As consumer demand for insurance products grows, banks are increasingly positioned to meet this need, according to a recent report from PYMNTS Intelligence and Franklin Madison. The study reveals that 44% of consumers prefer to obtain insurance from their financial institutions (FIs), marking a significant trend upward over recent years.
Mike Mahoney, regional vice president at Franklin Madison, which serves over 3,500 FIs with insurance products, highlights several key insights for banks considering entering the insurance market:
Young Consumers Drive Demand
Younger demographics, particularly Generation Z, show a strong preference for obtaining insurance through FIs. Generation Z consumers are notably 43% more inclined than average to seek insurance from their banks. Mahoney underscores that this group places high importance on insurance offerings when selecting a financial institution, a sentiment four times more pronounced than among baby boomers. Banks that recognize and cater to this trend are likely to gain a competitive advantage as younger consumers constitute a larger segment of the market.
Convenience and Trust Are Critical
Existing relationships and trust play pivotal roles in consumers’ decisions to purchase insurance from banks. Mahoney notes that consumers prioritize trust (39%) over cost (19%) when choosing an insurance provider, citing the convenience and established trust inherent in banking relationships as significant factors. Leveraging these relationships allows banks to offer personalized insurance solutions tailored to individual customer needs, further enhancing customer convenience and bolstering trust.
Opportunity in Specialized Insurance
While property and casualty insurance are commonly offered by FIs, there exists a notable gap in specialized insurance products such as life, pet, travel, and cyber insurance. Mahoney points out that consumers increasingly recognize the importance of these specialized coverages. Diversifying insurance offerings enables banks to tap into new revenue streams and position themselves as comprehensive financial service providers, fostering increased customer loyalty and lifetime customer value.
Embedded Offers Drive Engagement
Banks can boost insurance sales by strategically embedding offers into relevant customer interactions, such as new loans, credit cards, or account openings. Mahoney suggests that these embedded offers capitalize on pivotal moments in customer relationships, enhancing the likelihood of insurance uptake while improving overall customer experience through timely and relevant product offerings.
Addressing Awareness Challenges
Despite growing interest, a significant portion of consumers remain unaware of their bank’s insurance offerings. Mahoney emphasizes the importance for banks to implement robust marketing strategies that educate customers about available insurance options. This omnichannel approach includes targeted digital campaigns, in-branch promotions, and traditional advertising methods to effectively raise awareness and drive engagement.
As the insurance landscape evolves, banks poised to integrate these insights into their offerings stand to gain from enhanced customer loyalty, diversified revenue streams, and a competitive edge in attracting younger demographics. By focusing on catering to younger consumers, leveraging trust, expanding into specialized products, employing embedded offers, and improving awareness, banks can effectively capitalize on the increasing consumer preference for insurance products offered by their financial institutions.
