Of the many challenges presented by collateral protection (e.g. force-placed insurance), credit union executives are becoming painfully aware of the necessity to have a program in place that detects red flags, anticipates problems and covers all contingencies.
In an industry that was built on a foundation of quality, dependable member service, credit unions must hold tight to this competitive distinction and do whatever is necessary to protect it. One step credit unions have started to take is to go the extra mile and begin to layer their preventive measures. Layering a collateral protection program may be the most effective way to minimize the "static" associated with membership communication when it comes to loan issues.
Nothing can eat away at a credit union's reputation like the noise created by angry, unsatisfied members, especially when the problem was clearly instigated by a credit union's (or its providers') inefficient systems. One common example is when a member purchases insurance coverage, but the credit union's records aren't updated right away so a reminder notice is inadvertently sent. Credit union members, like most people, don't usually take well to reminders about something they've already done. It's just one example of a small strain in the relationship that can end up being the grounds for litigation. The layered approach covers its bases.
If the credit union, whether through in-house staff or through a vendor, applies separate layers to the Collateral Protection process, there's bound to be increased success with insurance tracking to be sure members don't go uninsured. The layers, all based in communication, are designed to ease the job of the lender:
* Create a customized letter series. Created specific to each credit union, insurance notification letters are sent to borrowers, with credit union officials making their own choice about the tone and overall mood the letters present. Over the years, most credit unions have established philosophies that help dictate the nature of their correspondence with members.
* Permit verbal acceptance, a big time saver.
* Apply outbound phone calling. In an effort to further protect lenders, a series of calls are placed to help identify or verify accuracy of insurance records. An outbound phone call is placed to insurance agents or borrowers, depending on the credit union's preference, to determine whether the insurance has been reinstated or cancelled.
* Offer automated call transfer. This is for seamlessly connecting members insurance-verification calls to a tracking center, saving members a second call.
* Establish an Internet interface. An Internet-based insurance tracking system is applied that leverages the Internet's power and speed, allowing for real-time management of any member's account. Proper application of this technology reduces false placements of policies and speeds up the transmission of data to ensure account records are current.
* Provide a web link on the credit union's website to ease the insurance information submittal process for its members, as well as drive members to its website.
* Track faxes. Implements fax server capabilities to enhance automatic archiving of faxes, more efficient processing time and quality assurance testing.
A Look At The Benefits
Certainly the layers speak volumes with respect to resulting benefits:
* Competitive advantage. A credit union's competitive edge is enhanced when unnecessary noise is removed from the equation o longer are angry members calling about force-placed insurance, nor are they spreading the word among other members regarding their dissatisfaction. Instead, they might have been reminded on a number of occasions to obtain their own coverage by a certain date-and they did.
* Reduced lender-paid personnel time. Collateral protection, like most areas of insurance, has its fair share of tedious details to accompany it. You can reduce personnel time by outsourcing.
* Real time data transactions are available through the Internet. By leveraging its power and speed, enhanced Internet-based insurance tracking systems are available to assure credit union management of uninterrupted loan portfolio protection.
* The increased productivity that results from open dialogue between the credit union and its risk prevention partner is significant. The simple truth is that only credit unions really know what their member want and need; an open dialogue should be encouraged, if not required.
Collateral protection is often referred to as the necessary evil in the lending world, especially because of the financial disaster that can befall a credit union if the collateral protection program isn't properly administered. In the fall of 2002, the rate of uninsured motorists hit 14% nationwide and as high as 32% in some states. These numbers should speak volumes when it comes to making decisions about protecting loan portfolios.
Mike Kehoe is CEO & President of Western Reliance Corp., a Portland, Ore.-based comprehensive insurance products through superior specialized customer service and innovative collateral protection technology. For more info: 800-932-0989 or www.westernreliance.com
