MADISON, Wis.-In the search for non-interest income, credit unions should be paying closer attention to payment protection products, according to one person.
Karim Habib, director of lending for CUNA Mutual Group, said tht not only are payment protection products a win for CUs from a non-interest income perspective, they also are a benefit for members.
"Members receive information on their options for protecting themselves and their families from financial hardship," he said. "In recent years credit unions are doing a much better job of marketing payment protection and informing their members about the different options that are available."
In addition to using their websites, newsletters and displays in their branches, CUs are "upskilling" their staffs to talk with members and inform them about payment protection products, Habib continued. He said the most effective form of marketing is to make sure the staff is able to pass along information to members-and with the belief they are not just trying to sell something, it is a product they believe in.
Payment protection options depend on the type of product a given CU offers. Habib said credit life and credit disability insurance cover the insured amount in case of death or disability, respectively. Another product is debt protection, which he noted is not an insurance product, but it has a life component, disability component and involuntary unemployment coverage.
"The disability and life components of debt protection work the same as the insurance products, but involuntary unemployment makes payments for insured if he/she is laid off," he said. "Members pay a fee for debt protection, not a premium, as it is not an insurance product. There are specific state licensing requirements for insurance products, but not for debt protection."
Habib also recommended credit unions offer GAP insurance-guaranteed asset protection to protect vehicle collateral in a car loan.
"There is an increasing need for this source of non-interest income from the credit union perspective," he said. "Because credit unions are member-focused and member advocates GAP products work because they are a win-win for the credit union and members. They are optional products that protect members from future financial hardship."
