Backlash expected over move that could lead to scrapping insurance on credit union savings

The insurance pays out a multiple of a member’s savings to their estate when they die

Any move to scrap the insurance will be hugely controversial for many of the 3.6 million credit union members on the island. Photo: Getty Images

Charlie Weston

A motion to be debated at the annual general meeting of the Irish League of Credit Unions (ILCU) is being interpreted as an attempt to scrap much-valued insurance on savings for members.

The insurance pays out a multiple of a credit union member’s savings to their estate when they die. It also wipes out any loans the member has when they die.

Some older members take out loans to pay for their funeral, knowing when they die their family will not be burdened with having to pay it back.

But the life savings and loan protection scheme is becoming expensive to provide.

Any move to scrap it is likely to prove hugely controversial for many of the 3.6 million members on the island, especially among older members.

It is a requirement for credit unions that are part of the ILCU to have life savings and loan-protection insurance.

Some credit unions see the member life insurance as too costly and want to get rid of it. Others want to retain it but get it from another provider at a cheaper cost.

However, life savings and loan protection insurance is highly valued by ordinary credit union members.

The loan protection wipes out a loan when a member dies, and the life insurance generally pays out twice the person’s savings when they die.

In the case of a tragic death, up to three times the savings can be paid out.

However, some credit unions have restricted the payouts on the life insurance to just €1,000, as they struggle to make returns due to low levels of overall borrowing.

One senior ILCU source insisted that the motion was seeking to get rid of the insurance and loan protection.

He said: “No-one ever told members this was time limited. If this is pulled from people there will be a lot of anger.”

He said that credit unions, which are member owned, were required to pay a social dividend and the provision of loan protection and life insurance should come as part of that.

A rule change is proposed for the annual general meeting (AGM) of the ILCU in Killarney at the end of April. It is proposed by Community Credit Union that rule six in section six of the ILCU’s rule book be “deleted in its entirety”.

This rule states that each credit union that is a member of the ILCU “shall carry such insurances in respect of itself and for and on behalf of its members”.

It goes on to state that ILCU credit unions “shall enter into or make such arrangements for the better protection of its assets and savings of its members as may be determined from time to time by the members in general meeting”.

Credit unions are required to get their loan protection and life insurance from the ILCU’s insurance subsidiary, ECCU Assurance.

One person familiar with the League said this stops credit unions getting the insurance from an independent provider, Cuna Mutual, which is cheaper.

He insisted that motion was to allow credit unions get their insurance from any provider they want to use, rather than to scrap the insurance.

Asked if the motion was seeking to get rid of the life savings and loan-protection scheme, a spokesperson for the ILCU said: “A similar motion has been democratically debated at previous AGMs... Until such time as our members have had an opportunity to engage in that debate, we are not in a position to comment further.”​