September 17th, 2021
With regulations tightening around Real Estate servicing and force-placed (hazard & flood) insurance, Lee & Mason is having great success with our Outsource Insurance Tracking program. Many of our clients are looking to streamline their loan servicing operation by fully outsourcing their insurance tracking and insurance escrow, helping to free up manpower and putting them in a better position from a risk management perspective.
Below is a case study of a New York-based bank (980M in assets) that has made the transition to an outsourced tracking model. We interviewed their VP/Director of Loan Administration, Commercial & Residential Loan Servicing Officer, and Loan Servicing Rep to help give insight into the program benefits and implementation process.
Before switching to an outsourced insurance tracking model, how did the bank track insurance and respond to cancellation notices?
We made the switch to Outsourced Tracking in 2011. At the time, we tracked insurance manually on index cards, which worked for us but left room for human error. As we converted to outsourced tracking, it became apparent that things had slipped through the cracks inadvertently. There were more exceptions than we realized in our portfolio, which opened our eyes. The regulations were starting to change as it relates to tracking and force placing insurance, especially with flood, which pushed us to explore an Outsourced Tracking model.
Roughly how many employees were dedicated full or part time to this process?
We had one employee dedicated full time to tracking and servicing our loans. If we were still tracking insurance manually today, we would need 2 or 3 employees to handle the servicing.
How many employee hours a week do you estimate were spent tracking insurance, opening mail, scanning insurance documents, managing,escrow billing, borrower agent contact, exception letter cycles, force-placing insurance?
Roughly 30 hours a week in 2011, which would equate to 50+ hours today with the growth we have experienced.
What led you to explore an outsource insurance tracking model? Were their specific problems the bank was experiencing?
The tracking process had become a burden within loan servicing and we wanted to outsource the E&O exposure that tracking in-house creates.
How long has the bank been outsourcing its tracking to Lee & Mason?
Our tracking has been outsourced to Lee & Mason for roughly 6 years.
How did the implementation process go when you decided to make the switch?
The implementation process presented a challenge, because our system of tracking was paper-based; not digital. We had to figure out a way to convert our tracking data and insurance data (Declaration Pages, etc.) to an electronic file, which was time-consuming. However, Lee & Mason was extremely helpful and provided on-site assistance with three account managers to help with the conversion. Once the file was up to date, the rest of the process was very stress-free.
What are the top two or three benefits of switching to an outsourced tracking model?
Our servicing department was more efficient, which allowed us to apply resources to other aspects of the bank. Then from a risk standpoint, all the requirements of tracking loans and force-placing insurance with proper notification was now in the hands of Lee & Mason. Lee & Mason tailored our insurance policies to create a risk management model that combines both blanket and traditional coverages to effectively address insurance risk across all portfolios.
Did outsourcing your insurance tracking help positively affect the bank's bottom line along with your loan servicing workflow?
Absolutely, it helped tremendously as we now only spend two hours a week servicing loans. We dedicate less employee time to servicing, which equates to less operational expenses with a more comprehensive tracking program than we originally had in-house.
How would you compare life before the bank implemented the outsourced tracking program to life after the implementation?
We are much more comfortable that we are meeting all regulatory guidelines — especially as it relates to flood. The actual process of tracking insurance is very tedious as well, so it’s nice to have that process outsourced. Overall, we are more efficient as it relates to loan servicing.
From a regulatory standpoint, do you feel the bank is in a better position from a risk management perspective?
Yes, 100%. The majority of our insurance risk exposure has been outsourced to Lee & Mason.
Would you recommend Lee & Mason’s services to other financial institutions?
We would highly recommend Lee & Mason’s services. They have been a great partner every step of the way. From a service perspective, they are always quick to respond and help with any issues and questions.
If you would like to discuss our insurance tracking program, please contact one of our sales professionals in your location: Contact us!