Let's face it-few people enjoy collecting funds for premiums. Collecting on past-due accounts is even less pleasant. What can be done? How can this difficult but necessary task be made easier?
One way is to implement an internal credit policy. Sound complicated? It isn't. It's just a matter of resisting the tendency to fall back on reactive financial-management practices and implementing a definitive, proactive policy. Consider the following:
Premium collections occur primarily:
- During the new-business process
- At renewal time
- When an endorsement change is requested or required
- Upon receipt of a completed audit by the insurance company
Each of these service requirements presents the perfect opportunity for establishing, explaining, and enforcing your agency's credit policy.
Implement the following practices, as well:
- Present 'premium estimates' to clients, rather than quotes. Customers tend to interpret a quote as being set in cement, whereas a premium estimate is more likely to be interpreted as having a margin of error.
- At the next staff meeting, discuss the agency's guidelines for requesting deposits for new coverage, renewals, and endorsement requests. Suggest requiring a smaller deposit for present clients than you do for new ones.
It will be helpful to you, as well as to your insureds, to explain your premium-payment options to prospects and clients before they buy new coverage or add additional coverage. (Some people base their decisions to buy on whether financing options are available. If the company you're placing coverage with doesn't offer an acceptable payment plan option, you may be able to make arrangements with a third-party finance company or local financial institution.)
It's easy to fashion your agency's credit policy after the methodology used by companies offering direct-billed premiums:
- Payment due
- Payment late
- Policy cancelled
Establish a suspense system for sending premium-due notices. The first notice is generally mailed to the client 10 to 20 days prior to the due date. On the renewal or effective date, the second notice advises the insured that the premium is late. Within ten days after the inception date, if the premium still has not been received, the notice is sent advising the insured that coverage is no longer in effect.
(Note: In the event of a premium-due notice after audit, call your client within 24 hours of receipt of the audit to verify its accuracy. If necessary, you can usually order a re-audit, or have a producer make a personal visit to the customer to clarify any discrepancies within the 30-day period during which the company requires payment of the additional premium.)
Whenever premium is due, explain to your prospect or client that the agency expects to be paid at least a deposit on the premium and that the balance may be financed. Handle it gingerly, though-you don't want to insinuate that the client is in need of financial assistance. Present it as a value-added service.
An official agency credit policy will save not only time, money, and confusion, but customers, as well. Things go more smoothly when everyone knows what the expectations are!
Get The Main Ideas
- Establish, explain, and enforce credit policy during premium collections
- Present 'premium estimates' rather than quotes
- Require smaller deposits for present clients than for new ones
- Explain financing options to clients and prospects before they renew or buy new coverage
- Establish a suspense system for premium-due notices