3 minutes
Heritage Federal Credit Union and its members benefit from upgrading this insurance offering.
Sponsored by SWBC
Change is not always easy, particularly for busy credit unions that are laser-focused on meeting their members’ daily needs. As an organization dedicated to meeting the changing financial needs of its membership, $518 million Heritage Federal Credit Union, Newburgh, Indiana, understands that to better serve a broader membership base, change is sometimes necessary.
Guaranteed Asset Protection is not a unique offering. Lenders know that GAP offers borrowers a level of auto loan protection while generating non-interest income for the CU; most borrowers know that GAP can help “fill the gap” between their loan balance and insurance payout in the event of a theft or total loss. However, in a competitive auto loan market, more and more lenders are thinking outside the box to find creative ways to generate non-interest income. In other industry news, we have seen a dramatic shift in consumer borrowing behavior that puts consumers and members at an increased risk for GAP exposure, making sufficient vehicle protection coverage even more critical to auto loan borrowers.
Back in 2010, borrowers had a maximum GAP exposure of around $1,800 based on the average vehicle loan value and loan term. However, in 2016, average loan terms have increased by nearly $5,000, giving borrowers a maximum GAP exposure of more than $5,000 that lasts 30 months.
The desire to protect more of their members—both the ones with GAP exposure, and the ones who put enough money down to avoid a GAP exposure—is what drove Heritage FCU to consider upgrading its vehicle protection coverage. According to CUES member John Phipps, the CU’s chief lending officer, while standard GAP wasn’t inadequate, it didn’t provide full benefits to the CU’s entire membership base, including members who had good equity positions in their financed vehicles. Aside from the advantages of providing better vehicle protection to more of its membership base, the credit union also achieved some incredible sales results by upgrading its vehicle protection coverage:
- increased vehicle protection product sales by nearly 50 percent in the first six months of implementation
- increased contribution margin by 76 percent
- increased average monthly revenue by more than $18,000
Read the full story about Heritage FCU’s successes in this area.
Ronni Martinez is VP/specialty products for the financial institution division at CUES Supplier member SWBC, San Antonio, Texas.
