Copy of an article published on this week's Post Magazine website:
It’s hardly surprising why insurers, brokers and affinity groups want their products to appear on the aggregators; when for personal lines, it represents an ever-expanding marketing channel. The rush to the channel has however, recently led to a re-appraisal of the relationship between providers and their partners, as well as a greater degree of realism on both sides.
The danger for insurance providers has always been that using affinity brands runs the risks of “cannibalising” customers and perhaps more importantly, losing many of the benefits of working with affinity brands in the first place. For providers, these include the strength of those brands in the eyes of their customers, members or donors, the access and channels they command and increasingly, the valuable data that can be used to help underwriters and marketers.
Affinity groups like the aggregators because of (relatively) low acquisition costs and the ability to reach customers who might not otherwise access the brand. However, these new customers can cause a real problem to insurers and brokers, who find them to be very different from those an affinity partner attracts through its more “traditional” channels.
Take the example of a retailer such as Marks & Spencer attracting a new (and different) type of customer through the aggregators; when compared with more traditional consumers, who regularly use its stores or branded credit cards. This may sound like a benefit to both parties in a partnership, but not if new aggregator customers are overly focused on price and demonstrate limited brand loyalty. Some affinity partners may argue that this is not their problem, but if an account’s performance and loss ratios suffer, insurers will need to take rating action which can impact all the affinity group’s insurance customers.
In the recent past, some insurers considered charging higher rates on the aggregators than through other channels, for their affinity brands, but these efforts have been resisted by the major aggregators who can negotiate strongly in ensuring that their prices are not undercut elsewhere. Aggregators’ ultimate control over the number and type of brands that appear on their sites is also something that providers are reluctant to ignore!
Given that charging more on the aggregators is not viable, most providers have had to look at alternatives. Some have gone as far as removing poor performing affinity brands from the aggregators, but this is unlikely to provide a viable solution in a serious “partnership”.
More sophisticated providers have instead adopted a more creative approach. Insurers have again come to realise that the best affinity groups can add real value to the partnership through the use of data that can be reflected in “dynamic pricing” to reach the most profitable and loyal customers; even through the aggregators. Providers can and must access valuable data from their partners – for example, evidence of a profitable existing relationship – such as a retailer’s credit or store card, a motor manufacturer’s finance agreement, or a lender’s credit score. In these cases, rating can be enhanced and a targeted quote provided, to ensure the profitability of the wider partnership.
There remains little doubt that the aggregator channel is here to stay, but affinity groups are increasingly aware that the best partnerships require more than just brand strength or product enhancements to work effectively on the aggregator channel. In many respects, the sharing of data and common objectives, suggests a far more equitable relationship between the provider, the affinity group and the aggregator. It also serves as a great reminder of the complexity but also the benefits of partnership marketing.