbeing programs, these interventions can help identify health issues at an early stage when they are easier and less costly to treat.
It should be noted that while these practices became much more common in the days post-pandemic, it seems these practices may be leveling off in 2024. According to The Business Group on Health, roughly half of employers (53%) offered on-site clinics in 2023, with approximately the same figure is expected to do so in 2024. Because many employers have migrated to a hybrid or remote work environment, the need for health services at the workplace is no longer growing.
Final Thoughts
Rising costs are likely to continue to impact employers into the new year. However, by focusing on improving health outcomes and increasing access to mental health support and preventative care, employers can mitigate some of these costs. Work with your Gregory & Appel benefits consultants to devise strategies to offer great care, minimize increasing costs and provide benefits that attract and retain talent within your organization.
December 21 marks the first day of winter. With cold and snowy weather approaching for much of the United States, this is a great time to take stock of some important safety tips for the months ahead.
In this article, we’ll divide our focus into three very important areas for winter weather safety: preventing slips and falls, driving safety and cold weather preparation for your home. For each of these areas, we’ve provided 10 simple tips for the winter months ahead.
Preventing Slips
The CDC reported that about 1 million U.S. adults are injured due to slips and falls each year, while the U.S. Bureau of Labor Statistics reported over 20,000 occupational injuries related to ice, sleet and snow.
Here are ten tips for reducing the risk of falls on slick surfaces this winter.
Wear proper footwear, like boots or shoes with anti-slip soles. The treads should be able to disperse water and grip the ground.
Plan ahead for snow removal – place salt on sidewalks ahead of winter weather and keep your driveway and sidewalks clear from snow, ice and debris.
Walk slowly and cautiously, especially in areas that may become slick, like ramps, stairs, tile floors, parking lots and on metal surfaces.
Avoid shaded areas: remember that areas that are not exposed to sunlight may stay frozen even when temperatures rise.
Use handrails when going up and down stairs or ramps.
Keep your hands out of your pockets to help you maintain balance.
Watch for black ice, which is difficult to see, and always be aware of your surroundings.
In slippery, high-traffic areas, consider placing non-skid floormats and caution signs in addition to ice melt or sidewalk salt.
Use traction devices that strap onto shows when conditions require them.
Use extra caution when entering and exiting your vehicle. Hold onto a grab-bar or doorframe for stability.
Vehicle Safety
Snowy, icy road surfaces contribute to a high volume of car crashes and injuries each year. Take a look at the tips below to reduce your risk and travel safely this winter.
Regularly service your vehicle. By proactively maintaining your vehicle, you won’t have to worry about your brakes, tires, battery and lights functioning in winter.
Install winter tires that provide better traction on icy or snowy roads. Worn treads will not provide stability on wet or icy roads.
Slow down and increase following distance when roads are slick. Reduced visibility and slippery surfaces require driving at a slower speed. Avoid sudden movements and leave extra room to decelerate before stop signs or traffic lights.
Be mindful of black ice, a thin, transparent layer of ice that is difficult to spot. Be cautious, especially on shady areas, bridges, and overpasses. Reduce speed and avoid sudden maneuvers if you encounter black ice.
Remove all snow and ice from your vehicle, including the roof, hood, windows, and lights. This prevents snow from obstructing your vision or becoming a hazard to other drivers.
Use your headlights in winter weather and overcast conditions, even during the day, to increase visibility for yourself and others.
Avoid cruise control: it’s essential to have full control of your vehicle and to be able to react immediately if road conditions change. If you begin to skid, turn the vehicle in the direction you want to go. Ease your foot off the decelerator, and do not hit the brakes.
Always have a good ice scraper – driving without clear visibility through your windshield or windows is dangerous. Know the weather conditions you may encounter and plan ahead.
Turn on hazards to increase visibility when pulling over due to unsafe driving conditions.
Have a safety kit in the trunk of your car, just in case – including blankets, a safety vest, warning triangle and flares.
Home Safety
Cold weather isn’t just a hazard for slips and vehicle crashes, it can also pose a threat to your home. Here are some tips for avoiding frozen pipes or other winter weather related claims, as well as some additional items for your winter checklist.
Inspect and seal gaps: check doors, windows and other openings for air leaks. Use weatherstripping or caulk to seal gaps and prevent cold drafts from entering your home to avoid a bloated heating bill this winter.
Service your heating system. A routine, professional inspection and maintenance can ensure your furnace is performing at peak efficiency this winter.
Schedule a cleanout of your ventilation system. Poor airflow can not only reduce efficiency of your HVAC, dust and debris in your ducts can also pose a fire hazard.
Clean and inspect chimneys and fireplaces. This eliminates the risk of chimney fires and ensures proper ventilation.
Insulate exposed pipes to reduce the risk of freezing. Unheated areas, such as the attic, basement, crawl space or under sinks are at the greatest risk. Consider allowing faucets to drip during extremely cold nights to prevent pipe bursts.
Clear debris from gutters and downspouts to allow proper drainage. This prevents ice dams from forming, which can lead to water damage and roof leaks.
Stock up on winter essentials: create an emergency supply kit that includes items like extra blankets, flashlights, batteries, non-perishable food and bottled water. Be ready for potential power outages or severe weather events.
Test smoke and carbon monoxide detectors. Replace batteries in smoke and carbon monoxide detectors and test them to ensure they are functioning correctly. These devices are crucial for early detection and protection.
Properly store outdoor furniture and equipment. Clean and store outdoor furniture, gardening tools and equipment in a protected area. This extends their lifespan and prevents damage or rust caused by harsh winter conditions.
Insulate your home. Check your insulation and add more if necessary, especially in the attic and walls. Well-insulated homes retain heat more effectively, reducing energy consumption and heating costs. Consider window wraps: these plastic sheets block drafts during cold months to help keep your home energy-efficient.
We hope you found these tips to be helpful. Follow this guide and you’ll be on track for a safe winter. Spring weather will be here before you know it!
This article was produced in a partnership with KPA.
This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.
Conquer the Stresses of Open Enrollment With These Tips for HR Pros
Open enrollment season has arrived for many U.S. companies, and if you are responsible for managing your organization’s benefits program, you already know how stressful this time of year can be. The tasks and responsibilities involved with guiding your colleagues through this process can unfortunately have a major impact on your physical, mental and emotional health. And you know that each year presents its own unique challenges.
To help benefits administrators navigate this challenging period, we have some guidance for promoting your overall wellbeing throughout the open enrollment timeframe.
Recognizing Signs of Stress
If you’re an HR pro, you already recognize the stresses and challenges that come with your role. This time of year, it can feel like a whirlwind of stress and pressure — you’re searching for candidates to fill an open role, dealing with the demands of leadership and trying to build and maintain a great organizational culture, all while juggling the challenges of open enrollment.
Dealing with stress is impossible if you can’t recognize the differences between routine challenges of the job and feeling truly overwhelmed. Some of the short-term warning signs of excessive work-related stress can include [1]:
Headaches
Muscle tension
Neck, back or chest pain
Elevated heart rate
High blood pressure
Difficulty sleeping
Loss of appetite, or overeating comfort or convenience foods
Lack of concentration or focus
Memory problems or forgetfulness
Irritability or short temper
Anxiety
If you don’t deal with stress, the long-term impact on the body and mind can be even more significant [2]. Each of the short-term issues listed above can lead to more serious health issues over time. For example, difficulty sleeping for months will greatly impair your body’s ability to heal and recover. High blood pressure could lead to heart attack or stroke. Chronic stress can even impair your immune system, causing you to be more susceptible to illness [3].
It often seems those who help others have the most trouble asking for help themselves. In the next section, we’ll cover some techniques and practices to help manage work-related stresses.
Managing Stress
In the moment, it’s easy to get caught up in trying to solve a problem, even when you may not have an immediate solution. That feeling of being overwhelmed can be a lot to handle. There is no one-size-fits-all approach to managing stress. Understand that the guidance below can provide benefits, but what works for you may not work for another.
Use Your Support Network Remember that you are not alone, even when it may feel like it, and that the best solution to dealing with stress is working with others to solve the problems causing tension in the first place. Any problem can seem overwhelming when you don’t see a clear solution. But sometimes, just talking through a challenge with a trusted colleague or even a loved one can provide clarity and give you an opportunity to view a setback with a little more insight.
Practice Self-Care Self-care takes many different forms, but regardless of how you like to relax and pamper yourself, it’s important all the same. It doesn’t have to be a spa day or lighting candles by the bubble bath. Maybe it’s taking a weekend trip to see family or just spending time with friends at a concert or sporting event. Whatever it is that brings you happiness and gives you a break from the stresses of your personal or professional life, make sure you take the time to invest in yourself.
Exercise Exercise has been proven to help manage both acute and chronic stress [4]. It has also been shown to cancel out some of the long-term effects of stress, such as a diminished immune system [5]. It also provides a break from stressors and an opportunity to recharge while your mind is focused on your workout or activity.
It’s important to find something you enjoy doing — if you don’t enjoy running, for instance, a 30-minute jog will probably just stress you out even more. Know your strengths and interests, and try many different things to find an activity that suits your preferences.
Mindfulness Mindfulness is the ability to be fully conscious and aware of where you are, what you’re doing and taking the time to process your surroundings instead of being reactive [6].
Think of a time when you’ve experienced a setback or hurdle and reacted with frustration. Mindfulness is when we seek balance in those moments and experience them rationally, not emotionally. When we are mindful, we are able to reduce stress, enhance our performance, gain insight and have awareness of our own wellbeing.
Studies support this practice: reframing your thoughts can help you reduce stress. Next time you find yourself feeling overwhelmed or reacting strongly to a setback, try to take a moment to process these feelings logically, rather than emotionally.
Box Breathing This yoga technique is employed by many athletes and is even incorporated into training for Navy SEALs. It could also be considered a form of mindfulness. The practice is simple; do each of the following while slowly counting to four.
Breathe in through your nose
Pause and hold your breath
Exhale slowly through your mouth
Pause and hold your breath
Repeat this several times, giving focus and attention to your breathing. Studies show that regulating your breath can lower levels of the stress hormone cortisol and reduce heart rate because it activates the parasympathetic nervous system, controlling the body’s ability to relax.
Regulating your breathing can have a calming effect, and directing your mind to focus on the four-count, as well as feeling the air enter and exit your body, can take your mind off external stressors. Practice this skill: working on it can prepare you to experience its benefits in times of hardship. It can even be a great practice to calm down and evict busy thoughts before bed.
Taking Breaks Knowing your own best practices for productivity at work can present its own unique challenge. No matter your preferences, one thing is certain: taking breaks can not only improve your mood, it can make you more productive in the long run [7].
Being able to detach from a project and return to it later with renewed focus and energy can help you secure wins throughout the day, instead of feeling the burden of responsibilities piling up. In today’s connected world, it’s also likely you’ve felt pressure to be “on” evenings and weekends. You need to be able to detach from work in your down time, your mental health depends on it. Prioritizing breaks, downtime and setting boundaries can have a profound effect on your wellbeing.
Journaling Writing down your thoughts and feelings can help you be more aware of underlying beliefs and behaviors. Taking time to digest events in your life can help you define them more clearly and bring meaning to them. It can also help you resolve feelings lingering in your mind, and sometimes even uncover thoughts or beliefs you weren’t consciously aware of. Take time before bed or after a busy day at work to record thoughts and occurrences. It could even just be as simple as making a list of things you accomplished that day, versus fixating on items left unfinished.
Remember, You’re Not Alone
Remember that all across the country, there are HR pros like you feeling the same stresses related to open enrollment. It’s normal to feel overwhelmed from time to time, but that doesn’t mean you’re helpless. While it’s just about impossible to completely avoid work-related stress in any profession, hopefully these tips can help you now and in the future. You’re not alone — and open communication with your support network, practicing self care and being aware of your emotions can go a long way towards lowering your level of stress.
This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.
Level Up Your Organization’s Cyber Security With These Safety Tips
One cyber attack could derail your organization, costing you not just time and money, but also damaging your reputation. According to the FTC, phishing schemes cost individuals and businesses in the United States over $330 million in 2022 alone, more than double the reported losses from the previous year and a 500% increase over a five-year period.
Unfortunately, businesses and their employees are targeted with advanced email phishing attacks and text message scams every single day. These tactics have become much more common because they are effective ways to exploit personal and corporate security.
There are many factors that have led to the increase in these schemes, but what’s most important is being able to identify these and avoid the consequences of falling victim.
Recognize Phishing Attempts
To start out, here are a few tactics that are commonly used by potential scammers. It’s possible you will already recognize some of them. Being aware of these tactics can help you avoid them.
They Pretend to Be Someone You Know You receive an email or text claiming to be from a friend, colleague or associate who asks you to click a link or share information.
An Urgent Request The message you receive claims it’s an emergency situation — for example, a supervisor saying a task needs to be completed immediately. This lowers your defenses and plays on your desire to help them.
It Looks Real The message comes from an email address that looks legitimate at first sight, but upon closer examination doesn’t match the company website or name. Scammers use familiar names and hope you won’t look at every detail to notice misspelled URLs or false email addresses.
Login Scams Often, scammers will try to gain access or sensitive information by claiming there has already been a fraudulent login attempt on an existing account. In your haste to secure or recover your account, you may actually be entering sensitive information on a fake website, giving the hackers access.
QR Codes It’s very possible you would recognize a false website URL, but a QR code is much harder to evaluate. Spam filters also have a harder time assessing images included in attachments. Malicious QR codes have been used to steal login credentials.
Avoid Falling Victim
So how do you avoid becoming the latest victim of a phishing scheme? Here are a few things to keep in mind. These attacks are becoming so common that it’s not a matter of if, but when you or your business will be targeted.
When In Doubt, Call If you receive a suspicious email or text, contact that person through a trusted method that you know isn’t compromised. Even the number in the signature line of their email could be fake, as it is possible to invade an ongoing email chain, where impersonators can change contact information to make sure the call comes to them.
Be Aware of Impersonation Artificial intelligence introduces greater risk to unsuspecting victims. Scammers are now using AI to craft specific and pointed email and text message-based attacks. Additionally, attackers are now able to replicate voices by using past recordings.
Always Use Two-Factor Authentication Most online services offer two-factor authentication, and many now require it. This system offers additional security by requiring an additional verification after entering your password like a code sent to your phone, a security question or a scan of your face or fingerprint. While we can control and implement two-factor authentication for services that we control (company email, for example), we cannot always control third-party software solutions and websites that may not offer this capability.
Password Best Practices Never use the same password in more than one location and avoid holding passwords in spreadsheets, documents on your computer or phone, or writing them down on a notepad. Using strong, unique passwords makes it more challenging for a hacker to gain access in the first place and limits the damage they can do if they secure access to one site.
Email Account Access Keep in mind that cyber attackers can gain access to the accounts of legitimate business contacts. If something feels off about an email from a legitimate contact, pause and report it. An example of this may be a customer or vendor requesting you to send funds to a different bank account.
Keep Software & Systems Updated Always keep operating systems and applications updated to the most recent version, including patch updates. It’s best to institutionalize these updates, either having all software automatically update when a new version is available or by having your IT department deploy these updates.
Firewalls & Antivirus Protection Prevent attacks before they happen with antivirus software that can detect and mitigate viruses and malware. Firewalls can prevent bad actors from accessing vulnerable parts of your network.
Routine Employee Training Conducting regular training for all employees will support the entire organization’s ability to resist cyber attacks. If employees are able to identify a threat, you significantly lower your risk of a breach. Empower everyone in your organization by at least providing basic training on security best practices.
While many of these tips and recommendations may seem like common sense, these attacks happen every day and even those with experience and training could be susceptible under the right circumstances. Gregory & Appel is CCIC-certified, meaning we can provide the guidance to help organizations prevent and respond to cyber attacks with incident response plans.
If you need guidance, connect with your risk advisor and get up to speed with the latest in cyber risk management.
This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.
Prevent Cooking Fires With These Best Practices
Today marks the start of the National Fire Protection Association’sannual Fire Prevention Week. This year’s theme is Cooking Safety Starts With You. Pay Attention to Fire Prevention.
To support this national agency’s efforts, we’ve gathered some important cooking tips to remember. While many of these tips may seem like common sense, these helpful reminders can help prevent damage to your home and property and even save lives.
Why It’s Important
According to NFPA, cooking fires accounted for 49% of all home structure fires between 2017 and 2021, by far the biggest cause of both fires and injury.
Additional statistics of note:
Average of 166,430 home fires are caused by cooking per year – an average of over 450 per day [1]
Ranges or cooktops account for 3 of every 5 home fires involving cooking equipment [2]
There were a total of 520 civilian deaths and 4,520 injuries from 2017 to 2021 [1]
Cooking fires cost over $1.2 billion in property damage [1]
And, according to reports by Indianapolis CBS4 and The Washington Post, house fires burn significantly faster today than they did in the past due to higher use of synthetic materials in homebuilding and in items like furniture and carpeting used in the home. That means cooking safety is more important now than ever.
Top causes of home cooking fires. Additional context provided in next section.
Tips for Fire Safety
With that information in mind, let’s cover some important safety tips that can help reduce risk while cooking.
Never leave cooking unattended. If you leave the kitchen for even a short period of time, turn off the stove. Unattended cooking is the most common cause of home cooking fires (28%) and accounted for 48% of deaths between 2017-2021. [3]
Keep cooking area free of flammable materials. Hand towels, oven mitts, food scraps, plastic and wooden utensils, food packaging and cooking oils should all be kept well away from flames and hot surfaces.
Regularly clean stovetop and burners. Even a small amount of grease can be a hazard, and residue can build up over time. This causes 9% of cooking fires. Always wait until cooktop has fully cooled to clean.
Have a “kid-free zone” of at least three feet around the stove and area where food is being prepared. Any children in the kitchen should be supervised at all times.
Double-check to make sure oven and stove are turned off. In a busy kitchen, it’s easy to pull a pot or pan off the stove and forget to switch off the burner. Or, maybe you turned off the cooking element but didn’t turn the knob all the way off. Always double-check. This causes 7% of home cooking fires.
Have a working fire extinguisher — and know how to use it. If you choose to put out a small fire yourself be sure you have a clear way out and that family members are already evacuating and safe from danger. Fighting the fire can put you and others at risk.
When in doubt, get out. If a fire has already started to spread, the safest choice you can make is to evacuate the home. Close the door behind you to reduce airflow and slow the spread of the fire. More than half of non-fatal injuries occur when people try to control the fire themselves. [3]
Always set a timer. Losing track of how long something has been on the stove could spell danger, especially when frying or cooking with oil. Overheating or spilling food in an oven can also be a hazard.
Other Things to Remember
While the following tips and reminders aren’t directly related to cooking safety, this time of year is a great time to remember and plan for the following:
Test and replace batteries in fire alarms regularly. Pay attention to manufacturer guidelines for servicing smoke detectors. If it takes a home fire to realize your smoke detectors don’t work, it’s already too late.
Know and rehearse your escape plan. Especially for families with younger children, know how to escape each room of your house in the event of a fire. Practicing this plan with young children could make a difference. Don’t stay to secure valuables — things can be replaced, people can’t.
Take care of yard clutter, especially around fire pits and grills. Trash, yard trimmings, fallen leaves, wood piles and dry grass can all be instant fuel for a fire. Don’t burn leaves. Not only does this pose a risk to the environment and to your health, it can cause a fire.
Be careful with space heaters. Temperatures are dropping and before you know it, the cold of winter will arrive. If you’re using a space heater in your workspace, basement or bedroom, keep it at least three feet away from combustible materials. Turn it off and unplug it when not in use. Always plug directly into a wall outlet, and keep it out of walkways where ity may be a tripping hazard.
Replace HVAC filters. Always adhere to the manufacturing recommendation for replacing your filter at regular intervals. An old, dirty filter can restrict airflow through heating ducts and put you at risk.
If you are looking for more cooking & fire safety tips, more information can be found at NFPA.org.
[1]: NFPA’s Home Structure Fires research, April 2023. [2]: NFPA’s Home Cooking Fires infographic. [3]: NFPA’s Home Cooking Fires research, September 2023.
This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.
Here’s Why a Group Health Captive Is Worth Considering
For the purposes of this article, we’ll assume two things are true:
Your organization invests significant time and money into offering employees a high-quality health insurance program in order to attract and retain top talent.
Managing the cost of this investment is incredibly challenging.
If you are fed up with the huge increases in premiums that have become so common in today’s insurance market, you are far from alone. Another common frustration is the lack of insight you likely receive into claims data on your plan. Or maybe this better describes your situation: you currently self-fund your health plan and are overwhelmed by the stress of managing volatile, high-cost claimants?
If you answered yes to any of these questions, a group health captive arrangement is an alternative risk model worth your consideration.
Captives are growing in popularity, and it’s easy to see why. This strategy gives employers a better chance to manage the volatility that can occur with a group health plan, with the end result being a more competitive health insurance plan to offer current and prospective employees.
While the sweet spot has historically been in the 50-250 employee range, larger employers are finding success with group health captives because of the unique contractual financial protections built into the solution.
How It Works
The key: keep things simple. Group health captives come in all shapes and sizes, but they all operate in a similar manner. Members of a captive use their shared size and scale to pool risk in the stop-loss market in an effort to improve pricing terms and add contractual protections such as a competitive annual rate cap and can even offer a provision to help you avoid a new laser at renewal.
In most cases you’ll keep your key partners in place, including your medical TPA, your health plan network and your pharmacy benefit manager. Captive members also benefit from having access to national best-in-class cost containment partners which can lead to lower healthcare costs. Finally, captive members have opportunities to network at annual member meetings, where they can learn best practices to implement with their own organization.
Here are a couple more things to consider:
Say your organization fully-insures its health plan and you are interested in looking at self-funding with a captive arrangement. In that case, it is recommended to complete a feasibility study to understand if self-funding makes financial sense at this time. Your employee benefits consultant can assist with that analysis.
If you are already self-funding and have historically purchased stop-loss insurance, the contractual provisions built into a group captive’s stop-loss contracts are often superior to what you can purchase on your own. The rate cap, in combination with a no new laser at renewal provision, can buy you enough time to plan ahead for a known, recurring high-risk claimant.
Curious if a group health captive is feasible for your organization?
This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.
