Monthly Archives: September 2015

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InsuranceNews – Premium Funding laid bare

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Per www.insurancenews.com.au

http://www.insurancenews.com.au/analysis/premium-funding-laid-bare

Premium funding is a crucial cog in the workings of the insurance industry that deserves much more attention.

That’s the view of Ross Hayward, Director of Queensland-based Premium Funding, who has released a “white paper” and broker survey aimed at lifting the lid on industry trends – something he believes has never been done.

“We’ve never drilled down and had a really close look at funding,” he says. “We wanted to show brokers some trends, and get everyone on the same page.”

The paper says with one in three commercial premiums in Australia funded, the industry’s important impact is often overlooked

“We know the market is about $4 billion and there are roughly 270,000 commercial funding contracts written annually.

Mr Hayward is happy to admit that – to the untrained eye – premium funding can be a little confusing.

“When I tell people what I do, they look at me blankly,” Mr Hayward told insuranceNEWS.com.au. “They think of their own arrangements and say, ‘Can’t you pay insurance monthly, anyway?’.”

The answer is that in the commercial insurance space you usually can’t.

So it’s no different to a bank loan? Wrong again.

What makes premium funding stand out is the fact it can usually be approved instantly, with almost no checks required.

This is possible due to the “cancelability” of insurance premiums.

If a client fails to make their payments, the cover is cancelled and the insurer repays the outstanding balance to the funder.

“The moment a broker produces a contract and it is signed, then the funding is in place,” Mr Hayward said. “It is the simplest form of finance I’ve ever come across.

“I fund businesses all the time that are under financial stress. It’s no problem.”

But if it all seems too easy, it isn’t. At least, not in a soft market.

Mr Hayward’s paper details a dramatic drop in premiums this year, across all sectors. This has hit premium funders hard.

“If premiums drop by 10%, then we are lending 10% less and margins are tight,” Mr Hayward says. “We’ve all been operating in an easy market for a long while, but the industry takes a big hit in the tough times.”

Conversion rates are also down.

“Businesses may have more cash available, or now that premiums are cheaper they may be able to pay upfront,” Mr Hayward says.

The survey shows only one-third of brokers offer a funding option with every contract, suggesting judgements are being made based on the amounts involved.

But the paper says brokers may be missing out on commissions by applying such “hard and fast rules”.

Offering funding can not only improve brokers’ bottom lines but can also build on relationships with customers.

“We have funded premiums of millions of dollars for companies that have no problem with cash but that love the easy funding option,” Mr Hayward says.

His biggest bugbear is that more than half of brokers are forced to use particular funders.

“There has got to be more work done on making the industry more open.

“The best outcome for the client should dictate which funder a broker uses, not whether you are part of a cluster group.

“It assumes that one funder is the same as another – and that is not the case.”

Mr Hayward concedes funders charge broadly similar rates of interest, but he says there are other ways to stand out from the crowd, such as technology, innovation and efficient processes.

One obvious issue for funders will arise if insurers start to offer monthly payment of commercial premiums.

But Mr Hayward does not see that happening any time soon.

“There are a couple of insurers that do it. But think of the cashflow impact, and insurers don’t really want the hassle of chasing monthly payments.

“Brokers also don’t like insurers to be in regular contact with their clients.”

The premium funding industry is as crucial to insurance as motor finance companies are to car sales, Mr Hayward says.

“They are absolutely integral. Without financiers, there would be no motor industry.”

And without funders, large numbers of business owners would be unable to afford their premiums.

The message for brokers is clear: give premium funding a little more thought. It deserves your attention.

Team

NIBA Convention Success

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‘A sensational effort by NIBA in having record numbers of exhibitors and 750 delegates attending the convention in Melbourne.

Firstly, congratulation to Premium Funding supporting brokers who walked away winners at the NIBA award’s ceremony:

2015 Broker of the Year: Bunmi Ajayi (Megalines)
2015 College Student of the Year: Jeremy Thornton (IAA Mid North Coast, NSW)
Our Prize giveaway, a Garmin Vivo Active GPS Smartwatch, was won by Holger Schnabel from Whitebread Insurance Brokers.
Team
A huge thank you to supporting brokers and future prospects who dropped by the stand to introduce themselves and to pick up the premium funding industry white paper/broker survey.  Hopefully the booklet will be a useful tool to upskill all levels of staff across your business and realign strategies when providing the funding product to your clients.
The booklet would look very nice on your office coffee table as well! Shout out if you would like additional copies mailed out.The biggest trend at the conference was the rise of the Authorised Representative network.  Our systems are specifically designed to cater for any size brokerage and with our relationship management staff all around Australia we are just around the corner to show you how our systems/applications can be used when you are ‘on the move’.

We have a long term vested interest in the insurance industry and hopefully we are demonstrating this with the support and information sharing strategies we rolled out at NIBA2015.

We also have some further innovative solutions that will be announced in the short term so watch this space.’

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Whitepaper2

THE 1ST WHITE PAPER FOR THE PREMIUM FUNDING INDUSTRY

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We are pleased to launch the Premium Funding Industry White Paper and Broker Survey

Click to view our – Premium Funding Industry White Paper and Broker Survey

While often considered a small part of the insurance industry, the premium funding product can be at times overlooked for the important impact it has on the insurance industry. Huge numbers of clients rely heavily on what is one of the simplest forms of finance available to assist with payment of the annual insurance cost. Many of these clients would simply not be able to afford their premiums if it were not for premium finance. So in this white paper, we share our data, insights and trends to help you make better decisions for your business and clients.

With an estimated one in three commercial premiums in Australia funded, premium funding companies actually gather an enormous amount of data around premiums, policies, renewals endorsements, client locations and price. However, very little is known or reported about premium funding companies – so I thought I would share some of this data with our Brokers and the industry as a way of learning together and leveraging opportunities.

We know the market is about $4 Billion and there are roughly 270,000 commercial funding contracts written annually. Very limited knowledge is shared by funders, considering approximately 30% of commercial policies in Australia are funded. So, we’re going to roll back the curtain and share that data with you here in our inaugural white paper – which we will publish annually, so you can monitor changes to your industry and adapt your business to suit.

In 2015, we at Premium Funding funded approximately 1 out of every 7 commercial premium funding contracts in the market. While information is not readily available, it is estimated that would put us in the top 3 funders based on volume of contracts written. We had over 1,000 Brokers use us to provide clients with over 100,000 quotes for some 300,000 insurance policies. We firmly believe this is enough data to demonstrate some very solid trends across the industry.  This mass of information is how I have been able to draw some meaningful insights and conclusions about our industry that may be of use to you in your course of business.

Edited

 

Team

2015 NIBA Conference Melbourne: Left to Right: Nick Sidoti, Shuzaha Houghton, Brett Rudzis, Michael Vergura.