BOQ renews focus on premium funding, aims for more growth
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As interest rates and operating costs remain high, businesses are turning to insurance premium funding to manage their cash flow – and BOQ Finance is ramping up its offerings to meet demand
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THE NEED for insurance premium funding has increased in the post-pandemic economy, and BOQ Finance now aims to expand its related services to new markets, with digital-driven innovations offering straight-through processing.
Once seen as something of a niche industry, premium funding has become much more appealing to Australian businesses in an environment of higher interest rates and persistent inflation; the cash flow benefits it provides are invaluable as they struggle with everything from maintaining working capital to front-footing investments for new growth.
“Businesses are currently being impacted by interest rate
BOQ Finance supports brokers and their clients with a wide range of financial services, from business loans to insurance premium funding. With a team of business banking specialists, BOQ offers guidance to its broker network, allowing them to help businesses of all sizes achieve their financial goals. Focused on building strong broker relationships, BOQ Finance delivers practical support to meet the specific needs of its brokers. By understanding the challenges faced by business owners, BOQ provides the tools, education and expertise necessary for long-term success.
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Late B2B payments by industry
Information, media and communications
“[Businesses] need to be smarter around how they retain cash within their business and continue to grow and use that for other areas such as digitisation or transformation of their business or new products”
Karen Carter,
BOQ Finance
rises over the past year,” says Karen Carter, head of commercial broker at BOQ Finance. “They’ve also had higher electricity costs, higher staffing costs, wages … what’s left at the end is impacting them, and they need to be smarter around how they retain cash within their business and continue to grow and use that for other areas such as digitisation or transformation of their business or new products.”
BOQ Finance is positioning itself to capture a larger share of the growing market partly through technology improvements. “We are going to be launching a change in the next month that will be a significant digital innovation for our business,” Carter says. “Over the past six months, we have invested heavily in some technology upgrades, which will actually lead to better outcomes for our brokers.”
The bank has invested in streamlining its processes, with a focus on reducing the administrative burden. “It’s designed to reduce the admin and non-essential documentation for premium funding loans, which allows a faster outcome for our customers and brokers,” Carter explains.
These technological advancements are part of a broader strategic shift. “We have been in the midst of a transformation process geared towards growth,” she says. “However, for the past year, we’ve been focusing our efforts to leverage digital technology for a better and more competitive outcome.”
The last few years have seen the premium funding market grow by around 30%, and economic indicators suggest business owners remain desperate for cash flow solutions.
Currency and deposits held by households in the June quarter fell by $10.3 billion, marking only the second time since June 2007 that this indicator has been in the minus column. This suggests that Australians are using savings buffers to pay for business costs.
With higher interest rates making loans too expensive to service, late payments are at their highest rate since the end of JobKeeper in March 2021 as more businesses struggle to pay outstanding invoices, according to credit reporting bureau CreditorWatch’s September Business Risk Index.
The construction and hospitality sectors have the highest rates of payment defaults and construction the highest rates of arrears, reflecting declining building approvals and flat spending in cafes and restaurants across much of 2024. CreditorWatch currently rates 16.2% of businesses in the food and beverage services sector as at ‘high’ or ‘very high’ risk of foreclosure.
The longer B2B payment times and upward trend in payment defaults suggest that any relief to cash flow pressure via premium funding would be welcome.
BOQ sees opportunity across a range of sectors: “transportation, hospitality, professional businesses – as well there is also workers’ compensation,” Carter says. “Commonwealth states and territories are responsible for implementing, regulating and enforcing work health and safety laws in their jurisdictions. There are a variety of agencies responsible for overseeing workers’ compensation, including private sector insurers and state regulatory authorities. Whichever state or territory you are in, BOQ can also premium-fund workers’ compensation. Insurance premium funding can be offered to some of the agencies.”
Much of the growth in the premium funding market has come as insurance premiums have significantly increased. Direct business
Carter also sees opportunity in the fact that businesses typically cannot spread their premium payments directly through insurers, leaving premium funding providers such as BOQ to fill the gap.
“Insurance companies don’t generally offer the ability to spread payments over 12 months for businesses,” she says.
This culmination of factors points to continued growth for the sector. “I do feel that there is opportunity to get more market share through people that haven’t considered it in the past.”
Looking ahead, the trajectory is expected to moderate but remain solid. Carter believes premium increases will settle into “high single-digit territory” over the next year. BOQ therefore aims to quickly ramp up its related business on the back of its tech-driven innovations.
“We’re really working off a short-term growth strategy, and we’re really wanting to double in the short to medium term. If we can innovate, we have an opportunity to scale the business very quickly and provide an offer to new markets,” says Carter.
This level of expansion may continue over the long term for premiums across many types of insurance – global property premiums, for example, are picked to continue growing at a compound annual rate of 5.3% to 2040.
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Businesses primed for better cash flow solutions
Fewer barriers to adopting premium funding
Published 18 Nov 2024
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“I do feel that there is opportunity to get more market share through people that haven’t considered [premium funding] in the past”
Karen Carter,
BOQ Finance
Electricity, gas, water and waste services
Financial and insurance services
Food and beverage services
Construction
Administrative and support services
Rental, hiring and real estate services
Arts and recreation services
Accommodation
Professional, scientific and technical services
Healthcare and social assistance
Mining
Retail trade
Transport, postal and warehousing
Agriculture, forestry and fishing
Manufacturing
Education and training
Wholesale trade
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Source: CreditorWatch Business Risk Index, September 2024
5.3%
Source: PwC Insurance 2025 and Beyond report
Estimated growth in global property premiums to 2040
A digital transformation for premium funding
Higher insurance premiums to propel future growth
gross earned premiums in Australia saw double-digit annual growth in FY22 and FY23, according to Finity analysis. By comparison, the industry grew at an average of only 5% per annum over the five years to FY21.
Businesses both large and small can benefit from premium funding, even if insurance expenditure is relatively moderate. “Any business that has an insurance need over $1,000 should consider it as a way to preserve cash and growth,” Carter explains.
Given the size of the SME market, the upside is huge. Data from the Australian Small Business and Family Enterprise Ombudsman shows that almost 98% of businesses in Australia are small businesses. The value of small businesses to the Australian economy surged by 15% in 2021/22 to $506 billion and accounts for one-third of Australia’s GDP.
Common barriers cited as reasons for not using premium funding can include a lack of knowledge about the product itself, not wanting to pay interest, worries about hidden fees, and a preference for paying up front.
Aside from the benefits of freeing up cash flow for other parts of the business, broker recommendation is also a key driver of premium funding adoption.
Carter sees three important broker subchannels: “You’ve got insurance premium funders that have their own insurance broking arms. As well you have commercial brokers and equipment finance brokers who could readily offer insurance premium funding and educate their clients.”
BOQ Finance is investing in broker support and education to help spread the word. This includes regular workshops, webinars and access to BOQ Finance’s commercial broker network.
“We have recently taken administration tasks away from our frontline BDMs, which is now allowing them to meet with our core market,” Carter explains.
By fostering a culture of continuous learning, BOQ Finance aims to ensure that brokers can offer the best possible advice and services to their clients.
There are also stronger industry requirements around professional standards in premium funding practice that help ensure this growth is sustainable.
The Australian Finance Industry Association (AFIA) launched its Insurance Premium Funding (IPF) code in December 2023, necessitating robust risk management and compliance frameworks in order to protect customers. High standards of behaviour and professionalism are promoted by the code, and customers have access to an enhanced complaint-handling system and key information disclosures.
The sector has embraced this enhanced self-regulation and increased rigour in the industry.
“We’re AFIA-accredited,” Carter says. “We have robust risk management and a compliance framework in place across the industry, and it creates a higher standard of behaviour and professionalism by the code being enforced.”
The new framework aims to enhance customer protection and may lead to further consolidation of industry standards, according to Carter.
“At some point AFIA will align a few of the codes that they’ve got under one code,” she says. “It’s good to have the ethics and self-regulation happening within the industry.”
For its part, BOQ Finance expects to see a significant transformation in premium funding over the next few years, with increased adoption of digital solutions.
“Our focus will be on continual transformation and innovation, expanding our product portfolio and regaining our market position as a leader in insurance premium funding.”
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BOQ Finance supports brokers and their clients with a wide range of financial services, from business loans to insurance premium funding. With a team of business banking specialists, BOQ offers guidance to its broker network, allowing them to help businesses of all sizes achieve their financial goals. Focused on building strong broker relationships, BOQ Finance delivers practical support to meet the specific needs of its brokers. By understanding the challenges faced by business owners, BOQ provides the tools, education and expertise necessary for long-term success.
There are also stronger industry requirements around professional standards in premium funding practice that help ensure this growth is sustainable.
The Australian Finance Industry Association (AFIA) launched its Insurance Premium Funding (IPF) code in December 2023, necessitating robust risk management and compliance frameworks in order to protect customers. High standards of behaviour and professionalism are promoted by the code, and customers have access to an enhanced complaint-handling system and key information disclosures.
The sector has embraced this enhanced self-regulation and increased rigour in the industry.
“We’re AFIA-accredited,” Carter says. “We have robust risk management and a compliance framework in place across the industry, and it creates a higher standard of behaviour and professionalism by the code being enforced.”
The new framework aims to enhance customer protection and may lead to further consolidation of industry standards, according to Carter.
“At some point AFIA will align a few of the codes that they’ve got under one code,” she says. “It’s good to have the ethics and self-regulation happening within the industry.”
For its part, BOQ Finance expects to see a significant transformation in premium funding over the next few years, with increased adoption of digital solutions.
“Our focus will be on continual transformation and innovation, expanding our product portfolio and regaining our market position as a leader in insurance premium funding.”
Higher standards drive need for better service
Common barriers cited as reasons for not using premium funding can include a lack of knowledge about the product itself, not wanting to pay interest, worries about hidden fees, and a preference for paying up front.
Aside from the benefits of freeing up cash flow for other parts of the business, broker recommendation is also a key driver of premium funding adoption.
Fewer barriers to adopting premium funding
Looking ahead, the trajectory is expected to moderate but remain solid. Carter believes premium increases will settle into “high single-digit territory” over the next year. BOQ therefore aims to quickly ramp up its related business on the back of its tech-driven innovations.
“We’re really working off a short-term growth strategy, and we’re really wanting to double in the short to medium term. If we can innovate, we have an opportunity to scale the business very quickly and provide an offer to new markets,” says Carter.
This level of expansion may continue over the long term for premiums across many types of insurance – global property premiums, for example, are picked to continue growing at a compound annual rate of 5.3% to 2040.
gross earned premiums in Australia saw double-digit annual growth in FY22 and FY23, according to Finity analysis. By comparison, the industry grew at an average of only 5% per annum over the five years to FY21.
Businesses both large and small can benefit from premium funding, even if insurance expenditure is relatively moderate. “Any business that has an insurance need over $1,000 should consider it as a way to preserve cash and growth,” Carter explains.
Given the size of the SME market, the upside is huge. Data from the Australian Small Business and Family Enterprise Ombudsman shows that almost 98% of businesses in Australia are small businesses. The value of small businesses to the Australian economy surged by 15% in 2021/22 to $506 billion and accounts for one-third of Australia’s GDP.
Higher insurance premiums to propel future growth
The last few years have seen the premium funding market grow by around 30%, and economic indicators suggest business owners remain desperate for cash flow solutions.
Currency and deposits held by households in the June quarter fell by $10.3 billion, marking only the second time since June 2007 that this indicator has been in the minus column. This suggests that Australians are using savings buffers to pay for business costs.
With higher interest rates making loans too expensive to service, late payments are at their highest rate since the end of JobKeeper in March 2021 as more businesses struggle to pay outstanding invoices, according to credit reporting bureau CreditorWatch’s September Business Risk Index.
The construction and hospitality sectors have the highest rates of payment defaults and construction the highest rates of arrears, reflecting declining building approvals and flat spending in cafes and restaurants across much of 2024. CreditorWatch currently rates 16.2% of businesses in the food and beverage services sector as at ‘high’ or ‘very high’ risk of foreclosure.
The longer B2B payment times and upward trend in payment defaults suggest that any relief to cash flow pressure via premium funding would be welcome.
BOQ sees opportunity across a range of sectors: “transportation, hospitality, professional businesses – as well there is also workers’ compensation,” Carter says. “Commonwealth states and territories are responsible for implementing, regulating and enforcing work health and safety laws in their jurisdictions. There are a variety of agencies responsible for overseeing workers’ compensation, including private sector insurers and state regulatory authorities. Whichever state or territory you are in, BOQ can also premium-fund workers’ compensation. Insurance premium funding can be offered to some of the agencies.”
Businesses primed for better cash flow solutions
BOQ Finance is positioning itself to capture a larger share of the growing market partly through technology improvements. “We are going to be launching a change in the next month that will be a significant digital innovation for our business,” Carter says. “Over the past six months, we have invested heavily in some technology upgrades, which will actually lead to better outcomes for our brokers.”
The bank has invested in streamlining its processes, with a focus on reducing the administrative burden. “It’s designed to reduce the admin and non-essential documentation for premium funding loans, which allows a faster outcome for our customers and brokers,” Carter explains.
These technological advancements are part of a broader strategic shift. “We have been in the midst of a transformation process geared towards growth,” she says. “However, for the past year, we’ve been focusing our efforts to leverage digital technology for a better and more competitive outcome.”
A digital transformation for premium funding
THE NEED for insurance premium funding has increased in the post-pandemic economy, and BOQ Finance now aims to expand its related services to new markets, with digital-driven innovations offering straight-through processing.
Once seen as something of a niche industry, premium funding has become much more appealing to Australian businesses in an environment of higher interest rates and persistent inflation; the cash flow benefits it provides are invaluable as they struggle with everything from maintaining working capital to front-footing investments for new growth.
“Businesses are currently being impacted by interest rate
Published 18 Nov 2024
Information, media and communications
Electricity, gas, water and waste services
Financial and insurance services
Food and beverage services
Construction
Administrative and support services
Rental, hiring and real estate services
Arts and recreation services
Accommodation
Professional, scientific and technical services
Healthcare and social assistance
Mining
Retail trade
Transport, postal and warehousing
Agriculture, forestry and fishing
Manufacturing
Education and training
Wholesale trade
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Source: CreditorWatch Business Risk Index, September 2024
Late B2B payments by industry
Source: PwC Insurance 2025 and Beyond report
5.3%
(CAGR)
Estimated growth in global property premiums to 2040
“[Businesses] need to be smarter around how they retain cash within their business and continue to grow and use that for other areas such as digitisation or transformation of their business or new products”
Karen Carter,
BOQ Finance
“I do feel that there is opportunity to get more market share through people that haven’t considered [premium funding] in the past”
Karen Carter,
BOQ Finance
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Copyright © 1996-2024 KM Business Information Australia Pty Ltd.
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US
CA
AU
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Companies
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Newsletter
About us
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Terms & Conditions
Contact Us
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Copyright © 1996-2024 KM Business Information Australia Pty Ltd.
News
MORTGAGE INDUSTRY
BEST IN MORTGAGE
SPECIALTY
TV
Resources
US
CA
AU
NZ
UK