Our credit union is thinking about offering insurance services to our members, but the path has been murky and foreboding—not unlike my latest Verizon contract.
Insurance is an entirely new business for us. And while we’re always looking for noninterest income, some stories of credit unions getting ravaged like a buffet table on a broken-down cruise ship have given us reason to pause.
Of course, the reasons for offering insurance products and services are well-known, but here’s a refesher:
1. Insurance, like banking, is a relationship based on trust. As consumers flock to credit unions in droves, offering insurance can help you retain those members.
2. Insurance has an automatic time to rewrite once or twice per year during renewals, not unlike a Kardashian marriage.
3. Standard types of insurance (auto or home) are universally accepted and understood, which reduces the burden on your training and marketing departments.
4. Credit unions often know the renewal times for insurance policies and, therefore, have an easier way to determine what products to pitch and when.
5. It’s the one financial product you know members do, or at least should, have.
6. Did someone mention “noninterest income”?
While tantalizing, the fundamentals of the business are different from normal financial services.As one provider points out:
► Most local firms specialize in business/commercial policies, not consumer policies. National firms, on the other hand (led by a small green reptile with a thick accent), focus on the retail end. While many might consider this an advantage (remember that margins on consumer accounts are thinner than Kate Moss on a diet), it’s important for your credit union to talk about the real value of that personal connection.
► Errors can be costly. Remember the $50,000 boat that got smashed by the teen driving his SUV? Oops, your clerk forgot to do the paperwork correctly. What’s worse is that you hold the loan on it, too. That’s what we call correlated risks.
► The product line is somewhat like an interstate during rush hour—getting off might take a lot longer than getting on. One CEO refers to it as a “checking account with margin.” While it’s a good source of fee revenue, insurance is something that needs continual support and development.
Which brings us to the main point: Is this something credit unions should have in their product and service repertoire? The answer is oddly enough the same answer to this question: What do all 80-year-old men need at night? “Depends.”
It depends on your geographic size, membership demographics, and your competitive environment. It depends on your commitment to the process and the amount of patience you have to wait for a new business to build to fruition. Success, regardless of how you define it, won’t come overnight.
Ultimately, it comes down to a level of trust. If members trust you, and you in turn can trust your insurance provider, then success is quite possible. But if any of it requires a leap of faith, then the chasm can be much wider than you expected.