Captive management is a multi-faceted endeavor with two basic objectives: to manage risk and preserve assets for the insured. One of the primary aspects of captive management is the matter of underwriting. Regardless of premium rate structures and other aspects of captive management, the functionality of the underwriting system can make or break the captive.
Before spending thousands of dollars on insurance software, including insurance policy software, captives may find that partnering with a third-party underwriting administrator makes better sense.
The Challenges of Underwriting
The process of underwriting carries a plethora of risks in itself. Policies should be adopted, followed, and updated as needed in order to make sure that all underwriting decisions are fair, consistent and within all legal and regulatory parameters as provided by law.
Captives have a unique challenge in underwriting administration in that they not only need experienced and knowledgeable underwriting staff, but they also need insurance software that can support them. This type of software can be expensive to purchase, difficult to install, and in constant need of updating for regulatory compliance purposes.
A Better Solution
Captives across the country are finding that outsourcing the administration of underwriting to a company that specializes in this type of service can save thousands of dollars and assure better service than trying to maintain an in-house underwriting department.
Some of the services that 3rd party underwriting providers often encompass may include:
- Administrative services at the front end
- Corroboration with captive management to develop a rating and premium structure that fits well with the captive
- Providing analytic reports on a regular basis regarding risk exposures, control of potential losses, and management of risk
- Issuing certificates of coverage as applicable
- Preparing and presenting status reports to boards of directors and other members of executive management
Solutions For Multiple Challenges
Captives are wholly-owned by the entities who are insured by them to mitigate risk and preserve capital to the greatest extent possible. When it comes to underwriting, captives can quickly lose their competitive edge if they choose to administer underwriting in-house. Staffing requirements, including underwriters and technology personnel, can be cost-prohibitive and the software, along with the necessary accompanying hardware, can be expensive as well. And, to compound the issue, some captives provide more than one type of coverage.
Choosing to partner with a company experienced in providing insurance solutions for smaller insurance companies and captives can be a wise decision. This type of company usually administers its insurance policy software through the cloud, and the services are kept up-to-date allowing management to keep a better handle on risk exposures and potential losses.