From a Client's Perspective: Marketing Insurance Through Banks

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In 1907, Louis D. Brandeis, a prominent Boston attorney, recognized the need for low-cost life insurance. He puzzled over ways to get inexpensive life insurance to consumers. Then he had a thought. Why not distribute it through savings banks? Thus, Savings Bank Life Insurance was born.


It was clear that consumers were amenable to the idea of buying life insurance from their banks. They had established relationships based on trust, and insurance was, quite simply, a natural. It worked, and the concept moved through Massachusetts, Connecticut and New York. Then it stopped. That's still a puzzle.


But in the past three decades, banks nationwide have jumped into the fray, offering insurance to their customers. The problem was that most were simply not very good at it. That's changing.


Today, banks -- including savings banks, commercial banks and credit card issuers -- nationwide offer insurance products. New legislation has resulted in new opportunities for banks willing to take the leap into insurance sales.


With their large customer base, banks have natural markets for many forms of insurance, specifically credit insurance, homeowners, title insurance, life and health insurance -- products where the bank is named beneficiary and/or benefits from premiums as well as the protection of their assets. And new technologies have made it possible to efficiently target the right banking customers with the right products.


Some banks have gone further, employing licensed individuals to offer life and health insurance and annuities to affluent customers, generally through platform sales. Others have gone to the next level, offering "forced place" products such as homeowners and hazard insurance, often through third-party insurers.


National City is the ninth-largest bank in the United States. Based in Cleveland, National City operates more than 1,100 branches in six states and ranks as the seventh-largest mortgage originator in the country (according to US Banker, April 2003). National City Insurance Group offers a full line of insurance products including credit insurance, auto, home, life and health.


NCIG's direct marketing efforts are a key part of the bank's success, representing 12 percent of revenue in 2003 with a gross profit margin of 32 percent. The challenge was to expand the optional insurance business, increasing revenue without sacrificing margins. The first target was the bank's 1.1 million mortgage customer base.


Market analysis. A comprehensive review showed that from 2001 to 2003, marketing frequency had been fairly consistent -- that is, the same number of campaigns had been run in each of the three years. The problem was that the mortgage market had changed as a result of the refinancing explosion.


Customers who had a mortgage with NCB were refinancing in droves. But as new mortgages were put on the books, any insurance attached to the prior mortgage was canceled, causing NCIG to lose as much as 4 percent of optional insurance customers monthly. The problem was that static marketing efforts were not taking advantage of the new inflow of prospects, and the effect of the increased rate of cancellation was showing. It had become clear that an opportunity was being lost.


Next steps. NCIG was charged with making recommendations that would limit any large outflow of insureds as a result of refinancing while at the same time grow the optional insurance product revenue.


The direct marketing department suggested the introduction of a home warranty product, a re-evaluation of existing insurance relationships and the creation of a strategy to more efficiently increase marketing to take full advantage of the many new prospects, as well as those who were insureds but now lacked coverage.


From a tactical perspective, this meant recapturing lost insureds by implementing a 30- to 45-day direct mail notification program to those customers, increasing the existing insurance product offers to new mortgage customers resulting from refinancings, targeting broader segments of the mortgage file with existing products that were overlooked in the past, and finding and launching new products within a four- to six-month window.


NCIG has three established business relationships on the mortgage side and recently added a fourth -- each with different market strengths in terms of product and distribution. Each partner offers distinct advantages with unique marketing philosophies in terms of the markets they targeted.


Thus, while one provider might target the upper deciles of an income select, for instance, another might accept lower deciles as appropriate prospects. Historically, the unused deciles for each promotion had not been "recycled" to other partners but this, too, began to change.


While mortgage customers had been natural insurance target markets, the insurance group began to expand its marketing across other bank files. This included targeting checking account and credit card customers, who were also homeowners, for homeowners insurance, home warranty products and mortgage coverage options not previously solicited to these groups. Also, NCIG is mining its retail customers this year for evidence of homeownership and fashioning a strategy of product offers to these customers.


Media strategies. Telemarketing is part of the marketing mix at NCIG. But like other direct marketers, NCIG is reconsidering its effect given the introduction of the national do-not-call registry. Though NCIG undoubtedly will be affected, the effect is anticipated to be minimal because it already runs its in-house DNC list as well as any state DNC lists against its marketing files. To counter, NCIG is diverting DNC customers to the mail channel as specific offers are made and as it monitors the customer drop-off because of the DNC list.


New direct mail and telemarketing campaigns are being introduced for various products, including a home warranty program where NCIG's expectations are that direct mail will deliver 1 percent to 1.5 percent response, an accident disability product, a final expense whole life insurance program and a package of health discount services combined with accidental death coverage.


What does all this prove? That with a little creativity combined with a solid direct marketing strategy, banks really can sell insurance -- efficiently and profitably!


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