Many small business ventures find the premiums for quality liability insurance daunting and confusing. Packages aren’t one size fits all, and for those businesses who don’t have a firm grasp on their risks or exposures, it can be hard to decide what is a reasonable price. If you aren’t sure of the insurance industry, perhaps you could benefit from an RRG.
A risk retention group (RRG) is one aspect of the captive insurance industry. The cost of insurance premiums are often unrealistic for small businesses, and in the late 1970s, the federal government took steps to make liability coverage more affordable. Through acts of legislation, it became possible for businesses to take part in a form of self-insurance, where one or more non-insurance companies band together to assume the risk of the insured. Captive insurance companies have been formed around the glove and within the U.S. In fact, there are over 7,000 captives currently in operation.
The Benefits of an RRG
These groups are generally created in order to meet a specific risk management need. The beauty of the RRG is the affordability but quality coverage it provides the insured. These benefits can include:
- No market residuals
- No fronting fee expenses
- No licensing requirements
- No multi-state filing needs
Within an RRG, members are assured of competitive rates and can have direct input when there are concerns with management or litigation. Certain areas have captive jurisdiction legislation, creating stricter parameters of operation. At the very least, state-level regulatory requirements establish capital, reporting, and reserve criteria.
Quality Coverage is the Key
The only coverage generally offered is liability insurance. If your business practices leave you open to exposure in other areas, such as auto or employee benefit needs, you want to consider a more traditional form of insurance coverage. In today’s market, there is no room for error when it comes to business operations. No matter the size, a business cannot afford to operate without quality insurance.