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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
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
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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
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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
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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
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17%13%
17%4%4%4%4%4%
33%
0% 20% 40%
20102009200820072006200520042003
Not Sure
Year Debt Protection Implemented
Debt Protection
Protected Loan Types
• Loan types most commonly protected within Debt Protection programs are
Consumer, Home Equity and Credit Cards
6
0%
4%
13%
54%
71%
92%
0% 20% 40% 60% 80% 100%
Commercial loans
Other*
Mortgage loans
Credit Cards
Home equity loans
Consumer loans
Debt Protection Product Types Offered
n. 24; Select all that apply
*Other: Vehicles only
• 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
7
4%
8%
13%
67%
96%
96%
0% 20% 40% 60% 80% 100%
Other*
Family leave
Hospitalization
Involuntary unemployment
Disability
Death
Events Covered by Debt Protection
n. 24; Select all that apply
*Other: Loan default
Debt Protection
Protected Events
• “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”
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Debt Protection
Influencing Statements
• 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
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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
Overall Satisfaction
with Debt Protection
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
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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”
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Debt Protection
Program Experience
• 64% of respondents who implemented
a Debt Protection program indicate their
protected loan volume has increased
• When asked to indicate by what
percentage, responses range from
1% to 53%; half of the percentages
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
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21%
36%
21%
21%
Percentage Protected Loans Increased
Less than 10%
10% - 24%
25% - 49%
50% & Above
n. 14
Debt Protection Program
Fee Income Experience
• 55% of respondents who
implemented a Debt Protection
program indicate their fee income
increased
• When asked by what percentages,
responses ranged from an increase
of 3% to 100+%; half of percentages
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
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25%
33%8%
17%
17%
Percentage Loan Protection Product Fee Income Increased
Less than 10%
10% - 24%
25% - 49%
50% - 74%
75% and Above
n. 12
• Overall success with the credit unions’ Debt Protection programs is high at
91% (based on the sum of the top two ratings)
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Overall Success Percent
%
Extremely Successful - 4 26
3 65
2 9
Not at all Successful - 1 0
Total 100
n. 23
Overall Success
with Debt Protection
• 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:
• Respondents cite insufficient staff training and staff’s lack of sales culture as
explanations why their Debt Protection Program is less successful
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Debt Protection Success Factors Percent
% Training 26
Pricing 18
Variety of coverage 18
Easy 15
n. 17 participants, 34 responses
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.”
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Overall Success
with Debt Protection (cont.)
• 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
credit life and disability and debt [protection].”17
Peer Recommendations
for 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”
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What to Avoid When
Implementing Debt Protection
• 52% of those without
a Debt Protection program
in place have considered
offering one at their credit
union
• Among those who did
not consider offering Debt
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”)
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7%
9%
11%
13%
15%
17%
33%
44%
0% 20% 40% 60% 80% 100%
Benefit terms inadequate
Life events covered insufficient
Minimal fee income generation anticipated
Lack of member interest
Technology requirements
Product complexity
Too expensive
Other*
Reasons Debt Protection Not Pursued
n. 54; Select all that apply
Those with No Debt Protection
Program in Place
• 83% of those without a current Debt Protection program indicate they will
reconsider it in the future
• 77% of respondents might consider offering a Debt Protection program in the
next two years
20
Will Reconsider Offering Debt Protection Percent
% Yes 83
No 17
Total 100
n.96
Timeframe Credit Union Might Reconsider
Offering Debt Protection
Percent
%Less than one year 39
1 – 2 years 37.5
3 – 5 years 6
More than 5 years 0
Not sure 17.5
Total 100n.80
Reconsidering Debt Protection
in the Future
• “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”
21
8%
15%
48%
58%
64%
68%
74%
78%
0% 20% 40% 60% 80% 100%
Other*
Reduces CU licensing costs
Is affordable to members
Flexibility in program design, pricing, marketing
Meets members' needs
Generates CU income
Provides members variety of benefit options
Protects CU assets
Reasons for Reconsidering Offering Debt Protection
n. 80; Select all that apply
Reconsidering Debt Protection
in the Future (cont)
• 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
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Who Offers
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)
23
Overall satisfaction with Credit
Insurance Program
Percent
%**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)
Overall Satisfaction
with Credit Insurance
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.”
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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”
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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”
– “We have branches in 3 states, 3 different rates”26
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
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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
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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
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