When it comes to risk management, credit unions must keep in mind the liability exposures of their CUSOs, according to one expert.
"CUSOs traditionally do not think about their exposures-particularly professional liabilities-when looking at their coverages," said Jim Hunt, CUNA Mutual Group's brokerage solutions and reinsurance manager. "It is even more critical now that CUSOs evaluate their professional liability exposure as they expand their fee-based services."
Speaking to NACUSO's annual meeting here, Hunt said credit unions' desire to grow revenue has led to more fee-based services and with those services come the professional liability exposure.
"If you partner with a vendor to provide these services, the partner shares in the liability with the CUSO. The risk would be lower than if the CUSO decided to provide these services on its own," said Hunt. "The bottom line is if your CUSO offers fee-based services, you need professional liability coverage."
Hunt said CUSOs need to understand four primary exposures they face:
* Business liability (General liability): Covers for bodily injury, property damage, personal and advertising injury.
* Excess liability: provides for coverage above what normal business liability covers.
* Professional liability: covers for economic damage.
* Directors/volunteers/employees: covers for economic damages for individuals, not entities.
Also, CUSOs need to understand the difference between a business risk and an insurance risk. People take risks every day that are not insurable, Hunt said. "You do the same thing in the daily operations of your CUSO. Some risk is pure business risk with no option but for the CUSO to bear the risk itself."
In order to differentiate and understand risks inherent with various business practices you have to ask the right questions. Hunt said CUSOs need to have a full awareness of their business, know what it is doing and how it is doing it. "In order to ask the right questions it is advisable to involve an outside consultant who has experience in identifying the various exposures," Hunt added. "CUSO executives are experts in their business operations but not on the exposures that result from their business."
Hunt said once risks are identified, a CUSO needs to evaluate how to protect that exposure and it can be done in five ways:
* Avoid it: Don't offer the service because it's too risky.
* Retain it: You understand the risk and it's so small that you handle it in-house.
* Reduce the chance of loss: It's basically having sound practices in place to reduce loss.
* Shift the risk: Shift the risk to an outside vendor who provides the service and assumes risk.
* Transfer the risk through insurance: Purchase coverage.
Caption: Jim Hunt, CUNA Mutual Group's brokerage solutions and reinsurance manager, spoke to NACUSO annual conference attendees Wednesday on CUSO liability exposures.
