About Telcom

WHAT IS A CAPTIVE?

For 30 years, National Telcom Corporation has represented NTCA members to the insurance community at large as an Association Captive, owned and sponsored by NTCA and its member companies. For more than twenty-three successful years of operation, more and more members have joined in an effort to enhance this insurance risk management function at the local telecommunications level.

But what has made this organization so successful? What is so special about owning a captive? In part, it comes from the same philosophy that makes a telephone cooperative work so well. “Owned by those we serve” is a common theme that we see in rural telephony. The mandate to provide excellence to your owners cannot be understated, and becomes one of the foundation blocks of a successful association captive. But there are specific aspects that lie just below the surface that make a good association captive of great benefit to the membership.


Excellent Coverages

When the insurance community begins to lose interest in the risks that are specific to your industry, how do you negotiate these coverages back into your package? How do you include new exposures into a policy that hasn’t changed to meet the new technologies or structures in your operations?

This is a common problem and is handled well by the insurance professionals that the captive has on staff for your behalf. Many telco managers struggle to keep up not only with the constant changes inherent in rural telecommunications, but also the same onward march of change in employee benefits and insurance risk management to name just a few. With a captive that has staff on hand to negotiate these enhancements in your place, you can be assured of a quality insurance program at your local telco, all provided by the benefits of your Association.


Price Stability

It goes without saying that price is a major determinant in any insurance buying decision. Have you experienced drastic changes in insurance pricing from one year to the next? Has this affected your personal insurance costs as well as your business insurance costs?

As goes the economy, so goes industry, and insurance is not insulated from this. When we see an economic downturn, often insurance becomes more costly and more difficult to obtain. This has clearly been the case recently and despite the improved insurance marketplace conditions you may still be overpaying for your insurance. The beauty of owning a captive is in its ability to mitigate some of the more drastic effects of these economic shifts. While a captive doesn’t operate in a vacuum, it does have the advantage of representing only one industry. When that industry has a better than average loss experience, (as does rural telecommunications) a captive can often negotiate careful reactions to marketplace adjustments. We lower rates judiciously, not getting caught by an overly aggressive competitive streak, and raise rates carefully, recognizing that the balance of insurance rates and losses in a low loss industry should still reflect this benefit.

Rural telecommunications is a complex industry and that growing complexity adds risk each day of your expanding operations. However, it still has lower than average losses as compared to the entire insurance industry. Without careful attention to insurance classifications, rural telephony often finds itself in too broad a rating class, and the costs of less positive class members end up being passed on to the telco in the form of higher than expected insurance rates. A captive clearly demonstrates the power of one, representing only one industry and enhanced with the buying power of many telcos banding together as one homogenous risk. The captive model can keep rates appropriate for the individual risks of each member and as is often the case, better than the market would provide for each member individually.


Service, Service, Service

Owning a captive also has the distinction of owning the company that will pay your claims. A captive “reinsures” the primary insurance carrier that provides your policies. Great American Insurance Company is the primary carrier that provides insurance policies to Telcom insureds. Telcom “insures” the insurance company by agreeing to assume or share in the risks that are undertaken in the insurance policy. Money is transferred from the fronting carrier to Telcom from your insurance payments that enable Telcom to pay claims for a portion of each loss. When that layer is exhausted, then the reinsurers behind the captive assume its responsibility for these few extraordinary losses.

How does this enhance your insurance experience? In two ways. One, as the company that will pay on the majority of all program losses, Telcom is able to advocate your position in the claims process. Claims are settled with premium dollars you ultimately paid into the Telcom program. Two, not only is Telcom able to derive the benefit of lower than expected loss ratios, but each day those dollars sit in company investments, the investment earnings become part of the financial enhancement directly to Telcom, which can then in turn return to you a better program with better services.

This circular money flow is not in place in the traditional insurance process. In the traditional process, the monies you spend on insurance premiums remain with the insurance company, and become part of the benefit to all of its shareholders. Creating and supporting your own captive returns these benefits directly to you through- this unique medium.

Of course the maturing captive that invests its resources in serving the membership in more and more creative ways, becomes the ultimate one-stop shopping experience. When an NTCA member thinks insurance, it should think of its captive (Telcom), and the captive that provides not only comprehensive insurance policies at stable and appropriate prices, but also value-added services like loss control consultation, risk management education, claims advocacy, etc., that will truly meet the goals of the Association and its members for member service.

Telcom is benefited by this kind of association with its sponsor, NTCA and the loyal members that comprise the NTCA family. Over the years we’ve been able to accomplish many of the goals that are stated above. These goals were tested every year, and the long history that is a testament to member support allowed us all to prevail with a premier association captive organization. Captive insurance is just one of the ways that members can obtain the benefits of association membership, and we’re proud to spend each day working on behalf of the members of NTCA.

Please call on us when you get a chance. We’d love to discuss the benefits of your captive organization, Telcom Insurance Group, with you because it has always been a matter of trust.