How Old-School Insurance Can Offset Margin Pressures
For decades, credit unions have treated insurance products as the redheaded stepchild to their core business. Pressure on net-interest margins, the need for fee income that comes from helping members and not dunning them, the focus on member retention by increasing products per household, and the major jump in online banking utilization rates-all of these factors are causing a few innovative credit unions CEOs nationally to rethink insurance.
Phil Tischer, the COO of Fairwinds Credit Union, put it best: "The one financial product that 100% of our members purchase every year, year in and year out, is insurance. Our goal at Fairwinds Insurance is to have a permanent insurance aisle in our stores, so our members know that when they need insurance, Fairwinds Credit Union's Insurance Agency can provide for all their insurance needs."
In the summer of 2011, Deloitte published a research paper, "The Voice of the Personal Lines Consumer," that offered a startling insight: "Four in 10 members surveyed reported that they use an agent because they don't trust insurers to deal with them fairly, and another four in 10 surveyed reported that they bought direct because they don't trust insurance agents to objectively represent their interests."
Have you ever seen a better illustration of an opportunity ripe for competitive incursion? And who in America is in a better position to offer a trusted and transparent shopping experience for a financial product that every consumer in America has to purchase every year? Can anyone spell CREDIT UNIONS?
We all know that credit unions typically rate near the top of the "trusted advisor scale," while insurance agents and carriers don't do nearly as well. And we all know that insurance is the only financial product that 100% of your members purchase every year-year in and year out. It is an opportunity credit unions cannot afford to miss.
The Elephant in The Branch
Ask your teenagers where they would go to buy insurance. Now take a moment to imagine their response. As I write this I don't remember how much GEICO spends on advertising direct to consumers-let's just say there are a lot of zeroes involved. And like any good business model that is trying to help consumers as they vote with their digital wallets, they are offering members a chance to buy insurance online. Credit unions enjoy over 40% of their member base visiting their web site an average of 6.8 times per month-and consumers report insurance is the leading financial product shopped online.
A small but enlightened group of credit union leadership sees this convergence and understands the brand equity and brand trust their credit union offers to consumers looking for financial products and services. These same leaders are pioneering efforts to provide pricing and product transparency, and are realizing that if they treat insurance with the same commitment and focus as deposit and loan products, they can arbitrage the anxiety and deep-seated distrust that insurance agents and carriers have created and that CUs are perfectly positioned to establish themselves as distributors of auto, home and small business insurance for consumers nationally.
In 2013 we'll start to read more about insurance "aisles" being designed, built and managed inside credit unions. The opportunity created by this convergence of events that is driving the realignment of traditional insurance distribution models is inevitable. More CU executives will begin to understand that every time they approve a loan, they create an insurance need-and that their members will welcome an opportunity to purchase insurance coverages every year from distribution models they can trust. Insurance carriers will begin to recognize the power of the brand equity, trusted advisor role, and sophisticated technology platforms of credit unions, and that credit unions represent the best new "shelves" for them to put their insurance products on.
Jeffrey Chesky is the founder and president of Insuritas, East Windsor, Conn. Mr. Chesky can be reached at firstname.lastname@example.org.