Insuring Non-Interest Income
MADISON, Wis.-From almost their earliest days, credit unions have looked to generate additional income and meet member needs with the sale of insurance products. Yet the biggest obstacle facing credit unions when it comes to selling those products are CUs themselves, according to industry analysts.
Those analysts told Credit Union Journal that credit unions must make efforts to ensure their member-facing staff is better informed about insurance products, believe in the offerings, and understand that upper management stands behind the additional line of services.
A large number of credit unions offering insurance products such as debt protection, gap coverage, credit life, and auto extended warranties simply treat the offerings as a sideline and therefore pass over a great deal of potential revenue, experts say.
"If you are getting into the insurance game to drive non-interest income, get into it. Don't half-heartedly sign up with a partner and let them do everything," stated Eric Hansing, director of MemberCONNECT, CUNA Mutual Group's direct-to-member marketing program for core insurance products. "You can do that, but the best way to drive non-interest income is to get involved with the insurance partner and do small things, like clearly communicating with front-line staff about the products, and letting them know the credit union is behind selling insurance products and is paying attention to those sales. When the front-line team is engaged, it demonstrates to members that this is your insurance program and you have not just sold off your member list to a third party."
Hansing said employees don't have to become insurance experts, they just need basic product knowledge and should know when a communication from the insurance partner is sent to members. "So when a mailing prompts a member to come in and ask about an insurance product, employees are not caught off guard-which concerns members. They can then capably talk about how the credit union's insurance offerings help protect members' financial situation and encourage them to look more closely at the insurance offerings."
Hansing has seen those simple steps lift a CU's insurance penetration within its membership from 30% to 80%. What's also helping is keeping pace with members' changing lifestyles. "The days of offering one life insurance product are well behind us. You simply will not be able to meet a high percentage of members' needs doing that."
Irene Girard, VP at CRI Solutions, Elkridge, Md., a provider of credit insurance, gap, and auto warranties, is concerned some credit unions do not work with front-line staff to make them comfortable selling insurance products and to understand the CU views insurance sales as important to the credit union's revenue stream. "We have seen credit unions be most successful when support comes from the top down. If your boss is saying that selling insurance is important and you are being measured and rewarded on it, you are much more likely to sell that product."
Sandra Torres, SVP sales and marketing at IWS, Deerfield Beach, Fla., said credit unions "leave opportunities on the table," not always offering insurance products when they have the chance. "We know this happens, either because employees are in a hurry to get people through the loan, or for some other reason are not engaged in the sale. You have to make the offer happen. It is a simple point, yet an important one."
IWS provides vehicle service agreements and gap coverage to credit unions nationwide. Torres said that while the price a CU makes on the offerings varies based on what a credit union charges, the average income per contract is about $200.
$60K in Annual Income
Denise Floyd, CEO of Fort Sill FCU, Fort Sill, Okla., said the $215-million credit union makes $60,000 a year selling IWS products. She attributes the strong sales to support from the top down. "We have monthly overall goals that if the team reaches we double their incentives. And each person's yearly evaluation includes insurance sales goals."
The credit union's loan officers are trained to look carefully at members' financial situations when they apply for a car loan to spot a need for an extended warranty or gap coverage-such as a member purchasing a luxury car and not having the financial reserves or monthly income to cover a large repair. "We just have a good group of loan officers who believe in the insurance products. They have seen them work for members and save them from having a car repossessed."
In Tampa, Fla., Steve Miller, senior analyst at financial consulting firm Twenty Twenty Analytics, agreed that CUs must either have the staff who can spots needs within the membership-or, more importantly, make better use of their member data to effectively cross sell. "Instead of throwing out a blanket to sell insurance, pick a percentage of the membership that matches predetermined specific criteria."
Miller insisted that approach is needed today due to regulatory and economic pressures on credit unions that demand greater efficiency. "Before the recession credit unions were fine with their approach to business. Loans performed and plenty of non-interest income was there. So they did not worry much. Then the recession hit along with the corporate crisis and money started pouring out. Now credit unions are scrambling, trying to plug holes."