When insurance agents and brokers are selling coverage and services to clients, relationships are critical. It is perhaps not surprising, then, that these same producers consider relationships carefully when seeking services themselves, such as premium financing.

Luther Grafe, executive vice president and chief operating officer of Bank Direct Capital Finance, a premium finance company based in Illinois, said relationships go a long way when it comes to courting agents' business.

“The insurance market is still a very relationship-driven business, so it's who do you know, or who can you get in to see in an agency?”

He said that when his company approaches an agent, his first goal is to get a meeting. The second goal is to get the agent to try his company for at least one premium finance quote, and finally, the third goal is to try to convince the agent to finance at least one deal with his company.

Kurt Huffman, president and chief executive officer of UPAC, a premium finance company based in Kansas, noted that an agent's job is sales.

“Most of them are the extroverted sales type–big-picture folks,” Mr. Huffman said. “And then there are generally people in their offices that handle the paperwork and the details of the transactions. So what most of them want is kind of a dual-edged sword.”

Most agents, according to Mr. Huffman, want to deal with someone they feel they can trust. At the same time, they need their inside people to be comfortable with the tools and services offered.

“You need that high-level trust factor that generally hinges on whether [the agency and premium finance company] get along at the principal level, and then there's the service–the day-to-day transaction service level.”

Lane Rubin, managing member of Excel Coverage Group LLC and secretary-treasurer of the Independent Agents and Brokers of New York, described just how important relationships are to an agent.

“We were dealing with primarily one [premium finance] company–a very large company–for a number of years,” Mr. Rubin said. “We're a very low-maintenance-type agency–we don't require that much service. But I met some marketing people from a couple of other finance companies that added that personal touch to the whole relationship, and we moved to where we started doing business with another finance company or two because of that.”

Aside from relationships, Mr. Rubin cited “ease of use” as important in choosing a premium finance company.

“Ease of use is number one with our agency. If they're going to make it easy for us, then that's where we're going to go. We're not going to go someplace else where we may have to do an extra few steps to put business on the books,” Mr. Rubin said.

Ease of use does not just mean technology solutions, according to Mr. Rubin, who said he needs to be able to get someone on the telephone to resolve any problems as well.

While Mr. Rubin said his agency does not accept any sort of fees or commissions from premium finance companies, such considerations do factor into some agents' thinking when selecting a premium finance provider.

Speaking to the prevalence of these fee arrangements and their importance to agents, Mr. Grafe said: “It's all over the board. There are some agencies that want the absolute lowest rate for their insured and will not get involved in this sort of fee arrangement. There are some states where fees are prohibited by law. And then there are cases where an agency will say, 'For the effort I go through on premium financing, I want to be able to make a little incentive or income on this.'”

For those agencies that do look for fee arrangements, where they are legal, Mr. Grafe said there is some competition among premium finance companies to accommodate the agents.

“If Bank Direct, for example, had a policy that we don't participate in fee arrangements, even though it's permitted in many states–if we just said, 'You know what, that's not the way we want to do business. We just want to give the best rates we can and let that prevail in the marketplace,' I would say that a vast majority of agencies that can get [fee arrangements] wouldn't even be willing to talk to us, because they won't leave something on the table that they can get from somebody else.”

The degree and terms of these arrangements, Mr. Grafe said, tend to stay constant and do not fluctuate depending on the market conditions.

Generally, these fees are only affected by changes in statute in certain states. “There are events that happened, if you think back to New York…when [then-attorney general, now governor, Eliot Spitzer] began to look at some of the commissions between carriers and agents–some agencies backed off a little bit, and maybe made sure that the i's were dotted and t's were crossed a little bit more, but I wouldn't say that I've seen any significant increase or decrease in the process,” Mr. Grafe said.

Special Reports /

Agents See Premium Finance As A Matter Of Relationships

Related Stories

Recommended For You