# Credit Unions withdraw death benefit insurance



## Brendan Burgess (19 Nov 2019)

Pearse Doherty challenging this at the Oireachtas Finance Committee 

People have contributed to this for 40 years and now when they need it, it's gone. 

Have you looked at this? 

Ombudsman: Yes, we have looked at these. 

What was the communication? 

CUs are member organisations - what the members decide... 

But yes, we can look at the complaint.

If it's within the commercial discretion of the CU, we cannot decide on it.


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## 24601 (19 Nov 2019)

With ageing memberships and huge premiums credit unions should scrap non-member pay death benefit schemes. The premiums for death benefit  and life savings cover are not sustainable in the long run.


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## Feemar5 (19 Nov 2019)

Those benefits were a big selling point for people joining the credit unions in the past - now they don't seem to want anyone who is not borrowing from them.    The only benefit I can see  in having savings in the credit union  is the under €23K which can be nominated to someone and  does not form part of a deceased person’s estate.    Oherwise credit unions are operated like banks.


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## 24601 (19 Nov 2019)

Feemar5 said:


> Those benefits were a big selling point for people joining the credit unions in the past - now they don't seem to want anyone who is not borrowing from them.    The only benefit I can see  in having savings in the credit union  is the under €23K which can be nominated to someone and  does not form part of a deceased person’s estate.    Oherwise credit unions are operated like banks.



They can’t lend the money out, so yes they don’t really want too many people that aren’t borrowing from them. I don’t think I’d agree that they’re operated like banks. If they were we’d have seen far more consolidation and branch closures by now and all these added insurance benefits would have been phased out completely 5 years ago.


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## Brendan Burgess (19 Nov 2019)

But the criticism as articulated by Pearse Doherty was that people have paid the premiums for this death benefit for 40 years when their risk of dying was low. And now when they should be getting good value, the insurance policy is just scrapped. 

He likened it to a 20 year life insurance policy being unilaterally cancelled by the insurer mid way through. 

It's a tough one for the Credit Unions. I don't think that they should have scrapped it for people who had been long-term members. 

Brendan


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## 24601 (19 Nov 2019)

Brendan Burgess said:


> But the criticism as articulated by Pearse Doherty was that people have paid the premiums for this death benefit for 40 years when their risk of dying was low. And now when they should be getting good value, the insurance policy is just scrapped.
> 
> He likened it to a 20 year life insurance policy being unilaterally cancelled by the insurer mid way through.
> 
> ...


But people haven’t paid any premiums? It’s free cover that may be changed or removed altogether at the discretion of the credit union. The credit union is the policy holder and pays premiums based on their membership’s demographics. With average membership age increasing most credit unions will have to lower their cover or phase it out over time.


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## AlbacoreA (20 Nov 2019)

It's to encourage long term membership.

Drop it and people are free to move at a whim.  So they risk someone undercutting them and decimating their membership in a flash.


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## Brendan Burgess (20 Nov 2019)

24601 said:


> But people haven’t paid any premiums? It’s free cover



Hi 24601

They have paid premiums in terms of reduced dividends. The Credit Union which they owned paid the premium on their behalf. 

Brendan


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## 24601 (20 Nov 2019)

Brendan Burgess said:


> Hi 24601
> 
> They have paid premiums in terms of reduced dividends. The Credit Union which they owned paid the premium on their behalf.
> 
> Brendan



Every bit of expenditure reduces the surplus available to pay dividends. It's not an automatic entitlement of membership and where a CU does offer it there are usually conditions attaching. I appreciate that there may be some moral duty but that is surely overridden in a credit union by the duty to ensure the viability of the credit union? If a credit union is struggling to generate a surplus an expensive death benefit premium is one of the first things that should be looked at.


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## 24601 (20 Nov 2019)

AlbacoreA said:


> It's to encourage long term membership.
> 
> Drop it and people are free to move at a whim.  So they risk someone undercutting them and decimating their membership in a flash.



Undercutting them with what? What type of savings accounts carries free death benefit insurance? It's also worth remembering that credit unions are obliged to offers life savings protection cover if they are affiliated to the Irish League of Credit Unions.


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## Feemar5 (20 Nov 2019)

Whats even more worrying about it that they don't seem to have notified members .    Our local credit union has not announced it - I will contact them today.    I agree with Brendan it should not be scrapped for members with llong membership.


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## elcato (20 Nov 2019)

Feemar5 said:


> The only benefit I can see in having savings in the credit union is the under €23K which can be nominated to someone and does not form part of a deceased person’s estate


I never heard of this. You can basically leave a tax free lump sum to anyone you want when you die ? (up to 23k)


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## Peanuts20 (20 Nov 2019)

There is a requirement for CU's that to offer this, a certain % of their members have to sign up for it. In some cases, some CU's have not made that threshold and therefore have to stop offering it. It is not across the board on all CU's


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## Rosjohn (20 Nov 2019)

It's a matter for each Credit Union to decide.


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## Zebedee (20 Nov 2019)

Cu life assurance is priced on a yearly renewable basis (like a 1 year renewing term assurance). This gave them a premium which matched the risks in the year of cover.  The premium can be varied each year. So as the membership ages the premiums increase. In theory they could have chosen a “level term option” by paying higher premiums in the past to build up a “surplus “ for the future. However this is difficult to manage on a group basis with all the comings and goings. To make it work properly you would need to set a premium on an individual level which would be a nightmare.

in essence they have the same type cover as employees would have under a group pension scheme (which is usually annually renewable).


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## Saavy99 (20 Nov 2019)

elcato said:


> I never heard of this. You can basically leave a tax free lump sum to anyone you want when you die ? (up to 23k)



Is this true?


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## 24601 (20 Nov 2019)

Saavy99 said:


> Is this true?



No. It's not exempt from tax,, it's just not subject to the usual complications of probate and passes outside of the will.


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## fayf (5 Dec 2019)

While there are arguements for and against the withdrawal- (mostly againt)what might have been a more common sense option, is to give members the choice, of continuing their Death Service cover- and have it deducted annually from their CU accounts. 

The CU would have excellent prices available to them, due to volume, so this could have been passed along to members. It would certainly be a lot cheaper than if members took out a similar policy themselves, on an individual basis.

However, this change is another reduction or dilution,  in what made credit unions great in the first place.

Its still a good place to get a short term loan as you can pay it off faster than the agreed terms, but interest rates can vary from one branch to another.

A good whilewhile back i got a car loan, i was in two different credit unions at the time (home/work common bond), and one was charging 12%, and the other was charging 6%. Both had year end interest rebates, but this was a substantial difference and just didn’t make sense, but each branch are run separately for the most part on key policy decisions like interest rates.


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## llgon (5 Dec 2019)

fayf said:


> The CU would have excellent prices available to them, due to volume, so this could have been passed along to members. It would certainly be a lot cheaper than if members took out a similar policy themselves, on an individual basis.



Not sure about this. If everyone is offered the benefit at the same price older members will continue with it while younger members will be a lot less likely.  With an older age profile it will become a lot more expensive per member than it currently is.


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## 24601 (6 Dec 2019)

llgon said:


> Not sure about this. If everyone is offered the benefit at the same price older members will continue with it while younger members will be a lot less likely.  With an older age profile it will become a lot more expensive per member than it currently is.



Exactly this. Your typical credit union member’s age is increasing every year so it’s not viable. It was and is a nice add-on while it lasts but in the current environment it’s folly for many credit unions to be paying out 100s of thousands in insurance premiums when they're barely generating a surplus and can only lend out 20-30% of their assets.


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## BadTimes (6 Dec 2019)

24601 said:


> Exactly this. Your typical credit union member’s age is increasing every year so it’s not viable. It was and is a nice add-on while it lasts but in the current environment it’s folly for many credit unions to be paying out 100s of thousands in insurance premiums when they're barely generating a surplus and can only lend out 20-30% of their assets.


Some of the Credit Union reports I have looked at do not mention Insurance or give full reports on Investments. Just look at salaries at the moment way outside what is sustainable. Please call assets what they actually are, an overstock of money. This should have being tackled after the joining the Eur Exchange Mechanism in 1999. I am glad to see that your own Credit Union made efforts in this regard 15 years ago.


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## 24601 (6 Dec 2019)

BadTimes said:


> Some of the Credit Union reports I have looked at do not mention Insurance or give full reports on Investments. Just look at salaries at the moment way outside what is sustainable. Please call assets what they actually are, an overstock of money. This should have being tackled after the joining the Eur Exchange Mechanism in 1999. I am glad to see that your own Credit Union made efforts in this regard 15 years ago.



I don't understand much of what you're saying to be honest. It seems a bit bizarre. I've never heard any person ever refer to assets as "an overstock of money" and your reference to the Euro Exchange Mechanism is way over my head. All credit unions have to report their accounts in line with FRS102 so I'm not sure what reports you have been looking at. I didn't mention anything about my "own Credit Union" either.


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## Rosjohn (11 Dec 2019)

A work Credit Union has very few expenses such as premises etc and likely no bad debts.
Different Credit Unions are Independent entities, not "brabches" of anything.


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## Feemar5 (12 Dec 2019)

I attend the A.G.M of our local credit union recently and asked about the Insurance.   They have no plans to drop it at the moment but the auditor did point out that it does not seem to be a selling point for loans.    They have too much cash which they can't lend and now have to pay huge amounts of money in regulatory levies.


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