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Savings and Loan Insurances. Savings and Loan Insurances. Only Insurance required by FSA is Fidelity Bond Other ‘must have’ insurances include General, Office, Liability, etc. Member Insurances are optional but condition of affiliation to ABCUL (For Now?)
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Savings and Loan Insurances NACUW Conference 20th October Ken Dunn
NACUW Conference 20th October Ken Dunn Savings and Loan Insurances Only Insurance required by FSA is Fidelity Bond Other ‘must have’ insurances include General, Office, Liability, etc. Member Insurances are optional but condition of affiliation to ABCUL (For Now?) Cannot set up in-house insurance without permissions from FSA
NACUW Conference 20th October Ken Dunn Savings and Loan Insurances The Current Position… ABCUL All inclusive package. Condition of affiliation (Under review) UKCU No obligation. Offer Death Benefit Scheme ACE No obligation. Recommend ‘CU Consultants Ltd.’ Scottish League No obligation. Offer Death Benefit Scheme Non-Affiliated Free to do anything within Law,etc
NACUW Conference 20th October Ken Dunn Savings and Loan Insurances Why have member insurances? The ‘Witchita Linesman’ story (debt dies with member) -Do those conditions and needs still apply? Who are we covering, why and at what cost (to CU and to individual members)? Are there other ways to help the ‘under provided’ Is your, very unique, CU offering a ‘one size fits all’ solution?
NACUW Conference 20th October Ken Dunn Savings and Loan InsurancesCase Study- ‘Black Cat CU’ Large V1-£12m assets 8% Reserve to asset ratio Average Dividend 2-4%pa 90% payroll 10%DD payers Call on final salary pre notified of leavers Majority have Death in Service cover All employees have regular health checks i) Because of way payments made, usually v low balances at death Average 10-12 deaths pa Average age of members is 45 yrs and 6 months Premium 2010 = over £80,000 + dues + bond Largest annual claim £37,000, average £14,832
NACUW Conference 20th October Ken Dunn Savings and Loan Insurances An alternative for ‘Black Cat CU’? Check legality, logic and sense of the following… Cancel all insurances and at same time arrange Fid bond, General, etc. Disaffiliate from ABCUL (if currently with ABCUL) Build a Death Benefit Fund (DBF) with an initial deposit of £60-80,000 Top-up with annual amounts (approx. £20-40,000pa)
NACUW Conference 20th October Ken Dunn Savings and Loan InsurancesAlternative (Cont’d)… Pay ‘nominated persons’ £1,000-1,500 each and write off loans (this would have cost £14,293 pa average and £34,286 in worst year) Stress the DBF is not an insurance and full payments not guaranteed if huge number of deaths Arrange back up with bank -or other CU(s) – to further minimise the above happening Set up small committee to administer, monitor fund.
NACUW Conference 20th October Ken Dunn Savings and Loan Insurances Conclusions: I am certainly NOT advocating that all credit unions drop their member based insurances (and therefore remove themselves from ABCUL if that is their current affiliation). For the majority the simple option of letting an insurance provider do the hard work and take the risks is probably the best course of action. However, I think every (obviously unique) CU could just do an exercise to test the business case and if necessary -and with great caution, prudence and risk awareness- look at the alternatives (legal and sensible ones only please!).
