At Allied Solutions, Love oversees our claims department and has been essential in building our catastrophic event (CAT) claims team for total loss, GAP, and other risk and recovery products for auto and mortgage. Under her leadership, Allied Solutions has established CAT phone lines and emails as dedicated channels of communication and developed an expedited process for consumers directly impacted by the event.
Catastrophes are commonly defined as infrequent occurrences that cause severe loss and damage to a large, concentrated population in an impacted area. Natural events are most often associated with a catastrophe. These can include:
- Earthquakes
- Flood
- Ice/Snow
- Storm/Hail
- Hurricane
- Tornado
- Volcanic Eruption
However man-made disasters can also be categorized as a CAT event. This can include:
- Wildfire
- Industrial Explosion
- Pollution
In recent years there has been an increase in the frequency and magnitude of these natural disasters. In the past 20 years, the United States averaged $24.43 billion in damage costs annually with 2018 seeing $40.95 billion in damage.
Love shares, “When I started at Allied Solutions 18 years ago, catastrophes weren't as prevalent as they are today. We weren't dealing with a number of hurricanes, tornadoes, flooding and wildfires every year. Lending institutions did not have the solid catastrophic event plans they have today. In the last several years they have been forced to build out those plans.”
It’s important that lending institutions stay proactive in their preparations and continually review those plans at least once a year. Risks exist nationwide as the Southwest faces wildfires, the Southeast deals with hurricanes, and the Midwest regularly faces hail and floods.
Download the eBook: "What Happens After a Natural Catastrophe? Disaster Preparedness"
So What Does This Mean For Lenders?
Below is a list of 3 tips for best practices when it comes to CAT planning. At Allied, we consistently take time in January to review our plan documents, review the previous year’s data, and update information as necessary.
Create and Manage a "Living" CAT Plan
In the past, dealerships were largely responsible for handling any aftermarket product cancellations and refunds because they owned the relationship with the product carrier. Today, the burden to perform these cancellations and refunds has largely shifted from the dealers to the lenders. Yet, lenders will still need to work with a significant number of dealer networks, insurance providers, and product vendors to process the cancellation and refund.
Stay in Tune with FEMA
An important aspect of the refund process is how long it actually takes. Regulators are considering consumer-friendly practices. In other words, processing these cancellations and refunds needs to be quick and painless for your lending institution, while also being quick and painless for your consumers (i.e. consumer-friendly), and quick and painless for your dealer networks. Make sure you’re reviewing regulatory requirements in your state. Then establish service timelines for all triggering event types.
Collaborate with Providers
If information is not accurate consumers may not receive their refunds, receive the incorrect amount, or receive a delayed refund. Lenders may also incorrectly report deficiency balances. Additionally, dealers and lenders could face incorrect invoicing or chargebacks. A thorough review process is necessary to ensure information is being verified by the dealer or provider, and validate that points are being established for quality control.
Consider working with a vendor who will spend the time, money, and resources to handle collateral recoveries in a compliant fashion, so your lending institution remains protected against financial losses. Allied Solutions is committed to providing our clients dedicated support and resources to help protect their properties from unforeseen losses. Contact Allied to learn more about their risk management services: alliedsolutions.net/contact-us.
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