BEDFORD, Texas—With auto lenders going longer on terms and reaching to deeper credit scores (see related story here), advice is being offered on how to effectively leverage collateral protection insurance (CPI).
Mike Gallagher, director of marketing at State National Companies, which provides CPI, reminded that CPI “is a fundamental part of a credit union’s comprehensive risk management strategy.“In today’s auto lending climate of more and more non-prime loans, it has never been more critical to put this strategy in place.”
But Gallagher said it’s equally important to put the right CPI program in place, and shared advice on how to do that.
- Have coverages in the CPI program that reflect appetite for risk: “CPI is not ‘set it and forget it.’ Things change, like your lending parameters, credit scores going down because of the economy . . . You have to keep monitoring and adjusting as necessary.”
- Get the best value for the coverage: “Not all vendors have the same way of paying claims. Some, when evaluating the value of the collateral—say in a total loss—pay the claim based on the lower wholesale value of the car, not the retail. So you don’t get as large a claims settlement as you possibly would from a different provider.”
- Choose a CPI vendor that offers real-time borrower information: “This way, when a borrower asks the credit union a question—such as wanting to know if proof of insurance has been received—staff don’t have to search online or send an inquiry to the CPI provider . . . and make the member wait.”
- Make sure members have access to a CPI provider who is available: “Members want someone ready to answer their questions. A CPI provider with long weekly call centers hours and is available Saturday keeps members happy and it eliminates calls to the credit union. That also means IVR for common inquiries that runs 24/7, self-service options like a website that lets the borrower submit insurance, see all the notices that have been sent, what the insurance tracker has on file, exact dates of any lapses in coverage . . .”
- CPI specialization is important: CPI has a lot of moving parts and thousands of transactions per day can be processed by your CPI provider on your behalf. A provider that specializes in CPI not only improves the member experience, but the credit union’s too.