Every successful risk management strategy should include insurance. The first thought is to incorporate traditional insurance in your plans, but not every business benefits from it. If more companies took a look into risk retention and its benefits, they would understand why it may be a more logical part of their business process.
Risk Retention Explained
Different companies have different risks depending on the industry. Some have one detrimental risk or several high level risks. For instance, a hospital would have more risk—and more in depth risk— than a retail store. When a business decides to take charge and assume their own risk, they also choose not to place that burden on an outside insurance company.
How it Works
Assuming your own risk could include paying a deductible, building a reserve or escrow account, risk prevention, or self insurance. Without making a transaction with an outside insurance company, businesses plan for the unexpected by making sure funds are in place to fully or partially cover losses from monetary claims.
With risk retention programs, you have the luxury of more control over customizing insurance products to meet your needs. This solves the problem of no access to liability insurance for your industry due to rising costs or elimination within the market. Legislation allows these programs to adapt regular insurance laws or captive laws for that particular state.
Liability insurance products that fall under the RR category are:
• medical malpractice
• errors and omissions (E&O)
• professional liability
• product liability
Benefits of Risk Retention for Your Business
A wide range of benefits stem from this process. Businesses could have ownership in the company. Companies of the same industry can collaborate to form their own insurance company versus paying someone else. Shifting that risk will encourage the organization to see the importance of loss prevention and be more proactive.
They could also save money on the cost of premiums. Traditional insurance companies base insurance premiums on the cost of risks that could occur far in the future. This process reduces the price by using costs of common risks nearer in the future. Saving money with risk prevention will cut expenses on your overall bottom line, which will take pressure off your cash flow.
The Importance of Risk Retention
The most significant reason to practice risk retention is to protect your company and its assets. Minimizing risk however possible protects company finances, branding, and reputation.
For instance, a hospital uses desktops, laptops, and other mobile devices to care for patients daily. They know eventually these products will suffer wear and tear or employees may misplace them. At that point, they have to weigh out the costs of filing a claim to replace these devices versus having a company fund for incidentals. There is also the issue of compromising company data when losing some devices. The hospital will need to carefully decide which method of risk retention will best protect the business and its patients.
Why Contact Venture Captive?
The goal of risk retention is to do what is best for everyone involved in your company. That requires careful planning and decision making. Setting up a risk retention group or joining an existing one has steps that rely on state regulations.
We are there to help you sort out options to minimize risk without draining your budget. Our expertise and proven success will bring you peace of mind as you take this important step. Contact us today to get started.