In recent years it has become more common for insurance products to be sold through unconventional channels like large retail stores and supermarkets. These are mostly small value general or life insurance products, such as cell phone insurance and funeral policies. These policies are sold either at the in-store financial services counter or at the till points. Credit retailers began to offer insurance in 2000, focusing initially on insurance directly linked to retail credit products, such as credit life and balance protection.
Could these policies be packaged like any other consumer good to enable a shopper to read the label and add it to their trolley without having to talk to a sales consultant?
Boosting insurance sales through white labeling is an approach that has been followed in the past. It assists insurance companies to sell their products to customer segments that they may not target under their own brand or traditional marketing and distribution channels. For example, an insurance company who has built its brand servicing high net worth customers can use the white label approach to sell to other customer segments, ensuring their brand value does not get diluted or confused 1.
Why would the retailer offer financial services including insurance products to its consumers? Finmark Trust provided the following reasons and examples in a recent report “Retailers’ motivation for offering financial services”:
- Increased consumer traffic – retailers can increase footfall by acquiring new customers and by increasing the number of interactions with existing customers. To do this, retailers can offer insurance products that are in demand within their target markets in order to draw more customers in the retail environment more frequently. A number of credit-based clothing and furniture stores encourage customers to pay their accounts in store. This allows the retailer to engage with the customer and encourage them to spend when the facility exists on their accounts. For example, the funeral insurance offered by PEP stores brings customers into the retail environment on a regular basis as customers pay monthly premiums in cash in the store.
- More profitable customer behaviour – Loyalty programmes can be an effective tool to incentivise more profitable customer behaviour and to gather customer-linked basket data for cash retailers. Clicks Group Limited offers free funeral cover to its members as a value added benefit. The benefit pay-out for this policy is directly linked to the value of purchases over the six months leading up to the date of claim.
- Leveraging existing assets – retailers can leverage client data and collections platforms to offer additional insurance products that are not linked to store credit. Edgars and Jet have done this particularly well. Edcon now has an insurance portfolio of ten products including funeral insurance, motor and household insurance, legal expense insurance and even dental accident insurance. Its insurance products are offered to account holders only and entry level premiums are relatively low.
This is an interesting way to bring insurance to consumers and make it more tangible and convenient. It enables the insurer to reach middle to low income families who are often underserved by the financial services industry and the insurer is able to build new customer relationships 2.
There may however be changes to the practicalities and compliance requirements of these arrangements with the recent draft information letter from the FSB – Compliance with sections 4(3) of the Long-term Insurance Act and Short-term Insurance Act, respectively: Advertisements, brochures or similar communications – enforcing the following in terms of white labelling:
- “No advertisement, brochures or similar communications must use the name of another person to mislead or deceive as to the true identity of the insurer or to create the impression that any person other than the insurer is financially liable under a policy.
- Any advertisement, brochures or similar communications of a white labelled policy must clearly and prominently identify the relevant insurer. Specifically, the identity of the insurer must be at least as prominent as that of the person under whose brand the policy is offered.”
Does this bring to an end the no-name brand insurance products being sold in our retail stores and Supermarkets? Insurers need to carefully consider which brands they associate their insurance products with in order not to dilute or confuse their perceived brand in the market. In the mean time we may soon hear cashiers bellowing over grocery store intercoms, “Price check on Motor policy in aisle five, please!”
1 Insurance Services Outsourcing, Boosting insurance sales through a white label approach, 2009.
2 KPMG Global, Milk, eggs and life policy? Insurers bag grocery aisle sales, 2014.