MADISON, Wis. (1/31/12)--The dollar amount paid by CUNA Mutual Group in bond claims that cover fraud losses stemming from dishonest credit union employees has increased steadily since 2006, prompting the insurer to step up recovery efforts through litigation against those responsible for the losses.
"In 2006, CUNA Mutual paid roughly 250 bond claims due to employee dishonesty," Loose said. "In 2010, that number was about 200. However, claim dollars paid more than tripled, jumping from $12 million in 2006 to $38 million in 2010," she said.
The increase in dollars significantly outpaced the reduction in the number of claims, said CUNA Mutual, noting the average claim cost about $190,000 in 2010, compared with $50,000 in 2006. "Employee dishonesty claims account for 13% of the total number of bond claims paid by CUNA Mutual Group but represent 45% of the total dollars paid," Loose said.
CUNA Mutual said it is aggressively pursuing recovery through civil litigation against the individuals responsible for the losses in an effort to recoup the losses on behalf of its policyowners.
It noted that the individuals sued do not have to be convicted of a crime. Sometimes legal authorities choose not to press charges, said CUNA Mutual. "Our recovery efforts involve the filing of civil lawsuits, which require only a preponderance of evidence, and that's beneficial for our recovery efforts," Loose said.
CUNA Mutual filed 30 such suits in 2011. Before suing, CUNA Mutual's subrogation unit typically performs a cost/benefit analysis on each claim and weighs the likelihood of success. "If there are assets available and there's a good probability of success, we will pursue recovery."
Recovering paid claims through civil lawsuits helps lower the cost of insurance, which can benefit policyholders collectively and individually through recouped deductibles, improved loss ratios and lower premiums, Loose added.
Although the company always has pursued recovery in these types of cases, recovery has become more important with losses increasing in recent years. Pursuing recovery is "simply the right thing to do for the greater good of credit unions. Those perpetrating these crimes should be held accountable and repay what they stole. We will continue to aggressively pursue those that take money from our credit union partners," Loose concluded.