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Exposure to Risk Due to Under Coverage in HFCs

Ruchika Dhamija Basics of Insurance June 29th, 2023

Housing Finance Companies (HFCs) play a significant role in fulfilling the housing needs of individuals and families in India. HFCs offer various types of loans, such as home loans, loans against property, and construction loans. However, HFCs face significant risk exposure due to under-coverage of loans, which can have serious financial implications.

Exposure to Risk Due to Under Coverage

Under coverage refers to the situation where the insurance coverage provided for a loan is inadequate, leaving the HFC exposed to the risk of loss. This occurs majorly due to having a limited set of insurance partners. For instance, if a loan is offered for 15 years, the insurance cover provided is for 5 years, leaving the HFC exposed to the risk for 10 years. Or if the loan is 20 lakhs, insurance cover is only offered for 15 lakhs, leaving the HFC exposed to the risk of 5 lakhs.

Renewal Management Challenges Faced by HFCs

Insurance renewals are required at the right time to cover the gap, but the challenge of managing renewals further compounds the under-coverage problem. Managing insurance renewals is challenging for HFCs, especially when dealing with a large portfolio of loans. HFCs must track the insurance coverage for each loan and ensure that the insurance policies are renewed on time. However, this process is time-consuming and complex, and missing renewals can increase the risk of exposure to HFCs.

How Zopper Helps HFCs Overcome Under-Coverage Challenges

Zopper, an API-enabled platform, provides a comprehensive insurance management system that addresses under-coverage and renewal management challenges. The system tracks insurance coverage at the time of loan disbursement and throughout the loan tenure. This ensures that HFCs are aware of any gaps in coverage and can take the necessary actions to mitigate risks.

Zopper's system also ensures the timely disbursement of insurance claims by automating the claims processing and settlement process. The system provides real-time updates on the status of insurance claims, enabling HFCs to take proactive measures in case of any delays.

Additionally, Zopper's solution automates the entire renewal management process, providing HFCs with reminders for renewals and tracking the status of renewals. This helps HFCs save time and resources while ensuring that their portfolio is always covered.

In conclusion, under coverage is a significant challenge for HFCs, and it can increase their risk exposure. However, with the help of Zopper's solution, HFCs can mitigate this risk and ensure adequate insurance coverage for their loans. By automating the entire insurance management process, Zopper helps HFCs save time and resources, enabling them to focus on their core operations.

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