3 ways home insurance can derail mortgage closings

image: www.geograph.org.uk

Many home buyers don’t start thinking about home insurance for their new homes until their lenders ask them about it during their closing process. Inexperienced lenders can be late to check on their clients’ insurance.  Too often, things come up that can have a negative impact on loan closing and even wreck deals. We’ve handled enough panicky phone calls and emails from mortgage lenders and home buyers to know. But home buyers and lenders don’t have to worry if they keep a few things in mind.

Environmental Conditions

We at Comparity live in an area where both hurricanes and flooding threaten homes on an annual or perhaps more frequent basis. But even areas not as infamous for damaging weather can face environmental conditions that force insurance carriers to adjust their underwriting criteria, increase rates, and restrict policy issuance. Regional restrictions vary by carrier over time and change frequently. Homebuyers often expect to go to their current insurance carrier for a new policy only to find the carrier has temporarily halted issuance of new policies in the area.

Excessive Claims

At some point during every closing process both home buyer and lender should be protected by a Claim Loss Underwriting Exchange (C.L.U.E.) Report. No home buyer or mortgage lender should do a deal without a C.L.U.E Report. The C.L.U.E. Report details the insurance claims history of a property. If there have been many claims on a property the cost of insurance on that property can increase, no matter what carrier. But again, all carriers have different appetites for risk so their policies will have different costs for excessive claims properties.

Debt-to-Income

For any number of reasons, including the two aforementioned, the cost of a home insurance premium can put a buyer over a legal limit on the amount of debt they can carry relative to their income. Hazard insurance policies often vary by thousands of dollars across carriers.

Shop and Compare

Anytime someone is buying a home they should shop and compare their options for home insurance. Mortgage lenders should encourage their clients to shop for home insurance well before closing. There are too many variables in every homebuyers situation to assume that they can find the right coverage for the best prices by going to only one seller, even if that seller represents multiple insurance carriers.

 

Better Together

Today we reached a milestone for our company and at the same time we contributed something useful to the world of home buying and home insurance. Today we launched our first API integration with a mortgage technology company and it was not only our first integration, it was the first integration of its kind between the home mortgage and home insurance industries.  It will help lenders, borrowers, and insurance carriers alike by streamlining home insurance into the increasingly digital mortgage business. It’s something that lenders have wanted for a long time but was never possible until we came along.

Technically, API integration is quite simple, almost trivial. For technology companies, API integration is expected. You’re not a tech company if you don’t API. But in the mortgage and insurance industries, API integrations are rare. Mortgage and insurance companies are not only decades behind with their technology but layers of regulations, consumer protections, and market forces made any business case for integration between mortgage and home insurance seem untenable.

That’s where we came in. The combination of our technology and business model makes it not only possible to integrate home mortgage with home insurance but profitable for us to do so, and in a way that adds value for everyone in the ecosystem. Lenders get a way to help their clients with hazard insurance that is compliant with lending rules and streamlines their closings. Homebuyers get a way to privately shop and compare the market without any effort. Insurance carriers and their agents get access to desirable customers without any up-front lead fees.

Today we reached a milestone for our company and did something useful for the 5M people who buy homes each year, their lenders, and their insurers. We won’t reach them all right away but we took the first step. That feels good.

Insurance and Empathy

Empathy and Emotional Intelligence by Roy Blumenthal

Featured image: “Empathy and Emotional Intelligence” by Roy BlumenthalCC BY-SA 2.0

Empathy and Emotional Intelligence by Roy BlumenthalEarlier this week I was chatting on LinkedIn messenger with my friend Alexander Tran, who happens to be a UX Designer at Embroker. Alex and I met when we worked together at Code for America. I pinged him when I realized that we were in the same industry again. It was surprising to us both that we would go from #civictech to #insurtech.

But then we realized we were both bringing many of the same motivations with us from one field to another.

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Said I

Alex agreed.

This got me thinking about empathy and insurance. Is that weird?

I’m new to this industry, starting in 2014. Two things I learned in my first couple weeks have stuck with me ever since:

  1. Everyone needs insurance
  2. Most people don’t understand their insurance

Mainly I’m referring to property and casualty insurance though I’m sure this applies to all insurance. I could go as far as saying no one understands their insurance because I’m confident that I could surprise anyone with things they don’t know about their own policies. Every day we hear customers exclaiming, “wow, I didn’t know that!”

That just seems wrong to me. How can so many people be uninformed about something they are required to have and that has a huge impact on their most valued possessions? Righting that wrong is a big part of what drives me – us – at Comparity.

I don’t blame the insurance industry (for selling something nearly every single person must buy when there’s no practical ability to compare options) though it would be easy to do so.  Carriers are in the business of writing good insurance policies, not making it easier to shop.

Unfortunately, lead generators in the space are just selling and reselling contact information for someone who has said they want insurance and leaving it to agents to race to the customer. Read lead generators’ fine print. What buyer wants eight insurance agencies calling and selling them? BTW, agents hate it, too!

But the fact is that home insurance is complicated. There’s no other way to put it. Home and auto insurance with a family, a couple of teenagers, maybe a minor infraction is exponentially more complicated. It’s not just hard for buyers but sellers, too, including carriers and their agents.

This is the vibe that attracted me to insurance technology even before I fully realized it. Insurance is a massive marketplace affecting hundreds of millions of people, it’s an industry where simple technology applications can have exponential impact, and it’s desperately in need of technologists who have empathy.

There’s plenty of talk around #insurtech about disruption, with camps both favoring and marginalizing the idea. Sensors, big data, drones are all the rage. I get it. Those things are cool. But they don’t do anything at all to address the main problem with insurance: people don’t like it and don’t understand it even though they must have it. I certainly don’t want “empathy” to become insurance buzz d’jour but I would like to see more of it in #insurtech.

https://www.comparityins.com