September 16, 2024 • 28 mins
Welcome back to another enlightening episode of "Up to Speed," the podcast that keeps you informed on all things insurance. Join Samantha from Lytespeed as she sits down with her dear friend and industry expert, Erin Foxworthy, Vice President at IPFS, a leading premium finance company.
In this episode, Erin demystifies the concept of premium finance, explaining how it helps insureds afford their coverages and optimize cash flow. Discover the practical benefits for both agencies and insureds, including the ease of setting up monthly payment plans and the administrative relief for agencies.
Erin shares valuable insights into the current turbulent insurance market, the impact of rising premiums, and how premium finance companies are stepping up to assist. She also highlights the technological advancements that are making the process more efficient for everyone involved.
Whether you're a seasoned insurance professional or just starting your career, this episode offers a wealth of knowledge and practical tips to navigate the complexities of premium finance. Tune in to learn how you can leverage this powerful tool to enhance your insurance practice.
https://www.ipfs.com/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Well, welcome back. It's Samantha with Lightspeed, and we are here with Up to
Speed, our podcast keeping you up to speed about all things insurance,
helping you be better, faster, and stronger in your insurance practice.
Today, I've got a treat for you guys. I've got a dear friend of mine,
somebody I've grown up in the insurance business world with,
my girlfriend, Erin Foxworthy. How are you doing?
(00:20):
I'm doing great, Sam. Thanks for having me on your pod.
We've come a long way, girl. I mean, from the streets of San Francisco to now
that we are Zooming. You are currently vice president at IPFS,
which is a premium finance company.
And I'm super excited to bring this information to our listeners just about
the premium finance market, what it is, what it is as a tool in your agency,
(00:41):
and how it all kind of works out.
So tell us a little bit about premium finance as a whole concept and what it does and what it is.
So I like to describe premium financing as a tool for agencies to use to basically
help insureds afford their coverages. I mean, that's the main reason why we're here.
There's a lot of bells and whistles in the process now.
(01:02):
But at the end of the day, we're here to finance insurance premiums.
So when insureds have policies where all the money is due up front,
that can be a big cash expenditure for businesses.
And that's where we come into play. So we can finance the insurance premiums
for the insureds, and then we will pay the premiums for them.
(01:24):
They pay us back over the loan period, which is typically between 9 to 12 months
during the policy period.
So it's a really easy way to obtain financing.
The process is very quick and easy. And for insureds, it's a low-cost way to
help optimize their cash flow.
Which we'll get into because we both sit in San Francisco, California.
(01:47):
And as we all know, the California marketplace is a little bit turbulent.
And we're no longer paying $800 or $1,000 for our different,
even at a homeowner's level, which you guys do personal lines and commercial.
We do, we do. And fun fact, we've financed more personal lines in the last two
years than we have in the history of IPFS, which is over 45 years.
(02:09):
So it's a really good reflection of what's going on in the marketplace right now.
Well, and I think too, many agents are finding that they're no longer using
their direct bill markets because they're not writing insurance.
So they're going into the surplus lines or the non-admitted carriers.
And those, for those of you that aren't in that space, you know, it's pay in full or not.
Do this outside premium finance with a third-party vendor. And what that does
(02:33):
is, again, allow them that monthly payment option, which is great.
But it's also something that from an agent's side, you got to understand how
that works. Like, what does that look like? What types of policies can I premium finance?
You know, is it a direct bill or only an agency bill? So what do you say to that?
Yeah. So typically we don't finance direct bill because there's already payment plans for those.
(02:54):
So agency bills, surplus lines is 99% of what we see on our side.
And like I said before, the process is pretty easy. If the insured is interested
in having a monthly payment option, super easy to set up.
The agency is the one who comes to the premium finance company to coordinate
(03:14):
the premium finance agreement.
They give us the policy information. we turn around a quote usually within minutes.
Sometimes it takes a little bit longer if there's any kind of complications
with the policy, you know, if there's extended earnings or, you know,
large minimum earned premiums.
But for a standard policy, quote gets turned around very, very quickly.
(03:37):
Insured signs the PFA, gives us a down payment, and then we'll pay the carrier
and then and they just start paying us monthly installments. So very, very simple.
It's super easy. And it's also great as a tool for agency brokers and agents
because a lot of times, you know, we write the policy, we service the policy,
and then unfortunately, we're chasing money a lot of times.
(03:59):
You know, we're calling our clients, hey, did you make the monthly payment?
We're going to get an NOC.
So you guys kind of really take that part of the puzzle out because you've got it built in.
Yes. We've coined the phrase, take the bill out of agency bill.
So that's one of the great, great benefits for people on the agency side is
that we take on all the administrative work for billing and collecting.
(04:22):
And then also the financial risk that is involved in agency bill gets transferred over to us.
And it's a really smart thing for agencies to take advantage of because we are
experts at billing and collecting.
I mean, it's 90% of what we do for the last 45 years.
So we have great processes in place. We can collect in a timely manner.
(04:43):
We have a lot of tools available as well, like texting our insurers to let them
know that they're late, giving them all kinds of online tools and technology
to be able to stay current, manage their loan, make payments to us.
So the thing to remember is that the premium finance company has the infrastructure
in place to be able to handle We handle the billing and collecting of insurance premiums,
(05:08):
and it's something that we encourage our agency partners to take advantage of.
There's so many benefits for the insured and the agency.
In utilizing premium finance. One of the biggest ones that agencies love is
that you will get your commission up front, so you get paid up front.
And then the other huge one, like I said, is just the administrative time and
(05:30):
costs that you save associated with the billing and collecting.
That's almost a seat in your office. I mean, if you've got a lot of business
on the books, I mean, that's a full-time job for a CSR is just collecting and
making sure that people are paying their bills.
And it's also, it's very cumbersome, right? And it's always the same people
too. Each month you're like, come on. Yes, the repeat offenders.
(05:51):
But to take that piece of the puzzle out, I think that alone is a huge time.
And there's no cost for an agency to use a service like this.
It's basically just a tool that you can add into your menu of services for your
clients, which is fantastic.
Now, when it comes to the down payment, I actually had a client,
a conversation with a client, I'm working on a deal right now.
(06:13):
And he was like, well, why do I have to put the 25%? Well, it's actually 35
with all the fees and everything else.
And I said, listen, most policies are going to be written with a 25% minimum earn.
So as we all know, that means the policy needs to stay in place for three months,
and then you can wiggle around and do what you want. The insurance company wants that money regardless.
And so that's why that's due up front.
(06:34):
Exactly. Exactly. Yeah. I mean, that 25% is what the insurance company is going
to use to deal with the cost of putting the policy into place for you.
They say, okay, we want at least 25%. So as a premium finance company,
we, from a collateral standpoint, we look at that as money that we'll never
get back if the policy cancels.
(06:56):
So if the insured defaults on their payments and the policy cancels,
that 25% is earned on the very first day of the policy at inception.
So most of the time, we're also going to want to make sure that that 25% gets collected up front.
Which is brilliant. And the fees and the taxes, because those are two things
that, you know, they're gone. Once they happen, they're out of here.
(07:17):
One thing I love, and many of us will experience it in our insurance career
is, you know, you write a policy and let's say they acquire another property
or there's an audit or there's something else that is a money generating activity
that now means a monthly payment or an output.
We're allowed to add that into an existing finance agreement, which is really cool.
Yeah. So for additional premiums, it's a super simple process.
(07:41):
Basically, you just come to us and say, hey, we have an additional premium that we need to add in.
And what we do is we wrap that additional amount into the remaining installments on the loan.
So super, super simple. They just get added into the bill that they're already getting.
Each payment increases by a fraction of the cost and it's all done.
(08:03):
So from an agency standpoint, once again, creating just a big efficiency and
also the tool to be able to afford those additional premiums because sometimes
our insureds aren't expecting those or they don't think it through all the way
to understanding that like,
okay, I maybe just bought this new truck and they're not thinking about how
that's going to impact their insurance and they might not be prepared for an extra cost like that.
(08:26):
So that's where we can come into play and help out to spread that additional
cost over the policy period.
And it's super easy. And it, again, just kind of creates that another little
line item that you don't have to worry about. Now, when we finance policies,
we can finance any kind of policy with respect to insurance.
So if you've got a cyber policy, professional lines, building insurance,
(08:47):
general liability, work comp?
Can we do work comp? In some cases, we do. In some cases, we don't. It's a guaranteed cost.
Yes. Yeah. It's not a standard. But I mean, all the greatest hits are really
things that we can attack really easily.
Is there any no-go policies you will not finance? No.
I would say probably direct bill is the one that you is the most prominent sometimes
(09:08):
we'll get because maybe someone will come to us wanting a different payment
plan than what's being offered.
We can't finance direct bill because with direct bill,
if the policy cancels, the carrier will not recognize us to have power of attorney
to actually cancel the policy and get the return premium back to us,
which maybe I should explain the collateral on the loan to help people understand
(09:31):
what the The most beautiful thing about premium finance is that it's a relatively
low-risk loan because the collateral on the loan is the actual insurance policy itself.
So when an insured signs a premium finance agreement within the clauses of the
premium finance agreement, they give us power of attorney to cancel the policy if they default.
(09:55):
So in that situation, if an insured, for whatever reason, defaults,
they don't pay us, we go to the carrier and say, hey, we have power of attorney.
We need to cancel the policy.
The return premium comes back to us and we pay off the loan,
which in most situations will cover the balance.
So it's relatively low risk for us,
(10:18):
but also for our customers who give you the peace of mind to know that I'm not
going to have someone chasing after me if my policy cancels to pay back whatever
amount of money is left on the loan.
So with direct bill, unfortunately, the carrier doesn't give us power of attorney over those policies.
So that's why we try to stay away from them because we won't be collateralized.
(10:41):
Any return premium, if it cancels, we'll go back to the insured.
Once the insured gets their hands on that return premium, it's real hard for us to get back.
They're not writing checks back to the finance company. Exactly, exactly.
So that's typically, in most situations, we'll steer clear of any direct bill policy financing.
So now that we've been, you know, we're not going to disclose our age here,
(11:03):
but we've been around the block a few times in this insurance wild market.
And I think when we both really started in insurance, it was a super hard market
when we both began our careers and it got a little loosey goose and it was kind of a lot easier.
And now here we are again. And it's probably one of the hardest we've seen in a long time.
What is that like in your seat? Because I can tell you what it's like in my
(11:24):
seat, but I'm interested in what's like on your side. Yeah.
So within the premium finance industry, we're always a direct reflection of
what is going on in the insurance industry.
So as the market has hardened over the last couple of years with premiums going
up, a lot of insureds who have never financed in the past are now turning and
(11:44):
looking for additional payment options.
So we have...
We've financed a lot, a lot of premiums in the last couple of years as the market has hardened.
And it's a beautiful thing because that's really what we're here for.
At the end of the day, we want to help insurers afford the coverages that they need.
And it is an important piece of the puzzle because looking back over the last
(12:07):
few years, there's so, so, so many situations where if premium finance companies
weren't around, insurers wouldn't be able to afford the increases.
They haven't been, I mean, especially when premiums first started increasing,
they weren't prepared for those increases.
Now it's so in your face, everybody knows about it, that insureds do have time to prepare.
(12:27):
But in the beginning, they didn't. And they're maybe seeing 100%,
200% increases, and they just didn't have the cash reserves for that.
So like I said, companies who have typically paid in full in the past have now
turned to premium finance to help ease the burden of increasing premiums.
Because it's crazy out there.
I mean, it's like you get quotes back and you're just like, is this right?
(12:52):
Yeah. Yeah. And you're also seeing a lot of different minimum premiums.
Like the minimum premiums, I'm starting to see 50 or 100%. I mean,
these carriers are not playing around.
They are not. Yeah. Really. I mean, the prices are going up and the carriers
are not being very, you know, they're not being super nice to their consumers.
Yeah, no, it's definitely a difficult time for our insurers.
(13:15):
And, you know, from our standpoint, like I said, our main goal is to help insurance
afford their coverages.
And at the same time that the insurance market is increasing in our space,
interest rates have also been increasing over the last couple years.
Obviously, we're all very aware of that situation.
(13:35):
Good thing is that because our loans are extremely short-term,
the impact isn't as big as some might think it is.
A lot of times when you're thinking of a loan, you're thinking of a car note
or your mortgage, which are long-term loans.
Because these are short-term loans, typically 12, 9 to 12 months,
an impact on the interest rate going up isn't as great as it would be on a much longer loan.
(14:02):
So for example, if you're financing, let's say $7,500, the effect on a monthly
payment by the interest rate increasing 1% was $3.50 per month.
So relatively low impact in our industry from interest rates going up,
which is kind of a a silver lining because the loans are so short.
(14:26):
But we do understand that insureds, they're getting hit on the premium.
They're getting hit on the interest rates. Not only within the insurance industry,
within all industries, costs have gone up.
So we do do our best to be as fair as possible and make accommodations where
we need to and try to keep our pricing as competitive as we possibly can.
(14:48):
And I think it's great too, because some clients, you know, are cash heavier
at different times throughout the year.
And so if they repay the loan, they just, it's over, it's done with, they don't have to pay.
The interest or the payments are based off of, you know, a nine month term or a 10 month term.
And if they prepay it, then they just pay for the part that they use,
which is also really great.
(15:08):
Yes. Yeah. The insured can prepay their loan with us at any point in the loan.
There's no prepayment penalties.
So if they do get a big influx of cash three or four months into the loan,
go ahead and pay it off if that makes sense for them.
Is there any carriers that you guys won't work with?
(15:31):
Not typically. There are some RRGs in the transportation space that we have
to be a little bit careful with.
That's a risk retention group for those of us. Risk retention groups,
which you'll have another episode. Yeah, you'll have another episode on them at a later time.
But typically, if it's an A-rated carrier, we will work with them.
(15:53):
We do have an insurance carrier management division in our company that analyzes
the performance of carriers on a quarterly basis, just to make sure that the
financials are on the up and up and that they're in a very good place.
So we do monitor it because we want to to make sure that we're not doing business
with any carriers that are close to becoming insolvent or anything like that.
(16:14):
So we monitor it very closely.
And typically, you know, most carriers we work with, it's not an issue.
And as agents too, most, I would say 99.9% of us on our E&O policies,
we're not allowed to write anything B plus or lower.
You shouldn't be writing that paper anyways, as it just isn't a practice in my opinion.
(16:35):
So it's kind of, you know, I think we all kind of play along the same lines
when it comes to carriers and making sure that we're placing our clients with
the right markets that will be there if there is a problem.
As far as, you know, like what percentage of people have, not that default,
but do you find that with these systems and things that you guys are building out and providing,
(16:55):
it's really hard for them not to keep their loans current, right?
I mean, we make it easy enough for people to pay their bill. Yes.
Yeah. There's so many tools that we have for insurance and agencies to take advantage of.
And as we kind of continue into the insurance digital revolution that I think
(17:17):
we're maybe in the beginning or middle of right now, more and more agents and
insurance are taking advantage of these tools.
I mean, the old school way is that the premium finance loan would get set up
and we send the bill to the insured via U.S. mail every month and hope for a check to come in.
Well, now that's all changed because we can send e-forms, which means we know
(17:38):
when they get the invoice.
We can see if they've opened it or not. We get returned email if it bounces or whatever.
So we can put corrective action into place really quickly to make sure our insureds
and agents are getting our notifications.
We have all kinds of alerts that can be set up via text message or email to
go to agencies and insureds to let them know where they're at with their loan.
(18:03):
If they're getting close to cancellation.
And then we also have a lot of payment capabilities.
We can take payments on our portal from insured agents can make payments on
behalf of the insurance.
We've got a mobile app that insurance can use. We know a lot of our customers
are out on the road constantly.
I mean, these are business owners, right? So they're out wheeling and dealing.
(18:25):
Mobile app is super, super helpful for them because they have access to their loan at all times.
And from an agency side, we have all kinds of tools in place for you guys too
to set up at the beginning of the loan with the e-forms, with the text message notifications,
with getting the insureds all of the notifications they need to get set up on our website, etc.
(18:49):
So if all of these things are taken advantage of, we actually do have some data
on it that insureds are like 90% less likely to go into cancellation if these
digital tools are being used.
So many warnings. Unless you are under a rock in Bali, not paying attention,
your insureds are getting notified, which is a lot more than any of us could
(19:13):
ever do from an agency perspective just because we're managing multiple clients.
And so it's really hard to pay that special attention to things.
And that's why we have those tools for you is because we We don't want you guys
spending your time chasing down payments. We want you focusing on selling insurance.
Get out there, meet the customers, handle these difficult conversations that
(19:35):
you guys are having to have in this marketplace, not worrying about premium finance.
So that's why we have all these tools in place for you. And we continue to develop
more tools to make the process easy, efficient, and keep our insurance loans
in force at the end of the day. That's the goal, right? We don't want them to cancel.
So I know you get to go out and see a lot of agencies. I don't know if you're
(19:56):
doing that yourself anymore like you used to. I used to come see you all the
time, but I know you're an agent.
What are agents saying out there? What's the climate like with these independent agencies out there?
I mean, I'm sure it's what we've all heard, but every time I visit an agent,
at least one of the conversations is discussing the marketplace and how difficult
it is for everyone right now.
(20:17):
I know it's difficult for agents. It's difficult for insurance.
It's It's difficult for carriers. It's difficult for wholesalers.
It's difficult for premium finance companies.
Everybody is having a difficult time right now just navigating through placing policies.
Increase in pricing. So, you know, everyone's having to work a lot harder than they did before.
(20:39):
But I always try to tell people, I like to, I'm kind of a therapist for my,
I'm the therapist of the group.
And I always say, this is just a moment. So it's just something that we need
to get through because this industry is cyclical.
We go in phases. And in my 16 years in this industry, I've gone through three
of them already, you know, hard market, soft market, hard market again.
(21:01):
So, you know, it's just a moment. We just have to get through it. Things will change.
And I know that our regulators are, they know that there's a serious problem
going on in insurance right now, especially in California.
And they're working on, they're working really hard to figure out how to try
to solve it and, you know, get new protocol in place to avoid what has happened
(21:25):
over the last couple years.
Yeah. I mean, they keep saying stuff's coming. So we're all waiting.
We're all waiting. I know. I'm on pins and needles over here.
Ready. We're ready, baby.
Yeah, I think, too, you know, I always feel for those younger agencies,
you know, those people that are just kind of starting their careers because
it's so, it's turbulent.
I say it all the time. It's just messy. It's bumpy.
But the thing that's kind of cool about this time in this industry is a lot
(21:49):
of the technology that's coming forth.
And, you know, I attend a lot of meetings. I go to a lot of different things
around a lot of just insurtech or just tools, AI. I mean, there's so many cool things.
That are helping agencies, I think, work smarter and faster.
So, yes, it is harder, but then there's also ways that it's becoming easier.
(22:10):
Yes, yeah. And, you know, I'm hoping that there is some resolve,
you know, with our Department of Insurance. But it's not just us, right? It's everybody.
I don't care what state you're in. You're feeling it.
Yes. Oh, 100%. So we're all in this together.
And I do echo what you said about the emerging technologies in our industry.
There's so many tools that, you know, agencies can take advantage of to make
(22:34):
the process easier, but it is difficult to change, you know,
because you change one process and it's a domino effect.
And next thing you know, you got to change the whole policies and procedures
of the agency because you implemented one new system.
But I try to think about, okay, let's look at who's going to be the insurance
buyer in five years, in 10 years.
(22:54):
The demographic is changing and it's going to be a whole different ballgame
of how insurance is transacted in another 10 years because we're going to have
really technology-driven insurers purchasing insurance and they're going to
be looking for a digital experience.
So I think now is the time to- This next generation, I was just at back to school
night last night and we're in the English class learning about what we're doing
(23:17):
and he's up there showing us this all online English program.
There's no books, like no one's reading books anymore.
And I finally read my, raised my hand. I was like, is this the way they're learning?
And here it is. Like, this is the way they're learning. This is how they're
going to consume products.
This is how the world is going. And so I think as people in an industry that's
ever changing, this is the time to rise to the moment and really jump on board.
(23:40):
You know, it's scary and it's weird. Embrace it. Yeah.
Embrace it. Yeah. Cause that's, it's the future. There's no stopping it.
Some of it's like a little bit crazy, though, when you start looking at some
of the AI and you're like, well, what about me? Like, do they say me? Yes, they do need you.
Yes, exactly. You need the smart people to know the smart things.
You're out in the world. You're out seeing things.
(24:02):
What's coming up? Where can people see you guys out in the wild?
So you've got some trade shows coming up?
Yes. IPFS, I mean, we attend all the big trade shows.
Great thing about IPFS, we're one of the only premium finance company that has
a local presence. So that means we've got 30 offices across the United States.
We've got a huge sales force all over the country. So we're at all the big eyes.
(24:24):
We're at all the big conferences.
We usually have a booth. We love to support our local insurance associations and causes.
So definitely come see us at whatever insurance association functions you guys are attending.
It's more than likely that we will be there. and then on a national level too.
We go to the insured tech, we go to the applied, we go to the AMS, we go to all the big ones.
(24:48):
So you can always find someone from IPFS and we're more than happy to answer
any questions people have about premium finance.
If you guys are interested in working with us, if you go to ipfs.com under the contact tab,
just fill in your information and someone will reach out to you within a couple
of hours to try to understand what your needs are and then they'll direct traffic
(25:10):
to a local person to get in touch with you.
And the systems are super easy, guys. And there's no cost to you as an agency.
Like this isn't a software you have to buy.
This is literally just a tool to help you help your clients pay their bills.
And everybody at the end of the day gets what they need and gets paid.
So at the end, it's a great little thing.
(25:31):
Yes. Thanks, Sam, for recognizing the value in premium finance.
I love that about you and sharing the good word. Because like I said,
we don't want to be just seen as a vendor.
We truly want to provide value and be a tool for our customers.
And we definitely want people to take advantage of that.
(25:51):
One other closing point too I dig is when you're working on a renewal,
let's say, you can go in there and if your client's been using...
They're familiar with the program, they know the system, you literally can just
go in there and type in their name and all their information populates, affects everything.
You just change the policy numbers and the numbers.
It's super, it couldn't be like super simple. Yeah, super simple.
(26:12):
Our portal, ipfs.com, very robust.
And it's almost to the point where like, if you never wanted to talk to anyone
at IPFS, you wouldn't have to, you can do everything you need to do on ipfs.com.
But we do love talking to our customers. Let me say that.
But yes, we have the renewal feature, which will pre-populate all the information.
So it makes it super easy.
We also have a very robust API capability.
(26:35):
So we can integrate with your agency management systems. And what that does
is it just pulls the policy info right over and delivers you either a PFA or
a quote, depending upon how you want to set it up. Yep.
So, you know, we try to make the process, like I said, as seamless as possible
because premium finance is usually something that's set up at the 11th hour, right?
(26:57):
Like you're, it doesn't come into play until you're at the point where you're binding coverage.
And so we know that you've got a lot of the balls in the air at that point in
the process of selling an insurance policy.
So it truly, truly is our goal and one of our missions to make this process
as easy and efficient as possible for our customers.
Which is so refreshing because if you're like me, you know, I've noticed in
(27:20):
the last three, four years, the communications between carriers, markets, and things.
I mean, you used to send an email and it takes, now it'll take two,
three weeks to get an endorsement, to get an answer back.
And I'm like, this new level of communication or service, clients are gone if
they're not getting back.
And so being able to be quick and have this box effect, boom, it's awesome.
(27:43):
Yeah, that's great. I mean, that's one of the other great things about premium
finance is that from a sales aspect, it allows you to close the deal quickly, right?
Because if you're trying to sell a policy, you want to make sure that the funds
are there before you bind because you're you're on the hook for that as an agent.
And with us, almost every single agent is approved up to $100,000,
(28:03):
pre-approved up to $100,000 in premium on our website.
So if you've got a quote that you need under $100,000, you can get that off
of our website like that within two minutes.
All it is is inputting the policy information and the insurance information.
It's so easy. I wish everything in life was this easy. I wish insurance as an
entire marketplace was this easy. Erin, Erin, I can't say thank you enough.
(28:25):
I was so excited to get to sit down with you just because I know you know your
stuff and I know that I love using you guys and I love having options for agents
and clients to be able to do business fast and quick and get it done.
At the end of the day, we're all working together and we will navigate this
crazy insurance market the best we can. So thank you, Erin.
Yeah, thanks for having me. I'm so excited to be able to educate people on premium
(28:50):
finance and what a fantastic tool it is.
Awesome. You're the best. We'll see you soon. And thank you,
everybody. We hope we kept you up to speed.
Well, welcome back. It's Samantha with Lightspeed, and we are here with Up to
Speed, our podcast keeping you up to speed about all things insurance,
helping you be better, faster, and stronger in your insurance practice.
Today, I've got a treat for you guys. I've got a dear friend of mine,
somebody I've grown up in the insurance business world with,
my girlfriend, Erin Foxworthy. How are you doing?
(00:20):
I'm doing great, Sam. Thanks for having me on your pod.
We've come a long way, girl. I mean, from the streets of San Francisco to now
that we are Zooming. You are currently vice president at IPFS,
which is a premium finance company.
And I'm super excited to bring this information to our listeners just about
the premium finance market, what it is, what it is as a tool in your agency,
(00:41):
and how it all kind of works out.
So tell us a little bit about premium finance as a whole concept and what it does and what it is.
So I like to describe premium financing as a tool for agencies to use to basically
help insureds afford their coverages. I mean, that's the main reason why we're here.
There's a lot of bells and whistles in the process now.
(01:02):
But at the end of the day, we're here to finance insurance premiums.
So when insureds have policies where all the money is due up front,
that can be a big cash expenditure for businesses.
And that's where we come into play. So we can finance the insurance premiums
for the insureds, and then we will pay the premiums for them.
(01:24):
They pay us back over the loan period, which is typically between 9 to 12 months
during the policy period.
So it's a really easy way to obtain financing.
The process is very quick and easy. And for insureds, it's a low-cost way to
help optimize their cash flow.
Which we'll get into because we both sit in San Francisco, California.
(01:47):
And as we all know, the California marketplace is a little bit turbulent.
And we're no longer paying $800 or $1,000 for our different,
even at a homeowner's level, which you guys do personal lines and commercial.
We do, we do. And fun fact, we've financed more personal lines in the last two
years than we have in the history of IPFS, which is over 45 years.
(02:09):
So it's a really good reflection of what's going on in the marketplace right now.
Well, and I think too, many agents are finding that they're no longer using
their direct bill markets because they're not writing insurance.
So they're going into the surplus lines or the non-admitted carriers.
And those, for those of you that aren't in that space, you know, it's pay in full or not.
Do this outside premium finance with a third-party vendor. And what that does
(02:33):
is, again, allow them that monthly payment option, which is great.
But it's also something that from an agent's side, you got to understand how
that works. Like, what does that look like? What types of policies can I premium finance?
You know, is it a direct bill or only an agency bill? So what do you say to that?
Yeah. So typically we don't finance direct bill because there's already payment plans for those.
(02:54):
So agency bills, surplus lines is 99% of what we see on our side.
And like I said before, the process is pretty easy. If the insured is interested
in having a monthly payment option, super easy to set up.
The agency is the one who comes to the premium finance company to coordinate
(03:14):
the premium finance agreement.
They give us the policy information. we turn around a quote usually within minutes.
Sometimes it takes a little bit longer if there's any kind of complications
with the policy, you know, if there's extended earnings or, you know,
large minimum earned premiums.
But for a standard policy, quote gets turned around very, very quickly.
(03:37):
Insured signs the PFA, gives us a down payment, and then we'll pay the carrier
and then and they just start paying us monthly installments. So very, very simple.
It's super easy. And it's also great as a tool for agency brokers and agents
because a lot of times, you know, we write the policy, we service the policy,
and then unfortunately, we're chasing money a lot of times.
(03:59):
You know, we're calling our clients, hey, did you make the monthly payment?
We're going to get an NOC.
So you guys kind of really take that part of the puzzle out because you've got it built in.
Yes. We've coined the phrase, take the bill out of agency bill.
So that's one of the great, great benefits for people on the agency side is
that we take on all the administrative work for billing and collecting.
(04:22):
And then also the financial risk that is involved in agency bill gets transferred over to us.
And it's a really smart thing for agencies to take advantage of because we are
experts at billing and collecting.
I mean, it's 90% of what we do for the last 45 years.
So we have great processes in place. We can collect in a timely manner.
(04:43):
We have a lot of tools available as well, like texting our insurers to let them
know that they're late, giving them all kinds of online tools and technology
to be able to stay current, manage their loan, make payments to us.
So the thing to remember is that the premium finance company has the infrastructure
in place to be able to handle We handle the billing and collecting of insurance premiums,
(05:08):
and it's something that we encourage our agency partners to take advantage of.
There's so many benefits for the insured and the agency.
In utilizing premium finance. One of the biggest ones that agencies love is
that you will get your commission up front, so you get paid up front.
And then the other huge one, like I said, is just the administrative time and
(05:30):
costs that you save associated with the billing and collecting.
That's almost a seat in your office. I mean, if you've got a lot of business
on the books, I mean, that's a full-time job for a CSR is just collecting and
making sure that people are paying their bills.
And it's also, it's very cumbersome, right? And it's always the same people
too. Each month you're like, come on. Yes, the repeat offenders.
(05:51):
But to take that piece of the puzzle out, I think that alone is a huge time.
And there's no cost for an agency to use a service like this.
It's basically just a tool that you can add into your menu of services for your
clients, which is fantastic.
Now, when it comes to the down payment, I actually had a client,
a conversation with a client, I'm working on a deal right now.
(06:13):
And he was like, well, why do I have to put the 25%? Well, it's actually 35
with all the fees and everything else.
And I said, listen, most policies are going to be written with a 25% minimum earn.
So as we all know, that means the policy needs to stay in place for three months,
and then you can wiggle around and do what you want. The insurance company wants that money regardless.
And so that's why that's due up front.
(06:34):
Exactly. Exactly. Yeah. I mean, that 25% is what the insurance company is going
to use to deal with the cost of putting the policy into place for you.
They say, okay, we want at least 25%. So as a premium finance company,
we, from a collateral standpoint, we look at that as money that we'll never
get back if the policy cancels.
(06:56):
So if the insured defaults on their payments and the policy cancels,
that 25% is earned on the very first day of the policy at inception.
So most of the time, we're also going to want to make sure that that 25% gets collected up front.
Which is brilliant. And the fees and the taxes, because those are two things
that, you know, they're gone. Once they happen, they're out of here.
(07:17):
One thing I love, and many of us will experience it in our insurance career
is, you know, you write a policy and let's say they acquire another property
or there's an audit or there's something else that is a money generating activity
that now means a monthly payment or an output.
We're allowed to add that into an existing finance agreement, which is really cool.
Yeah. So for additional premiums, it's a super simple process.
(07:41):
Basically, you just come to us and say, hey, we have an additional premium that we need to add in.
And what we do is we wrap that additional amount into the remaining installments on the loan.
So super, super simple. They just get added into the bill that they're already getting.
Each payment increases by a fraction of the cost and it's all done.
(08:03):
So from an agency standpoint, once again, creating just a big efficiency and
also the tool to be able to afford those additional premiums because sometimes
our insureds aren't expecting those or they don't think it through all the way
to understanding that like,
okay, I maybe just bought this new truck and they're not thinking about how
that's going to impact their insurance and they might not be prepared for an extra cost like that.
(08:26):
So that's where we can come into play and help out to spread that additional
cost over the policy period.
And it's super easy. And it, again, just kind of creates that another little
line item that you don't have to worry about. Now, when we finance policies,
we can finance any kind of policy with respect to insurance.
So if you've got a cyber policy, professional lines, building insurance,
(08:47):
general liability, work comp?
Can we do work comp? In some cases, we do. In some cases, we don't. It's a guaranteed cost.
Yes. Yeah. It's not a standard. But I mean, all the greatest hits are really
things that we can attack really easily.
Is there any no-go policies you will not finance? No.
I would say probably direct bill is the one that you is the most prominent sometimes
(09:08):
we'll get because maybe someone will come to us wanting a different payment
plan than what's being offered.
We can't finance direct bill because with direct bill,
if the policy cancels, the carrier will not recognize us to have power of attorney
to actually cancel the policy and get the return premium back to us,
which maybe I should explain the collateral on the loan to help people understand
(09:31):
what the The most beautiful thing about premium finance is that it's a relatively
low-risk loan because the collateral on the loan is the actual insurance policy itself.
So when an insured signs a premium finance agreement within the clauses of the
premium finance agreement, they give us power of attorney to cancel the policy if they default.
(09:55):
So in that situation, if an insured, for whatever reason, defaults,
they don't pay us, we go to the carrier and say, hey, we have power of attorney.
We need to cancel the policy.
The return premium comes back to us and we pay off the loan,
which in most situations will cover the balance.
So it's relatively low risk for us,
(10:18):
but also for our customers who give you the peace of mind to know that I'm not
going to have someone chasing after me if my policy cancels to pay back whatever
amount of money is left on the loan.
So with direct bill, unfortunately, the carrier doesn't give us power of attorney over those policies.
So that's why we try to stay away from them because we won't be collateralized.
(10:41):
Any return premium, if it cancels, we'll go back to the insured.
Once the insured gets their hands on that return premium, it's real hard for us to get back.
They're not writing checks back to the finance company. Exactly, exactly.
So that's typically, in most situations, we'll steer clear of any direct bill policy financing.
So now that we've been, you know, we're not going to disclose our age here,
(11:03):
but we've been around the block a few times in this insurance wild market.
And I think when we both really started in insurance, it was a super hard market
when we both began our careers and it got a little loosey goose and it was kind of a lot easier.
And now here we are again. And it's probably one of the hardest we've seen in a long time.
What is that like in your seat? Because I can tell you what it's like in my
(11:24):
seat, but I'm interested in what's like on your side. Yeah.
So within the premium finance industry, we're always a direct reflection of
what is going on in the insurance industry.
So as the market has hardened over the last couple of years with premiums going
up, a lot of insureds who have never financed in the past are now turning and
(11:44):
looking for additional payment options.
So we have...
We've financed a lot, a lot of premiums in the last couple of years as the market has hardened.
And it's a beautiful thing because that's really what we're here for.
At the end of the day, we want to help insurers afford the coverages that they need.
And it is an important piece of the puzzle because looking back over the last
(12:07):
few years, there's so, so, so many situations where if premium finance companies
weren't around, insurers wouldn't be able to afford the increases.
They haven't been, I mean, especially when premiums first started increasing,
they weren't prepared for those increases.
Now it's so in your face, everybody knows about it, that insureds do have time to prepare.
(12:27):
But in the beginning, they didn't. And they're maybe seeing 100%,
200% increases, and they just didn't have the cash reserves for that.
So like I said, companies who have typically paid in full in the past have now
turned to premium finance to help ease the burden of increasing premiums.
Because it's crazy out there.
I mean, it's like you get quotes back and you're just like, is this right?
(12:52):
Yeah. Yeah. And you're also seeing a lot of different minimum premiums.
Like the minimum premiums, I'm starting to see 50 or 100%. I mean,
these carriers are not playing around.
They are not. Yeah. Really. I mean, the prices are going up and the carriers
are not being very, you know, they're not being super nice to their consumers.
Yeah, no, it's definitely a difficult time for our insurers.
(13:15):
And, you know, from our standpoint, like I said, our main goal is to help insurance
afford their coverages.
And at the same time that the insurance market is increasing in our space,
interest rates have also been increasing over the last couple years.
Obviously, we're all very aware of that situation.
(13:35):
Good thing is that because our loans are extremely short-term,
the impact isn't as big as some might think it is.
A lot of times when you're thinking of a loan, you're thinking of a car note
or your mortgage, which are long-term loans.
Because these are short-term loans, typically 12, 9 to 12 months,
an impact on the interest rate going up isn't as great as it would be on a much longer loan.
(14:02):
So for example, if you're financing, let's say $7,500, the effect on a monthly
payment by the interest rate increasing 1% was $3.50 per month.
So relatively low impact in our industry from interest rates going up,
which is kind of a a silver lining because the loans are so short.
(14:26):
But we do understand that insureds, they're getting hit on the premium.
They're getting hit on the interest rates. Not only within the insurance industry,
within all industries, costs have gone up.
So we do do our best to be as fair as possible and make accommodations where
we need to and try to keep our pricing as competitive as we possibly can.
(14:48):
And I think it's great too, because some clients, you know, are cash heavier
at different times throughout the year.
And so if they repay the loan, they just, it's over, it's done with, they don't have to pay.
The interest or the payments are based off of, you know, a nine month term or a 10 month term.
And if they prepay it, then they just pay for the part that they use,
which is also really great.
(15:08):
Yes. Yeah. The insured can prepay their loan with us at any point in the loan.
There's no prepayment penalties.
So if they do get a big influx of cash three or four months into the loan,
go ahead and pay it off if that makes sense for them.
Is there any carriers that you guys won't work with?
(15:31):
Not typically. There are some RRGs in the transportation space that we have
to be a little bit careful with.
That's a risk retention group for those of us. Risk retention groups,
which you'll have another episode. Yeah, you'll have another episode on them at a later time.
But typically, if it's an A-rated carrier, we will work with them.
(15:53):
We do have an insurance carrier management division in our company that analyzes
the performance of carriers on a quarterly basis, just to make sure that the
financials are on the up and up and that they're in a very good place.
So we do monitor it because we want to to make sure that we're not doing business
with any carriers that are close to becoming insolvent or anything like that.
(16:14):
So we monitor it very closely.
And typically, you know, most carriers we work with, it's not an issue.
And as agents too, most, I would say 99.9% of us on our E&O policies,
we're not allowed to write anything B plus or lower.
You shouldn't be writing that paper anyways, as it just isn't a practice in my opinion.
(16:35):
So it's kind of, you know, I think we all kind of play along the same lines
when it comes to carriers and making sure that we're placing our clients with
the right markets that will be there if there is a problem.
As far as, you know, like what percentage of people have, not that default,
but do you find that with these systems and things that you guys are building out and providing,
(16:55):
it's really hard for them not to keep their loans current, right?
I mean, we make it easy enough for people to pay their bill. Yes.
Yeah. There's so many tools that we have for insurance and agencies to take advantage of.
And as we kind of continue into the insurance digital revolution that I think
(17:17):
we're maybe in the beginning or middle of right now, more and more agents and
insurance are taking advantage of these tools.
I mean, the old school way is that the premium finance loan would get set up
and we send the bill to the insured via U.S. mail every month and hope for a check to come in.
Well, now that's all changed because we can send e-forms, which means we know
(17:38):
when they get the invoice.
We can see if they've opened it or not. We get returned email if it bounces or whatever.
So we can put corrective action into place really quickly to make sure our insureds
and agents are getting our notifications.
We have all kinds of alerts that can be set up via text message or email to
go to agencies and insureds to let them know where they're at with their loan.
(18:03):
If they're getting close to cancellation.
And then we also have a lot of payment capabilities.
We can take payments on our portal from insured agents can make payments on
behalf of the insurance.
We've got a mobile app that insurance can use. We know a lot of our customers
are out on the road constantly.
I mean, these are business owners, right? So they're out wheeling and dealing.
(18:25):
Mobile app is super, super helpful for them because they have access to their loan at all times.
And from an agency side, we have all kinds of tools in place for you guys too
to set up at the beginning of the loan with the e-forms, with the text message notifications,
with getting the insureds all of the notifications they need to get set up on our website, etc.
(18:49):
So if all of these things are taken advantage of, we actually do have some data
on it that insureds are like 90% less likely to go into cancellation if these
digital tools are being used.
So many warnings. Unless you are under a rock in Bali, not paying attention,
your insureds are getting notified, which is a lot more than any of us could
(19:13):
ever do from an agency perspective just because we're managing multiple clients.
And so it's really hard to pay that special attention to things.
And that's why we have those tools for you is because we We don't want you guys
spending your time chasing down payments. We want you focusing on selling insurance.
Get out there, meet the customers, handle these difficult conversations that
(19:35):
you guys are having to have in this marketplace, not worrying about premium finance.
So that's why we have all these tools in place for you. And we continue to develop
more tools to make the process easy, efficient, and keep our insurance loans
in force at the end of the day. That's the goal, right? We don't want them to cancel.
So I know you get to go out and see a lot of agencies. I don't know if you're
(19:56):
doing that yourself anymore like you used to. I used to come see you all the
time, but I know you're an agent.
What are agents saying out there? What's the climate like with these independent agencies out there?
I mean, I'm sure it's what we've all heard, but every time I visit an agent,
at least one of the conversations is discussing the marketplace and how difficult
it is for everyone right now.
(20:17):
I know it's difficult for agents. It's difficult for insurance.
It's It's difficult for carriers. It's difficult for wholesalers.
It's difficult for premium finance companies.
Everybody is having a difficult time right now just navigating through placing policies.
Increase in pricing. So, you know, everyone's having to work a lot harder than they did before.
(20:39):
But I always try to tell people, I like to, I'm kind of a therapist for my,
I'm the therapist of the group.
And I always say, this is just a moment. So it's just something that we need
to get through because this industry is cyclical.
We go in phases. And in my 16 years in this industry, I've gone through three
of them already, you know, hard market, soft market, hard market again.
(21:01):
So, you know, it's just a moment. We just have to get through it. Things will change.
And I know that our regulators are, they know that there's a serious problem
going on in insurance right now, especially in California.
And they're working on, they're working really hard to figure out how to try
to solve it and, you know, get new protocol in place to avoid what has happened
(21:25):
over the last couple years.
Yeah. I mean, they keep saying stuff's coming. So we're all waiting.
We're all waiting. I know. I'm on pins and needles over here.
Ready. We're ready, baby.
Yeah, I think, too, you know, I always feel for those younger agencies,
you know, those people that are just kind of starting their careers because
it's so, it's turbulent.
I say it all the time. It's just messy. It's bumpy.
But the thing that's kind of cool about this time in this industry is a lot
(21:49):
of the technology that's coming forth.
And, you know, I attend a lot of meetings. I go to a lot of different things
around a lot of just insurtech or just tools, AI. I mean, there's so many cool things.
That are helping agencies, I think, work smarter and faster.
So, yes, it is harder, but then there's also ways that it's becoming easier.
(22:10):
Yes, yeah. And, you know, I'm hoping that there is some resolve,
you know, with our Department of Insurance. But it's not just us, right? It's everybody.
I don't care what state you're in. You're feeling it.
Yes. Oh, 100%. So we're all in this together.
And I do echo what you said about the emerging technologies in our industry.
There's so many tools that, you know, agencies can take advantage of to make
(22:34):
the process easier, but it is difficult to change, you know,
because you change one process and it's a domino effect.
And next thing you know, you got to change the whole policies and procedures
of the agency because you implemented one new system.
But I try to think about, okay, let's look at who's going to be the insurance
buyer in five years, in 10 years.
(22:54):
The demographic is changing and it's going to be a whole different ballgame
of how insurance is transacted in another 10 years because we're going to have
really technology-driven insurers purchasing insurance and they're going to
be looking for a digital experience.
So I think now is the time to- This next generation, I was just at back to school
night last night and we're in the English class learning about what we're doing
(23:17):
and he's up there showing us this all online English program.
There's no books, like no one's reading books anymore.
And I finally read my, raised my hand. I was like, is this the way they're learning?
And here it is. Like, this is the way they're learning. This is how they're
going to consume products.
This is how the world is going. And so I think as people in an industry that's
ever changing, this is the time to rise to the moment and really jump on board.
(23:40):
You know, it's scary and it's weird. Embrace it. Yeah.
Embrace it. Yeah. Cause that's, it's the future. There's no stopping it.
Some of it's like a little bit crazy, though, when you start looking at some
of the AI and you're like, well, what about me? Like, do they say me? Yes, they do need you.
Yes, exactly. You need the smart people to know the smart things.
You're out in the world. You're out seeing things.
(24:02):
What's coming up? Where can people see you guys out in the wild?
So you've got some trade shows coming up?
Yes. IPFS, I mean, we attend all the big trade shows.
Great thing about IPFS, we're one of the only premium finance company that has
a local presence. So that means we've got 30 offices across the United States.
We've got a huge sales force all over the country. So we're at all the big eyes.
(24:24):
We're at all the big conferences.
We usually have a booth. We love to support our local insurance associations and causes.
So definitely come see us at whatever insurance association functions you guys are attending.
It's more than likely that we will be there. and then on a national level too.
We go to the insured tech, we go to the applied, we go to the AMS, we go to all the big ones.
(24:48):
So you can always find someone from IPFS and we're more than happy to answer
any questions people have about premium finance.
If you guys are interested in working with us, if you go to ipfs.com under the contact tab,
just fill in your information and someone will reach out to you within a couple
of hours to try to understand what your needs are and then they'll direct traffic
(25:10):
to a local person to get in touch with you.
And the systems are super easy, guys. And there's no cost to you as an agency.
Like this isn't a software you have to buy.
This is literally just a tool to help you help your clients pay their bills.
And everybody at the end of the day gets what they need and gets paid.
So at the end, it's a great little thing.
(25:31):
Yes. Thanks, Sam, for recognizing the value in premium finance.
I love that about you and sharing the good word. Because like I said,
we don't want to be just seen as a vendor.
We truly want to provide value and be a tool for our customers.
And we definitely want people to take advantage of that.
(25:51):
One other closing point too I dig is when you're working on a renewal,
let's say, you can go in there and if your client's been using...
They're familiar with the program, they know the system, you literally can just
go in there and type in their name and all their information populates, affects everything.
You just change the policy numbers and the numbers.
It's super, it couldn't be like super simple. Yeah, super simple.
(26:12):
Our portal, ipfs.com, very robust.
And it's almost to the point where like, if you never wanted to talk to anyone
at IPFS, you wouldn't have to, you can do everything you need to do on ipfs.com.
But we do love talking to our customers. Let me say that.
But yes, we have the renewal feature, which will pre-populate all the information.
So it makes it super easy.
We also have a very robust API capability.
(26:35):
So we can integrate with your agency management systems. And what that does
is it just pulls the policy info right over and delivers you either a PFA or
a quote, depending upon how you want to set it up. Yep.
So, you know, we try to make the process, like I said, as seamless as possible
because premium finance is usually something that's set up at the 11th hour, right?
(26:57):
Like you're, it doesn't come into play until you're at the point where you're binding coverage.
And so we know that you've got a lot of the balls in the air at that point in
the process of selling an insurance policy.
So it truly, truly is our goal and one of our missions to make this process
as easy and efficient as possible for our customers.
Which is so refreshing because if you're like me, you know, I've noticed in
(27:20):
the last three, four years, the communications between carriers, markets, and things.
I mean, you used to send an email and it takes, now it'll take two,
three weeks to get an endorsement, to get an answer back.
And I'm like, this new level of communication or service, clients are gone if
they're not getting back.
And so being able to be quick and have this box effect, boom, it's awesome.
(27:43):
Yeah, that's great. I mean, that's one of the other great things about premium
finance is that from a sales aspect, it allows you to close the deal quickly, right?
Because if you're trying to sell a policy, you want to make sure that the funds
are there before you bind because you're you're on the hook for that as an agent.
And with us, almost every single agent is approved up to $100,000,
(28:03):
pre-approved up to $100,000 in premium on our website.
So if you've got a quote that you need under $100,000, you can get that off
of our website like that within two minutes.
All it is is inputting the policy information and the insurance information.
It's so easy. I wish everything in life was this easy. I wish insurance as an
entire marketplace was this easy. Erin, Erin, I can't say thank you enough.
(28:25):
I was so excited to get to sit down with you just because I know you know your
stuff and I know that I love using you guys and I love having options for agents
and clients to be able to do business fast and quick and get it done.
At the end of the day, we're all working together and we will navigate this
crazy insurance market the best we can. So thank you, Erin.
Yeah, thanks for having me. I'm so excited to be able to educate people on premium
(28:50):
finance and what a fantastic tool it is.
Awesome. You're the best. We'll see you soon. And thank you,
everybody. We hope we kept you up to speed.
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