Article
TIO kiosk network adds insurance product
A leading billpay kiosk network now sells an accidental death policy for $12 a year. Is this a harbinger of enhanced services for the unbanked?
July 23, 2006 by James Bickers — Editor, Networld Alliance
On July 4th, TIO Networks announced the launch of KEY A-D insurance, an accidental death and dismemberment (AD&D) insurance policy to be sold through convenience retail networks and underwritten by Stonebridge Casualty Insurance Company. The product was rolled out in early July in Tennessee and Texas in On The Run and Tigermarket stores.
According to Mike Pollard, executive director of the Texas Association of Life and Health Insurers, most AD&D policies are sold to an employer or an association or some other large group. "Most of the AD&D is sold as a group add-on, at a very low cost," said John Sterrett, an agent with Physician's Mutual Insurance. "Typically, it's not something that an individual agent would sell."
Simply put, it's not the biggest moneymaker in an insurance salesperson's arsenal. But the lack of need for a physical exam and the relative simplicity of the sale make it ideal for automated delivery.
According to the Federal Reserve Bank of New York, 15 percent of U.S. households are unbanked — that is, they don't have a traditional banking relationship, which includes checking and savings accounts. This is the group that TIO Networks and the Stonebridge Casualty Insurance Company are betting on — a group that, to a large extent, is ignored and falls outside the system of automatic coverage that many Americans enjoy as part of their employment benefits package and take for granted.
Many of these unbanked individuals are immigrants who are just beginning to integrate into our economic system. Pollard said that in Texas there has been a steady decline in those covered by life insurance — in some segments as much as 30 to 40 percent. One reason, he said, is because of the influx of immigrants to the state, who are struggling to make ends meet and probably don't spend much time thinking about insurance needs. Besides that, Pollard blames the decline on people lacking a perceived need for an insurance product.
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Marketing may be the biggest challenge to the success of this initiative. "The sell may be hard through a kiosk because the need for insurance is rarely perceived unless you have someone with a life experience — with a relative or friend who passed away without insurance," Pollard said. "Insurance is typically sold, not bought." And with no one present to actively engage the prospect, the insurance component of the kiosk could be easily ignored.
Still, Pollard was upbeat about other possible applications for kiosk distribution.
"I might want to go in there and purchase a certificate of deposit," he said. "There may be any number of financial services that could go on (a kiosk) that we haven't thought about. Could I pay the premium for my automobile insurance policy? Or my homeowner's policy?" He pointed to the ATM and how it has become the accepted banking norm as proof of the viability of this distribution channel.
Sterrett said that selling AD&D policies through kiosks will pose no threat to his business and sees this as a good thing for all parties involved. "It's an untapped market. It's underserved. But you can't exactly spend a lot of time training a sales force and sending them out, because you can't pay them enough to make it financially viable. So, I can see something like that, where you don't have the human capital cost, being worthwhile."
"I really can't see any downside to it other than if the market penetration for the cost relative to the cost associated with implementing the product is not sufficient to support that," Pollard said.
