By Patrick Touhey
It was not that long ago when credit unions lacked access to competing carriers for fidelity bond coverage. This led to constantly rising fidelity bond coverage premiums that these credit unions were forced to pay, since the alternative was having no coverage at all. For nearly 30 years there was one insurance carrier that controlled fidelity bond coverage in the credit union market. There were instances of competitors entering the market in the earlier years, but due to their unimpressive policies these competitors quickly died out.
It was not until the late-1990s and early-2000s that credit unions finally received access to alternative fidelity bond coverage options.
Fast forward to 2016: credit unions today have access to more fidelity bond carriers and coverage options than ever before. This expanded level of marketplace competition has required bond carriers to really step up their game so they can win the business of credit unions over their cohorts. A lot of value has come out of this competitive environment for credit unions.
Things like lower premium costs, free risk education and training, bundled pricing for solutions have come out of this expanded level of marketplace competition. In fact, the existence of multiple bond carriers has even resulted in helping some credit unions stay in business.
For example, during the last economic downturn there were various credit unions paying extremely high premiums to hold onto their fidelity bond insurance while they were simultaneously trying to cut costs and stay afloat. Some credit unions were even considered “uninsurable” and consequently denied coverage access altogether. Fortunately, other carriers stepped in and offered alternative insurance options to ease the financial strain of these credit unions. Were it not for this competitive marketplace, most of these credit unions would likely not have survived.
However, to uphold this healthy level of marketplace competition it is essential that credit unions exercise their right to research what other bond options exist and what it is that makes them stand apart from one another. Let us not forget that there was a time not so long ago when credit unions had to pay whatever bond premiums were asked of them because there wasn’t any other choice; overcoming this stronghold on product and pricing took a lot of time and hard work for credit unions and carriers alike.
While our industry has come a long way from where it once was, we need to continue sustaining the level of competition that now exists. Competing bond carriers are doing their part to uphold the health and stability of our industry, now it’s time once again to make sure you are doing yours.
Patrick Touhey is Senior Vice President with Allied Solutions, LLC.