Insurance services benefit members

Insurance services benefit members

Products generate noninterest income and provide protection for members.

September 29, 2017

Credit unions have three motivations to sell insurance products, says Tyreo Harrison: improving profit margins, rounding out product offerings, or seeing rivals introduce insurance programs.

Harrison, executive vice president of The Financial Institution Group at SWBC, says about 80% of credit unions offer some form of insurance.

“It used to be that they’d connect with one or two agencies, then take income from the referral,” he says. “But these days, credit unions want more. They want to be able to connect to many carriers on a branded site. That’s where we come in.”

Brian Werger offers an additional insight about credit unions’ presence in the insurance market.

“Credit unions are facing competition, strict regulatory requirements, and growing expenses—they need a means of providing noninterest income that is beneficial to members,” says Werger, director of the TruStage insurance program at CUNA Mutual Group.

“We stress that one job of credit unions is to protect their members with insurance products,” he adds. “Strategically, most credit unions are trying to increase noninterest income or increase product sales per member.

The need for speed

“We’re transparent and we’re fast— our speed of response is under a minute,” says Harrison. “The goal is to prevent a member from pulling a quote for an insurance policy from a credit union website and then going elsewhere to look for a lower price. A response that takes only one minute makes it 10 times more likely that a member will stop and buy a policy at the credit union site.”

A quick response is necessary, Werger says, because we live in an era of convenience.

“When I was younger and purchasing life insurance, the process took six weeks: Fill out the application, undergo a medical exam, receive a letter of approval, mail back a payment, wait to receive a formal policy. How many millennials do you think would put up with that?” he asks.

“Now, you can go online and apply for insurance in a process that takes only minutes,” Werger adds. “In the case of life insurance, where there might be a couple of questions about general health, an applicant listing an existing condition—such as diabetes—can ‘pivot’ to a guaranteed product application.”

Werger believes an effective insurance-purchase page on a credit union’s website should be designed to handle the three basic questions members ask when they are searching for insurance options:

  1. What am I looking for?
  2. What can I afford? 
  3. What makes the most sense for me and/or my family?

Building awareness

Of course, even the fastest, best designed website and a mobile presence doesn’t guarantee success.

“There are other variables,” Harrison says. “Members might just be window shopping and not quite ready to commit. Sometimes they’re not even aware that their credit union offers these products, which tells you that the credit union hasn’t been on the ball.

“Some credit unions don’t understand that they can bundle their offerings when a member is looking for insurance,” Harrison continues. “For example, auto insurance is the top-selling insurance in the country. Selling that policy should be an occasion for reminding members of the credit union’s other insurance offerings, such as home insurance and personal or business loans. We can set up marketing campaigns that do this.”

Credit unions can build insurance policy sales three ways:

  1. Start or buy an agency.
  2. Enter a joint venture with an outside insurance source.
  3. Outsource. “Some 75% of credit unions outsource insurance sales,” Werger says. “Even billion-dollar asset credit unions are gravitating toward outsourcing.”

When a credit union hands over its insurance sales program to a third party, “that’s not a truly independent model,” says Harrison, who instead recommends that credit unions “partner with a carrier like us. We can front for the credit union on a branded site and represent a large number of carriers.

“A credit union can go independent,” he adds, “but often it has to trim its offerings because of the complexities involved in running an inside agency.”

Joining forces with a single outside source also creates a situation where a vendor promotes its insurance brand—and no competitors— through a credit union site.

“That means the lack of a range of offerings for the member,” Harrison says. “Our approach is to offer a range of products on the credit union’s branded site and not push our own brand—we don’t have our own insurance product— or make any carrier the only source for the insurance policies a credit union offers.”

Credit unions that offer insurance products should offer more than one option in each category, Harrison says, because carriers are charging higher premiums in today’s market.

“For example, auto insurance premiums have increased by 20% over the past five years because cars are smarter and more expensive—and because claims are up,” he says. “If a credit union offers auto insurance, it has to offer a range of options.”

Credit unions also need to offer a variety of insurance products.

“The gamut of insurance products is wide,” Werger says. “Besides staples such as home, auto, life, and accidental death coverage, there are other kinds of insurance—payment, debt, GAP, warranty, and more.”

Werger offers a word of caution for credit unions once they’ve decided how to handle insurance products: Have a plan in place to market the product properly using a multichannel approach. Otherwise, he says, selling insurance products won’t be beneficial for the credit union or members.

“Our core product offerings give credit union members bargains they wouldn’t ordinarily get in the general market,” Werger says.

Setting up insurance product sales

Choosing a selection of insurance products to sell and then market affects core processing systems, but credit unions don’t have to do it alone.

“We can provide software to set this up or modify a credit union’s current core processing,” says Harrison. As a rule of thumb, it takes about 60 days to install the SWBC system, Harrison says.

During the installation, three tasks must be completed:

  1. Installing and fine-tuning the technology.
  2. Training employees to understand and feel comfortable with the technology.
  3. Integrating insurance products into staff’s interactions with members. Employees should believe in the product, understand its value, and follow through on selling insurance products.

“We also assign a number of SWBC agents to handle each credit union’s account with us,” Harrison says. “Internally, the credit union should have a ‘champion’ that interacts with us and works as a link between us and our client’s staff.”

Whatever means a credit union uses to engage in insurance product sales, Harrison has an important warning: “Don’t invest in an agency that has a culture different from yours.”

There’s an upside to a well-planned insurance sales program. “This is a growing market, although margins are thinner than ever. The sophistication of digital technology is drawing members into interactions with the credit union because of our fast response time,” Harrison says.

Werger sees no astounding new products or data-handling capabilities anytime soon. “The emphasis these days is on simplifying and optimizing the mobile insurance application and purchase,” he says.