As the markets shift and institutional consumers look for ways to become more efficient, certain ideas have emerged to provide the potential for a more sustainable future. One of those ideas is captive insurance. The captive marketplace for insurance is based on the idea that if insurance purchasers are able and willing to cut out the middle man, then these purchasers will make out better on the back end. Insurance, after all, is just the pooling of risk, with a large group of people putting money into the middle that can be shared if and when things go wrong. This particular type of insurance looks like it could be a model for other industries to follow.
How the captive insuring industry works is relatively simple. All of the companies in a given industry come together and essentially self-insure in their own little group. The profits that they make by forming their own insurance cooperative are then redistributed among the participants. While it works on the surface like a traditional insurance company, the “company” is really just a body of shareholders who are able to win twice with this particular deal. It represents an excellent way of companies to produce another stream of profit while still taking advantage of the benefits of insurance coverage.
Other industries may look to follow this model in order to give companies the chance to share in their own spoils. Rather than being easy marks who are losing out on money in order to take advantage of critical services, companies could come together in such a way that win-win situations are created. More than that, it may be possible for companies to then pass on the savings they receive to their customers or even their employees.
One great example of an industry where this might be possible is the legal industry. Lawyers have to pay very high fees in order to insure themselves against malpractice claims. At the end of the day, they end up having to charge higher rates to their clients because of these high insurance costs. By pooling together with other lawyers to creative a captive industry to share risks, lawyers may have a chance to become more efficient. This type of business behavior has proven to be a positive for markets overall, and it may represent the future for many companies.