NAFCU Services Blog

By: Anne Holtzman, Senior Vice President of Claims & Recovery, Allied Solutions

How can insurance tracking programs alleviate the burden of compliance requirements without much impact to your business functions?

The key is to partner with a qualified, experienced vendor that will proactively consult with you on an ongoing basis about compliance requirements that affect your lending practices, geography, and consumer base. By working with such a partner, you can ensure you are consistently adhering to all new or reformed rules and regulations while not having to put in the time and resources to keep track of these ever-changing requirements.

This consultative role filled by an insurance tracking partner can be especially helpful in assisting your institution to comply with temporary requirements set forth by FEMA and other governing bodies in areas affected by a declared catastrophic event. Such requirements may affect the following areas of your business:

• Repossession
• Collection
• Consumer notifications
• Insurance & loan premiums

But the benefits of partnering with a vendor go way beyond addressing compliance requirements. In fact, outsourcing insurance tracking and placement is usually the best route to take for many reasons, regardless of whether you can or can’t do it yourself.

The key to adopting a strong, successful program is to partner with a vendor that has the experience, wherewithal, and administrative support necessary to consistently perform the following valuable services in consultation with your lending institution:

1. Risk Management:
   • Track your entire loan portfolio in real-time, regardless of the borrower, status, age, state, etc.
   • Send weekly reports of collateral that is no longer covered by insurance, so you can remedy those right away
   • Inform you of how much of your entire portfolio is prone to risk on any given day, so you can properly & regularly assess your risk appetite
   • Supply you with a working knowledge of your consumers and territories affected by a catastrophic event, should one occur
2. Customer Service:
   • Send accurate, timely notifications to consumers about uninsured property
   • Help consumers locate affordable insurance options for their property
   • Educate your consumers about future and present risks
   • Protect relationships with consumers, namely those in good standing
   • Setup practices and processes during a natural disaster that aim to inform and help consumers address their risks
3. Compliance:
   • Provide ongoing education and consultation on compliance standards required of your insurance tracking program
   • Perform compliance reviews on behalf of your institution to ensure you remain compliant
   • Consult on the implementation of temporary requirements enforced during a national catastrophe

The strongest insurance tracking partners will consult with your business to build and sustain a program that fits your culture and the culture of your consumers.

So how exactly are insurance tracking vendors able to promise these valuable services on a consistent basis, you ask?

The answer is fairly simple: Data.

Leveraging the Right Data

A good insurance tracking partner will track and report any loan collateral that goes from an insured status to a non-insured status, in real time, so that they can work with lenders to assess how that newly unprotected collateral is adding to the overall risk on the entire loan portfolio.

The more experienced insurance tracking vendors are able to take this one step further by spotting and reporting red flags in the data that may indicate current and future risk exposures so you can quickly, accurately and compliantly address and prevent exposure to these additional risks, such as:

• Catastrophic events
• Title fraud
• Synthetic loan fraud
• Insurance fraud

Lenders are better equipped to act faster and more effectively when a disastrous event occurs if they already have a clear picture of the amount and location of their collateral that is more historically prone to these events. With this relevant, detailed risk report readily available, lenders are able to more successfully prevent, manage, and respond to risk exposures resulting from these catastrophic events.

Forming this complete understanding of your entire portfolio’s risk potential can only be done if you are tracking all of your outstanding loans. In other words, no insurance tracking = no way of looking at how much of your collateral is at risk of certain types of exposure, so no way of proactively addressing these potential exposures.

To end, answer “True” or “False” to the following statement: My institution is proactively using an insurance tracking program that acts as a true risk management strategy that can mitigate numerous types of risk, strengthen relationships with consumers, and simplify compliance requirements.

If you answered True to this statement: Good on you! You get a gold star for being ahead of the curve!

If you answered False to this statement: Consider taking action sooner rather than later to establish an insurance tracking program that goes way beyond mitigating risks on your collateralized loans.

Listen to our two-part podcast series to learn more about this topic:

Listen to Part 1  Why Insurance Tracking Should Be Part of Your Risk Arsenal

Listen to Part 2  Leverage Insurance Tracking Programs to Strengthen Your Risk Management Strategy

Allied Solutions is the NAFCU Services Preferred Partner for Insurance- Bond, Creditor Placed (CPI), Guaranteed Asset Protection (GAP), and Mechanical Breakdown Protection (MBP). More educational resources and partner contact information are available at www.nafcu.org/allied. Sign up for Allied Solutions’ newsletter to receive ongoing education on collateral and compliance risk management.