Less than four months into the Twenties of the 21st Century, uncertainty has hit our world and our economy in ways that can aptly be described as unprecedented. Our country and our industry face challenges on a scale that would have been hard to imagine only a few short months ago. When I first sat down to write this, I intended to focus on blanket insurance concepts and how they might be of assistance to community lenders as they strive to be more efficient and better protected. While I still hope to accomplish those goals, I also want to acknowledge the current adversity and display sensitivity to the new financial and human context that the health crisis brings to our industry.
The novel coronavirus spreading throughout the world and our nation is harrowing. Doctors, nurses, caregivers, and local and national leaders are grappling with how best to face down this unseen adversary. Families have been forced into compromised circumstances and make difficult choices daily. Employers must find ways to stay afloat while doing what they can for their employees. While there can be no doubt that this crisis will take a heavy toll upon our nation, I have confidence that we can band together as an American people and look back upon this trying time with pride in our efforts to weather this storm, as we have weathered so many others in the past. Community lenders will have a vital role to play in that effort.
Community lenders touch almost every facet of American life and are intimately tied to our fortunes as a nation. From enabling families to purchase a home or automobile to powering small business and agriculture, community lenders are a mainstay of our nation’s success and provide a personal touch and sense of community along with local loan decisions that vastly improve the local economy and the experience of the consumer. As they enable Americans to live out their dreams, community lenders also take on much of the risk associated with unforeseen events. Bill Jones founded Golden Eagle Insurance in 1995 on the principle of helping lenders manage that risk through innovative blanket and lender-placed solutions and that remains our calling card to this day.
One of the best examples of this can be seen by highlighting the dilemma lenders have faced time and time again in regards to insurance tracking for their loan portfolio staying properly protected at an affordable price. Since uninsured losses are rare, lenders rightfully try to minimize expenses and staff time spent on tracking insurance. However, the risk of a large uninsured loss and the regulations dictating that loans be properly tracked lead to costs that are higher than desired. Those high costs include:
- Employee pay, taxes, and benefits
- Management time and expense
- System costs of tracking
- Postage and phone expense
- Letterhead and envelope costs for notification letters
- Training expense
The vast majority of customers have protection on their collateral at any given time. Thus, the tracking expenses above are being incurred for the sake of 1-2% of the portfolio. Blanket insurance can eliminate these high costs while still properly protecting the portfolio. Blanket insurance provides the same type of protection that a lender-placed policy provides, and the coverage is superior to typical lender-placed insurance because it’s automatic.
In addition to eliminating tracking, blanket insurance has become more attractive to many lenders because it easily passes regulatory examinations. When examining insurance procedures, regulators are primarily concerned with ensuring an institution is properly protected. Regulators are very positive about blanket coverage since they know that it offers better protection than tracking and it eliminates the possibility of human error.
Perhaps one of the most valuable facets of blanket insurance is its ability to help improve relationships with borrowers. Blanket insurance eliminates negative interactions with borrowers because there is no need to contact them in the event of an insurance lapse. Under a blanket policy there are no contentious phone calls or letters to be sent, and no headache of placing and subsequently removing a lender-placed policy as a borrower’s private policy lapses and is reinstated. Just as good fences make good neighbors, a blanket policy improves relationships through peace of mind.
Through years of experience, Golden Eagle has continued to innovate and expand our lender-placed and blanket concepts to best serve the community lenders who in turn serve their communities. Our blanket concepts can be applied to mortgage loans, including commercial portfolios, consumer portfolios, and even industrial or agricultural equipment. Our lender-placed products also improve lender-borrower relationships with built-in features that eliminate unnecessary letters and interactions with borrowers and minimize false force-placements. We are constantly looking for new ways to help lenders become more efficient while staying adequately protected.
The mission and mindset of community lenders is one we know to be noble and essential to a verdant society and we take pride in helping community lenders better serve their clients. Many lenders have shared the disruptions to their staff and workflow since the virus began causing more and more work from home and other issues. Blanket protection might be helpful at this time to protect your collateral on a 24/7 basis without the need for staff or an outsourced company to track insurance and have unnecessary interactions with borrowers. Our programs are designed to lighten the burden for your institution.
As we all work to navigate the difficulties and successes that this year places before us, Golden Eagle is excited to kindle new relationships and provide innovative solutions for lenders in any community when the timing is right for you and your team. Stay healthy and let us know how we can help you.