Tag Archives: financing

3 Ways to Improve Premium Financing

As an MGA, ensuring your commercial customers receive the quality service they deserve is a top priority—and premium financing options that help clients afford the best policies on the market are a great way to achieve that. The average premium finance loan can range from several thousand dollars to more than $25k—a welcome influx of cash that frees up customer capital to be applied toward more business-critical needs.

Unfortunately, establishing a premium financing process is a multi-step affair that can often be drawn out for weeks or even months. But thankfully, there is a way to streamline the process: by partnering with a premium financing provider that supplies quality services on an accelerated timeline.

How can a premium financing provider achieve this delicate balance? They do so by integrating automation into their processes, structuring certain aspects to address customer convenience and freeing up the crucial time you need to keep your company moving forward.

See also: It’s All About the Customer Journey  

Let’s take a look at some of the benefits of partnering with a premium financing provider that incorporates automated processes into their customer service delivery.

1. Automated quote integration

Want to add value to your offerings and boost customer loyalty? Partner with a premium financing provider that automates the policy quoting process. Not only does this speed up a necessary step for everyone involved, it serves as a great starting point for a conversation around competitive policy rates available to your customers—so they can easily assess which rate and policy works best for them.

2. Online customer portal

Another great way the right premium financing provider enhances the overall customer experience through automation is by granting customers access to an online portal. This allows your customers to follow along with every step of their premium financing journey, anytime they please, from start to finish.

3. Automated statements and reporting

Keeping good records has always been important, but in the age of information it’s more crucial than ever. Putting policy statements and reporting easily within your customers’ reach is another benefit of premium financing automation, ensuring transparency and the accurate delivery of key data.

Finally, even with all the benefits of automation, it’s worth noting that the right premium financing provider will also understand when to stick with more traditional methods. Key service offerings like live customer care—whether face-to-face or over the phone—are still critical to a successful premium financing partnership.

See also: 3 Keys to Success for Automation  

Automation can sometimes get a bad rap, but when applied to the right processes, it can be the perfect way to provide top-tier customer service to your commercial clients seeking premium financing services. Make sure to partner with a premium financing provider that shares these values and prioritizes you and your customers’ success.

trends

InsurTech Trends to Watch For in 2016

The excitement around technology’s potential to transform the insurance industry has grown to a fever pitch, as 2015 saw investors deploy more than $2.6 billion globally to insurance tech startups. I compiled six trends to look out for in 2016 in the insurance tech space.

The continued rise of insurance corporate venture arms

2015 saw the launch of corporate venture arms by insurers including AXA, MunichRe/Hartford Steam Boiler, Aviva and Transamerica. Aviva, for example, said it intends to commit nearly £20 million per year over the next five years to private tech investments. Not only do we expect the current crop of corporate VCs in the insurance industry to become more active, we also expect to see new active corporate VCs in the space as more insurance firms move from smaller-scale efforts — such as innovation labs, hackathons and accelerator partnerships — to formal venture investing arms.

Majority of insurance tech dealflow in U.S. moves beyond health coverage

Insurance tech funding soared in 2015 on the back of Q2’15 mega-rounds to online benefits software and health insurance brokerage Zenefits as well as online P&C insurance seller Zhong An. More importantly, year-over-year deal activity in the growing insurance tech space increased 45% and hit a multi-year quarterly high in Q4’15, which saw an average of 11 insurance tech startup financings per month.

In each of the past three years, more than half of all U.S.-based deal activity in the insurance tech space has gone to health insurance start-ups. However, 2015 saw non-health insurance tech start-ups nearly reach parity in terms of U.S. deal activity (49% to 51%). As early-stage U.S. investments move beyond health coverage to other lines including commercial, P&C and life (recent deals here include Lemonade, PolicyGenius, Ladder and Embroker), 2016 could see an about-face in U.S. deal share, with health deals in the minority.

Investments to just-in-time insurance start-ups grow

The on-demand economy has connected mobile users to services including food delivery, roadside assistance, laundry and house calls with the click of a button. While not new, the unbundling of an insurance policy into financial protection for specific risks, just-in-time delivery of coverage or micro-duration insurance has already attracted venture investments to mobile-first start-ups including Sure, Trov and Cuvva. Whether or not consumers ultimately want the engagement or interfaces these apps offer, the host of start-ups working in just-in-time insurance means one area is primed for investment growth in the insurance tech space.

Will insurers get serious about blockchain investments?

Thus far, insurance firms have largely pursued exploratory investments in blockchain and bitcoin startups. New York Life and Transamerica Ventures participated in a strategic investment with Digital Currency Group, gaining the ability to monitor the space through DCG’s portfolio of blockchain investments. More recently, Allianz France accepted Everledger, which uses blockchain as a diamond verification registry, into its latest accelerator class. As more insurers test blockchain technologies for possible applications, it will be interesting to monitor whether more insurance firms join the growing list of financial services giants investing in blockchain startups.

Fintech start-ups adding insurance applications

In an interview with Business Insider, SoFi CEO Mike Cagney said he believes there’s a lot more room for its origination platform to grow, adding,

“We’re looking at the entire landscape of financial services, like life insurance, for example.”

A day later, an article on European neobank Number26, which is backed by Peter Thiel’s Valar Ventures, mentioned the company would like to act as a fintech hub integrating other financial products, including insurance, into its app. We should expect to see more existing fintech start-ups in non-insurance verticals not only talk publicly but also execute strategic moves into insurance.

More cross-border blurring of insurance tech start-ups

Knip, a Swiss-based mobile insurance app backed by U.S. investors including QED and Route66, is currently hiring for U.S. expansion. Meanwhile, U.S. start-ups such as Trov are partnering and launching with insurers abroad. We can expect more start-ups in the U.S. to look abroad both for strategic investment and partnerships, and for insurance tech start-ups with traction internationally to expand to the U.S.

Moving Closer to the ‘Smart City’

Judging by the reported 11,000 attendees at the Smart City Expo World Congress in Barcelona, representing companies and cities from around the world, there is great interest in governance, mobility, society, sustainability and technology. The trade show was very crowded even with sunny Barcelona beckoning with a perfect 71 degress Fahrenheit. The event gave me the opportunity to see many interesting technologies.

Many innovations focused on smart traffic routing and parking supported by sensors. Solutions in this category address the need to decrease traffic congestion or enable drivers to find available parking spots – problems afflicting many cities. Car-sharing initiatives by city communities were shown and explained. Autonomous vehicles were on display and got a lot of attention while raising questions about financing and insuring some of these new developments.

With the tragic events in Paris fresh in people’s minds, city officials were very interested in any offerings dealing with crisis or incident management. One example was IOmniscient’s 3D high-accuracy cameras that count people present in a specific location in real-time (very handy for crowd management). Other solutions include facial recognition capabilities to locate lost children or people of interest to law enforcement. These, and other applications, can assist local governments and citizens in preventing, managing and mitigating incidents.

“Gamification” got significant interest. Virtual reality environments supporting driving education or enabling urban planning were in high demand. There were also long lines for learning how to drive a real tram in a virtual city (not as easy as it looks). And Microsoft partner Geodan NEXT demonstrated how children were educated in smart-city development and how kids assisted in real-life design of schools and playgrounds by use of a Minecraft-based solution. In a more adult world, this same tool is being used for collaboration between professionals and citizens working together around a big touch table to address urban planning issues.

It is not often that I get to attend conferences outside of the insurance or technology space. It was refreshing to see the enthusiasm of professionals for innovation in a different industry. And many of the technologies that we frequently discuss, such as driverless cars, resource sharing, gamification, drones or Internet of Things, are equally relevant for smart cities.

I was also pleased with the balanced approach the people I spoke with took regarding opportunities for innovation and risk mitigation. Assisted by big data and technical developments, historically more disconnected industries such as technology, insurance, government, health or energy will quickly become more connected to each other, and the people of the world will collaborate in smart communities to capitalize on innovations.

The show in Barcelona was an uplifting experience, even with the sun beckoning.

‘Safer’ Credit Cards Already Vulnerable

A recent Gallup survey found that 69% of Americans worry “frequently” or “occasionally” about having a credit card compromised by computer hackers. It’s not shocking. Consumers are becoming more educated on the topic, and financial institutions are beginning to do more to combat fraud, including introducing new types of credit cards. One example of the latter is chip-and-PIN technology, which everyone from consumers to the president has hailed for its ability to help prevent fraud. But is it the panacea that it’s been made out to be?

Let’s take a closer look at exactly what this technology entails. Unlike cards that use a magnetic stripe containing a user’s account information, chip cards implement an embedded microprocessor that contains the cardholder’s information in a way that renders it invisible even if hackers grab payment data while it is in transit between merchants and banks. The technology also generates unique information that is difficult to fake. There is a cryptogram that allows banks to see if the data flow has been modified and a counter that registers each sequential time the card is used (sort of like the numbers on a check), so that a would-be fraudster would have to guess the exact historical and dynamic transaction number for a charge to be approved.

Already used in every other G20 country as a more secure payment method, chip-and-PIN cards can be found on the consumer side of a global payment system known as EMV (short for Europay, MasterCard and Visa). The system will be rolled out in the U.S. in 2015, and many of us in the banking and data-security industries believe that it will stanch the flow of money lost to hackers while simultaneously cutting down on credit- and debit-card fraud.

MasterCard, Visa and American Express have already begun sending out chip cards to their American cardholders. The technology is expensive—the rollout of chip cards in the U.S. will cost an estimated $8 billion—and this cost may balloon exponentially if the implementation of the new technology is done incorrectly, as a recent spate of fraudulent charges using chip-and-PIN-based technology shows.

This recent trend is one early sign that chip-and-PIN may not be the cure-all many consumers were hoping for, at least during the rollout phase. According to Brian Krebs, during the past week, “at least three U.S. financial institutions reported receiving tens of thousands of dollars in fraudulent credit- and debit-card transactions coming from Brazil and hitting card accounts stolen in recent retail heists, principally cards compromised as part of the breach at Home Depot.”

The curious part about this spate of credit- and debit-card fraud is that fraudsters used account information pilfered from old-school magnetic stripe cards skimmed in that attack and ran them as EMV purchases in what’s called a “replay” attack. “After capturing traffic from a real EMV-based chip card transaction, the thieves could insert stolen card data into the transaction stream, while modifying the merchant and acquirer bank account on the fly,” Krebs reported. It sounds confusing, but the bottom line is money was stolen.

As with many scams, this particular evolution in the world of hacking for dollars cannot succeed without human error, which is probably the biggest liability in the coming chip card rollout. Krebs spoke with Avivah Litan, a fraud analyst with Gartner, who said, “It appears with these attacks that the crooks aren’t breaking the EMV protocol but taking advantage of bad implementations of it.” In a similar attack on Canadian banks a few months ago, one bank suffered a large loss because it was not checking the cryptogram and counter data, essential parts of the protocol.

As with all solutions in the realm of data-security, there is no such thing as a sure thing. Whether the hackers banked a false sense of security at the institutional level, knowing that the protocols might be deemed an unnecessary expense, or the recent attacks are merely part of the chip card learning curve, this latest technology is only as good as its implementation.

So, despite the best efforts of those in the financial services industry, the truth is I can’t blame anyone for worrying a bit about credit card fraud. The good news is that in almost all cases, the consumers aren’t responsible when they’ve been hit with fraud. The banks take care of it (though it can be trickier with debit cards, because money has actually left your account). These days, though, the reality is that you are your own first line of defense against fraudulent charges. That means pulling your credit reports at least once each year at AnnualCreditReport.com, monitoring your credit scores regularly for any sudden and unexplained changes (you can do that for free using free online tools, including those at Credit.com), keeping a close eye on your bank and credit card accounts daily and signing up for transactional monitoring programs offered by your financial institutions.

Representations and Warranties Insurance: How It Can Help Close Business Deals

A Representations and Warranties policy provides coverage for losses incurred as a result of breaches or inaccuracies of the representations and warranties made in business transactions.  A seller typically makes numerous representations to the buyer and warrants to the buyer critical facts about the business.  These attestations are an inducement to the buyer.  While parties both hope that the representations are accurate, disagreements often arise.  Such disputes routinely occur in connection with financial condition, accounts receivable or intellectual property.  Disagreements can also arise over the scope of representations and warranties made, as well as the duration and amount of a seller’s indemnification obligations.

Often, when a transaction is nearly complete, last-minute issues can create an impasse.  It is at this critical juncture that R&W insurance can be utilized to remove obstacles and  facilitate closure.  The preemptive purchase of R&W insurance can remove fears regarding certain representations that might lead to litigation after the deal closes. An R&W policy can also eliminate the need for a buyer to rely on the seller to make continuing indemnification payments—meaning a buyer wouldn’t need to chase down sellers who might be foreign, insolvent or long gone.  In this regard, R&W policies provide both sides of the deal with peace of mind that each party will receive what they believe they bargained for.

HOW are R&W Policies Structured?
Each agreement is unique, and an R&W policy is tailored to meet the specific needs of each deal.  Depending on the client’s needs (whether the buyer or seller), R&W policies can be structured to achieve various things.  These goals might include: (1) increasing the amount of indemnity available, (2) providing a “backstop” to the indemnity already available, (3) extending the expiration of the indemnity, (4) eliminating the need for collateral for contingent liabilities, (5) providing “ground up” coverage to replace an indemnity, or (6) increasing the scope or breadth of an agreed indemnity.

WHEN should parties consider the purchase of an R&W policy?
Most often, R&W policies are purchased in a mergers-and-acquisitions context.  However, R&W policies are also secured in connection with restructurings, insolvencies, liquidations, financings or loans, or in connection with the licensing of intellectual property.  In these situations, an R&W policy adds value as it can eliminate or reduce perceived or identified exposures and can address disagreements on the allocation of legal or financial risk for certain perceived or already identified exposures.  It can also give one buyer a competitive edge over another.

For example, consider a transaction where the buyer requires that a seller retain liability equal to 30% of deal consideration in respect of breaches of representations and warranties, while the seller is only willing to assume liability for up to 10% of deal consideration.  An R&W policy could provide coverage for the buyer for loss resulting from breaches exceeding 10% of deal consideration up to a limit of 30% of deal consideration. 

Or consider a situation where the seller’s weak financial position causes the buyer to require that security be posted for seller liability for breach of any representations and warranties.  An R&W policy could be designed to cover the buyer for loss resulting from breaches only if the seller is unable to meet the liability it has agreed to assume under the sale agreement.

WHO Buys an R&W Policy?
Buy-side policies make up the majority of R&W policies.  A buy-side policy enables the buyer, should a breach occur, to recover losses directly from the insurer without having to make a claim against the seller, often without having to locate and pursue the seller.  Such a policy provides the buyer with assurance that the value of the acquired business will not be reduced by unexpected liability.  Further, buyers can utilize R&W policies to improve their bargaining position by using the coverage to enhance their bid by reducing the indemnity ceiling and required escrow.

A sell-side policy provides indemnification by the insurer for defense costs and loss resulting from claims made by the buyer for inaccuracies in the transaction that are the subject of seller representations and warranties.  Simply put, a sell-side policy also enables the seller to walk away from a closed deal confident that the proceeds it receives in the transaction will not be diminished by subsequent legal claims and claw-back.  A sell-side policy provides a structure so that the seller can make a clean break once the sale has been executed by reducing or eliminating the need for an escrow account.  This is of great value to the seller as the seller can distribute more of the proceeds from the transaction more quickly, thereby expediting shareholder return (and the purchase of the yacht or sports car that the seller has always wanted).

If I have a client who wants to consider R&W coverage, what information would they need to provide?  Generally, underwriters can prepare a non-binding indication with a minimal amount of key information.  This information would include (1) the draft purchase agreement, (2) the draft disclosure schedules, and 3) the most recent audited or reviewed financials of the target.

Socius has conferred with Ambridge Partners LLC, a leading managing general underwriter of Representations & Warranties Insurance (R&W), to present this article.