Everybody seems to have a side hustle these days—does your company have one? Whether you’re a fintech, a bank, a car dealer, or retailer, here are four different business models your company can implement to generate revenue from insurance.
Companies across all industries can grow their revenue by cross-selling to their existing customer base. For insurance-adjacent fintech companies in particular, offering insurance to your customers will enhance your business’ profitability and longevity. Business models based on cross-sells often include marketing strategies that will grow your clientele as well.
The ways in which your company can incorporate insurance sales vary in complexity and revenue potential. Here, we overview four business models with different depths of integration so you can choose the one that best fits your specific situation.
How Cross-Selling Business Models Help Your Company
Cross-selling insurance will grow your business in a number of ways. Right off the bat, each of the business models we’ll discuss will increase your revenue in the short term. So for insurance-adjacent companies who need more revenue, adding insurance is a natural next step.
In addition, these business models will boost your brand’s reputation and customer experience, resulting in steady growth and business longevity. Specifically, here are the benefits you’ll see:
Cross-selling insurance gives you an almost immediate return on your investment (ROI). Rather than running expensive marketing campaigns to attract more leads, you build revenue from your existing customers. Depending on which of the business models you choose, you may get payouts based on lead-sharing or formal partnerships.
Improved Customer Satisfaction and Loyalty
Aside from bolstering your revenue by generating sales from your existing customer base, cross-selling insurance supports business sustainability in a few other ways. In insurance-adjacent industries, offering an easy road to insurance coverage solves a customer pain point and improves customer satisfaction.
After conversion, the final part of the buyer’s journey is brand advocacy. By supporting your product or service through cross-selling insurance, you offer a more holistic purchase to your consumers. With this enticing offer, your customers leave having checked more than one thing off their to-do list. Satisfied with your complete range of services, customers are more likely to continue their relationship with you.
Increased Customer Lifetime Value
With this increase in customer loyalty, you can also bump up your profit projections of customer lifetime value (CLV). Insurance has a lifecycle, and clients routinely renew their policies. Whether you offer insurance in-house or through a partnership, you can increase the lifetime value of each patron, as they will likely continue purchasing their policies with you for the foreseeable future.
Enhanced Brand Image
Finally, the combination of improved revenue streams and customer satisfaction will enhance your brand’s image. Not only will you garner a positive reputation for your holistic approach to products and services, but you will also be positioned as a one-stop shop for all your customer’s needs.
When dealing with insurance and insurance-adjacent industries, many consumers experience fatigue and impatience. By offering a simple and clear road to choosing the most suitable policy, you’ll save patrons time and effort. As a result, your brand image will reflect the relief and trust consumers feel when purchasing your products or services.
Business Models by Investment vs. Output
With each of these four business models, you’ll need to consider both set-up investment and revenue potential. We’ll start with a model that requires the least setup but also offers the lowest potential profit margins. Then, the following options will increase both in complexity and potential ROI.
As you weigh each option, think also about the specifics of your business. You’ll want to choose the insurance cross-selling business model that best aligns with your capacity to manage insurance sales and your need for additional revenue streams.
1. Lead-Sharing Business Models
Lead generation is one of the trickiest parts of succeeding as an insurance agent. But finding leads is integral to success, especially in the early months of an agency’s life. Businesses can generate an additional revenue stream through a lead-sharing model. With this strategy, you can offer insurance to your clients and make a few bucks by selling leads to one or more agencies.
How Lead Sharing Works
The value of each lead will depend on the amount and relevancy of information. In this arena, quality will almost always outperform quantity.
Thousands of random leads will get an insurance agency nowhere if the prospects have no interest or buying power. However, a few hundred quality leads that have shown a need for or interest in insurance are a goldmine for insurance agents. That’s where your business comes in.
Your client base is a ready-made stock of quality leads—especially if you’re an insurance-adjacent company. Develop a relationship with insurance agencies to sell your leads to their agents. Their sales team will be grateful to have a solid place to start finding clients, and they’ll pay you a fee for each lead.
Potential Challenges of Such Business Models
While it’s one of the simplest ways to add insurance as a revenue stream for your business, lead sharing does come with a few challenges. The drawbacks of this model include a comparatively low-profit margin and a potential drain on your customer satisfaction.
First, the profitability of a lead-sharing model is quid pro quo. For every lead you offer an agency, they will pay a predetermined amount. This might not be worth it for smaller businesses, as the effort to generate leads ultimately outweighs the small payout you get from sharing them. On the other hand, lead sharing can be profitable for high-volume businesses with a large customer base.
A lead-sharing model is one of the simplest business models to set up. However, you won’t have much control over customers’ experiences once you pass the leads to insurance agencies. For instance, if you’re a part of a non-exclusive lead share, multiple insurance companies might be bombarding your customer with sales pitches. Overwhelming consumers with spam could reflect poorly on your company.
2. Referrals and Partnerships
Business models focused on building referrals and partnerships are the next step up from lead sharing. With a bit more effort and resources, your company will have more influence over insurance offerings and garner a higher revenue share.
Mutually Beneficial Referrals
Referral programs are a marketing tool in which an agency offers incentives to customers or other businesses to recommend its services. Insurance agents often rely on referrals for some of their leads. The appeal for insurance agencies is clear—they reduce their cost of customer acquisition, and the new prospects enter the interaction with a baseline of trust in the agency.
The referring company benefits by being able to add value to their customers and the agency will provide compensation for each referral.
To take it a step further, companies should work with trusted insurance agencies and formalize a referral partnership agreement. Partnerships between insurance agencies and companies are key to generating leads and increasing revenue for all parties.
For an insurance partnership program to work, you partner with one or more insurance agencies and co-market your collaboration. Working in complementary industries gives insurance agencies the advantage of high-quality leads while generating revenue for the insurance-adjacent company.
The insurance agency pays a fee for each lead your business supplies. Since it’s a formalized partnership, there are different ways to negotiate the compensation. For instance, you can generate revenue through either a predetermined referral fee (similar to the lead-sharing model) or a percentage compensation at the close of each insurance policy sale.
The business and agency collaborate in this true partnership, so you still have some control over the customers’ experiences after you pass the lead to your partner agency.
In a partnership program, you build trust with a specific agency that aligns with your business’ values. This keeps you both centered on a single cooperative goal. However, nurturing this relationship can be tricky, so you want to ensure each partner’s goals are aligned. With the right attention, processes, and co-marketing, a formalized partnership between an insurance agency and your insurance-adjacent company can yield decent returns to boost your revenue.
3. Embedded Insurance Marketplace
The third type of business model is offering an embedded insurance marketplace. An insurance marketplace is a service that allows people to compare and shop for insurance policies in a single place: your website. Using an embedded insurance marketplace integrates the insurance shopping experience into your brand, so it feels like an extension of your company.
This experience is seamless for the customers and enhances your brand image and offering. This keeps the process a bit more in-house, even though the insurance agencies that ultimately bind the policy are still separate businesses.
How Embedded Insurance Works
Once a marketplace is up and running, your customers will love the ease and simplicity of the system. After they make a purchase from your business, they will then be able to opt-in for an insurance plan.
Unlike the lead-sharing and partnership models, customers won’t feel like they are being sent off to another company to purchase insurance, they will simply be directed to a page where they can peruse options for relevant insurance plans. Here, they’ll get real quotes for insurance policies based on their purchase. You can populate the page with offers from multiple insurance agencies.
When set up properly, an insurance marketplace offers customers an appealing way to shop for insurance. With a straightforward marketplace, you provide a solution to several major pain points of insurance shopping:
- You provide options curated for their specific purchase, reducing the feeling of overwhelm.
- You save customers the time of filling out forms on multiple insurance websites to get quotes. Instead, the quotes are provided in real-time, based on the details they already provided.
- All the details of each plan are laid out so they’re easy to compare. When you’re in control of the marketplace, you can enhance your customers’ satisfaction by reducing the amount of confusing jargon that often fills insurance policies.
Hosting an embedded insurance marketplace can also give the customer the option to instantly bind directly to the plan they’ve selected.
Challenges of an Embedded Insurance Marketplace
The challenge with running a white-label insurance marketplace appears before you launch. Compared to the previous two business models, this requires more upfront investment to set up the platform. However, if you’re able to develop that integration, you’ll reap all the benefits of maintaining part of an insurance business. You should also quickly start seeing profits from your existing customer base.
4. Subsidiary Agency
The final and most involved way to generate revenue through insurance cross-selling is by keeping everything under one roof. This means you start your own insurance agency that’s owned by your primary company and earn revenue from the insurance sales.
Of all the business models reviewed, this requires the most upfront commitment. However, it also has the highest potential ROI.
What Is a Subsidiary Agency?
In this case, your original company is the parent company, and the insurance agency is the subsidiary. A subsidiary is a business entity that is either fully or partially owned and operated by your company. Under this business model, you have complete control of the process. Plus, all the profits from both the parent company and the subsidiary go to the same place.
To better understand what this looks like, consider this example. The National Corvette Museum in Kentucky already has a few revenue streams. Along with the museum, it operates a race track and a national network of regional collector car clubs. Essentially, it lives and breathes specialty cars.
With so much experience and expertise in the high-performance vehicle market, museum operators know what their customers need and what their customers fear. In response, they created NCM Insurance, which offers insurance specifically to their target audience of race car and specialty car owners. Since they have a pulse on the pain points of car collectors, they’ve created an insurance agency that directly fills this unique corner of the marketplace.
Pros and Cons of Subsidiary Agency Business Models
Establishing a new company may sound ridiculous at first. After all, you’re looking for ways to increase the revenue stream of your existing company. Starting from scratch may not make sense, but hear us out. Though the upfront investment requires more resources and energy, you reap all the rewards of the revenue stream.
The initial setup is the biggest challenge. You need a licensed broker and a team of insurance agents. But once you have a trusted staff who understands the needs of your clientele, the subsidiary functions in complete synergy with your parent company.
Additionally, subsidiary businesses have a few other advantages. Because they function as separate entities, they limit the risks of loss and liability. However, the legal fees to set up a subsidiary can be pricey, and the insurance agency will be caught up in the bureaucracy of the parent company.
If you’re willing to make the investment and start your own subsidiary insurance agency, you will have in-depth control over both the management and the profits. As such, you can directly tailor the customer experience.
Enhance Embedded Insurance with Canopy Connect
Growing your company can happen through multiple avenues. While you broaden your reach, you can also grow your depth by increasing revenue through your existing customer base. Insurance cross-selling offer a reliable way to bolster your profits, increase customer satisfaction, and enhance your brand’s image. In addition to the short-term profits that insurance sales provide, all the benefits support long-term business growth.
The four main business models that incorporate insurance cross-selling into your company are lead-sharing, offering referrals and partnerships. Creating an embedded insurance marketplace, and starting your own subsidiary insurance company. While the latter two generate higher profit margins, they can be more complicated to set up. However, you can find a partner who can simplify that initial investment.
Canopy Connect helps businesses like yours launch their own insurance marketplace. We build the infrastructure into your site and offer you a selection of insurance marketplaces to choose from.
Working with Canopy Connect, you get all the benefits of running an embedded insurance marketplace within your site, but with an enhanced experience that increases conversions. Our team makes it easy for you to choose exactly what works for your company.
Learn more and book a consultation to see how an embedded insurance marketplace can boost your revenue. We can’t wait to support your business’ growth.