Protecting Your Auto Loan Portfolio Starts With the Right Partner

Bellco, then a $400 million Colorado credit union with about 15,000 automobile loans, was positioning itself to grow. Today, Bellco's assets top $1.2 billion, evidence of the success of their philosophy and strategy.


In 1989, Bellco, then a $400 million Colorado credit union with about 15,000 automobile loans, was positioning itself to grow. Today, Bellco's assets top $1.2 billion, evidence of the success of their philosophy and strategy.

President and CEO Doug Ferraro's plan included implementing a ''resource leveraging strategy.'' He knew Bellco couldn't do everything themselves and do it well. Instead, they would partner with experts who had the resources they needed so management could focus on its core mission - serving its members and growing the credit union. Vendors would have to become partners in Bellco's plans for success.

Bellco was already covering its auto loan portfolio with a collateral protection insurance (CPI) program from State National Companies. Bellco reviewed this relationship in terms of its new strategy.

''I think Doug was looking for two things,'' says Trace Ledbetter, Vice President of State National. ''He wanted to work with companies that were committed to staying on the leading edge technologically, and he wanted these vendors to work with Bellco as partners, pooling their strengths and helping Bellco achieve its goals. That's always been our philosophy too, so it was a great fit. Since State National is the underwriter, claims processor, and agent, we had the flexibility to respond quickly and become a seamless part of his team.''

State National was already leading the industry with a stand-alone tracking system that no one else could match. They were also settling claims in less than 5 working days, far faster than the industry standard turnaround time of 3-4 weeks (others didn't start their clocks until they had all the information in hand). In addition, State National issued refunds immediately when a policy was cancelled. All these things made members happier. This was the kind of company Bellco wanted as a partner.

Partners Through Thick and Thin

Bellco had an early opportunity to test State National's commitment to the partnership. The late 1980s saw a rise of lawsuits against banks, S&Ls, and credit unions for unintentional non-disclosure associated with collateral protection insurance, often the result of following regulator-approved standards and procedures.

Many insurance providers walked away from their clients when the lawsuits hit. When Bellco found itself in this position, State National stuck by them. The added strength helped them settle without going to court, at far more favorable terms than their peers were experiencing. For State National, standing by a client is part of doing business and exemplifies their partnership approach.

Through the years, the partners have met other challenges together. In 2001 Bellco converted their mainframe system. State National stayed on top of each development that affected the auto loan portfolio, making adjustments and going the extra mile whenever necessary to keep Bellco's members satisfied and its portfolio protected during this difficult transition.

Partnership Brings Better Member Service and Continued Growth

In the early 1990s Bellco changed its charter to be a community credit union. They were also one of the first credit unions in Colorado to pursue indirect auto loans. These two changes had a big impact on the loan portfolio, and with the growth in loans came greater risk.

''I came to Bellco in 1993,'' Phil Smith, Bellco's Senior Vice President for Sales and Service recalls. ''The Denver market was really growing, and Bellco was growing with it. State National really helped us minimize our risk and loss.''

At first, the explosive growth in auto loans led to a rise in loss ratios, a common problem. While it did go down again, in more recent times the downturn in the economy caused the loss ratio to grow significantly. ''State National has continued to work with us to manage this volatility and mitigate the losses as much as possible,'' says Smith.

State National continued to update its system with the latest technology to stay ahead of Bellco's growth curve and ensure that the portfolio was always fully supported. For example, early adoption of an electronic data interface (EDI) system eliminated the need for paper documentation. This allowed for faster response, and further reduced the generation of unnecessary notices.

''They have always been really good about working with our members,'' says Smith. ''I'm impressed by the way they've worked with us to tailor coverage to our members' needs and lifestyles on a case-by-case basis. If there's a situation where Bellco wants to do something differently for a member, State National goes along with us. For instance, quite a few of our members are 'snowbirds' who spend half the year in a warmer place. While they're gone their vehicle will be locked in their garage for months at a time and they may not want to carry insurance on it during that time, or only carry accidental damage. They've been able to help us provide these exceptions.''

A key factor making this possible is the company's ability to use specific information in ways that other CPI providers don't. Wording on notices is flexible, too. These two factors - willingness to identify specific problems and tailor the language on the notices to match the credit union's tone and style - have played a major role in the decline of member complaints, despite the fact that the portfolio continues to grow.

Using Technology to Put Service First

As part of their initial commitment to Bellco, two full-time representatives were placed in the credit union to handle members' claims and questions. These representatives always had real-time access to State National's database, so they could handle any problem or question immediately.

Today there are four full-time reps on site at Bellco. These people work side by side with Bellco's collections staff to create a seamless team and give Bellco's members the very best customer service. CPI has reduced charge-offs, and most members can't tell where their credit union's staff stops and State National's starts. Perhaps the best testament to their service is the lack of complaints about CPI.

''State National has been very responsive and receptive,'' says Bellco's Smith. ''They've done an excellent job. As a partner in our 'resource leveraging strategy' they provide a service that is a core competency for them, but not for us. Our strategy to align with them to help us meet our long-term strategic goals and ensure continued financial stability has paid off handsomely.''




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Sept. 30, 2002


  • All good CPI companies are expected to service their clients in the same way that State National does.
  • great article