SAN ANTONIO, Texas - Between the economy, increasing branch networks and expansion deeper into cyber space, credit unions would be wise to review their insurance coverages, according to several analysts.
Mark Hein, CEO of the credit union division of SWBC here, said credit unions’ insurance needs have changed throughout the years, and it’s important to take time to ensure the insurance has changed, as well.
Credit unions would be wise to review products “such as VSI/LSI, CPI and REO coverage,” he advised, “to ensure they are protecting themselves adequately from the risks associated with a slowing economy and the probable increase in delinquency, repossession and foreclosure.”
It isn’t just the economy driving the need to rethink insurance coverage; each year, credit unions are becoming much more complicated animals to cover, Hein notes.
“I believe that the needs have changed as the sophistication of the credit unions has evolved over the years,” he said.
Others agree. “It’s been a kind of evolution at credit unions,” says Chad Nitschke, vice president of credit protection at CUNA Mutual, regarding the changes he has seen in CUs’ insurance needs.
Vulnerability On The Internet
One area Nitschke credit unions may not recognize their increased liabilities is the Internet, where coverage is needed to protect against issues related to online bill payment, computer crime and data privacy.
“We ask ‘What kind of services do you offer?’ We make sure we are providing the right solutions to meet their needs,” he says.
Nearly unheard of 10 years ago, coverage for Internet-related risks has become especially critical over the past five years, Nitschke added.
SWBC’s Hein, who noted that credit unions should not overlook the retail opportunities to drive fee income using insurance products, said another emerging liability is developing in the form of credit unions expanding branch networks.
“As branch networks grow, the risks obviously grow in many areas,” he says. “These include a drop in member loyalty, increase of property and casualty exposure with more brick and mortar, return on investment, increase in potential fraud exposure, and decentralization.”
Nitschke concurred. “From a property casualty perspective, credit unions need to make sure their facilities are protected,” he said.
Wrong Time To Make Cuts
Nitschke stressed that the majority of insurance decisions should not be driven by conditions in the economic environment, especially when the economy is in recession, as it is now. The reason, he said, is that credit unions start looking to cut out costs and one of the first places they look to is insurance premiums. The irony is that CUs may actually need more coverage during these times, he said.
“At CUNA Mutual, we make sure to work with credit unions to make sure they have what they need but can still manage their balance sheet,” Nitschke says. “When we see rising foreclosures, credit unions need lender liability coverage, we definitely encourage lenders to adequately have coverage.”
Credit unions should be constantly reviewing their insurance needs, making sure they are completely covered, Nitschke said. “This should be more of an ongoing basis.”
As a rule, CUNA Mutual reaches out to the credit unions it serves at least twice a year to review their policies and make sure they have the coverage they need. “It’s really important to review policies ongoing–not just when there is loss,” he says. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com
