Ep. 508 Economic Effects of US Economy on the Insurance Marketplace

Rancho Mesa President Dave Garcia sits down with Korben Konrady with IPFS to talk about how the economy affects the insurance industry.

Show Notes: IPFS,⁠ ⁠⁠⁠⁠⁠⁠Subscribe to Rancho Mesa's Newsletter⁠⁠⁠⁠⁠⁠

Host: ⁠⁠⁠⁠⁠⁠Dave Garcia

Guest: Korben Konrady

Editor: Jadyn Brandt

Music: "Home" by JHS Pedals, “Breaking News Intro” by nem0production

© Copyright 2025. Rancho Mesa Insurance Services, Inc. All rights reserved.

Transcript

Dave Garcia: Hi, you're listening to Rancho Mesa’s StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your businesses thrive. I'm your host, Dave Garcia, and today I'll be joined by Korbin Konrady with IPFS.

Today we're going to talk about how the economy affects Financing the world and its implications to the insurance marketplace Korbin welcome to the show.

Korbin Konrady: Thanks. Good to be here Dave. I appreciate the invite.

DG: Thanks. Is this is your first visit to StudioOne Korbin?

KK: It's my first visit I've you know kind of peeked inside before and wondering what's going on in there and now I'm happy to be here finding out.

DG: I'm glad to have you really glad to have you. So Korbin to get started. Why don't you tell our listeners a little bit about IPFS and what you guys do there?

KK: All right, great. Thank you. So my name is Korbin. I've worked for IPFS for the past seven years. We are the national leaders in premium financing, which essentially means that we work with insurance agencies to help their insureds or their clients pay for their insurance.

There's a certain part of the insurance market about 20% where the insurers require an entire year of payments up front, they don't offer any billing methods, and they can either pay up front or they can find a finance company like ourselves that will set up a payment plan for them. Just like when you go and buy a new car, they take you into the office at the end of it and say, "All right, sit down with the finance guy." So that's me.

DG: That's you, yeah. We've worked with Korbin and IPFS now for about 15 years, and they've just been just a great asset for us here at Rancho Mesa and our particular clients that need their services.

But Korbin before we get too deep into this, heard a little rumor out there that you've recently won a pretty significant award or some recognition. Why don't you share that? I know you're a modest person, but I want to hear all about that.

KK: I appreciate that, Dave. I am very proud of it. I was awarded the Pinnacle Award for IPFS, which is the salesperson that's made the most impact on the company. There's a couple of ways you can do that. That's through either new sales or through growing your current book. And I did the majority of that work through growing my current book. It was an amazing year thanks to clients that are continuing to grow. And I'm really proud of that because it's a team award. I can bring in new clients all day but keeping them around keeping them happy and keeping them growing takes the whole team. So, yeah, very, very proud of everybody that works with us and what we've done.

DG: And you should be, Korbin.

KK: Thank you.

DG: You do a terrific job of representing IPFS here locally to us, but most importantly to our clients and working through their issues in order to get that premium financing in place. So congratulations. I know that's not an award you purchase. You've got to earn it. So congratulations for that.

KK: Thanks a lot. That means a lot.

DG: Okay, let's shift it back to, there's been a lot of changes in the economy over the last, I don't know, 12, 18 months, six months. How's that impacted the premium financing world?

KK: You know, this is such a great question or such a great topic to dive into because insurance and the economy are so tied together. If you look around a room, if you look around a shopping center, if you look around just anywhere in the world, everything has insurance kind of hidden within its interior. It kind of reminds me of the term is, I believe, mycelium, which is the fungus that grows on the entire planet. It's in the dirt, it's in the trees, and it helps the planet work together. It's what connects nature. And that's what insurance is for the economy.

If there's a major disaster and there's a shock in the economy, it's something that helps to reduce the pain. You know, if it's something minor, then it's going to help you not have such a bad day because you know that you're covered. It's really a way of kind of sharing the risk that we've got. We've all got risks.

DG: Oh, for sure. It's mycelium. Okay, we've all learned a new word today. Thank you for sharing that. So being kind of the fabric that holds it together, the insurance product, and then you being a key distributor of helping to put that in place, what are some of the changes that you've seen over the last 18 months, 12 months that have impacted your abilities to do that?

KK: Well, there has been just a roller coaster of a ride for the past year or so in the economy. We're seeing changes every day. I actually, when I sent over my notes two days ago, I said, "Hey, stay tuned because there's more changes coming out this week."

So I'd say from a global perspective, our global trade certainly has an impact on everything in the economy. Essentially, our interest rates are determined by two things. Well, first of all, they're determined by our Federal Reserve telling us what is the overnight lending rate, which is currently about four-and-a-half percent. The target's four-and-a-quarter to four-and-a-half. And we're not pegged exactly to those rates, but it helps us determine our costs. So the federal overnight rate's going to be determined primarily by inflation and unemployment. So depending on how fast prices are rising and where unemployment is going, there will be changes to the overnight rate.

There was just a decision made on May 13th, I believe, last week to not move the rates. So we've got no movement right now, which is good because the economy likes stability. It doesn't like change to happen too fast. And currently for the next interest rate move coming up in June, the experts are predicting another no move.

DG: Oh, okay.

KK: It's sitting, there's a website you can go to the CME Market Watch to tell you what the futures market is doing. And it's saying there's only about an 8% chance to reduce rates next June.

DG: To reduce. Okay

KK: 90% chance to just no change.

DG: So do you feel like this, with the tariff talks going on now for several months, do you think that's having an impact on the feds just staying where they're at? Inflation going up at all? Have you seen anything tracking up there along those lines?

KK: Yeah, we just had some interesting data come out this last week. Inflation is tracking right now at 2.3% annually. It was 2.4% so that was some good data and market reacted. It's crazy to watch the stock market react so violently at times over something small like oh, it was expected to be 2.4 and it came out at 2.3.

Monday morning, we had a 3% jump in the stock market. It just, it went crazy over the weekend. So minor little things can have a major impact. And as I said before, the market likes stability. So we're seeing where things are going one day at a time.

DG: Yes, as you know, we do a lot of construction risks here. So a lot of those contractors have bid work that'll begin in the future. And then there's this, we're all kind of holding our breath the Fed Fund Rate. Is money going to get more expensive? Is it going to stay the same? Is it going to become less expensive?

If you were to look into your crystal ball to our construction clients, would you expect their cost of money over the next year or so to increase or stay relatively the same? Any thoughts on that?

KK: I think we're going to go down, but I don't think it's going to be a fast ride. In 2022, we raised interest rates at the fastest rate that in my memory, that's for sure, when we went up 4% in just a few months, and now we're really taking our time to unwind that. Doing things slowly is always going to be the method of the Federal Reserve. They don't like to move too quickly. We saw several rate increases a few years ago of half a percent at a time, 50 basis points, and that's considered moving very, very fast.

But on a historical basis, we're actually in good territory right now. Having 4.5% as the overnight rate translates into mortgage rates around 6-7%, historically, that's great. The problem is, is that our economy got addicted to free money.

DG: Right, 2%.

KK: Yeah, for 10 years, you go out finance your house at two-and-a-quarter-percent and you're done. Why would you ever refinance that? So that's also had a major impact on the mobility in our society. People aren't buying and selling homes the way that they used to because it doesn't make sense financially to go out and pay double the interest that you were a few years ago.

DG: Yeah. So it sounds like that bodes well for our construction clients, that maybe projects they bid will start on time, that at least money won't be or the lack of access to money won't be the reason they don't start the job on time.

And that obviously also impacts unemployment, you know, they want to keep their current people employed, maybe looking for additional people. So that's great, you know, I don't have the expertise that you do. I read the papers, listen to the news, but then you're trying to mine down. It's always fun to talk to an expert like you to see, okay, so what am I reading and hearing? What does it really mean? And that we can now convey that back to our clients.

You know, I've worked with, as I mentioned, with you guys for so many years, and you have so many different tools that are at our disposal, different deposits, length of term on the payment plan. What are some of the things that you think are most attractive offerings that you have to the buyer, to the person that's going to need to finance that premium.

KK: Well, when people come to us, it's generally because they want to maintain their cash flow. They want to make sure that they can pay their bills, pay their payroll, and yeah, keep cash flow consistently. It's tough to come out of pocket for an entire year of insurance all at once. So right now, I wouldn't expect that we're going to have any changes. I wouldn't tell people run out and borrow money fast as it's going up. I would say that stability is in our future. For right now, it seems like the storm has sort of passed as well with all the, let's call it craziness of the global trade imbalances that we're trying to sort out.

DG: Is there something a client could do to present a financial picture to IPFS that will change the rate that they might pay or the terms of their, does that matter? You know, like if they have really strong financials, is that something that you guys are looking at to say, yes, this is a great credit risk, we can be a little bit more aggressive on the rate or is it just everybody gets the same rate? How does that work?

KK: It's more like everybody gets the same rate, but there's factors that influence it. Now, the reason everybody would get the same rate is because your insurance policy actually serves as collateral. There's value in that policy.

So if we finance a policy and the client decides that they no longer need it, they go out of business, they move along, then we're actually able to recoup most of those funds from the market. But in terms of, yeah, we want to make sure that our clients have good pay history with us, but it's very interesting because premium financing is nothing that goes against your credit.

If it's a large one, let's say we're doing a million-dollar policy, we'd like some assurances. We might ask for a profit and loss statement. We would look and see if there was any bankruptcies. But at the end of the day, if we can ask for 25% down, which covers the risk, then we're willing to lend to most folks given the collateral.

DG: Fantastic. Korbin, are there other areas or factors I haven't thought to ask that you want to talk about that would impact the premium financing world?

KK: You know, it comes down to cancellations also, which we're very industry specific. We keep an eye on the cyclical industries, construction and transportation or something that give us those transportation, especially as something like looking into the, to the crystal ball. We are experiencing a high number of cancellations in transportation right now.

DG: That's interesting.

KK: So we want to know, hey, is this something that's showing cracks in the in the armor of the entire economy or is this just something unique to transportation?

My hunch is that it's probably something that's within the transportation industry, given the crazy amount of supply chain problems, the amount of international trade issues that we're dealing with right now.

There was actually, I think one of the most interesting things that has happened in the past few weeks is that we had a, essentially a waiver on small packages coming into the United States that paid zero, zero taxes. Everybody knows what Temu is these days. I still haven't used Temu, but you can get things for a cost that is probably is too good to be true. And they had been using a loophole in the law to avoid the import taxes.

And so that has been, I believe they settled on 30 or 40% that we're going to be charging those, but there's two million packages a day that had been pushed through that loophole.

That's a lot of trucks. That's a lot of planes, ships, whatever; 2 million a day. So we'll see what the impact on that is. They just changed that rule a few weeks ago.

DG: Okay. Yeah. And then just for our listeners, when you talk about financing premium, is that all lines of insurance that you see being financed or are there more likely certain lines of insurance that need to be financed?

KK: You know, it comes down, our meat and potatoes is definitely the general liability, the property the stuff that's really easy to determine. When it comes to something like workers comp that's a moving target. You know, there's a different number of employees a different payroll every week and we typically stay out of those that are that are moving around and might require an audit.

But we do help out our clients that have end-of-year audits because sometimes they're asked to come up with a large amount of cash in a little amount of time.

So for our current clients, we know that that's something that we can help out on. But if you're in the case where you're not financing and you have an audit, you don't have a partner to help you out with that.

DG: Right. Korbin, listen, it's been a pleasure having you in StudioOne today. Is there anything before we sign off that you'd like to add or talk about in particular?

KK: No, I just I really appreciate the opportunity to be here I'm happy to report that we're getting mostly positive signals out of the economy.

DG: Awesome.

KK: No doom and gloom to report. I love that clear forecast but as always, you know, those meteorologists can get it wrong and the right economists can get it wrong too. So it's good to pay attention and check in.

DG: Well, listen, we really appreciate you taking the time to come in. We need to have you back and maybe give a weather report, so to speak, you know, every so often to try to give us all a little heads up about what you think is coming.

So, Korbin, thank you so much for your time today. It's been a pleasure having you in StudioOne.

KK: Thanks, Dave. Appreciate it.

DG: Thanks for tuning in to our latest episode produced by StudioOne. If you enjoyed what you heard, please share this episode and subscribe to our podcast. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter. Bye-bye.