You’re Not So Special - Affinity Marketing

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I was recently going through my junk mail and I came across an affinity offer for my wife to buy life insurance with a “discount” for being a member of a medical association. This gave me a great post idea.

A Good Deal?

Looks like a nice offer. “Rates just lowered an average of 30%!” Wow! I better look at this closer. The offer is for a 10 year term life policy on a 27 yr old female. I quickly found a few problems with the affinity “special” offer.

Overpriced

I did a quick search and came across an insurance subsidiary of GE that sold term life. Below are the prices I found.

$100,000 policy - $7.18/month or 25% less than this “special” offer of $9.66/month

Wholesale Coverage at Retail Prices?

Another thing that struck me about this offer is that to go from $50,000 coverage to $100,000 or double coverage, the premium went up by 3x.

There is a baseline cost of doing business or writing an insurance policy. As such, the larget the policy the premium per dollar coverage. With GE I found the premiums to be:

• $100,000 - $7.18/month, 7.18 cents/$1000 coverage
• $250,000 - $10.50/month, 4.20 cents/$1000 coverage
• $500,000 - $16.63/month, 3.33 cents/$1000 coverage
• $1,000,000 - $28.83/month, 2.89 cents/$1000 coverage

Click the image above for the full cost schedule

The above should be the norm. Think of it as wholesale prices. Whether you buy $100K of policy or $1 million, the insurance company has to have an underwriter and agent write your policy and enter it into the system. There is not much difference to the insurance company in costs. Therefore, it is cheaper per dollar coverage for the insurance company. According to this offer it looks like they are offering wholesale coverage at retail prices. That’s not how it normally works.

You’re not so “special”

Affinity offers tend to appeal to an individuals need to feel special. If you are a member of the Bar Association, or the American Kennel Club, or the American Medical Association, or any other association you will likely get an affinity offer. These offers want you to feel special for being in your group. In effect they are banking that you will feel that you received a “special” offer and take the bait. With very little research you can usually find better deals. Sometimes you will find the affinity deals to be better, but do your research before you start feeling special.

This offer did have one thing right - “Send No Money”. Don’t worry, I won’t.