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Creating an Insurance Agency Aisle in Your Store
ProfitStars, a division of Jack Henry & Associates, Inc.
Since 1999, regulatory changes have encouraged financial institutions to surge into the property and casualty insurance business as the “next big thing.” Over the past seven years, banks and credit unions have invested billions of dollars in buying, building or starting property and casualty insurance agencies.
The initiatives, however, have generated mixed results, to the shock and disappointment of many senior executives who jumped headfirst into these inviting waters.
In fact, several of the early players are already exiting the business, divesting previously acquired agencies. Others – huge industry leaders among them – continue to struggle with alternative delivery models. What’s going on here? The first-ever analysis of financial institution insurance referral data indicates that the failure is a matter of a structural misalignment between the financial institution and its insurance agency:
- Selling auto, home and business insurance to bank customers and credit union members is much more commodity driven than financial institution and insurance agency principals ever imagined.
- Most insurance agencies purchased by financial institutions are relationship-driven and built to serve only a small, high-end slice of the financial institution’s customer base.
- Financial institutions have failed to research and understand the insurance needs of their customer base – and as a result often offer products that fail on price or coverage.
- Because 100 percent of a financial institution’s customer base buys insurance year in and year out, the institution can generate huge referral flows to their insurance agency platform, but our research will show that half of these referrals will be for future purchases, and a failure
to plan for this paradigm creates massive operational bottlenecks, service breakdowns and depressed profits.