Consumer Value Study Debt Cancellation & The Home Equity Lending Marketplace 00 Aon Integramark. All rights reserved.
Introduction: Debt Cancellation & The Home Equity Lending Marketplace For several years, our team has examined the home equity line of credit (HELOC) and mortgage marketplace to determine the potential for optional debt cancellation programs. Many banks have either launched or are considering a debt cancellation offering for this form of consumer indebtedness. Among those offering an optional debt cancellation or debt suspension program to HELOC customers, acceptance is usually less than anticipated. In our most comprehensive Consumer Value Study to date, we examine the home equity lending marketplace and potential to gain results with an optional debt cancellation type offering. While we found the enrollment action is often based on one s feeling of financial security and potential to be at risk, we also found many existing programs leave the customer perplexed with too many options on issues of little to no value. In the pages that follow, you ll learn more about providing value and gaining results with a debt cancellation program. You ll learn more about meeting the needs of the home equity lending customer. Whether you are launching a new program or looking for ways to improve an existing one, this Consumer Value Study provides ways your organization may wish to respond. The Market For A Debt Cancellation Program Our Consumer Value Study research projects demand for an optional debt cancellation program offering to be.% of home equity line of credit customers. Of course, each bank customer base will have traits that could increase or decrease potential demand. For example, our research indicates that a customer s perception about their future financial security will impact acceptance of the program. Among HELOC customers who are less than very confident about their financial future, demand is projected at.%. Demand shrinks to.% among HELOC customers who are very confident about their future financial security. The following chart illustrates HELOC customer preferences on a range of features that may be associated with debt cancellation programs. In addition to providing preferences among total respondents, you will find slight differences among those respondents expressing confidence in their future financial security. Feature On severe events, cancel outstanding HELOC balance plus amount of debt equal to all monthly utility bills Total HELOC Respondents Very Confident About Future Financial Security Less Than Very Confident About Future Financial Security % % % On severe events, cancel outstanding HELOC balance % 0% % Protects credit rating (never fall behind in payments) % % % Delay payments on debt up to one year interest-free % % % Costs nothing until there is a HELOC balance % % % Delay payments as long as condition lasts, up to months interest-free 0% 0% % Bob Reilley Ty Ragland First 0 days are free after starting the protection % % % Authors of the Consumer Value Study 0 days to cancel and receive a full refund % % % $0 debt reduction for no claims in one year if debt used % % % Delay one HELOC payment per year during any convenient month % % %
What s Important To HELOC Customers? Determining The Value Issues HELOC respondents feel that protection against long-term or permanent disability (%), disability from an accident (%), an unplanned hospitalization (0%), or an involuntary loss of job (%) are most worth paying for in their debt cancellation protection program. The core of our Consumer Value Study is based on creating a Value Analysis Map that visually depicts the data gained from our research. It not only looks at what is important to the customer, yet also plots the value perception of a given topic. By adding value perception data to the ranked items of importance, we establish a very realistic picture of what a customer cares about and is also willing to purchase. Type of Coverage Total Value Analysis Map Fig. Long-term or permanent disability % Disability from an accident % Unplanned hospitalization 0% Involuntary job loss % Identity theft % Accidental death % Assisted living arrangements % Primary residence in a federally-declared natural disaster area % BASIC ISSUES UNIMPORTANT ISSUES VALUE ISSUES CUSTOMER IMPORTANCE HIGHEST LOWEST Loss of eyesight or hearing % LESS CONTRIBUTES TO VALUE PERCEPTION MORE Spouse dies from natural causes % How to Read the Value Analysis Map Vertically: Attributes are plotted according to how important they are to prospects or customers, whereby importance scores increase as they move from the lower half of the map to the upper half of the map. Horizontally: The map plots the attributes by the degree to which they contribute to prospects /customers perception of value in the debt cancellation program, whereby attributes increase in their contribution to value as they move from the left to the right of the map.
Mapping the Consumer Value of Debt Cancellation Program Elements 0 Attributes plotted in the upper left portion of the map are Basic Issues, or those attributes that prospects or customers expect all debt cancellation program providers to offer. Attributes plotted on the right side of the map are Value Issues to prospects and customers. Value Issues plotted in the lower right portion of the map are of particular importance, since these are the attributes that are valued by prospects/customers but about which they know the least. 0 Unimportant Issues are noted in the lower left area of the map. Prospects and customers have the greatest learning curve when it comes to these attributes; however, depending upon how valuable these attributes are eventually perceived as being, they may have the potential to appeal to a wide market. 0 LESS HIGHEST CUSTOMER IMPORTANCE LOWEST Fully Understanding The Value Analysis Map Fig. MORE CONTRIBUTES TO VALUE PERCEPTION How Issues Move Over Time Over time, many attributes on the Value Analysis Map move counterclockwise as the market evolves and responds to customers needs. These shifts on the map (see arrow in Fig. ) follow a clear and logical pattern: ) Attributes that truly have the ability to change the course of prospects perceptions often begin as Unimportant Issues attributes which currently are not important to prospects and do not affect prospects value perception. ) Innovation allows these attributes to move from Unimportant to low importance Value Issues. These attributes are of low importance because not all debt cancellation program providers offer the innovative improvement yet, or prospects do not yet fully understand them. ) Over time, performance improves on these attributes. As more debt cancellation program providers make the needed improvements valued by prospects and customers, these attributes become high satisfaction Value Issues. ) Eventually, prospects/customers begin to take the high-satisfaction Value Issues for granted, and these attributes lose influence as major contributors to value perception as they evolve into Basic Issues. Basic Issues 0 Putting The Information To Use The Value Analysis Map shows us the path to: ) Meeting customers needs (today s debt cancellation offering) Be competitive on the Basic Issues Give customers what they want ) Anticipating customers needs (future debt cancellation offering) Structure to deliver on Low Satisfaction Value Needs Determine how to make Unimportant Issues more valuable Long-term or permanent disability as a Involuntary job loss as a Unplanned hospitalization as a Protects credit rating Disability from an accident as a Cancel outstanding HELOC balance on severe disability Accidental death as a Identity theft as a Delay payments for duration of condition, up to months interest-free 0 days to cancel and receive full refund Assisted living arrangements as a Loss of eyesight or hearing as a Primary residence in federally-declared natural disaster area $0 debt reduction for no claims in one year Disability ending within one year as a Nursing home confinement as a Cancels outstanding balance for events lasting more than 0 days Value Issues 0 Unimportant Issues Cancel outstanding HELOC balance plus amount equal to all monthly utility bills Delay payments on debt up to one year interest-free Debt cancellation costs nothing until there is a HELOC balance First 0 days are free Spouse dies from natural causes Delay one HELOC payment per year during any convenient month Planned retirement as a Leave of absence from work as a Cancels monthly payment for any lasting less than 0 days New home purchase as a Delay one HELOC payment per year during any month with a national holiday Divorce as a CSRs can be reached Monday Friday, am pm, ET Receive free companion airfare for enrolling when minimum $0 ticket is purchased by covered person Cancellation of one monthly payment if full-time student graduates from -year college Cancellation of one monthly payment if full-time student gets straight-as New marriage as a 0 Debt cancellation costs nothing during pending claim period CSRs can be reached / $0 debt reduction on your birthday for no claims in one year 0 days to cancel and receive a full refund Called to active military duty as a First 0 days are free Household family member starts college as a Relocation of more than 0 miles as a Newly born or adopted child as a Receive a $ gift card to a favorite store for enrolling in program Receive a $0 gift card to a favorite store for enrolling in program
Methods Of Payment Don t Keep Me Waiting! Three-quarters (%) of total HELOC respondents prefer to pay a monthly amount that is based on a percentage of their current loan balance than prefer paying a flat fee per month even with no balance (%). Preferred Method Total HELOC Respondents Paying monthly amount based on percentage of current loan balance % Paying flat fee per month, even with no balance % Respondents were asked about waiting period provisions common to many debt cancellation programs. Most waiting periods require a length of time to pass before a customer is eligible to receive program benefits. As it might be imagined, respondents preferred shorter vs. longer waiting periods to receive program benefits. Customers often only understand the full consequence of a waiting period when they need the protection the most. 00% % % % % 0%.% FAST FACT: Research indicates that.% of home equity line of credit customers would purchase an optional debt cancellation program offered by their bank. No waiting period for higher cost 0-day waiting period for moderate cost 0-day waiting period for lower cost
About the Consumer Value Study Aon Integramark creates and deploys the Consumer Value Study on debt cancellation programs. This particular research study included both a qualitative and a quantitative phase. The qualitative phase was performed via a -minute interview conducted via telephone using open-ended questions. Then, the second phase was conducted among 00 quantitative interviews with people who have an active balance on a home equity loan or line of credit from a US bank. The study was conducted from July to September, 00. About Aon Integramark We are the first and only organization fully devoted to supporting lenders with their debt cancellation programs. It s been our sole focus since opening our doors in. Today the organization provides functional services that bring hands-on experts and end-to-end solutions designed specifically for home equity lenders. Learn more by visiting www.aon.com/integramark or calling --0.