Safety Through Security

Safety Through Security: Because Cybersecurity Awareness Isn't Just for October In October, security organizations around the world have focused extra efforts on cybersecurity awareness, urging individuals and businesses of all types and sizes to pay attention to and examine their systems and their daily habits in every area of online life. Cybersecurity Awareness Month (CSAM) was launched by the National Cyber Security Alliance and the U.S. Department of Homeland Security (DHS) in October 2004 as a broad effort to help all Americans stay safer and more secure online. While this year’s observance may be coming to a close, it’s important to remember to keep the ideas emphasized this October top of mind all year long. Did You Know: The average total cost of a data breach in 2020 was $3.86 million and took an average of 280 days to identify and contain. (IBM) The use of new breach techniques has boomed as a result of the COVID-19 pandemic, with 35% of breaches having leveraged new techniques in 2020. (Cynet) 88% of data breaches are caused by human error. (Tessian) 61% of data breaches used compromised credentials, and phishing attacks account for more than 80% of reported security incidents. (Verizon Data Breach Investigations Report) The situation especially impacts the financial industry: Although only 6.5% of breaches were suffered by financial services firms, those incidents comprised 61.7% of affected information. (Bitglass) The NCUA further warns that smaller financial institutions with less than $35M in annual revenue are especially vulnerable to hacking, malware, and ransomware attacks. Because financial institutions are disproportionately impacted — and the consequences of breaches in this area are so consequential — carefully vetting business partners and partnering with other businesses that share your vigilance is critical. Here at State National, the security of our customer data is incredibly important — it’s a critical factor in our business and the service we provide to our clients. Our security team is on a mission to not only meet but exceed all security standards — often well past what others think is strict enough. “Security threats don’t stop when the whistle blows at 5 p.m. and hackers don’t take vacations,” says Michael Weiskircher, State National’s CIO, “so protecting against attacks has to be an ongoing, real-time process of fixing vulnerabilities immediately.” Our security team is constantly monitoring every variable and system to stay on top of all new vulnerabilities as soon as they are identified. There’s no waiting for patch day or weekly updating — we’re monitoring and assessing security 24 hours a day. Another thing that makes State National a leader in terms of network and data security is our status as part of the Markel family of companies. The strength of Markel and their security teams coupled with access to the security tools and resources of a multi-billion dollar, multinational insurance holding company adds yet another layer of protection when it comes to keeping sensitive client data securely locked down. So, while the threat of cybercrime in our world is certainly real, it’s nice to know that you can focus your efforts on other actions, like practicing good password hygiene, being savvy about not clicking on “phishy” links, and keeping cybersecurity at the forefront of your mind as you connect daily — and rest easy knowing that when it comes to your portfolio protection program, State National has you covered. For ways on how organizations and individuals can incorporate cybersecurity best practices into their decision-making processes, visit www.cisa.gov/cybersecurity-awareness-month. Do Your Part. #BeCyberSmart

A New Workout: STATE NATIONAL'S TRAINING DEPARTMENT OFFERS SUGGESTIONS FOR HOW YOU CAN STRETCH YOURSELF FROM ‘EXIST’ TO ‘GROW’ In 2020 and for at least part of 2021, many of us went into “Exist” mode with our lives. How can we push past this? Exist When you look back on your life, you will probably not find many times where you have had to slide back into just the basics. Our mindset and our habits changed. This extended period played tricks on us and changed how we see things. So what do we do to break out? Inquire & Interact We can begin by having brief conversations, then meetings with family and friends and eventually coworkers. Challenge yourself to make “Inquire & Interact” an active part of your day. Reach out to colleagues and friends whom you have not reached out to in a long time. Ask about how they and their families are, and how are they approaching work. Engaging with one another is a basic and fundamental component of human existence. The more you interact on a daily basis, the quicker you will become stronger and more confident. Grow It may take some time, but eventually you will find that these inquires and interactions are actually helping you expand yourself. Maybe you already used time during the pandemic to grow personally, by baking bread, losing weight, or taking on a new hobby. As your confidence grows, the desire and need to grow professionally will come to the forefront. Think: How can you propel your skills? How can you work toward a promotion? How can you be a better asset to your employer, your family, your community, and yourself? Reach out to find ideas and assistance from colleagues and mentors, seek training in the form of books, classes, and online workshops, and look for areas where you want to learn more and GROW!

Now, more than ever, it is critical to protect your auto loan portfolio with GAP Vehicle values have been at historic highs for the past year If you considered purchasing a vehicle this summer, you likely experienced some degree of sticker shock. New and used vehicle prices skyrocketed earlier in 2021 and are only now showing signs of a slight slowdown. How did we get to the point where Edmunds.com reported the average trade-in value of used vehicles was up 75.6% Year-Over-Year (YOY) in June? Simply stated, it all began last year. The manufacturing shutdowns of early 2020 left dealers with low inventory levels as shelter-in-place orders lifted and consumers, armed with stimulus funds and a desire to spend, went auto shopping in droves. The resulting low dealer inventories meant that would-be new car buyers were often forced to consider used vehicle options instead. Both new and used vehicles prices started rising in response to this unusual surge in demand. Despite seeing some stabilization of vehicle pricing in late 2020, things took a turn for the worse this year due to the global shortage of microchips. According to TrueCar, a Consumer Reports partner, there still remains an inadequate allocation of microchips for automobile manufacturers, exacerbating the inventory shortages that began in 2020. With inventory down as much as 50% in some areas, willing and able consumers are paying significantly more, with 20% of all new car purchases in May 2021 transacting at amounts above MSRP. This phenomenon has not been limited to new car purchases only — CNBC shared earlier this month that the average price of a used vehicle was up 21% YOY with a 10% increase from Q1 2021 to Q2 2021. What does the future hold for car values? July witnessed a slight reduction in the rate at which vehicle prices were increasing YOY. However, Carvana’s CEO, Ernie Garcia, warns that the cost of used cars will not normalize until manufacturers can produce inventory at pre-2020 levels. Supply chain challenges are likely to cause “some lasting” impact on used car prices, said Garcia on an August 6th CNBC’s Squawk Box. Black Book, in their 2021 Vehicle Depreciation Report, paints a slightly less optimistic picture, projecting “residual forecasts to return to pre-COVID 19 valuation levels in 3 years.” How will this valuation normalization impact lending portfolios? For a variety of reasons, many consumers found themselves paying in excess of MSRP or NADA for a vehicle over the past 18 months. This reality will not change overnight — it will take the automobile manufacturers replenishing and maintaining inventory levels on a consistent basis for prices to normalize. Whether that be in 2022, or in 3 years as predicted by Black Book, the reset of vehicle valuations has the potential to negatively impact your auto loan portfolio. Black Book’s annual vehicle depreciation rates averaged approximately 13% for each of the 9 years prior to 2020, when it dropped to just 2%. As vehicle valuations fall back in line with more historic depreciation models, loans already on the books as well as loans written through the remainder of 2021 will reflect inflated sales prices. In the event of a future theft or total loss at a time when vehicle values are back to pre-COVID-19 levels, primary carrier Actual Cash Value (ACV) settlements will result in unprecedented deficiency balances. And that is where GAP can help. Essential protection for you and your borrowers GAP has always been an important risk management tool. However, in today’s economy when vehicles are still selling above MSRP or NADA, it is especially important to lenders and borrowers alike for collateral to be protected against the changes in valuation expected over the next several years. Private Passenger Auto carriers settle total loss claims based on the ACV of the vehicle immediately prior to the loss, regardless of the original sales price. Inflated sales prices mean inflated loan balances on the date of loss, resulting in increased deficiency balances — the exact thing GAP is designed to protect. Not only will your potential charge-offs be reduced with GAP protecting your collateral, but your borrowers will also be better positioned to finance their replacement vehicle without the burden of having to satisfy a large deficiency balance on their original loan. How State National's GAP is different The State National GAP product provides unparalleled flexibility in the marketplace, primarily given our unique position as the direct sales force, underwriter, and program administrator. With options to protect amounts up to 150% of MSRP or NADA, you won’t need to worry about future deficiency balances resulting from today’s extraordinary market conditions. Additionally, you can rest easy knowing your pricing is not inflated to cover agent costs or, worse yet, that you will be part of an across-the-board rate adjustment because another lender’s program is not performing as expected. If you’re looking for the most efficient GAP claim submission process (it’s true — we really do not require any supporting documentation to initiate a GAP deficiency balance claim) and fastest claim settlement time (2 to 3 days, on average), isn’t it time you consider State National for your GAP Program? Contact us today to start protecting your consumer loan portfolio from the effects of inflated auto prices — driving a more positive experience for you and your borrowers. Contact us today to receive more information about GAP from State National. Francine Gagliano, State National Director of Client Services 817-265-2000 x1247 or fgagliano@statenational.com

State National Employees Crowdsource to Give Their Company Blog a Name When we launched our State National blog in 2020 as part of our company’s newly redesigned website, we had a few goals in mind: To provide valuable thought leadership and educational content that could be of help to our clients, potential clients, and anyone else in the industry whether they ever became a client or not To add even more transparency (one of our main core values) around the way we do business To help others in the industry get to know more about the thoughts and insights of some of our experienced subject matter experts and assist in building relationships To share more about the company culture we’re very proud of with those in the industry and with potential future employees And of course (speaking of transparency), because we are in business — to share benefits and features of our products and services and show credit unions, banks, and finance companies how we can serve them and help them be more profitable and successful The blog has been a great success so far, and we’ve received really positive feedback about the value people are receiving from our content — thank you!