“With the impact of COVID-19 on businesses – especially small businesses – premium financing is not only something that has been very necessary during the pandemic,” said Chris Gebhardt, chief technology officer at COST Financial Group, “but it will also be important in the recovery.”
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As businesses start getting back on their feet and return to operating at full capacity, they are not likely to be sitting on excess capital that would enable them to pay their insurance premiums in full, given the financial hardships of the past year. As a result, demand for premium financing will likely increase over the course of 2021 and beyond, predicts Gebhardt, which agents and brokers need to be prepared for.
However, not all premium financing solutions are created equal. COST is a premium finance service provider that is focused on enabling agents to start their own finance company and capture revenue that would otherwise be going to traditional premium finance lenders. These lenders tend to offer agents revenues via standard commission programs, however even the best commission programs in the industry pale in comparison to the revenue generated by agent-owned premium finance companies.
Additionally, many states prohibit commission programs, meaning the agent gets nothing for arranging financing through traditional premium finance companies. Yet, in every state, agents can start their own premium financing company and earn significantly higher profits from its operation.
By utilizing COST, agents can own their own premium financing company and lend the money to clients themselves. COST takes care of all the heavy lifting by providing all the backroom services for these premium finance companies – removing the need by the agent to purchase software, hire staff, and locate office space as well as source office equipment. In turn, agencies can earn $30,000 to $40,000, or more, for every $1 million of financing they arrange. From initial licensing to the daily operations of the premium finance company, COST does all the work so the agent can remain focused on their core insurance business. COST clients instantly gain an experienced partner in the premium finance industry, with the knowledge and expertise to operate their premium finance company properly.
“This is our 32nd year in business, so we have over three decades of experience in running these premium financing companies and working with the individual states on licensing and compliance issues,” explained Gebhardt. “Anybody could, in theory, go out and start a finance company, but insurance agents want to focus on selling insurance – and they don’t have the time or desire to learn another industry and hire the people to run things in-house. We fill that need by providing the people, expertise, and technology to enable our clients to own a premium finance company without the traditional hassles of owning and operating a second business.”
Agents’ barrier to entry into the premium finance realm is lowered when they can utilize a program like the one that COST offers. In this model, agencies benefit from having control over every aspect of their premium financing operation. Rather than negotiating with an external premium finance company, agents can directly adjust rates, offer specialized terms, and waive fees on a case-by-case basis.
“It’s their company, so they’re the ones ultimately making the decisions, and it’s that flexibility that they grow to appreciate [working with COST],” said Gebhardt.
Over the past three decades, COST has refined its processes and focused on meeting the needs of its various insurance clients, serving everyone from truck agents operating in the southeast to clients that write contractors on the West Coast, and everyone in between. To serve its diverse clientele base, COST is flexible and understands what each of their clients expect from their premium finance company.
“The track record that we have of producing revenues for our clients is three decades long,” Gebhardt told Insurance Business. “We don’t oversell our program, we don’t claim to have it do anything that it can’t do … and we don’t try and sell this as a one-size-fits-all solution. The agent is the one arranging the financing, and we believe they should be the ones earning all the profit from premium financing. Our 32-year track record speaks to our ability to meet and exceed the expectations of our clients.”