The impending Department of Labor fiduciary rule, which seeks toexpand the definition of “fiduciary” under the Employee RetirementIncome Security Act, is certainly on the minds of credit unionmanagers.

The rule, which is currently set for implementation on June 9,will significantly impact financial institutions that utilizeinvestment advisors to sell investment and insurance products. Manyof these institutions have, or are contemplating, making changes tothe ways that these products are sold, including altering the waycommissions are paid and requiring the use of planning softwareprior to recommending a product.

Ultimately, the DOL rule is designed to ensure that customersare presented with products that are appropriate for their specificsituation and goals, rather than fulfill the needs of the sellinginstitution or agent.

With implementation possibly just weeks away, it begs thequestion of whether it will impact the sale of life insuranceproducts in credit unions. Certainly, credit union managers andinvestment advisors are concerned about whether there are any risksinherent with these products versus investment products that couldattract the unwanted attention of the DOL.

Rest assured, the risks are minimal, if at all. I consulted withPatrick Leary, vice president of distribution research at researchorganization LIMRA International, about how life insurance comparesto other products offered through credit unions.

Per Patrick, “From the perspective of the financial institution,I think the DOL environment should actually have an indirect,positive impact on the sale of life insurance. Many feel (or hope)that the new fiduciary rule will help move licensed agents who areemployed by these institutions to deploy more of a 'planning'mentality, which should include discussions about lifeinsurance.”

Traditional term and whole life insurance products purchased by“core” credit union members (typically middle income) are generallynot affected by the DOL rule because they are not funded bytax-deferred, or “qualified,” retirement money.

While there are exceptions, including situations where requiredminimum distributions (RMDs) from retirement plans are used to fundlife insurance costs, life insurance products are an excellentchoice for credit unions that want to offer a valuable product andearn noninterest fee income.

In a survey conducted by LIMRA International in 2016, investmentprogram managers of financial institutions overwhelmingly reportedthat they see life insurance as benefiting from the requirements ofthe DOL rule.

That satisfies the question of whether life insurance is a“safer” product to offer in the post-fiduciary rule environment.However, the next logical question is whether credit union membersactually need life insurance.

According to research from LIMRA International on middle incomeconsumers' financial health, they unequivocally do! If the primarywage-earner in the household were to pass away, nearly two-thirdsof middle income households would have “immediate” trouble payingeveryday expenses or only have enough money to pay everyday livingexpenses for “several months.”

With that in mind, it's apparent that offering life insurance tomembers of credit unions is not only important, but, in most cases,absolutely critical because the majority need more protection.

Credit union investment and insurance program managers can getstarted on a comprehensive life insurance program by contacting alife insurer that has significant experience helping institutionsbuild such programs. Having an experienced team at a life insurancecompany can help you identify appropriate products for your membersand build effective distribution points through which to offerthese products.

Craig Simms is SVP/CMO for VantisLife Insurance Company. He can be reached at 860-298-6005or [email protected].