Looking Forward: Challenges Facing Auto Finance During and After COVID-19
May 13, 2020 | Produced by Suzi Straffon, Director of Finance Company Markets
Did you miss our webinar on May 5? Allied Solutions hosted a panel discussion to share risk and recovery trends being observed across repossessions, claims management, and tracking amidst the COVID-19 pandemic. We shared how Allied is approaching the pandemic and practical steps we’re taking as we continue to monitor the rapidly changing regulatory, economic, and service environments to look forward and prepare for what’s next.
Allied Solutions’ Risk and Recovery Experts:
- Moderator: Suzi Straffon, Director of Finance Company Markets
- Tina Love, Vice President of Claims and Recovery
- Brett Odom, 2nd Vice President of Claims and Recovery
- Christy Wilson, Loan Servicing Products Division Product Manager
Below are some key insights and takeaways from the webinar:
2020 Challenges During and After COVID-19
The entire economy has been impacted as services halted and demand rapidly fell at the beginning of March due to the economic shutdown. As governments begin to shift towards a ‘re-opening’ strategy, it’s important to be aware of the current state of the industry and identify ongoing challenges to be best prepared for consumer, vendor, and client needs.
Looking Back on Repossession During COVID-19
Industry services have slowed down significantly and even halted in some cases. Insurance carriers and financial institutions have offered flexibility in reporting, policy extensions, and payment deferrals to help support consumers during the pandemic. This slowdown creates a ripple effect, as limited claims impact recovery revenue, abandons, and total loss. Repossessions were halted as guidelines and restrictions were placed on a state-by-state basis. These restrictions included both voluntary and involuntary recoveries. Many auctions also closed at the beginning of the pandemic, due to being deemed non-essential and are only now starting to re-open with virtual options.
It’s anticipated repossessions will see a staggered, phased return as the industry awaits each state's implementation of its re-opening strategy. Allied is using this time to cross-train claims specialists for an anticipated increase in service once moratoriums end. While repossessions may be paused for now, a repossession reboot will likely lead to an uptick in service.
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GAP and Total Loss Claims During COVID-19
Claim filings have decreased 35-40% this year due to a decline in drivers. Vehicle sales have dropped abruptly from March to present, but demand is beginning to rebound slowly with consumer-friendly financing options and an estimated two million lease expirations expected to reenter the market. While numbers are expected to improve as the economy reopens, vehicle values will likely remain lower than normal.
Lenders should review ACV calculations and ask for a valuation for proper debt settlement based on what is being offered in the market. Current flexibility from insurance carriers has allowed for varying accommodations, such as photos instead of in-person inspections for claim filings, filing extensions, and payment deferrals for consumers. Opportunities for virtual service options have also emerged as the industry seeks to create a safe environment for employees and clients. Online forms, photo submissions, and virtual meeting environments have helped business continue.
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Monitor Risk with Insurance Tracking
Currently, 42 states have some form of payment deferral guidance in place for carriers during the pandemic. Many insurance carriers have suspended cancels for 30-120 days and have been offering billing leniency, payment plan options, or policyholder refunds. Both active and passive tracking options can help monitor lender risk. Electronic Data Interchange (EDI), provided by 900 insurance carriers, helps identify coverages and assess uninsured collateral. During COVID-19, the amount of insurance updates has dropped, which is largely due to a halt in cancellations and other moratoriums in place, so information and coverages aren’t changing as frequently. While regulation is in place, it varies by state and may be considered recommendation and guidance rather than mandatory compliance.
Key Actions for Lenders:
- Be Prepared: A turnaround will come, so expect an increase in volume. Plan ahead by sharing resources across departments, cross training personnel, and developing a flexible plan to handle business needs.
- Expect Flexibility: The return to service will come in phases, with significant billing leniency and digital accommodations. Be sure new, developed processes account for the current flexibility and plan ahead for how your business can adapt.
- Monitor State Government Recommendations and Regulations: State government guidance poses a challenge as it varies across the country and often changes from day to day. Regularly monitoring changes is important to ensure compliance and service recommendations are met.
- Continue to Assess Risk: Insurance tracking is one way to assess risk and monitor your loan portfolio. In our current economic slowdown, having resources in place to help assess your loan portfolio is critically important in assessing next steps.
Read More: Allied Solutions' COVID-19 Response
Allied Solutions, LLC is one of the largest providers of insurance, lending, and marketing products to financial institutions in the US. Allied Solutions uses technology-based products and services customized to meet the needs of 4,000 clients, along with a portfolio of innovative products and services from a wide variety of providers. Allied Solutions maintains over 16 regional offices and service centers around the country and is a subsidiary of Securian Financial Group, Inc.
Content in the blog posts are the opinion and views of the writer, and don't necessarily reflect the opinions or views of Allied Solutions.