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Affinity insurance grappling with its issues
Easy for individuals to underwrite, generating additional revenue for distributors and providing premiums for insurers, affinity insurance provides advantages for all stakeholders.
Born out of banks' penetration into insurance and developed in the 1980s in the form of borrower guarantees, affinity insurance is now associated with consumer goods and services provided to individuals.
Premiums generated by this segment reached 140 billion USD in 2024, with an average annual growth rate of around 10%.
This rapid growth, which has helped increase insurance penetration rates, has unfortunately been coupled with structural woes that have damaged the industry's image.
With little oversight, policies have been sold without adequately explaining to policyholders the actual scope of coverage, exclusions, and deductibles. Criticism has also pertained to the commissions charged by distributors, which can be as high as 40% or even 50% of premiums, leaving little margin for the payment of claims.
The model also features increased exposure to the risk of fraud, with the rate for telephony and equipment potentially affecting 30% of claims.
Despite its weaknesses, affinity insurance remains an important driver of market growth. However, the sustainability of the model requires rigorous supervision, a crackdown on commercial abuses, and, most importantly, efforts to maintain consumer confidence.
