How Auto Deductible Reimbursement Benefits Your Financial Institution5 min read

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(Last Updated On: September 20, 2019)

Your Borrowers Love Value.

What makes something valuable? Judging by the definition, you must deliver “relative worth, merit, or importance”. Everything you offer has value, obviously. So how to convince your borrowers? Marketing team, batter up! It’s time to build “perceived value”. What’s perceived as being more valuable…is.

What does Auto Deductible Reimbursement have to do with value? Simple, it’s great for all parties. Here’s a quick summary of how it benefits your financial institution:

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Auto Deductible Reimbursement (ADR) is a high perceived and real value product at your institution. Its benefits and affordable pricing make generating interest easy, while providing peace of mind for borrowers.

Plus, by ADR’s nature, loyalty improves. And for your institution, enjoy reduced portfolio risk and enhanced non-interest income.

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What You’ll Find Below

Unclear on what Auto Deductible Reimbursement is? That’s ok. We’ll start there and then dive into the benefits for your institution and borrowers.

Learning Library Full Disclosure

As part of our commitment to transparency and honesty, this is important to share:

Our company offers an ADR program. We get that you’re here to learn about the product in general, not be sold something that might not even be a fit.

As a result, we made every effort to provide honest, unbiased information so you can decide what makes the most sense for your institution and borrowers.

What is Auto Deductible Reimbursement (ADR)?

Auto deductible reimbursement is a protection product intended to cover the collision deductible on your borrowers’ car insurance policy. Since a higher deductible means a lower premium (with equivalent coverages), ADR protects against this potential additional cost.

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According to USAA, the most popular deductibles are $250 and $500. Therefore, Auto Deductible Reimbursement is available for up to $500 per loss. It is a supplemental added protection, not insurance, which pays directly to the borrower after a claim is filed and paid by the primary auto insurance carrier.

Common terms and features:

  • Allows for unlimited claims per year, up to $500 per claim, within the term of coverage (i.e. 1-5 years available).
  • Coverage begins on the date of enrollment (no wait period).
  • The primary borrower receives the ADR coverage.
  • Program covers all autos the borrower owns & insures.

Sound like a lot of value to you? You’re right!

The GAP Connection

ADR is beneficial on its own, but your agent and digital platforms have enough products to present. Another one adds further complexity and possible borrower fatigue. Institutions built a clever solution using your most popular vehicle risk-management product. Yes, GAP.

In the mid-2010s, we began to see lenders “bundling” ADR with their existing GAP program. Why? Because they complement each other.

A borrower with both GAP and ADR is better protected following a crash. GAP is perfect if the vehicle is totaled, but doesn’t help in a repairable claim. ADR offers assistance for both scenarios.

No gap anymore!

ADR Benefits For Your Borrowers

Helps Avoid Out-of-Pocket Expenses

Hand Cupping Car Globe - Insurance

Even with insurance coverage, the sudden expenses after an auto accident can be significant. With the common $250 or $500 deductibles, the borrower is out these amounts, regardless if they are at fault. Not ideal for the 41% of people unable to cover an unexpected $500 expense.

Families like these, living paycheck-to-paycheck, would suffer the most. ADR eliminates that expense. It may be a nice perk for some borrowers. For others, it’s a financial lifesaver.

Saves Premium Money

When it comes to auto insurance, the lower the deductible, the higher the premium. If some or all of that can be covered by ADR, would you take the premium savings? It may be less costly to add auto deductible reimbursement than to choose the lower deductible on the policy.

Further, remember that ADR covers all cars owned and insured by your borrower. 

Provides Peace of Mind

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Yeah, he’s on his phone. And driving.

“There’s not enough bad drivers.” Said no one, ever. Knowing a “minor” accident won’t put them in dire financial straits gives borrowers confidence.

Which is nice to have as they navigate this country’s often-maddening roadways and parking lots.

ADR Benefits For Your Institution

Reduces Loan Risk

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GAP reduces loan risk. ADR reduces it further. For borrowers already struggling, the out-of-pocket costs after an accident may make the difference between making their payments on time, or not at all. It can also be the “helping hand” to get their car fixed. Which lets them drive to work, bring the kids to school, and get on with their lives.

Builds Loyalty

How does your institution differentiate? Would a “Bruised or Totalled” protection package set you apart? Consider the improved “perceived value”. And the real benefits.

Bottom line: When your borrower ran into difficult situations, your institution was there. That’s what they’ll remember.

Adds to Revenue Stream

You know non-interest income is important. Experience improved sales penetration by adding ADR to your GAP or GAP/VSC offering. That protection offering looks mighty appetizing!

Cost

ADR generally has blanket pricing. This assumes it will be included on all your GAP sales or packaged within a GAP/ADR/VSC offering. As of 2019, the average cost range to your institution is between:

  • $30 for a 1-year program
  • $85 for a 5-year program

Our ADR Solution

We represent the Assurance Plus Auto Advantage Program through Frost Financial. It includes:

Man Driving Car
  • Auto Deductible Reimbursement (ADR)
  • VisualGAP Menu-Selling System
  • Personal ID Restoration Consulting: Your borrowers will have the peace of mind of knowing that a professional is standing ready to help restore their good name if identity theft strikes.
  • Warranty Vault™:  The on-line storage & organizing service that helps your borrowers to take full advantage of their consumer product warranties.   

More “Can’t Miss” Learning Library Related Content

To find out more about GAP and ADR and how it can benefit your institution and borrowers, check out the GAP section of the Learning Library.

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Let’s Talk Shop

Past the research step and now looking for providers? Auto Deductible Reimbursement is one part of our auto lending profitability suite we call cuZOOM. Schedule a 15-minute chat with us to decide if it’s worth arranging a full discussion with all necessary parties.