Premium Finance News

One Premium Financing Source With Access To Multiple Companies
January 21, 2007

Insurance premium financing can be a time consuming chore, especially if a contract gets rescinded by your premium finance company and a rush to find another provider becomes priority.  All premium finance companies are not equal and do not operate the same.  Some premium finance companies will not finance Work Comp or auditable premiums while other finance companies will not finance Assigned Risk policies by the state.  Unfortunately, strengths and preferences are usually not discussed during initial setup and when a contract is rescinded, agents can be left with a bad taste.

There are, however, premium finance agents that have multiple relationships with premium finance companies.  By utilizing one source with several national relationships, misunderstandings can be eliminated.  Certainly, higher risk can translate to higher cost in finance charge.  Once explained and understood, business interruptions will no longer become an issue.  Many agencies are seeing the benefit of letting one premium finance agent manage their portfolio by outsourcing specific financing risks.

Insurance agencies have also entertained the idea of starting their own premium finance company.  This would be recommended for general agencies with high volume and common risks.  For the most part, they can underwrite the industry with relative certainty.  Insurance agencies that are generalists and writing all types of coverage will have more risk associated with their premium finance exposure.  The profit margin for premium financing is negligible associated with the risk and one large loss can wipe out the profit margin for a whole book of business.  Unless an agency is willing to hire risk management assessment and price risk accordingly, an additional 3% margin to their commission is negligible.  

One premium financing source is quickly becoming the preferred method by the busy agency.  Just ask a busy producer or CSR what it feels like to double or triple their effort in trying to secure a premium finance agreement with another company because it didn't fall within the comfort zone of their single premium financing provider.  Bill Friend, principal of PFA - Premium Finance Associates, has enjoyed triple digit growth over the past five years.  "We offer choice to our agent/broker network along with some of the most competitive rates and incentives," says Friend.  "Our underwriting department analyzes the types of coverage an agent/broker finances, average size premium, states premium is written, as well as other key factors to recommend the best premium finance companies."  PFA does all training and customer servicing as well as incentive administration for the agent/broker so there is one point of contact.  "We quickly analyze the risk and finance the policy with the appropriate company willing to underwrite that coverage."  

All of the premium finance contracts are streamlined through PFA Premium Finance Associates and then distributed to the various companies for verification, booking and finally funding.  "We perform all of the customer service so there is truly one point of contact," says Friend.  Some of the customer service perks to agents are access to insured status Online, Check-by-Fax and Check-by-Web for same day posting of payments.  We also train agents to view their own accounts Online to view "intent to cancel" so they can take a more proactive approach by calling their insured.  Custom reports can also be designed for high volume agents to avoid time consuming paperwork on cancellation for non payment.

"We set up agencies with primary relationships and advise in advance who to use for certain coverage," says Friend.  "Some of our heavy volume agents are fluent with multiple companies whereas our lighter volume agents just prefer to call us and we simply e-mail them completed contracts for signature.  We act as a clearing house in many instances."  Whatever your volume, Premium Finance Associates has a rather unique approach which has earned double digit growth over the last five years.

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