Key strategies for property and casualty insurance companies to win in wealth management

Client expectations are shifting towards a preference for holistic financial guidance. Today’s customers are looking for advice tailored to their specific needs. They will actively turn to companies that provide personalized support and experiences that match their preferences.

In a previous article, we discussed four key reasons why we believe property insurance carriers and agents should enter the financial advisory and wealth management market to succeed amid compressive disruption. Providing the right level of interaction and technical support is part of delivering an increasingly personalized experience that will enable operators to win in the wealth management space.

Property and Casualty insurance carriers and agents are well-positioned to provide comprehensive financial advice because they have developed ongoing relationships with their clients and have a deep understanding of their lifestyles. Their activities have also been linked to the financial services industry: insurance is certainly part of the overall financial resilience and well-being of their customers.

In this article, we turn our focus to how P&C insurers can win in the advisory and wealth management markets.

We will begin by examining the decisions strategic operators must make when entering the advisory and wealth management markets. We will then provide an overview of the capabilities required based on the decision. Finally, we’ll take a closer look at its potential value bet.

Choose where to play and how to stand out

P&C insurance companies can enter the financial advisory and wealth management markets through a variety of channels. For the purposes of this article, we have identified four main market entry points:

1.Customer visit: Represents leads between agents or sells leads to financial advisory and wealth management firms.

2. Consulting services: Offer exclusive advice or exclusive access to existing advice sources through partner organizations.

3. Product supply: Offer proprietary products or enter product markets to provide customers with options to choose from.

4. Platform innovation: Build wealth management and advice into one platform to provide easy access to advice services and products or comprehensive financial wellness information.

To be successful, operators must optimize and leverage specific areas of their business to differentiate themselves at their chosen market entry point. Operators need to select their market entry point and within that entry point select an order based on: Their belief in the market. Here’s a starting point for what’s necessary (or what operators need to believe) to be successful at a specific market entry point.

Market entry point 1: Customer access

  • The operator’s distribution partners are able and willing to monetize advice and wealth management shares of their existing client base by selling portions of their untapped client portfolio as leads to other companies.
  • Carriers have agencies that effectively connect distribution partners and the ability to promote leading markets.
  • The airline has the ability to form partnerships with advisory and wealth management firms as potential recipients to best meet customer needs.

Market entry point 2: consulting services

  • The carrier has unique and reliable data or knowledge about its customers that allows it to provide more targeted recommendations than its competitors, or
  • Carriers are able to create proprietary products alongside existing advice providers, or
  • The carrier’s distribution partners are willing to provide or work with those who can provide advice.

Market entry point 3 – product supply

  • The operator needs to create a product that is equivalent to or better than current market products at the same or lower cost, or
  • The operator is able to enter a product market in the wealth management space offering the same product suite at the same or lower cost than its competitors, or
  • The carrier’s distribution partners are willing to sell the product or work with someone who can.

Market entry point 4 – platform innovation

  • The operator has the technical capabilities to create a high-performance proprietary platform that outperforms current market offerings, or
  • Operators can partner with technology providers who can build and maintain competitive platform products.

With these factors in mind, operators can approach each entry point with several different go-to-market configurations. For example, there may be go-to-market configurations that require collaboration across propositions, products, and platforms. , there may be a go-to-market configuration that results solely in the monetization of leads without regard to expansion into propositions, products, or platforms. Keep in mind that different allocations will have different amounts of risk, investment and reward.

Additional options for exclusive carriers

In addition to the entry points discussed above, exclusive agency operators have other options to tap into the wealth management and advisory markets, given their unique relationships with agents. As with the previously discussed entry points, each option has its own unique risks and risks. Benefits that operators need to consider. These opportunities include:

  • Licensing existing agents for wealth management and advisory services.
  • Utilize a current or experienced financial advisor on a commission-split basis.
  • Recruit current or experienced financial advisors directly as experts within the organization.

While the configurations are potentially endless, there is an important set of features required across configurations that are worth discussing here

Configure required functionality across entry points

While property and casualty insurance carriers are used to adapting their business and operating models to complex, highly regulated businesses, operating in the financial advisory and wealth management space requires additional capabilities. These capabilities may need to be built or provided with partners.

Let’s start with how operators enable the suggestion service. In the underserved markets described in our first article, hybrid suggestion capabilities, including automated digital interactions and human-to-human interactions, are table stakes. Customers expect ease and the cost savings associated with automation, but also require human touchpoints to handle complex situations as they arise.

As these hybrid models evolve, companies that get it right will be able to dynamically switch between digital and human advice delivery pipelines to optimize the customer experience at the lowest cost to serve.

Carriers also need to ensure that agents have or have access to individuals with the correct titles and licenses to be able to provide financial advice. Certifications such as the Certified Financial Planner (CFP) designation or Series 65 and 66 designations are required to provide services. in this space.

Next, let’s look at offering new or enhanced products. Operators looking to enter the wealth management space need access to market-leading products, which can often be achieved through open source architecture. In many ways, the financial products space is mature and ready to go. There are already multiple proven products available, so the natural path for most operators is to provide customers with product-market access rather than building a proprietary product. Operators need to be confident in their ability to create desirable proprietary products that justify the investment required to create a competitive product.

Platform development has similar “build versus buy” considerations. Operators will either need to develop or partner with a company that provides a best-in-class portfolio management software platform. They need to carefully consider whether they have the resources to develop a platform that is comparable to the current platform. In the fintech market, when it comes to customer experience.

In addition to these entry-point-specific considerations, operators are also required to engage or partner with a registered investment advisor (RIA) and a full-service broker-dealer (BD). Another key consideration is the strength of the investment adviser’s compliance function, given the high degree of regulation within the financial advisory and wealth management market.

Assess value at risk

There are four primary (potentially overlapping) value levers relevant to the advisory and wealth management market opportunity, which are:

  1. Revenue from lead campaigns
  2. Commission income
  3. Consulting fee
  4. management fee assets

While every lever is important, we believe assets under management fees represent the greatest leverage of value and the greatest opportunity.

In the first article in this series, we discussed underserved marketwhich includes $15 trillion in wealth associated with households with less than $1 million in investable assets.

To be conservative, we assume that the truly underserved markets are those with less than $500,000 in investable assets, according to Report by John Hancock, accounting for $7.3 trillion in total wealth. If property and casualty carriers capture just one-tenth of that market, at a margin of 30 basis points per year, that would mean $20 to $30 million in additional billable profits annually.

Because this revenue is fee-based, it also provides the added benefit of diversifying operators’ revenue streams while strengthening customer relationships and driving improved customer retention. To put this opportunity in perspective, at a combined ratio of 95%, the operator would need to add $500 million worth of property/casualty premiums to generate a similar margin contribution.

Additionally, we believe growth opportunities are greater for operators that combine assets under management fees with any or all of the other three levers

In summary

Through this series of posts, we aim to chart the way for property and casualty insurance carriers looking to diversify their revenue streams and capture a greater share of wallet by entering the financial advisory and wealth management markets. We believe this is an area of ​​business with huge potential to help insurance companies differentiate and succeed.

We hope this series of articles inspires you to take next steps or provides you with food for thought as you consider your long-term strategy, and look forward to discussing with you how entering this market will impact your own business. Scott AUnknown date. Bob Stay tuned for our next series, which will cover our thoughts on embedded insurance.

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Disclaimer: This content is for general information purposes only and is not intended to replace a consultation with one of our professional advisors.

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