Embedding Home Insurance in the Mortgage Process

Homebuyers, and especially first-time homebuyers, often find themselves scrambling to fulfill the myriad requirements of their loan in time to meet the closing deadline. Just one uncompleted task may result in the closing being delayed. This, in turn, can trigger a domino effect of documentation revisions, compliance challenges and rescheduling headaches.

It’s no wonder then that originators are eager to embrace anything that makes it easier and/or faster for homebuyers to complete that closing to-do list. One of the latest innovations automates and simplifies the procurement of a homeowners insurance policy.

Lenders require borrowers to take out an appropriate level of homeowners insurance to ensure the note holder’s interest is covered in the event the property is damaged or destroyed. It also protects from potential loss should someone be injured on the property and sue the homeowner for compensatory damages.

Typically, mortgage providers require the homebuyer to submit proof of insurance at least three days prior to closing. Even though their loan officer reminds them in a timely fashion they need to purchase the insurance, homebuyers often underestimate how much time it takes to gather the necessary application information and documentation, choose a provider, wait for underwriting and approval, and then deliver proof of insurance back to the lender. The lender must then factor the monthly premium into the monthly mortgage payment before producing a final (and accurate) Closing Disclosure in time for the closing.

By embedding a homeowners insurance procurement platform within their mortgage process, lenders have greater control over the delivery of a homeowners policy with the appropriate amount of coverage.

Let’s say Procure Homeowners Insurance is step 4 in the borrower’s process instructions. At that point, he or she is provided with a link to the embedded insurance platform. Lenders can choose to program the platform to automatically pull the home and property data needed to write the policy directly from their LOS database or the buyer can manually input the data into the online application.

Once the homebuyer hits “submit,” the platform’s engine returns the top three carriers ranked by their respective premium prices for the coverage and policy. The homebuyer then chooses which carrier and policy they want to purchase. The transaction is completed and the payment receipt is uploaded to the loan file so that the loan processor has proof that the insurance is in place.

Today’s robust digital interconnectivity across the insurance landscape enables most but not all policies to be automatically processed and issued. However, there will always be exceptions when the applicant can’t complete the insurance purchase online. To keep the borrower from becoming frustrated and ensure the policy is delivered on time, the platform should feature a staffed 800 number for live, customer support.

In addition to helping borrowers with the application process, customer service representatives also take care of those whose homeowners insurance requires extra hand-holding. Fewer carriers, for example, are insuring homes in California and Florida. The system will return at least one option but the borrower may have questions or will want to know if there are any other choices available. Homes on a barrier island will require a specialty line of insurance such as a state-sponsored Fair Plan.  Knowledgeable customer representatives are key to ensuring these borrowers get the home insurance coverage they need in time for the closing.

As of this writing, embedded home insurance platforms support purchase and refinance transactions. Lenders do not have to hire a single FTE to manage the platform nor do they need any type of insurance license. The cost of integration is nominal and there are typically no per transaction fees. Time to deployment of the platform varies depending on the lender’s IT and typically takes from four to six weeks.

While any mortgage lender can reap the benefits of an embedded homeowners insurance solution, it is particularly helpful to those with multiple branches. With a simple integration, they can expedite the delivery of homeowners policies prior to closing while ensuring a consistent borrower experience across the enterprise.

Craig C. Eagleson is President/Chief Revenue Officer of the Ft. Washington, Pa.-based Incenter Insurance Solutions, a company that provides personal, commercial, health and life insurance services and solutions in all 50 states.