As is the case with many of the different CUSOs at Maps Credit Union ($460M, Salem, OR), the cooperative’s foray into the insurance business through financial subsidiary Maps Insurance Services (MIS) has been a long-term play, growing and evolving in scope over time. Yet the stabilizing influence of this outside industry — which often runs countercyclical to trends in other financial services — has remained a consistent benefit for the credit union.
“Insurance, if it's running well, can generate margins of up to 35%,”says Maps CEO Mark Zook. “If a credit union has a $2 million-commission agency, it could generate roughly $600,000 - $700,000 in income a year.”
Although Maps had offered insurance products to its members for a number of years, in 2004, Zook — who at the time managed the credit union’s strategic planning efforts — convinced leadership to acquire an insurance agency in an underserved market, both as a business line expansion strategy and a brick-and-mortar one.
“We thought ‘Wouldn't it be perfect if we could acquire an insurance agency in a community where we were eventually going to build a branch, and then just bring the agency into the branch?’ So that's what we did,” Zook says.
Piggybacking off the foundation and associated business of its first acquired agency, the credit union also began hiring additional insurance representatives until the operation was able to expand into the Maps branch network.
“In the beginning, we primarily focused our personal insurance cross-sale efforts towards credit union members with an auto loan as a way to complement Maps’ loan portfolio and provide extra value to the membership base,” says Chris Federici, the CUSO’s general manager of insurance and investment services. “But over time, we also recognized opportunities to acquire market share outside of the credit union, which would allow us to generate enough revenue to reinvest in our platform and continue to expand as the credit union opens new branches in other markets.”
Following the closure by a large national bank of its insurance agency in the Salem region, the CUSO was able to procure five of these former bank employees for its own roster and begin exploring another particularly profitable side of the business — commercial insurance.
“Commercial insurance can certainly generate a disproportionate percentage of the revenue compared to personal insurance,” Zook says. “However, it's very hard to get appointments with carriers if you don't have a commercial insurance agent. And you can't attract a commercial insurance agent unless you have appointments, so it's a very tricky dynamic.”
“We found that while we were using credit union philosophy and logic to manage the program, what is truly necessary to grow and compete at a top level in the insurance industry is an experienced and knowledgeable staff, who bring industry best practices and guidelines with them,” says Federici.
While not all of its expansion efforts have panned out, the MIS CUSO has successfully secured one additional agency acquisition which will be completed at the end of the year, is engaged in several ongoing conversations with other potential candidates, and has developed its own in-house expertise for navigating through these delicate financial and legal processes.
“In the early years, Chris and I often referred to outside experts in our outreach efforts, and I generally believe that you should use industry experts as you work through your early attempts at acquisition,” Zook says. “But we’ve had enough seat time with other folks to know what to look for, so now we tend to utilize experts only when unique situations arise.”
For 2013, as MIS moves through several key growth transitions, the financial goal is a break even proposition which includes reimbursements for the CUSO's nine-person staff — who are leased from Maps — as well as the utilization of credit union support services such as accounting, IT, and marketing.
“After going through this last economic recession and seeing how our insurance business didn't miss a beat, this is a nice additional revenue stream for any credit union looking to add to their bottom line,” Zook says.
For more information on Maps Credit Union and its innovative application of the CUSO business model in a wealth of different industries, look for your copy of the 1Q 2013 Credit Union Strategy & Performance (CUSP) guide, coming this summer.