As businesses and individuals begin to come out on the other side of the COVID-19 pandemic, it’s a good time for insurance agents to consider starting their own premium finance company - especially those that do a lot of business with certain industries.
COST Financial Group, Inc. - an organization that manages and operates premium finance companies owned by insurance agents, agency groups, insurance companies and general agents - has traditionally seen commercial trucking and general contractor premiums as the most active areas. Now that “the world is opening back up and more people are getting back to work, we are seeing an increase in policies being financed, particularly across those two industries,” said Travis Klingler, executive vice president, finance & business development at COST.
Find out more: Learn all about COST Financial here.
With the trucking industry, truckers need insurance to get up and down the road and they are making their payments, or they cannot work, Klingler noted, adding there tends to be a high rate of late charge income in that industry as well. Agencies that do a lot of general contractor premiums also see high volume, as again contractors must have insurance to bid for the work and to perform it, so there’s high demand for those types of policies.
“In our 30 years of business we have shown the profitability for our finance companies within those industries are higher than the norm,” Klingler said. “If insurance agents haven’t looked into it in the past, it’s beneficial for them now.”
Agents are already arranging premium financing for insureds that need it, usually with traditional premium financing companies, but many states prohibit commission programs meaning the agent does not see any return on their effort. Setting up a premium finance company with COST addresses that issue because the agents themselves reap the benefits of the finance charges as well as any late fee income. If the agency has enough volume, which Klingler states is at least $1 million in annual financed premium, starting a premium finance company is a great option, especially as agencies themselves are stabilizing and many owners are looking for another revenue stream to complement their main line of business. As the pandemic illustrated, in times of uncertainty, income from diverse sources can help companies weather the storm.
“With COST managing the day-to-day operations of the finance company, who would not want to generate that additional revenue stream without any overhead?” he asked. “There’s really no work necessary if you partner with us. The hardest question to overcome when I tell people about what we offer is, “Why isn’t everybody doing this?” The easy answer is that everyone should consider this alternative to traditional premium financing.
COST, which has no financial stake in any of the premium finance companies it runs, offers streamlined solutions that fit seamlessly into agencies’ existing workflows and provide a flexible approach - something that came in handy over the course of the pandemic, and now into recovery. Klingler tells prospects, as well as current clients, that “we’re going to run the company as you see fit” - within the boundaries of being fully compliant with state guidelines - and if the agent wants a late fee or a NSF fee waived for a long-time client that’s had a hard month, a quick phone call or email instructing COST to waive these fees is all it takes to show that customer some good will in a tough environment.
“There’s a lot of flexibility with owning your own finance company and having COST run it,” Klingler said. “Not only the ability to waive fees but also with the setting of rates and flexibility with down payment percentages - if you want to lower a rate for a good customer or need to increase a rate, there’s a lot of leeway with our program that owners can leverage.”
COST has experienced more interest in the first half of the year, with a crop of new clients signing up and beginning the onboarding process, and Klingler said they are hopeful the second half of 2021 is as positive. To that end, Klingler is focused on getting the message out about the benefits of partnering with COST, especially at this time.
“Getting people to understand - and truly believe the profit potential - is probably the toughest part,” said Klingler. “If a particular agency has enough volume to make it worth their while, this is another revenue stream that can be beneficial for them in the long term.”