Enduring Affinities

Affinity is defined as ‘a quality that makes people or things suited to each other’. For the purposes of successful selling of travel insurance, understanding your partner’s brand values is key to the success of affinity and white-label marketing, leading players tell David Kernek

Fashions in marketing and management come and go as rapidly as the jargon used to name – or misname – them. There are, though, two sales systems that stand out for their sheer durability and proven success: the affinity partnership, and its younger sibling, white labelling. The origins of modern affinity marketing can be found in the 1970s (although Aon in the US can trace the roots of its affinity business back to 1947) when interest rates on credit card borrowing were increasing steeply. The not-for-profit American Automobile Association (AAA) teamed up with MasterCard to offer its members a branded credit card with preferential interest rates and special offers. The rewards for the AAA were a strengthening in its members’ loyalty, and a share of the additional revenue generated by MasterCard’s larger cardholder base … which was MasterCard’s prize. 

The white label product or service is slightly different in that it is constructed by Company A yet packaged, labelled and sold by Company B … or Companies B, C and D! It’s a variation of the division of labour – and costs – principle: one company focuses on providing the product, others carry only the retailing cost. The system owes its name to the vinyl record age when discs bearing only plain, white labels were sent by record companies to radio DJs and clubs for audience testing or promotion purposes. Its everyday use can now be seen most ubiquitously in supermarkets, whose ‘own brand’ goods are supplied by manufacturers. For examples in the travel insurance sector, Virgin Travel’s cover is arranged and administered by InsureandGo Insurance Services in the UK and underwritten by MAPFRE Asistencia, while policies sold by Essential Travel are underwritten by White Horse Insurance in Ireland which, as it happens, is a wholly-owned subsidiary of the Thomas Cook travel group.

Finaccord’s latest overview of the UK travel insurance market finds affinity and partnership marketing to be ‘an important, strategic topic for financial institutions’, and identifies more than 500 schemes involving external partners, with most of them organised via an external intermediary rather than directly with underwriters. Its research found that travel insurance was promoted and/or organised by more than a quarter of charities, one third of professional associations, more than 50 trade associations, and a ‘significant’ number of trade unions.

There are, however, mixed views as to whether the affinity marketing model, while still undoubtedly popular, has achieved its peak potential for growth. For example, UK General’s personal lines director Stella Jones suspects it might have: “Insurers are probably doing less of this type of business, mainly because the traditional affinity customers for travel business – the banks – are doing less, probably due to the fact that banks previously had to offer a lot of extra products in their added-value accounts for a relatively small charge. Also, the Financial Conduct Authority has started to examine added-value bank accounts and the practice of bundling products within them.”

Stuart Lloyd, commercial manager at Columbus Direct, is similarly restrained in his assessment of the current market: “The landscape has settled in the last few years. Prior to that, there were plenty of entrants into the market with supermarkets and high-street retailers coming out with financial services products. Banks also started pushing their products more, especially as part of added-value accounts, and many of these deals would have been affinity/white label solutions. However, as travel agents and tour operators have struggled to quantify selling travel insurance due to tighter regulatory requirements, insurers have lost these affinity/white label opportunities. With aggregators continuing to grow market share, it’s unlikely that affinity deals are increasing significantly.” He concluded: “Many key brands have tested the market with affinity partners and then moved on from white label [products] to distribute travel insurance themselves.”

It's not all about the numbers on the commercial side ... if you think of the horrendous beach shootings in Tunisia, that's where the product is really tested

Others are much more bullish about the future prospects for travel insurance and affinity deals. “Insurers [in the UK] are definitely having more affinity and white label partnerships than ever before,” Paul Firkins, Hood Group’s business development director, told ITIJ. “Back in 2000, travel agents accounted for about 70 per cent of distribution; now they’ve got about 13 per cent, while the UK market has grown in that period to about £650 million to £700 million, so business is being written through other sources. It’s always difficult to put a number on how much of that is white labelling – there’s much ambiguity around what is classified as affinity and white labelling – but without a doubt, the number of these partnerships has grown. More than 550 affinity and white label travel schemes are being marketed in the UK now – airlines, travel companies, lifestyle organisations, professional organisations, trade unions, retailers … anyone who has a brand, a database and is in a logical place to offer travel insurance.” He added: “Back in 2000, Internet sales accounted for just under one per cent, but now it’s 57 per cent. Customers are just used to going online and buying this type of product.”

Trust is key

Firkins sees falling levels of trust in the financial services sector as a factor in the steady growth of affinity marketing. “What we find – and we’re in other personalised products, too, particularly home insurance – is that customers have got more trust in non-financial services brands than they have in a lot of insurers, brokers and banks; a consequence of, among other things, the 2008 crash and the miss-selling in Britain of payment protection insurance. Research I’ve seen points to affinity channels being expected to show the strongest growth in the insurance sector because customers have more trust in certain non-financial services brands. It is distrust of the banks, but insurers didn’t feature too well in there, either, probably by association.”

Customers, he explains, are ‘very comfortable’ buying from a brand they like and are familiar with. “The one everyone always points to, which is a great example, is John Lewis, which could sell a number of financial services very successfully because there’s that immediate feeling that if John Lewis is putting its name to this service, it must be good. It’s not a company that’s going to do something that’s going to ruin its brand.” For product providers, continued Firkins, affinities remain really attractive. “For insurers,” he added, “the real benefit is being able to reach those distrustful customers through a different brand. For the affinity partner, it’s about extending the range of products and services – and clearly there’s a revenue stream there – and as long as it complements what they do, it should be a win-win for all parties.”

Andy Glynne is commercial director at Cigna Insurance Services, a UK provider of specialist insurance and affinity marketing services. In January this year, AA Insurance entered an affinity partnership with Cigna to improve its policy benefits (including no upper age limit for single-trip cover), and in 2013 it was chosen by P&O Ferries to provide a white label travel insurance service for ferry passengers, with cover for elderly travellers and those with pre-existing medical conditions. Many P&O customers, said Cigna, needed non-standard cover.

“Our business is growing strongly … we have had significant growth in this area,” he told ITIJ. “Our approach has always been to focus on our core strengths – travel – and working through affinity partners in a white label space. Certainly, affinity brands are looking to strengthen their customer proposition. We are seeing movement in terms of the market becoming healthy from not only the existing players who have been key in the delivery of travel to their customers, but also new ones looking at added-value propositions and customer loyalty through those channels.”

Glynne, too, flags up the value of trust. “If the brand is well known and trusted in its core area, there is a natural affiliation in terms of customer purchase power to gravitate to that brand as being trustworthy. What you tend to see on the insurance aggregator sites are some brands that are relatively unknown at the top of the site and very cheap, and you’ll see other, better-known brands that are slightly further down and slightly more expensive, and people will purchase those because of the trust basis.”

Why are you selling travel insurance? You're my utility company!

Steve Scott, head of business development at Travel Insurance Facilities Group (TIFG) agrees that insurers in the UK are doing more travel business through affinity and white labelling arrangements than ever before, and adds: “While travel insurance products have always been highly valued by the customers of affinity partners, we are seeing a trend in which they are looking for an enhanced level of service and coverage. This is driven partly by membership organisations, such as unions, which are looking to offer more tangible benefits to make membership more attractive. In the past, travel insurance offered through affinity deals typically provided a limited amount of cover, which was not able to meet all consumers’ needs. We’re now seeing, therefore, a demand for bespoke products which they can offer for a more streamlined customer journey.”

Travel insurance tie-ups with airlines, car hire companies, cruise lines and airlines are the ‘norm in the US and have been since 1990 or earlier’, said Christina Hopper, president and CEO of Aon Affinity Travel Practice. “These types of partnerships have gained popularity outside the US within the last 10 years as the travel industry has become increasingly global. Affinity partnership marketing provides an effective means of reaching travellers at a time when they are booking travel and therefore considering travel protection products. Our practice continues to lead through its principal strategy of white label partnering with pre-eminent organisations in the travel industry including cruise lines, online travel agencies, tour operators and associations.”

Mansukh Ganatra, managing director of Citybond Suretravel in the UK, points to the ‘clear synergies’ in offering travel insurance at the point of sale for a holiday, a flight, airport parking, car hire or foreign currency. “We work with hundreds of partners operating in the travel industry, many of which we have been working with for more than 10 years. Fifteen years ago, the travel market dominated travel insurance sales. Today, the market is very open in terms of the huge choice people have when buying cover, and they are also more comfortable buying cover from different providers. The success of price comparison websites highlights this. Brands operating outside travel and insurance have a good opportunity to capture a policy sale. They can promote their cover in different ways, whether it’s via point of sale or email marketing, to leverage the trust that customers have in their brand to drive sales.”

But, he adds, travel brands haven’t stood still. “They are now much slicker in the way they promote and offer cover, due to affinity partnership providers offering improved sales solutions and technologies. This is especially the case with the airlines, where travel insurance used to be seen as an add-on element and marketed after the flight had been purchased. Now, the option to select and buy cover is integrated into the booking process, so it’s much easier for the customer to include insurance and pay for everything in one go.”

Insurers are definitely having more affinity and white label partnerships than ever before

The primary affinity arrangements, noted Stuart Lloyd at Columbus Direct, ‘are with financial services and retail brands looking to test the travel insurance market, and brands associated with travel, primarily airlines and online travel agencies looking to build ancillary revenue’. He added: “There has been more interest in recent years with retail brands looking to use travel insurance to build databases for cross-sell and brand exposure, often with aggregator presence driving growth.”

Getting it right … and wrong

As in human relationships, some affinity partnerships are imperfect and end in breakdown. The Hood Group’s Paul Firkins explains why this happens. “The ones that go wrong are affinity partners who think they’ve got a great brand and a loyal customer base, and then try to flog them everything. It doesn’t work, because the brand loyalty wasn’t as strong as they thought it was. The customer’s response is: why are you selling travel insurance? You’re my utility company! There needs to be some strength and depth between the customer and the brand; they’re the ones that work really well.”

He identifies what he describes as the two ‘big challenges’ in the affinity field: “One is that the insurer or broker needs to be set up in an agile way, to create something a bit different for each affinity [deal] and then be able to adapt when you go into a live environment, because some products need tweaking; for example, with promotional campaigns. The reality is that a lot of people get it wrong initially, which is fine, but if you haven’t got the IT infrastructure to be able to change it, then you’ve got problems. We see a lot of that, particularly with larger organisations.”

He continued: “The second big challenge is the boom and bust cycle in the market. Affinities want to sell bucket loads of travel insurance, so they secure unsustainable pricing with an insurance provider who wants a big distribution deal. The relationship kicks off and everything is going in the right direction with lots of sales, particularly through price comparison sites, but over time, of course, it fails to deliver the right profit and loss ratios. The insurer then needs to put in big price increases, and at that point the affinity [partner] breaks the contract, returns to the market, and does it again. We’ve seen this over the last few years, and it isn’t in anyone’s interest – the affinity’s, the customer’s, the insurer’s, or the market’s. Our model is very much based on long-term, sustainable propositions that balance the needs of all the stakeholders and have realistic numbers that stand the test of time.”

Understanding the affinity partner’s brand is the key to success, says Cigna’s Andy Glynne: “We’ve always been an affinity marketing specialist, so we have deals that go back a significant number of years, not necessarily in travel, but certainly in affinity partnerships. It’s about aligning yourself to their customers’ needs and their brand values. You’re putting yourself in their shoes as them – it’s being delivered in a lot of cases in their name – so you deliver the service and the products to the values that they as a partner require and that customers expect.”

Christine Hopper at Aon underlines the importance of keying into the values of the affinity partner: “Expertise is needed to develop and manage successful affinity programmes and partnerships. Since 1947 – we have nearly a 70-year relationship with one of our professional association affinity partners – Aon Affinity has specialised in the development, marketing and administration of insurance programmes and specialty market solutions for affinity organisations and their members or affiliates across a multitude of industries and geographies.” Key to success, she said, is a process that starts with the discovery of client needs and leads to customised solutions, while also maintaining a focus on the goals and values that are key to each client relationship: “Transparency in business dealings and a primary focus on the client and their customers/members are core elements to our success.”

Customers have got more trust in non-financial services brands than they have in a lot of insurers, brokers and banks

The main challenge, explains Stella Jones at UK General, is being able to carry the affinity brand effectively through the entire process. “For the affinity partner whose core business is not insurance, selling it needs to make sense, as insurance is heavily regulated. So a company such as UK General works with the affinity partner to provide a range of products from one source, while also providing the necessary knowledge and expertise. That way, it becomes a proper development partnership in which the affinity partner can capitalise on selling complementary products to their customer base.”

Citybond Suretravel’s Mansukh Ganatra added: “We’ve found that partnerships work best when we are able to work as an extension of the brand’s own team and we really get to understand the brand’s values and ethos. This includes ensuring that all of the elements we offer, from the white label website to the call scripts and the policy documentation, fit within the brand’s own style and appear seamless to their customers.”

But, warns Stuart Lloyd at Columbus Direct, maintaining brand values across companies in affinity partnerships can be a ‘huge’ challenge: “As retail companies focus more on brand and customer loyalty, the need for insurers to align their values with those of their partner can add unexpected issues and costs to the partnership, to ensure that they are set up to handle the requirements of the affinity partner. An ancillary product is not an area in which they will want to take any brand reputational risks, so signing up with the right partner is key.”

Who does what?

Achieving clarity – or sometimes lack of it – has been cited as a significant factor in affinity partnerships; cover can be marketed by company A, underwritten by company B, and serviced by company C. There’s scope, isn’t there, for confusion and frustration for customers?

“If you get it right, no,” says Cigna’s Andy Glynne. “It depends how you deliver it. If you are delivering it as part of a membership benefit, it’s about making it very, very clear at the outset and through communication about how it operates and what’s in the cover and what’s not. In a retail space, we would operate through two mediums: one through digital, and that means having a website or mobile platform that’s clear, enabled and user-friendly – we go through a lot of design and testing on that side of things; and another is an in-bound call centre. We track the types of calls coming into the centre, and if we see a number of queries in a certain area, we address that and amend it, meaning that those questions don’t arise again because it’s clear at the outset. We are seeing a lot of traffic in terms of purchase and delivery via web and mobile, which is convenient, quick and 24/7, as opposed to call centres, which have some sort of hours around them.”

Regulation has improved many of the previous issues that existed with affinity partnerships, especially in terms of mis-selling and in ensuring we treat customers fairly

Confusion can be avoided, adds Paul Firkins at the Hood Group, if the language used in the sales process is one that customers can understand. “We’re seeing a shift away from a lot of financial service-speak and jargon to everyday language, which customers will understand. We’re seeing a lot of brands insisting on that. It’s important to be very clear about what is and isn’t covered, and pointing that out throughout the sales process and beyond … if you do that, it shouldn’t be challenge.” The language used to describe who is responsible for each part of the service should also be very clear, said Firkins.

“Regulation has improved many of the previous issues that existed with affinity partnerships, especially in terms of mis-selling and in ensuring we treat customers fairly,” commented Citybond’s Ganatra. “It has enabled affinity providers and partners to become much more confident in their provision by ensuring all sales are compliant.”

Steve Scott at TIFG told ITIJ: “Financial Conduct Authority regulation in the UK – prohibiting automatic opt-in to affinity partner deals – has continually improved customer service and made insurance both clearer and more transparent. The key to ensure a good customer experience is consistency throughout the sales and claims process. While upholding the brand’s values, the insurer must provide excellent service and products that meet the requirements of the policyholder.”

The bottom line

Gauging the success or failure of affinity deals isn’t just about profit and loss, insists Cigna’s Glynne: “The commercial side comes into it, there are required commercial margins that we need in any deal, but we measure a host of things. We survey customers using Net Promoter scoring because a key part of our focus is service delivery to the end-user. If you think of the horrendous beach shootings in Tunisia, that is where the product is really tested. That’s when you measure it because that’s when you deliver what people need and are paying for.” He added: “It’s not all about the numbers on the commercial side. A lot of it is about the customer experience in terms of not only the service, but also the claims process and giving them, at the time it’s needed, the empathetic, streamlined approach that makes life easier for them in the way they’re entitled to expect.”

Financial Conduct Authority regulation in the UK - prohibiting automatic opt-in to affinity partner deals - has continually improved customer service and made insurance both clearer and more transparent

At TIFG, Steve Scott reports: “We recently started working with an affinity partner who required six streams of business which included a full range of sales to end services. We created a suite of products to enable customers to select their benefits from a menu of products. By offering the right products and creating the right customer journey, the affinity partner has seen almost immediate benefits: within two months, there is a 100-per-cent growth in sales.”

When the affinity deal matches the expectations of the insurer, the partner, and the customer, then, the potential for growth seems almost limitless.