This article was adapted from Mr. Jones' “University Day” presentation at this year's annual convention of the American Association of Managing General Agents. The event took place in May in Orlando, Fla.)
MANY businesses have become comfortable with risk. Consequently, they no longer consider insurance to be the answer for everything. They also regard insurance as a significant expense–and unpredictable in its own right. Hard markets, for instance, drive business owners crazy. When premiums go up 400%, the increase comes right off the bottom line–and they don't like it. They want steady, predictable profits and more control–and they are willing to accept more risk to get these things.
In other words, they want alternatives. The proliferation of captives and risk retention groups is the result of buyers who have said, in essence, “You guys in the insurance business didn't give me the answer to my problem, so I'm going to invent my own.”
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