Insurance Is Security During a Recession

June 1, 2010

By Patrick Totty

Members have a lower risk tolerance during tough financial times.

As the Great Recession continues to undermine their confidence, people’s perception of insurance changes.

“When recession hits people directly, they become more risk averse,” says Dan Kaiser, CUNA Mutual Group’s vice president of credit insurance product management. “So they often increase their insurance coverage because insurance equals security.

“In fact,” he adds, “insurance may become more important than consumers’ money market accounts and 401(k) investments. They focus first on life insurance, then on home, auto, and disability coverage.”

The consumer focus on life insurance, says Kaiser, isn’t unexpected. “Life insurance, term, and gap policies become very attractive, while whole life—typically purchased as a hedge against taxation or an aid to estate planning—becomes less important.”

During a recession, people want financial matters to be simple, Kaiser notes. “They don’t want complexity in a time of war, recession, and political battles. So credit unions should keep simplicity in mind when offering these services.”

The upshot is that credit unions are looking to insurance as an income opportunity. Insurance services help compensate for reduced noninterest income.

When it comes to selling insurance, says Kaiser, credit unions have a built-in advantage: “People trust and feel secure with them. Their advantages are simplicity, in terms of all offerings being in one place, competitive pricing, and the ability to work with large national providers, which means discounts.

“In most cases,” he adds, “credit unions can offer members a dedicated phone number they can call to have questions answered or services provided quickly.”

Kaiser says an organization like CUNA Mutual Group helps credit unions in two ways: “We provide marketing materials for use in lobbies, online, and in statements.

And we educate and train staff to sell insurance products, including assistance with tracking and reporting. The idea is to make insurance a routine part of the business.”

He says there’s an overlap in the level of service a credit union can offer. “You can do face-to-face, where members sit with planners to find the appropriate types and levels of insurance, then work backward to find them. The most basic form is to offer a list of standard insurance policies and have members select from among them.”

Niche coverage
In some cases, an insurance provider will focus on niche coverage and become the go-to expert in that field. “Almost five years ago, credit unions started coming to us wanting to offer auto and home insurance—our niche—to their members,” says Frank Castellano, director of SWBC Insurance Partners.

“They wanted our help because they either lacked experience in selling these types of insurance, lacked the capital to buy an agency, or were in a market where many of the good agencies are in acquisition mode,” he says.

SWBC offers credit unions two sales models. “We place agents in the credit union who serve the entire membership and work full time on the credit union’s behalf selling auto and home insurance,” Castellano says. “We market with the credit union and brand our offerings with the credit union’s logo, colors, name, and look.

“The credit union uses our marketing materials and makes sure our offerings are within two clicks of the home page,” he says.

Smaller credit unions follow the same scenario but without an onsite agent. Instead, calls and queries go to SWBC, which handles inquiries as though it were the credit union.

“As a credit union grows, it converts to an onsite agent,” says Castellano. He says successful insurance product marketing has three distinct and persuasive aspects:

1. Insurance services are a value-added offering that helps with member retention.
2. Insurance services provide a revenue stream that grows as older policies come up for renewal and newer policies are added.
3. Credit unions can market themselves as one-stop shops, offering all legitimate carriers under one roof.

“Keep in mind that carriers compete, too,” Castellano adds. “If members see rate increases, they can ask us to look for better rates with other carriers.”

Target marketing
Vendors often use credit union databases to find members who are likely targets for insurance policies. “From there, we can design direct-marketing pieces that appeal to them,” explains Castellano. “There are lots of models out there for selling insurance via credit unions. The beauty of ours is that they’re very customizable.

We sit down with a credit union and look at what it’s trying to do.

“For example,” he continues, “we can partner with a credit union to buy an agency. We recently did that with one Kentucky credit union that had an agency for 15 years but wasn’t satisfied with its performance. We purchased the agency and implemented our model.

“Also, we don’t have to put our own person onsite,” he says. “Some credit unions already have licensed insurance agents onsite and we work through them.

Sometimes we’ll manage a credit union’s in-house agency. It depends on what will best help the credit union.”

Castellano notes that credit unions already have good relationships with members. “The prospect of having a service-oriented financial institution looking out for their interests by finding the best coverage for the best price is very attractive to them.”

Castellano tells credit unions to remember that “policies reflect retention. A satisfied member who moves far away may switch checking and savings accounts to another institution but will keep the bond that good insurance services have created.”


While credit unions can make money selling insurance to members, they have to remember that they, too, need to be insured against losses from loan defaults. That’s why collateral protection insurance (CPI) should be a crucial, perhaps mandatory, part of any credit union’s insurance portfolio.

“CPI’s cost savings is the biggest selling point,” says John Pearson, executive vice president and national sales manager at State National Companies. “Without CPI, credit unions are writing off a lot of losses to their portfolios at their own expense. We pay as much as two-thirds of what they’d otherwise be writing off.”

Pearson says the biggest objection to CPI is credit unions’ concern that members would perceive it as an invasive program. “Some credit unions remember the bad old days when programs like this were not administered well, and demands for CPI seemed brusque and abrasive. We can now discreetly query various databases to learn about a member’s insurance status. Before we had that ability, we could get reactions like, ‘You were bothering people who already had good insurance!’ ”

If a credit union is very small, says Pearson, CPI may not be necessary. “For larger credit unions that don’t want CPI, they can have coverage via a blanket insurance policy. But they have no way of knowing how much insurance is enough because they don’t really know who among their members is a potential problem. With CPI, they know the insurance status of each of their members and exactly how much they need to pay to protect themselves. With blanket coverage, they’re running blind.

“Credit unions now routinely tell borrowers that if we give you this money, you understand that you must have insurance. But they also need to add a warning: If you don’t, we may buy insurance on your behalf. And this insurance doesn’t cover you, it covers us.”


• CUNA Mutual Group, Madison, Wis.: 800-356-2644 or
• State National Companies, Bedford, Texas: 800-877-4567 or
• SWBC Insurance Partners, San Antonio: 800-527-0066 or

Staff Salary Resources

Make sure your compensation packages are competitive with this suite of staff salary resources from the Credit Union National Association (CUNA). Use the reports as your baseline, then choose from other supplemental materials for additional perspective.

• Complete Credit Union Staff Salary Survey Report. Get the latest information on compensation package benchmarks and trends. The report includes base salaries, incentives, salary ranges, and more. (Stock No. 29440)
• Small Credit Union Staff Salary Survey Report. If your credit union has less than $35 million in assets, this report provides the same salary information as the complete report, but with a focus on small credit unions. (No. 29447P)
• Complete Guide to Setting Salaries. The guide provides data to assign base pay, make peer comparisons, and benchmark positions. (No. 29446)
View sample pages and order at reports and select “staff research.”


Executive Compensation

Ensure your credit union offers competitive compensation packages to attract and retain top talent with CUNA’s 2010-2011 executive survey reports. Report data is geared to credit unions with more than $100 million in assets.

• CEO Total Compensation Survey Report. Compare salary and total compensation package for positions in your geographic area and among peers. (Stock No. 29448)
• Senior Executive Total Compensation Survey Report. Obtain compensation data for the top four senior executive positions: executive vice president, chief financial officer, chief operating officer, and chief information officer. (No. 29449)
• Guide to Setting Executive Salaries. Get the most out of executive compensation reports. This is an excellent stand-alone tool to help create a senior management pay program. (No. 29451)

See sample pages and order at and select “staff research” and “CEO and Senior Executive Salary Survey Resources.”

Available summer 2010. Order now to ensure you receive the 2010-2011 staff and executive compensation reports as soon as they’re released.


Brush Up on Consumer Lending

With many members still affected by the recession, these latest resources from CUNA ensure your lending staff understands all aspects of credit granting.

• Consumer Lending eSchool. Lending professionals can log in for eight sessions on everything related to consumer lending, including credit counseling, sales and service, and regulations. Attend sessions individually or as a series. Tuition for the August event includes six months access to the recorded presentations for your entire credit union.
• Loss Mitigation for Real Estate Loans Course. Help members prevent home foreclosure, and avoid financial burdens for members and your credit union. Learn how to develop a plan for handling loan delinquencies, conduct financial analysis of troubled loans, and explore workout solutions.

For more information on courses, visit


Additional resources:

• Consumer Lending Compliance Guidebook. This guide offers a practical, hands-on approach to typical compliance challenges. Solutions are based on real-life issues concerning common lending problems and errors—not just a summary of regulations. ($68.95, Stock No. 25350)
• Consumer Lending Management. The second edition of this credit union favorite will help position your credit union to become more competitive and stand out in the lending market. It includes lending strategies, lending teams, and managing the loan department. ($39.95, No. 22479)
• Servicemembers Civil Relief Act: A Compliance Guide. This newly released edition provides clarification on servicemembers’ obligations toward your credit union. Incorporating recent changes to the law, it’s designed to help your staff maintain compliance under the revised act. ($19.95, No. 0300)

For more information or to order, visit and enter the Stock No. in the product finder.