{"id":2320,"date":"2022-09-29T15:05:23","date_gmt":"2022-09-29T19:05:23","guid":{"rendered":"https:\/\/blog-admin-panel.ladderlife.com\/?p=2320"},"modified":"2023-10-23T15:10:12","modified_gmt":"2023-10-23T19:10:12","slug":"life-insurance-partnerships-financial-institutions","status":"publish","type":"post","link":"http:\/\/ladderlife.com/blog\/life-insurance-partnerships-financial-institutions\/","title":{"rendered":"Life insurance partnerships: a silver bullet for financial services platforms\u2019 non-interest income needs"},"content":{"rendered":"\n\n\t<p>The importance of non-interest income for banks continues to grow: non-interest income <a href=\"https:\/\/www.spglobal.com\/marketintelligence\/en\/news-insights\/latest-news-headlines\/banks-increasingly-look-to-noninterest-income-to-bolster-revenue-70292875\">comprises over 40% of US bank revenues today<\/a> and has grown at a much faster pace than net-interest income in recent years. Here&#8217;s why fintechs and financial institutions, collectively referred to as Financial Services Platforms (FSP), should be exploring ways to expand their non-interest income.<\/p>\n\n<h2><strong>Non-interest income is an important element of a resilient business strategy<\/strong><\/h2>\n<p>Non-interest income serves two important purposes: diversification of revenue and boosting returns.\u00a0<\/p>\n<ul>\n<li aria-level=\"1\"><b>Diversification of revenue<\/b>: Non-interest income reduces reliance on the core revenue stream for FSPs, which is usually interest-based. This can help hedge against business cycles and headwinds.\u00a0<\/li>\n<li aria-level=\"1\"><b>Boosting returns<\/b>: Unlike interest-based income, non-interest income doesn&#8217;t require as much in funds and usually has better margins. As a result, core profitability metrics like return on assets and return on equity get a significant boost.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h3><b>What makes up non-interest income?\u00a0<\/b><\/h3>\n<p>Non-interest income can broadly be broken down into two buckets: core business and partnerships.\u00a0<\/p>\n<ul>\n<li aria-level=\"1\"><b>Core business<\/b>: Non-interest income generated by the core business, such as processing fees, ATM fees, late fees, overdraft fees, and mortgage sales.<\/li>\n<li aria-level=\"1\"><b>Partnerships income<\/b>: Revenue generated through partnerships, such as cross-selling fees, commissions, and revenue share.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><b>Partnership income is more important than ever<\/b><\/h2>\n<p>Given today&#8217;s economic environment and growing headwinds faced by core income streams, partnership income plays an increasingly important role. This includes economic slowdown, overdraft fee headwinds, and a cooling mortgage market.\u00a0<\/p>\n<ul>\n<li><b>Economic slowdown<\/b>: The slowing down of business activity (<a href=\"https:\/\/www.cnbc.com\/2022\/07\/28\/gdp-q2-.html\">U.S. GDP contracted in Q1, Q2 2022<\/a>) and consumer spending (<a href=\"https:\/\/www.cnn.com\/2022\/08\/12\/economy\/consumer-sentiment-survey-inflation\/index.html\">consumer sentiment about the economy has turned increasingly negative recently<\/a>) point toward a potential recession which would translate to lower levels of financial activity, lower repayment rates, and an overall contraction of funds.<\/li>\n<li><b>Overdraft fee headwinds<\/b>: Overdraft fees, which have historically contributed significantly to a financial institution&#8217;s fee-based income, face an uncertain future. Consumers hate them (a survey<a href=\"https:\/\/civicscience.com\/three-quarters-of-americans-think-the-government-should-ban-bank-overdraft-fees\/\"> by CivicScience<\/a> found that nearly three-quarters of Americans believe that the government should ban bank overdraft fees altogether), which adds to the growing regulatory and legal scrutiny (the House is evaluating passing the <a href=\"https:\/\/www.congress.gov\/bill\/117th-congress\/house-bill\/4277\">Overdraft Protection Act<\/a>). Additionally, with the emergence of neobanks promising zero overdraft fees (among other benefits), banks are beginning to eliminate such fees. Earlier this year, <a href=\"https:\/\/www.npr.org\/2022\/01\/11\/1071860136\/people-hate-overdraft-fees-capital-one-is-ditching-them-and-other-banks-may-foll\">Capital One did away with overdraft fees <\/a>for its consumer banking customers, and other banks are likely to follow suit. Given these trends, it is highly unlikely that overdraft fees will continue to be a valuable contributor to a financial institution&#8217;s non-interest income.<\/li>\n<li aria-level=\"1\"><b>Mortgage sales<\/b>: Profits from the mortgage sales to Fannie Mae and Freddie Mac, which serve as a key source of income for many financial institutions, are expected to decline. We&#8217;re observing a slowdown in demand for real estate and the construction of new homes (<a href=\"https:\/\/www.washingtonpost.com\/business\/2022\/07\/20\/home-sales-down-june\/\">home sales tumbled by 14.2% year-over-year in June 2022<\/a>), trends which are expected to continue as mortgage rates climb to the highest they&#8217;ve been in recent times.<\/li>\n<\/ul>\n\n<h2><b>Life insurance orovides customers with value while adding new income to the portfolio<\/b><\/h2>\n<ul>\n<li aria-level=\"1\"><b>It&#8217;s a win-win opportunity<\/b>: By partnering with Ladder, fintechs can democratize access to life insurance and play a critical role in reducing the coverage gap. The 2022 Insurance Barometer Study by LIMRA estimates that <a href=\"https:\/\/www.limra.com\/en\/newsroom\/liam\/\">106 million Americans don&#8217;t have sufficient life insurance<\/a>. In addition to helping solve a very pertinent problem, partnering with Ladder provides valuable income. Unlike most forms of non-interest income, it is not punitive to the customer but adds value to them, making it mutually beneficial for both FSPs and their customers.<\/li>\n<li aria-level=\"1\"><b>It deepens the customer relationship: <\/b>Life insurance purchases help increase customer engagement between the customer and company as term life insurance, by design, is a consumer product with a long relationship horizon. Customers trust their existing financial services providers for life insurance purchases. A <a href=\"https:\/\/www.accenture.com\/us-en\/insights\/insurance\/guide-insurance-customers-safety-well-being\">survey by Accenture<\/a> found that customers are increasingly willing to consider insurance purchases while shopping for other needs &#8211; &#8220;27% of consumers are likely to consider purchasing insurance from online service providers like Amazon and Google, while 24% are likely to purchase insurance from a retailer.&#8221; Furthermore, as per a <a href=\"https:\/\/covergenius.com\/wp-content\/uploads\/2021\/06\/CG-PYMNTS-Embedded-Insurance-Report-061121.pdf\">report<\/a> by Cover Genius and PYMNTS.com, 45% of US consumers are highly interested in bank-embedded insurance offers based on transactional data. Further, laddering, a unique product feature by Ladder that allows users to adjust their coverage and premium as needed, invites more frequent engagement and opportunities for FSPs to help their customers save money.<\/li>\n<li><b>It&#8217;s a big opportunity<\/b>: The life insurance market is a <a href=\"https:\/\/content.naic.org\/sites\/default\/files\/inline-files\/2020%20Life%20Annual%20Industry%20Commentary_0.pdf\">$776 billion industry<\/a>, with over four times as many life insurance policies sold as mortgages each year. By comparison, the auto insurance industry is worth <a href=\"https:\/\/www.alliedmarketresearch.com\/auto-insurance-market#:~:text=The%20global%20auto%20insurance%20market,8.5%25%20from%202020%20to%202027.\">$740 billion<\/a>). A confluence of factors such as COVID-19, growing global uncertainty, and the emergence of new-age insurtechs such as Ladder has driven life insurance interest and applications to a decade-long peak.<\/li>\n<\/ul>\n\n<h2><b>Ladder makes it easy to partner<\/b><\/h2>\n<p>Ladder is redeeming life insurance, using technology to help more people get covered in an instant, easy, and affordable way. Ladder partners with trusted consumer brands to enable a seamless term life insurance experience.\u00a0<\/p>\n<p>Ladder&#8217;s digital-first approach, which powers its ability to offer around 90% of our customers a policy offer within 5 minutes, also enables a quick and seamless integration experience for partners. FSPs can add a relevant new digital product with little upfront time or resource investment and avoid the compliance burden of rolling out their own insurance product. Ladder has successful partnerships with a variety of well-respected financial services brands.\u00a0\u00a0\u00a0\u00a0<\/p>\n<p>&nbsp;<\/p>\n<p><b>Curious to learn more? Email us at <\/b><a href=\"mailto:bd@ladderlife.com\"><b>bd@ladderlife.com<\/b><\/a><b> to see how partnering with Ladder can benefit your organization.<\/b>\u00a0\u00a0\u00a0\u00a0<\/p>\n<p>&nbsp;<\/p>\n\n","protected":false},"excerpt":{"rendered":"<p>The importance of non-interest income for banks continues to grow: non-interest income comprises over 40% of US bank revenues today and has grown at a much faster pace than net-interest &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"http:\/\/ladderlife.com/blog\/life-insurance-partnerships-financial-institutions\/\"> <span class=\"screen-reader-text\">Life insurance partnerships: a silver bullet for financial services platforms\u2019 non-interest income needs<\/span> Read More \u203a<\/a><\/p>\n","protected":false},"author":9,"featured_media":2323,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-global-header-display":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":""},"categories":[12],"tags":[],"aioseo_notices":[],"jetpack_featured_media_url":"http:\/\/ladderlife.com/blog\/wp-content\/uploads\/2022\/09\/Untitled-design-34.png","_links":{"self":[{"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/posts\/2320"}],"collection":[{"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/comments?post=2320"}],"version-history":[{"count":7,"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/posts\/2320\/revisions"}],"predecessor-version":[{"id":2710,"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/posts\/2320\/revisions\/2710"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/media\/2323"}],"wp:attachment":[{"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/media?parent=2320"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/categories?post=2320"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/ladderlife.com/blog\/wp-json\/wp\/v2\/tags?post=2320"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}