Collateral Protection Insurance: Delivering what your members need

“Have it your way” is a fine approach to selling hamburgers, but not for providing auto loans.

It’s true that you need to deliver members the fast, fair, and friendly service they expect and deserve. You need to offer competitive prices and products. However, sometimes you have to say, “No—you can’t have it your way.”

You can’t give every member everything that he or she would like to have. Some members would like to pay loans late—or not at all. Others would gladly avoid those pesky loan requirements that call for them to insure their collateral and name you as the insured lienholder. Giving in to those requests would ultimately put you out of the lending business.

That’s a “tough love” stance for service-focused credit unions to take, which is why most turn to collateral protection insurance (CPI) to monitor and enforce insurance requirements through tracking and force-placement services. By protecting collateral from uninsured loss, credit unions give their members—all of them—what they truly need.

Need and Don’t Need

You should always be aware that members facing CPI placement need:

  • Clear explanations of their insurance requirements
  • Several options for proving proof of insurance
  • Ease of access if they have a question or want to check the status of the insurance the CPI vendor has on file

On the other hand, you need to know what members don’t need:

  • They don’t need to be confused over their loan insurance requirements.Most CPI providers send welcome letters to borrowers with new auto loans, in addition to the legally-required notices, reminding them of the requirement to provide current insurance information, what’s acceptable, and how to contact them.
  • They don’t need delays in getting questions answered.Your CPI provider must respond to borrowers promptly and accurately. The top ones offer an interactive voice-response system that answers a good portion of borrower questions, a call center open at least five days per week, and attempt to resolve the majority of other questions on just one call.
  • They don’t need to have to follow up with the company or be worried that issues are resolved correctly. Most CPI vendors acknowledge online submissions and update insurance information in near real-time, certainly within a few days. A few providers have enhanced their borrower submission site so that it shows each borrower all notices sent, all submissions, any lapses in the required continuous insurance, and more.

Providing the best service to members does require a bit of “tough love” and distinguishing between wants and needs. You can’t say “yes” to every request, ignoring delinquent or noncompliant borrowers. When it comes to dealing with those borrowers, CPI might just be your best strategy for protecting your auto portfolio, and there are several vendors in the country doing it well.

Mike Gallagher

Mike Gallagher

Mr. Gallagher spent 17 years promoting CPI as the marketing director for State National. He is currently consulting with credit unions: Details