The arranging of premium finance can add 5% in revenue for insurance brokers. It’s icing on top of the cake for brokers selling insurance policies. Despite this, less than half the £13.2 billion in UK insurance sold via brokers is premium financed via monthly payment plans. When measured against the total £28 billion general insurance market, the £6 billion premium finance segment is less than a quarter of its full potential.
Given this big market, revenue boost and headroom for growth, it’s suprising that premium finance isn’t more widespread. What’s holding the market back is simply a lack of innovation.
The premium finance market has been long devoid of innovation, evident by the fact that it’s been dominated by two players for more than two decades. Suffice to say the premium finance market could use some disruption: alternatives to the two incumbents are both desired and required.
That’s the mindset that motivated PremFina – the Uber of the premium finance business – to enter the market and show brokers what they’ve been missing out.
It’s time to start doing things differently
Brokers have traditionally passed on their customer relationships to financing companies in exchange for a commission, creating an unhealthy dependency on financing companies. In doing so, brokers facilitate, rather than manage premium financing agreements, thereby losing out on a share of profit and benefits that come from a retained customer relationship such as higher renewal rates and the ability to cross-sell and up-sell.
But things don’t have to be like this, and they shouldn’t. The catalyst for change lies in disintermediation of the market combined with a mobility of finance. Uber has done it with their ‘tech startup meets taxi service’ mobile app, giving drivers a platform to accelerate their business by connecting them with the customers directly. PremFina has done this with its white-label premium finance solution that makes insurance brokers more ‘freelance’. It saves brokers from a handover of their customer relationship to the financing company by providing them with an in-house premium finance facility.
Peer-to-Peer Premium Finance
The removal of broker dependency on financing companies effectively brings peer-to-peer economy to premium finance, already prevalent in FinTech industry with apps such as Uber. Together with bringing more ownership over customer management, brokers’ own premium finance also removes the reliance on the financing company for profit as it gives brokers a line of funding to offer to customers to fund their payment plans and a bigger interest-based fee.
Software as a (much better customer) Service
Let’s not forget about technology. An increasing digitalization of the UK insurance industry offers another window of opportunity to improve the functioning of insurance brokerages by, as PremFina did, dragging premium finance systems out of the pre-digital age. The systems currently out there seem to be quite inflexible and simply too difficult to manage and respond to customer demands. Loan Administration systems should be more like the Uber app, easy to use and highly flexible, tracking the progress of customer journey, offering options at every price and for different needs. All this means the highest standard customer service, and, let’s face it, that’s what it’s all about.