Credit Unions Shy Away From Insurance-Based Benefits Credit unions appear to be well-positioned to sell retirement products and other employee benefits to small businesses.
But, so far, credit unions are not showing much interest in the benefits market.
Ken Furth, business lending officer at Fair Winds Credit Union, Orlando, Fla., says his organization recently met a glazed-eyed yawn from the local business community when it offered a variety of group employee benefits packages.
"Ive been assigned to see what we didnt do right," Furth says. "Im going to do a study to figure out how we can do it better."
Many nonprofit organizations, employers and employer groups sponsor credit unions, and the biggest credit unions manage billions of dollars in assets. Because credit unions get breaks on their taxes, they can offer members a wide array of no-cost and low-cost financial services, and some are trying to make small commercial loans.
Few have paid much attention to selling insurance-based benefits.
"Not many credit unions are offering employee benefits to their members employees," says Vicki Joyal, vice president of market research at the Credit Union National Association, Madison, Wis.
CUNA has announced a new program to help its members provide small businesses with payroll services, insurance products, employee benefits and retirement plans. But the program is just getting off the ground.
"We hear a lot of credit unions talking about [offering employee benefits]," says Tom Eckert, senior vice president of pension services at CUNA Mutual Group, Madison, a CUNA affiliate that sells financial products to individual members of credit unions.
"We do have a number of employee benefits initiatives, but they are experimental," Eckert adds.
Active benefits programs have been rare even at credit unions with small-business lending programs.
"Its not likely a strategy of cross-selling benefits will take off in a big way," Eckert says. "There are a number of credit unions that have done it. But I dont see any that have got a lot of volume in sales."
One complication is that credit unions are not-for-profit organizations. A credit union that wanted to sell benefits would have to set up a for-profit subsidiary to do so, and the subsidiarys revenue would be taxable, Eckert notes.
Another problem is that few employers use credit unions as their primary financial institutions. Most sponsors also use a commercial or regional bank, Eckert says.
A new study for CUNA by the Filene Research Institute, Madison, Wis., suggests that credit unions could enrich sponsoring employers benefit programs at a low cost by offering free financial advice to the sponsors employees.
"Financial wellness programs" could provide individuals with credit counseling and personal debt-management programs, according to the studys authors.
"It makes sense for credit unions to form broader relationships with employers than just offering savings and checking accounts," observes Bob Hoel, executive director of the Filene institute.
But Hoel concedes that he has not yet seen CUNA members flocking to offer financial wellness services.
Reproduced from National Underwriter Edition, April 7, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.
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