Since 1971, when I first wrote about it, I've been concerned about the system under which insurance agents and brokers hold premiums collected from insureds for extended periods before remitting them to insurers. The first problem is that the intermediaries earn investment income on these fiduciary funds, income that is not generally reported to customers. It is income that should accrue to either the insured or the insurance company. Sophisticated buyers try and remit to brokers and agents at the end of any grace period, thus reducing intermediary investment income on float, but it is impossible to eliminate it entirely. The buyer using insurance for risk financing should insist on direct payment and move business elsewhere if a company will not accommodate.
Optimists are the ultimate realists.
Copyright 1998, by H. Felix Kloman and Seawrack Press, Inc.