Certainty for business is great. No doubt about it. It enables confident strategy planning, allows for effective resource management and reduces unpredictability in revenue streams and costs.
For premium finance providers, exclusive agreements with introducing brokers are just the ticket. They secure pre-agreed lending volumes for up to 4 years, enabling the finance provider to plan and predict their own revenue streams, with the added bonus that the provider doesn’t need to tender for the business again any time soon!
For the insurance broker the benefits also appear compelling. Having the security of knowing the brokerage has a willing, long-term premium finance provider with added attractions such as low rates and commission advances can sound like a no-brainer. An action point sorted that doesn’t need revisited for a while.
So, what are the downsides for brokers?
Perhaps you subsequently discover that your provider’s cheaper rates aren’t as competitive as you thought, or your provider’s policies change on short notice affecting your ability to transact with them. When this happens, likelihood is you have no alternative but to continue on and ignore that better rate on offer elsewhere, work through the potentially diminished service levels or implement impactful process changes that might adversely affect your clients .
Certainty provides a stable foundation for planning and decision making, but excess rigidity can stifle innovation and progress. Flexibility allows adaptation and change. Inevitably finding a balance between business certainty and flexibility is optimal.
Our advice to insurance brokers?
We recommend that brokers strive to build stable, long term, mutually beneficial and collaborative business relationships with a premium finance provider or providers but, keep options open, maintain flexibility, and think very carefully before committing to exclusivity agreements.
Speak to Keys first as this is what we do and we do it well.
