Financial Institutions and Insurance Go Together Like Popcorn and Butter

Has your financial organization ever considered offering insurance to customers? Read on to learn why it could be a strategic next move for your business.

Financial Institutions vs. Insurance Companies

What’s the difference between an insurance company and a financial institution – like a bank or credit union? It may seem like the answer would be obvious, but the two entities may be more similar than you think.

The Differences Between Financial Institutions and Insurance Companies

Banks are subject to state and federal regulations, while insurance companies are only subject to state-level oversight. They also have different functions, business models, and risks they face. While insurance companies insure their customers against risks like home fires and car accidents, banks and credit unions offer services to help people manage their money properly.

The Similarities Between Financial Institutions and Insurance Companies

Both entities are financial institutions, and both have underwriters for different types of risks. As bankers underwrite repayment risk, insurance companies underwrite claims risk. Both types of organizations collect very similar information from their customers – and much of it overlaps.

5 Reasons Financial Institutions Should Offer Insurance

1. 100% of your customers need insurance.

If you work for a financial institution, every one of your customers taking out any kind of loan will need insurance to go with it. Whether your customer is acquiring a new car loan or a mortgage, they will need auto or homeowners insurance to pair with it. If someone is taking out a business loan, they’ll need business insurance. It’s that simple.

Even those who choose not to take out a loan will still have an insurance need. And the need is recurring every single year.

2. If you’re not offering insurance, you’re passing up easy sales.

Financial institutions already have a customer base for insurance products and services. That means not offering insurance is passing up easy sales.

Banks and credit unions create insurance customers every time they agree to fund a loan and require proof of insurance before doing so. Instead of sending customers from the bank to their insurance company, you can offer them a one-stop shop to streamline the loan process.

You can also diversify your revenue stream, reduce your dependence on net interest income, and deepen your customer relationships by offering insurance alongside other financial services.

Think of it this way. Not offering insurance at a bank or credit union makes about as much sense as selling popcorn without butter. In other words, it’s an easy – and obvious – sales opportunity.

3. Banks and credit unions are perfectly positioned to offer insurance.

As a financial organization, you may have to spend time building trust and proving yourself to new and prospective customers. After you’ve created relationships with your customers and they’re willing to work with you, you’ve already sold the most challenging part. This can give you a leg up on insurance agents and companies.

According to a recent study, only 22% of people affirmatively trust their insurers. Accenture found that only 27% of consumers consider their insurers trustworthy, while Deloitte learned that merely 11% have strong trust in their agents and brokers.

If you have a strong base of customers who already trust you with their finances and investments then you have a serious advantage. You are perfectly positioned to provide transparent and trustworthy insurance offerings.

4. Insurance companies face insane competition.

In 2019, there were nearly 6,000 insurance companies in the U.S. alone. Searching for “best insurance companies” on Google brings up over 1.5 billion results. Additionally, large insurance companies like Geico and Allstate can afford to advertise to millions, often leaving smaller agencies in the dust.

All this to say, insurance is a highly competitive industry. But bankers have an opportunity to cut through or sidestep the competition. They can offer insurance to people who already trust them and are sitting across the table, willing to listen and very possibly buy.

5. Insurance isn’t a “one-size-fits-all” solution.

While some individuals want to buy insurance quickly and instantly online, others will look for better deals – the kinds of deals they can only get from talking to an honest sales rep.

Offer your customers the opportunity to communicate with a real person and get a better quote than they can get from automatic quotes online. When working with a sales rep, customers can explain their unique needs. Insurance agents can work with them directly to find customized solutions.

Insurance shouldn’t be a one-size-fits-all product. This gives you another leg up on online-only insurance services.

Ready to become a one-stop shop for your customers?

Acquiring or starting an insurance agency from scratch can be expensive and come with cultural and operational challenges. By partnering with an established and trusted agency, you can offer your customers top-notch insurance products and services for a fraction of the cost.

If you work for a mortgage broker, bank, or credit union, consider installing a branded insurance business unit. Our cutting-edge technology, outstanding customer service, and tailored coverage options will provide you and your customers with the best possible value.

Talk to us to learn more.

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