Financial institutions and post offices have long offered safety deposit boxes. When banks and credit unions adopted them it became possible for members to store their money and valuables in one spot.
These individual containers are safeguarded by a vault, require multiple keys and at least one authentication procedure - making them an excellent place to store important items. However, heirlooms and official documents may now be rendered more vulnerable to damaging home accidents like fires or natural disasters, because, according to The Boston Globe, safety deposit box usage is on the decline.
The Globe reported Bank of America dropped the majority of its safe boxes in 2013. Among wealthy neighborhoods and long-time banking customers, however, safety deposit boxes still seem to hold significance. This is important for credit unions because a new company is using safety deposit boxes to increase the potential of noninterest income.
The product a win-win
Safe Deposit Box Insurance Coverage is partnering with credit unions to insure deposit boxes. The Illinois-headquartered company's coverage ranges from $5,000 to $1 million and protects everything from collectibles and important documents to varying forms of gold and metals.
"Over $1 billion in member property was lost to credit union robberies in 2014."
Typically the only fees a renter incurs are for annual or monthly usage. Making new provisions for member valuables allows credit unions to mint their services in new ways, according to Credit Union Times.
Credit unions could expect to receive 10 to 20 percent of policy fees, SDBIC has begun compensating some institutions for each individual purchase, Jerry Pluard the company's CEO told Credit Union Times.
"In some cases, SBDIC pays credit unions a flat fee for every policy members buy," Pluard added. "Anything other than illegal contraband is fully insurable. Coverage starts at $5,000 for a $25 premium. The average premium is about $80, which is enough to cover about $25,000 to $30,000 of property."
A nod to its historic roots, this revolution in how Americans store their physical assets may be something both members and credit unions can benefit from.
Potential benefits for credit unions
Prime Trust Federal Credit Union, an institution with over 17,000 members and $149 million in assets is one of SDBIC's newest partners, reported Credit Union Times. Pluard estimated over a billion dollars of member property was lost to the some 312 credit unions that fell victim to burglary in 2014. Though unfortunate, this indicates a large market opportunity for deposit box-credit union partnership.
With an open market and low noninterest income trending, it may be wise for credit unions to consider income sustainability and the positive sentiment that adopting box insurance will leave with members. According to CreditUnions.com, 46 percent fewer credit unions offer overall member insurance than in 2012. Payouts in relation to life, credit and credit disability savings were also found to be down early this year.
Credit unions across the country seem to be shifting away from many aspects of member insurance. To potential members concerned with safety, a branch's willingness to reinforce member safety may be all the persuasion they need to feel secure in "community banking."