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1. 2011 NAFCU Annual Conference and Exhibition
Debt Protection and Credit Insurance
Benchmarking Survey Results
John Gibbons
National Sales Director
Securian Financial Group, Inc.
June 30, 2011
2. Background and Objectives
• NAFCU Services Corporation and Securian Financial Group (NAFCU Services’
Preferred Partner for Debt Protection and Credit Insurance products) partnered
to conduct research with NAFCU member credit unions regarding their
experiences with Debt Protection and Credit Insurance products
• Objectives: to provide credit unions with benchmarking data to use when
considering Debt Protection versus Credit Insurance and what contributes to
overall program satisfaction and success
2
3. Specific Measurements
• Factors contributing to the overall satisfaction and success of credit unions
with Debt Protection programs
• Factors contributing to the overall satisfaction of credit unions with Credit
Insurance programs
• Credit union likes and dislikes of both programs
• Peer recommendations and what to avoid when implementing Debt Protection
• Reasons why credit unions have considered Debt Protection in the past and
why they will reconsider the program in the future
3
4. Methodology
• Securian’s market research department, Securian’s financial institution division
and NAFCU Services created an online survey delivered to NAFCU member
credit union managers with “lending” titles
• The survey was delivered to all NAFCU member credit unions, regardless of
Debt Protection and/or Credit Insurance provider
• The study was conducted in two phases in the spring and fall of 2010; the
second was added to increase overall response and make the data more
meaningful
• In total, 121 out of a possible 749 responses were received, yielding a 16%
response rate
4
5. Who Offers
Debt Protection?
• A total of 20% of respondents currently offer Debt Protection
• Nearly half of respondents offering Debt Protection implemented their
programs during the past two years, with the highest concentration in 2008 and
2010
• Debt Protection is more prevalent among respondents with larger asset sizes
Year Debt Protection
Implemented
Not Sure 33%
2003 4%
2004 4%
2005 4%
2006 4%
2007 4%
2008 17%
2009 13%
2010 17%
0% 20% 40%
5
6. Debt Protection
Protected Loan Types
• Loan types most commonly protected within Debt Protection programs are
Consumer, Home Equity and Credit Cards
Debt Protection Product Types Offered
Consumer loans 92%
71%
Home equity loans
Credit Cards 54%
Mortgage loans 13%
Other* 4%
Commercial loans 0%
n. 24; Select all that apply
*Other: Vehicles only
0% 20% 40% 60% 80% 100%
6
7. Debt Protection
Protected Events
• Protected events most commonly offered are Death and Disability, both at 96%
and Involuntary Unemployment at 67%
• Death and Disability are the most commonly offered protected events across
all product types, followed by Involuntary Unemployment, Hospitalization and
Family Leave respectively
Events Covered by Debt Protection
96%
Death
96%
Disability
Involuntary unemployment 67%
Hospitalization 13%
Family leave 8%
Other* 4%
0% 20% 40% 60% 80% 100%
n. 24; Select all that apply
7 *Other: Loan default
8. Debt Protection
Influencing Statements
• “Protecting credit union assets and “providing members a variety of benefit
options” top the list of statements that most influenced the decision to
implement a Debt Protection program
– “We were offering straight credit life/disability products and decided to
offer the debt protection coverage to help our members in involuntary
unemployment situations”
8
9. Overall Satisfaction
with Debt Protection
• Overall Satisfaction with the credit unions’ Debt Protection program is high at
81% (based on the sum of the top two ratings)
• “Provider administration services” and “Program design” top the list of Debt
Protection program aspects that satisfy the most
Overall Satisfaction Percent
%
Very Satisfied – 7 33
6 48
5 19
4 0
3 0
2 0
Very Dissatisfied – 1 0
Total 100
n. 21
9
10. Debt Protection Program
Likes and Dislikes
• When asked to identify what respondents particularly like about their Debt
Protection program, “Easy to use and offer” and the “ability to tailor the
program to best meet their needs” are most commonly mentioned
– “Easy to use, claims process is very good”
– “That we were able to make the price more affordable for members”
– “Our ability to set the parameter and pricing margins for each product”
– “We were able to tailor our own pricing and product combinations for the
best value for our members”
• No common themes are apparent regarding particular dislikes of their Debt
Protection program
• The few items identified include lack of core processor support, program
exclusions and desire to increase penetration
10
11. Debt Protection
Program Changes
• Most respondents indicated they have NOT made changes to their Debt
Protection program since initial implementation
• Verbatim comments referred to the addition of incentives, re-pricing and
adjusting benefits:
– “Incentives are now paid and management’s focus on the program”
– “We re-priced some of the plans”
– “Increased covered limits”
11
12. Debt Protection
Program Experience
• 64% of respondents who implemented Percentage Protected Loans Increased
a Debt Protection program indicate their Less than 10%
21% 21%
protected loan volume has increased
10% - 24%
• When asked to indicate by what
21% 25% - 49%
percentage, responses range from
36%
50% & Above
1% to 53%; half of the percentages
n. 14
reported are from 25% and above
• 42% of respondents indicating an
increase have had their Debt Protection program in place since 2008
• Of those seeing no change in their protected loan volume, 75% implemented their
program in 2010
• Only two respondents indicate a decrease in protected loan volume
12
13. Debt Protection Program
Fee Income Experience
• 55% of respondents who Percentage Loan Protection Product Fee Income
Increased
implemented a Debt Protection
Less than 10%
program indicate their fee income
17% 25% 10% - 24%
increased
25% - 49%
• When asked by what percentages, 17%
50% - 74%
responses ranged from an increase 8%
33% 75% and Above
of 3% to 100+%; half of percentages n. 12
reported are from 30% and above
• 42% of respondents indicating an increase have had their Debt Protection
program in place since 2008
• Of those seeing no change, 75% just implemented their program in 2010
• Only two respondents indicate a decrease in their fee income
13
14. Overall Success
with Debt Protection
• Overall success with the credit unions’ Debt Protection programs is high at
91% (based on the sum of the top two ratings)
Overall Success Percent
%
Extremely Successful - 4 26
3 65
2 9
Not at all Successful - 1 0
Total 100
n. 23
14
15. Overall Success
with Debt Protection (cont.)
• Respondents were asked to identify the two most important factors contributing
to their credit union’s Debt Protection success
• Training programs are mentioned most often, followed by:
Debt Protection Success Factors Percent
%
Training 26
Pricing 18
Variety of coverage 18
Easy 15
n. 17 participants, 34 responses
• Respondents cite insufficient staff training and staff’s lack of sales culture as
explanations why their Debt Protection Program is less successful
15
16. Overall Success
with Debt Protection (cont.)
• Factors contributing to success
– “Training of staff on how to sell product”
– “Ongoing training to reinforce benefits”
– “Member affordability”
– “Fair cost/benefit”
– “Providing a more diverse loan protection product for members”
– “Program simplicity”
– “Sales incentives”
• Factors contributing to less successful programs
– “We need to train more staff on how to offer it to our members”
– “We do not have a sales culture at the credit union.”
16
17. Peer Recommendations
for Debt Protection
• When asked what recommendations for success respondents would offer to
another credit union considering Debt Protection, common themes include
offering staff training and incentives to sell Debt Protection
– “Do it now, and make sure you incorporate continual periodic training
updates and follow-ups with your staff”
– “Train and incent”
– “It is a good move to work with their consultant to develop plans their
members will buy”
– “Determine needs of your member in this economy”
– “Partner with a company that can give you the flexibility to tailor the
program to your membership”
– “Cover unemployment risks”
– “Either go all or none in the program. Do not split as we did between
17 credit life and disability and debt [protection].”
18. What to Avoid When
Implementing Debt Protection
• A question about what to avoid when moving to a Debt Protection program
yielded little response; no common themes are apparent
– “There’s nothing to avoid, but be careful and do your homework on setting
pricing and margins for the products”
– “Make sure the data processor can handle another protection program”
18
19. Those with No Debt Protection
Program in Place
• 52% of those without Reasons Debt Protection Not Pursued
Other* 44%
a Debt Protection program Too expensive 33%
Product complexity 17%
in place have considered Technology requirements 15%
offering one at their credit Lack of member interest 13%
Minimal fee income generation anticipated 11%
union Life events covered insufficient 9%
Benefit terms inadequate 7%
• Among those who did
0% 20% 40% 60% 80% 100%
not consider offering Debt n. 54; Select all that apply
Protection, explanations include common themes such as lack of
awareness/understanding, no interest in product, too expensive and not a
priority
• Of those who have considered offering Debt Protection the below reasons top
the list of why the credit union did not pursue a program (the majority of “Other”
responses include themes such as “currently considering” and “not a priority”)
19
20. Reconsidering Debt Protection
in the Future
• 83% of those without a current Debt Protection program indicate they will
reconsider it in the future
Will Reconsider Offering Debt Protection Percent
%
Yes 83
No 17
Total 100
n.96
• 77% of respondents might consider offering a Debt Protection program in the
next two years
Timeframe Credit Union Might Reconsider Percent
Offering Debt Protection %
Less than one year 39
1 – 2 years 37.5
3 – 5 years 6
More than 5 years 0
Not sure 17.5
Total 100
n.80
20
21. Reconsidering Debt Protection
in the Future (cont)
• “Protects credit union assets,” “Provides members a variety of benefit options”
and “Generates credit union income” top the list as reasons why respondents
will reconsider offering a Debt Protection program in the future
– “Periodic review of products to ensure we are offering the best to our
members”
Reasons for Reconsidering Offering Debt Protection
Protects CU assets 78%
Provides members variety of benefit options 74%
Generates CU income 68%
Meets members' needs 64%
Flexibility in program design, pricing, marketing 58%
Is affordable to members 48%
Reduces CU licensing costs 15%
Other* 8%
n. 80; Select all that apply 0% 20% 40% 60% 80% 100%
21
22. Who Offers
Credit Insurance?
• A total of 90% of survey respondents offer a Credit Insurance program at their
credit union
• Some credit unions seem to be offering both Debt Protection and Credit
Insurance
22
23. Overall Satisfaction
with Credit Insurance
• Among those with a Credit Insurance program, overall satisfaction is modest at
45% satisfied (based on the sum of the top two ratings)
Overall satisfaction with Credit Percent
Insurance Program
%**
Very Satisfied - 7 14.3
6 30.5
5 27.6
4 17.1
3 6.7
2 2.9
Not at all Satisfied – 1 1
Total 100
Credit Insurance Not Offered n. 12
n.117
**Percentages based only on those with a credit insurance program (n. 105)
23
24. Overall Satisfaction
with Credit Insurance (cont)
• Respondents rating their satisfaction as a 3, 2, or 1 were asked to expand on
why they are not currently satisfied
– “Expensive for members”
– “It’s not the carrier; it is simply the fact that people today in our credit
union are not interested in credit insurance”
– “Very little interest from members for simple life/disability”
– “Very restrictive and premiums are high. Limited member interest due to
price points.”
24
25. Credit Insurance
Likes and Dislikes
• Ease of selling/administering and member benefit top the list of most
commonly mentioned aspects of respondents’ Credit Insurance programs they
particularly like
– “Easy to understand and administer”
– “Meets our membership needs”
– “Convenient and relatively inexpensive”
– “Protects the credit union, good income”
– “Excellent customer services in handling claims”
25
26. Credit Insurance
Likes and Dislikes (cont)
• Respondents who currently offer Credit Insurance were likewise asked what
aspects, if any, they particularly dislike about their program
• Among those offering feedback, “doesn’t meet needs,” “challenges with the
claims process” and “price” are the most commonly-mentioned aspects they
dislike
– “Limited in the types of events covered”
– “Lack of options”
– “Difficult claims process”
– “Cost compared to protection”
– “Rates are too high”
– “Unable to pay incentives to MSRs and Loan Officers since it is an
insurance product and they aren’t licensed”
– “We don’t make enough money on it”
26 – “We have branches in 3 states, 3 different rates”
27. Key Takeaways
• Although only 20% of respondents offer Debt Protection, they are significantly
more satisfied and see more success with this program than those who offer
only Credit Insurance (81% versus 45%)
• More than half of those with Debt Protection in place saw increased protected
loan volumes and fee income
• According to your peers, Debt Protection program success can be attributed to:
– Effective staff training (both in-house and from your provider) and
motivating sales incentives
– Prudent design and pricing that meets your members’ needs
– Offering additional protected events, such as Involuntary Unemployment
coverage, to meet member needs
27
28. Key Takeaways (cont)
• 83% of credit unions who have considered Debt Protection in the past will
consider it again in the future
– Strong desire for product education and design/pricing consultation
– A Debt Protection needs analysis is essential
• Although overall satisfaction with Credit Insurance was low in this survey, it
remains a viable product that a majority of credit unions continue to offer
28
29. Thank You
• For more information on the survey, please visit our booth in the Preferred
Partner Pavilion or http://www.nafcu.org/securian
• For more information regarding Debt Protection or Credit Insurance, including
client research Securian has conducted in the past:
john.gibbons@securian.com
612.234.1018
Follow me @securianjohn
29