Many US banks are missing out on a golden
opportunity to increase service fee income and boost customer
retention through greater cross selling of insurance and investment
products.
This is the key finding of a study, “The Value
of an Investment and Insurance Customer to a Bank,” sponsored by
Prudential Financial and Western National Life.
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“The [study’s] results provide the proof
needed for banks and credit unions to seize the opportunity for
developing investment and insurance relationships with existing
customers,” comments Kenneth Kehrer, who co-authored the study
together with Christine Kehrer and Peter Bielan.
Kenneth Kehrer is the founder of research and
consulting firm Kehrer-LIMRA.
The study highlights that those customers who
purchase insurance and investment products where they bank have on
average $348,000 of investable assets, 84% more than financial
assets held by other banking customers.
However, the authors add that only two out of
every 10 affluent customers have purchased insurance or investment
products from their bank or credit union.
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By GlobalDataAlso of note, the study’s authors point out that investment
brokerage and insurance customers have more than twice as many
credit products and 11% more remote banking products than customers
who have not purchased an investment or insurance product from
their primary bank or credit union.
“Overall, banks and credit unions have a
terrific opportunity to market to households likely to buy
investment and insurance products,” says John Gies, Prudential
Annuities’ vice-president and national sales manager. “
While many of these institutions are focused
on banking products and services as their primary source of fees, a
potential strategy for boosting profits, especially among highly
desirable customers, is hiding in plain sight.”
Cross-selling opportunity
The study also found that cross selling holds
significant positives to enhance client retention.
Specifically, customers who buy insurance and
investment products through their bank are 34% more likely than
other customers to stay with their current financial institution,
even if they receive better offers.
By contrast, selling the typical customer
additional banking products did not yield meaningful increases in
customer loyalty.
“The research confirms that the number of
products is much less important than the type of product in
predicting how ‘sticky’ a customer is likely to be,” comments
Gies.
He said banks and credit unions have a
significant opportunity to redeploy resources and modify their
cross selling strategies.
“These [cross selling] strategies work well
today on core banking products, but research shows a far greater
return by repurposing those efforts to focus on investment and
insurance products for existing bank customers,” stresses Gies.
The study is based on data from the
MacroMonitor, which is retail financial services and marketing
database.
