Premium Innovator

Premium Funding’s Ross Hayward explains his attitude to innovation, growth, competition, the future for brokers and why having new ideas will never get old.

By John Deex of Insurance News Magazine June/July 2016 Issue

“I DON’T SEE IT AS A JOB – FOR ME IT’S fun,” says Brisbane-based Premium Funding director Ross Hayward. It may not be everyone’s idea of entertainment, but for him it’s the freedom to innovate that adds the pizzazz.

Funding is undoubtedly a crucial cog in the insurance wheel, allowing the monthly repayment of commercial premiums. Much simpler than a bank loan, it can usually be approved instantly.

Mr Hayward put his career as an accountant on hold more than 12 years ago to assist the family business, and he has never looked back.

Premium Funding has grown from four staff to about 30, and from a purely Queensland focus to a genuinely national presence.

It wrote 40,000 contracts last year and is among the three biggest funders in the country.

But Mr Hayward never wants to stand still, and a series of initiatives unveiled this year have stirred up the sector.

First came a partnership with St George Bank to launch the Acquisition Finance product in February, enabling brokers to borrow more for acquisitions, succession planning and refinancing.

Then in April a pre-approved business loan product to be sold via brokers was introduced. Premium Funding Advance provides loans of up to $20,000, but there are already plans to raise the limit.

And later that month the Pay By The Month (PBTM) initiative went live. Available to brokers with the Ebix-owned WinBEAT broking system, it eliminates the need for manual contract preparation and allows the inclusion of a funding pay-ment option in every client invoice or statement.

Premium Funding sees relationships with brokers as absolutely crucial and PBTM, which saves both time and money, is winning lots of new friends.

“It really has taken away any work required to do premium funding,” Mr Hayward tells Insurance News.

“You just print an invoice and the pay- ent option is on the bottom. It’s an enormous time-saver. “And brokers are on commission for premium funding, so the more opportunities they present to fund their clients the more chance they have of earning that revenue.

“In the past a lot of brokers didn’t bother offering it because of the time it took to prepare a funding contract.”

Mr Hayward says brokers using PBTM have doubled the number of contracts they fund, and Premium Funding’s competitors will now be scrambling to catch up.

“It’s the way of the future. I can’t see in three or four years a broker preparing a contract the old-fashioned way. That whole process will go.

“It’s been something that’s been done before for the big end of town, but it’s never been available for the majority of brokers in Australia.

“I’m sure that all funders at some stage will be offering this product.

“The aggressiveness of how quickly we’ve rolled this out will probably mean that they’ll push hard to get into it as quickly as they can.”

Many brokers recognised the benefits straight away, he says.

“On a $2000 insurance premium the broker will earn 15% on that, so that’s $300. If they were to fund that $2000 they would earn another $60. It doesn’t seem like that much but the funding commission is close to 20% [of the broker’s commission]. All for doing nothing.

“It’s like anything with technology, there are early adopters, and I think we’ve found most of them. All the ones that have recognised the enormity of it have jumped on the phone and requested it.”

Innovative technology has always been a crucial plank of Premium Funding’s culture.

Mr Hayward says 10 years ago the company was the first to allow brokers to submit contracts online without a signature. It was also the first with an iPhone app, five or six years ago.

“We’ve always been working on technology plays and looking at ways of being ahead of the other funders,” he says.

Increasingly the company will look for opportunities outside the premium funding core product, with Premium Funding Advance a classic example.

“We have all these clients paying large bills on a monthly basis, and I thought to myself, maybe they want additional working capital,” Mr Hayward says.

“It’s very unsecured lending, unlike the premium funding which is backed by the ‘cancelability’ of insurance premiums. This one really is a punt. You hope they pay it back.

“We did a trial run with two or three brokers about nine months ago and wrote about $2 million business to 100 clients. We have watched that book run, and it’s run really well, so we thought, let’s go live.

“We called all the clients and asked what they wanted the money for.

“The majority said they had applications with the bank and it was all too hard, with all the financial statements they have to give.

“All we are saying is you’ve been a premium funding client before, you’ve been a good payer, here’s some cash. The ease was just sensational.

“And it’s more commission for brokers. It’s money for nothing again. It’s been really well received.”

The acquisition loans for brokers were sparked by increasing consolidation in the marketplace.

Mr Hayward says previously Macquarie Bank was the only option, but many brokers wanted an alternative.

“We’ve been working with St George for a while now. They get this space. With current interest rates where they are it’s really affordable to borrow money to buy a business. The payback time is really quick.

“We’ve had a hell of a lot of enquiries.”

Diversification was made all the more logical by the current soft market, Mr Hayward admits, which has had a clear impact on growth.

The last 12 years have been “an easy ride”, with annual growth of 20-30%, but this year has been tough.

“We will grow slightly, but not at the previous pace.

“I would have liked premiums to go up this year, but it hasn’t happened. It has got us off our backsides to come up with more product.”

And, Mr Hayward tells Insurance News, premium rates still haven’t hit the bottom.

“We are all hoping there is a turnaround, but at this stage I am still seeing numbers going backwards.”

There has been a very deliberate shift to make sure the business is not so exposed to the vagaries of the insurance cycle.

“We felt that for a long time our eggs were all in one basket. We have morphed our business into being more than just a premium funder.

“The more of these innovations that I can give, then the more chance there is of other brokers using us.”

He believes this side of the business can only grow in the future.

“I’ve got a feeling that in the next two to three years this unsecured lending that we are doing will make up 20-40% of our business,” Mr Hayward says.

“It’s got that feel about it. There’s a demand for easy access to capital.” And there’s no real future in just being a premium funder, he says.

“You’ve got to do more, or you’ll get left behind. Premium funding is the core business, but we are pushing hard into other financial services sectors.

“We are competing with some of the fintechs out there. What we are doing is essentially what they’re doing – it’s just that we’ve got the distribution already.”

Mr Hayward sees technology continuing to have a major impact on the insurance industry, but believes reports predicting brokers’ demise are way off the mark.

He says Premium Funding is “absolutely committed” to working with its key partners.

“The reason brokers exist is because they are actually giving a service,” he tells

Insurance News. “They are using a skillset to help find clients the best insurance.

“So I think you are always going to need a broker to assess each individual client’s requirements.

“I think the technology plays are just going to make that easier for them. Things like PBTM, which will mean that work is more automatic and the knock-on effect will be cheaper costs to the client.

“There is no question that the tools the providers to the industry will give brokers will make their lives much easier. There is always going to be a need for insurance brokers.”

Mr Hayward says Premium Funding “will never go direct. We do get a lot of phone calls from clients, but we just call a broker and leave it with them. “

We can’t cut the broker out of the commission. They are not our clients, they are the broker’s clients. We are just a service provider.

“The moment we do anything to interfere with the client/broker relationship, we’re costing them their core income, so we have to be so careful.”

Mr Hayward remains deeply frustrated that some brokers are not free to choose which funders to work with.

“Certain cluster groups or AR networks are restricting the products that their members can use,” he says.

“It makes no sense to me. Some brokers cannot access our PBTM product for example. Why would you force your network to do more work? It infuriates me.”

While Premium Funding is focused on diversifying at home, it has no current plans to expand abroad.

Rival funder Centrepoint Alliance recently confirmed that a move into the New Zealand market had not been successful, something Mr Hayward says could have been foreseen.

“New Zealand is a tough market. Unless you are doing something different I don’t understand how you can just walk into a new area and assume you are going to pick up business. They have got so many options over there.”

He says options in Asia have been considered, but it is not a priority right now. “It would be silly for us to take our eye off our growth in Australia. To move across borders is difficult. Other funders have tried and failed, but who knows, maybe one day. In five or ten years, possibly.”

Mr Hayward believes family-run businesses are ideally suited to working with brokers, and Premium Funding’s flexibility and stability sets it apart from the competition. “We are family-owned, just like the majority of brokers out there.

“We don’t report to anyone, so we can do whatever we want. We are always going to be here – we have no interest in selling the business. I’d like to see my kids run the business one day.

“We are accountable to ourselves only. We literally turn up at work and give some thing a go – if it works it works, if it doesn’t it doesn’t. That flexibility gives us an enormous competitive edge.”

He says he isn’t interested in what the competition thinks of Premium Funding, but that’s not the case when it comes to the views of brokers.

“I’m sure we have been a thorn in the side of most of our competitors. But at the end of the day all I’m doing is trying to give brokers a better product. The competition can either sit back and get frustrated by us or they can react and build a product themselves.

“It is not going to stop any time soon.”

His enjoyment of his role is obvious, as he looks toward what he considers a very bright future for the business.

“Every day I get in the office and think, ‘what can we do today?’ As opposed to just sitting there and waiting. That’s what we’re all about.

“We turn up and just try to create the best product. The fact that you have a licence to do that is very motivating. “I love hearing that brokers like our products. I love it when a manager from another premium funder calls us and asks for a job, which has happened a lot lately. It shows that we’re doing the right thing.

“As the younger brokers come through it is an ideal time for us to accelerate our growth. They get technology and they get automation, and old-school loyalties will be a thing of the past.

“Everything we are doing now sets us up perfectly for the future.”

Who knew premium funding could be so much fun?