Understand Your Options for Offering an Auto and Home Insurance Program

Auto and home insurance programs are a proven way for credit unions to increase products per member, build non-interest income, and help members protect their investments in their home or vehicle. But deciding to make the coverage available is just the first step. Equally—if not more—important is deciding how to structure the program.

CUNA Mutual Group recently worked with MarshBerry Inc., a provider of consulting services to the financial services industry, to learn more about the most common insurance delivery models used by credit unions and the pros and cons of each. Here’s what we learned.

Insurance Delivery Models

BUILD OR ACQUIRE: In this model, a credit union will either build an insurance business from the ground up or acquire an existing agency.

  • Pros
    • Control of the process and outcomes
    • Full ownership of customers
    • Strong relationships with members enhance the chances of success
  • Cons
    • Start-up phase can be long and expensive: A successful launch requires your credit union to learn the industry and cover an array of operational, legal, and compliance expenses.
    • Difficult to scale
    • Limited experience or resources to invest in mass marketing:Does your credit union have the expertise to develop effective marketing tools and the budget to afford them?

JOINT VENTURE: In this model, the credit union forms a joint venture with an outside party. Each usually owns a percentage of the business and the annual profits are split accordingly.

  • Pros
    • The outside partner provides/oversees management and production talent:The credit union doesn’t need to staff the program.
    • Direct monetary incentives for the partners
    • Avoids complications with licensing, training, and carrier appointments:Partner will handle these issues.
  • Cons
    • Lack of control over strategic direction
    • Profit potential may be quite small
    • Lack of control over customer experience:And members may be confused over who “owns” the relationship, especially if the partnership ends.

OUTSOURCE: In the final model, the outsourced specialist is responsible for every aspect of the program.

  • Pros
    • Low cost of entry: There is often no investment on the part of the credit union.
    • Direct monetary incentives: No payback period, income flow can begin at the point of the first sale.
    • Can be used in tandem with other distribution models: Even if a credit union has its own agency, it can still opt to use an outsourced program to ensure it meet the needs of customers who won’t be served by the agency or might prefer to buy through online/call center channels.
  • Cons
    • Partner has primary control of the program’s strategic direction
    • Lack of control over customer experience: And members may be confused over who “owns” the relationship, especially if the partnership ends.
    • Channel availability may vary by state

Other Considerations

Although these pros and cons are a good starting point, your credit union will also need to weigh a variety of other factors when determining which insurance model is the best fit for you. These include:

  • Assets
  • Membership size
  • Locations
  • Staff experience
  • Operational readiness
  • How insurance aligns with your credit union culture
  • Whether available model options meet local consumers’ channel preferences. If most consumers prefer to research insurance online, does your preferred model allow for this?

After considering the pros and cons, more than 4,000 credit unions across the country have chosen the TruStage Insurance Agency as their insurance partner.

TruStage uses a mix of media to create awareness, including traditional methods such as direct mail and referrals, and new ones such as social media, emails, and web ads. Members research and buy using the channels they prefer, including call center, online options, and through a local agent. And TruStage offers trusted national carriers, including Liberty Mutual Insurance and Esurance.

Ready to learn more about the benefits of an outsourced program? Contact CUNA Mutual Group at 800.356.2644, or visit www.cunamutual.com/auto.

Strategic Link is the NWCUA’s wholly-owned service corporation, using the power of aggregation to provide the Association’s member credit unions with exclusive high-quality, competitively-priced products and discounted services. Contact Director of Strategic Partnerships Craig Reed today to find out how Strategic Link can help your credit union save money while meeting its goals in 2014 and beyond: creed@nwcua.org.

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