Stop Tracking Your Customer’s Insurance!!!

For years I have been telling my bank and credit union clients to stop tracking their customer’s insurance.  Really, stop!

When you write a mortgage, you require that the customer buy property insurance (and maybe flood insurance). Then for the life of the loan, you track their insurance. Maybe you file renewals. Maybe you only respond to cancellation notices. If the customer fails to prove they have insurance, you “force place” insurance.

Think of the resources dedicated to following the paper trail of customer insurance.

Stop it!

Oh, the risks of a customer not having insurance is real. You don’t just stop the process. You manage the risk by outsourcing the task or buying insurance.

The first strategy, (and most common) is for you to outsource the tracking. You hire a company to do all the work of tracking and force-placing coverage. On average, this costs about fifty cents per mortgage per month. The contractor takes on the job of watching the notices, reminding customers, calling customers, sending letters to customers, and placing coverage that your customer fails to buy. For $6 a year per mortgage!

Can you really do it cheaper and better yourself? Let me know if you can. No bank has shown me they can. Perhaps your’s will be the first.

The second option is to insure the exposure; called blanket insurance. (Note: The Feds require that all flood insurance policies be tracked. I’m only talking about property insurance here. Not flood.)

You can use a blanket policy for all your mortgages or you can just blanket second mortgages and HELOCs.  Most banks find the premiums charged for all mortgages a bit steep. The insurance covering second mortgages is quite reasonable, though.

A bank client recently requested a quote on blanket second mortgages and HELOC’s. They have a total of about 2,800 mortgages, of which about 365 are seconds/HELOCs.  The premium for blanket coverage is about $450 a year.

So, on these 365 loans, the bank can continue to track the insurance themselves (cost unknown). They can outsource the tracking for about $2,190 ($6 times 365), or pay a premium of $450.

Talk with your insurance agent or give me a shout to talk about your options.