CRM in intermediated financial services markets: CASE STUDY OF A SPECIFIC BANK PARTNER PORTFOLIO

CRM in intermediated financial services markets: CASE STUDY OF A SPECIFIC BANK PARTNER PORTFOLIO

Where a partnership exists it makes a great deal of sense to explore the two companies’ experience with the same customer. If the partners are operating within the same business sector, it is probable that the customer will display similar characteristics in both relationships. There are also specific factors that apply to the way banks market insurance.

For example Table 2 highlights the importance of the strength of the relationship with the bank in determining the rate at which customers convert their quotations to a policy. A customer taking out buildings insurance in association with a bank mortgage is nearly four times more likely to convert than if the customer requested a quotation after seeing a newspaper or other advertisement without any other relationship.

Where the partners operate in sectors that are not primarily financial, say retailing, it is still worth exploring the relationship. Here, however, the retail predictor variables for ‘goodness’ in insurance are likely to be more complex. They might include:

—   merchandise buying behaviour (eg product types, frequency)

—   payment behaviour (eg credit card, cash, cheque)

—   finance behaviour (eg how purchases are funded)

—   complaint and merchandise return behaviour

—   loyalty (ie share of wallet spent at store)

—   Loyalty card behaviour (eg use, fraud etc)

Banks commonly measure their customers’ behaviour in terms of number and types of bank account held, account balance, credit card activity, credit scores and how well the customers manage their accounts. These measures have been used for some time to help guide bank staff as to how to treat the customer, eg whether to grant new loans or extend existing credit.

Table 2 Relative conversion rates split by source of enquiry and policy cover

Source of enquiry


Cover held


Mortgage adviser




Branch referral




Newspaper or other advertisement




The Insurer believed it was worth testing whether positive bank scores correlated with profitable insurance behaviour, ie to answer the question, ‘does a good bank customer make a good insurance customer?’ Common sense suggests that there is a good chance that a relationship will exist. The problem is to prove it and then, if proved, to capitalise on the fact.

Privacy legislation as interpreted by the Data Protection Registrar, The Banking Code of Practice and the Association of British Insurers does not allow companies to share personal customer information. So a procedure had to be devised to merge insurance and bank data to create a complete picture, but in such a discreet way that the identity of the individual customer was not known and could not be derived. The exercise then went on to test the relationship between the individual bank scores and the various insurance behaviours to be encouraged or avoided.

Positive banking characteristics include:

—    surplus balance on account, ie in credit

—    no or few unauthorised overdraft withdrawals

—    multiple bank accounts: loan, savings, current, credit card.

Positive insurance characteristics are:

—    low claims history or a low propensity to claim

—    low sensitivity to size of premium

—    multiple lines of insurance cover (eg buildings and contents)

—    long-term relationship or a tendency to renew or extend each year.

The following general results were discovered:

—    Conversion rates for new business are higher for customers with positive banking indicators and are lowest where negative banking indicators are present.

—    Customers are significantly more price sensitive when negative banking indicators are present.

—    Customers are more likely to renew their policy if they have positive

banking indicators leading to higher retention rates.

—    Claims experience is worst where banking indicators are negative.

The conclusion reached was that the best insurance customers also have good banking and credit experience.

The Insurer then had to implement processes or procedures to capitalise on this knowledge. Where bank staff provide insurance quotations, it is possible to provide prompts for them to offer incentives to desirable customers to drive up their take-up rate. Typically, where banks measure their customer behaviour, an indication of their value is displayed on the customer contact screen.

Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

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