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    Lending | 3 min read

    Building Borrower Trust and Loyalty with Payment Protection Programs

    Data from the 2020 Financial Trust Index paints a gloomy picture of peoples’ relationship with their financial institutions. It shows a decrease of trust in financial institutions and increased anger with the economy, with only 31.3% public trust in financial institutions.

    As a lender, this troubling statistic may or may not come as a shock. So, how can you begin to improve that number while keeping your bottom-line top of mind?

    Uncertain Times Call for Protection from the Unexpected

    In the past couple of years, we’ve all been oversaturated by unprecedented situations. The question is—how do you connect to and support your account holders during (and after) such an era of uncertainty?

    While all industries have been affected by the changing landscape of a post-coronavirus reality, financial institutions must pay particular attention to how they are connecting with consumers. As the arbiter of home and auto loans, the caretaker of checking and savings accounts, and the primary contact for financial questions, you play a major role in your account holders’ financial wellbeing.

    While borrowers' needs vary, the one thing that remains consistent time and time again is that they want products and services that offer value to their financial portfolio. Being too "salesy" with your product offerings is not always the best approach to building long-lasting relationships with your borrowers. The key is to offer products and services that meet their needs, and as an extra little bonus for your institution—generate non-interest income.

    Payment Protection Programs to the Rescue

    Payment protection programs are designed to provide a safety net for unexpected occurrences such as loss of life, disability or sickness, loss of a job, and/or other unforeseen events.

    There are two types of products: credit insurance and debt cancellation. Both programs help cancel or suspend debt that a borrower owes to a lender. When a borrower chooses to add a program to their loan, it can assist by making monthly payments or paying off the loan in its entirety should one of the previously mentioned unexpected situations occur.

    Additional benefits include keeping the loan current with its payments, reducing delinquencies and foreclosures for both the lender and borrower and ensuring that there is one less thing for the family to worry about during a time of emotional stress.

    So, while your institution is able to offer a valuable program, what you are ultimately offering is a product that is truly invaluable to both your financial institution and to your borrowers.

    Building Borrower Loyalty through Education

    When a borrower decides to add payment protection to their loan, they are agreeing to have an additional expense tacked onto their monthly payment or the total loan. In these uncertain financial times, this may not initially sound like an attractive offer. That’s where borrower education comes in.

    Helping a borrower understand the tangible and intangible benefits these products offer may help them feel more at ease with adding this protection to their loan. Borrowers are looking for products that offer peace of mind in a troubled economy, so helping them understand the value of this product with authentic communication is key.

    Offering Convenient Financial Protection

    Since payment protection is added at the time of obtaining the loan, it is also one of the most convenient ways of obtaining financial protection. Besides the fact that you are providing good value, you are also meeting a need--whether or not they know right then and there that they have the need. With this point-of-purchase add-on, payment protection can effortlessly become a simple product for your employees to discuss, resulting in protection for your borrowers and your financial institution.

    Conclusion

    Should the unfortunate time come when a borrower needs to engage their coverage—or even if they never end up using it at all—they will have the priceless benefit of peace of mind.

    For your institution, yes, you can calculate the amount of non-interest income earned and the money saved from delinquent loans, but what truly matters is the trust that you are gaining from each person that is offered a product to make them feel more at ease.

    Remember, in order to build long-term relationships with your borrowers, you must be invaluable to their financial success.

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    Joan Cleveland, CLU, ChFC, REBC

    Joan Cleveland, CLU, ChFC, REBC leads SWBC Life Insurance Company as President and CEO. With more than 30 years of experience in the life insurance industry. She holds her Agent licenses for Life, Accident, Health Insurance, and has multiple FINRA securities Licenses. Joan is a frequent industry speaker and media spokesperson. She is a member of the Board of Directors of the Consumer Credit Insurance Association, the Texas Association of Life and Health Insurers, as well as the Life Insurers Council. In addition, she is chair of LIMRA’s Strategic Marketing Issues Committee.

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