Insurance is something virtually everyone buys year after year, but fewer than 25% of credit unions offer it, according to recent data from Callahan & Associates, and that could mean big opportunities to snap up market share for credit unions willing to venture into the space.
"One thing I always say is, 'The days of the free toaster are done,'" Brett Harner, an insurance services specialist at CUSO Financial Services, said. "What I mean by that is members are increasingly looking for value-added benefits from their partnerships and their relationships. By offering insurance solutions, it's just another way to acquire new relationships and deepen relationships for our member institutions, as well as add noninterest income."
About 5% of credit unions' overall noninterest income comes from insurance sales, making it a great, member-friendly way to diversify income streams, Corrin Maier, director of CUNA Mutual Group's TruStage program, noted. Members reward credit unions for offering insurance, she said, stating that members who buy through the TruStage program have a 92% year-over-year retention rate at their credit unions versus 86% for members who don't have policies through the program.
Credit unions thinking about adding or upping their insurance programs, Maier and Harner said, should keep a few things in mind, however.
Decide whether to partner or go it alone
Credit unions typically launch their own in-house agencies or partner with a third party to offer insurance, and that decision requires careful thought.
"One of the biggest mistakes that I see is that institutions think too big when they start," Harner said. "What I mean by that is some of the institutions may come out of the chute, depending on who they talk to, and think that an agency is in their best interest to establish from day one. Really, that's not necessarily the correct way to do things. It's really a matter of building blocks and making sure that you have a sustainable business that would grow."
Credit unions also have to consider how much marketing effort and expense they want to undertake.
"Really understanding who's going to do the marketing is really important," Maier said. "Members don't know that your credit union offers insurance unless you're making them aware of that. Do you want to work with somebody who's going to help you with the marketing, the sales and the service? Or do you want to take on that investment and risk yourself?"
Start with auto and home
"That is a book of business that over time has the potential to not only continue to grow, but also continue to add that value-added piece of the relationship with the member institution," Harner said. "Life insurance, specifically term insurance, is also something that an institution should come out of the chute with. If you're not going to offer that, you're certainly not going to be in a position to get some of the large life insurance cases and permanent life insurance cases."
Accidental death and disability insurance is another, he said.
"Members many times like to see AD&D as maybe a part of their membership," he noted. "This is something that, depending if the institution is paying for it themselves out of pocket or if they just want to add certain thresholds, clients can buy up. This is another very profitable means of providing value to your membership."
Have a prospecting plan
Members are already visiting their credit unions' websites to do their banking, so it's important to promote products there, gather information and capitalize on those visits.
"What that really means is, let's say you've got a member and they're able to log into the website at two, three in the morning, and maybe they're checking their checking account," Harner said. "It's a matter of just being able to drip on them regarding some other ancillary products that may be available through a member institution."
Cross-selling is key, especially with millennials thinking about things other than insurance. "There are going to be life-changing events that take place with the millennial," Harner explained. "One could be something as simple as an auto purchase. Maybe it's purchasing some sort of protection for that loan. Maybe it's a home purchase, and now that we've purchased a home and maybe that same individual is married; maybe now they need to consider looking at life insurance to protect that home if and when something were to happen to the client in the event of a death. It's really just a matter of just being there early."
It's important to follow the rules regarding who can advise members.
"The frontline staff, you want them to be aware of the product offerings," Maier said. "At the same time, you don't want them to become licensed insurance agents."
Some credit unions do use licensed agents to sell at the front lines, Harner added.
"A lot of times these may be certain thresholds of term insurance only, or maybe even just a transfer product," he said. "Something simple, something easy, something transactional. Depending on the case and the size of the case, much of the insurance is still purchased through a financial consultant due to the complexity and obviously, the underwriting."
Do not resist technology
A web-based quoting platform is a must, Harner said, as is an integrated presence on the credit union's homepage so that members don't have to dig around to find insurance offerings.
"If you fight technology long enough, you will go the way of Kodak," he warned.
Members do a ton of research online, Maier explained, but many still want to talk to a human when they're ready to buy. That may not be the case for much longer, though: Sixty-one percent of 18- to 54-year-olds view purchasing life insurance online as "attractive," according to a PwC study, for example. Nonetheless, it's important to factor in the human element, especially when partnering with a third party, she said.
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