One of the hardest times for businesses was in the 1980’s when they had trouble obtaining liability insurance and other types of commercial insurance coverage. Since it is imperative for business owners to have business insurance to take care of unseen predicaments that lay in their future path, new vehicles for transferring risk, such as captive insurance companies, were developed.
A captive insurance company is a type of insurance entity that is created by a parent company, group or trade association just to make sure that the risks of its owner or owners are insured. A great example of this was the development of Risk Retention Groups (RRGs) that were established for the purpose of providing liability insurance for the owners or organizers for a group of businesses or institutions in the same line of business or same profession.
A Risk Retention Group (RRG) is a policy issuing liability insurance company that is owned by its insured member’s and formed under the Liability Risk Retention Act of 1981, as amended in 1986. The Liability Risk Retention Act (LRRA) is a federal law that helps U. S. businesses, professionals, and municipalities create their own solutions for liability insurance. A primary RRG requirement is that their Members must be in the same or similar business or profession and have similar or related liability exposures among each other. Just as the name stated, LRRA restricts coverage provided by a Risk Retention Group to liability coverages only.
Why be insured by a Risk Retention Group? As insurance companies that are owned and run by their members; some of the advantages that you can benefit from Risk Retention Groups as a dentist include:
• Retained profits by members/policyholders,
• Enjoy insurance at lower rates,
• You get to enjoy broader coverage than what you can benefit from other regular insurance markets,
• There are also great risk and loss control management programs,
• Reinsurance markets access,
• Coverage stability,
• Shared Interests among members – this will allow them to help one another.
The advantages of dentist-owned and operated insurance companies are numerous, especially for single specialty programs. With a dentist-owned insurance company, the dentist led board of directors has compete control over the program. The results are savings, materialized through improved claims experience and efficient operation, returned to dentist-policyholders wither in the form of dividends or reduced premiums Financial success is also found in many cases where dentist-owned companies vigorously defend their insured’s when peer review indicates that negligence was nonexistent, rather than following the route of commercial companies who are too often willing to settle unwarranted and frivolous claims, despite the resulting effect on the dentist’s professional reputation. In addition, since dentists examine the claims, dentist-owned companies use this information to develop effective and acceptable risk management programs.
Today, RRG’s have become solid financial enterprises in the market place as is evident in the fields of Anesthesia, Dentistry, Emergency Medicine, Gynecology, Obstetrics, Ophthalmology, Oral Surgery and Pediatrics. Most importantly, RRG’s maintain their strong commitment to providing a safer and more cost-effective healthcare environment. Risk Retention Groups have provided smaller businesses, such as healthcare professionals, a path to a more cost-effective risk transfer approach. For a dental practice, partnering with their peers in a Risk Retention Group provides many benefits.