While I’ve heard many too many empty promises of corporate synergies over the years, I’ve learned that one form of cross-selling really does work: “Do you want fries with that?”
So, I’ve been waiting (and hoping) for insurers to find ways to achieve similar sorts of easy, intuitive crossover sales.
There are already a few combo meal sorts of offerings that show promise — e.g., Tesla bundling auto insurance with its cars, or Comcast selling insurance into homes that are tethered to it via coaxial cable — but my ears really perked up last week when stories surfaced about Walmart forming an insurance agency.
It just makes sense. With 5,000 outlets in the U.S. alone and 265 million customers worldwide, Walmart has a target-rich environment for insurance sales. Many, in fact, are visiting Walmart to pick up pharmaceuticals or to buy other items related to their healthcare, so health insurance is on their minds. Walmart, given its relentless efficiency, could easily develop insurance products that undercut competitors’ prices and would have the credibility with customers to sell boatloads of those products.
In fact, Walmart wouldn’t even have to generate the sorts of profit margins that competitors do, because a tighter relationship with customers on their health needs would bring them into stores more often and let Walmart generate profits on groceries, home goods and all sorts of other products. (Regulators will surely weigh in on what constitutes fair competition.)
Walmart signaled that it will begin with a niche, Medicare Advantage, that plays to its price-sensitive demographic. In fact, through a $4 generic drug program, Walmart often provides pharmaceuticals to customers for less than their Medicare Advantage insurance would charge them, so Walmart has already made inroads.
In research I’ve done with Chunka Mui on major strategic mistakes, the kind of adjacency move that Walmart is making raises red flags, because retailing and health insurance have little in common. But Walmart has done all the right preparation, having spent more than 15 years testing the waters in health care and insurance — hosting insurance agents onsite, setting up joint ventures with insurers, putting clinics in some stores, buying and deploying technology to help customers manage medications, experimenting with telemedicine and much more.
Walmart is also starting small with its agency, advertising for employees and building an internal capability, rather than spending a bunch of money on a splashy acquisition or two. (Sears made that mistake in the early 1980s when it bought Coldwell Banker and Dean Witter, only to be distracted by integration issues and take its eye off the ball in its core business, which it ceded to… Walmart.) So, I see no particular obstacles for Walmart.
In fact, health insurance is such a mess that many customers would love an outsider’s approach, especially if the outsider is, like Walmart, known for being straightforward and inexpensive.
Given the battle to the death between Walmart and Amazon, it’s reasonable to think that Amazon might now accelerate whatever plans it has for health insurance. It might behoove insurers to get ready, and even to go on the offensive, looking for partners outside the industry rather than waiting for them to define an opportunity in insurance.
Insurers won’t be pushing fries and, alas, can’t offer dollar meals or dollar anythings, but there are lots of healthy options that can be offered and sold easily if insurers get creative about how to bundle their products with partners’.
P.S. Here are the six articles I’d like to highlight from the past week:
Life and health carriers are responding with new protection products and services.
Agile response to COVID-19 bodes well for returning the life insurance sector to long-term growth and wider financial protection in society.
The pandemic and the response to it have highlighted significant gaps in industry offerings that are yet to be resolved.
AI alerts have played and continue to play a critical role in detecting and controlling future outbreaks like COVID-19.
Fires can create their own weather: Smoke-infused thunderstorms produce lightning that starts new fires and can lead to fire tornadoes.
The temptation to try to own all the value at every layer of a solution can be fatal, and is something Plaid brilliantly avoided.