Selling insurance products that are fully branded in a lender’s name can be an effective way to help grow the business and increase revenue, while at the same time providing customers with greater choice and flexibility, says RSA’s Andy Elkington
Public perception of the banking industry is at an all time low. There is a lack of trust and recent G20 protests in the nation’s capital demonstrated that blame is being put on the whole sector, whether guilty or not. Consequently, banks and building societies are feeling the pain.
With the lowest interest rates in over 300 years, consumers see little point in saving and spending has also fallen dramatically. According to research by PwC, falling consumer confidence caused retail collapses to soar in the first quarter of 2009. On average, more than seven retailers hit the wall a day in the three months to March.
Furthermore, with 4.5 million people on tracker mortgages – some of which are now paying pennies per month - mortgage lenders are not reaping the rewards they had initially anticipated.
The industry needs to start making money again and regain the trust of consumers. A popular way to achieve both objectives is to increase the product range to include a guaranteed consumer essential – insurance.
In a time of uncertainty, consumers seek some peace of mind that they will be protected should the worst arise. They cannot guarantee that their jobs are safe, but they can protect their home and contents with a range of insurance covers. And, in recessions, crime rates can rise significantly, making insurance even more important to have.
Aside from the sure-fire demand for the product, offering insurance has plenty of other benefits.
Selling insurance alongside existing, established products is a great way of generating additional income and has been proven to boost customer loyalty. It has recently become an increasingly central aspect of some lenders’ propositions and a valued source of additional revenue.
Affinity partners
So how do you set about adding insurance to your product range? RSA has a specialist Affinity division with the sole purpose of providing organisations from outside of the insurance sector with the resources to offer insurance products to their customers. This means that Affinity partners - which include retailers, car manufacturers, charities, banks and building societies – have access to a range of specifically developed insurance products, market leading point-of-sales systems and a team of dedicated insurance professionals.
All of these will help them to grow their businesses and make a profit through branch sales and direct channels including web and more traditional direct marketing. Affinity partners also benefit from the insurer’s marketing knowledge and industry insight, allowing them to regularly develop tailored insurance products for customers and approach them in the most effective way.
What is more, every stage in the process can be fully branded in the partner’s name, thereby adding more value and stretch to an existing brand.
Directly selling insurance products that are fully branded in your own company name can also be a great way to optimise the insurance channel fully as a tool to help grow your business, while at the same time offering an additional product that your customers want and need.
Adapting to change
Our Affinity division is growing with the regular introduction of new products and services and new partners on board.
A reason for the growth is the market’s ability to adapt to the changing economic conditions. In the past, mortgage providers sold insurance packages easily by attaching them to home loans. Now, with changes to the housing market causing a significant drop in home loans being provided, insurers have recognised a need to implement new routes to market that don’t rely so heavily on home loan support. By doing this, sales growth can still be achieved.
RSA, for example, in 2008, worked with all of its building society partners to move from an average of 80 per cent of home insurance sales being driven from mortgage sales to 80 per cent of home insurance sales being driven through the investor base whilst keeping overall policy volumes stable.
One partner even saw new product sales grow from 5,000 policies to 45,000. These results were delivered by focussing effort to drive growth and opening up new channels.
This drive of non-mortgage related branch sales used a combination of direct marketing and branch based sales consultancy support, successfully increasing penetration to investor base customers via sophisticated direct mail activity driven by renewal date capture. A web channel was also introduced enabling members and non-members to gain an indicative quote.
IT
Technology is an important factor in making the insurance offering a success. Many insurers use a robust multi-product web-based technology platform to streamline the sales process, minimise administration and generate meaningful management information to help measure, direct and manage an insurance proposition profitably. These can often be linked to partners’ own websites, call centres and branch operations to ensure full integration and allow mortgage advisers to generate competitive quotes quickly and easily, simply by asking four or five short questions. One of our partners experienced vast success with this process - a 300 per cent rise in sales after moving from a lead generation approach to our platform, Stargate.
So the benefits are there, and sales and growth are possible. But choosing the right partner is important.
Choosing a partner
Appointing an insurance partner to act as a custodian and representative of your brand will require confidence that it will enhance your customers’ experience. It needs to get under the skin of your business, living and breathing the things that matter to your company and your customers. The team of insurance experts that you take under your wing should allow you to demonstrate added value and forge closer and more durable relationships with your customers – both of which can be key factors in long-term retention.
The insurer should look to tailor the insurance products you offer to ensure that they align with your company’s identity. This could be ensuring that they match your target customer base or, for example, have eco-friendly characteristics.
Tailoring will be carried out jointly by the two partners. This practice of ‘co-creation’ may begin with a series of interviews and conversations with people at all levels within the company to form a detailed understanding of objectives, followed by a number of customer focus groups once the product is completed to ensure that the offering meets all requirements. Then, following any necessary fine-tuning of the product and the marketing package around it, the product would be sold directly by the mortgage provider’s sales staff. There would be a major focus at this stage on training and support to make sure the selling process works smoothly and easily and does not in any way detract from the core sales process.
As an example, we worked with one of our partners to co-create insurance propositions tailored to their customers. Being a high profile environmental charity, it was important that all of the insurance products we created with them had green features built in. These included premium discounts for low-emission vehicles and access to home energy efficiency surveys.
Having an insurance product is one thing, but making it sell and bringing in customers is quite another. It is vital that you are supported by your partner with a strong relationship management and sales consultancy team who will put time and effort in to understanding and absorbing themselves in your business, your goals and your customers. In some cases, sales consultants and relationship management people can be placed within the partners’ businesses to ensure that the insurance professionals work closely with your own sales forces and throughout your branch network.
Insurers will also have extensive and sophisticated marketing resources which can benefit your organisation in a variety of ways. As well as providing coaching on the best techniques for selling insurance, sales professionals from the insurer should be able to consult on, analyse and optimise the effectiveness of your sales process as a whole.
Many insurers will also have extensive and advanced customer profiling and segmentation capabilities, enabling them to work with you to analyse your customer databases and develop a sophisticated understanding of where to pitch future sales initiatives and marketing messages. Again, this need not be restricted purely to insurance products.
Costs
As well as sharing segmentation capabilities and market insight, forming a partnership with a supplier of a new product could lead to cost savings as your insurance partner may be willing to share expertise in areas like compliance and HR.
The financial benefits do not stop there. The primary purpose of providing insurance is to increase revenue. It would not be unusual for partners to raise significant multi-million pound income streams from insurance sales. Also, partners would get access to flexible financial packages from insurers including profit share and marketing funds to help support the insurance partnership.
An added benefit when offering insurance is to improve overall customer loyalty. In times of financial uncertainty customers may be even more sensitive to price than usual and a great way to retain customers is to keep price changes to a minimum. Choosing a partner with the ability to deliver long term, sustainable pricing should be a priority and is something at the heart of the RSA proposition.
Offering building and contents insurance is a good starting point but it makes sense to partner with an insurer which provides a wide range of covers should you wish to extend your offering in the future. This is a proven way to secure customer loyalty - the more premium-quality products a customer has with you – the stronger their sense of brand loyalty. If your customers have one or more policies such as household, motor or home emergency cover with you, this significantly broadens and deepens the relationship.
Choosing a company with a solid claims offering is also crucial as this will safeguard and strengthen your brand and help build customer loyalty.
Many mortgage providers are now seeing insurance as a core product and one that generates sufficient revenue to cross-subsidise their core products and help make them more competitive.
Done properly, selling insurance products that are fully branded in your own company name can be an extremely effective way of growing your business, while at the same time providing customers with greater choice and flexibility, and increasing your revenue.
Andy Elkington is the partnerships director for RSA’s Affinity business. E-mail andy.elkington@uk.rsagroup.com
Date: 1st, June, 2009
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