The latest Insurance Consumer Dynamics Survey from the marketing research firm Acxiom revealed that a full 25 percent of consumers shopped for auto insurance within the past 12 months, and one-third of those shoppers changed carriers within the last year.
This spells trouble for lenders. When borrowers change insurance companies, lienholders can be inadvertently dropped, or deductibles and coverage terms can be modified. Every change to borrowers' insurance increases the chance that the coverage no longer satisfies loan requirements and puts lenders at risk. When borrowers switch auto insurance carriers, lenders' information on underlying coverage needs to be quickly updated to ensure collateral is adequately covered against risk of loss.
Protect Your Collateral
Lenders nationwide often rely on collateral protection insurance (CPI) to safeguard their interest when borrowers' insurance is inadequate to cover losses to the collateral. CPI enables lenders to manage and mitigate various risks associated with transferring the risk of uninsured collateral to an insurer.
We, as well as most CPI vendors, provide an online system that gives lenders access to tracking technology-providing instant retrieval of insurance records, customized management reports, billing options, and other information-that require little manual work on the part of the lender. Online insurance tracking information from the best vendors is updated in real-time, rather than in overnight batches.
In today's economy, consumer debt is still near record levels, unemployment is over 9%, auto sales are flat, and economic uncertainty is definitely high. At the same time, cash-strapped consumers and price-conscious insurance agents are more willing than ever to switch insurers for a lower premium, increasing the chances of coverage gaps and deficiencies that can impact lenders and loan collateral.