Is your auto loan agency ready for this year’s disaster season? A record-breaking 55 nationwide catastrophes totaled $47.5 billion in damages during 20181, leaving the auto industry among those overwhelmed with financial losses. To get auto lenders thinking proactively during this year’s disaster season, we are sharing three tips for staying a step ahead of the chaos:
1. Educate borrowers on the importance of proper coverage
As storm season prepares to deliver its annual round of damage to property, auto lenders will have vehicle owners looking to them for insight more than ever. Auto lenders should arm borrowers with insurance knowledge to help dramatically decrease the number of total auto losses and loan defaults. Borrowers should also be reminded of car prices going up each year—especially used cars, which borrowers tend to purchase as replacements for cars totaled by severe weather. A used car branded as damaged before purchase, however, will need to be flagged and undergo more lender scrutiny; make sure your borrowers are familiar with these details as they can adversely affect the borrower’s chances of replacing their vehicle.
2. Always know the status of insurance coverage on your portfolio
As an auto lender, your ROIs could suffer when vehicles are insufficiently insured. Don’t get caught unprepared should a natural disaster cause mass-scale damage to vehicles and collateral. Having the proper coverage before disasters hit will ensure peace of mind for both borrower and lender. All vehicles in your portfolio should be monitored to ensure insurance coverage exists and that deductibles match your loan criteria. An experienced vendor can assist with portfolio monitoring if your agency’s workload is excessively high.
3. Prepare for the influx of increased claim volume for disaster-related losses
Can your agency currently handle the volume of vehicle claims anticipated for this natural disaster season? Summer hurricanes alone wiped out an estimated 1 million vehicles in 20182; the proportionate number of subsequent claims would put a strain on any loan servicer. We believe it’s best to be prepared for the worst year-round, and auto loan servicers would benefit from increasing the amount of staff, the quality of training, and the efficiency of claim filing processes. Claim filing efficiency can also be achieved by partnering with a vendor like DIMONT, with the knowledge and years of expertise needed to navigate the complexities of natural disaster-related claims.
1. Insurance Information Institute (chart): Estimated Insured Property Losses, U.S. Catastrophes, 2009-2018. https://www.iii.org/fact-statistic/facts-statistics-us-catastrophes
2. EUR This N That: 2018 Hurricane Season Damaged or Destroyed Over 1 Million Vehicles. https://www.eurthisnthat.com/2018/10/22/2018-hurricane-season-damaged-or-destroyed-over-1-million-vehicles/