In recent years, more and more individuals and businesses are turning to entities that provide non-bank credit to finance the establishment of a business, product purchases, apartments, vacations, and more. The ever-increasing demand for this credit also increases the risk that those credit companies take in handling a wide variety of customers who may be harmed and the financial losses they may incur. Insurance for non-bank credit providers protects the companies and entities involved in the field and minimizes the risks imposed on them.
What Does Insurance for Non-Bank Credit Providers Include?
Errors & Omissions Insurance – Required by non-bank credit providers in order to protect themselves against potential claims by customers or other parties because non-bank credit providers may be at risk of being sued for mistakes, omissions, or other professional conduct. This insurance covers the cost of the defense and any compensation payments that may arise from them.
Examples of professional liability claims against non-bank credit providers:
Misrepresentation of the terms of the loan: A customer may sue the credit provider for an inaccurate representation of the terms of the loan, such as the interest rate or the repayment period.
Errors in processing the loan: a claim for errors made during the processing of the loan, such as incorrect calculation of the interest rate or the repayment amount.
Breach of contract: A claim by a customer for failure to comply with the terms of a loan agreement, such as failure to make payments on time or failure to disclose all relevant information.
Discrimination: The credit provider may be sued for discrimination based on race, gender, or age.
Unfair or deceptive practices: A customer may sue the credit provider for engaging in unfair or deceptive practices, such as charging excessive fees or imposing hidden charges.
These are just a few examples of the types of claims that non-bank credit providers may face. Professional liability insurance helps protect them from these types of claims and the associated financial losses.
D&O Insurance (Directors and Officers) – Helps the directors and officers of the non-bank credit institutions to reduce the risk and receive compensation in the event that personal claims are filed against them for decisions they took within the scope of their duties. The insurance covers the cost of defending against such claims and any damage or compromise that may arise from them. Senior executives in those entities that provide non-bank credit may face various lawsuits related, among other things, to loan procedures, compliance with laws and regulations, or financial reporting. D&O insurance helps reduce the risk of personal financial loss and helps them maximize company profits without worrying about the individual risk they are taking.
Cyber Insurance – Protects credit providers against financial losses and legal liability resulting from a cyber-attack or data breach. This type of insurance covers the cost of responding to a cyber incident, such as recovering lost data, compensation for any financial losses, and more. Non-bank credit providers handle sensitive personal and financial information. They are, therefore, at risk of cyber-attacks, which may result in data breaches, theft of confidential information, and financial losses. Cyber insurance helps ensure that non-bank credit providers have adequate protection and minimize the impact of a cyber incident on them and the organization itself.