New payment protection product helps lenders
mitigate costs and risk while attracting borrowers and
strengthening loan portfolios
MADISON,
Wis., July 11, 2024 /PRNewswire/ -- Speed and
convenience are even more critical to consumer lending with more
and more people turning to digital channels to access critical
capital. To address this market trend, TruStage, a financially
strong insurance, investment and technology provider has partnered
with leading bank consultancy, Cornerstone Advisors, to develop a
new whitepaper, "Improving Online Lending Profitability With
Embedded Payment Insurance," available for free download here.
With approximately $102 billion in
U.S. consumer debt currently delinquent due to unemployment and
disability, digital lenders and fintechs are actively developing
new lending solutions to meet consumer demand and grant greater
access to credit to previously marginalized borrowers without
taking on additional risk.
While traditional credit insurance products have been a key
facet of lending for decades, there is a growing need for new
approaches specifically designed to support the evolving digital
lending landscape. Though often necessary, the complexities that
many traditional offerings can introduce to the loan process can
add friction, hindering the simple, fast and convenient
interactions today's modern digital consumers require and expect.
By making loan payment insurance a component of the loan, digital
lenders are overcoming this challenge in a risk responsible way
that protects consumers from the negative effects of unforeseen
financial or medical hardships.
Some key points addressed in the whitepaper include:
- The benefits of payment insurance for borrowers;
- The impact that embedded loan payment insurance can have on a
lender's loan portfolio;
- How embedded loan payment insurance works; and
- Current real-world examples of embedded loan payment
insurance.
In developing the whitepaper, Cornerstone Advisors created a
five-year financial model that analyzes the effects of providing
digital loan payment insurance on a portfolio of personal loans.
The model compares an assumed cost for personal loan charge-offs to
various scenarios where loan insurance is implemented and outlines
the expected savings a lender can realize in charge-off costs
related to covered job losses and disability.
"Many lenders can achieve a 20% reduction in charge-off costs
with loan payment protection. A growth-focused lender can save
$42 in charge-off costs for every
$1 in insurance
premiums1," said Ron
Shevlin, Chief Research Officer at Cornerstone Advisors and
author of the white paper.
"We see embedded payment insurance as a critical component of a
successful digital lending strategy," said Danielle Sesko, TruStage Director, Product
Management. "For borrowers, it is a proven way to provide a
financial backstop in case of unplanned job loss or disability and
for lenders, it provides an effective way to manage risk while
expanding access to credit to more U.S. consumers."
1 Conerstone Advisors, Improving Online Lending
Profitability with Embedded Payment Insurance, June 2024
About TruStage
TruStage™ is a
financially strong insurance, investment and technology provider,
built on the philosophy of people helping people. We believe a
brighter financial future should be accessible to everyone, and our
products and solutions help people confidently make financial
decisions that work for them at every stage of life. With a culture
rooted and focused on creating a more equitable society and
financial system, we are deeply committed to giving back to our
communities to improve the lives of those we serve. For more
information, visit www.trustage.com.
TruStage™ Payment Guard Insurance is underwritten by CUMIS
Specialty Insurance Company, Inc. CUMIS Specialty Insurance
Company, our excess and surplus lines carrier, underwrites
coverages that are not available in the admitted market. Product
and features may vary and not be available in all states. Certain
eligibility requirements, conditions, and exclusions may apply.
Please refer to the Group Policy for a full explanation of the
terms. The insurance offered is not a deposit, and is not federally
insured, sold or guaranteed by any financial institution. Corporate
Headquarters 5910 Mineral Point Road, Madison, WI 53705. ©TruStage
PGI-6744701.1-0624-0726
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SOURCE TruStage