The Challenge:Unfortunately these days, sticker shock caused by insurance renewal quotes seems to be the norm for employers of all sizes and industries. Spring was contacted by a large, national electric utility that was facing a massive increase in their life insurance renewal rates. Their employee benefits, risk and finance groups challenged Spring to find an alternative solution that would take some of the sting out of their renewal.
Spring explored a number of alternative funding solutions including fully insured loss sensitive products, self-insurance and captives. We determined a captive feasibility study was a logical first step in identifying cost savings. This research would help our team determine if which funding method was most appropriate.
In the captive feasibility process, our actuaries and consultants looked at several years of experience data, including premiums, claims, expenses, and exposures. The actuaries calculated the expected savings that would result from insuring life insurance in the captive.
The result of the funding feasibility study with a captive in the mix was that the utility had a robust bargaining chip in their negotiations with the current life insurance carrier. If the carrier did not significantly reduce their quoted premiums, the utility had the captive solution as an option.
In the end, the life insurance carrier reduced the quoted premiums, saving the utility millions of dollars per year.
Using the information gathered in the feasibility study, the utility was able to negotiate much lower fully insured rates. The feasibility study was a critical component of this negotiation, which resulted in the company saving over $10 million over a four-year period.
The utility was very pleased with the results of this project and has engaged Spring on a number of additional projects since.
Got a question or concern about the funding of your company’s life insurance? We can help. Contact us today and a member of our consulting team will be in touch soon.