ORLANDO — With margins stretched and lending still struggling to grow, credit unions need all the non-interest income they can get these days, and insurance may represent the greatest opportunity for CUs to find that revenue. After all, industry insiders say, it's a product that nearly every credit union member needs.
"It's true everywhere-everybody has to have home and auto insurance, and in our market if you rent, virtually every apartment complex requires people to have renters' insurance," said Phil Tischer, COO at MIDFLORIDA CU here. "So it's kind of a necessary evil that everybody has to buy it."
Many credit unions have recognized that frontline staff can be the start of the insurance referrals process, and at United Nations Federal Credit Union, member service representatives have been trained (as part of a broader shift toward a sales culture) to have meaningful conversations with members that can lead toward needs assessments and consultative sales, said Steve Ryerson, VP of financial services at UNFCU and president of UNFCU Financial Advisors.
"The issue lingering in credit unions that is starting to be overcome is the issue that 'I wasn't hired to sell,' " said Ryerson. "That's correct. You were hired to help the members and tell them about how we can help them in different ways." Ryerson added that multiple studies have shown that members expect to be cross-sold on various credit union products and recognize that as a deepening of the relationship with the credit union.
In-Branch Vs. Online
Many CUs recognize that the greatest battle for non-interest income isn't actually getting the member to purchase the products, but making sure the member understands the products are actually available for purchase from a source they trust, such as the credit union.
At Greater TEXAS Federal Credit Union in Austin, there's a strong emphasis on increasing awareness of insurance options, not only through newsletter articles, direct mail and on-hold messaging, but also through e-mail-the credit union's most successful messaging channel.
According to Marketing Director Brandy Conway, e-mail messages related to insurance have higher open rates than all other regular monthly e-mails to the membership, in part because the insurance messages are more targeted, such as only e-mailing homeowners within a certain age range.
Greater TEXAS works with CUNA Mutual Group on its insurance lines, and it beta tested its e-mail messaging this year with the company. Since that began, said Conway, there has been a 16.2% increase in the number of members taking out the GTFCU's insurance products.
One CU, however, made the determination that in-branch referrals were not just inefficient-they simply didn't work.
"Trying to sell personal lines or be able to provide it to the membership by face-to-face and at the teller line, and trying to get referrals that way was kind of a disaster," said Mike Gordon, general manager for Denali Alaskan Insurance, the in-house agency at Anchorage-based Denali Alaskan Federal Credit Union.
Rather than focusing on in-branch sales, Denali Alaskan keeps the focus on e-commerce and driving traffic for insurance products either to its website or to a toll-free number.
"We found that frontline staff were kind of afraid of insurance because they don't have an in-depth knowledge of it," said Gordon. DAFCU's MSRs can now give members a business card listing the phone number and website for information on insurance whenever members ask about those product lines.
"We've found that to be extremely successful compared to having a teller take down information electronically, send a referral electronically and we go back and re-contact the member," said Gordon.
He added: "If they go on our website and we quote them, we have over a 50% success rate in writing that policy. Before, when we got referrals form frontline staff ... in a month we'd get 150 referrals and we'd write one or two."
Auto, Home, Life... Pet?
Along with traditional lines such as home and auto insurance, many credit unions also offer ancillary products such as life insurance, pet insurance or vacation insurance.
But those traditional lines continue to be the best insurance bets for CUs, said many who were interviewed for this story.
"By focusing on [home and auto], we know we're focusing on something that virtually all of our members have to buy," said MIDFLORIDA's Tischer.
That sentiment is true at some smaller CUs, as well. At Wichita, Kan.'s Central Star CU (and its CUSO, Central Star Financial Solutions), 70% of its insurance business is in auto insurance, 25% in homeowners' insurance and the remaining 5% in ancillary lines.
Along with the importance of carrying must-have lines like home and auto, industry experts and insiders stress that credit unions do not have to go it alone when it comes to offering insurance.
Both MIDFLORIDA and Central Star work in partnership with Insuritas, though CUNA Mutual Group, SWBC and others also partner with CUs to offer insurance services. Not only do Insuritas and others have the expertise in insurance that many CUs lack, but in many cases the services can be branded to match the credit union.
When Central Star members call Insuritas (and they have to call or go online; service is not currently available in-branch), MSRs answer the phone as Central Star Financial Solutions.
"We're not experts in insurance, nor did we have the bandwidth to have someone fully dedicated on staff to be an expert in insurance," said Central Star CFO Mary Wehner.
That's a position many CUs have found themselves in, said UNFCU's Ryerson. He noted that that his CUSO has struck up a partnership with three CUs in the Washington area-ranging from $160 million to a half-billion in assets-wherein a UNFCU rep rotates between those credit unions, working with staff and management, and meeting with members for insurance.
'Size Doesn't Matter'
The major lesson voiced by executives from credit unions, CUSOs and insurance companies alike for this story is that insurance has the potential to be a reliable income stream for credit unions both large and small.
"Size doesn't matter," stressed Dale Fossselman, SVP of corporate development at Denali Alaskan. While many smaller CUs still struggle with many of the same compliance requirements as larger shops, "you still need the non-interest income, because you want to diversify away from the interest rate risk and credit risk, and all the other local economic risks. The key there is to find an efficient way to bring those services to your members."
Fosselman's colleague Keith Fernandez, Denali Alaskan's vice president of corporate development, noted that while CUSOs and those in the vendor space are an option, CUs shouldn't overlook the possibility of partnering with local insurance agencies.
One other thing to remember, said MIDFLORIDA's Tischer, is that the revenue will come, but it won't be overnight.
"It's a long-term proposition," he said. "It is something you make revenue on, but you do have to amortize those start-up costs over time."