Contributing Author: Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies
In a new world order of uber-competitive interest rates and shrinking profit margins, a significant number of lenders are supplementing revenues by promoting and marketing privately-labeled consumer protection products. While still reeling from the implementation of formal compliance processes relative to financing, discussion has grown louder regarding FTC and CFPB involvement in the oversight of the sale of F&I products.
There are many elements to consider as you review your current policies and procedures for your existing product offerings. On a positive note, having a suite of private-labeled products provides the ultimate control in pricing (and profit), and significantly more control in making sure your product offering passes the litmus test from a consumer perspective.
This being said, applying compliance standards and scrutiny to the partners you have chosen to be a third party administrator or insurer is growing in importance. A recommended starting point, as you evaluate or re-evaluate product offering, is to ask a simple question: Does the product’s benefits fulfill a real and mathematically calculable customer need (or have risk)?
Starting with this premise, here is an additional checklist to perform due diligence:
- Are the products filed and approved with Department of Insurance in every state you conduct business?
- Is the product cancellable by the consumer?
- Do the cancellation provisions in the contract meet all the individual state and federal requirements, and is the cancellation process clearly communicated to the customer and carried out in practice?
- What is the A.M. Best rating of the Insurance carrier backing the program?
- For customer claims, what is the average hold time, call abandonment rate, availability of an adjustor/claims representative, time of the average claims call, and percentage of claims paid?
Compare the answers to these questions to industry standards, and set up quarterly random audits to ensure standards are met. In addition to “consumer friendly” best practices, don’t forget to review all of your individual pricing models. Make certain that they are:
- deemed to be fair by any reasonable person;
- consistent with the policy in writing, and that any rate deviation is clearly defined: less coverage, longer term, etc. and not arbitrarily negotiated; and,
- actively reviewed by your legal department, ensuring guidelines are adhered to without exception, and that remedy is taken for the benefit of the consumer if exceptions are discovered.
With almost 40 years innovating and administering consumer protection products, EFG Companies operates as a 100% administrator obligor on all product programs, removing any contingent liability from its clients. EFG’s almost 30-year uninterrupted relationship with Assurant Solutions and their affiliated insurance companies, all “A” rated A.M. Best insurance companies, sets EFG as Assurant’s longest-standing Third Party Administration partner.
With a Consumer Credit Compliance Certified Specialist and a field team that is 100% AFIP (Association of Finance & Insurance Professionals) certified, EFG has the unique ability to provide AFIP training and certification, and help lenders iron out their compliance strategy with regards to auto finance. EFG is also the only product provider to be certified as a Center of Excellence by Benchmark Portal – a customer service designation that less than 10% of companies achieve. In addition, EFG is the only product provider awarded the Automotive Service Excellence (ASE) Blue Seal of Excellence, with EFG’s claims adjusters averaging 15 years of experience.
EFG ensures:
- during business operations, 96% of all claims are paid within the hour;
- claims calls are answered, on average in 30 seconds; and,
- average handle times for each claim call is 3.5 minutes.
EFG also invests substantial resources to enhance the efficiency of its claims process, resulting in a seamless experience for both clients and customers. Many of the company’s proprietary solutions are fully mechanized with secure online portals that allow clients to enroll customers and file claims in real time with no EFG intervention required. Examples include:
- full contract automation;
- online cancellation quoting and cancelling; and,
- EFG’s parts wizard that identifies the highest quality parts from suppliers across the nation at the lowest price in real-time.
Contact EFG today to learn how our administrative excellence drives compliance and profitability within the automotive financing space.