Control and cost savings are the primary drivers for companies with employee benefits in their captive, according to a Willis Towers Watson report.
The report found that 44 percent of companies with employee benefits in their captive said their main driver for this was to control and improve their claims data to help with ongoing cost management.
It also found that the number of companies that see the main driver as cost savings dropped from 67 percent in 2015 to 44 percent in 2016.
It suggested that the use of captive insurance companies for financing employee benefits continues to evolve as companies increasingly go beyond using their captive vehicle purely to save money on their annual employee benefits bill.
Mark Cook, director of Willis Towers Watson, said: “There has been a clear evolution in the rationale for companies to include employee benefits in their captives.”
“The initial motivation for using a captive is often the simple desire to save money on the ever-increasing cost of providing employee benefits. For some companies these ongoing cost savings are all they require from their captive, but many are developing their use and finding additional benefits.”
In the study, Willis Towers Watson found that 50 percent of participants use their captive to provide death and disability benefits as well as healthcare or medical benefits.
It also showed that 47 percent of employee benefit captive users indicated that they are also considering a captive pension transaction in the future. Of that figure, 41 percent said they would consider it in the next three to five years and 6 percent in the next 12 months.
Cook added: “We continue to see a broadening use of employee benefit captives. Companies continue to explore further areas in which they can take on more of the risk and manage it internally, in order to save money and mitigate risk.”
“Also, many companies now recognise captives’ importance as a tool in benefit cost management, by identifying and addressing the key cost drivers. Successful employee benefit captives are able to stabilise and slow down the increase in benefits costs, in an environment where medical costs continue to increase.”
