Many lenders have known for years that good collateral protection insurance (CPI) programs help achieve higher returns on their auto portfolio. Why? Part of the reason is that CPI protects against loss to uninsured collateral, and part is that it reduces charge-offs by as much as 40%.
Additionally, CPI positively impacts borrower behavior by encouraging compliance with loan insurance requirements. Force placement that impacts the borrower’s monthly payment—or even the threat of force placement—is the only proven method of changing the behavior of non-compliant borrowers. Tracking insurance without this is a waste of resources. CPI can also be a predictor of delinquency by monitoring in-force vehicle insurance, updating policy status, and making that information available through online tracking systems.
With the right CPI program in place, you manage risk and achieve greater return on assets (ROA), without raising delinquencies.