To Buy or Not to Buy an Agency? Credit Unions Need To Look in the Mirror for the Answer

WEST PALM BEACH, Fla. – Experts say the decision of whether or not to purchase an insurance agency will soon be on the minds of many credit union executives. According to Thomas R. Linn, senior vice president of Concord, Ohio-based insurance consulting firm Marsh Berry and Company, the future is one where more financial institutions and insurance agencies will be joining forces. “In general, over the past five years we’ve seen financial institutions go from zero market share to now 33% of the market share, ” said Linn. “ Credit unions have lagged behind banks in this area, but recently we’ve had more inquiries and there appears to be a great deal of credit union interest.” Despite a booming insurance industry, Linn says selling an insurance agency can be a win-win situation for both parties. Financial institutions have an opportunity to increase their revenues while the move may lead to exciting opportunities for the insurance agency. ” Most agencies are cash poor and don’t have the capital to be consolidators,” said Linn. “ With the financial backing of a credit union an agency can then buy up their peers and smaller agencies in the area to build a larger organization. The agency would also now have the ability to sell to not only to the credit union membership but also SEGS and every relationship that the credit union has.” Determining whether or not purchasing an agency is right for a credit union is an involved process that ultimately boils down to the credit union’s level of commitment to insurance. Credit unions that simply want to provide members additional services without a big investment should explore alternatives. For example many credit unions have signed up with Holyoke, Massachusetts-based Banc Insurance Services for its turnkey insurance agency solution. In just six months, the BIS model creates an offsite agency that is owned by the credit union. BIS provides a team of insurance agents, continuous sales training, taggable marketing collateral and access to multiple carriers while the credit union owns the book of policies. According to Linn, buying a stand-alone operation makes sense if the credit union is capable of making a significant investment and looking to have a powerful internal profit center. Since buying an agency is a complicated, involved process that Linn says can take from 12 to18 months, unless a credit union is well versed in the nuances of the insurance industry it is best to turn to experts. “When evaluating an insurance agency it is important to focus on profitability and cash flow -not volume and to find an agency that matches the credit union’s strategic goals in terms of geography and clientele but also the agency and credit union goals must match well,” said Linn. “And finally, the most important factor in the purchase is the quality of management. If all the numbers look good but the quality is not there to lead your team then you should pass on the agency.” [email protected]