Businesses have long had to contend with the reality that insurance is going to cost them something. They have to price in these costs because without insurance, these business people would often find themselves in too much danger. Looking to eliminate risk, business leaders of late have found new ideas to help generate more revenue. Those ideas are relatively simple to understand. Business leaders are considering captive insurance and becoming their own insurance provider. This is different from self-insuring, which has long been a choice for the wealthiest companies. It is more like taking control of the insurance industry to generate better opportunities.

At the end of the day, businesses are giving up profit to insurance providers that do not really understand the dynamics of their particular industry. This can be hugely problematic for some, who want to work with insurers that know their product or service. For companies in industries without specialized insurance, captive insuring provides the chance to band together to collectively insure. Captive insuring a process by which companies in an industry will form their own insurance pool and keep the profits when the year is over. It gets back to the heart of what insurance was in the beginning. That was a time when businesses insured themselves and did not give up money to the insurance industry.

Captive policies work well because companies can design insurance that is specific to the needs of their own industry. A general insurance company may not understand the dynamics of the boat rental business, for instance, so their insurance polices may not completely meet the needs of the companies within that industry. Accordingly, when companies are able to band together, they can come up with new ideas. More important is the financial gain. Captive arrangements truly allow these companies to “capture” the profits that would have otherwise flowed right to the big insurance players. This expands the potential for revenue production among big companies. They can use this source to pad the bottom line while also gaining the certainty of insurance.