CPI as Consumer Protection?

The Dual Advantage of Collateral Protection Insurance: A Closer Look at Borrower Benefits Collateral protection insurance is most commonly thought of as a protection for lenders. And that is certainly correct — a well-run CPI program is an undeniably powerful risk mitigation tool that helps lenders safeguard their auto loan portfolios from loss. It's one of the best ways credit unions, banks, and other financial institutions can reduce financial risk associated with lending.

At the start of each new year, many of us pause and reflect on our actions and accomplishments over the past 12 months. Here at State National, we’re doing the same and taking a moment to recognize and appreciate the impact that SNCares, our charitable committee, has made in the lives of those we've been fortunate enough to support throughout 2023.

The Hidden Dangers of Abandoning CPI Over the past 50+ years we have seen how unintended consequences often surprise lenders who choose to switch their portfolio protection solution from CPI to a blanket policy. For many credit unions, it seems like a good option — until later down the road when both their number of uninsured borrowers AND their premiums keep rising. Without the monitoring of the loan portfolio that comes with CPI, it has been shown time and again that the number of uninsured borrowers will increase and the credit union’s losses will grow larger. To show how this plays out in a real-world example, one of our current clients* recently worked with us to run a test on their portfolio after they decided to move to blanket coverage, by continuing to track their borrowers' insurance status (to ensure their privacy, we'll call them "Best Lending Institution").

State National brings back QR codes — now new and improved! When was the last time you scanned a Quick Response (QR) code? Was it on a restaurant menu, on a real-estate sign, or maybe to access a form? The reliable QR code has now become a part of our daily life. In our mobile-first technology era, QR codes are back, giving consumers instant access anywhere to the targeted information you want to provide them. There is no need to keep pamphlets in stock or worry about your customers going to the wrong website when scrolling past noisy ads on search engines. While State National has offered our clients the ability to have QR codes on their borrower notices before, there was not a real demand for them until the recent increase in use sparked by the pandemic. With increased consumer receptiveness to these abstract squares and State National’s dedication to constant improvement, we are harnessing the power of QR codes again — adding on improved customizations that make it even easier for borrowers to submit their insurance when they take out a new loan or have a lapse in coverage. "We appreciate having a good vendor partner that understands your needs sometimes before you even know you have a need. State National is always looking for ways to make things better for your staff as well as your leadership.” – JAX Federal Credit Union QR Codes for Borrower Notices Borrowers can scan their personalized QR code on their mailed paper notice and be directed straight to their personal account on MyLoanInsurance.com. On this borrower-friendly site they can view their insurance status and easily provide updated proof of insurance. Since the QR code on each borrower’s notice is specific to them, no reference ID or PIN is needed, and the webpage will automatically populate with their name and vehicle type. A helpful short video applicable to their particular situation will instruct them on exactly what they need to provide to resolve their specific impairment. And finally, the site will also show them how to easily upload and submit their information. Our borrower-specific QR codes personalize the website borrowers are directed to, including details such as informing them if the lienholder is missing or if their deductible is too high. QR Codes for Lenders Lender custom QR codes are another way we provide total access and empower your borrowers to easily update their insurance with us before they even enter our notice cycle. These institution-specific lender QR codes can be used anywhere you choose, including your website, lender agreement, and loan closing documents. Borrowers who scan your custom lender code are directed to a MyLoanInsurance.com page branded with your financial institution’s name and logo. From here, borrowers can upload insurance even if they do not know their access PIN. Pro Tip: Add Your Lender QR Code to Your Lender Agreement to Prompt New Borrowers to Submit Their Insurance We encourage you to add your custom QR code in your new loan packet and actively point it out to borrowers when they take out a vehicle or home loan. Let your borrowers know they can scan that QR code to quickly and easily provide their insurance details. The visual effect of having the QR code on the agreement packet reminds the borrower to take action, and as soon as the website pops up, it tells them exactly what they need to do to update their insurance. MyLoanInsurance.com is accessible 24/7, so borrowers with missing information or a lapse in coverage can update their insurance at any time, at their convenience. Scan Here for an Example of a Lender QR Code Leading by Always Improving Since 1973, State National has been dedicated to a culture of continuous improvement. We are proud to be the technology leader in our industry, and are consistently evolving to make portfolio protection easier, faster, and more user-friendly for your borrowers and your staff. We are glad to provide our lenders with these customized QR codes as the latest feature to make the process even more seamless and convenient. Borrower QR codes are already actively employed on all mailed notifications. To find out more about getting your own customized lender QR code, contact your Client Executive today!

Inflation has been squeezing businesses and consumers alike. Perhaps the easiest industry in which to spot the consequences of financial stress is the automotive industry. How can you maintain a competitive advantage while also protecting your portfolio in this market? Read on to find out. Spotlight Soundbite: Maintaining Your Competitive Edge During Auto Industry Inflation Consumers Are Facing Financial Stress and Uncertainty With many Americans increasingly financially strapped, as well as uncertain what their financial future will bring — what does this mean for lenders? We know that those directly impacted by inflation (which is virtually all lower- to middle-class Americans) alter their consumption, investment choices, and spending habits as their purchasing power decreases. Something has to give as many consumers struggle to make ends meet. Unfortunately, many may choose to scale back on or even cancel their auto insurance as a result. In addition, consumer debt-to-income ratio is expected to increase. As borrowers continue to take out large auto loans, particularly on used cars, they will be stuck with these loans even if the value of the item purchased decreases long-term — potentially putting borrowers upside down on their loans, with a vehicle worth considerably less than what they still owe in the future. Revenue Lost in Charge-offs What does this mean for lenders? Unfortunately, this financial stress being felt by consumers also increases risk in a lender’s loan portfolio. As financial institutions are providing loans for vehicles with a hyper-inflated value, the risk of bad debt and charge-offs remains high. Without proper risk mitigation measures in place, if the collateral sustains damage or loss when a borrower is uninsured or underinsured, the financial institution making the loan can also find itself “upside down,” so to speak, with the claims amount received insufficient to cover its exposure. Not all is lost, however — lenders with a high-quality portfolio protection insurance program will experience relief from a significant amount of this bad debt. Not only will this critical protection keep your borrowers covered, it will also safeguard your balance sheet. Insurance Tracking Also Helps Lenders Manage Risk In addition to the protection provided by the insurance coverage, lenders can also use the detailed borrower insurance tracking in the program to assess and mitigate risk. High-quality, real-time tracking allows lenders to leverage knowledge of a borrower’s lack of coverage as an indicator of when a loan may be at a higher risk of default. This early warning sign provides an opportunity to initiate preventive steps to work with those borrowers to avoid collections, as well as take proactive measures to step up early collections efforts. How a Program with State National Tackles Inflationary Pressure We can help as you are undergoing a double squeeze from consumer risk combined with tighter net interest margins. In addition to decreasing your charge-offs, here are a few of the relevant ways our program supports you no matter the storm: Our partners have full transparency and access to immediate real-time data with InsurTrak, the industry’s only system built from scratch specifically for CPI. It’s your single sign-on source of truth for insurance tracking, claims, and reporting, resulting in maximum ease, speed, and transparency. With your loan portfolio data at your fingertips, accessible instantly all in one place, it's easy and quick to identify trends and potentially at-risk borrowers. Our internal infrastructure is supported by our parent company Markel, a $62 billion Fortune 500 company, which has been proudly rated “A” (Excellent) by AM Best for many decades and is regarded as an industry leader. Our combined tenure, strength, and expertise translate to unmatched peace of mind and security for our partners. Our Claims Advisory Recovery Services (CARS) boosts your bottom line by mitigating your auto portfolio losses, reducing your internal expenses, and giving you more time to spend servicing your borrowers. With CARS, we manage repossessed collateral and remarketing profitability at auctions for you while also maximizing settlements from outside insurance claims and recovering suspected skips. All of this combined with State National’s culture of continuous improvement for the past half century, unwavering commitment to investment in technology, and unsurpassed service delivery ensures we can best serve our partners in both good times and challenging times, and we can help your business weather any economic storm. Practical Solutions for Mitigating Portfolio Risks State National's Client Advisory Council (CAC) recently discussed some practical steps their credit unions are taking for creating alternative revenue methods. Even in the face of rising inflation and decreased lending demand, there are still many ways credit unions can grow while serving their members well. For more information on how our solutions can help your credit union, contact us! To read the first article in this SNC Spotlight series, Tackling Inflation and the Auto Industry, visit: Protecting Your Credit Union from Car Market Volatility