We are reviewing a proposal from American General to monitor our insurance coverage on collateral. Their proposal is to review loans to ensure that coverage is in place, and if coverage lapses, they notify the customer to obtain coverage or force-place. Force-placing involves capitalizing the premium onto the loan balance. Is anyone using this service at this time, and how's it working for you?

Years ago we had Vendors Single Interest insurance. Sounds the same.

We tried adding the premium cost to the loan at the end of the note and amortizing it over the life of the loan by increasing payments. After the premiums are issued, customers wake up and bring you a policy. Then they object to being held to any of the costs.

Past dues sky rocket. Customers on auto debit for payments have fits.

It was a headache from both the lending and collections side. While we were not supposed to have to do much other than watch our collateral be protected, I'm not sure the benefits outweighed the costs we really did have administering the processes and customers.

We had the same headaches and heartaches with VSI. A blanket policy, where a fee is assessed per loan made (not to the customer, to the bank) and the collateral is covered is much more efficient for us.

That is also what we have now, and life is so much more fun.

VSI was the first time I was introduced to the phrase, "actual cash value". That is where the real value of the car is less than what you loaned and you are still subject to a loss.

We use CPI and I would recommend adding the premium to the loan balance and then either amoritizing the premium over the life of the loan OR amortizing over the life of the premium. Do not leave the premium till the end of the loan, I have seen numerous instances where the customer refuses to pay the premium from three years ago. In these cases the premium owed might be more than the value of the car and the bank winds up charging off the premium. In addition to the letters & requests to the borrower about obtaining the insurance, I would recommend calling the customer before the insurance is in place. Bottom line all you're trying to do is get the insurance, once the policy is issued, problems increase. I do think this is a good product because only those individuals not having insurance pay. The 98% of customers that have insurance don't pay.