One look at insurance industry figures reveals a startling statistic. While insurance brokers sell £28bn worth of insurance policies each year, only about a fifth of these are sold via financing agreements, which makes it convenient for customers to pay via monthly installments.
This is even more surprising, because in those instances that brokers do arrange for insurance premium financing, they can add as much as 5% to their top line, according to the UK’s Financial Conduct Authority (FCA). Since this occurs in only 20% of current insurance policy sales, there’s headroom to quadruple this figure. In other words, the more the non-financed 80% or £22bn worth of insurance premiums brokers can sell along with a finance arrangement, the more money they stand to make. Using the FCA’s benchmark, brokers have room to boost revenue by another 20%. This is something any financial broker would envy.
It’s with this upside in mind that the new premium finance company PremFina was started. Insurance brokers facilitate, rather than manage, the issuance of premium finance agreements. For this, they get a referral fee and nothing more. Having their own premium finance facility, such as the one PremFina provides through white-label solution, instead empowers the brokers to sell premium finance agreements using their existing staff, thus getting a share of the financing fee that previously went solely to the financing company.
‘Uberizing’ premium finance
Brokers pass on customers to financing companies once they find the right insurance policy for them, in exchange for a commission. The same goes for private taxi drivers usually reliant on a car service company for attracting clients. Uber instead empowers drivers, via its IT system, to connect with customers directly. The car drivers, in effect, become the car service company. Premium finance could operate with the same logic through a white-label premium finance solution, supplying brokers with an IT system and funds to finance their customers directly. The brokers, in effect, become the premium finance company.
Brokers’ own premium finance business means they no longer have to hand over a customer relationship to a financing company. They get more autonomy and decision-making power to manage their clients, set financing interest rates and make appropriate commercial decisions for their business. They’re also able to cross-sell and up-sell additional insurance products. This is in addition to the higher profit from the revenue boost brought about by selling more premium finance.
It’s also highly important to have flexible software to support the broker premium finance business. Instead of focusing on a premium finance provider to get their referral fee, providing brokers with the right software makes them track the journey of each financing customer they onboard, manage and renew, to provide the best customer service. This is not unlike the Uber driver, who can now focus on providing customers with the best experience rather than the terms of their contractual relationship with a car service company.
An emergence of a white label premium finance solution makes brokers leapfrog into an efficient and interconnected digital future, while maximizing their revenue, profit and participation within it. This should change FCA figures to double-digit figures in future years.