The Western Journal 2018 - 24

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FEATURE | INSURANCE

What if You Could
Get a Total Of
20% Reduction in
Insurance Costs
Annually?
BY LOIS GARDINER, CPA, FCIP, FRM

s business people, we probably don't think about insurance enough, and when
we do, the thoughts are
apt not to be too positive. For one thing, business insurance
represents a significant annual outlay, and one that seems to be getting
larger every year. For another, when
you need insurance the most - that is,
when there's been a loss - getting from
there to claim to settlement can be a
long, drawn-out process.
There's no doubt that in an increasingly litigious world, where long-tail and
liability risks are clear and present operating considerations, and where today's
building systems and techniques are
becoming ever more complex, every
mechanical contractor needs solid
insurance coverage. But have you ever
wondered if there's a better way?
That is exactly what the Mechanical
Contractors Association of Canada
24

(MCAC) asked recently on behalf of its
members. For answers, the organization
turned to Aon, a global leader in insurance consulting and innovation. MCAC
retained Aon to perform a study on the
feasibility of a so-called captive, which,
on the most basic level, operates like an
insurance company, but is owned by an
organization to insure its own risks. For
a member-based organization such as
MCAC, the potential benefit is clear: a
captive can lower costs and provide
insurance coverage more efficiently by
using the purchasing power of many
companies together.
Over the course of the last two years,
Aon's experts assessed the potential of
an insurance captive for MCAC members, and their actuarial analysis and
financial models confirmed that it was
indeed a more than viable option (particularly given our six-year history that
shows a very positive outcome in relation to the loss ratio). Now, MCAC is

partnering with Aon to launch a group
insurance captive, available exclusively to
all members to join on a voluntary basis.
So what might this mean for your
business? As we noted above, a captive
is like an organization's own insurance
company; in MCAC's case, it will operate as a wholly owned subsidiary of the
association, and will be available to all
members that meet specific criteria to
insure their risk. Applying is no more
complicated or time-consuming than it
is when you apply for renewal of a regular
insurance policy. MCAC is proposing that
the captive will insure qualifying members
in five main areas - commercial liability, automotive liability, property, crime
and contractor's equipment. Longerterm, it's envisioned that surety coverage will be provided when the captive
is able.
So what makes participating in a captive different from just buying from an
insurance company? In short, insuring
through the MCAC captive can be less
costly, in terms of both time and money.
Members will be able to access broader
coverage than is available in the regular
insurance market. Because the pool of
capital will be held within the captive itself,
and the captive is dedicated to members,
managing claims and cash flow will be
more efficient than with traditional insurance. That translates into quicker claims
settlement. As well, the captive will have
more control over pricing in relation to the
group of companies involved - contributing to an estimated 20-per-cent reduction in program costs, which can then
be passed on to members in the form of
reduced premiums.
Finally, participating in the captive
means members can also participate in
its success. With traditional insurance,
the insurance company gets the profit;
with a captive, the members do, in the
form of a dividend. Aon projects the
MCAC captive to be profitable after its
first year, and a dividend to be available to members in one to two years
as determined by the Board. Together
with more efficient claims handling and
administration, the result could be significantly reduced costs for participating
MCAC members.
Of course, a captive doesn't come
without risks - after all, its very structure

Mechanical Contractors Associations of British Columbia, Alberta, Saskatchewan & Manitoba 2018



Table of Contents for the Digital Edition of The Western Journal 2018

Message from MCA Canada
Message from MCA Alberta
Message from MCA British Columbia
Message from MCA Manitoba
Message from MCA Saskatchewan
Innovation in the Mechanical Industry
Four MCA Presidents Speak
Membership Advantage Programs
What if You Could Get a Total Of 20% Reduction in Insurance Costs Annually?
The Western MCAs – Year at a Glance
The Western Journal 2018 - Intro
The Western Journal 2018 - cover1
The Western Journal 2018 - cover2
The Western Journal 2018 - 3
The Western Journal 2018 - 4
The Western Journal 2018 - 5
The Western Journal 2018 - Message from MCA Canada
The Western Journal 2018 - 7
The Western Journal 2018 - Message from MCA Alberta
The Western Journal 2018 - 9
The Western Journal 2018 - Message from MCA British Columbia
The Western Journal 2018 - Message from MCA Manitoba
The Western Journal 2018 - 12
The Western Journal 2018 - Message from MCA Saskatchewan
The Western Journal 2018 - 14
The Western Journal 2018 - 15
The Western Journal 2018 - Innovation in the Mechanical Industry
The Western Journal 2018 - 17
The Western Journal 2018 - 18
The Western Journal 2018 - Four MCA Presidents Speak
The Western Journal 2018 - 20
The Western Journal 2018 - 21
The Western Journal 2018 - Membership Advantage Programs
The Western Journal 2018 - 23
The Western Journal 2018 - What if You Could Get a Total Of 20% Reduction in Insurance Costs Annually?
The Western Journal 2018 - 25
The Western Journal 2018 - The Western MCAs – Year at a Glance
The Western Journal 2018 - 27
The Western Journal 2018 - 28
The Western Journal 2018 - 29
The Western Journal 2018 - 30
The Western Journal 2018 - cover3
The Western Journal 2018 - cover4
The Western Journal 2018 - outsert1
The Western Journal 2018 - outsert2
The Western Journal 2018 - outsert3
The Western Journal 2018 - outsert4
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http://www.nxtbook.com/naylor/MABA/MABA0016
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