For what seems like an eternity, credit unions had been used to working with an insurance broker model that some in the industry said prevented more revenue from flowing their way.

Roughly four years ago, the $382 million MaPS Credit Union in Salem, Ore., started to discuss a new prototype that would not only increase revenue streams but also be national in scope. Those talks led to the April 2009 launch of CU Insurance Alliance, a CUSO owned by 15 credit unions from around the country. In addition to insurance products, the insurance brokerage offers risk management solutions and other fee income drivers that credit unions can offer their members, according to CEO John Harris.

“The typical broker market out there, the way it has been brought to credit unions, that model has been in place for 50 years, forever really,” he said. “Those companies that are serving credit unions have done very well financially. We wanted to design a CUSO where most of the revenues flow back to credit unions.”

CU Insurance Alliance offers nearly 18 products and services but the maximum number of vendors for each is two. Harris said that's an important distinction because some competitors try to cull contracts with as many vendors as possible, which could result in a watering down of the services being offered. Instead, the CUSO opts to keep vendor connections small so that the best in class are available to credit unions. Harris acknowledged it may not always be the lowest price solution, but said in the end, it's the best solution. Another reason why strong vendor relationships (Harris calls them partners) are so critical is because they help keep costs down for both the CUSO and CUs.

“We are doing it a new, virtual way,” Harris said. “We don't have 10 people earning six figure salaries running the company and we don't have to staff up like many brokerages do.” He added that technology has significantly aided in lowering overhead expenses.

From the start, CUIA had strategic plans to venture beyond its home base of Oregon. The majority of the owners are in the Northwest as well as North Carolina. Harris said the initial pitch went to 20 local and regional CUs in their neck of the woods. Roughly 10 invested in the CUSO. A few months later, another round of invitations was sent out to six geographic areas and the remaining owners signed on.

Looking ahead, CUIA plans to move into California, Washington, Virginia and the Midwest and expand even more in North Carolina. Those areas are prime because the CUSO has already established some good connections there. They also have a high concentration of metropolitan areas, a friendlier attitude toward insurance type products and less stringent state regulations compared to other regions, Harris pointed out. CUIA's goal is to have 30 owners by year end.

To meet that mark, the CUSO has had to educate CEOs, CFOs and boards on a new way of doing business, Harris said. Because credit unions are so used to aligning with nonindustry insurance brokerages, it sometimes takes several rounds to convince them of the value of the new model.

“People may not get it the first time so we have to educate folks on a different way of doing things and just as important, the benefits,” Harris said. “It's so fun to watch when it actually clicks.”

Still, opportunities have arisen for CUIA because of systems problems at some vendors, Harris said. Rather than offering a one-size-fits-all solution, when new CUs sign on, the CUSO goes through a laundry list of who they have a contract with, whether there is a marketing agreement in place, when the contract is set to expire and whether there are plans for a renewal.

When CUIA was created, 200 units were made available. The CUSO's owners now own 15 of them. Harris said that with one unit per credit union, “it's not like buying stock in Apple [computers] but it's like 'the more you buy, the more you make.'” One of the strategic goals is to have the 200 units secured over the next five years. CUIA's current owners range in asset size from under $100 million to $1.4 billion. Due to a confidentiality agreement, Harris could not provide the names of the owners.

Meanwhile, a little over a year since its launch, CUIA is slightly behind its revenue goals, in part because the CUSO insurance brokerage is going into uncharted territory and new entities tend to build slowly the first year out, Harris said. “We're happy and we're fortunate but we still want to push harder.”

Having a new kid on the block has also rankled some of the more established firms, Harris said.

“We're cutting in on what they've done for the past few decades,” he said. “They don't like what we're doing. But credit unions are evolving and becoming more sophisticated.”

msamaad@cutimes.com

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CU Insurance Alliance Is on a Mission to Break the Status Quo

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