The Pros and Cons of an Agency Setting Up a Premium Financing Company

• By: The Big "I" Virtual University
• March 20, 2026

An agency has a book of medium and large-sized commercial accounts with stable cash flow. Currently, they work with two premium finance companies and are considering handling it inside the agency in a designated department with an accounting team. 

Q: What are the pros and cons of an insurance agency setting up and running its own premium finance department?

Response: This is a great question—and one we’re hearing more frequently from agencies with strong commercial books and stable cash flow. As agencies grow, it’s natural to start looking more closely at areas where you may be able to gain greater control over the client experience, improve efficiency or retain more of the economics already flowing through the organization.

Premium financing often lands squarely in that category. For agencies with larger commercial accounts, it can feel like a logical next step to ask whether handling financing internally—rather than relying solely on third-party premium finance companies—might be a good strategic move.

The short answer is: it can be, but it’s not a simple plug-and-play decision. Setting up and running an in-house premium finance operation introduces a different set of operational, financial and regulatory considerations. Like most things in agency management, the right answer depends on scale, structure, risk tolerance, and the strength of your internal controls.

Here are some of the key pros, cons, and practical considerations agencies should weigh when evaluating whether to bring premium financing in-house.

Potential Advantages

Greater control and improved client experience. Handling premium financing internally allows the agency to control timelines, communication and service standards. This can improve responsiveness, particularly those with complex financing needs.

Revenue retention. Instead of sharing economics with third-party premium finance companies, the agency may retain interest income and fees—assuming volumes are sufficient to justify the investment.

Customization and flexibility. An internal department can tailor financing terms, billing cycles, and service approaches to align with agency workflows and client preferences.

Stronger client stickiness. Embedding financing into the agency’s service model can increase retention, as clients appreciate the “one-stop-shop” experience.

Challenges & Risks to Consider

Capital and cash flow requirements. Premium financing is capital-intensive. The agency must have sufficient liquidity or a lending arrangement to fund premiums while managing the timing of repayments and associated risks.

Regulatory and compliance complexity. Premium finance is regulated at the state level and often requires licensing, compliance oversight, disclosures, and audit readiness. This adds administrative and legal responsibility.

Operational burden. Running a premium finance department is not just “accounting work.” It includes loan documentation, payment tracking, cancellations and reinstatements and carrier remittance timing. All this requires dedicated, experienced personnel, not just shared staff.

Credit and default risk. Third-party premium finance companies are built to manage credit risk and defaults. Bringing this in-house means the agency assumes that exposure directly.

Technology and systems. Robust systems are required to track loans, payments, interest, notices, and compliance. Manual or lightly automated processes can quickly become burdensome and risky at scale.

Before moving forward, agencies should clearly answer these questions:

• Do we have sufficient and consistent volume to justify the cost and complexity?
• Do we have strong accounting and financial controls already in place?
• Are we prepared to separate agency operations from finance operations cleanly?
• Is our leadership team aligned on the risk appetite and long-term commitment required?

For many agencies, partnering with established premium finance companies remains the most efficient and lowest-risk solution. For others—particularly larger, well-capitalized agencies—it can become a profitable and strategic extension of the business.

Some agencies have chosen a hybrid approach—maintaining strong relationships with external premium finance partners while selectively handling certain accounts internally once systems, staffing, and compliance maturity are proven.

This question was originally submitted by an agent through the Big “I” Virtual University’s (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

This article is intended for general informational purposes only, and any opinions expressed are solely those of the author(s). The article is provided “as is” with no warranties or representations of any kind, and any liability is disclaimed that is in any way connected to reliance on or use of the information contained therein. The article is not intended to constitute and should not be considered legal or other professional advice, nor shall it serve as a substitute for obtaining such advice. If specific expert advice is required or desired, the services of an appropriate, competent professional, such as an attorney or accountant, should be sought.