by: Stephanie Lutz, Management Analyst, CRI Solutions
Credit insurance has been a staple at many credit unions for decades, but over the past few years, many have migrated to debt protection as a new way to help members protect their loans against the unexpected. Past obstacles, including the difficulty of quoting debt protection, have been solved by technologies such as the QuoteMore™ tool from CRI Solutions allowing the benefits of debt protection to shine through. There are a variety of reasons that debt protection has become such a desirable alternative to credit insurance, but the following five reasons are leading the charge.
Reason 5: Fewer Strings Attached
Over the past several years, tightening regulation surrounding credit insurance has made it increasingly difficult for credit unions to run a profitable program. Licensing requirements and state-mandated rate decreases result in administrative headaches. Debt protection is a refreshing change of pace in terms of regulation, since it is not a state-regulated product. The red tape associated with traditional credit insurance programs is at a minimum in the world of debt protection.
Reason 4: Set Your Own Income
Unlike credit insurance, which has state-regulated rates (including fee-cutting mandatory decreases in recent years), debt protection allows credit unions to decide what their margin of income is going to be on their program. The way it works is simple. Program providers set a rack rate for each debt protection package that the credit union offers and the credit union decides what percentage above that rate they want to charge their members for the protection. This allows the credit union greater control over their program, as well as the fee income that it generates.
Reason 3: No Incentive Restrictions
It’s not unreasonable to want to reward front-line staff for selling add-on products, such as credit insurance or debt protection. However, with a credit insurance program, there are often a variety of regulatory hoops to jump through and licenses to buy in order to set up an incentive program. Debt protection removes those restrictions, allowing you to develop an employee incentive program that works best for your credit union, without worrying about the regulatory implications.
Reason 2: I’ve Got a Package With Your Name On It
Credit insurance feels so impersonal. Every financial institution has the same combination of options in a one size fits all approach. Debt protection, on the other hand, allows credit unions to mix and match protection options into customized packages for their members to choose what works best for their needs. It acknowledges the fact that not every group of members is the same and allows the credit union to target protection that will provide the maximum benefit to their specific needs.
And the #1 reason that Debt Protection is the new Credit Insurance…
Gen-Y Friendly Protection Options
Gen-Y is young, educated, and very aware of how volatile the employment landscape can be at any given time. Since they feel invincible, as did many young people before them, traditional credit insurance, offering only life and disability coverage, just doesn’t seem to fit. Debt protection speaks to this maturing generation by offering protection options like Involuntary Unemployment and Family Medical Leave. These fit perfectly into Gen-Y’s life stage, as many are starting families or have aging parents and others are concerned about the security of their employment in a recovering economy.
Stephanie Lutz is a Management Analyst with CRI Solutions in Elkridge, MD. CRI Solutions exclusively serves credit unions by integrating insurance and financial products with the company’s best-of-breed technology platforms, resulting in market leading custom lending and workflow solutions. To learn more about the variety of training programs offered by CRI Solutions, visit our website at www.crisolutions.net.