A Vendor Single Interest (VSI) policy protects a financial institution, reduces administrative workloads and improves examinations.
Many institutions use a CPI policy which requires a financial institution to track a borrower's individual insurance policies, send notification letters at prescribed intervals to inform the borrower that they need to obtain/maintain coverage and obtain a force placed policy updating their loan account. If the borrower does not maintain insurance, there is now increased risk of the account going delinquent due to increasing a borrower’s payment by the amount of the force placed policy. Once the borrower realizes their payment has increased, they will often provide proof of current insurance coverage requiring cancellation of the force placed policy and forcing the institution to reverse the payment charges on the account. Increased borrower dissatisfaction and risk to your portfolio increases with every touch and action.
The blanket nature of the VSI reduces risk. A financial institution’s entire consumer portfolio is covered. VSI does not require tracking of insurance so there is no longer the need to make calls, send letters, obtain individual policies or alter loan payments. VSI protects against physical damage during and after repossession as well as provides skip tracing services to help locate the missing collateral. Blanket Vendor’s Single Interest reduces the administrative workload, creates efficiencies and reallocates dollars back to a financial institution's bottom line. The examiner will no longer request to see up to date policies on a sample of files, and the borrower will not have the potential for a wrongful force placed policy and increased payments.