Global Premium Finance Market was USD 51.7 Bn in 2024 and is anticipated to be USD 132.9 Bn by 2035, at a CAGR of 15.23 %.
Premium Finance Market Overview
Premium Financing is the financing of money to a specific individual or organization to purchase the insurance premium. Premium finance loans are also made available by a third-party finance company referred to as a Premium Financing Company. Insurance brokerages offer premium financing services through premium finance platforms. In order to finance a premium, the insurance company seeking insurance sign a premium finance agreement with the premium finance company. Premium financing assists high-net-worth individuals to increase and preserve wealth without slowing down existing investments and is anticipated to enhance the Premium Finance Market growth. The premium finance company pays the full premium amount to the insurance company on behalf of the policyholder. This enables the policyholder to enjoy the insurance coverage they require without paying the full premium.
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Risk Factors in Premium Finance Market
Just like in any industry, there are some risk factors that impact the finance company’s profitability and the collectability of the receivables:
Timely Cancellation of Finance Agreements: The collateral value of a policy decreases with time and is essential for the underlying policies of the defaulted contracts to be cancelled on time. The entire system is managed by the company’s premium finance management software.
Liberal Loan Terms: The “equity” of the premium finance companies in a loan is influenced by the percentage down payment and the number of instalments. If these terms are not within the provided guidelines, then upon cancellation of a policy the return premium from the insurance company is insufficient to pay for the balance.
Insurance Company Insolvency: In exceptional circumstances, a premium insurance company is put into receivership by a state regulatory body and results in cancellation of all policies. The return premiums of the premium insurance companies are backed by a state guaranty association and pay the return premium to the premium finance company. Some of the high-end insurance service providers or companies are not guaranteed by an association and most of the companies are well-rated so insolvency is not typically a concern.
Auditable Policies: The premium of some insurance policies like workers’ compensation is subject to audit provisions. The insurance companies can audit the policy to ascertain if the initial premium is appropriately calculated or not. If not, then the shortage of premium would be adjusted from the return premium.
Additional Premiums: Once an agent has bound an insurance policy, the insurance company is entitled to review the policy premium to see whether it was computed correctly. In case it wasn’t, the insured can be liable for the payment of additional money. It is not so rare and the finance company generally finances this additional premium. But if the insured does not pay or finance the extra premium, the policy may be cancelled by the insurance company and the deficiency can be offset against the unearned premium.
Premium Finance Market Segment Analysis:
In the Premium Finance Market’s segmentation analysis, a thorough study identifies three main dimensions that mark its landscape: type, interest rate, and provider.
Under the type category, the market is divided into Life Insurance and Non-life Insurance. Life Insurance, including policies pertaining to individuals’ longevity and health, forms a major segment of the Premium Finance Market. Conversely, Non-life Insurance, including a range of policies pertaining to assets, liabilities, and risks, forms another important aspect of the market.
Premium Finance Market Companies
Leading companies in the premium finance market are
IPFS Corporation
FIRST Insurance Funding
Agile Premium Finance
Imperial PFS
ClassicPlan Premium Finance
PayLink Direct
Premium Finance Industry News
In May 2024, Agile Premium Finance teamed up with ePayPolicy to simplify financing at checkout for insurance industry customers. Agile now offers its customers with frictionless online enrollment for financing and online premium payment solutions through ePayPolicy’s latest feature release, Finance Connect. Finance Connect enables Agile customers to apply for premium financing, including e-signed Premium Finance Agreements (PFA), in a single online session, utilizing secure interfaces to the customer’s systems and shared industry management systems.
The premium finance market research report provides detailed analysis of the industry with estimates & forecasts in terms of revenue (USD billion) from 2021 to 2032, for the below mentioned segments
Market, By Type
Life insurance
Non-life insurance
Market, By Interest Rate
Fixed interest rate
Floating interest rate
Market, By Provider
Banks
NBFCs
Others
Premium Finance Market Competitive Landscape
Banks and financial institutions are dominant players in the premium finance market. They use their financial power and established customer base to provide premium financing services. Participants create strategic partnerships and collaborations with insurance agencies, brokers, or other financial institutions to increase their customer base and reach. These collaborations result in higher Premium Finance market penetration and more extensive premium financing solutions. The Premium Finance company profiles and competitive landscape of the leading players are given in the Premium Finance Market report. The geographies included in the report are North America, Europe, Asia-Pacific, and LAMEA. The tactics followed by the leading player, including product portfolio expansion, mergers & and acquisitions, agreements, geographical expansion, and collaborations, to increase the Premium Finance industry penetration.
Premium financing is well accepted by most insurance firms and is available for qualified customers. A suitable customer would need to have at least $5 million in net worth, with the sweet spot being USD 25 million
