You’re either working or have worked very hard to get your client into a captive. So what can happen if they blow it? Some clients flame out and flounder. Unfortunately, it isn’t just their problem; it becomes yours. The last thing you want to do is lose credibility, revenue, and the relationship with your client.
Don’t worry, you’re not the only one with these concerns. Thankfully, the majority of clients who join captives find success more often than not.
Captive Coalition’s sole purpose is to help independent agents learn about all things captive insurance so they can best help their clients and maintain their book of business. We’ve seen where things can go wrong. Failure doesn’t happen overnight. That said, it’s painful when failure does hit. Thankfully, this is often avoidable.
This article will teach you what failure looks like inside a captive, what causes it, how to spot it early, and what you can do as an agent to prevent it. This is about ensuring your best clients stay in the captive, stay profitable, and stay with you.
What “Failure” Really Means Inside a Captive
Failure in a captive isn’t about getting kicked out. That’s very rare. What’s more common is a slow burn that involves constant assessments, poor loss performance, no distributions, rising frustration, and a client wondering why they went with captives in the first place.
That’s failure. It happens when clients don’t hold up their end.
Three Ways Clients Fail in a Captive
There are three primary ways you can see your clients failing. These are, thankfully, preventable. Here’s what you can see:
1. They Don’t Manage Risk
This is the number one killer. Clients come in thinking the captive will magically fix everything. Then they ignore their frequency losses, refuse to implement safety measures, and act surprised when their numbers go sideways.
Captives don’t want to kick out clients. In fact, they want to see their success. Captives reward clients when they manage risk well. They’re not a band-aid for bad behavior. Clients who fail here either drain the group or rack up their own losses until they’re underwater.
2. Their Business Collapses
You can have a great client that does everything right in the captive, only to see their business tank. If they can’t pay premiums or fund collateral, the captive relationship ends. It is that simple.
This is why financial health matters just as much as risk performance. The two can’t be separated.
3. They Refuse to Participate
The captive model works when everyone is engaged. When a client ghosts the process, they fall behind. And fast. This means they’re asking no questions, don’t take any feedback, and aren’t taking action to improve their safety and risk management.
Captives are built for those who own their risk. If clients aren’t willing to do that, they won’t last.
Red Flags: What Failure Looks Like Before It Happens
If you’re keeping tabs on your client, you can see failure coming before it happens.
- Their claim counts are creeping up, especially the small ones.
- Safety audits are getting ignored.
- Monthly calls are missed or canceled.
- General “just handle it” attitude toward the captive.
These are the signs you can see early. Get involved when you can see the wheels start to fall off the vehicle.
Captive Insurers Don’t Babysit Clients
This isn’t traditional insurance. No one is holding their hand. They’ll help clients, but your clients are the ones putting things into action. Captives are for business owners who want control and are willing to earn it.
The Domino Effect in a Group Captive
Failure isn’t isolated in a group captive. One bad performer hurts everyone. It affects pricing. It also affects distributions and morale.
Don’t let your client become that person. They will face pressure in some form to leave the captive. Again, the captive wants to see their success. Guide them the best you can to help them get better.
Can a Previously Failed Client Recover?
Absolutely! But that’s only if they actively make the necessary changes. Better risk management. New Leadership. Cleaner Operations. Waiting it out won’t work.
If they leave the captive and get their act together, they might be a fit again down the road. That said, they need to prove it.
You, the Agent, Setting the Tone and Helping Your Clients
You can’t guarantee their success. That said, you can stack the deck in their favor and show them how to be successful.
- Set expectations from day one. They need to put in the work. And they need to know that.
- Stay on top of the data. Track the frequency and trend of claims.
- Have the hard conversations. If your client is showing poor performance, don’t sugarcoat anything. Have a conversation so they can improve.
- Coach them like an owner. Remind them this is their captive, and they’re the owner.
You can set up your clients for success inside a captive. And make sure they know how to see success.
Making Sure Clients Succeed With a Captive
The captive model rewards the right kind of business owner. The wrong owners are punished for their negligence. If your client wants control, savings, and long-term value, they’ll have to put in the work.
If you’re unsure if your client qualifies for a captive, use our Captive Insurance Prequalification Checklist to evaluate your clients before moving forward.
Finally, become a member of Captive Coalition for FREE to access tools, resources, webinars, and training to learn more about captives. That way, you can help your best clients and strengthen your book of business.
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