Premium Technology

Insurance brokers are generally aware that premium- financing solutions exist for their clients. In fact, in the wake of the global financial crisis, and with ongoing concerns about the prospects for a full economic recovery, access to credit and financing has never been a more topical issue for businesses in Canada and around the world. But when it comes to the specifics of premium financing, many brokers still face a learning curve. Some want to find out more about how this product can help strengthen client relationships and build their business. Others express skepticism based on their somewhat disparate experiences in dealing with financing products and procedures.

The key message for brokers is that premium financing should not be cumbersome or time-consuming. It should be an integrated offering that allows brokers to serve their clients quickly, easily and better. Technology is available today to help them to do just that.

Recent surveys show brokers are interested in technology solutions that can help them deliver premium-financing products seamlessly to their clients. In a poll of Canadian brokers, more than 60% said they are interested in working with a provider that offers technology as an enabler to better premium financing.

WHAT IS PREMIUM FINANCING?

Simply put, premium financing is when an individual or business finances the cost of their insurance. The procedure on paper is straightforward: the insured signs a premium finance agreement that is sent by the insurance broker to a premium finance company. The premium finance company then pays the insurance premium on behalf of the insured.

Clients have a number of good reasons to choose premium financing. Many want to have better control over their cash flow by having another party pay their premium on their behalf. Others may want to preserve their credit line or maintain their balance sheets. The most typical reason for premium financing, however, is to eliminate the need for the client to make a large lump sum payment to an insurance company.

Most brokers today do not aggressively promote premium financing. They will, however, accommodate a client’s request for this product if asked. There are some distinct reasons for this reluctance.

Some find the additional time required to explain premium financing to a client, as well as the time needed to process and administer the financing arrangement, partially or completely offsets any gains for the broker. Several have complained that some products require multiple steps to generate quotes. There are common and widespread concerns about the work involved in introducing premium financing to clients.

These concerns, however, are a process problem. They can be solved. The fact is, premium financing represents a huge, untapped opportunity for many brokers and their clients — especially hard-to-place clients who may see access to financing as a lifeline.

TECHNOLOGY TO THE RESCUE

So, how can the “process problem” be addressed? What innovative solutions exist that can benefit brokers when it comes to premium financing? And how can technology help reduce the brokers’ administrative burden?

One readily available answer is an online quotation tool that allows brokers to quote a client’s premium financing costs quickly. Ideally, this tool would also provide the flexibility to structure installment dates to suit various policies, as well as offer a continuous contract option and a streamlined endorsement funding procedure.

One such tool exists already, called Web Quote.

Web Quote is designed to save brokers time by allowing them to renew, add to or amend an existing loan without the hassle of dealing with an exhaustive amount of paperwork. This tool comes with accredited (subject to provincial licensing regulations) online, telephone or in-your-office Web Quote training for brokers.

There will be future opportunities to integrate Web Quote into various broker management systems for greater ease of use. The idea is that brokers will be able to access all of the information they need –quotes, reconciliations, etc.– simply by entering a client’s information once. This option could be integrated into broker management system set-ups, so all the information is right there at their fingertips. Pilot projects have begun in this area.

Another technological innovation, already in place in Australia, is an end-to-end payment and reconciliation system. This industry innovation streamlines client invoicing, surcharges merchant costs, provides an automatic reconciliation process for trust accounts and allows brokers to offer a broader range of payment options.

There is a strong appetite for this kind of solution in Canada, and vendors are interested in working with brokers to build this kind of technology here. Technological innovation can support and simplify premium-financing solutions for brokers, eliminating many of the concerns around administrative time and multiple procedures. With more streamlined options available today, brokers should be more confident in introducing it as a viable and beneficial option for their clients.

That is the not-so-scary truth of premium financing for the opportunistic broker.