When our members are financially braced for disaster, we end up in better shape too.
Nobody likes to dwell on the unthinkable. But September was National Preparedness Month, making now an opportune time to take stock of how ready we are personally and collectively for a natural disaster or other emergency. At the individual level, being prepared can make all the difference in rebuilding our lives. And, as a credit union, we are stronger when our members are as equipped as they can be to deal with unforeseen events.
$12 billion First Technology Federal Credit Union, with headquarters in San Jose, California, and a membership that also encompasses Oregon and Washington, is squarely in earthquake country. In recent years, especially in light of damaging quakes in Ridgecrest and Napa, California, we’ve seen members express greater interest in the topic of earthquake insurance. Many homeowners are unpleasantly surprised to learn that earthquake claims are excluded by conventional insurance; it’s an add-on that must be purchased separately. Flood coverage, too, is something our members tend to forgo.
Whether due to a lack of awareness on members’ part, or the sense that the additional disaster coverage is not worth the cost, having an improperly insured home or business is a tremendous vulnerability. In a crisis, our members could be left without the financial resources needed to repair, rebuild or replace what is damaged. Ultimately, this also means that much of the mortgages and collateral owned by First Tech FCU is not properly insured—and that’s a vulnerability for the credit union as a whole.
Educate Members on the Hows and Whys of Coverage
Taking earthquake policies as an example, only about 20% of homeowners in Oregon have earthquake insurance—followed by 13% in California and 11% in Washington. What are the reasons behind such a low preparedness rate in such a disaster-prone area? What can we do to help our members better understand the coverage they’re choosing and why?
Education is the component that traditionally is missing at the point of sale. And then, after a calamity strikes, it’s too late. Policy holders can be upset to discover that they didn’t actually have the level of coverage they wanted or believed they had. Homeowners may assume that their conventional policy kicks in for a natural disaster such as an earthquake or flood, without ever realizing that most policies cover a more narrow set of specific perils.
One reason so few of our members are insured for earthquakes is that deductibles are so high. Whereas a homeowner’s deductible for a fire might be $1,000, the deductible for earthquakes can be 50, 75 or even 100 times that amount. It’s staggering, yet in the event an entire house is destroyed, it still makes more financial sense for our members than being self-insured.
When First Tech Insurance Services, a wholly owned subsidiary of First Tech FCU, began writing earthquake policies in 1993, it was common in the industry to see deductibles of 10% or even 5% of the replacement cost. Today, most deductibles start at 15%. Another factor impacting the number of homeowners considering earthquake insurance is a tightening of eligibility requirements. For example, most insurers now insist that a home be attached to its foundation—that is, not be a mobile home—before it qualifies for an earthquake policy.
Some of our members who purchased earthquake coverage in the past under different parameters can be in for a surprise when they look into a new policy. Ideally, our agents will work with members directly to perform a comprehensive review of the assets they own and the policies that are appropriate.
Align Members’ Preparedness With Their Expectations
Part of the member-centric culture of First Tech Insurance Services is that we engage with our members and use an educational approach to offering our products and services. When we sell our members insurance for their property, price is important—but it’s not the only driver.
Our agents take on an advocacy role, informing members where a lapse in coverage may exist and, when necessary, encouraging them to consider a level of coverage that more closely meets their expectations. Although we’re part of a quickly growing credit union, much of our insurance team has been in the industry for decades. We have knowledgeable, tenured agents whose deep background allows them to guide members to the coverage they truly need.
This expertise extends beyond insurance sales. While insurance is the best way for our members to have financial peace of mind for a disaster or emergency, we also encourage our members to pack a few other items into their financial “first aid kit” just in case. These include having $200 to $300 on hand in small bills; a robust emergency fund available to live on if insurance coverage hasn’t yet kicked in; good records about their property and valuables; and a safe deposit box that contains vital documents and information.
Helping to educate and inform our members is in line with First Tech FCU’s philosophy of putting people before profits and investing in our communities every day. It’s in our interest to have members who are educated about disaster readiness, not only logistically but also financially. A prepared member base makes our organization more prepared overall—ready to ride out any catastrophe.
Eric Mitchell is VP at First Tech Insurance Services, a wholly owned subsidiary of First Technology Federal Credit Union. First Tech FCU is a $12+ billion institution headquartered in San Jose, California, that serves the world’s leading technology-oriented companies and their employees, including HP Inc., Hewlett Packard Enterprise, Microsoft, Agilent, Intel, Cisco, Amazon, Nike, Intuit, Google and more. Federally insured by NCUA. Equal Housing Lender. Insurance products and services are offered through Addison Avenue Financial Partners, LLC, d/b/a First Tech Insurance Services.