Hybrid CPI for Auto Lenders & Financial Institutions

Unlike traditional Collateral Protection Insurance (CPI), which can result in a substantial insurance charge based on the loan or collateral exposure, Hybrid CPI programs are generally structured around a more predictable monthly premium.

The result is a collateral protection strategy designed to maintain insurance protection while giving lenders another option for managing the financial, operational and borrower-service implications of CPI placement.

What is Hybrid CPI?

Hybrid CPI, or Hybrid Collateral Protection Insurance, is a lender-placed insurance solution designed to protect a financial institution's interest in eligible vehicle collateral when a borrower fails to maintain required insurance coverage.

Hybrid CPI typically works in conjunction with an insurance tracking and verification process. When a borrower's required insurance cannot be verified, the lender follows its established notification and compliance procedures. If the borrower does not provide acceptable evidence of coverage, insurance may be placed on the collateral according to the applicable policy and program requirements.

The defining characteristic of Hybrid CPI is generally its premium structure.

Rather than relying solely on a traditional CPI premium calculation, which can include a percentage of the outstanding loan balance, Hybrid CPI programs commonly use a flat monthly premium structure that is designed to provide greater predictability and reduce the financial impact of placed insurance. Actual coverage, billing and program terms vary by insurer and lender.

For financial institutions, Hybrid CPI can provide an alternative between traditional lender-placed insurance and portfolio-level blanket protection such as Vendor's Single Interest (VSI).

Features
Benefits
Coverages

Protects Auto Loan Collateral: Helps protect the lender's financial interest in eligible vehicles when required insurance is not maintained.
More Predictable CPI Costs: A monthly premium structure can provide greater predictability than traditional CPI billing.
Reduces Borrower Financial Friction: A more manageable premium structure can reduce the impact of a large insurance charge.
May Reduce Lender Cash-Flow Exposure: Program structure can reduce the need to carry larger placed-insurance premiums.
Simplifies Insurance Administration: A defined tracking and placement process can reduce manual insurance-related work.
Supports Portfolio Risk Management: Helps lenders address uninsured collateral consistently across their auto loan portfolios.
Provides an Alternative to Traditional CPI: Gives lenders another option without requiring a move directly to a blanket insurance strategy.
Supports a Better Borrower Experience: A predictable insurance cost can help reduce confusion surrounding CPI placement.

Helps reduce the risk of losses on uninsured collateral.
CPI premiums may be passed onto the borrower.

Dual Interest Coverage: Both the lender and borrower have coverage under the policy.

Claims Process: a simplified claims process with repossession not required to file a claim.
Allows lenders to easily manage coverage with online ordering and the ability to instantly bind coverage.

Dual Interest: Provides coverage for both the lender and the borrower which means repossession is not required to file a claim.
Physical Damage: provides All-Risk coverage for uninsured damage up to the policy limits.

Automatic Coverage: allows a lender to file a claim when a Notice of Insurance is not issued due to inadvertent error or omission. Only available with Outsourced Auto Insurance Tracking service.

Repossessed Collateral: optional coverage which provides coverage on eligible collateral for up to 90 days after repossession.

Additional optional coverages:
- Repossession Expense Coverage
- Skip Coverage
- Mechanical Breakdown Coverage
- Repossession & Remarketing

Hybrid CPI is a type of Collateral Protection Insurance designed to protect a lender's interest in eligible vehicle collateral when a borrower fails to maintain required insurance. Hybrid CPI programs commonly use a monthly premium structure rather than relying solely on traditional CPI pricing methods.

Hybrid CPI generally works with an insurance tracking process. When required borrower insurance cannot be verified, the lender follows its notification procedures. If the borrower does not provide acceptable proof of insurance, CPI coverage may be placed on the vehicle according to the policy and program requirements.

Both are designed to protect eligible auto collateral when required borrower insurance is not maintained. The primary difference is generally the premium structure. Hybrid CPI commonly uses a monthly premium structure, while Traditional CPI may calculate premiums using loan balance, collateral exposure or other program factors.

Hybrid CPI generally involves tracking individual borrower insurance and placing coverage when an insurance deficiency remains unresolved. Blanket VSI provides portfolio-level coverage for eligible collateral according to the terms of the blanket policy.

There is no universal Hybrid CPI price. Premiums vary based on portfolio characteristics, coverage, underwriting, carrier and program structure. Many Hybrid CPI programs use a monthly premium structure, but lenders should evaluate the complete economics of the program.

	Hybrid CPI	Traditional CPI
Primary purpose	Protect eligible auto collateral when required borrower insurance is not maintained	Protect eligible auto collateral when required borrower insurance is not maintained
Insurance tracking	Required - Can be combined with an Outsourced Auto Insurance Tracking service	Required - Can be combined with an Outsourced Auto Insurance Tracking service
Premium structure	Positioned around a flat monthly premium	Typically, calculated as a percentage of the outstanding loan balance
Borrower impact	Designed to provide a more predictable cost	Can result in a larger monthly insurance charge and payment
Servicing impact	Can simplify certain billing and adjustment processes	Can require additional premium and refund administration
Portfolio impact	May reduce number of charge-offs and delinquencies due to lower premiums	May increase delinquencies and charge-offs due to higher premiums and loan payments

Neither structure is automatically right for every lender. The appropriate approach depends on portfolio characteristics, insurance lapse rates, servicing processes, borrower profile, program economics and the institution's risk-management objectives.

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Hybrid CPI

Placed coverage thru an online platform which generates compliant warning letters and allows lenders to easily add, cancel and edit CPI coverage when necessary.

Add, Edit or Cancel Coverage Online
Automated Warning Letter Cycle
Physical Damage Coverage Included
Additional Coverage Available
Simplified Monthly or Annual Billing

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Vendor's Single Interest

A Blanket VSI policy eliminates the need to track insurance policies, send warning letters and force-place CPI coverage after loan closing.

Collateral Protection Insurance Alternative
Eliminates Insurance Tracking Post-Close
Provides Physical Damage Coverage
Additional Coverages Available
Simple Reporting & Remittance

LEARN MORE ABOUT BLANKET VSI

Auto Insurance Tracking

Outsource all the duties associated with opening insurance renewal mail, tracking insurance policies, sending warning letters and force-placing coverage.

Third-Party Insurance Tracking
Notifications Handled By Third-Party
CPI Coverage Placed When Needed
Transfers Risk of Non-Compliance
Access to Real-Time Online System

EXPLORE INSURANCE TRACKING

Hybrid CPI

What is Hybrid CPI?

Features

Benefits

Coverages

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Hybrid CPI Frequently Asked Questions

What is Hybrid CPI?

How does Hybrid CPI work?

What is the difference between Hybrid CPI and Traditional CPI?

How is Hybrid CPI different from Blanket VSI?

How much does Hybrid CPI cost?

Hybrid CPI vs. Traditional CPI

Additional Collateral Protection Insurance Solutions for Lenders

Hybrid CPI

Vendor's Single Interest

Auto Insurance Tracking

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