Why More Banks Say Yes to Insurance as a Consumer Product

As consumers increasingly look to their financial institutions for insurance products, banks have an opportunity to meet this growing demand. A recent report from PYMNTS Intelligence and Franklin Madison shows that 44% of all consumers would turn to their financial institutions (FIs) for insurance needs, a trend that has been growing over the past few years. Based on insights from Mike Mahoney, regional vice president at Franklin Madison, a company that provides insurance products to more than 3,500 FIs, here are five key takeaways for banks considering entering the insurance market:

1. Young Consumers Are Driving the Trend

Younger consumers are particularly keen on shopping for these services from a financial institution. For example, Generation Z consumers are 43% more likely than average to consider getting their insurance from an FI. “Gen Z consumers specifically are four times more likely than baby boomers to think that insurance offerings are important part of the decision-making process in choosing a financial institution,” Mahoney told PYMNTS. This shift in consumer preferences is likely to continue, he said, making insurance products an essential part of attracting and retaining younger customers. Banks that fail to recognize this trend may find themselves at a competitive disadvantage in the future as these younger consumers become a larger part of the market.

2. Convenience and Trust Are Key Selling Points

Consumers are drawn to the idea of purchasing insurance from their banks due to existing relationships and trust. In fact, consumers are more than twice as likely to name trust as a deciding factor on where they get their insurance, at 39%, than cost, at 19%. “I wasn’t surprised to see and learn that consumers are interested in buying insurance from their primary financial institution. That just makes a lot of sense to me to have a relationship there,” Mahoney said. “It’s convenient and they trust them.” This trust factor gives banks a significant advantage over traditional insurance providers. By leveraging their existing customer relationships and data, Mahoney believes, banks can offer personalized insurance products that meet their customers’ specific needs, further enhancing convenience and strengthening trust.

3. There’s a Gap in Specialized Insurance Offerings

While many financial institutions offer property and casualty insurance, there is an opportunity to expand into specialized products. The report shows that the average consumer has 3.7 different insurance types. Wealthier consumers carry a bit more, averaging 4.4 different types. Most consumers have health (78%) and auto coverage (75%). Beyond the must-haves, consumers’ need for specific types of insurance — such as life, pet or travel— varies. As Mahoney said, “More and more consumers are recognizing the importance of specialized insurance coverages, such as pet, long-term care, travel insurance, personal cyber insurance, maybe supplemental accident plans. So, there’s really … definitely a lot of opportunity for financial institutions to offer and expand a set of products to meet these growing needs from consumers.” By diversifying their insurance offerings, banks can tap into new revenue streams and position themselves as one-stop shops for all their customers’ financial needs. This comprehensive approach can lead to increased customer loyalty and higher lifetime value per customer.

4. Embedded Offers Can Boost Engagement

Banks can increase insurance sales by offering relevant products at key moments. “Embedded offers can be included in a new loan or maybe a refi car loan, new credit card opening, or even a line of credit college education loans,” Mahoney said. “There are all sorts of transactions or even just opening a savings and checking account for the first time at the financial institution. All of those are excellent opportunities to bring forward, timely and relevant offers to that consumer.” This strategy of contextual offering not only increases the likelihood of insurance uptake but also enhances the customer experience by providing relevant products at the right time. Mahoney believes banks can leverage their wealth of customer data to create highly targeted and personalized insurance offers, increasing conversion rates and customer satisfaction.

5. Awareness Is a Major Hurdle

Over half of consumers don’t know if their bank offers insurance products. Addressing this issue, Mahoney emphasized the opportunity for financial institutions to meet customer needs for coverage and win a greater share of that consumer’s wallet — and increase retention — at the same time. To overcome this awareness gap, Mahoney recommends banks implement comprehensive marketing strategies that educate their customers about available insurance options. This can include targeted email campaigns, in-app notifications, branch promotions and even traditional direct mail. “Having a balanced omnichannel approach I think is still important,” Mahoney said.

As the insurance landscape evolves, banks that successfully integrate these products into their offerings stand to benefit from increased customer loyalty, additional revenue streams and a competitive edge in attracting younger consumers. By addressing these five key areas — catering to young consumers, leveraging trust, expanding into specialized offerings, using embedded offers and increasing awareness — banks can position themselves to capitalize on the growing trend of consumers seeking insurance products from their financial institutions.