Warning Lights on the Financial Dashboard: Navigating Risk in Auto Finance

In the financial world, uncertainty often casts a shadow of doubt over the future. As economic experts and analysts scrutinize current data and trends, it seems likely that the path ahead is likely to be one with its share of obstacles.

From Moratoriums to Market Fluctuations to Disappearing Agents — a Lender’s Conundrum Auto repossession, the process of reclaiming a vehicle from a borrower who has defaulted on their loan payments, has become a more challenging and time-consuming process in the current environment than ever before. Why?

Protecting your auto loan portfolio doesn’t need to cost your credit union, bank, or finance company as much money, time, and resources as it does today. With seamless implementation and a multitude of unique advantages in our service model, State National saves lenders money. Just how much? Let’s find out! 1. How many auto loans do you have in your portfolio and how much time per week does your staff spend on managing collateral protection in your current portfolio? Our program is built to free up your staff’s capacity and provide you with FTE savings. Our exclusive lender platform, InsurTrak, has every tool you need, including: Real-time data on borrower insurance status, notifications sent, account history, insurance documentation, and all borrower interactions Instant, on-demand access to all recorded borrower phone calls. Fast, automated payment change and refund information On-demand management reports and customized, transparent reporting of all aspects of your program Created in-house and customized for CPI programs specifically, InsurTrak is the industry powerhouse in tracking, claims filing, reporting, and program management, all in one user-friendly, easy-to-use platform. “Efficient? I’d estimate State National’s system saved us 6 figures and 1 FTE!” ~ Steve McIntire, VP of Administration and General Counsel, SELCO Community Credit Union 2. What is your 12-month claim benefit? State National returns, on average, 20% more in claim dollars than other providers. Because we are the carrier, underwriter, and claims payer, there is no middleman and almost no paperwork required. Many claims are processed in 10 seconds with AI and those that need further review are paid within 5 days of their submission date. That’s 5 days start to finish. Additionally, filing a claims payment has never been easier for your team. Our claims form comes pre-populated with data from InsurTrak. You don’t even have to decide which claim type you want to file — we automatically process each claim for ALL available coverages, regularly returning more dollars to you. Did I mention we have broader coverages that provide more value to the financial institution? Not only that, but we offer a borrower-centric coverage that allows your borrower to file a claim even if they are uninsured! “State National has saved us a truly significant amount of money.” ~ John Grimes, AVP of Collections, MAX Credit Union 3. If you have a CPI provider, what is your current CPI penetration? We reduce CPI penetration by 20-30% because of our proprietary AI tracking software, proactive verification methods, and our email and text programs. Our Web-Based Robotic Automated Processing (WRAP) software automatically extracts insurance information from insurer websites and updates it in InsurTrak — without any human effort or intervention. WRAP uses AI and machine learning to proactively search for new policy information from seven different carriers, including the country’s top five auto insurers, before ever notifying a borrower. Only if we can’t verify insurance through WRAP or our other proactive and behind-the-scenes verification methods do we reach out to the borrower via multiple channels, including email and text. Borrowers can easily respond through the channel they prefer — email, phone, or our borrower-facing MyLoanInsurance.com portal. They can even send an image of their insurance information by text! All this combines to create a more seamless, frictionless experience that results in lower penetration rates and greater client and borrower satisfaction. “Even though State National provides the insurance, I know their goal in the end is to NOT have forced placements. It's an active partnership that hits from all angles.” ~ Lora Stebleton, Vice President of Payments & Customer Service, Gate City Bank 4. What core processor do you use? InsurTrak is engineered to work seamlessly with all major core processors. Because innovation is our mindset, we have multiple automation options available to accommodate your systems and processes. When designing InsurTrak, we kept software compatibility a top priority. This means seamless real-time premium adds, refunds (including partial refunds), and payment syncing. With minimal steps to set up, you can link Symitar Episys, Temenos, and AKUVO directly to InsurTrak. For those who use Symitar Episys, State National has set up two-click direct connectivity, allowing all InsurTrak data to be accessed through your Episys system. Temenos and AKUVO users can easily connect to InsurTrak within their frameworks using the State National connector. “I just don’t think anybody else out there can compete with what State National has as far as the product, the technology and innovation, and how many things are automated.” ~ Corey Rupp, Chief Retail Officer, Affinity Plus Credit Union Switch Without a Glitch Once you decide to partner with State National, our dedicated Program Implementation Team is there to guide you all along the way and answer any questions you may have during any step as you onboard. “It was the best implementation I have done with any company. It was flawless.” ~ Joy Dominguez-Mota, Department Manager, Nationwide Acceptance Want to determine the actual savings your financial institution can achieve with these advantages? Let us know your answers to these questions and see how you can take advantage of these and other exclusive benefits. Sign up for an in-depth, customized consultation and program review today to see how much time and money we can save you!

A Journey to Greatness Setting and achieving goals is one of the best ways to feel fulfilled. Whether it’s in our personal, social, or work life, we all require a certain level of success to build confidence and to have a sense of well-being. There’s something especially remarkable about success in the workplace, where a group of people with common goals and values come together to help each other achieve those goals on a personal and collaborative level. And the significance of celebrating those successes is equally as important as setting them and reaching them! Working Together to Provide an Excellent Borrower Experience Our Contact Center here at State National does exactly that. Not only do our hard-working representatives strive for and achieve daily, weekly, monthly, and yearly success as measured by ambitious KPIs, they were also recently awarded with Center of Excellence Certification from BenchmarkPortal — the global leader in the call center industry. BenchmarkPortal provides benchmarking, certifications, training, consulting, and industry reports and has gained international recognition for its innovative approach to best practices. Their Center of Excellence Certification isn’t an easy accolade to achieve — it’s specifically given to call centers that implement best practices and attain world-class performance in their industry. BenchmarkPortal’s CEO, Bruce Belfiore, says that he was “struck by the high level of customer service and by the efficiency with which contacts are handled,” at our in-house Contact Center, noting that the State National team achieved certification on the very first try due to their exceptional performance on BenchmarkPortal’s comprehensive 360-degree on-site assessment. The Power of Persistence Earning this certification wouldn’t have been possible without our knowledgeable and dedicated Contact Center representatives. They recognize the importance of delivering exceptional service to borrowers and focus on building and maintaining a positive relationship with every individual, on each call. Our Contact Center’s core values include regular, ongoing training, process improvement, and utilizing our state-of-the-art technology to better serve borrowers nationwide. Working as a team is critical for achieving success in any organization. We’re especially proud of what our SNC Contact Center team has accomplished, which is a testament to the power of teamwork and the importance of setting clear goals and working together to achieve them. We are excited to see what they will do next and have no doubt that they will continue to raise the bar for customer service excellence. Our dedicated representatives’ enthusiasm, professionalism, true caring, and daily focus on continuous improvement makes them a shining example of what can be accomplished through teamwork and a clear vision for success. See what BenchmarkPortal has to say about State National’s recent win here. Have questions about BenchmarkPortal Certification and how world-class, dedicated service can benefit your financial institution and your borrowers? Learn all about it here.

Examining the Ongoing Ripple Effect of Supply Chain Disruption, Inflation, and Interest Rates Picture the economy as a large lake, with all the economic players and stakeholders being boats on the water. Back in 2020, Covid-19 was the reckless jerk in the speedboat who just ripped across the water without regard to anything or anyone else. Anyone who’s been a recipient of the aftermath of reckless speedboat guy knows there will be many waves that follow in his wake. Depending on your distance and the size of your own boat, these waves may threaten to swamp your craft or they may just be mild ripples in the normally calm water (hey, it’s my analogy). In addition, the direction your boat is situated, or your vector should you be underway, will also change the way your boat experiences the wake. All that is to say that there isn’t a one-size-fits-all answer to how you will be affected by the waves. In our economy, just like on the water, major disruptions are not over right after the trouble has passed by. In our current “economic lake,” there are three distinct waves that have been created by the “speedboat” of our global pandemic. Wave One – Supply Chain Disruption With the onset of Covid-19 and the shutting down of manufacturing and limiting of on-site work to “essential” personnel, the auto market changed quickly. We went from a market where car manufacturers and dealers were begging the public to buy their inventory through heavily discounted prices to a situation where the prolonged chip shortage and lack of manufacturing created empty lots and not enough vehicles to go around. As any good student of economics can tell you, the lack of supply and the excess of demand leads to higher prices. Credit unions outperformed other financial institutions in this market, and while new car loans were a bit more scarce, the higher prices of used cars more than made up for the difference. But another ripple caused by Wave One is what car manufacturers were doing with the limited supply of chips they did have. They focused production on their high-end, higher-margin vehicles, which made them a lot of money. Unfortunately, as a result it created a market gap where literally (literally) millions of low-cost vehicles that would have otherwise been manufactured simply don’t exist today. The impact of this missing category has just now begun to be felt in the used car market. Low-cost vehicles that we would now expect to see being traded in for new cars are just not widely available in the used car market. Those that do exist move at a high speed, staying on the market in some cases only hours. What’s a used car buyer to do? They must wait for those nicer, high-end cars to hit the market at a price they can afford, which may mean another year or two before buying. In addition, the buyer who purchased that high-end car during the pandemic is likely to hang on to it a year or two longer to get more value from the price they paid. Manufacturers are slowly bringing back production of low-cost vehicles, but it will be years before this wave and the following ripples work their way through the economic landscape (waterscape?). Wave Two – Inflation As stimulus money inflated bank accounts and drove down consumer debt, and as businesses closed or limited hours, people had money to buy goods and services but limited places to spend it. More money chasing goods and services created a perfect environment for inflation to start to spiral. Groceries, energy, and cars all took significant jumps — and housing prices, especially, escalated steeply. During the height of the run-up, in many places, when selling a house it was not uncommon to get multiple cash offers for significantly more than list price in a matter of days. Renters also felt (and still feel) the bite of inflation as their leases renew at significantly higher rates. As inflation continues to be an issue, many households have moved from having to decide how to spend their extra dollars to instead having to decide which bills will get those dollars. As a result, lenders are back in the full swing of collections as delinquencies rise. Unfortunately for lenders, an increasing delinquency rate can move quickly into increased charge-offs. The inflation wave is just now being felt in the lender space and the expectation is that 2023-2024 will be challenging to the bottom lines of many lenders. Staffing shortages combined with salary inflation, combined with more demand for repossession, skip tracing, and remarketing services than market supply currently provides, leads to anecdotal stories of lenders spending extra money to have their vehicles bumped in priority so they won’t be left out. It doesn’t take long for all of these forces to combine to create a new higher price point for everyone — and so inflation continues. Wave Three – Interest Rates In the bid to combat inflation, the Federal Reserve has continued to raise interest rates. Rates climbed steeply from 3.25% to (at the time of this writing) 8.00% in the space of less than a year. While the rate of increase has started to taper off, the impact is undeniably being felt in many areas. In the housing market, lending has cooled significantly as: Refinance activity has virtually dried up. Inflated home prices plus significantly higher mortgage rates have priced many buyers out of the market altogether. Similarly, in the auto market: Buyers who would normally trade in their vehicles for a new one are looking at either a huge increase in the monthly payment amount or a one- to two-year extended term on the note. Many of those buyers are deciding to hang on the vehicle they have. For those borrowers who do take the plunge, even small changes in their economic reality could lead to delinquencies, defaults and repossessions — making the risk much higher for their lenders. Historically, the labor market has to tighten significantly in order to rein in inflation. That hasn’t happened yet. The Fed is being cautious in an attempt to not make that a reality, but it remains to be seen. The impact of this wave has shifted the water line, but stay tuned for more turbulence. Naturally, all boats aren’t the same size, the same design, or heading in the same direction. Each lender has to examine their own unique boat to determine the best way to position it to ride out the waves and hopefully return to calmer waters — at least until the next jerk in a speedboat comes along to stir things up. For a personalized consultation regarding ways we can help your financial institution ride out this storm with reduced risk, reduced charge-offs, and greater peace of mind, contact our CPI experts.