The Premium Finance Industry is largely made of up of small, independent finance companies and Agency operated premium finance subsidiaries. Prior to the mid 90’s the industry was made up of only large finance companies such as AFCO, Imperial Premium Finance and the likes. The reason for this being that only companies with large capital to were able to make a profitable return from the business.
Managing and servicing a book of policies required high manual administrative functions such as keying in mailed in payments, tracking missed payments, sending out late notices, tracking cancellation, etc. Without the volume or large scale, the administrative costs out weighed the revenue from the fees and finance charges. All this changed with the introduction of specialized desktop and today cloud-based software desktop. The functions that were once carried out manually have been automated. Banks offer the capability to setup ACH based withdrawals for payments, software is able to automatically track missed payments and generate late and cancellation notices. It can even automatically email these notices.
Customer also are able to make online payments through a customer portal. Contracts can be e-signed, fees and interest charges automatically calculated, the list goes on. Automation of the administrative functions have produced a low cost of administration and a very high ROI, with minimal or no risk.
Small and mid-sized agencies are able to make as high as $40,000 annually with as low as $250,000 in a line of credit capitalizing on the low cost of borrowing.
Administration overheads are as low as 2 hours per day to manage a book of 20 financed policies per month.