Affiliate marketing can be an extremely effective customer acquisition channel for insurance businesses.

But that doesn’t mean every insurance business should launch an affiliate programme.

One of the mistakes I see businesses make is starting with the wrong question.

They ask:

“Which affiliate platform should we use?”

Or:

“How do we recruit affiliates?”

The better question is:

“Are we actually ready for an affiliate programme?”

Because buying affiliate software and recruiting a few partners is relatively easy.

Building a programme that partners want to promote — and that generates profitable, compliant business — is considerably harder.

Before launching, I would look at five areas.

1. Do the economics work?

Before deciding what commission to offer affiliates, you need to understand what a customer is actually worth.

That sounds obvious, but affiliate commission structures are frequently created by looking at what competitors appear to be paying.

That’s the wrong place to start.

An insurer, broker or financial services business needs to understand its own numbers.

What is an acceptable customer acquisition cost?

What is the average value of a new customer?

How long does that customer remain with you?

What are the renewal economics?

How does the value of business differ by product?

And, crucially, how much can you afford to pay a partner while still acquiring profitable business?

Only then can you build a commercially sensible commission structure.

2. Do you have something partners actually want to promote?

An affiliate programme isn’t simply another distribution button you switch on.

You are asking another business to invest its time, audience and reputation in recommending your product.

Why should they?

For insurance businesses, the answer doesn’t necessarily have to be the highest commission.

It could be a specialist product.

A strong conversion rate.

Excellent customer service.

Access to a niche that other insurers struggle to cover.

Useful content and tools.

A particularly simple customer journey.

Or a commercial proposition that complements what the partner already offers its customers.

The important thing is having a clear answer to:

“Why should I recommend you rather than somebody else?”

If you can’t answer that, your prospective partners probably won’t be able to either.

3. Can you identify who your ideal partners are?

This is where I think many insurance businesses unnecessarily limit themselves.

Mention insurance affiliates and people immediately think of comparison websites, cashback sites and large publishers.

They can obviously be important.

But they aren’t the only opportunity.

Depending upon the insurance product, potential partners might include:

• Mortgage brokers
• Accountants
• Property managers
• Letting agents
• Financial advisers
• Estate agents
• Trade associations
• Membership organisations
• Specialist publishers
• Software businesses
• Professional service firms
• Niche content creators

For a landlord insurance provider, for example, a property management business could potentially be a much more strategically valuable partner than a generic high-traffic website.

For a specialist commercial insurance broker, an accountant or business adviser might be more interesting than a traditional affiliate publisher.

Your best affiliate might not think of themselves as an affiliate at all.

That is why I increasingly prefer to think in terms of partnership marketing, with affiliate marketing sitting within it.

4. Do you have the resources to manage the programme?

This is a big one.

An affiliate programme isn’t a piece of software.

You can buy the platform.

You can integrate the tracking.

You can create a signup page.

You can even recruit 100 affiliates.

But then what?

Someone needs to recruit partners.

Someone needs to onboard them.

Someone needs to communicate with them.

Someone needs to provide content, offers and reasons to promote.

Someone needs to identify inactive partners.

Someone needs to develop the relationships with your highest-potential partners.

Someone needs to monitor performance.

And in financial services, someone also needs to make sure the appropriate compliance processes are being followed.

If nobody owns those activities, you haven’t really launched an affiliate programme.

You’ve installed affiliate software.

There’s a considerable difference.

5. Are you ready for the compliance implications?

For insurance and financial services businesses, this obviously needs to be considered from the beginning.

Affiliate marketing doesn’t sit outside your normal responsibilities simply because another company is generating the lead or customer.

You need appropriate processes around how products are promoted, what affiliates can and cannot say, what marketing materials they use, how activity is monitored and what happens when something goes wrong.

That doesn’t mean financial services businesses should avoid affiliate marketing.

Far from it.

But compliance needs to be designed into the programme rather than added once the programme is already operating.

So, are you ready?

Before launching an affiliate programme, I would want an insurance or financial services business to be able to answer five questions:

1. Do we understand the economics?

2. Do we have a compelling partner proposition?

3. Do we know which partners we actually want?

4. Do we have the resources and processes to manage them?

5. Can we operate the programme within our compliance framework?

If the answer to one or two of those questions is “no”, that doesn’t necessarily mean abandoning the idea.

It means fixing those gaps before spending money on technology and recruitment.

Because the objective isn’t to launch an affiliate programme.

The objective is to build a profitable partnership channel that generates the right customers for the business.

Those are two very different things.