A COMMITTED PARTNER HELPING CAPTIVES MODERNIZE

The captive insurance industry is wrestling with rising administrative costs driven, in part, by IT costs to digitize insurance delivery systems and inflationary pressures. One way to reduce administrative costs and increase customer touchpoints for a better customer experience is to engage companies that offer a complete package of billing, collection, customer service and funding services to collect all premiums upfront.

By engaging those services insurance companies and captives can take the hassle out of billing and collections, increase liquidity and advance forward in digital distribution. Captives and insurance companies should look for service provider partners that offer this full-service package, have a long history of working in the captive insurance space and understand their needs.

The captive insurance space continues to show growth that outpaces the traditional insurance industry. The hardening market and a much greater understanding of the captive insurance industry are encouraging a growing number of businesses to consider going down the captive route.

Running your own insurance company is not without its challenges. Pricing, managing risk and claims settlement are considerable challenges, then add in the additional back-office challenges associated with managing billing and the collection of premium payments, and owner/managers have a full plate. That is why, for many, enlisting the aid of a full-service billing, collection, and funding company could be an attractive option.

The full service

By engaging a billing/funding company, that makes use of premium financing to enable full upfront premium payments, insurance companies and captives can take a giant leap forward to meet the demands of policyholders who want to transact insurance on a digital basis. It can strengthen an insurance company’s financial performance and ratings, through increased liquidity and investment income, at less cost and risk than billing and collecting premiums on their own.

It allows them to invest premium dollars faster and gives them access to the technology suite of their service provider, without requiring them to invest in one of their own.

Shawn M. Paretti, divisional vice president of insurance operations at medical professional liability insurance carrier Lammico writes: “The IPFS payment portal for insureds of Lammico and the Lammico risk retention group (RRG) was launched in 2021. The portal allowed Lammico to improve customer service by giving insureds the option to either pay in full or premium finance online. Additionally, the portal allows either credit card or automated clearing house bank account draft. As a result of the portal’s ease of use, a significant percentage of our policyholders have opted to utilize the online payment option, reducing both administrative costs and the time period to receive premium payments.”

The insurance industry is rapidly moving towards the digital sale and distribution of insurance products increasing technology demands on insurance companies and captives. Insurance companies and captives often spend the bulk of their IT resources on the front side of insurance (underwriting, policy issuance, claims) leaving little IT resources to address backroom functions such as accounting, billing and collections, customer interactions (touchpoints), etc.

Full-service billing, collection and funding (premium financing) services offer captive insurers and programs considerable flexibility in how they organize their businesses. Captives collect their premiums in full upfront whether the insured pays in full or selects a premium payment plan offered by their funding service provider. When the insured selects a pay plan, they make a down payment to the captive and the funding provider funds the balance of the premium on behalf of the insured.

This enables the carrier or captive to be paid in full upfront and the insured to have a payment plan. The result is a significant savings of time and expense and an uplift in liquidity which is especially welcome for small operations such as captives and programs.

Troy Winch, vice president–director of captive insurance at Risk Services, writes: “IPFS is a unique premium finance company as it understands how RRGs and captive insurance companies are different from standard market carriers and have adapted to provide specialized and flexible options to meet the unique needs of these entities. RRGs, captive insurance companies and their service providers can eliminate the administrative burden associated with premium installment plans by using premium financing and the collection of full premiums at policy inception improves compliance with many regulatory ratios.”

IPFSDirect offers off-the-shelf solutions or can create payment solutions to suit nearly every need. Every insurer is unique in their billing plan options, requiring different down payment amounts, different repayment schedules and service charges. While some insurers want the most cost-effective option available, others prioritize insured touchpoints and convenience, and other factors.

Creating a billing, collection and premium funding arrangement with a service provider ensures every captive can offer payment plans that best suits the needs of insureds without the costs of running their own in-house billing systems.

The goal of IPFSDirect is to create a low-touch and timely premium billing, collection and funding process, enabling underwriting companies to focus their time on the business of insurance: underwriting, claims, distribution, and risk management. It means premium billing and collection is one less thing to worry about.

Brian A. Menendez, founder & chief executive officer of Healthcare Professional Liability Specialists, writes: “IPFSDirect allows our clients the benefit of managing their cashflow by paying premiums in monthly instalments. It also allows our company to collect premiums upfront and improve financial metrics such as liquidity ratio. The technology IPFS has developed is best in class and allows us to provide superior service to our policyholder. Without their partnership we would have to invest in additional staff to meet the accounting needs of our programs.”

Technology advances

What has changed for the insurance industry is the delivery, and the technology backdrop in which the business operates. Technology is speeding up claims handling and improving pricing. Perhaps most important from the insurance perspective, it is increasing the amount of data available to underwriters. This trend has been playing out for years but has accelerated recently: the technology available in the insurance space is unrecognizable from what was on the market even five years ago.

Keeping ahead of the curve as technology advances is crucial for a service provider that wants to remain relevant. IPFS has been busy leveraging new technology and developing products to simplify operations for its customers.

One such product is IPFS TotalPay. It is a unique product that offers carriers and programs the ability to offer insureds the choice of paying premiums in full upfront or select an installment plan. It creates a seamless, low-touch transaction that complements the underwriting and insurance policy issuance process and simplifies billing and collections for the underwriting company, agent and insured.

IPFS has been servicing the captive insurance space for over 30 years and has the expertise to understand complex insurance policy structures and provide financing options. It has a deep network of contacts and relationships in the captive community, having spent many years attending conferences and discussing industry trends with captive managers and other service providers.

IPFSDirect understands the captive industry’s potential and what is needed to fulfill it. This is increasingly important as captives branch out into emerging risks. A captive can be an attractive vehicle for insuring emerging risks, where traditional commercial insurers balk at the lack of data available. Captives that go down this path need service providers that are equally comfortable working with such complex and unique risks.

Dan Towle, president of the Captive Insurance Companies Association, writes: “As a member of the Captive Insurance Companies Association for more than a decade, IPFS has been very active and supportive of the captive insurance industry.”

Customer service

Captives looking for a billing, collection and premium funding service provider should also bear a few other factors in mind. Customer experience is crucial. Any partner offering a service that is intended to simplify the insurance purchase transaction for insureds by taking on administrative functions must back that up with high quality customer service. Captives should select service providers that have a proven record of delivering billing, collection and funding services.

This is especially true today, when people have become so used to high levels of convenience and service from companies selling on the internet. Technology has raised the bar for customer service expectations, and service providers that do not raise their own game will be left behind.

Harish Kapur, CEO of Across America Insurance Services, writes: “IPFS has provided us tremendous customer service over the years. Its services have simplified our transaction between our consumers. IPFS has always been there when we need assistance or help with any of its services, always ready to help with amazing attitudes throughout the staff. Its services have led us to success and many more opportunities. In our industry where needs and the methodologies of doing business are ever-changing based on the current market, IPFS is always striving to keep up with the evolving changes and embrace them with open arms.”

The industry will see many new program formations in coming years, continuing the trend. Many existing programs will be expanded, helping businesses with unique risks associated with their business activities. These captives should consider working with a service provider that provides the full-service package of premium billing, collection and funding services, allowing them to focus all their attention on doing what they do best.

They should make sure they select a partner that knows the captive and the traditional insurance industries inside out, has the expertise and market recognition to underwrite loans for complex insurance policy structures, and has a track record that demonstrates a commitment to the industry.

Andy Roderique is director of carrier services for IPFSDirect, a carrier-focused services provider platform of IPFS Corporation. He can be contacted at: andy.roderique@ipfs.com