Why Insurers Should Take Their Cues from the Travel Industry

06/06/2016

When consumers visit the Expedia or Delta Air Lines websites, not only can they book an airline ticket, they can also quickly and conveniently purchase everything related to the trip: car rental, travel insurance, hotel bookings, etc. For insurers, taking a lesson from the travel industry inspires a new way to leverage ecommerce to strengthen their affiliate marketing programs.

Central to this lesson: The shift toward ecommerce is moving faster than many insurers anticipated. Experts predict ecommerce will account for 30-to-57 percent of retail sales within the next five years. Add to that the trend toward mobile, which some predict will account for 80 percent of all online sales by 2018. With the wide-scale adoption of a consumer-centric retail model across all industries, health insurers are moving to an ecommerce model, with some already implementing private exchanges, which are ecommerce websites for health insurance.

A key tenet of an ecommerce approach is easy access to a wide array of product options. For insurers, this is all the more important. According to a recent McKinsey & Company report, consumers don’t purchase based upon premium alone, but in fact want to mix and match health and voluntary insurance products. Plus, they are willing to pay more to assemble the benefits that best meet their needs.

Expand Through Affiliate Marketing

Insurers need to move boldly to meet the demand for a wide range of products offered through an ecommerce experience. Hence, today’s environment is ripe for insurers to do what other industries, such as the travel industry, have done for years: Build strong relationships with affiliated companies to expand their offering and generate more revenue. Consumers have come to expect other ecommerce experiences to be similar to airlines by offering convenient one-stop shopping for complementary products provided by affiliated companies right alongside their own anchor product.

For example, when a shopper visits the Delta Air Lines website to purchase an airline ticket, they have the option to add on hotel reservations, car rentals, travel insurance, even cruises. Delta does not directly provide these products and services, but makes it possible for their affiliates to offer products through their ecommerce website, including convenient payment at the end. Delta has mutually beneficial financial arrangements in place with these affiliates and they all gain from increased sales and consumer loyalty. 

  

Similarly, health insurers have the opportunity make their private exchanges a one-stop-shopping site through partnerships with other companies that offer vision, dental, disability, life insurance, financial products, such as health spending accounts, even pet insurance. This approach can serve all lines of business, including groups and individuals. In short order, the insurer’s product shelf can expand significantly, as illustrated, below:

More Than One Way to Launch a Private Exchange

Affiliate marketing programs are not new and already work well in many industries. For insurers, who already have relationships with other ancillary product vendors, affiliate marketing could expand and deepen those relationships in mutually beneficial ways. With a private exchange, insurers can grow their affiliate marketing program and offer rewards and incentives to those companies who provide the complementary products consumers want most. All three key stakeholders – the insurer, the affiliates and customers – benefit. 

Historically, health insurers have orchestrated and funded private exchanges. Most private exchanges offer several ancillary insurance products, which both improve the member experience as they shop and enroll as well as generate greater revenue for the health insurer. Revenues are generated from the sale of health products and affiliate fees. While both insurer and affiliates gain in this traditional ecommerce model, the health insurer makes most of the investment and pays the operating costs of the private exchange.

Given the important role ancillary products are beginning to play in the private exchange shopping experience, new models for structuring private exchanges are emerging. For example, health insurers might share the cost of the private exchange with affiliates. In this arrangement, the ancillary partners cover some of the up-front and operational costs of the private exchange in return for a membership commitment by the health insurer. All participants are responsible for bringing members to the platform who then become potential customers for the ancillary and other products offered, such as HSAs, gym memberships, etc. In this arrangement, the private exchange gives affiliate product partners access to customers they would otherwise not reach. In return, they share in the private exchange costs. 

With a well-crafted program modeled after what airlines do so well, insurers can deepen partnerships and use their private exchange to elevate their brand in their market, build their product shelf with an attractive product mix, and grow both revenue and market share. At the same time, insurers and their affiliated companies can create win-win relationships that benefit them financially while fostering long-term consumer loyalty and satisfaction. 

If you are interesting in learning more about innovative approaches to affiliate ecommerce, please contact Lance Hood, VP of Marketing at Array Health at lance.hood@arrayhealth.com.