DUBLIN, Ohio — Credit unions across the U.S. that offer excess deposit insurance are enjoying a healthy blip in new business, with many quick to point out the advantage on Web sites and other marketing materials. And American Share Insurance Co. reported last week a big spike in inquiries from CUs interested in private deposit insurance.
"I'd say that in the last two weeks we received more than 30 inquiries, which is quite a lot for us, plus more than 600 queries from consumers, which is really tremendous," declared Dennis Adams, the president/CEO of Dublin-based ASI, which also owns Excess Share Insurance.
As public angst over the IndyMac Bank failure and Freddie Mac and Fannie Mae problems increased, CUs in several states not previously known to have a large percentage of CUs offering the extra $250,000 in insurance have called or emailed ASI sales reps about the possibility of signing up. While Ohio is home to some long-time clients, there has been new interest from Kansas, Michigan, Minnesota and Florida, said Adams.
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ASI currently lists 291 CU subscribers in 35 states that offer its excess insurance package, which carries a 16- to 18-basis point premium, with a $55 million statutory maximum.
"It's working very well for us considering that since we started with ASI in 2002, we've seen our NCUA-insured shares grow from $3.5 million to $25 million," declared Robert Hernandez, senior vice president/chief financial officer for the $325 million Greater Texas FCU of Austin.
His CU "feels quite comfortable" in promoting the excess insurance feature and recently added more explanatory material on its Web site (www.gtfcu.org). He also finds more consumers shopping financial institutions because of the insurance factor. That, he said, allows the Austin CU to do more cross selling of products and services.
He noted that Greater Texas has now reached about 50% of its insurance maximum under ASI's $55 million ceiling.
But the tide toward excess insurance is by no means universal considering the $660 million Austin Telco CU, which was part of the program for three years but dropped its ASI coverage within the last few months. "We've been growing quite rapidly, and we've maxed out on the $55 million. And you know if we had even known about that cap, I might not have signed up in the first place," said James Poplin, president/CEO.
The $437 million Velocity CU in Austin had reportedly quit the plan as well, but Velocity officials were not immediately available for comments.
Also in Austin, Kerry Parker, president/CEO of A+ CU, said deposits have jumped from $495.5 million at the end of 2007 to $551.9 million as of end of June 2008 because of the flight to safety and special CD offerings. But, said Parker, excess insurance, while valuable "is something that you have to constantly reevaluate."
One enthusiastic backer, Rob Givens, president/CEO of the $357 million Mazuma CU of Kansas City, said his previous experiences at Nevada credit unions with the excess product taught him its value as a differentiator to the public, "particularly when there is a flurry of concern."
When IndyMac hit, "I hauled out that gun real quick," directing his marketing staff to put posters in the lobby and info on the Web site (www.mazuma.org), and so far "it has worked well in attracting shares."
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