Improved claim data drive use of employee benefit insurance captives

ARLINGTON, Va., Aug. 03, 2016 (GLOBE NEWSWIRE) -- 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 benefit bill. According to a study by Willis Towers Watson (NASDAQ:WLTW), a leading global advisory, broking and solutions company, the primary driver for nearly half (44%) of companies with employee benefits in their captive is to control and improve their claim data to help with ongoing cost management. This is up from a quarter (24%) in last year’s study. Conversely, the study finds the percentage of companies that cited cost savings as the main driver dropped from two-thirds (67%) in 2015 to 44% in 2016.

“There has been a clear evolution in the rationale for companies to include employee benefits in their captives,” said Mark Cook, director at Willis Towers Watson. “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.”

More companies are using their captive as a strategic tool to manage risk and benefit costs proactively and to analyze claim data to identify and address key cost drivers. Many also look to employee benefits as a source of diversification to more traditional lines of risk typically included, such as property, casualty or business-related risks.

Willis Towers Watson polled over half* of the employee benefit captives operating globally as part of its specialist Captive User Group** forum, held in London and New York in May and June. The study found that half (50%) of those questioned use their captive vehicle to provide death and disability benefits as well as health care or medical benefits.

Proactive risk management was also reflected in the influence employee benefit captives have over pricing, with half (50%) indicating that their captive has full determination or significant influence over pricing rather than relying purely on local insurers’ underwriting. Looking ahead, nearly half of the employee benefit captive users (47%) indicated that they are also considering a captive pension transaction, either in the next three to five years (41%) or within the next 12 months (6%).

“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,” said Cook. “Also, many companies now recognize captives’ importance as a tool in benefit cost management, by identifying and addressing the key cost drivers. Successful employee benefit captives can stabilize and slow down benefit cost increases in an environment where medical costs continue to increase.”

“Our own Global Medical Trends report from earlier in the year shows that the average global health insurance premium increased 7.5% in 2014, 8% in 2015 and is estimated to grow by over 9% this year. Captive users recognize this trend: Over three-quarters of those we questioned had noticed a trend toward increasing medical insurance claims among their employees. So the savings available to companies that run a successful benefit captive can be significant,” said Cook.

Notes to editors

*Willis Towers Watson received responses from 41 representatives out of the total 80 employee benefit captives currently operating globally.

**Willis Towers Watson’s Captive User Group runs twice a year — once in Europe and once in the U.S. The group consists of 700 specialists (typically from finance, risk, insurance, HR and benefits) who all have an active interest in the captive financing of employee benefits.

About Willis Towers Watson

Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at

Media contact Josh Wozman: +1 703 258 7670

Source:Willis Towers Watson Public Limited Company