Your credit union’s members want to hear about loan protection, which is why you need to integrate them into your digital channels.
Sponsored by TruStageTM
In today's fast-paced world, financial stability and security are paramount for individuals and families. One of the critical aspects of financial well-being is ensuring that your members have access to loan products that provide protection and security during challenging times.
Key Findings from Consumer Lending Research
TruStage™ surveyed consumers about lending in both 2019 and 2023. These surveys revealed some significant findings that shed light on the importance of consumer protection in loan products.
1. Worries About Loan Payments: According to TruStage’s 2023 Consumer Lending Preferences research, eight out of 10 consumers expressed concerns about their ability to make loan payments. This statistic highlights the very real and widespread financial anxieties that people face today.
2. Focus on Financial Wellness: The research also showed that consumers' worries about loan payments were closely linked to their concerns about overall financial wellness. Just as health was a significant concern a few years ago, financial wellness has taken center stage. This shift underscores the importance of financial protection products in loan offerings.
3. Interest in Payment Protection: One remarkable finding was the 68% increase since 2019 in consumer interest in payment protection products when they are offered. These products can provide a safety net in case of unexpected financial setbacks, such as illness, job loss or vehicle repairs. Unfortunately, many consumers reported not being offered these protections. For auto loans, 50% recalled being offered protection products and for personal loans only 30% recalled.
Understanding Payment Protection Products
Payment protection products offered by credit unions and financial institutions are designed to safeguard borrowers from unforeseen financial challenges. These products typically cover various aspects, including:
Life Coverage: In the event of the borrower's death, the insurance will pay off the remaining loan balance, relieving the burden on surviving family members.
Disability Coverage: If the borrower becomes disabled and unable to work, the insurance covers loan payments during the disability period.
Unemployment Coverage: In case of job loss, the insurance helps make loan payments.
Vehicle Protection: Some products also include mechanical repair coverage to address unexpected vehicle repair costs.
Guaranteed Asset Protection (GAP): This coverage bridges the gap between the loan amount and the vehicle's value if the vehicle is totaled or stolen.
Increasing Member Access to Protection Products
Our research shows that members want to know about loan payment protection products. Credit unions would benefit from incorporating protection products directly into the loan selling cycle. Here are some key strategies.
Digital Integration: Digital channels provide an efficient way to offer protection products. Integration with online banking platforms and loan application processes ensures that members are aware of these products at various stages. Plus, by integrating them into your digital process, ensure it gets in front of the member 100% of the time, while reducing the burden on the loan officer in the process. Plus, incorporating these products into your digital loan process allows you to offer the plans multiple times such as when the member is researching a loan, starting an application, getting the loan approval, and during application signing or even after.
Consumer-Tested Design: Is the language you are using to sell your loan protection products understandable to your members? Are you offering it at the right time? These are areas that you can and should test and tweak over time. We have been testing these processes to know what works best.
Multi-Channel Approach: While digital channels are essential, a seamless multi-channel experience is also crucial. About half of credit unions’ loans are started digitally, but only 10-15% are closing end-to-end digitally, with no loan officer interaction. Your goal is to keep protection products in front of members in the channel they are using. While we are making offers in the digital channel, it's also important to seamlessly pass that information on to the loan officer so they know a member is interested in the products and can follow up as needed. This approach ensures that even in face-to-face interactions with loan officers, members are informed about protection products.
Streamlined Activation: It may sound daunting, but credit unions can activate protection products easily into their lending process, often with minimal or no development work. We work directly with third-party technology providers to do the development. We have seven partners that we are currently working with and many more in discussions. With the current partners, we can reach almost 900 credit unions and more than 50 million credit union members.
Typically, a credit union can activate the process in less than five minutes. Our goal is to make the process akin to flipping a switch, therefore reducing the administrative burden on credit unions. 95% of our clients said the integration into their technology was straightforward.
“The integration of TruStage/MeridianLink Payment Protection has been a game-changer for our loan applicants. The simple application process has made the experience much more user-friendly and efficient. The solution not only plant seeds in the conversation, but it also helps our remote agents have a consistent discussion about the product, even if the member didn’t express initial interest. This integration has truly improved the overall loan experience. As an added bonus, this was the one of the easiest implementations we have done! As a result, our remote services team achieved a record month coming in at 65% penetration, and in the following months have continued the momentum.”
--Richard Walter, SVP Retail Experience, Excite Credit Union
Regular Updates: Through API technology, providers can automatically update protection product information, ensuring compliance and effective communication with members.
Impact on Abandonment Rates
Credit unions may feel queasy about interrupting the loan in the middle of the application to sell another product. Contrary to concerns, integrating protection products into digital channels does not seem to affect loan application abandonment rates. In fact, members appreciated the option and felt that the credit union had their best interests in mind.
While members feel taken care of, credit unions are also benefiting through a healthier loan portfolio and fewer delinquencies.
In today's uncertain economic landscape, the importance of consumer protection in loan products cannot be overstated. Our research reveals that consumers are genuinely concerned about their ability to make loan payments and are actively seeking protection options. By leveraging digital integration and a multi-channel approach, credit unions can offer these critical protection products efficiently, ensuring the financial well-being of their members. Providing consumers with peace of mind and financial security is a testament to the credit union's commitment to its members' financial health.
Corrin Meier is VP/lending consumer experience at CUESolutions provider TruStage, Madison, Wisconsin.