Premium financing serves as a chance for insurance agencies to provide a higher level of client service while expanding their revenue flow.
Amid increasing competition through acquisition and diversification, insurance agencies are searching for new chances to distinguish themselves and hold fast to renewals while growing their new business base. At the same time, agencies are experiencing a greater demand from their insureds to provide a diverse array of programs and policies while also requesting relief with payment options and cash flow. Premium financing is a payment approach that is one of the most dependable and flexible available.
Premium finance companies have worked with both insureds and agencies for decades to provide the needed financing for every commercial and personal insurance policy iteration. They have the ability to provide loans at rates lower than those set by traditional commercial banks - with no requirement for personal guarantees or the posting of collateral.
Through premium financing, the insureds are allowed to leverage their capital for other critical business. Moreover, the insurance is paid for as it’s used due to the unique tailoring of the payments to the insured’s needs, amortized over an agreed-upon period of time. Cash flow and allocation of expenses are smoothed out because of a simpler budgeting process, owing to the set regular schedule of premium payments.
Premium financing also becomes an additional credit facility with fixed rates for the loan term and no origination costs, making it cost-effective. In addition, early payoff does not require a penalty for pre-payment.
It is typical to have 30-day intervals following the financed policy’s effective date as the established payment date. However, the payment date may be adjusted to accommodate the unique budgeting and cash flow needs of the insured - anywhere from as short as three monthly payments to 12 equal installments (including down payment). It’s also possible to arrange for quarterly, seasonal, and multi-year repayment plans.
Premium financing presents a chance for insurance agencies to sustain their revenue flow while delivering an elevated level of service to their clients. While the insured is able to schedule their payments over an extended period of time, the agency collects the annual commission up front as if the premium was paid in full by the policyholder. Premium financing allows agents to realize their entire commission sooner than carrier direct billing by six to nine months since most carriers pay commission as the premium payments are received.
Insurance agencies are also removed from the burden of managing and tracking premium payments with premium financing. Insurance agencies can focus on providing great service to their insureds since the premium finance company is now handling the billing and collection process. In addition, a new revenue stream can result from premium financing, as many states allow for the finance company to have revenue-sharing arrangements with agencies.
Agencies are now expected to deliver to insureds the best policy package tailored to their needs. Offering multiple payment plans that include a premium finance option allows the agency to build a long-lasting business partnership with its clients.
Banks and other financial institutions have made their lending policies more stringent because of the credit crunch created by recent economic events. This has made obtaining even the most rudimentary of loans difficult for most business owners and individuals. Not so for premium financing, which remains as available and competitive as it has ever been.
Comparably low rates on all kinds of commercial insurance policies are provided by premium financing and can be had by corporations and businesses of all sizes in all sectors.
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