New Whitepaper from Cornerstone Advisors and TruStage Highlights How Embedded TruStage Payment Insurance Could Offer an Effective Strategy to Lower Risk and Improve Profitably for Digital Lenders

Speed and convenience are even more critical to consumer lending with more and more people turning to digital channels to access critical capital. To address this market trend, TruStage, a financially strong insurance, investment and technology provider has partnered with leading bank consultancy, Cornerstone Advisors, to develop a new whitepaper, “Improving Online Lending Profitability With Embedded Payment Insurance,” available for free download here.

With approximately $102 billion in U.S. consumer debt currently delinquent due to unemployment and disability, digital lenders and fintechs are actively developing new lending solutions to meet consumer demand and grant greater access to credit to previously marginalized borrowers without taking on additional risk.

While traditional credit insurance products have been a key facet of lending for decades, there is a growing need for new approaches specifically designed to support the evolving digital lending landscape. Though often necessary, the complexities that many traditional offerings can introduce to the loan process can add friction, hindering the simple, fast and convenient interactions today’s modern digital consumers require and expect. By making loan payment insurance a component of the loan, digital lenders are overcoming this challenge in a risk responsible way that protects consumers from the negative effects of unforeseen financial or medical hardships.

Some key points addressed in the whitepaper include:

• The benefits of payment insurance for borrowers;
• The impact that embedded loan payment insurance can have on a lender’s loan portfolio;
• How embedded loan payment insurance works; and
• Current real-world examples of embedded loan payment insurance.

In developing the whitepaper, Cornerstone Advisors created a five-year financial model that analyzes the effects of providing digital loan payment insurance on a portfolio of personal loans. The model compares an assumed cost for personal loan charge-offs to various scenarios where loan insurance is implemented and outlines the expected savings a lender can realize in charge-off costs related to covered job losses and disability.

“Many lenders can achieve a 20% reduction in charge-off costs with loan payment protection. A growth-focused lender can save $42 in charge-off costs for every $1 in insurance premiums1,” said Ron Shevlin, Chief Research Officer at Cornerstone Advisors and author of the white paper.

“We see embedded payment insurance as a critical component of a successful digital lending strategy,” said Danielle Sesko, TruStage Director, Product Management. “For borrowers, it is a proven way to provide a financial backstop in case of unplanned job loss or disability and for lenders, it provides an effective way to manage risk while expanding access to credit to more U.S. consumers.”

1 Conerstone Advisors, Improving Online Lending Profitability with Embedded Payment Insurance, June 2024