The Independent Tire Dealers Group (ITDG) L.L.C. has decided to form its own captive insurance program as an added member benefit as it moves closer to becoming a full-fledged marketing group.
The Juno Beach-based group wants to lower its members' insurance premiums and is now in the process of working with San Francisco-based Polaris Enterprise Group to create the program, said ITDG President Michael Cox. Workers' compensation premiums are ``just killing'' many ITDG members, he said, so the group wants to offer its own workers' comp, general liability and auto insurance.
A captive program-an alternative to self-insurance-primarily insures the risks of its owners and is managed by the owner and/or insureds who typically own the assets. Captives traditionally offer groups cost controls, custom coverage, increased profits, cash flow and stability of coverage and price. Such a policy typically is fronted by an insurance firm that assumes financial responsibility for the captive's business.
``Most Fortune 500 companies have their own insurance captive companies,'' Mr. Cox pointed out. ``We're in the process of collecting loss runs from our membership, then we'll get the actuaries and re-insurers involved.''
He said he had hoped to complete the process by the end of October but now thinks the program will be established at year-end. ITDG, after introducing the idea to its members at its annual meeting in April, has been discussing with members and Polaris the loss runs and the benefits of joining a captive plan.
ITDG has 90 members, 50 of whom are shareholders, according to Mr. Cox. The group's shareholders purchase a minimum of $500,000 annually through ITDG as well as stock, he explained. Members purchase $200,000 through ITDG annually and pay $600.25 in annual dues, with no in-house requirements.
Mr. Cox said he estimates half of ITDG's members will participate in a captive program as some dealers have had issues with workers' comp claims in the past, while others may elect not to join. He said he also expects that ITDG will represent about $5 million to $8 million in premiums its members are paying.
``At the end of two years, and potentially three, (our members will) start receiving dividends of the monies that are left over after loss runs and everything else, so it could be fairly lucrative for the members who participate,'' Mr. Cox said.
ITDG, formerly known as the Tire Factory Groupe, gained 20 members and six shareholders in the past year and now represents more than 260 locations in California, Arizona, Nevada, New Mexico, Colorado, Montana, Oregon and Hawaii. When Mr. Cox became president in April 2003, the group moved its headquarters to Juno Beach from Los Angeles.
Although the group is based in Florida now and intends to keep expanding, Mr. Cox said the group's goals are to increase membership within its geographical footprint, not ``leapfrog all the way over to the East Coast.''
``We're very cautious that we don't sign up dealers on top of dealers and cannibalize individuals,'' he said. ``We're looking to go outside of those spaces where it does make sense...marching eastward from where we are.''
The ITDG is a member of the Tire Alliance Groupe. In addition to creating a captive insurance program, the group also is deciding on common signage for its members-a plan it hopes to have in place by 2005's first quarter, Mr. Cox said, adding that ITDG would work with some suppliers to offset the costs of creating signage.
The group also is looking at warehouse space, which he said ``could come to fruition'' near the end of 2004, and advertising support probably will become a member benefit during late 2005 or early in 2006. Additionally, ITDG is in the initial stages of looking at a proprietary wheel line from China.