If credit unions are considering offering personal and commercial insurance to their members, the biggest challenge is researching and finding the most effective and efficient mode of delivery, a panel of insurance experts said.
Not having property and casualty insurance products can cost you relationships, cross sales, a share of members' wallets, and vital revenue opportunities, the panel told CUNA Mutual's Discovery Conference. But just as important is that if you don't provide it, someone else will, the panel emphasized. They said more than 60% percent of people with insurance have it with one of the top 10 carriers, and many of them are cross-selling at every chance.
"You should do everything in your power to put a wall around your member," said Tom Schaetz, senior vice president, Marsh Berry Company, Inc.
The panel included, Schaetz; Bill Jolicoeur, vice president, CUNA Mutual Group's individual property and casualty products; James Gallagher, CUSO vice president, Credit Union Services LLC; Mike Miller, vice president, Indiana Members Credit Union; and Leonard Gzesh, CFP, chief operating officer, Kinecta Financial & Insurance Services, LLC, and acting president, Apollo Agencies, Inc.
The First Consideration
Before entering the insurance business, credit unions' first consideration must be how involved to become, said Jolicoeur. "If they see a strategy work in one place, they assume that's what they should be doing," he said, "when they should really be asking, 'What are we trying to accomplish and does it fit our strategic direction?'"
Panelists said there are two main options for credit unions to enter the insurance business, and both have pros and cons. First is an "affinity" partnership, which Jolicoeur said is the largest and fastest-growing sector in the credit union and banking marketplaces.
An affinity strategy is a much less intensive approach for credit unions, said Miller. "It is much easier and simpler to have staff provide referrals, than to train staff about the insurance business, plus you need to realize there aren't many qualified people to hire."
The affinity partnership is a turnkey approach where the credit union partners with a carrier, which can offer such things as marketing, direct mail options, call centers, and private-label servicing.
Multi-Carrier Strategy
"Look at a multi-carrier solution to provide a steady strategy," said Gallagher. "That way if one carrier goes out of business or drops a product, you still have a solution."
The second strategy is starting an insurance agency, where the credit union can buy, build, or outsource, with outsourcing being the most popular of these choices. The panelists all cautioned these are expensive and resource-intensive solutions that require in-depth strategic planning and management, even for the most sophisticated credit unions.
"The break-even point for any financial institution is about three to four thousand policies and that takes quite a few years to get there," said Gzesh. "You will need a lot more than just a sales rep to start your own agency. You will need additional staff like customer service people, and you better make sure everyone in your credit union is licensed all the way to your CEO and president, because if there is a legal problem they always look for the deepest pockets."
