January 16, 2015

RETAIL Insurance Processing

Retail Insurance Processing

Insurance is an integral part of consumer lending in a retail credit environment. Our system offers retail insurance processing for insurance offered to borrowers that includes credit life, accident and health (disability), vehicle protection, and collateral protection insurance.

Insurance can be added to the system at the time the loan is boarded or after boarding at any time during the life of the loan. Insurance can be added manually or through an insurance interface from the provider. Force placed insurance is also an option. Multiple vehicle protection and collateral protection policies can exist on a loan over the life of the loan, but only one of each type of insurance can be active on the loan at any given time. Typically these types of policies have a term of one year, and the loan term is usually more than one year.

To ensure data integrity, the system offers many user-defined options to edit data that is boarded into the system and default many data elements based upon the policy type, insurance company, and other factors.

Premiums can be paid directly to the provider (borrower has paid for the insurance), financed as part of the loan balance, or billed as a separate item on the loan bills.

If the insurance is added after the loan is boarded to the retail system and the premium is financed, there are user-selected options to determine how the existing scheduled payment amounts are adjusted for the loan. The options are:

  • Balloon ­ final payment is adjusted with the addition of the premium and interest charged for the premium.
  • Recompute ­the premium, plus interest, is spread over the remaining term of the policy or the depending on user-selected options.
  • No changes are made to the payment schedule.

If the premium is financed, the following amortization options are available:

  • Rule of 78s
  • Pro Rata
  • Mean of Pro Rata and Rule of 78s
  • Actuarial
  • No Amortization

Insurance policies may be cancelled at any time during the life of the loan. Full cancellations and partial cancellations are both accommodated. There are many options to determine how the appropriate rebate amount is calculated, including the following:

  • Pro rata
  • Rule of 78s
  • Mean of Pro Rata and Rule of 78s
  • Actuarial
  • Rule of Anticipation
  • VSI
  • LPI
  • No Rebate

When insurance cancellation occurs, payments that were applied to the account while the insurance was in place are reapplied to reflect the appropriate application of the payment to principal and interest. Options are available to determine if and how remaining payment amounts are recomputed for the loan when the insurance is cancelled.

On third-party dealer loans an insurance policy can be participated with the dealer.

General Ledger entries are created by the system to accommodate insurance additions, cancellations, rebates, accruals, and other types of activity. Consideration is given in the GL interface for financed versus billed premiums and backdated additions and cancellations.

The following list is a sample of the retail insurance processing reports available:

  • Activity Reports
  • Expiration Reports
  • Insurance Company Reports
  • Penetration Reports
  • Claim List
  • Earnings Reports
  • Active Insurance Loan List