Customers who buy investments and insurance where they bank are among a retail financial institution's most profitable, loyal and desirable customers, according to a new study.
Of the customers that had 5.5 banking products, 29 percent said they would not switch to another bank or credit union if sold an additional banking product compared to 39 percent who said they would not switch if sold an insurance product, according to LPL Financial’s study "The Value of an Investment and Insurance Customer to a Bank."
“This key finding indicates that insurance products cultivate loyalty in customers, which means the bank or credit union can earn more money on the banking products the customer already owns because the customer that buys an insurance product will stay longer,” Study Co-Author Kenneth Kehrer told Insurance Networking News.
Insurance products typically sold through banks and credit unions include auto, life, annuities and long-term care.
“The reason that insurance products promote loyalty is because insurance is more of relational product not a transactional or commodity product. Selling an insurance product requires a more in-depth conversation and relationship with the client,” said Kehrer who also founded Kehrer-Life Insurance and Market Research Association (LIMRA).
The study found that by under-investing in their investment and insurance services businesses, banks and credit unions are missing the opportunity to increase fee income as well as the loyalty of their most profitable customers.
“The insurance product gets pushed out because there are so many banking products,” says Kehrer. “Banks and credit unions need to focus on and give insurance priority by training staff to identify insurance customers and sell insurance because society as a whole tends to trust their local banker.”
Customers who purchased an investment or insurance product from their primary bank or credit union have checking account balances that are 16 percent higher than those households without a brokerage or insurance relationship, according to the study.
“Banks are struggling to maintain fee income. Selling insurance is a new source of income,” said Kehrer.
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