Force-placed CPI insurance is frustrating, cumbersome, and expensive. Is there a better way to transfer the risk that CPI covers? A credit union executive recently shared the thought that “those expensive force-placed premiums just don’t feel right.” It was clear that the CPI (Collateral Protection Insurance) model of tracking insurance and then force-placing expensive insurance premiums onto their most vulnerable members did not sit well with her. She said, “there has to be a better way.” In the big business of CPI, it is rare that other alternative options are offered or even discussed by the big CPI vendors. Might the huge premium dollars of force-placed insurance be shielding more efficient and member-friendly solutions that exist out in the marketplace?
As the economy recovers, things have taken an interesting turn in the home lending sphere. Most lenders are flush with deposits, having seen a massive increase in 2020 and early 2021. This trend is expected to continue throughout 2021. At the same time, many larger banks and lenders paused their HELOC applications while the economy was on shaky ground.
Few aspects of modern business have gone untouched by the digital transformation of the last decade. For banks and credit unions, technology has rapidly transformed how they communicate with customers. Younger tech-savvy consumers have grown up comfortable interacting in a myriad of ways with financial institutions. With more data and analytics available than ever, lenders can tailor their approach to become more efficient and results-focused in their interactions.
As I meet with lenders across the Western United States, there is a strong aversion to talking about insurance in general. Insurance is a product that nobody wants to think about until it is needed, and everybody wants to pay as little as possible for their lender coverage. There is a particular aversion to talking about insurance for lending institutions, and I often joke that it is because we are mixing two of the most boring industries in the world. Due to the particularly dry nature of it, I spend nearly all of my time talking at a high level about insurance coverages. Those conversations typically reference the benefits of Unitas Financial Services’ innovative approach to blanket insurance coverages for lending institutions. On the rare occasion that I do get to dive into the intricacies of insurance coverages, I often run into a lender that uses a blanket mortgage impairment policy. While blanket mortgage impairment policies provide a similar benefit at a high level (eliminate the need to track and force-place insurance while still protecting collateral), they do not compare to a full Unitas Blanket Mortgage policy, especially when it comes to flexibility, getting claims paid fast, and the overall coverage.
Many community lenders across the United States deal with CPI every day. It’s a popular strategy used to insure consumer auto portfolios, and in many cases is considered the paradigm for that type of portfolio protection. At Unitas Financial Services, we make no secret of the fact that we believe blanket insurance is a superior product that holds numerous advantages for lenders, from easing compliance considerations to increasing lending efficiency. We love to expound on how blanket products are a lender’s best friend, but perhaps we don’t talk enough about the advantages blanket coverage has over CPI from a borrower’s perspective. To that end, I’ve laid out some differences between blanket coverage and CPI and how they affect consumers.
Charles Kettering liked to say, “People are very open-minded about new things, as long as they're exactly like the old ones.”
As an American innovator (inventor of the cash register and the electric starter for automobiles), he lived each day to rethink the way things were done. The daily musings of our team here at Unitas aren’t much different. Insurance is our world. It is important, but it shouldn’t take time away from the essential, impactful work that our community lenders are focused on each day. However, as we expand our presence across the country, we’re shocked to discover just how many lenders have insurance programs that are actually slowing them down.