As everyone reading this is well aware, the world is currently experiencing extraordinary circumstances that have upended daily life — now, there’s no such thing as “business as usual.” One question being posed by banks, finance companies and other lenders everywhere is, “How do we best care for our customers during this time of unprecedented economic and social upheaval?”

Caring for your customers involves many decisions, both large and small, in every single area of your institution. Along with decisions related to areas such as whether to close branches, the amount of cash to keep on hand and possible lending modifications — among hundreds of others — choices about how to safeguard borrowers as well as your institution from undue risk are more important than ever.

Protecting your portfolio now

With that said, portfolio protection is our greatest area of expertise, so it’s a good place to start. We’ve heard from many of our partners seeking guidance on how to handle their portfolio tracking and insurance programs now. Each institution is unique, so there are few blanket statements to make about specific program details that would apply to all; if you have questions, we encourage you to contact your State National Client Executive to explore your best solutions. What applies to everyone, though, is that mitigating risk in your portfolio is critical to weathering this storm as well as recovering successfully when the storm has passed.

One in eight drivers in the U.S. is uninsured — a number that will likely grow as consumers across the country face increasing financial hardships. Given that, as well as many unanswered questions about what will happen with the U.S. and world economy, making sure your auto and mortgage collateral is properly insured is essential. It’s part of protecting your institution, as well as protecting your borrowers, both now and in the future.

The question is: What is the fairest, most efficient way to protect both while also best caring for your borrowers and creating the best possible customer experience?

Having partnered closely with lenders of all sizes, all around the country, for almost half a century, it is our experience that collateral protection insurance (CPI) stands out as the clear answer — IF it is part of a well-run, well-managed program. 

Some insurers may suggest that blanket insurance is the way to go to avoid borrower noise, and it may seem so on the surface — but there’s more to how it affects your customers’ experience than meets the eye at first glance.

Who should pay?

Most of your borrowers do comply with the promise they made to maintain insurance on the car or home they financed. But with a blanket policy, ALL borrowers — those who keep their property insured and those who don’t — bear the cost. Depending on your location that might happen directly or indirectly, but either way, the cost is shared by all of your customers. Our philosophy is that serving the greatest good means taking care of your borrowers collectively, as a whole — keeping costs as low as possible for the majority while still providing adequate protection for all.

But what about noise?

With a well-run tracking program using state-of-the-art automation that updates insurance data in real time, borrowers only hear from the provider when there is no proof of insurance in place. The vast majority of borrowers will never receive a notice or even be aware the program exists.

Even those who haven’t provided insurance information, or those whose information is incorrect or insufficient, receive multiple chances to correct the deficiency before a policy is placed. And again, with a well-run program, it is exceedingly easy for borrowers to submit their insurance information, through multiple channels, with updates recorded immediately. 

When it comes to protecting your collateral, don’t let scare tactics or publicized examples of poorly managed programs make the decision for you — or your borrowers. A well-run tracking and lender-placed insurance program protects not only your portfolio, but also your customer experience and the financial health of your institution.

State National considers our business partners just that — partners. Our goal is and has always been to help our clients achieve success, both because when you are successful, we are successful — but also because we truly care about our business partners and believe in doing whatever we can to help them, their customers, and their communities.

In the upcoming weeks and months, we will be sharing resources and information about many areas of concern to lending institutions in these volatile times. Topics will vary, depending on what pressing needs may be in the moment. Some will have little to do with the products and services we offer — they will be presented simply for the purpose of offering assistance you need to navigate what’s happening.

Be on the lookout for more resources to come, including topical information and advice developed in conjunction with our industry partners. In the meantime, please stay safe, and let us know how we can help you and your financial institution not only survive but thrive in the unpredictable days and months ahead.

Trace Ledbetter is executive vice president at State National Companies, where he directs and oversees delivery of all services and products for lender services, including customer relationship management, underwriting and claims.