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.
Neil Batley
Managing Director
Benalder Consulting
