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Choosing a Tech-Savvy Insurance Vendor

As third-party vendors continue to be an extension of the servicer, it’s imperative that a servicer selects a lender-placed insurance vendor that operates as a partner.

There are various elements that should be considered when evaluating a lender-placed insurance partner, one of which is technology. Vendors that can effectively leverage technology can efficiently meet the changing needs and evolving regulations of the mortgage servicing industry. A vendor’s commitment to technology can ensure that servicers remain in compliance.

Servicers should ask the following questions to evaluate a lender-placed insurance vendor’s commitment to investing in technology that supports the vendor’s infrastructure, IT security, and tracking system.

Can the vendor demonstrate robust infrastructure technology to guarantee system uptime?

Servicers need to assess a vendor’s investment in infrastructure technology that supports uptime of systems, networks, data centers, and facilities. Two primary objectives are to protect data and to continue operations without interruption of service.

One of a vendor’s primary lines of defense is a firewall that protects for DDOS attacks, Malware, Viruses, web filtering and access lists to limit connectivity. In addition, firewall management includes consistent and timely application upgrades and updates to threat and antivirus signatures.

Redundancy should be built into technology to prevent business disruption.  This includes redundancy in power, servers, firewall, data storage, and internet service providers.  A vendor should invest in an Uninterruptable Power Supply (UPS) with a generator that maintains the building, data center, and system uptime without skipping a beat.

A strong disaster recovery program is essential.  A vendor touches and updates valuable servicer data daily, which in turn should be continually replicated throughout the day to a disaster recovery site. Seek a vendor that institutes a business continuity and disaster recovery plan that is tested annually and verified by an independent third-party auditor.

Can a vendor prove its financial commitment to IT security measures?

Financial investment is required to build an IT security and governance team that protects information and systems from unauthorized access, use, disclosure, disruption, modification, or destruction in order to preserve confidentiality, integrity, and availability of information systems to servicers.

Look for a vendor that demonstrates competency in cyber security at the state and federal level. Competency can be measured by assessing the vendor’s cyber security policies and programs, which should include the following elements:

  • cyber security risk assessment
  • dedicated cyber risk governance and management team
  • incident response plan
  • cyber resilience
  • frequent penetration testing and vulnerability assessments contracted by a qualified independent firm
  • strong independent audits of the organization’s security
  • ongoing cyber security training for its teammates

Seek a partnership where the vendor understands the importance of managing the potential risk that exists when confidential data is entrusted with a third party.  A vendor should approach the partnership with cooperation and a sense of urgency to comply with a servicer’s vendor management requests.

Does the tracking system demonstrate investment in technology that prevents borrower harm?

A servicer doesn’t need an insurance monitor. A servicer needs a vendor whose system is capable of identifying insurance exposures and intelligently correcting them with compliant lender-placed insurance practices. There are several questions a servicer can ask to identify how technology is leveraged to prevent non-compliance and borrower harm.

Does the system include automated warnings, process stops, and control reporting to ensure accuracy and compliant results? 

Systems that maintain data integrity and identify illogical data conditions should be incorporated into the technology solution.  Even when electronic data interface (EDI) is fully leveraged for insurance invoice processing, human involvement is part of the process. Flags, stops, and integrated controls that help prevent duplicate or incorrect insurance disbursements offer optics and preventative measures against borrower impact.

Robust and timely control reporting is the key to demonstrating that systems and processes are delivering expected results. Controls around timely insurance mail processing and lender-placed insurance refunds are critical to a compliant solution.  Servicers should seek partners with systems that can provide intelligent workflow management. Borrower harm is reduced when system rules are set to prioritize inbound insurance documents associated with borrowers currently in the lender-placed letter cycle or who have already been lender placed.

Tools designed to prevent lender placement are also important to consider.  An intuitive policy procurement system that allows the vendor to optimally manage communication to agents, carriers, and borrowers in order to obtain current insurance policy information should be an integral part of outsourced insurance solution.

Preventing unnecessary lender placement is one part of the equation.  However, when necessary, lender placement must occur. Lender-placed activities are highly regulated by federal and state laws and regulations.  Fannie Mae, Freddie Mac, and other investors also have servicing guidelines that require adherence.  The vendor’s technology should include tight controls related to notices, placement, cancellation, and refunds of lender-placed insurance, including the ability to evaluate adequate coverage and respond appropriately to changes in flood zones in order to keep the servicer in compliance.

How is technology leveraged to minimize and manage consumer complaints?

A consumer complaint tracking system that can produce reporting to the servicer is a minimum requirement that must be met.  Servicers should expect their vendor to leverage additional tools designed to provide real-time speech analytics during borrower phone calls that can alert management to potentially escalating situations as they are developing. Post call surveys are another tool for a servicer to utilize for ongoing evaluation of the borrower experience.

What technology solution does the vendor offer for monitoring repairs to a borrower’s property after an insurance claim is paid?

Efficient workflow and task tracking systems that keep funds flowing while maintaining required controls will dramatically improve the borrower’s experience throughout the claim process.  Seek a vendor that developed a module to manage and monitor claims for preferred policies

How does the vendor control change management?

A healthy balance needs to exist between nimbleness and tight controls established to manage the change process when new industry regulations need to be implemented.  A vendor’s technology team should use System Development LifeCycle tenets, processes, and standards which maintain a common code base and facilitate faster installation of common changes across clients.  Seek a vendor with a proven record of implementing change requests quickly and smoothly. Responsiveness to the evolving mortgage servicing industry keeps a servicer in compliance and mitigates borrower harm.

Is the tracking system designed to allow complete transparency?

With a click, a servicer should be able to perform independent vendor management to ensure their lender-placed partner is performing. Every borrower touchpoint should be memorialized and accessible at any time – including insurance documents received, recorded borrower phone calls, notifications sent, transaction history, and claims documents such as adjustor’s reports. This transparency and access is especially vital when a servicer is audited.  If housing all documents and notices on your own imaging platform is important, seek a vendor who can provide an export of documents in an indexed and usable format.

In conclusion, select a lender-placed insurance vendor that has proven its financial investment and commitment to technology, infrastructure, IT security, and intelligent tracking system. A vendor that invests in technology is a partner that invests in its client relationships.

To read our article on DSnews click here.


Mohamed ElewaMohamed Elewa began his career at Proctor Financial in 2001, where he has served in the capacity of Chief Financial Officer and Chief Operations Officer. Today, he serves in the role of Executive Vice President. Through his leadership, Mohamed has championed for the investment of millions of dollars in state-of-the-art technology advancements to improve operational efficiencies and develop workflow solutions.  Under Mohamed’s direction, Proctor Financial created proprietary technologies, such as IIM – Intelligent Insurance Manager tracking system and Proctor’s Loss Draft Module. Mohamed is committed to ensuring that Proctor continues to invest in technology, infrastructure, IT security, and tracking systems that strengthen client partnerships and improve the borrower experience.