Centre Solutions' ZC Sterling subsidiary is an insurance company that never says no.
This would seem to eliminate one of the basic functions of insurance underwriting. But for ZC Sterling, "Never Say No" is not only a slogan, it's a product name - and, in a sense, a business plan.
ZC Sterling was founded by Centre in 1987 to manage homeowner insurance policies on behalf of its bank clients. In other words, it makes sure people maintain the policies their mortgages require.
Two years ago the Atlanta company decided to enter the process earlier - by selling consumers insurance when they secure the loan rather than just solving coverage problems that emerge later. Thus Never Say No was born.
Launched in California, the product has been aggressively ramped up in the past year and is now offered in 42 states; it is sold through First Union, LendingTree.com, GMAC, GE Capital, and Homeside Lending, among others, according to ZC.
Basically, ZC Sterling pledges never to turn down a customer for insurance once the bank has approved a mortgage. "The term 'Never Say No' arose out of conversations with banks," said Bill Krochalis, president and chief executive officer of ZC Sterling. "No matter how many traditional companies they seem to sign up, they still ended up with about 40% of the borrowers who were approved for loans unable to be approved for insurance through traditional companies."
Mr. Krochalis says his company is "re-creating the underwriting process" by simplifying it and using much of the information gained through the loan application. ZC Sterling also speeds up quoting by drawing on databases to have answers ready for questions applicants might have - for example, Where is the nearest fire station?.
Mr. Krochalis also cited the company's range of offerings as an advantage. "We have a wide selection of rate tiers and programs available, and a very large and nimble reinsurance facility backing us."
The program also gives much weight to the banks' evaluation criteria in granting the mortgage in the first place. "Our goal is to leverage the brand of the financial institutions," said Michael Hersh, vice president of voluntary products for ZC Sterling.
"There are different reasons why people are turned down [for insurance] by the standard markets - because they live in coastal areas, or brushfire areas, or there are lots of vacant buildings," said Loretta Worters, a spokeswoman for the Insurance Information Institute in New York. Currently, though, the homeowners market has a lot of capacity and few people need to worry about being turned down for insurance, especially if they have already been accepted for a mortgage, she said.
Before agreeing to provide Never Say No insurance, ZC Sterling evaluates the types of loans that the bank make. "We have turned down entire organizations," Mr. Hersh said.
ZC Sterling says it is basically a "lender-placed company," which means it handles the insurance issues of a bank's lending business during the life of the loan.
If a homeowner's insurance lapses, ZC writes a letter on the bank's letterhead, offering to sell them insurance if they cannot obtain it through other means. Since it ends up insuring many of these consumers, offering Never Say No up front is not as risky as it sounds, Mr. Hersh said.
He would not say if Never Say No is turning a profit but said it has had "above-average results."
Mr. Hersh said another edge for ZC Sterling is that it sells only through banks. "We focus exclusively on the financial institution marketplace, and we've gotten to know what's unique about that."