Partnerships are nothing new. Companies have long turned to other businesses to increase brand awareness, gain access to new customers, and enter new markets. It’s simply a strategic means of expanding an organization’s reach.
When one company partners with another, leveraging its brand and distribution to provide goods or services, the strategic partnership takes on a new form and moves into a territory known as affinity marketing.
A NEW REALM OF AFFINITY MARKETING
What Is Affinity Marketing?
Affinity marketing, also referred to as sponsored benefits or the B2B2C model, happens when a business (B) teams up with a second business (B) to reach a specific consumer group (C).
One recognizable affinity marketing partnership in the industry is JPMorgan Chase and Amazon. The companies came together to create the Amazon Rewards Card. By developing this new credit card, Chase can access an entirely new customer base and leverage Amazon’s relationships with customers, capturing essential data in the process. Meanwhile, Amazon can leverage the incentives for using a credit card to increase overall sales.
Of course, this is just one example. Such affinity partnerships are also known to create value-added services and stronger promotional materials for customers, bridge skills gaps within organizations, increase the speed of innovation for businesses, and more. It all depends on the goals and terms of the affinity marketing partnership.
Digitalization and the Affinity Market
Like almost every other industry, technology is reshaping how insurance companies operate and interact with consumers. The affinity insurance market is no exception: It requires any company working in this space to look beyond the traditional insurance approach or a single distribution channel. Today’s consumers, particularly younger ones, expect much more. They’re digital natives, and they demand not only digital experiences, but ones tailored to their personal preferences across multiple channels.
Adopting new digital models and establishing digitally integrated affinity partnerships that leverage next-gen platforms can help extend reach, improve engagement, and even strengthen trust and loyalty. The move demonstrates that your organization is doing everything possible to meet the precise needs of customers at any moment in time and that what you offer is just a click away.
Consumers will always find new ways to trust a product or service. Because of technology, they’ve now done it with ride-sharing and vacation rentals. They also rely on reviews and recommendations from strangers online for nearly everything. They’ll do the same with the affinity insurance market. If companies don’t keep their eyes on consumer needs, connections will quickly be lost, and people will look elsewhere for their insurance and financial services needs.
Will it be easy to reach these consumers? Not necessarily. But if you continue to find ways of adding value with innovative financial and insurance solutions and start exploring affinity groups or types of risk that might not be on your radar, you’re going in the right direction. To aid business growth, the goal is to expand the view of affinity partnerships and adopt new insurance models that fit within the digital era. That’s how your organization can respond to all the changes taking place in the affinity insurance market.
HOW THE AFFINITY INSURANCE MARKET KEEPS PACE WITH CONSUMER NEEDS
The Importance of Trust
Trust has always been a key factor in purchase decisions. The challenge, however, is that consumers are no longer choosing between just two or three products. The options are endless, making trust a vital component to brand survival. In fact, 70% of consumers say brand trust is more important than ever, with 53% ranking it as the second most influential factor when deciding what to buy.
Insurance is no different. When consumers look for protection from risk, they’re more apt to choose a company they can trust. While greater transparency can serve as a building block — especially with an increasing number of consumers now researching and comparing products before committing to a purchase — sponsored benefits marketed through affinity channels is the key.
Consider for a moment the “typical” affinity group: customers of an organization like a credit union, membership group, or even a company like Vrbo. If you were to partner with this group, it serves as an endorsement, and its customers are much more likely to trust in your affinity offerings due to the shared connections within the organization.
The Evolution of Affinity Strategies
Though important, trust isn’t the only factor in consumer purchase decisions. Need is also a strong driver. New products and new risk opportunities can be found around every corner. Insurtech can attest to that: Companies in this space are constantly writing protections for more niche affinity groups.
With the concept of affinity evolving, it’s important to rely on more than just underwriters to design new products for meeting customer needs. Today’s affinity strategies should include greater personalization based on historical and behavioral data within the many affinity groups now forming around shared interests, goals, and affiliations.
Taking advantage of these opportunities won’t always be easy. Like any new insurance model, it often comes down to identifying potential market areas; understanding the risk inherent in those groups; and developing products, services, and offers to complement the group’s distinct needs.
THE EROSION OF TRUST WITHIN THE AFFINITY INSURANCE MARKET
Over time, the average affinity program moved from relational to more transactional in nature, which has not been ideal for an industry based on personal interactions, loyalty, and trust. Even with advancements in technology, consumers often require some direct and knowledgeable assistance from a person.
To maintain relevance, providers working within the affinity insurance market must start stripping away the layers and return to some semblance of simplicity. The goal should most often be ease of service. Data, AI, and all the other tools now available make it possible to maintain the level of personalization consumers expect from organizations.
Here’s where you can start to return to a place of trust:
- See the opportunities.
The insurance sector contributes to society in many positive ways, yet consumers often challenge its reputation. This is partly due to the costs associated with its products. However, we can also point to difficulties consumers often have in understanding what providers offer and, in moments of truth, how their situations are handled — and that is where organizations can find opportunities. To identify those opportunities, develop ways to make affinity products and services more affordable, easier to understand, and simpler to use.
- Take action.
The customer journey is far from linear, with various touchpoints along the path to purchase. While this can make it difficult to meet consumers where they are, data and AI can help deliver personalized experiences across multiple devices and offer the information necessary to help consumers make more informed decisions around affinity products. The move can help instill greater confidence in their choice of products and, in turn, your organization.
- Return to basics.
With insurance innovation at an all-time high, the process of buying products can become almost frictionless. This has put many insurance companies in a unique position: no longer needing to sell products but, instead, offering options ready to be bought at the time of need. This is a new insurance model that’s much more sustainable and scalable over the long term. You can simplify the process by creating easy-to-understand products and using more straightforward distribution channels.
TRADITIONAL VS. EMERGING MARKETS: INNOVATION IN THE INSURANCE SECTOR
Innovative trends in insurance don’t often stray much from one year to the next. Yet one thing is clear from PIMA’s Fall 2020 research with Majesco: Definite leaders are now emerging within the expansion of partner ecosystems, and what they all have in common can be traced back to tech. Each one understands how technology is reshaping traditional markets and distribution channels. This has led to the development of more innovative insurance solutions for everything from automotive to big tech, opening up new revenue streams for companies active in the space.
Beyond that, the emerging markets have spawned the creation of:
- APIs to embed insurance products with another company’s offerings or platforms
- Partnerships to include insurance products with another company’s products or services
According to the research, both of these scenarios outpace traditional partnering, which suggests a change in the choice of partnerships. It also indicates a move to offering products at the place and time of need — again, marking a shift from “selling” to “offering.”
Insurance Innovation at Its Finest
Plenty of companies in the insurance and financial services sector are now viewing consumers across life, health, wealth, and wellness. A great example of this practice is SoFi, a PIMA member organization. The fintech company started with a focus on student loans. This was a great entry point, as SoFi was able to expand and own the entirety of the financial services relationship as customers moved from one stage of life to another.
From Millennials to Gen Zers, SoFi has been able to capture next-gen customers to the point where the company now has more than a million members. It’s also provided more than $30 billion in loans and gone on to develop a digital platform that can handle everything a customer might need in financial services, including:
- Life, auto, home, and renter insurance through an ecosystem of partners
- Unemployment protection programs
- Financial planning services
- Career counseling
- Member discounts
- Digital payment options
SoFi even offers networking opportunities and events for its members. It shouldn’t come as much of a surprise that a fintech company so fully understands the needs of today’s consumers, but the effort put into meeting every possible need is exemplary. It can be used as a new insurance model going forward.
THE BENEFITS OF PIMA IN THE AFFINITY MARKET
The opportunities are endless within the affinity market. The only thing standing in the way is the current model. To expand the concept of affinity groups, it’s best to look to both traditional and new partners to access untapped markets and reconsider how you interact with consumers both on and offline by getting back to the simplification of affinity strategies.
You don’t need to solve the challenge alone. A partner ecosystem is ready to give you the tools to expand your reach and help your team meet consumers where they are today. At PIMA, you’ll find a community of insurance and financial services leaders with a deep understanding of how the affinity insurance market is changing and what must be done to keep up.
If you’d like to learn more about a PIMA membership and how to gain access to the PIMA continuing education opportunities, including networking, monthly events, and an extensive library of industry-specific materials, please contact us today. Joining can help you and your company generate business growth in the affinity market through collaboration, education, and innovation.
Published on February 10, 2021.
PIMA® (Professional Insurance Marketing Association®) is a member-driven trade association focused exclusively on the group-sponsored benefits market.