When revenue becomes difficult to generate, oft en the most rational thing to do is to return to selling products that consumers must have and are already sold on.
Insurance, for instance.
There has been a noticeable uptick in credit unions’ interest in selling insurance products because loan spreads have been thin for many credit unions, says Joan Cleveland, president/CEO of SWBC Life Insurance Co. “Noninterest income can be a risk management tool, and we use exactly that expression when talking to credit unions about insurance products.”
Corrin Maier, director of CUNA Mutual Group’s Member CONNECT program, sees the same phenomenon.
“During the past 12 to 18 months, we’ve seen credit unions’ interest in selling insurance products increase because of pressures on their other income sources,” she says. “Credit unions are looking to diversify their income streams, and that’s where insurance products can play a role.”
Maier says more than 60% of credit unions sell some kind of insurance product.
“But,” she acknowledges, “they don’t always know how to most effectively sell these products. There’s no lack of insurance companies or offerings. The question is, how do credit unions propel members to purchase insurance through them?”
Once they figure this out, “insurance is the most powerful source of noncyclical fee income a credit union can tap,” says Jeff Chesky, president/CEO of Insuritas.
“It’s not only a perpetually needed and purchased product, it pays an annual commission every year thereafter,” he says. “We officially call it ‘annuitizing fee income’ and, informally, ‘the gift that keeps on giving.’ ”
Chesky says the independent insurance agency system is becoming a thing of the past, and credit unions can help fill the void. “The days of the local agent in a brick-and- mortar office are over. Consumers are looking to purchase insurance products more like a commodity, with a focus on price, convenience, and selection. Credit unions are perfectly positioned to deliver these products just the way members want them.
“If you deliver products in an extraordinary manner—Amazon.com is a good example—members will gladly buy from you and stay with you,” he continues. “For example, when was the last time your insurance agent called you to say, ‘I notice that your rate just went up. Can I look around and see if I can get you a lower price?’ Credit unions can tell members, ‘We’ll help you shop and compare, and force carriers to bid and fight for your business.’ ”
Find the right vendor
When credit unions approach third-party insurance providers, Cleveland says their questions often revolve around potential risks to members and compliance issues.
“They’re very conscious of protecting members and making sure the insurance products are compliant with the appropriate regulations,” she says. “And, how comfortable are they with us as a third-party provider? Have we done due diligence on the providers we bring to the table?”
Once a vendor satisfactorily answers those questions, building an outsourced insurance program takes about 90 days on average, depending on the model, says Frank Castellano, vice president, SWBC Insurance Partners. “After that, it takes a minimum of six months from when the first policy is written before renewal income—a steady source of revenue— begins coming in.”
Image is important when selling to members. Maier, whose company offers insurance products across the spectrum—life, auto, home, annuities, and so on—says “we take a partnership approach to insurance product sales. The credit union logo and our logo show up together.”
The idea is to assure members that a trusted source backs the credit union’s offerings.
The beauty of outsourced products, Maier says, is that there are no up-front or ongoing investment fees. “Contrast that with situations where credit unions have their own in-house agencies or joint ventures with insurance providers: Those can be costly.”
But Chesky tells credit union clients, “We’ll create an ‘insurance aisle’ in their store with the same expertise and intensity that members would find in a standalone agency. Our heaviest focus is on auto and home insurance, which we know 100% of credit union members will buy every year.”
He says 86% of the policies his client credit unions sell renew in the following year, and the average duration of a credit union-owned policy is 6.5 years. “Property and casualty policies are not just annuitizing, fee-income generators, they’re also liquid and have market value.
Insurance sales success, however, does require training on the part of credit union staff.
“We customize training sessions to get credit union employees up to speed on the GAP and Service Contracts we sell,” says Ronni Martinez, vice president of specialty auto products, SWBC Financial Institution Group. “In multibranch credit unions, we can facilitate ‘train the trainer’ sessions so credit union employees can then go back to their individual branches to train other employees.”
Credit unions that enjoy the most success selling insurance products keep marketing uppermost in mind, Chesky says. “What you’re trying to do is build an agency inside a credit union’s Web ecosystem where members can shop, compare, and buy online.”
He notes that although credit unions may get thousands of repeat website visitors daily, many of them “haven’t figured out how to transform their sites from ‘brochureware’ to active sales engines.”
One key to ramping up their sites’ effectiveness, he says, is using e-mail to greater effect.
“Many credit unions either don’t use it or use it only sporadically for marketing,” Chesky says. “I heard a CEO say recently he’d worked for two years to get his staff to collect members’ e-mail addresses. But it shouldn’t be a case of ‘how do I get members’ e-mail addresses,’ it’s a matter of ‘what can I give them of value so they want to give us their e-mail addresses?’ ”
The best way to do that, Chesky says, is to provide helpful and timely information.
“Following the recent Target data breach, for example, one client credit union sent out an e-mail notice offering an ID theft protection product,” he says. You don’t look to grab members’ attention, you look to anticipate their intentions.”
Credit unions should make such information easy to find on their websites, adds Cleveland. “That means not making members drill down endlessly to get what they want,” she explains. “Sometimes it’s difficult to get credit unions past the ‘if we build it, they will come’ mentality. They should adapt a marketing- oriented outlook and use their websites proactively as sales tools.
Maier suggest two ways to drive awareness:
1. Integrate touch points. When financing an auto loan, for example, ask for proof of insurance.
“That’s an ideal point to segue to an auto insurance offer,” Maier says. “Or you might offer your new members a complimentary accidental death and dismemberment policy, which primes them to think about additional insurance coverage.”
2. Enhance your digital presence. But don’t overdo it, Maier warns.
“Make the right offers at the right time to the right members, such as when they’re receiving renewal notices for particular kinds of insurance,” she advises. “Don’t just blast out broadside appeals to everybody.”
Marketing messages should be friendly and catchy, Cleveland says. “It’s ‘edutainment’ that makes members want to look at emails, direct-mail flyers, or website articles.
“Credit unions also need a sense of timing,” she continues. “Oft en, after people buy a house, they think about getting a pet. That’s a good time to approach members with pet insurance offers. Know when and to whom to send product offers. That’s much better than a ‘spray and pray’ approach.”
Cleveland says educating members about insurance provides a valuable service.
“Members need help filtering all of the information that’s out there,” she says. “That is where credit unions come in.”
PATRICK TOTTY is a freelance writer based in Larkspur, Calif.