Are you prepared to tackle risk management in today’s socio-economic environment?

When assessing risk mitigation, insurance monitoring is only one part of the equation. Insurance monitoring and collateral protection insurance (CPI) placement are powerful components of a comprehensive risk management solution that opens access to information in real-time that can be used to enrich existing data in order to make more informed decisions. For example, non-payment insurance cancellations are a leading indicator of other types of default. Data gathered in the process includes information beyond “just” the insurance – it includes, monitoring coverage, collateral location information, other contact information, etc. that can be used to understand the bigger picture.   

As we emerge from the pandemic and look toward a return to normalcy, here are some of the questions you should be asking yourself about risk:

  • What can you do to mitigate risks, whether known or not?  
  • Do you know what risks are emerging in your portfolio?  
  • Do you know how many states have published guidance or moratoriums on non-payment cancellations?  
  • Do you know how many states have moratoriums on vehicle repossessions? 

Understanding Risk with Insurance Monitoring

The old-school notion of large-scale human intervention is a thing of the past when it comes to insurance monitoring. As we make our way through this pandemic, we will see an increased customer preference to communicate via non-paper methods utilizing available technologies.  

This extends to the insurance monitoring process, with technology such as Electronic Data Interchange (EDI) making up over 80% of all insurance transactions received. For most portfolios, this means insurance status updates (e.g., Renewal / Non-Renewal, Cancel / Reinstatement) are received and processed without any intervention. For non-EDI transactions, digital automation can check one of the many insurance carrier websites for status and update records millions of times annually with no intervention. Since they are not dependent on U.S. Mail, or subject to potential delays, EDI and digital automation are preferred methods for obtaining insurance updates.    

Even though technology plays an important role in obtaining and maintaining insurance information, physical mail does continue to be an important part of the process. However, technology such as Optical Character Recognition (OCR) can be utilized to ensure timely and accurate updates to insurance status.  

Mitigating Risk with CPI

The monitoring process positively influences customers to maintain insurance as part of their loan agreement, but the reality is some customers will not maintain it. On average, in prime / near prime portfolios, 1-3 customers out of every 100 won’t maintain insurance. This is where CPI steps in as one of the best ways to protect you against financial loss. There are many coverage options and features available that all work to do the same thing – mitigate risk in your portfolio.    

The good news is 97-99% of customers maintain their own insurance when a portfolio is actively monitored. For the remaining 1-3% it can feel like a challenging process – but it doesn’t have to be. An important aspect of monitoring and CPI placement is providing customer friendly methods to assist in resolving uninsured risks, especially when a CPI certificate is issued.  

An important component of this is to provide a customer facing web portal that is intuitive and easy to interact with. It should offer as many options as possible to self-service with enough clarity so that the customer understands what is needed to resolve their issue. Features such as live chat, calling into a call center, or self service through interactive voice response (IVR) can enhance the customer experience. 

Manage Risk to be Customer AND Client Friendly

As much as technology is deployed to create a low-touch, low-noise process for customers, the same can be said for financial institutions. System integrations and Payment Recalculation Modules (PRMs) play a vital role in automating the majority of the transactions within a program.  Also, as on the customer side, a dedicated self-service portal can allow institutions to address day to day transactions without the need for outreach.  

Especially in our current pandemic environment and moving forward, having a comprehensive risk management solution can help beyond just monitoring insurance. These tools can be leveraged to help strengthen your business continuity program (BCP), more effectively monitor compliance and regulatory guidelines, and maximize repossession recoveries. 

There are many factors to consider when evaluating your existing and potential risk management programs. Insurance monitoring and CPI as part of a comprehensive risk management solution can both protect your portfolio AND provide data and insights not available through any other existing mechanisms.  You can simultaneously protect your portfolio and keep noise to a minimum – it’s the ultimate win-win.

Doug Falvey

Doug Falvey

Doug Falvey is Senior Vice President at Allied Solutions. Doug’s responsibility at Allied includes overall responsibility for the Loan Servicing Products Division (LSPD).  LSPD encompasses all aspects of operations ... Web: Details