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What are the advantages
There are many advantages that a Premium Finance Captive has over traditional premium financing. The most attractive advantage will be the significant increases in profit; however, the other advantages can prove to be extremely beneficial to the insurance process. Some of these other advantages include:
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Taking full advantage of the existing policy .
The way we see it is that you have done the work of selling the policy to the insured. Included in this process is the procurement of premium financing. At this time you currently rely on an outside source to handle this for you. By outsourcing the premium finance process you also outsource the associated profits. |
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Customer satisfaction through flexibility .
You gain the control needed to come up with terms that may be required to sell the policy. You will have guidelines to follow for safe calculated funding, but ultimately this is your company and if you wish to offer special terms to your preferred customers you can. You can also adjust the APR outside of the normal competitive scale for preferred business. Another example of flexibility is the decision to waive a late charge for your insured. Working with the insured is a part of the relationship that guarantees retention and all of the flexibility you have can help increase retention. |
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Complete control of the policy.
A signed finance agreement gives the finance company the “right to cancel.” By owning the finance company, you gain control of the policy through a power-of-attorney. This would be benefical in trying to gain new markets. |
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Low cancellation ratios .
You of all people know your insured and in the case of preferred clients needing more time to make payments you can hold cancellations and no longer be at the mercy of your current premium finance sources. |
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No extra work or expenses associated with a premium finance captive .
Besides signing checks electronically and some extra accounting associated with the revenue you are now generating, there is really no extra work on your company’s behalf. This is a fully serviced captive that allows you to continue to focus on the growth of your company and not the management of your Premium Finance Captive. Mountain West will provide the service and expertise required to run a successful Premium Finance Captive. |
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Boost in Profits. This is the bottom line that excites captive owners. To give an example of the monetary potential of the captive, we will compare the captive with a 1%, 2% and 3% producer fee.. The loan portfolio was based on the following assumptions and can easily be catered to your particular numbers if desired.
- Annual premium finance volume of $1,000,000 ($83,333 a month).
- Average loan size of $20,000.
- The average APR was 12% and did not include a producer fee.
- All loans have 9 consecutive installments.
The annual comparisons are based on a no growth model and do not reflect tax provisions. |
