Credit unions switch tracked collateral protection insurance programs to improve member experience
Who pays the price when an uninsured vehicle is stolen or damaged and the credit union holding the lien must write off the loan? A credit union is owned by its members, so really, all of them pay the price of these write-offs. Even if the credit union owns a blanket collateral protection insurance (CPI) policy, all members technically contribute to the policy premium.
The three Midwest credit unions featured below chose to rebalance this risk so more of it falls on individual borrowers, using a "tracked" CPI program.
First, a little background: In a tracked CPI system, the provider monitors the insurance status of collateral vehicles, notifies members if insurance isn’t secured or if it lapses, and if necessary, binds coverage on the vehicle. The premium is then added to the member’s loan payment.
Especially in a rough economy with high unemployment, when auto loan portfolios are most at risk, tracked CPI is a strong consideration for many credit unions.
If your credit union is considering this step, your first concern is likely the reaction of your members and the overall financial impact. CUNA Mutual Group sought feedback on these concerns from three credit unions that recently chose tracked programs administered by its CPI partner, State National Companies, a Bedford, Texas company devoted solely to CPI.
Potentially difficult situations defused
Tracked CPI programs can create delicate situations when members are notified that their vehicles are uninsured, or that insurance has been placed on the vehicle for them. And members hold the credit union responsible—not the CPI vendor—so choose your CPI partner carefully, says Kathryn Harke, processing manager at Prospera Credit Union (Appleton, Wisconsin; assets $146 million).
Using State National’s "InsurTrak" online tool, Prospera no longer needs its own file system to hunt through for answers.
"We can absolutely trust what is on the website," Harke says. "The program works so well that we’re confident that any breakdown occurred on the member end." A simple, accurate explanation quickly defuses potentially difficult situations.
Rescuing claims from slow, complex processing
Accurate, efficient insurance tracking and placement is only the front half of a CPI provider’s responsibility. The back half—claims handling—is also critical.
Credit Union ONE (Ferndale, Michigan; assets $739 million) shifted to State National Companies’ tracked CPI program in part because the previous provider required pages and pages of faxed documentation to file a claim. Claims commonly took weeks or months to be paid, says Melissa Baysdell, Collector. "That caused loans to go further into delinquency and, understandably, led to some real member frustrations," she says.
Baysdell says claim delays also left Credit Union ONE and members hanging when a repossessed vehicle had uninsured damage, and needed to be fixed and sold. The difference since switching CPI providers is "night and day," Baysdell says.
Indirect portfolio requires quick, transparent claims
Fast claims service was also a priority at CommunityWide Federal Credit Union (South Bend, Indiana, assets $301 million). The credit union’s auto loan portfolio is primarily indirect loans in a region that has been hit hard in a tough economy. CommunityWide transitioned to State National’s tracked CPI program after the company partnered with CUNA Mutual Group.
Andrew Burggraf, vice president and chief operating officer, says State National’s transparent claims process helps the CPI program run smoothly with almost no staff intervention. In addition to real-time access to member coverage data and claims status, the staff can listen to recordings of member phone calls to State National and review every notice members are sent.
"Turnaround on claims is very good," Burggraf says. "You can load the claim, check back in a few hours and see that it’s in process, and the payment is usually handled within 24 hours of being settled."
Contact your CUNA Mutual Group Sales Executive at (800) 356-2644 to determine if a tracked Collateral Protection Insurance program is right for you.
By Al Olson, Commercial Products Staff Underwriting Specialist for CUNA Mutual Group. Reach him at email@example.com.
State National Insurance Company underwrites all coverages and endorsements available through the CUNA Mutual Group/State National Companies Tracked Collateral Protection Insurance alliance in all states except Texas where National Specialty Insurance Company, a State National company, also provides underwriting services. Product availability and features may vary by jurisdiction and are subject to actual policy language.
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