Morrisons' decision to launch pet and travel insurance, its first move into financial services, is the latest sign that affinity distribution is moving back up the industry's agenda. Tesco, Sainsbury's, Asda and Morrisons all increasingly view insurance as an extension of their customer proposition rather than a peripheral add-on.
For brokers, the more important question is not why retailers are returning to insurance, but what separates affinity schemes that become durable, profitable customer businesses from those that launch well but fail to sustain momentum.
Bruce Reid (pictured), commercial director at Hood Group, has spent more than a decade developing affinity partnerships for major consumer brands. His experience suggests success depends far less on the insurance product itself than on the quality of the customer data, the commitment of the partner organisation and the discipline with which the proposition is managed over time.
"It's the expectation that if you build it, they will come," Reid said of the most common mistake he encounters. "Standing up a product is less than half the work."
The first question brokers should ask a prospective affinity partner is not how well known the brand is, but what the organisation actually knows about its customers. Numbers alone reveal little, more important is whether the partner holds behavioural data, what permissions exist to market to those customers and whether that information provides insights unavailable elsewhere.
"You might have half a million customers," Reid said, "but what marketing permissions do you have? Is there legitimate interest in there, is there soft opt-in?"
For insurers, the real value lies in whether the partner holds customer insight that supports better risk selection and pricing than information available through the wider market. The implication is straightforward: data due diligence should come before commercial negotiations, not after.
Affinity distribution has also changed. Where many schemes once relied heavily on price comparison websites to generate volume, insurers increasingly expect brokers to demonstrate a direct acquisition strategy alongside aggregator business.
Directly recruited customers can perform differently from those that are aggregator-acquired, which is why the strongest schemes tend to manage both routes carefully rather than relying on one channel alone.
Aggregator acquisition can absorb a meaningful share of premium before underwriting costs are considered. As a result, insurers increasingly expect schemes to demonstrate a balanced channel mix and credible scale before committing capacity.
"You've got to have a blend of aggregator and direct," Reid said. "You can't just stand a product up and put it on aggregators and everything will be great."
Commercial agreement at board level is only the starting point because insurance rarely sits at the centre of an affinity partner's business model. Marketing resource, technology investment and management attention remain focused on the partner's core business unless insurance has support throughout the organisation.
"You need the buy-in not just from the top of the business but across the business," Reid said. "The marketing team need to be really fully engaged with where insurance is being offered in that affinity partnership."
Reid said organisations entering insurance also need to understand the reputational commitment that comes with selling financial products.
"You have to let your chief executive know that Mrs Jones in Huddersfield will write to him if she's not happy with what's happened with a claim or the service," he said.
The biggest commercial mistake Reid sees is treating affinity schemes as short-term acquisition exercises.
"This is not a get rich quick scheme," he said. "You don't make a lot of money in the early years. Your pricing strategy has to reflect acquiring customers and then retaining customers."
Drawing on Hood Group's experience, Reid said the economics of affinity schemes are usually built over multiple renewal cycles, with the strongest propositions managed for long-term customer value rather than short-term acquisition payback.
That long-term perspective extends beyond pricing. Consumer Duty and fair value requirements have reinforced the need for continuous product management rather than treating launch as the finish line.
"You don't just put something out there and then wait for it to start ticking over with the sales," Reid said. "You've got to work harder to keep those customers."
As more retailers expand into insurance, the headlines will inevitably focus on who launches next. Reid's experience suggests the more important story begins afterwards. The partnerships that prove successful are those that treat affinity not as a product launch, but as a disciplined, long-term proposition.
