CUNA Mutual Group has made the decision to discontinue its Life Savings Insurance product, which was first introduced in 1938.
For CUNA Mutual, this was strictly a business decision.
However, for the roughly 1,200 credit unions that offered the product, they are now in the process of informing their members that they will not honor these contracts and credit unions are getting the bad press.
Take for example an ABC News story about a 92-year Minneapolis woman who was notified by her credit union that it was cancelling her insurance policy that she hoped to use to pay for her funeral. (read the story)
The headline to the story read "92-Year-Old's Funeral Insurance Cancelled by Credit Union."
The credit union told this senior citizen that they would give her an extra one percent on her $2000 savings account in lieu of the cancelled policy.
How long would it take for the accumulated interest on this savings account to reach $2,000 -- the amount of the benefit to be paid by the life insurance policy?
Assuming an interest rate of 2 percent, it would take approximately 35 years.
According to the Minneapolis Star-Tribune, approximately 1,500 members of the credit union had their policy cancelled.
So much for people helping people.
Wow. The CU I worked for back in the day, which shall remain nameless (but made the CU Watch news for sponsoring dancers) had stopped offering the Life Share insurance years before my time, but continued the product for those who had the required deposit at the time they discontinued offering it to new members. They paid interest on the money but froze it so members couldn't forfeit the insurance without discussing the ramifications with a CU employee. The members who had the insurance knew about it and were grateful for the steps taken to preserve the benefit.
ReplyDeleteI am sure glad I'm not there to answer those loyal members (usually elderly members who were involved in the CU before it grew to $5 Billion in assets).
You'd think a large CU could flex its muscle with CUNA to make it right. Another opportunity to make it right for members is for the CU to self insure for the remaining policy holders by paying a 100% dividend upon death up to $2000. That would be an example of the CU difference or People Helping People. Not likely to happen though...
Disappointing.
That's a good idea and appropriate.
DeleteAnother question is, why did cmg do this?