Affinity insurance

In 2015 the FCA required a mandatory pause in the UK between the sale of a car and the sale of the GAP insurance offered at the same desk, having found that those policies paid out around ten pence in claims per pound of premium. That figure is affinity insurance in a nutshell. Instead of looking for customers, the insurer rents access to an existing customer base belonging to a retailer, a telecom operator, an airline, a manufacturer or a professional association. The partner brings the relationship and often its brand, the insurer carries the risk and the compliance. Acquisition cost is very low and take-up high, because the offer arrives when the need looks obvious. Hence the sometimes thin value to the policyholder, and the regulatory scrutiny. The chain of responsibility also gets longer, the final seller being neither an insurer nor a professional intermediary; the Insurance Distribution Directive, applicable since October 1, 2018, deals with it through the ancillary intermediary regime. One risk does not show in the accounts: a book resting on a single partner loses all its new business the day the distribution agreement ends.