Self-insurance, blanket coverage or CPI: Which is better for your auto loan portfolio? | Auto Finance News Self-insurance, blanket coverage or CPI: Which is better for your auto loan portfolio? | Auto Finance News
Auto Finance News

No products in the cart.

Subscribe
  • Home
  • News
    • All News
    • Capital & Funding
    • Compliance & Regs
    • EVs
    • Exec of the Year
    • Innovation & Technology
    • Powersports
    • Risk Management
    • Sales & Marketing
  • Events
    • Auto Finance Summit East
    • Auto Finance Summit
    • Powersports Finance Summit
    • Equipment Finance Connect
  • EXCELLENCE
    • Best Practices
    • Columns
      • Strategy Upshift: Georg Bauer
      • Under The Hood: Marcie Belles
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Data
  • Magazine
    • Latest Issue
    • Features
    • New Tracks
    • Car Culture
    • Staffing Shuffles
    • Under The Hood
    • Spotlight
    • Issue Archive
  • Podcast
AFN PLUS
Log In
No Result
View All Result
Auto Finance News
  • Home
  • News
    • All News
    • Capital & Funding
    • Compliance & Regs
    • EVs
    • Exec of the Year
    • Innovation & Technology
    • Powersports
    • Risk Management
    • Sales & Marketing
  • Events
    • Auto Finance Summit East
    • Auto Finance Summit
    • Powersports Finance Summit
    • Equipment Finance Connect
  • EXCELLENCE
    • Best Practices
    • Columns
      • Strategy Upshift: Georg Bauer
      • Under The Hood: Marcie Belles
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Data
  • Magazine
    • Latest Issue
    • Features
    • New Tracks
    • Car Culture
    • Staffing Shuffles
    • Under The Hood
    • Spotlight
    • Issue Archive
  • Podcast
AFN PLUS
Log In
No Result
View All Result
Auto Finance News
No Result
View All Result

Self-insurance, blanket coverage or CPI: Which is better for your auto loan portfolio?

State National Companies by State National Companies
March 3, 2021
in Risk Management
Reading Time: 2 mins read
0

Every lender has unique needs. It is important to take a holistic approach when exploring risk mitigation options. The key questions to ask when deciding on how to manage risk in your loan portfolio are:

  • How much risk can you tolerate vs. how much do you want to transfer?
  • What are your goals and objectives?
  • What do you expect in return?

Self-Insurance

Can a lender simply self-insure their auto loans? They can, but retaining the responsibility of covering financial losses due to uninsured and/or damaged collateral undermines the fundamental purpose of any insurance program, which is risk transference. A self-insured lender assumes all risks and absorbs any losses that occur.

To minimize uninsured losses, some self-insured lenders attempt to track borrowers’ private coverage in-house and follow up with those who don’t show proof of insurance. However, this kind of tracking is time-consuming, difficult to execute without advanced technology and highly trained staff, and rarely effective without a mechanism for policy placement.

Blanket Coverage

With a blanket insurance policy, lenders pay a premium based on the total number of loans, typically a fixed dollar amount per vehicle or a percentage of the outstanding balance. Through a blanket policy, all borrowers must bear the cost of an uninsured borrower.

Some states do not permit this cost to be charged to borrowers, and it must be absorbed by the financial institution. This can weaken your competitive edge, especially as the best borrowers can choose a lender that can offer lower rates and fees because they are not building this premium cost into the loan.

Additionally, the cost of a blanket policy on a growing book of business will increase regardless of whether or not a policy’s loss ratio — the ratio of claim payments lenders receive to premiums they pay — worsens.

Collateral Protection Insurance (CPI)

CPI affects only borrowers who fail to purchase or maintain insurance and offers your institution the same protection as if the borrower maintained private insurance.

CPI providers use sophisticated technology to track the insurance status of each loan and send appropriate notices to borrowers who do not maintain required insurance on their financed vehicle. If the borrower fails to submit proof of insurance in response, the lender may choose to place a CPI policy on the loan to protect the financial institution’s interest from damage or loss.

They then pass the cost to the non-compliant borrower by adding the premium to the loan balance. The charge is removed as soon as private coverage is reinstated. It costs financial institutions little or nothing to obtain this protection.

Which Is Better for Your Business? Five Considerations When Insuring Your Auto Loan Portfolio

  1. Determine the level of risk your institution is willing to assume.
  2. Consider market drivers, costs and broader economic conditions.
  3. Consider how an insurance product leverages new technology to improve administration and reduce borrower noise.
  4. Recognize the overall impact on you and your borrowers.
  5. Analyze your losses, their sources, and how they impact your bottom line.

Learn more at https://www.statenational.com/portfolio-protection/finance-companies/

Tags: Sponsored
Previous Post

Q4 brings positive delinquencies, mixed originations for auto finance

Next Post

Arivo Acceptance in ‘expansion mode’ on heels of second securitization

Related Posts

© 2023 Bloomberg Finance LP
Risk Management

TD Auto floorplan utilization rate climbs over 40%

March 24, 2023
© Can Stock Photo / pkproject
Risk Management

Recovery pickup time slows as repo volumes surge

March 21, 2023
© 2023 Bloomberg L.P.
Risk Management

Swiss look on in dismay as once-mighty Credit Suisse craters

March 20, 2023
Next Post
© Can Stock Photo / welcomia

Arivo Acceptance in ‘expansion mode’ on heels of second securitization

STAY INFORMED WITH OUR NEWS ALERTS

COLUMNS

© Can Stock Photo / sparky2000

Under the Hood: Subscription programs may worsen consumers’ auto finance health

March 17, 2023
The Consumer Financial Protection Bureau (CFPB) headquarters in Washington, D.C., US, on Sunday, May 22, 2022. The Federal Reserve raised interest rates by 50 basis points earlier this month and the chairman indicated it was on track to make similar-sized moves at its meetings in June and July. Photographer: Joshua Roberts/Bloomberg

New data request could feed CFPB enforcement actions

February 27, 2023

INNOVATION & TECHNOLOGY

© Can Stock Photo / cornelius30

PNC Financial ups digital outreach to delinquent customers

March 27, 2023
A Toronto-Dominion (TD) bank branch in Toronto, Ontario, Canada, on Wednesday, March 15, 2023. First Horizon Corp. fell by the most since September 2008 as the crisis in regional banks cast doubt on whether Toronto-Dominion Bank will follow through with its planned $13.4 billion takeover of the lender. Photographer: Cole Burston/Bloomberg

TD Auto to integrate loan payments on bank app

March 23, 2023

RISK MANAGEMENT

© 2023 Bloomberg Finance LP

TD Auto floorplan utilization rate climbs over 40%

March 24, 2023
© Can Stock Photo / pkproject

Recovery pickup time slows as repo volumes surge

March 21, 2023

SPONSORED

© Can Stock Photo / Ajlber

Q&A with CCC Intelligent Solutions VP of Lender Services Rick Evans

December 7, 2022

Your SaaS, Covered: Risk Decisioning through Economic Uncertainty

June 8, 2022
Drive a better consumer experience in auto financing with instant decisioning

Drive a better consumer experience in auto financing with instant decisioning

May 9, 2022

About

ABOUT US

PRIVACY TERMS

ADA COMPLIANCE

CODE OF JOURNALISM ETHICS

Manage Cookie Consent

Contact Us

ADVERTISE

HELP CENTER

Follow Us

twitter linkedin podcast
© 2023 Royal Media
No Result
View All Result
  • Home
  • News
    • All News
    • Capital & Funding
    • Compliance & Regs
    • EVs
    • Exec of the Year
    • Innovation & Technology
    • Management
    • Powersports
    • Risk Management
    • Sales & Marketing
  • Events
    • Auto Finance Summit East
    • Auto Finance Summit
    • Powersports Finance Summit
    • Equipment Finance Connect
  • Excellence
    • Best Practices
    • Topics
      • Compliance
      • Customer Experience
      • Technology
    • White Papers
    • Glossary
  • Magazine
    • Latest Issue
    • Features
    • New Tracks
    • Car Culture
    • Staffing Shuffles
    • Under The Hood
    • Spotlight
    • Issue Archive
  • Podcast
  • Data
  • +PLUS
  • SUBSCRIBE
  • Log In / Account

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
THIS WEBSITE USES COOKIES

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “I CONSENT”, you consent to the use of ALL the cookies.

Cookie settingsI CONSENT

Review our Cookie Policies
.
Manage Cookie Consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
34f6831605sessionGeneral purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
a64cedc0bfsessionGeneral purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
CookieConsentPolicy1 yearUsed to apply end-user cookie consent preferences set by our client-side utility.
cookielawinfo-checkbox-advertisement1 yearSet by the GDPR Cookie Consent plugin, this cookie is used to record the user consent for the cookies in the "Advertisement" category .
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
crmcsrsessionGeneral purpose platform session cookie, used by sites written in JSP. Usually used to maintain an anonymous user session by the server.
JSESSIONIDsessionThe JSESSIONID cookie is used by New Relic to store a session identifier so that New Relic can monitor session counts for an application.
LS_CSRF_TOKENsessionCloudflare sets this cookie to track users’ activities across multiple websites. It expires once the browser is closed.
LSKey-c$CookieConsentPolicy1 yearUsed to apply end-user cookie consent preferences set by our client-side utility.
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
CookieDurationDescription
__cf_bm30 minutesThis cookie, set by Cloudflare, is used to support Cloudflare Bot Management.
_zcsr_tmpsessionZoho sets this cookie for the login function on the website.
663a60c55dsessionThis cookie is related to Zoho (Customer Service) Chatbox
e188bc05fesessionThis cookie is set in relation to Zoho Campaigns
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
CookieDurationDescription
_ga2 yearsThe _ga cookie, installed by Google Analytics, calculates visitor, session and campaign data and also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognize unique visitors.
_gid1 dayInstalled by Google Analytics, _gid cookie stores information on how visitors use a website, while also creating an analytics report of the website's performance. Some of the data that are collected include the number of visitors, their source, and the pages they visit anonymously.
CONSENT2 yearsYouTube sets this cookie via embedded youtube-videos and registers anonymous statistical data.
vuid2 yearsVimeo installs this cookie to collect tracking information by setting a unique ID to embed videos to the website.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
CookieDurationDescription
__Host-GAPS2 yearsThis cookie allows the website to identify a user and provide enhanced functionality and personalisation.
_dc_gtm_UA-1038974-31 minuteUsed to help identify the visitors by either age, gender, or interests by DoubleClick - Google Tag Manager.
_fbp3 monthsThis cookie is set by Facebook to display advertisements when either on Facebook or on a digital platform powered by Facebook advertising, after visiting the website.
fr3 monthsFacebook sets this cookie to show relevant advertisements to users by tracking user behaviour across the web, on sites that have Facebook pixel or Facebook social plugin.
test_cookie15 minutesThe test_cookie is set by doubleclick.net and is used to determine if the user's browser supports cookies.
VISITOR_INFO1_LIVE5 months 27 daysA cookie set by YouTube to measure bandwidth that determines whether the user gets the new or old player interface.
YSCsessionYSC cookie is set by Youtube and is used to track the views of embedded videos on Youtube pages.
yt-remote-connected-devicesneverYouTube sets this cookie to store the video preferences of the user using embedded YouTube video.
yt-remote-device-idneverYouTube sets this cookie to store the video preferences of the user using embedded YouTube video.
yt.innertube::nextIdneverThis cookie, set by YouTube, registers a unique ID to store data on what videos from YouTube the user has seen.
yt.innertube::requestsneverThis cookie, set by YouTube, registers a unique ID to store data on what videos from YouTube the user has seen.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
CookieDurationDescription
caf_ipaddrsessionNo description available.
citysessionNo description available.
countrysessionNo description available.
gnt_eidsessionNo description available.
gnt_eu6 hoursNo description
iamcsrsessionZoho (Customer Support) sets this cookie and is used for tracking visitors (for performance purposes)
systemsessionNo description available.
traffic_targetsessionNo description available.
Save & Accept
Powered by CookieYes Logo