In today’s market, auto lenders are battling to maintain profitability and growth. Finance companies, banks and other lending groups are all competing for consumer auto loans. In this economic climate, it is imperative that lenders protect their bottom line by minimizing losses.

One initiative that lenders can take to help minimize losses and protect their profitability is to purchase collateral protection insurance (CPI) to help control their risk. This shields lenders in cases where the consumer isn’t current on their insurance and is either in an accident or the vehicle is returned from the borrower with damages. In addition to controlling the risk, a sound CPI program will increase profitability through an entirely new profit center, as well as help to retain existing customers. It’s a win-win-win for lenders.

How Does CPI Benefit Lenders?

Most CPI programs are administered by a third party – the CPI administrator tracks all borrowers in the lender’s auto loan portfolio to make sure that each loan has the necessary coverage in place. If the borrower has not purchased coverage for his car, or has allowed it to lapse, the administrator sends out a series of notifications informing him that he must correct the coverage issue immediately. If the borrower still does not comply, the lender has the option of placing CPI coverage on the loan and adding the premium to the loan balance.

A number of auto lenders today “self-insure” their exposure to uninsured collateral by simply absorbing the losses. But many auto lenders have no idea exactly how much exposure they are actually carrying, because they aren’t identifying and tracking those borrowers who have not maintained coverage on their vehicles and therefore can’t accurately budget for it.

A CPI program ends up being the most efficient way to control the risk of uninsured collateral since only those borrowers who have not maintained the required coverage on their cars end up paying for it. When deciding to implement a CPI program, it’s important that lenders select an experienced company with the technological and customer service capabilities to accurately identify those borrowers who have allowed their coverage to lapse, or have policies with other deficiencies such deductibles that are too high. This is where Verifacto comes in.

How Does Verifacto Help Lenders Administer Collateral Protection Insurance?

Verifacto’s  CPI solution module is designed with advanced compliance and tracking technology that lets you, as a lender, see and control your own portfolio insurance risk. Since auto insurance costs have been skyrocketing lately, lenders may be experiencing increased policy cancellations and more uninsured drivers on the road. Verifacto’s CPI solution can control that risk, increase a lender’s profitability and help retain customers.

Why Verifacto?

Verifacto provides auto lenders with a Collateral Insurance Program that allows the lender to reduce their risk to a minimum with a cost-effective and technology based solution. Choosing Verifacto allows auto lenders to:

• Decrease losses caused by excluded perils
• Decrease uninsured portfolio losses by controlling your risk
• Go beyond simply identifying customer coverage issues – now you can solve those issues
• Increase and track compliance of the CPI providers
• Increase automation and efficiency
• Increase Profitability

Contact Verifacto today at sales@verifacto.com to receive a no obligation demo and see the advantages for yourself. Our demo will provide a deeper look into the best ways to utilize our Collateral Insurance Program as well as an assortment of other solutions to keep you better protected.

Let’s face it: snail mail is an ineffective means of communication – especially when it comes to payment reminders. No wonder so many businesses are turning to payment reminders and bill alerts to encourage customers to settle on time. While some businesses might be skeptical of switching to an automated payment system it is easily the better option.

Here’s why.

Why You Should Choose Email or Text Notifications as Payment Reminders

1.Speed

Send a payment reminder by letter and it may be a few days before your customer sees it (it’s called snail mail for a reason). Additionally, the mail can take three days or more for a letter to arrive at its destination. Also, that mail can easily be lost or stolen.

Email and text notification with payment reminders, on the other hand, are delivered immediately. In terms of speed, electronic communications by text or email wins hands down.

2. Cost

When sending letters, you must cover the cost of the paper, envelopes, ink and postage. If you want to use recorded or express delivery, or enclose a copy of the invoice, that’s an additional cost.

Send out payment reminders by email, however, and the cost is far, far less!

3. Convenience

Although both letter and email reminders can be automated, emails are arguably much simpler and faster to process. What’s more, they can easily be scheduled to arrive on a fixed number of days before or after the due date and at a time when your customers are most likely to check their inbox.

But it’s not just businesses that appreciate the convenience of emails. So do most customers. They can open emails at home or on the move and can manage to reference these communications easier than filing a letter away somewhere in their house!

4. Urgency

While it’s true that emails offer a faster delivery method, some people feel that they don’t have the same sense of professionalism or urgency that letters do. In the minds of many—arguably older—customers, a letter carries more “significance” than an email, probably because we receive far fewer letters these days.

It may also be the case that, in some countries, companies threatening legal action over unpaid debts may be obligated to correspond via letter rather than email.

Whether sending a reminder by email or letter, you can underline the seriousness of the situation by using a more formal tone and style. You can also explain the consequences of late payment.

Even so, overcoming the perception of some customers that emails aren’t as urgent may be difficult. So, for final reminders especially, letters still probably beat emails.

5. Inbox overload

Send an email to your customer and it’s likely to be one of tens or more that they receive that day. Many of us suffer from inbox overload, so the chances of an email being overlooked or deleted are perhaps greater than those of a letter.

Mind you, one could argue that individuals who have debts piling up are likely to be stuffing unopened mail at the back of a drawer.

To ensure your emails are not ignored, send it at the right time of day, make your company name visible and the subject line clear (e.g. “Energy bill overdue” or “Automatic bill payment due on [date]”)

In addition, make sure your emails are mobile responsive so that they can be read easily on a mobile device.

6. Accessibility

Some of your customers may not have access to email, particularly if they are elderly, deprived, poorly educated, disabled or live in a rural location. Don’t underestimate the number of people that fall into these categories.

7. Delivery rates

Delivery can’t always be guaranteed with either email or letters. To begin with, you need the correct address. But even if you do have the correct address, there’s a possibility that the reminder may still go astray.

Emails can end up in the customer’s spam folder if the Internet Service Provider (ISP) or even the customer labels it as junk mail. Letters can get lost between your offices and the customer’s home, and less-than-honest customers can deny ever receiving the letter in the first place.

Working with a premium email reminder service provider goes a long way to getting over the spam problem. These companies can work within an ISP’s set of complex spam rules and use your company’s domain, which slashes your ‘designated as spam’ risk.

8. Measurable results 

One big advantage of digital communication is that you can check at any time whether the email has been bounced, opened or clicked on. There’s no need to wait for a payment that doesn’t come in.

And if the email isn’t delivered or opened, you can simply call or text the customer instead (this follow up through a different channel can be done automatically).

With letters, however, it’s a case of waiting for a phone call or a payment from your customers, which means it could take a few days before you realize your letter has been lost, mislaid or ignored.

9. Immediate response

If you want your customers to respond quickly, email is your best bet. Automated email reminders can include a pay link, and since most smartphones have banking apps, all your customer has to do is click on the link, view the invoice and make the payment.

A letter, however, is likely to be placed on a “things to do later” pile. And if you haven’t enclosed the invoice, you could be giving your customer another excuse for not paying.

10. Sustainability

Emails are undoubtedly “greener” than letters. If your company is serious about reducing paper consumption, email is a no-brainer.

So, which is the more effective payment reminder: letter or email?Having taken you through the pros and cons, I think it’s safe to say that email has a distinct advantage over letters in terms of cost, speed and convenience. What’s more, those that include a pay link enable customers to pay immediately. That advantage alone makes it a winner in my mind.

Survey after survey tells us that today’s consumers want fast and easy access to companies. Emails, therefore, are just the ticket. But those same surveys also tell us that consumers want options, so don’t rule out letters altogether. They still have their place.

Whichever version you choose, make sure you have a clear overview of your customer base, consider individual communication and payment preferences, and offer a range of options. That will please your customers and your finance director.

 

Your subprime borrower just totaled their vehicle. They still owe over $4,000. Unknown to you, they didn’t have any valid insurance or their insurance has lapsed.

You do your best to keep up with insurance tracking. However, the process is time-consuming and labor-intensive. You don’t have the time to verify between third parties. If you track insurance manually you run the risk of human errors as well. Between calculations that end up falling through the cracks and the inability to keep up with the amount of paperwork it takes to verify insurance, you could be left in a serious lurch.

Now, because of all the things that go wrong, you’re stuck with a substantial bill. Keeping up with insurance can be an exhausting process, but necessary to make sure you don’t end up having to spend thousands of dollars to cover a loss. Fortunately, Verifacto is has found a solution to streamline the process to benefit car dealerships, insurance companies, and drivers.
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As an auto lender, you need the power to manage insurance risks and reduce your insurance-based losses every day. Current risk management systems (RMSs) allow at least $3.5 billion in losses for companies like yours due to uninsured and improperly insured vehicle accidents every year. Don’t put your business’ assets in jeopardy. Verifacto can help. Let’s take a quick look at insurance tracking services, what they are, how they work, and the benefits of using them for your business. Read more