MADISON, Wis.-Credit unions looking to reducing costs in 2010 should keep in mind the old "penny wise, pound foolish" proverb when it comes to insurance coverage.
That's according to Chat Nitschke, VP-CU Protection for CUNA Mutual Group. "One of the things we try to counsel our insureds is to avoid making any short-term decisions that can lead to long-term problems," he said. "You can save $10,000 today (by self insuring), but if it costs you a half-million dollars down the road, that's not really a savings. If you are going to self-insure a portion of your risk, you need to make sure you have the financial wherewithal to support that."
The two most basic ways to save money on insurance costs are to reduce limits or to increase deductibles in order to shave dollars off the premium, Nitschke explained.
"Typically, out of those two, the choice is to increase the deductible. It's much easier to self-insure that, as opposed to the mess you're faced with if you have a catastrophic loss and you've reduced your limit."
Another way CUs can maximize their insurance dollars is to bring in the experts to analyze the operation. "A lot of insurance companies have some sort of loss-control specialists, but if you're working with a firm that does specialize in credit unions, they're probably looking at stuff like slip-and-fall, and the fact is, slip-and-fall is not generally a big issue for credit unions," Nitschke explained. "We have a risk-management team that does risk assessments, and because we are dedicated to credit unions, we understand the risks that are of primary importance to credit unions. For credit unions, it's more about having the right controls in place."
Case in point: funds transfer fraud. Nitschke related that earlier this year, CUNA Mutual started receiving a number of funds transfer fraud claims. Upon receiving those claims, the firm started looking into the situation and quickly put out calls to all of its credit unions to notify them about the scheme, how it worked, and the red flags to look for to prevent it from happening to them. The result: a number of credit unions reported seeing those red flags and nipping the scheme in the bud.
