There are a multitude of reasons why an Insurance Agency might choose to launch its own premium finance business:
1) To secure an additional source of revenue.
2) To retain better control over customer service.
3) To capitalize on a market opportunity in a mature, $150 billion/year industry.
4) Because it’s an easy, low-risk way to distinguish yourself from the competition.
The risk of operating a premium finance company is mitigated by the unique structure of the business model. All premium finance loans have built-in collateral, in the form of the insurance premium itself. When an insured defaults on his/her payments, finance companies simply contact the insurance carrier and collect the remainder of the loan as unearned insurance.
With the right software on-hand, tracking of receivables is automated. Thus, when a client defaults on a loan, notices are sent out automatically, assuring the timely collection of the unearned insurance premium.
Launching is as simple as following the three easy steps:
1. Licensing: Obtaining your licensing is as easy as completing the correct paperwork and filing it with the State. Third Eye Solutions’ expert legal affairs team can help facilitate this process on your behalf.
2. Funding: Most agencies leverage their relationship with their existing bank to obtain their initial funding line. Because Premium Financing is a secure form of lending, banks are rarely hesitant to provide funding. Agencies starting with a revolver as low as $50,000 can finance up to $150,000 in insurance premiums. Third Eye Solutions can walk you through the process of obtaining funding, make introductions to banks if necessary, and teach you how to maximize its potential.
3. Operating Framework: This means software, processes, and people. Third Eye Solutions will provide the software you need and coach you through the rest. If you have an employee who can spare 20 minutes a day, you’re already on the right track.
Today’s specialized premium finance software solutions allow businesses to run a premium finance company with low overheads. 98% of the labor involved has been replaced by technological automation. Most Agencies already have the infrastructure in place to begin premium finance lending, so the costs involved are negligible.
The following projection illustrates the expected revenues that can be made from owning a premium finance subsidiary:
|Average Premium||Total Contracts||Premiums Financed||Fin. Chg. Per Contract||Fin. Chg. On Portfolio|
*The revenue projections are based on an APR of 18% which is, on average, the allowed APR in most States. We will assist you in planning and structuring your program, and provide you with a tailored estimate about how much you stand to make in revenue.