How Credit Unions Should Evaluate their Insurance Providers
In order to offer members all the great solutions that your credit union does, itâs likely that youâve found it beneficial to rely on third-party providers. Oftentimes, agreements with these vendors automatically roll over when they are up for renewal as a matter of course. One reason is that it can be challenging to perform an in-depth review, especially in complicated areas like insurance. However, taking the time to analyze the vendors your credit union works with ensures that their solutions are providing members with what they need, as well as delivering value and revenue to your credit union.
Where do you start with this evaluation? When it comes to insurance, a good place to begin your evaluation is with ratings. We look at ratings for a lot of things in lifeâfine wines, TV shows, moviesâwhy not use them to help evaluate your vendors? Allow me to provide an example. In a recent podcast that we did with Securian Financial Group, we delved into the importance of ratings when choosing or re-evaluating insurance providers. The financial condition of many insurance providers is evaluated by up to 4 major ratings agencies (Moody's, Standard & Poor's, Fitch and A.M. Best).  Each of the  ratings agencies look at several different factorsâfrom assets and liquidity, to capital, to how risk is managed, and many others.
We can debate which rating agency offers the best analysis, but looking at all of them gives you a good idea of the companyâs background and financial stability. This is critical to determining long-term valueâwhich is what you both want and need in an insurance provider. Cost and revenue aside, the one thing that is non-negotiable in an insurance provider is financial stability. Without that, all you have are empty promises.
Next, you want to look at how the vendor is meeting your needs. Ask the right questions: Is this solution satisfactory? Is this solution really doing everything you intended it to? Is the solution yielding all the revenue promised or that is possible? And maybe most importantly, is there someone else offering this solution that can do better?
There are always changes in the industry and constant improvements are a part of that. Itâs critical that your third-party providers are keeping up. Of course, cost and revenue factor into this as well. Is this vendor providing you the best value, and/or the most revenue? Could you be using another provider that would cost the credit union less or yield greater revenue without sacrificing quality and long term value?
So, before you renew that Agreement, pencil in some time to evaluate that vendor, using these and other tips outlined in the podcast. You may be surprised at what you find.