Some credit unions want to scrap their insurance

[Brendan Burgess]

Backlash expected over move that could lead to scrapping insurance on credit union savings

A motion to be debated at the annual general meeting of the Irish League of Credit Unions (ILCU) is being interpreted as an attempt to scrap much-valued insurance on savings for members.

www.independent.ie

I have to say that I fully support this.

A lot of customers place an exaggerated value on it.

Scrap automatic insurance for people but offer it to them as an optional extra.

Then people will see the real cost of it and decide whether to pay it or not.

Brendan

 

[Freelance]

The Credit Union which my mother was a member of for over 50 years did exactly what you are suggesting two years ago Brendan. However, the offer of replacement optional ECCU Death Benefit, which they cheerfully named DBI+, was limited to those under 80 years of age. This had the despicable effect of robbing those long term members, who had indirectly paid the premium for the old scheme for the entirety of their membership, of any possible benefit. I have no issue with changes to the T&Cs for new members, but changing them in a way that robs existing members of long expected and paid for benefits is contemptible, discriminatory and very much at variance with the alleged ethos and alleged philosophy of the "credit union movement".

 

[24601]

The Credit Union which my mother was a member of for over 50 years did exactly what you are suggesting two years ago Brendan. However, the offer of replacement optional ECCU Death Benefit, which they cheerfully named DBI+, was limited to those under 80 years of age. This had the despicable effect of robbing those long term members, who had indirectly paid the premium for the old scheme for the entirety of their membership, of any possible benefit. I have no issue with changes to the T&Cs for new members, but changing them in a way that robs existing members of long expected and paid for benefits is contemptible, discriminatory and very much at variance with the alleged ethos and alleged philosophy of the "credit union movement".

Some credit unions can't afford to offer DBI any more and if it's a choice between going to the wall or phasing out such a product then it's a no brainer. The credit union is the policy holder for the product and it's extremely expensive. They can't just offer it in perpetuity with their ageing memberships and tiny loan books.

The article in the Independent is actually nothing to do with DBI, though, which has never been mandatory; it's primarily to do with life savings protection. All ILCU credit unions have to offer life savings protection, which provides a pay-out of X times savings to next-of-kin on death. This is also mad expensive and is even more nonsensical than DBI, especially given that the ultimate beneficiary is very often a middle-aged adult with no connection to the CU. They're meant to be community-based lenders so I'm all for them doing anything that keeps them focused on their core mission. All these insurance benefits are relics of the past that are a huge drain on resources. Fair enough if a CU going well want to offer them but its madness for struggling ones to be paying out huge premiums every year - it's usually their biggest cost after salaries. It should definitely be optional.

 

[Brendan Burgess]

So, first let's deal with the Death Benefit Insurance

This is an example from Wexford credit union which still offers it.

death benefit insurance​

All eligible members of the Credit Union can apply for insurance covered under our Death Benefit Insurance Policy. This means in the event of your death, a lump sum of €2,600 will be paid to your family to help with the cost of funeral expenses, thereby easing the financial burden of bereavement.
Nobody enjoys talking or even thinking about their own mortality. However the simple fact is funerals are now more expensive and very few people realise the impact funeral bills will have on their lives. Death Benefit Insurance will not ease bereavement but it will go a long way towards easing the financial burden your death may place upon your family.
To qualify for death benefit insurance you must be a Credit Union member and must have joined the Credit Union before your 70th birthday. You must always retain at least €5 in your account at all times. If your savings go below €5 after your 70th Birthday you will not longer be entitled to the benefit. Ask a staff member for assistance.

So Freelance's point is that elderly members have "paid" for this for years through sharing the cost when they were younger.

Fair point, so how does a Credit Union which is fighting for survival deal with this?

This is what DuBco say about their paid version of it

Death Benefit Insurance Scheme (DBI)​

The DBI policy will pay out a modest sum of money to the family of the policy holder to offset bereavement expenses. This is a group policy organised by Dubco Ireland and is available to eligible members. The cost of this insurance is paid by the member. The premium currently costs €3.63 per month. The current benefit is €3,075. The premium is agreed upon by the membership at the Annual General Meeting each year.

This is what my Credit Union, Capital offers

Cost​

The premium is €72 per year and collected directly from your share account by Capital Credit Union

Benefit​

A lump sum of €3,500 is paid towards additional support for any bereavement costs

Who Can Apply​

Available to all members of Capital Credit Union who Are at least 16 years AND no more than 70 years by the next enrolment period”

Seems like good value if you are 69 and have a terminal illness. But not great if you are a healthy 20 year old.

 

[Brendan Burgess]

Amazing differences there
Mine is €72 for €3,500
Wexford is €190 for €3,075

But Wexford doesn't say what the criteria are. Maybe anyone of any age can join.

 

[Brendan Burgess]

Scrapping free insurance for new members seem clear enough.

In reality, they do need to charge existing members for it as well.
But maybe have some cost based on the length of membership? If they have been members for 50 years - it continues to be free. If they have been members for less than 20 years, they get nothing.

Brendan

 

[Freelance]

I have no issue with the credit unions changing the deal for new members. And frankly I would have no issue with them changing the deal for existing members and charging them a fair premium, if it were offered across the board - that's what any reasonable and ethical business that actually cared for its customers would insist on doing in this situation. What I object to is that they simply excluded existing members over the age of 80 who had been paying the premium indirectly for many years. These members should have been offered the option to continue with DBI+ the same as everybody else and on the same terms. I appreciate that this would have resulted in an increased premium for everybody else, but then burden sharing is an intrinsic part of insurance. Introducing underwriting to an existing offering is complicate at the best of times, and this is a particularly crass and frankly despicable effort.

I suspect that being a tied agent of ECCU ( or whatever the actual relationship is) is part of the problem. If the CU had a titter of wit they would seek alternative quotes for the scheme.

As for this being an existential threat, I don't think so. There are plenty of other factors which threaten their existence of Credit Unions to a greater degree.