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This year has tested our personal and professional resiliency. From tragic natural disasters to political uncertainty, to inflation, affordability, and regulatory over-reach, lenders are challenged with how to grow margins and reduce defaults while keeping borrowers protected.

Damages from Hurricanes Helene and Milton are causing a surge in claims across coastal and non-coastal states and borrowers are struggling with vehicle affordability issues, including a 30% increase in insurance premiums compared to two years ago.^[1] Together, these macro factors have culminated in over 28 million uninsured drivers.^[2] How does this impact your portfolio?

Lenders and partners across the nation are asking, “How can we ethically and effectively manage portfolio risk during difficult economic times?”

The macroenvironment is spurring the questioning of ethics and effectiveness – specifically in the use case of lender-placed insurance. Many lenders fear that risk mitigation efforts, like placing insurance on collateral, could backfire and cause a surge in delinquencies.

The general hesitation with enacting a lender-placed insurance program is that the attempt to protect the collateral could result in a loan going into default. This tends to not be as much a matter of compliance, but one of rumored harm to borrower relationships or eventually default.

As more and more drivers struggle to find affordable insurance, lenders need to proactively prepare for heightened risk exposure. A flexible, borrower-centric lender-placed insurance program accomplishes this.

Lender-placed insurance should be uniquely – not broadly – applied. Placement decisions that are strategically made and backed with data provide two-fold benefit for borrowers and lenders.

When coverage is lapsed (or inadequate) and lender-held coverage is placed, collateral is protected. Collateral is protected in the event of total loss or damage and the CPI premium is applied towards the loan balance. An ethical, borrower-focused program should offer a range of flexible tracking and premium options.

Allied Solutions is keeping a watchful eye on upcoming regulatory changes stemming from a new Federal administration. Our lender-placed coverage will continue to evolve with guidance from regulatory bodies. We continue to remain optimistic that lenders can thrive under any political administration with the right tools in place for holistic (not partial) risk mitigation and remediation.

With stabilized inventory and lowering rates, the expectation is that lending will increase in 2025. More loans will likely mean more uninsured drivers. How will your financial institution manage not just the volume but also the risk of an influx of loans?

Lender-placed insurance is going to become an even more crucial component of a risk management strategy. But it’s only one component. From loan signing to sign off, your portfolio deserves holistic protection. Insurance tracking to AI-based collection efforts to compliant repossession processes are part of a suite of specialized tools designed for auto finance lenders.

Make sure your recovery strategies are in the fast lane. Reach out to an Allied Solutions representative today.

Allied Solutions is an 8-Star AFSA Premier Business Partner. Learn more about Allied’s comprehensive recovery optimization solutions here.

About Allied Solutions

Allied Solutions is one of the largest providers of insurance, lending, risk management, and data-driven solutions to auto finance companies and financial institutions in the US. With their consultative approach and commitment to the market, Allied Solutions uses technology-based solutions customized to meet the needs of 6,000 organizations. Allied Solutions is headquartered in Carmel, Indiana and maintains several offices strategically located across the country. Allied Solutions is a wholly owned and independently operated subsidiary of Securian Financial Group. Together, Allied and Securian boast 100+ years of industry experience.

^[1] https://www.autoremarketing.com/ar/analysis/soaring-auto-insurance-costs-a-big-problem-for-dealers-sales/

^[2] https://financebuzz.com/uninsured-motorist-statistics-by-state