As premium finance companies struggle against brokers' reluctance to share the market, some are finding their niche in the world of the internet. Nigel McFarlane reports.
Many premium finance providers assert they are looking at a vast untapped market potential, waiting for brokers to wake up to the benefits of using instalment plans.
They have made valiant efforts to "sell" themselves to intermediaries, using cashflow and process improvement as tools of persuasion.
At the forefront of this movement has been the introduction of new technology to provide the dream scenario of the paperless office through systems integration. But obstacles still lie ahead.
As one broker says: "The idea that we can maximise cashflow through increased use of premium funding is a nice one to have in this office, but there simply isn't time to go through the process of retraining our staff, some of whom are temps - all of them are going full-pelt at retaining the business we have already."
"Brokers like this are pressed right now. The industry is shrinking in terms of potential customers, and the insurers are just going all-out to fight over the tasty premiums, while we try and hang on to what we have. It's a good idea, but right now we can't afford to put another link in the chain, which is how it seems."
Overcoming barriers
It is precisely that lack of belief in the system that led Bob Golden, chief executive of premium finance provider Prompt, to launch I-Prompt, an internet-based premium finance trading facility.
"I think the main barrier for premium finance companies is the fear of the new among brokers," he argues. "The old adage of this being a traditional industry carries some mileage, but it is becoming less so all the time. The brokers that don't wake up to this method, in short, will be the ones that close, because as premiums increase, the future lies with financing solutions, and the ones that are already using it are the ones that will benefit in the long term.
"The question of training never really arises," he says. "Anyone with access to the internet can look at the website, and have a demonstration of the system. We don't need to train them in the old sense of the word. Within one hour they can use the whole thing, and they can see for themselves how their administration, the part that takes up the most time, can be done in a fraction of the time it takes now. They should ask themselves what they want to do, and if they want to improve their income, reduce their costs and enhance their customer service, they should be looking to online premium financing."
Doubt remains
But despite Golden's enthusiastic description of this brave new broking world, there remain doubts in the minds of enough industry insiders to keep the e-explosion at bay.
The cyber-criminals that operate over the internet are gaining knowledge and courage, and the consumer is still a long way from being convinced that there is any such thing as a 100% "safe" electronic financial processing system.
As Stuart Martin, chairman of the e-commerce section of the Association of Insurance and Risk Managers points out: "Once a hacker gets in, they can penetrate the back-office system, like emails, credit card details and personnel files." In addition, a survey by Integralis of cyber-crime among FTSE 100 companies, published in July 2000, revealed that 56% of those surveyed calculated that they had lost money through internet abuse. It is sobering reading, and many brokers will know that, too. Adding another potential loss to the bottom line is simply not an option for most intermediaries."
No alternative
A commercial lines broker in the North of England probably best sums up the long-term future of premium financing: "I use premium funding companies because I have no choice.
I want to keep my clients, and with every insurer comes a different instalment plan, with different rates and payment details and collection requirements. This way I have one payment plan to think about, and I can concentrate on providing a service. Some insurers have pushed up their rates to 8% in the last year, because they want to claw back their losses and they know they can do it. Small brokers like me will simply drown under the paperwork these companies generate, so what's the alternative?"
