Unleashing the Power of Personal Lines Insurance

1. Unleashing the Powerof Personal Lines Insurance Keith Kremers February, 2008 Wendy McCurdy, Moderator

2. Agenda • Today’s Personal Lines Insurance Marketplace • Challenges for Credit Unions and CUSOs • Potential Solutions Poll #1

3. Polling Question #1: Do you currently have a relationship with an agency or agents?

4. Giants Dot-Coms Global Players Retailers Trusted Insurance Local Institutions Financial Services Industry – TODAY!

5. Who Controls the US Personal Auto Insurance Market? Poll #2 Source: National Association of Insurance Commissioners Data 2006. All Private-Passenger Auto

6. Polling Question #2: Have any of your members refinanced loans through their insurance provider?

7. Insurance Shopping (Property & Casualty)

8. What’s Competition Doing in Mailbox? • 7+ billion insurance solicitations in ’06 • “Average” 60 per households (HH) annually • Assumes all HH were being solicited • Actual numbers 2x-3x this for highly desirable demographics – think credit cards! • Includes 3 billion Life, over 2 billion Auto and 240 million AD&D • GEICO mails approximately 800 Million – alone! • GEICO spends $37.66 per NCA* *NCA= new customer acquisition Sources: United States Postal Service http://www.usps.com/, DM News – key trade magazine http://www.dmnews.com/, Direct Marketing Association http://www.the-dma.org/ The “Bible” of Direct Marketing “Successful Direct Marketing Methods” by Bob Stone

9. Challenges of Credit Unions and CUSOs • Revenue • Economic resources • Product distribution/member access • Attaining scale

10. Revenue • Tightening margins in credit unions have made positive income from insurance operations a must! • Average commission is 14% new and renewal • On average, personal lines agencies delivers 10.8% profit to bottom line • Increased focus on products per household Source: The National Alliance Research Academy "Insurance Agency Growth and Performance Standards” 2006-2007

11. Economic Resources • Inadequate to secure growth • Inadequate to staff for administrative functions

12. Product Distribution/Member Access • Unable to support call center with extensive hours of availability • Unable to support wide network of local agents • Unable to support distribution demanded by today’s insurance buyer Poll #3

13. Polling Question #3: Which of the following methods does your agency use to market property and casualty insurance?

14. Scale • Hours of operation vs. member demand • Licensing • Call center support • Marketing Poll #4

15. Polling Question #4: What is the most important measurement of the success of your insurance affiliation?

16. Solution – MEMBERS® Auto & Homeowners Positioning and using new channels and member distribution methods in a manner where we market and distribute around the existing agency and provide more revenue and relationships opportunities to the overall insurance strategy of the credit union and/or CUSO without competing for the same members.

17. Wrap/Overlay Strategy • Complements current offering • Adds no additional cost • Increases participation/members served • National presence • Increase your agent sales force by 1700+ local agents • Positive bottom line impact

18. Hypothetical Case Study • 100,000 member credit union • Owns personal agency • Trying to increase agency profitability • Increase products per household

19. Current State • Agency producing $5 million in annual personal lines premium • $700,000 in annual revenue (at 14% commission) • Approximately 2,500 households served • $77,000 bottom line profit (11%)

20. Opportunity • 100,000 members • Incorporate CUSO “Wrap” – direct mail channel • $115,000 of bottom line revenue over 3 years

21. Overall Results • Increase agency profitability from 11% to over 16% • Increase households served by over 650 in the first year • Create national presence (1,700 local Liberty Mutual Representatives) • Increase the number of products per member

22. Revenue ComparisonIndependent Agency vs. CUNA Mutual Group/Liberty Mutual

23. Success Story - CEFCU Jim Sarver, Manager, CEFCU Financial Services Jim has been at CEFCU in Peoria, IL for 30 years and a manager in the CUSO since 1986

24. Challenges & SolutionsCEFCU Challenges Solutions • Enhancing agency approach with MEMBERS® Auto & Homeowners national program • Leveraging referrals from other member purchases (e.g. loan applications) • Ensuring strong customer service • Maximizing channel access • Carriers entering & exiting the market • Conversions • Ability to serve all geographic areas

25. MEMBERS® Auto & Homeowners Insurance Program Contributes to CEFCU’s Success Test: September 2006 mailings to small group of non-Illinois members Outcomes • Combined with incidental sales in all states, results were 40% of peer credit unions using the full MAH program. • 86% of all sales from F2F channels • CEFCU has decided to expand program to include Illinois and potentially implement additional components of MAH

26. Who might benefit? • Credit unions that own an agency • CEFCU-like scenario • Agencies that want to focus on commercial accounts and minimize personal lines • Credit unions that partner with a local agency • Credit unions using agency for “back-room” administration and referrals

27. Next Steps? We can help you assess your current program and work with you to design a solution to support your current program and help you reach your personal lines insurance goals. Call your CUNA Mutual Sales Executive at 800-356-2644.