Yes, times are tough, and brokers’ commercial clients are in a difficult financial situation during an economic recession, but brokers still have to ask their clients to pay their premiums.
Brokers need their clients to pay up so that they’re not holding the burden of receivables, said Karen Ritchie, president of Toronto Insurance Council, during Canadian Underwriter’s webinar,COVID-19 and the Economy: Protecting Your Receivables.
“The other way to look at it is: Do you value what you’re doing if you don’t want to ask somebody to pay you?” Ritchie said. “If you really value the product and the service, you should want to get paid. We really shouldn’t be carrying receivables. For a broker, I think that’s how you protect it. It’s all part of the service. It’s part of everything. It’s part of valuing what we provide as well and making sure that we collect it.”
Brokers often have to pay insurance companies within a window of 30-60 days. “So, if you haven’t collected that premium — and we have to report to RIBO (the Registered Insurance Brokers of Ontario) any receivables over 90 days — it’s really very important to make sure that you’re collecting the premium [and] you’re collecting it on time,” said Ritchie, who is also senior vice president of Baird MacGregor Insurance Brokers LP.
There are options to help clients out in case they’re having issues with payment, she pointed out, such as premium financing. It should be included as part of the sales cycle.
“That should be taken into consideration,” Ritchie said. “When you’re getting your renewal terms, how are you going to pay for it? What’s going to work for the client? What’s going to work to get it paid [and] get it off the brokerage receivables right away?”
The webinar showed statistics about how the government-ordered business shutdowns to prevent the spread of the novel coronavirus have affected brokers’ commercial clients. About 12% of Canadian small and medium-sized businesses are considering bankruptcy or winding down their business permanently as a result of COVID-19, according to a May 28 study of more than 4,400 Canadian small and medium-sized businesses conducted by the Canadian Federation of Independent Business.
It’s more important now than ever to ensure clients are paying their premiums, panellist Nancy Babeu, regional sales director of the premium financing company Primaco, said during the webinar. “Brokers need to be pro-active. They need to get, echoing what Karen said, the premium before the policy gets started. As of Day 1, premiums incur, and there’s short-rate cancellations, and every day there’s a potential for a loss.”
There are many different payment plans for clients — both commercial and personal — to work out with their broker, she added.
“By using the specialized services of premium financing,” Babeu said, “we have the tools, we have the procedures, we have all the systems in place to make it work and to make it efficient and to make it flexible for everyone. So it’s really a good option out there to help everyone — brokers and clients alike.”
Some may believe asking clients to pay when times are tough could be a delicate topic of conversation, but Ritchie disagrees.
“I don’t think you can look at it that way,” she said. “You’re providing something that is protecting their business. You’re selling them an insurance product that’s going to protect their business from going bankrupt if they have a major loss. Or protect their home. Or to protect them from a lawsuit. So you’re providing something of value and there has to be consideration for that. There has to be payment.”
Because these are financially different and difficult times, encouraging clients to protect their assets and financial position is even more important. And brokers can offer a way to ease the burden of those costs, Ritchie said.
“So I don’t think we should feel bad about it. We just find ways to make it work.”