3 Ways Mortgage Servicers Benefit From Embedded Insurance
Reading time • 5 mins
By Matic
The mortgage industry is experiencing a wave of challenges, and servicers haven’t been exempt from the impact. Disruptive factors like rising property taxes and home insurance premiums are increasing borrowers’ escrow accounts and making it harder for many individuals to make their monthly mortgage payments.
Mortgage servicers can help customers navigate these financial challenges by using embedded home insurance to lower costs when escrow changes occur. It’s an easy process that helps borrowers continue to afford their homes, while reducing risk for mortgage servicers.
Here is how embedded home insurance works and how it can help your servicing portfolio.
How does embedded home insurance work for mortgage servicers?
Embedded insurance generally refers to the process of insuring a purchase either at the point of sale or at other key moments where it would make sense for the buyer to do so. In reference to home insurance, the term comes from the fact that the process of insuring a home is “embedded” directly within the experience of financing or owning the home.
For servicers, adopting a home insurance solution gives borrowers the chance to find a new (and potentially cheaper) policy at important moments in their homeownership journey. For instance, when a borrower’s escrow payment is about to increase, an embedded insurance solution gives them the opportunity to shop for new coverage and ideally score more affordable rates. The right solution identifies these situations where each borrower can benefit from shopping for insurance.
Mortgage servicers are facing new challenges as escrow payments increase, especially in areas with large property value increases or natural disasters contributing to higher insurance rates. Providing insurance options from a large carrier network can reduce the risk of borrower defaults and also improve the overall customer experience.
3 benefits of an insurance partnership for mortgage servicers
Incorporating an embedded insurance solution into your mortgage servicing processes is simple and comes with very clear advantages. From improving margins to reducing the risk of default, find out exactly how this offering can impact your core business.
1. Decrease portfolio runoff and improve the borrower experience
Customer loyalty is important in the mortgage servicing industry. It’s all too easy for borrowers to refinance with another company, particularly as interest rates begin to stabilize and increased property values tempt homeowners to cash out with a new mortgage.
Ultimately, a great customer experience can help increase loyalty and protect your business from portfolio runoff. Matic’s partners see an average 2-3x increase in customer retention for a number of reasons.
By offering insurance when borrowers need it most (like when their insurance premium or escrow payment goes up, for example), you not only stay in touch, but also provide a solution to their problem. Matic, for instance, makes it easy for your customers to take advantage of this perk thanks to a frictionless shopping experience that is integrated into their servicing journey. The borrower can continue their journey with the mortgage servicer rather than feeling like they’re being outsourced to a third party. They can quickly get multiple quotes online without having to do the research themselves. Matic even pre-fills parts of the forms for a seamless experience. And if a borrower needs help, you don’t have to worry about an influx of customer service calls. They get access to Matic’s licensed insurance agents to clarify policy details as needed
2. Reduce problems with insurance and home affordability
It’s no secret that the home insurance market is facing widespread volatility. Many carriers are exiting disaster-prone states entirely or deciding to either cancel or not renew policies. This puts homeowners in a predicament of not having adequate coverage. These problems span across the entire US — with particularly heavy impact in states like Florida, South Carolina, Texas, California, Georgia, New York, and New Jersey.
Even if your customers aren’t seeing such dramatic coverage issues, homeowners nationwide are experiencing significant premium increases. In 2023, renewal increases averaged over 23%, compared to an average of 5-7% in previous years. This has a huge impact on home affordability.
How can mortgage servicers help? An insurance partnership that links customers to a marketplace of options from large, national carriers along with specialty and regional insurers can reduce some of these issues. You can potentially avoid having to institute lender-placed insurance and can even end up saving your customers money on their escrow payments.
3. Offset the cost of servicing a loan
Profit margins are becoming increasingly difficult to maintain, let alone grow, for mortgage servicers. Low inventory in the market makes customer acquisition another challenge. In fact, 2023 had the lowest number of home sales in 30 years.
Not only does Matic help with efficiency, it also helps offset the high cost of servicing a loan by adding an ancillary revenue stream. In addition, we can help with complex compliance requirements — Matic has a deep understanding of the highly regulated mortgage industry and offers a compliant revenue stream for mortgage servicers.
The bottom line
Despite the challenges facing mortgage servicers, there are new opportunities to improve efficiencies and build customer loyalty. Choosing an insurance partnership with Matic creates an easy way to add value for homeowners and even add a new revenue stream for servicers
