So, what’s a Risk Retention Group anyway and why do I care?
Everybody hates insurance! Or at least that’s the perception. It’s the thing states crams down your throat like Buckley’s cough medicine, insisting “It’ll make you feel better”. Yes, sure it will if you can retain it! Like Buckley’s, most of the country is only familiar with the “popular” insurance carriers. The AIG, Travelers and The Hartfords of the world.
Like the advancement of cold medicine, there has been a great expansion of “rewarding” insurance options. One option that’s skyrocketed in the last 17 years is Risk Retention Groups (RRG). Most great business ventures in the world are birthed out of lack. For RRGs, it was lack of product and/or lack of reasonable pricing for industries that have intricate coverage needs. Some of those industries are, healthcare, hospitality, educational institutions, churches and non-profit organizations. Standard carriers are often entering and departing these industries for one reason or another. However, the coverage needs remain.
Enter Risk Retention Groups, stage left! RRGs are formed by industry leaders, daring enough to fund their own insurance company and kind enough to share it with other professionals in their market. They were formed primarily to address liability coverage (general, products, benefits) issues. For many of the industries, liability coverage is often unavailable and/or unaffordable through standard carriers.
RRGs are formed by groups of business owners in an industry, like healthcare, that will fund the insurance company through stock ownership, making them the core company owners. Now on to the good stuff, rewards! Owners of an RRG can retain their underwriting profits because of low loss ratios. Owners are rewarded for properly managing their operation versus feeding the profits to the giants for their handy work!
Another benefit of Risk Retention Groups is; complete control over risk and litigation management. Unlike standard insurance carriers who control the handling of claims and make all litigation decisions. RRG owners steer the claims process and give directives regarding litigation choices. They are abreast of claims pending, potential loss trends and drivers that may affect profitability. They have a vested interest in the quality management of insured that purchase coverage through their organization.
Other benefits from an operational standpoint are; RRGs do not have to be licensed and filed in every state they do business, which reduces overhead. RRGs can also offer a stable market for coverage and rates. RRGs are a positive alternative to the residual markets. Countersignature laws for agents and brokers are not applicable. The owners call the shots and management’s signature is good as gold. Lastly, RRGs have the flexibility of unbundling services. It’s not an “all or nothing” deal.
Creating a Risk Retention Group is one way to positively impact your industry by providing an affordable alternative for coverage, while maximize benefits. The question of the day is, “Whose terms do you want to be insured under?”. Yours or the someone else’s? A Risk Retention Group might be just what you need to take your risk management to the next level!