Public distrust of financial services has been good for affinity business

Tesco

Not all clients are created equal - and nowhere in the market is this more true than in the affinity arena. In a business where success is all down to the strength and suitability of the brand, then its public perception and relationships are a prerequisite.

Affinity partnerships have become increasingly popular over the past few years, as the public has become disaffected with financial services brands in the wake of the financial crisis. Instead, they turn to brands they know and trust.

The consensus is that bigger brands are generally better because size enables them to put more investment into the operation. When partnerships start, they go through what is known as a ‘j curve’ of profitability, where the need for investment means that profitability can be ‘negative’ in the first few years. This reinforces the need for both parties to commit to long-term arrangements.

While the brands showcased opposite are all established financial players, there are ‘greenfield’ opportunities out there too that would have brokers and insurers rubbing their hands with glee. Amazon is a good example of a brand that has dipped its toe in financial services but never taken the plunge.

Top five affinity brands

1 BMW Insurance

Customers: BMW and Mini owners

Policies: 40,000 motor polices and a small number of travel and home policies.

Insurance: Car, emergency service, home, shortfall, travel, tyre, warranty.

Insurer: Allianz began a five-year affinity deal in July 2011 to be the sole underwriter of personal lines products for BMW and Mini in the UK.

Most wanted because: BMW is a gold-plated brand and Allianz says it sees the potential to grow the number of policies by 50% in five years, with particular potential in cross-selling from motor to travel and home cover.

2 Federation of Master Builders (FMB)

Customers: Federation membership, comprising 11,000 construction companies.

Insurance: Employment disputes and compensation awards cover, tax protection, FMB adjudication and enforcement, property protection, bodily injury, debt recovery, statutory licence protection, legal defence.

Insurer: DAS Legal Expenses Insurance.

Broker: Aon.

Most wanted because: The FMB is the building industry’s largest trade association and its future is set to brighten in line with economic recovery.

3 Marks & Spencer Financial Services (subsidiary of HSBC Bank)

Customers: More than two million people hold an M&S credit card.

Insurance: Car, home, pet, travel.

Insurers: AXA, RSA, plus others for motor through broker.

Broker: BISL (parent company of BGL).

4 Post Office

Customers: Ninety-nine per cent of the UK population is within three miles of one of the Post Office’s 12,000 branches and two million customers use the Post Office’s financial services.

Policies: One million travel insurance policies and 700,000 car and home insurance policies.

Insurance: Business (self employed, shopkeepers, property owners, office and surgery, homeworkers), car, home, life, motorcycle, pet, travel, van.

Insurers: AXA Insurance, Aviva, RAC Motoring Services

Brokers: AXA Services, BISL (parent company of BGL), Devitt Insurance Services, Heath Lambert.

5 Tesco Bank

Customers: Tesco Bank has 6.5 million customer accounts. Motor insurance grew particularly well, according to Tesco’s last annual report, with customer numbers increasing by 8%. Customers include 700,000 buyers of pet insurance. Tesco Bank’s turnover in 2011 was £919m (year to 26 February).

Insurance: Breakdown, car, dental, health, home, life,
pet, travel.

Insurers: Ageas (which has a joint venture with Tesco Underwriting), AXA PPP, DSA Legal Expenses, Friends Life, RAC Motoring Services and/or RAC Insurance, RSA.