Securing collateral while reducing member noise: An interview with University Credit Union
When we initially tell our Collateral Protection Insurance (CPI) clients that although an effective CPI program is a critical risk management tool, there are other options that can accomplish their goals without putting their borrowers into a potential bind, they usually think it’s too good to be true. We’re here to prove that it isn’t.
We interviewed University Credit Union Collections Manager, Christian Larson, on his credit union’s conversion from the industry-standard CPI program to SWBC’s Hybrid CPI solution, to learn what their greatest challenges were prior to implementation, and how the new solution improved their member relations, as well as their overall program administration.
What were the biggest challenges your credit union faced with collateral tracking before moving to the Hybrid CPI solution?
The biggest challenge we faced was member noise regarding premium add-on. We started increasing payments six months prior to moving to the hybrid program and saw a big influx in member calls regarding the increased premiums.
What was it about the Hybrid CPI program that made you decide to move forward with it?
The fact that you’re hearing so much about regulations and the CFP, we viewed the move to the hybrid program as a proactive step in protecting our credit union from any regulatory scrutiny. The cost of premiums was also a big factor. We felt it would help in reducing overall member noise.
How did the Hybrid program impact your credit union?
The biggest impact to our credit union was the reduction in member noise. While we don’t deal directly with program administration since we have a field rep, it is obvious that our rep has more time now to focus on other projects since there’s not a lot of adding on/refunding activity.
Did you see a reduction in repossession activity, specifically on loans where CPI was added?
Yes, we have experienced a reduction in collection and repossession activity, specifically due to CPI add-on, since moving to the Hybrid program.
Have you had to write off any CPI premiums on a loan?
No, we have not experienced any premium deficiency write offs due to CPI premiums since transitioning to the Hybrid program.
What do you think are the greatest benefits you’ve experienced from utilizing Hybrid solution?
The reduction in member noise and premium amount has been great Overall, the numbers are much better in comparison to a traditional program. The average life of a policy term is two months. Penetration is very low—1.24.Everything has gone really well with the program. Loss ratio is 0.19%, and waive percentage has gone way down as well to 0.03%.
Working within the limitations of a traditional CPI program can be challenging for any lender, no matter the size of their portfolio or their risk tolerance level. University Credit Union is just one of our clients that had a great experience with their conversion to Hybrid CPI. Check out our recent case study, where we highlight three more credit union clients whose conversion to Hybrid CPI subsequently led to reduced member noise, reduced administrative burden, and an increase in risk tolerance.