For the average credit union member, taking out an affordable insurance policy is a financially sound way to manage against the unpredictability of life. Today, there are 444 credit unions that have offered member insurance for more than eight years, according to NCUA data. These institutions, some of which own insurance CUSOs, see value in these offerings for both member and credit union.
Ent Federal Credit Union ($4.1B, Colorado Springs, CO), Listerhill Credit Union ($674.2M, Sheffield, AL), and Kentucky Employees Credit Union ($68.6M, Frankfort, KY) have all offered some form of member insurance for eight years or more. Their years of experience offers distinct insight into the strengths of insurance offerings as well as how to make the most of programs.
Know The Needs Of The Membership
Insurance offerings can be a benefit to all parties if the credit union offers them correctly, says Daryl McMinn, chief operating officer at Listerhill Credit Union.
Listerhill sells credit insurance on consumer loans including life, disability, GAAP protection, and extended warranty services.
CU QUICK FACTS
listerhill Credit Union
data as of 3.31.15
HQ: Sheffield, AL
12-MO SHARE GROWTH: 3.91%
12-MO LOAN GROWTH: 7.77%
The Northern Alabama region that comprises Listerhill’s field of membership includes the 12 counties in northwest Alabama as well as Tennessee’s Maury and Williamson counties. Many of Listerhill’s members work in manufacturing, McMinn says, and have a direct need for life and disability insurance.
“Most of our members work in an environment where they would have a greater chance of being injured on the job,” McMinn says.
But in addition to protecting members in the event of the unexpected, the credit union’s insurance offerings also benefits the institution by generating non-interest income and employee commission.
Most of our members work in an environment where they would have a greater chance of being injured on the job.
In 2014, Listerhill collected approximately $500,000 in non-interest income. However, it collected $2 million in premiums on life and disability insurance. For a graphical analysis of the credit union's non-interest income and total income, see the graph below.
In terms of commission, brokers earn $1.00 per $1,000 insured for both life and disability insurance. For example, according to McMinn, a $15,000 protected loan with both life and disability would yield the lender $30. Loan officers do not earn insurance commission on an unprotected loan.
“Non-interest income has been greater in the past,” McMinn says, “It fluctuates not because of a difference in premiums written but member claims on products.”
Similar to Listerhill, Kentucky Employees Credit Union offers credit life and disability insurance tied primarily to consumer loans. It also offers GAAP insurance for autos, auto warranties, and accidental death and dismemberment as well as auto and life services through a third-party provider.
CU QUICK FACTS
kentucky employees Credit Union
data as of 3.31.15
HQ: Frankfort, KY
12-MO SHARE GROWTH: 7.71%
12-MO LOAN GROWTH: 14.25%
Life and disability insurance are particularly successful for the institution. KECU’s insurance penetration rates — i.e., how many members add life or disability to consumer loans — ranges from 60%-70% for both products. That exceeds its goals of 60% penetration on life insurance and 50% on disability.
Life insurance has a higher penetration rate, on average, but disability earns more for the credit union because it is more expensive. The credit union bases its monthly premium pricing on loan balances. For example, single and joint life insurance cost $0.092 and $0.130 per $100 borrowed, respectively. Single disability, there is no joint disability at KECU, costs $0.27 per $100 borrowed.
KECU attributes its insurance success partly to its member pitch — which emphasizes three things.
We try to offer it to everybody who qualifies as a service. If you want it, great. If not, that's up to you.
First, the credit union keeps it simple.
“All they have to do is answer one question,” says Myron Moore, vice president of lending at KECU. “As long as they answer it correctly, they are going to qualify. There’s no forms; there’s no long process. It’s easy and beneficial for them.”
Second, KECU positions its product suite as payment protection rather than insurance and actively educates members on the benefits.
“We try to offer it to everybody who qualifies as a service,” Moore says. “If you want it, great. If not, that’s up to you.”
Third, it provides concrete examples of situations in which insurance plays a role. This approach not only highlights the benefits of the product but also creates a tangible illustration that members can understand. After all, it’s often not easy for a worker who sits at a desk to see the need for insurance.
“We tell examples of how we had someone fall off a truck, break their leg, and was off work for three months,” Moore says. “Disability kicked in and made their payments. When they got back to work and back on their regular payments schedule, they didn’t have to worry about it. It almost sells itself when you do that.”
Insurance To Loan Officers
More than 10 years ago, Ent Federal Credit Union formed a wholly owned CUSO called Enterprise First Financial Services (EFFS). Within EFFS, Ent Insurance Group was formed to offer insurance services such as property and casualty on mortgage and auto loans as well as life insurance and various umbrella policies.
CU QUICK FACTS
ent federal Credit Union
data as of 3.31.15
HQ: Colorado Springs, CO
12-MO SHARE GROWTH: 5.18%
12-MO LOAN GROWTH: 21.82%
“We needed to expand our core set of products and services for members,” says Gregg Cawlfield, director of Ent's business banking and Ent Insurance Group. “Members will ask for a home or auto insurance provider. Our in-house CUSO helps us provide that to our membership.”
When members take out a loan, loan officers also ask whether the member wants to add insurance. If the member is receptive, the loan officer requests a quote from Sandee Wurtz, Ent's senior insurance sales consultant. Until recently, Wurtz was the only employee of the agency. She facilitates most requests and knows firsthand the importance of developing relationships with Ent’s mortgage and consumer loan officers.
“When officers are talking to members in the beginning and they find out there is an insurance need, they know exactly where I am,” Wurtz says. “They know my extension. They call me or send an email.”
The credit union loan officers depend on CUSO employees to provide the same exceptional service as Ent, an expectation that is not lost on the insurance providers.
“Loan officers send us opportunities to provide insurance products and services,” Cawlfield says. “They trust us with their clients.”
Ent hopes to expand Ent Insurance Group, and the relationships between insurers and loan officers, specifically within the mortgage department, will play a large role in the expansion’s success. To that end, the CUSO hired a senior insurance consultant earlier this year to help with the servicing on its insurance claims. According to Cawlfield, this new hire will free up Wurtz’s time to partner with more mortgage loan officers.
When officers are talking to members in the beginning and they find out there is an insurance need, they know exactly where I am. They know my extension. They call me or send an email.
To measure its success, the CUSO tracks a “quote to close” ratio. This is the percentage of business the CUSO receives from loan officers that it can approve. Its goal is to hit 30%; right now, Cawlfield says, the credit union is right on target.
Moving forward, Cawlfield and Wurtz hope they can continue to grow the CUSO. They are considering adding insurance agents over time, as well as streamlining the quoting process between the credit union and the CUSO, with the goal to increase by 10 the number of households it can serve annually.
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