Jim Hawk, President/CEO
IWS Acquisition Corp.

Smart credit unions seek to produce robust non-interest income on the direct side of the house with significant yield over what they currently earn in the investment arena.

For many, one successful approach has been to offer auto loan protection products like Vehicle Service Agreements and Mechanical Breakdown Insurance (VSA/MBI). Importantly, VSA/MBI programs generate significant income on auto loans while protecting the credit union’s collateral (i.e., reduced risk of repossession due to a member’s inability to pay for unexpected, high-cost repairs).

Identifying the best long-term partner relationship for your credit union and members can be tricky, however, since there are a multitude of products and providers in the market – and not all are created equal. To select the optimal program for your members and credit union be sure to ask three important questions while making your choice:

1. What are the product’s terms and conditions?

Always double check the coverage assertions of the sales representative. To avoid loyalty-sapping crises come claims-time, critically review contract provisions to clearly understand exactly what will – and will not be – covered. Specifically, pay close attention to:

  1. Wear-and-tear coverage – Quality plans cover wear and tear for all plan types, not just premium products. Additionally, the best plans include coverage for repairs of vehicle parts beyond the manufacturer’s tolerances. But buyer beware – the cheapest plans on the market may not offer this broad, member-friendly coverage.
  2. Diagnostic time for covered failure – To identify the root of breakdown problems in most new vehicles today, mechanics rely on a host of high technology tools which require a fair amount of diagnostic time. The time it takes to run these tests can be extensive, and expensive; some basic programs may not provide this coverage. Your member will be pleased the product you represent makes sure covered repairs include the mechanical inspections needed to determine the problem.
  3. Rental coverage – If repairs are going to take some time, your members will need alternative transportation while their car is in the shop. Make sure the policy provides a minimum $50-per-day rental allowance.

2. What type of support and experience is included with the product?

Truly successful VSA/MBI programs provide comprehensive, active support for the credit union. Most lending departments offer multiple products and services, so staff can’t be expert in all of them.  Select a VSA/MBI partner who will serve as your “go to” expert – one that provides both real-time product-knowledge support as well as ongoing, customized staff training. This helps ensure a consistent, quality product presentation – translating to accurately informed, loyal members. Note that some VSA/MBI vendors broker other companies’ products, with little to no product support. A better choice is to partner with a vertically integrated service provider that creates its own program, directly supports the product, manages its claims, and prices its product across multiple rating groups. In our experience, management of the entire sales process for your staff as a white-labeled, outsourced solution is a great choice because the focus is always on a terrific member experience, and great results.

3. Is a decades-long track record of member service a key component of the program?

Wouldn’t it be great if your program was designed by credit union professionals, exclusively for the credit union channel? Shouldn’t your product partner have an equally high-level quality of member service? Partner with a provider that has an experienced, enthusiastic, member-friendly staff; has convenient service hours (including after-hours and weekends); and is responsive to your member’s questions – from components covered to the repair process. Having access to a specifically trained, experienced VSA/MBI staff, with a focus on specific products, helps ensure a positive after-the-sale service experience for your members.

Finally, as a general rule, it’s best to work with a provider rated “A” or higher to ensure the longevity and support that are vital for your VSA/MBI product offering.

VSA/MBI programs are a proven to increase non-interest income. Anyone can choose a vendor.  Answering these three important due-diligence questions ensures that you choose a real partner for auto protection – a win/win situation for both credit unions and members.

Jim Hawk is President and CEO of IWS, a national provider of vehicle protection products to credit unions, headquartered in Boca Raton, Fla. For more information, visit www.iwsgroup.com.