BOCA RATON, Fla.-The ribbon cutting is set for April 19 and the doors will open on May 1, but that's moving pretty fast for an idea that was only set in motion two years ago. The idea was to form a CUSO to provide for the insurance needs of credit union members. Nothing too complicated, there, noted Larry Hughes, one of the movers and shakers that put the plan into action. Hughes' credit union, IBM Southeast Employees FCU here, is one of the six partners that put up the ante to form the limited partnership. It was never a thought, allowed Hughes, that it would all be easy. The original idea was to buy an existing insurance agency ("we just didn't have the insurance know-how and expertise, so we thought we'd buy an agency that did.") Finding an agency for sale proved to be the hard part, however. Insurance agencies have been buying each other up, it seems, said Hughes; yet another byproduct of the consolidation trend. All the agencies they looked at were busy looking for others to gobble up. So the partners (see box) decided to form their own agency and simply hire another one to run it for them. They settled on the Mack Group of Boca Raton. The business principle involved here, Hughes said, was a straightforward response to a member-driven imperative-to provide personal lines of insurance-auto, home, credit life and disability, and later to add commercial lines. "Separately, each of these credit unions is something. Together, we're something else, something better," he said. "We have a quarter-million members between us." Insurance providers veritably drool at the prospect of marketing to a captive target group that size. And the discounts such size and numbers can assure will make most of the products offered reasonably priced, he added. And that's the point. "We can save a member a dollar and still make one ourselves." IBM SEFCU already had an insurance program in place with Travelers, Hughes noted, "but they only took the cream of the crop." The CUSO option will enable each CU to offer better rates and a variety of products to more members, even those with a few parking and/or traffic tickets. Each credit union partner kicked in $45,000 to form the CUSO. Each CU bought three units, each unit being worth $15,000. The Mack Group bought one unit. Expenses will be low, said Hughes, for despite the trendy reputation (and high rent) of Boca Raton, the office is located in an industrial park area that is not meant for retail operations, so there is little overhead. There are no fixed assets to speak of either, but IBM will transfer over its existing book of business, as will Atlantic Coast, to the new CUSO. "Our plan is to only allow members to do business through a 1-800 number (not in place yet) and over the Internet. Yes, there is a Web site, it's (membersinsuranceservices.com) but don't click on it just yet, it's under construction, said Hughes. "We hired an outfit to help with that too!) The mix of CUs involved was designed to offer both a geographic and a liability spread, Hughes noted. Atlantic Coast is in Georgia and some of the other CUs have fields-of-membership that cross state lines as well. That will be a benefit when providers consider risk factors into their pricing structure. (All of South Florida's hurricane insurance premiums skyrocketed after Andrew devastated much of Dade County.) Sam Murrow of Atlantic Coast is serving on the CUSO's marketing committee, and he's been working with an ad agency to create brochures and other materials. But patience is important too, as not all CUs will market at the same time. "It's got to be incremental or we'll be swamped, and the last thing we want is a poor response to a member's call. Service-it's a credit union thing," said Murrow. Hughes said that the new group is open to other credit unions joining up. "The more, the better. Power in numbers." -
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