085 – Premium Financing: Option for the Insured, Value for the Agency


On this episode of The Digital Broker, Ryan Deeds interviews Bill Wood of Imperial PFS about premium financing. By listening to this episode, you will learn:

  • When and how premium financing makes sense for the insured and the insurance agency.
  • How a premium financing company bills a customer and pays an insurance agency.
  • How customers have access to more coverage this way.
  • How premium financing increases agency revenue and improves agency operations, all without disrupting the agency’s payment touchpoint.

Insurance agencies and carriers will occasionally allow customers to pay for premiums in installments, but sometimes this isn’t possible or practical. For example, an agency might assemble a package that’s composed of coverage from several carriers, not all of whom might agree to receive their portion of the total premium in installments. But the customer might be reluctant to pay for so big a premium all at once. At that point, the customer can borrow money from a premium financing company.

At its most basic, premium financing is an additional source of credit. A premium financing company would pay the agency the total premium upfront, and the customer would then repay the premium financing company in installments. It sounds like a win-win for the agency and the customer—so why do so many insurance agencies hesitate to mention premium financing, unless the customer asks about it?

Perhaps they’re worried about liability: who takes the loss if a customer stops making payments? Or they’re concerned that the involvement of a premium financing company will complicate the payment process further. Or they’re unwilling to part from the payment process because it is a powerful touchpoint. But on this week’s episode of The Digital Broker, Bill Wood of Imperial PFS, a prominent premium financing company, dispels all those fears and reframes premium financing as a powerful option for the agency and the customer.

Since the premium financing company typically pays the agency in full upfront, it is the premium financing company, not the agency, that takes a hit if a customer stops making payments. An agency’s real liability is not so much a customer who stops making payments, but the collection of the down payment, Wood explains. “Right now, an agency collects a down payment, takes a commission out of it, and pays the market with the difference. Sometimes, carriers don’t get paid, terminating policies and putting customers at risk. We’ve created a platform whereby a customer pays us the down payment via credit card or ACH, we ensure the money is good, we drop the agency’s commission into their account, and then we pay the market its due. This increases efficiency, reduces risk and E&O exposure, and adds another layer of safety to the process.”

Agencies are right to be protective of their touchpoints, in particular the payment touchpoint, which allows agencies to upsell and forge a closer relationship with the customer. But transacting with a premium financing company doesn’t have to cost you a touchpoint, Wood explains. Imperial PFS is rolling out Total Pay, a tool that integrates into the agency’s electronic payments page. “It asks the customer how they want to pay. They can pay you in full, or they can finance it and pay in installments. It happens in the same communication. It’s not something that takes days to calculate.” The customer can thus choose to pay you in installments at checkout, without having to leave and go elsewhere. This keeps you in control of the touchpoint.

Customers benefit from additional payment options and appreciate an agency that goes to the trouble of procuring them. Premium financing gives customers access to coverage they need but might otherwise be unable or unwilling to pay. For the agencies, the uptick in business is obvious: premium financing can persuade customers to buy coverage they might have otherwise passed on. Amazingly, agencies who transact with Imperial PFS can expect to earn additional commissions. “In states where it is legal, and it is legal in most states, premium financing companies can pay the agency a commission. We agree, as an industry, that the agencies are getting customers for us, and that they deserve to be compensated for it.”

More business, more commissions, happier customers. Can you think of any reasons why premium financing wouldn’t make sense for your agency? If you can, or if you’d simply like to know more about it, you can find us in the Digital Broker LinkedIn group discussing it. Join the conversation, talk to Ryan Deeds and our guests, and ask your own questions.

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Indio provides insurance application and renewal software to automate the submission process among agencies, brokerages, insurers and the insured. The application provides a fully digital client risk capture and application experience by automating the data population across each individual, unique insurer application. In simplifying and accelerating the submission and renewal process, Indio enables agencies, brokerages, and insurers to create greater efficiencies and value while providing their insureds a digital customer experience.

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