RBC Insurance plans to step up its strategy of leveraging its multi-channel distribution channels to pursue further cross-selling opportunities, Neil Skelding, the company's President and CEO told The Insurance and Investment Journal during an interview in late July.
Mr. Skelding says RBC Insurance has grown its business by focusing on a wide array of products in travel, home and auto and insurance, as well as its life insurance offerings. It has also grown by focusing on a wide range of distribution channels, such as direct distribution via call centres or internet, third party distribution relationships and mobile sales agents. "We have a position, really, in all types of distribution and fundamentally, all types of products. The evolution of our strategy is to get those products and services working better together."
An example of this cross-selling strategy is offering incentives for travel insurance for the company's home and auto customers.
The company has also expanded its cross-selling to include life insurance. "We've just taken that a step further. We're now offering life products to auto customers. Not where brokers are involved, but where we own the client relationship. Where brokers are involved, they obviously own the client relationship. It's their client and it stops there. But, where we have a proprietary or direct relationship with that customer, we're looking to do more with them."
Mr. Skelding underlines that that independent advisors and distribution "are also an important component of what we do." In particular, he points to the company's key relationship with PPI Financial Group, which represents RBC Insurance in the high net worth market, he says. The company's cross selling strategy, he says, is targeted at the underserved mass market.
"There is certainly a big opportunity to grow that market, to bring more consumers into the insurance business, into the premium paying space." Often these direct clients have no life insurance coverage whatsoever, or perhaps just some group coverage, he adds.
Generally, the life policies cross-sold to its home and auto clients are simplified, shorter term products. "Maybe it is a 5 or 10-year protection for someone who has just had a child."
Mr. Skelding doesn't believe this cross-selling strategy conflicts with the interests of the company's independent advisory channel, because the mass market is generally not their target. "It's a very different kind of sale from someone who is a business owner and has a big estate and is retiring. There's a very different decision component and that market is pretty open right now. There are not a lot of people chasing that market. We think we can be successful."
In recent months, however, RBC Insurance's cross-selling strategy did lead to controversy in the independent channel following a March 2010 article in The Insurance and Investment Journal. The article reported on a situation where an advisor risked losing a client who noticed that he could get a 10% discount on a $1 million life insurance RBC Insurance term policy since he was already an auto insurance customer. However, this discount was only available if the policy was purchased directly from RBC Insurance.
In late April, RBC Insurance announced that it had decided to extend the discount to the advisor channel.
Mr. Skelding says that this discount has almost never been used by advisors' clients. He could only think of the one case, which was reported in the magazine. He adds that the situation rarely arises because direct sales are generally for much smaller amounts and advisors tend to sell higher face amount policies.
The discount, though, is applicable to larger life policies for existing home or auto clients. "Sure, but that is not the standard operating procedure. We didn't build that program...to do [large policies]."
Leveraging its relationship with bank branches is another ongoing and growing strategy for RBC Insurance, adds Mr. Skelding. The company has opened 55 insurance offices adjacent to bank branches over the past few years.
Most often, clients who walk into these offices are looking for auto insurance. The licensed, non-commissioned insurance agents who work in these offices carry out a comprehensive needs assessment, which allows them to identify if the client is lacking other forms of insurance. "The agents are trained to talk about home insurance, possibly travel...they will speak to you about life insurance. The lion's share, the majority of those customers, don't have any life [coverage] at all." Typically these life policies are for face amounts of fifty to sixty thousand. The policies also tend to be short term - five to ten years - with simplified underwriting.
RBC Insurance doesn't disclose sales breakdown figures for its near-branch insurance offices, but Mr. Skelding says sales are predominantly auto, then home, then travel and life. "Not every customer buys life insurance, needless to say, but it is an increasing proportion. "It's absolutely unbelievable how many people don't have any [insurance] and it's a massive market and we're getting at it."
RBC Insurance is well positioned to serve this mass market need for small, simplified life policies, particularly by leveraging existing auto insurance client relationships. "We don't have to go out and find [the client]." Within the offices, the agents are dual-licensed, so they can sell both general and life insurance. "It is non commission, so there is no pressure to buy. But they just ask the question (whether the client has life coverage) and inevitably the client doesn't have any."
He says, although the policies are small, it is worthwhile for RBC Insurance since it is "an add-on sale."
It is also an opportunity to grow the insurance market in general by bringing in new clients, he adds. "Ten years down the road, (those clients) are making more and they need a million dollars of insurance coverage. They probably will talk to a broker or a broker will find them. So we're very much at the entry level side of the market."
Mr. Skelding believes this benefit to the industry and the underserved mass market would be increased if banks are one day permitted to sell life insurance through their branches. The next review of the Bank Act, which restricts in-branch insurance sales, is coming up in 2012.
"I think our ability to get at this underserved mass market is high and I think we can grow the market as a whole, much as the Caisse has done in Quebec. They've grown the market...by getting new clients to pay premium."
"Are we going to go into our retail branches and write $10 million policies? That won't happen. It simply empirically, on the ground, doesn't happen. Will we get a whole ton of new Canadians covered? Yes, that's the opportunity that's out there."
He adds, however, that RBC Insurance's strategy isn't predicated on potential changes to the Bank Act. "I'd like it to change, yes. Is it consumer friendly to do so? Yes. But it is something that will evolve."
He adds that there are different ways that the Bank Act could be changed. It may not open completely, but perhaps it will for certain product lines. "We have a massive pension challenge in this country and you can't annuitize bank assets in-branch. You have to leave the branch, go to a broker, start a new relationship, go to a different company. I don't think that makes a lot of sense just at a consumer level. Just, fundamentally, it doesn't make sense."