This is the placing you first podcast. I'm Dan [inaudible] and this podcast features news and insights from CRCs fast knowledge base of 2000 plus associates who write next S of $8 billion in premium annually. And we're giving you insider access to what's happening in our company and the types of insurance we place on this edition of the podcast.
Every single circumstance is an entirely new, there is no cookie cutter or assembly line approach to this . Every insured, every jurisdiction, everything they're changing too from what they've been before. There's no simple answer .
These are difficult times for all of us. And one of the things everyone is experiencing is having the funds to meet all of your obligations. It's really top of mind . And so when you think about premium finance, it really can play a big part in the solution. This is the placing you first podcast. All right , so today we're talking about business re-purposing something that's going on and becoming an issue or
maybe not an issue. It's actually helpful to the country as a whole, but it is happening now and there is some insurance considerations that we have to think about and today we've got to have our casualty specialists with us on the podcast. Cushman Andrews joins us from Chicago, Illinois and he's a senior vice president casualty broker in that office there in Chicago. Good afternoon, Cushman . How are you?
Quite well. How's everybody doing? Somewhere you are.
Oh good. We had some storms blow through last night, but no issues. I trust that you and your family are doing well and staying social distancing, doing all that good stuff.
Absolutely. I've got two teenagers, two dogs and two working adults in our house. It's busy here.
Yes, you'll have to excuse us. I also have two dogs and if you hear kids or dogs, I mean we're just working from home. That's the way it is. In fact, there goes my dog shaking right there. We're also joined by Bob green in balm , executive vice president , central region director and casualty practice leader with our CRC group, Chicago, Illinois office, obviously Chicago office. How you doing Bob? Thanks for joining us today.
Q. Dan , I'm doing well as well as can be expected and these are unprecedented times. Everybody here is safe and sound. We're out of harm's way working remotely like everybody else and starting to get better at it, which is quite important.
Do you have the cabin fever yet? Tired of seeing your family?
I think I'm past Gavin . Fear incidence now. More like a, it's bigger than a cabin, let's put it that way.
Yeah. Well we're talking about one of the things that's come up with coronavirus and this is the fact that the entire country has really gotten into the process of helping to fight this virus and it's definitely not business as usual across countries. Everybody's aware. This subject of our article is business re-purposing and Bob, when we talk about business re-purposing , what are we talking about and what does that look like?
Well, it's actually
just what it sounds like. A , these are businesses that are changing what they do , uh, for a couple of reasons. First and foremost, everybody wants to do what they can to help out the fight against covert 19. So they are repurposing , they are changing the purpose of what they do , uh, and shifting to do a wide variety of things.
Um, some examples of that might be , uh , hotels that are offering their rooms or uh , either first responders or for , uh, treating , uh, non coven 19 patients to help ease the burden on our hospitals. You see event centers and arenas doing the same. They are setting up temporary hospitals. Uh, there's a huge manufacturing response to this, the overwhelming demand for PPE. Uh, right now everybody knows there's a significant lack of PPE available.
And so you'll see companies that will repurpose themselves to manufacture everything from ventilators to masks to gowns and gloves, so forth and so on. And , and so it is really quite remarkable when you look at that from a standpoint that many, many industries are now finding themselves doing something different than what they were doing before. And I was going through the social media the other day and I saw the Tesla had converted one of their car factories to start making ventilators.
It just was amazing to me that businesses are stepping up to answer the call for all of these different needs that the country has right now. And I think honestly it's the first time since world war II we've seen anything like this. It really is truly remarkable.
Now with all that being said and everybody wanting to jump into the fold and help out and being eager to do so, I would assume there is some, some issues that could arise when you take your primary business and your risk profile from that and switch it into something completely different. Cushman, any comments on that? Is that an issue?
Absolutely. I mean some companies may have benefit from federal or state toward immunity because they're contracting directly with those governmental entities and may see some risk transfer and some benefits from that. A lot of other companies are altering their workflow to keep their production lines open, to help out, but to keep their employees employed and keep things going. So it's sort of altering their business and not working with a governmental entity.
Some changes may be contrary to how those businesses represented their business to the insurance underwriters at the top of the last renewal and some applications for certain classes, mainly claims-made coverages contain warranty statements and deviation from what was represented. They void comp coverage as insurance companies like verbal medical equipment, medical equipment like Tesla moving over to make the but others don't like that type of class.
So we've also had , you know, restaurants now it's self delivering. Instead of using GrubHub or DoorDash , they may never purchase higher than on an auto coverage. So all of those types of changes can create dramatic problems with their insurance program because none of this was ever foreseen.
Absolutely. And and Bob, do you, you know, do you feel the same way? Do you see the same things with business re-purposing and the change in a risk profile?
Most definitely. The presentation of a risk to an insurance company is telling them what you do for a living. Right. And so if you are telling them, if you are a a mattress manufacturer, and this is a real life example here in Chicago, a company that's so mattresses has repurposed into making face masks. Okay. And so the insurance company based their premium and their exposure, their analysis of the risk exposure on sewing mattresses. And now it's a company that's making a medical product.
And so the insurance company may, as Chrisman just said, may either say we don't write medical products, so therefore we're not going to provide any coverage on any claims that might come in on medical products or want to reprice the premium associated with it because it's a much more hazardous product or considered to be a more hazardous product. So for sure , uh, shifting gears as a business can cause all kinds of , uh, bring forth all kinds of issues that were not considered originally.
So Bob, what pitfalls do you see? You know, an insurance agent insured changes their , their business, they've repurposed what pitfalls exist out there for that?
Well, in addition to what we just talked about, which was the fact that the current coverage that a company might have in place is not appropriate for the new risks that they're taking on. There's other things that come into play here. They may have furloughed a lot of their workforce. Okay. And, and , uh , in an attempt to keep some of those people working, they will bring them back into work.
Um , but they may have 20 people doing something that a hundred people had done before and they may have, are asking people to utilize their skills in a different way than they had done before. And they may not be well trained to do that. So sometimes support the greater good gets in the way of practical , uh, rest management
and Cushman . What should insureds and agents do if they're , you know , if the insured's considering re-purposing their business, I would assume the first thing they don't think about, unless they've got a risk manager or someone working with them is their insurance. What should they be doing
when , first and foremost, they need to communicate. They've got to reach out to their customers and find out what changes, if any they're making, are they shuttering locations or are they pulling back? Do they have revised exposure?
Estimates are the things to talk about with the insurance carriers, but then when it comes to repurposing itself, they need to figure out exactly what they're moving into, what those products are, the estimated revenues from their products, what experience they have with the quality control, manufacturing, everything related to that, that pivoted product or service that they're providing.
So then that agent could come back and talk to her , to their carrier or to their wholesale broker to discuss how to communicate that to the insurance company .
Yeah. And Bob, do you agree with all that?
I absolutely agree with that. Um, the communication first and foremost is, is , uh , dramatically increased or should be dramatically increased to dive into what somebody is doing now versus what they were doing before. And it probably puts a greater reliance upon the insurance agent or broker to divine what it is a company might be doing now that they weren't doing before. And there's many, many issues that can arise.
And so the more we know about what it is they're doing, the better response we can have to better protect them. And this is a good segue into , uh , what a good wholesale broker can do for their retail agents who are the ones that are directly in contact with the insurance. We can put them, give them a whole list of questions to ask so we can give them talking points, which I think would be really important.
We can connect them with the appropriate personnel and insurance companies to provide sort of the safety discussion that they're going to need to, to undertake. One of the great things about CRC is that we're a , you know, a trusted, valuable wholesaler with a huge variety of experience, experiences and people that place all kinds of risks . So we think that we're very well positioned to help out , uh, in this situation. We are in constant contact with the insurance companies.
We are in [inaudible] and employing them to be in contact with their customers. So we can put this, the answers together to help out in the situation.
And Cushman . Do you have the same recommendations?
W without a doubt. I mean what we understand is that every single circumstance is an entirely new, there is no cookie cutter or assembly line approach to this. Every insured, every jurisdiction, everything. They're changing too from what they've been before. There's no simple answer here and it was going to require a lot of people in a lot of communication and and cooperation and are , most of them are carriers.
I've said they're here to help us and here to cooperate and so all we have to do is be able to deliver that information to them so they can help us out.
Do you think the , the government will step in to protect these businesses that are repurposing or is that something we shouldn't be relying on?
Good. The government has stepped in to protect those businesses that are repurposing under a lot of government contracts where somebody's pivoting to do something else but not under the contract from a , from a state or federal government. That's where the real coverage issues come in as to how it's going to handle the liability claims will be handled going forward.
Okay. Well it sounds like the best course of action for good insurance agent and their insured is is just to make sure they're communicating with their brokers and their insurance companies and they can come through you guys through the CRC brokers to connect with the people they need to connect with and get the right questions asked and answered.
It's really an unprecedented situation is one that in the insurance worlds, you know everyone is doing their best to make it through it, so we appreciate you guys joining us from home today to help explain some of the issues around business repurposing . I'm sure we'll have more updates to come as as time goes on with coronavirus, but thank you Cushman . Thank you Bob for joining us on the podcast today. We really appreciate it.
Thanks Tim. Thank you.
That is Bob green and bomb and Cushman Andrews both from the CRC Chicago office. You can find them@crcgroup.com just search out their names or find a CRC broker near you is the placing you first podcast . Okay, so we're continuing on the podcast with Scott Tracy from AFCO. It's an insurance premium finance company and Scott's going to get us up to date with how premium financing can help during this Corona virus situation. How are you doing Scott? I'm doing well, Dan. Hope you are.
Yeah, we're doing great. We obviously are both working from the house, which is a good thing. My pets enjoy that and I'm sure your family loves it too. Absolutely . So let's talk a little bit about premium finance. So can you get us up to date on, you know , I'm sure everybody has a very basic understanding of what premium finance is. Can you kind of go a little more in depth for us and update us on anything that's new and exciting in the world of premium finance?
Sure. Well, you know, I mean Dan puts simply premium finance is basically a loan to an insured borrower. And the idea is that it's secured by the unearned premium in the underlying insurance policies. And then what we do is we document it on a very simple two page agreement. We call a premium finance agreement. So basically the idea behind the transaction is the insured would make a down payment and then they would finance the remaining premium over several months.
And effectively what they're doing is spreading the cost of their coverage over the policy period.
Yeah. So especially now when businesses are being affected by coronavirus, people can't go to work like they normally do. So you know, you hear all these terrible stories in the news about layoffs and companies not functioning the way they should. I would assume that for them to operate as normal, there might be some cash flow problems right now where premium finance could come in to help. Is that right?
Yeah, I mean right now liquidity is really a big issue and there are certainly, these are difficult times for, for all of us. Um, and , and one of the things everyone is experiencing has , you know, having the funds to meet all of your obligations is really, you know, top of mind. Um, and so when you think about premium finance, it really can pay a play a big part in the solution to that. Um , and we're seeing that right now demand is extremely high on the premium finance side.
Um, premium finance basically helps the clients relieve their financial pressure , uh, by spreading that insurance over the policy period. And so there's a, there's a actually a number of benefits that the insured can have from premium finance. One of those , uh , is the ability to maintain all of their existing credit lines while gaining access to additional capital. And that's huge. Right now people are trying to hold onto as much cash as they can and not tap their additional credit lines.
Um, but in addition to that, interest rates are extremely low. Right now. There's really no application process per se. Um, the insurance agent handles the entire transaction and most of that they can do , uh , very quickly online in just a few minutes if they have larger transactions. Um, those have a really fast approval process. Usually within about 24 hours. Those can be turned around. Um, you know, and as I said kind of a moment ago, it's all documented on a brief two-page agreement.
So there's really not, not a whole lot , uh , to it. Um, from an agent perspective, you know, premium finance really provides , uh , their clients a solution to one of their biggest risks. As we said, access to capital's a really huge issue. Um, and , and what it does is it solidifies the agent's position as a full service agency for their client and simultaneously shifts the burden of premium collection over to the premium finance company.
Yeah. Provides a , it seems like it provides a lot of value, especially right now when people don't really want to be talking about insurance or dealing with insurance to say that we've got it taken care of and this is the easiest solution for you. Um, you know, seems, seems like a really good thing at this point. Are you guys restricting it all now with coronavirus? Like is it a , is it harder to get finance at this point? Is there any challenges there?
Yeah, I mean there are definitely some challenges. I think credit markets in general obviously are tightening up. There's so much uncertainty in the market and nobody really knows where things are headed. Um, but I think that , um, in general , uh, premium finance is still available as long as the underlying policies exist in those collateral behind it. Um, we can kind of come up with some different structures.
So while there may not be the same , uh , terms that might've been available a year ago or even six months ago , um, there are still plenty of options available and many of those are really helping clients. Right?
Yeah. Great. So it sounds like it's pretty easy. It's all online. You can just get in there and start doing it.
That is the case. Um , there, there are online options that really make the process easy. Um, you know, if you think about premium finance, you have three parties to the equation. You have the insured, the agent and the premium finance company and their , uh , digital solutions out there that allow them to do really the entire transaction from different locations. And that's a huge piece.
Oh yeah. Thinking about that now everybody's working from home or not working in their main business location . So you can take care of all that remotely at this point.
Yeah, that's correct. I mean, I think that's of the big challenges we've had over the last few weeks is this concept of social distancing and this mobilization of the workforce to remote locations. And while we were very, very well prepared for that, it's been a part of our , um , disaster preparedness plan for many years. Um, you can't plan for everything, but I'm really pleased with how quickly and easily we were able to move into that , that environment.
Um, but there are a lot of businesses out there that weren't prepared or, or were partially prepared for this. And now you have people, you know, working from home trying to figure out how do I get my job done from my dining room table, maybe with one of their kids hanging on their arm and , uh , on a dog barking in the background. And , and I think that's really a challenge.
And so, you know, as we move into this new normal that we have , uh, currently , um, digital solutions are really going to become a bigger and bigger part of all that. And so with premium financing, the electronic options are terrific. You can make a down payment , uh, electronically. You can sign the agreement electronically , uh, and, and you can make your installments electronically. So really it's, it's zero touch,
right? So you can do it from anywhere. So it sounds like you guys are offering a, a pretty good option for people who are trying to keep that cashflow , that liquidity going. Is there anything else that people should consider or they should know about premium financing, especially right now during coronavirus?
Yeah, well I think, you know , one of the challenges, I think we get a lot of questions right now about, you know , um, I'm, I'm concerned about making my payments. What do I do? And , and that's a really common concern and we can all relate to that. You know, and I think one of the challenges that we have right now is the regulatory environment is changing, you know , daily and literally even hourly. I'm , there may be some changes going on as we're speaking right now.
So what we're trying to do is we've been meeting extremely regularly, sometimes many times a day , uh, with our senior leadership team and putting forth information to our frontline staff, the people that are actually talking to the insureds and agents every day , um, to make sure that they're prepared. And what we've done is we've empowered them to make decisions, to work empathetically with the insureds to help them get through this situation.
Um, and so when you have some insurance maybe changing coverage , uh, and reducing their coverage because they're closed at this time , uh, and so there may be some endorsement credits, return premiums coming back. And so we try to work with the insured to see, you know, what is the best way to apply that credit for that insurance benefit and to help them get through the situation. Um, so, so those are some of the things that are happening.
Um, and I guess the big thing, biggest challenge we have right now is demand. As we said earlier, there's just so much demand for premium finance right now. Uh , it's actually quite amazing. Um, fortunately we've been kind of prepared for that. We have a lot of our staff that are , uh , cross trained in multiple disciplines within the organization so we can shift people around as needed to fill any , uh, any demand issues that we're running into. So , um, so we're doing great with that.
Um, and we can help the insured's . There are a lot of unique scenarios that are out there. So it's, it's kind of hard to say. It's a one size fits all product. It's really , uh, you know, very unique to the client and we want to work with them, figure out what solution works for them.
Absolutely. So is there anything they can do to be put in a better situation? I mean is , you know, is this the type of thing where people get declined from time to time? Is there anything that they, any information they should be gathering before they come to talk to you guys?
Yeah, I mean certainly things can be declined from time to time for a variety of reasons. Um, you know, I , one of the challenges, you know, certain policies , uh, maybe fully earned for example, so there's really no collateral on the loan and that that poses a problem. Um, certainly the uncertain environment we're in now kind of has changed a lot of the , uh , forward-thinking , um, perspective. And , and those are some things we have to work through.
There are some clients that have , um, scenarios that may have difficulty because of one part of the coverage. And sometimes the carrier is offering an installment option that may help in that case, but may not help in other parts of it. And so by working together with the agent we can kind of come up with a solution that you know fits the needs of the client and still allows them to spread out the policies that they can over a longer time period.
What does an insurance agent need to do right now to get started with premium financing? Maybe there's some of our agents who who've never used it before or haven't really considered it
well. Agents who are not currently doing business with AFCO can reach out to us via email@ournewbusinessatafcodotcomemailboxorthroughourwebsiteatwwwdotafco.com and one of our sales teammates would be happy to answer questions about our touchless digital solutions and beginning a new relationship with AFCO .
Okay. That's Scott. Tracy, thank you very much for joining us, Scott Tracy from AFCO of course we appreciate your insight here on the different options available as far as premium finance goes.
Thanks a lot. Have a great day, Scott. Thank you Dan. Placing you first podcast as the situation with the Corona virus develops impacting normal daily life insurance . Across the country are in a state of uncertainty. CRC group is committed to doing whatever we can to help you and your clients@crcgroup.com we have a webpage specifically devoted to coven 19 coronavirus. It has all of our tools, Intel podcasts and industry leading white papers on the virus.
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