Leaving Annual CPI Premiums in the Dust
For a comfortable, smooth ride with worry-free maintenance, test drive Continuum™ with The Premium Alternative™. Support Insurance Systems (SIS) provides a high performance alternative to traditional, annual Collateral Protection Insurance (CPI) premium programs.
Stop Annual Premiums: What differentiates Continuum™ with The Premium Alternative™ from other CPI programs is that The Premium Alternative™ is a softer approach to premium infusion. Unlike traditional CPI programs, the premium is applied on a monthly basis and fluctuates with your member's loan balance. In effect, as their loan balance declines, so does the premium.
Caution Ahead: "Many credit unions are not aware of the impact their Collateral Protection Insurance has on member relations and future loan growth. ...your members want and need to feel the ease of financial burdens...Every auto and home loan in the credit union's portfolio is a potential target for a CPI experience. The service experiences that members have with a credit union will determine if they will return to the credit union for their future borrowing needs, and in these difficult times, your members want and need to feel ease from financial burdens," states Rhonda Sheets, Support Insurance Systems President.
Collateral Protection Insurance Business Grows in Hard Times
In times of financial struggle, some of the first things that people let fall by the wayside are car payments and car insurance payments.
In good times, Collateral Protection Insurance programs are a 'just-in-case' mechanism to protect credit unions from getting hit with paying for damages Relative to other financial commitments, auto insurance is often one of the first to be dropped.if a car needs to be repossessed. In bad times, Collateral Protection Insurance is a service for some members and a necessity for credit unions when a car is repossessed. In 2008, Support Insurance Systems, a company that provides insurance, technology and consultative solutions to credit unions and banks, saw its business grow by 46%. President Rhonda Sheets said that she has seen that growth continue so far in 2009.
Phil Tschudy, media relations manager for CUNA Mutual, said that from an overall industry standpoint, CPI is always important in protecting loan portfolio assets and is even more important in today's economy since borrowers may be feeling more economic pressure than usual.
Improve it or Lose it! CPI puts more at risk than just an uninsured vehicle.
In times of financial instability, some of the first financial commitments that people let fall by the wayside are auto insurance premiums. The Insurance Research Council By 2010, the Insurance Research Council expects that more than 16% of drivers will be uninsured.estimates that as the national unemployment rate rises, so will the number of drivers without auto insurance. By 2010, the group expects that more than 16% of drivers will be uninsured, up sharply from the historic average of around 14%. If an uninsured borrower gets into an accident, the credit union's position will be compromised. These are risks credit unions are not willing to take.
Collateral Protection Insurance, or CPI, insures property (primarily vehicles) held as collateral for loans made by lending institutions. Such coverage is critical in a negative economic environment. CPI programs help credit unions track members who stop paying their auto insurance premiums, send notices encouraging members to get covered, and 'force-place' insurance that covers the risk for members who don't respond with proof of insurance. Members typically pay for the forced insurance through a modification in their loan payment schedule.
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From a Collection Manager's Viewpoint
Ever since financial institutions began making loans, both direct and indirect risks have been associated with the uninsured collateral. For instance, if the collateral is damaged, stolen or even totaled, will the borrower continue to make payments? Or, will this loan become a collection problem and cause a charge-off if the borrower fails to make payments?
Member Retention Is Your Real Collateral
During uncertain financial times, many people look for any means necessary to reduce their spending, including skipping bills. As a result, auto insurance premiums are one of the first financial commitments that people allow to slip. The Insurance Research Council estimates that as the national unemployment rate increases, so will the number of drivers without auto insurance. Unfortunately, if an uninsured borrower gets into an accident, the credit union's position is compromised, and that is a risk that credit unions do not want to take.
When the economy is stable, collateral protection insurance (CPI) is a 'just-in-case' mechanism meant to protect credit unions from paying for damages on a repossessed car. In unstable economic times, CPI becomes a service for credit union members who are struggling financially, and how this service is delivered determines whether members borrow from your credit union again when they are more financially secure.
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