The “Old Days” of Insurance Sales
“When I was younger…” How many of you find yourself saying this? And you haven’t even reached 40! Change is the one constant we can expect. It’s true for insurance as much as your new phone.
In “the old days”, considering life and supplemental health insurance meant meeting with an agent. Either in your house or their office. No Zoom meetings back then. And once in conversation, you made your decisions.
With little outside access to information, the process was mainly a matter of trusting your agent. Did they provide the best options for you and your family? Maybe. Yet there was always a lot you didn’t know.
The Right Fit?
Bias was built into the process. Commissions varied between policy types. Both the agent and the company they represented could offer the most profitable options, with you none the wiser.
It made for a stacked deck against you, the consumer. You had questions, but no good answers: What’s the “right amount” of insurance? Is this a fit for us? Am I getting a good price?
Even questions about eligibility could go unanswered. Will you need a medical exam before issuance? Might the results change the terms?
With those concerns, many families never purchased life insurance. However, they still have a need for supplemental health protection.
Then came direct marketed insurance.
Oh, and spoiler, for many, it still works this way. Just swap in that web meeting. So what did “direct marketed insurance” change?
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The Growth of Direct Insurance
Insurance underwriters knew that the larger the pool of insured, the lower the risk to the insurance company. This translates to more relaxed underwriting. It’s known as “simplified issue.”
We work with companies which sell what we’re discussing below. As always, our goal is to ensure you have all the necessary information to make the best decision for your institution. What our partners offer may, or may not, be a fit.
Remember the long and involved applications? No more. Answer a few basic personal information questions. Add in some lifestyle and medical questions. No medical exam necessary (exceptions for specific high coverage levels).
Issue a policy in as little as 10 minutes…instead of weeks.
If this seems familiar, it should. It’s the basis for group insurance. Both employer-employee and “common bond”, or association type, groups offer in this manner. Who’s part of those groups? For our discussion, two possibilities:
- Customers of a specific bank
- Members of a specific credit union
What distribution channels can you use for direct insurance? Options are open:
- Direct mail
Life insurance is the common example for group issuance; it’s been available for years. And popularity continues to rise. 1 in 3 people purchased life insurance on a direct basis, while 47% say they are more likely to buy “simplified issue” life insurance.
How It Works
Step 1: Determine which product your institution will offer.
Already have a provider? Great. If not, or you’re curious about other options, we’ll have an article to discuss. Ok, back to the process.
Step 2: Choose your marketing collateral.
After selecting the insurance product, your provider will share several creative options for your marketing channels. Give to your team and see which best fit with your strategy, membership, design language, and mission.
Step 3: Create a list of recipients.
They’re your members. The provider just contacts those who are most likely to purchase. Rest assured, they’ll share the data points you can use for making that list. Target members with a need and financial ability to pay the premium.
Step 4: Set a campaign schedule.
Your campaign schedule starts before you send out a single promotional piece. Set up staff communication and any needed product training (for MSRs and Inbound teams). That way, everyone is on the same page from the start.
Step 5: Campaign is a go!
Once the campaign begins, your provider’s system captures, processes, and fulfills new enrollments. Since we’re talking about digital a lot lately (I wonder why?), the vast majority will go through the online platforms.
Should any enrollments arrive by mail or brought in person, simply follow your provider’s guidance on getting them submitted quickly and securely.
“They all seem the same!” Has this thought gone through your head while researching insurance providers? It’s true. Products are similar. You know what separates them the most?
Beyond the coverages, enrollment process, costs, or royalty percentages, it’s their marketing strategies and results. These factors have a huge role in determining program penetration and total earned revenues.
Which, from both the view of helping protect members and making money, is the point, right?
What factors to consider?
The most important statistic is Premium Per Customer (PPC). Let’s see an example. Which of these will generate more income for your institution?
- Company A offers a 25% royalty with a $6.00 PPC
- Company B offers a 30% royalty with a $3.00 PPC
In this case, Company A will achieve your goals far better, both in protection and revenues.
Here’s some other categories to consider:
- Campaign components: Direct mail, email, web-based portal or all?
- Campaign frequency: How often will they run a campaign?
- # of account holders targeted?
- Will the marketing campaign branding highlight your institution?
- How much control will your institution have on the campaign calendar?
As always, a complete due-diligence takes time, but it helps ensure your final choice is the best fit for both the institution and account holders.
What products are available for Direct Insurance?
Not all your insurance products are available as direct insurance. Here’s the “oldies but goodies”:
- Term Life Insurance: Low cost. Provides protection for a temporary period.
- Whole Life Insurance: Higher cost. Provides protection for life, while building cash value.
- Guaranteed Issue Life: A type of whole life insurance, developed for seniors who cannot medically qualify for standard life insurance.
- Accidental Death & Dismemberment: A “limited” type of life insurance with benefits only paid if the covered individual dies or is dismembered in an accident.
There’s also a new portfolio of supplemental health products ready for offer. They help cover gaps with modern health insurance and associated costs. Things including:
- Out-of-pocket costs
- Increased deductibles
- High co-insurance
- Related non-medical expenses
Today, direct insurance includes coverage for a range of risks, including auto, property, and even pet health insurance.
Benefits of Direct Insurance
Why bother with direct insurance? It’s easy to offer. It’s easy to buy. And more consumers trust their bank to offer it. In 2013, only 43% of people would consider buying insurance from a bank. In 2017, it was up to 60%.
So what about the benefits for your financial institution?
Insurance sales generate premium revenue for the insurance companies and their administrators. They have the product, the marketing expertise to offer it, and only lack an audience. Your financial institution provides those eyes, plus your trusted branding.
Sounds like the perfect match.
To accept commissions, you may need specific state licensing. However, you may notate income payments as list rental costs or administrative fees, neither of which require licensing.
This is where we say that we cannot speak to your specific insurance rules. If you’re unsure of regulations in the areas you operate, contact your state insurance department for clarification.
Fee income varies depending on the company, the product, and the effectiveness of their marketing efforts. In other words, how many people purchased the coverage. On the whole, these programs bring in substantial revenues for the institution. If…
If the process is solid. No worries. I’m sure you’re going to run an amazing campaign.
Member (Customer) Loyalty
You’re all about creating more loyal account holders. And you know one way to do so: Expand the number of products and services someone has with your institution. In other words: More things = Greater retention.
Plus, these all-in customers are more likely to consider other services with your institution, should the need arise.
Everything is digital now. That means you need to ensure member information is safe. Data breaches happen, but it’s less likely with strong data security processes in place. Regardless of your provider, ensure this is their policy as well.
Request appropriate compliance details for your IT department to review. If you have questions on their treatment of member data, raise them during early discussions. A competent provider will be happy to address your concerns.
Learn what data they need for processing (less information moving around is better), then figure out the most secure way to get it to and from each other’s platforms.
The main things to check are policies for data at rest and data during transfer. Ideally, you want both to be encrypted to the latest standards. Remember, data security can get little attention until there’s an issue. And then it’s too late.
It’s what our whole Learning Library is about. Helping you get the information needed to discover if this choice is a good fit. In the case of direct marketed insurance products, you have two main concerns:
- Assurance that benefits will be paid (promptly) to policyholders
- All risk is assumed by insurance carriers (never back to you)
Check the financial strength ratings (FSR) of your selected providers with a rating service. A.M. Best has respected data. Their information (and grade) helps you determine an insurer’s ability to meet its obligations to policyholders.
The ratings scale includes six “Secure” ratings: A++, A+ (Superior) A, A− (Excellent) and B++ and B+ (Very Good). The ratings scale also includes six “Vulnerable” rating grades. You’re not going to partner with them, right?
In our experience, financial institutions like yours aim to only choose companies which maintain an FSR of “A- Excellent” or higher.
Resources Required & Provided
There are several industry providers of direct insurance. While the products may differ, their promises to your institution are all quite similar. In most cases, the only resources required by your institution are:
- Developing an opt-in list of customers
- Review and approval of mailing & web collateral
- Adding marketing banners to your website and social media
- Utilizing pre-made email in campaigns
- Setting up a process to deduct premiums from customer accounts and remitting to administrator
The insurance administrator supplies all of the resources for:
- Design and postage for direct mail campaign
- Landing page design
- Online application
- Policy fulfillment
- Policyholder service & claims
Direct Your Attention to Direct Marketed Insurance
Direct insurance products can be a valuable addition to your institution’s offerings. In fact, you probably offer one or more right now. If so, take a look at that list to ensure you’re meeting account holder expectations.
“What are they expecting?” Great question. Think of yourself as the customer. What would you want? Simple explanations, easy application/purchase, rapid fulfillment, a variety of appealing products, and all at a competitive price.
Any of these not trigger a resounding, “got it!” from your inspection? It’s time to start your search. Your account holders buy direct insurance; if you don’t have the best choices, they’re just not buying from you.
Be their first, last, and best option.
So what’s available and, of those, which are the best fit?
We’ll help you answer your questions as we expand our Direct Insurance Products series. Each article will look at one of the popular direct marketed insurance programs. Like other categories, we’ll help you answer the following:
- What is it?
- Benefits & Advantages
- Pros & Cons
- What’s involved in purchase/implementation/operation?
Of course, we’ll even share our list of the best providers across the industry.
Beyond insurance, we are here to assist you in your due diligence journey. With new topics appearing all the time, bookmarking our Learning Library is a great time-saver. Plus, why not Subscribe to the Learning Library?
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Focused on helping your bank or credit union grow in the face of emerging challenges.