DALLAS — State National Companies provides Collateral Protection Insurance (CPI) to approximately 340 credit unions and John Pearson, executive vice president, national sales manager thinks it's still a misunderstood product, but an often necessary one.

"I'm asked all the time by credit union CEOs, 'What's the value to my credit union?' and I tell them that a credit union is a bottom line-driven institution as much as it is a member-driven one. But we've done a number of studies where we have taken a slice of a large credit union's repossessed cars. We calculate what the CPI would provide the credit union, as opposed to what the CU would get if they sold the car. I can come up with a pretty good figure, considering that one-in-three repos are damaged, and some say it's more like two-out-of-three. With the average repo damage of $3,500 its not hard to see how CPI coverage can save a credit union money," said Pearson.

Pearson uses the competitive auto loan marketplace with its tight margins as a sales tool for protecting a CU's auto loan portfolio. He recently authored a short white paper on the subject, noting, among other things, that a blanket insurance policy on the book raises program costs, which provides no incentive for borrowers to obtain their own insurance. Pearson said it only penalizes good borrowers.