Credit Unions Are Positioned Well For a Winning Property & Casualty Strategy

Transcription

1 Credit Unions Are Positioned Well For a Winning Property & Casualty Strategy

2 NACUSO s 2010 Property & Casualty Advisory Board (PCAB) Lynda Andrews - First Line Insurance Services, Inc. Nick Bloxham - Mountain America Credit Union Leonard Gzesh -The Golden 1 Credit Union Thomas Linn - Marsh, Berry & Company, Inc. Lyle Sandlin - Wescom Credit Union Stephanie Sherrodd - Texas Dow Employees Credit Union Jill SmithEly - Apollo Insurance Services, Inc. 2

3 Thomas Linn Marsh, Berry & Company, Inc.

4 Insurance Distribution Options Option 1: Outsource to third party vendor Pro: Low capital investment, expansion of member services Con: Low profit contribution Option 2: Build from scratch Pro: Low capital investment, expansion of member services Con: Very long payback period (5-10 years) Option 3: Purchase existing full-service brokerage Pro: Potentially high profit contribution, immediate turnkey capability and expansion of member services Con: High capital investment Option 4: Hybrids of Options 1, 2, & 3 4

5 100 Largest Brokers Ranked by 2008 U.S. Brokerage Revenues 13 Financial Institutions Controlling 27.0% of Middle Market Revenues Source: Business Insurance, July

6 What We Know as Fact Insurance agency ownership continues to be a superior investment. Seven Year Total Investment Return Independent Agency Investment vs. Alternatives Total Return (12/31/01 through 12/31/08) Notes: 2008 Private ESOP Agency index values are estimates based on third and fourth quarter 2008 valuations. Public Broker Composite includes BRO, WSH, AJG and MMC. 6

7 The Market Aggregate Property & Casualty (P&C) Premium Growth Per Year growth: (0.1%) First decline since growth: (1.4%) 1 st back to back since depression 3. Three Quarters 2009 growth: (3.8%) First 3 year decline since great depression Estimate: (1.9%) Contemplates Improvement in GDP Source: Insurance Information Institute, Public Estimates, MarshBerry 7

8 Enterprise Value Comparables Including Earn-Out Information considered in preparing estimated market comparables includes private transactions in which we were involved and have detailed information, private transactions from which we have general knowledge, transactions in the public record, our knowledge of the current M&A marketplace, and discussions with buyers and sellers that are active in the marketplace. Value illustrated is net of WC requirement. 8

9 Capital Gains Rate Lowest Since the Great Depression (10/29/29) 9

10 Window of Opportunity Do You Fit in this Window? If you are a Seller: Sell Now If you are a Buyer: Buy Now 10

11 Lennie Gzesh The Golden 1 Credit Union

12 Why is P&C a good fit for Credit Unions? Credit unions achieve higher satisfaction scores from their members than banks do from their customers. Higher satisfaction can be leveraged into needsbased sales of other financial products and services to include P&C Members trust their credit unions more for advice and recommendations Credit unions are strong players in auto lending, both Direct and Indirect; it s a natural fit to cross-sell auto insurance with a loan 12

13 Why is P&C a good fit for Credit Unions? Members, because they are owners, expect valueoriented products and services from their credit union. Members often save money by switching to the P&C carrier recommended by the credit union or through its chosen delivery channel/business model Many carriers offer affinity discounts to a credit union s members on auto/homeowners Credit unions offering business services (accounts, lending, other) can benefit from offering P&C commercial lines along with personal lines 13

14 Stephanie Sherrodd Texas Dow Employees Credit Union

15 Why Offer P&C? Insurance is required on collateralized loans at your credit union members are buying it somewhere else Establishes your credit union as a total financial center Diversifies your income stream 15

16 Positioning the Product Insurance should be a core product offering with management commitment Referral tracking Sales tracking Partnering insurance with other products Online banking 5 star mortgage Jumbo CD s 16

17 Jill SmithEly Apollo Insurance Services, Inc.

18 Agency Service Options Service in Agency What to consider: Size of book Spread of business Carrier Service Center Approach: Requires careful planning for successful execution Communication and training is critical 18

19 Service in Agency Benefits: Ability to manage customer interaction Customer s policies are with multiple carriers Not all Service Centers created equal No reduction to revenue for cost of carrier servicing 19

20 Insurance Carrier Service Center Benefit to Agency Reduced time & expense required to service & support policies Increased time for your service & sales staff to conduct activities that generate additional revenue Less worry about training & turnover Service expenses are more predictable Longer hours of operation Customer direct service using toll free line Services Supported Policy changes Billing & accounting assistance Renewal questionnaires General policy inquiry Claims reporting Account Rounding Coverage Consultation 20

21 Lynda Andrews First Line Insurance Services, Inc. and Nick Bloxham Mountain America Credit Union

22 Strategies to improve penetration within a credit union environment Once you have implemented a P&C program, focus should turn to maximizing penetration within the credit union s culture: Identify all the key advantages you have as a credit union in the P&C space Member Loyalty Above industry average on member response rates for direct mail Incredible Brand recognition and loyalty CPI Tracking Data Can be used to target market to your own members Lending synergy and Insurance correlation Auto Loans should = Auto Quotes Mortgage Loans Should = Home owner Quotes Business Services or Lending should = Commercial P&C Quotes Buy In / Sales Culture Employee Policy Reviews help create awareness and buy in. Make it easy for employees to make a quality referral (I.E. Technology & Training) Evaluate if paying for referrals fits inside your CU philosophy Is insurance considered a core offering of the credit union? 22

23 Strategies to improve penetration within a credit union environment Marketing Leverage your Carriers for free marketing Utilize online branch and your CU website to offer quotes and create awareness Web optimization - Where does your agency show up on a Google search for insurance in your area? Are you partnering with carriers that offer affinity discounts for your members? Relationship Pricing - The more you bundle the more you save Technology Make it easy for your members and agents to do business with you Online quotes Interface technology within your Loan Origination System (LOS) - Can you push quotes while completing an auto loan? Does your members insurance relationship also show up within online branch? How easy is it for front line employees to send a referral? Product Offering - Does your product offering support your credit union philosophy? Do you cover all risks or only the preferred or super preferred risks? 23

24 Lyle Sandlin Wescom Credit Union

25 Revenue growth and Personal Lines Impressive Growth Growth through leveraging the credit union relationship can be achieved EXAMPLE: 1% marketing success rate of 50,000 member households 500 policies average annual premium $1,300 $650,000 annual premium 15% commission $97,500 Calculate 95% renewal rate for future growth Mature agency 65% operating expenses Value 2X Gross Income 25

26 Revenue growth and Personal Lines Personal Insurance Premiums Personal automobile and homeowners insurance premiums represent the largest segment of the P&C insurance business Independent Agencies Write less than 35% of the personal insurance premiums Either do not write personal lines or provide it as an accommodation 26

27 Focus of NACUSO s PCAB going forward...

28 The Focus of NACUSO s PCAB going forward We will be meeting on an on-going basis during the year to: Develop a set of productivity and performance metrics and standards for the P&C insurance channel within the credit union industry Stay on top of the current, relevant, and timely issues in the P&C insurance channel Determine the most appropriate session topics for NACUSO s 2011 Annual Conference 28

29 Thank You! 29