Mass Merchandising

What Is Mass Merchandising?

In the context of the insurance industry, mass merchandising is a method for selling insurance in which an employer, association, or other organization agrees to assist in the sale of insurance policies to its respective members or employees. For example, a teacher’s union that agrees to market a particular insurance product to all of its members would be participating in a mass merchandising campaign.

Mass merchandising is most commonly used in the sale of property and casualty insurance, as well as in the case of auto insurance.

How Mass Merchandising Works

From the perspective of insurance companies, mass merchandising can be an effective way of marketing insurance policies to a large group of customers at a low cost. After all, selling the policies through a trust intermediary—such as a large employer or professional association—can provide access to a large number of potential customers at a relatively low cost. By contrast, marketing to those same customers directly could involve considerable direct marketing expenses and a more lengthy sales process. In this sense, mass merchandising is conceptually similar to mass production, in that the insurer uses a single approach to obtain new clients rather than using a customized approach for each new customer.

Mass merchandising can also benefit the end customer, by reducing the cost of their monthly premiums. This is because many insurers who rely on mass merchandising elect to pass on some of their own cost savings to their customers. In some cases, monthly premiums under a mass merchandising scheme may be as much as 10% to 15% below what they would be otherwise. For customers who purchase insurance through their employer, mass merchandising can also be beneficial by allowing them to pay their premiums through regular payroll deductions. For the most part, however, insurance sold through mass merchandising is not directly subsidized by the employer.

Mass merchandising is not without its drawbacks, however. For one thing, there is no guarantee that any particular individual will qualify for the coverage offered under a mass merchandising program. Although this insurance might be offered to all members of a particular organization, each of those members would still need to meet the minimum underwriting requirements of the insurer in order to qualify. Another potential drawback is that mass merchandising tends to be used by less well-known insurers who might struggle to attract brand recognition on their own. Potential customers should therefore independently assess the credibility of the insurer involved in mass merchandising before deciding whether to participate in any such program.

Real World Example of Mass Merchandising

Emma is an employee for a large corporation. During one of her company’s weekly meetings, she is informed of a new program being offered by the company in which all employees are welcome to participate in a company-wide insurance plan. The plan in question provides property and casualty insurance, at monthly rates that are advertised as being below those available from competing insurers.

Although Emma finds the advertised rates to be attractive, she is skeptical about the offering and seeks out further information about the program. She learns that the insurance company offering the coverage is acting in collaboration with her employer. Because the insurer is able to easily reach all of the company’s employees, they are able to reduce their marketing budget and pass on a portion of the savings in the form of lower premiums. At the same time, the assistance of the employer helps the insurer overcome the fact that their brand is relatively unknown, making it unlikely for Emma and other employees to have found their offering otherwise.

Emma learns that this approach, known as “mass merchandising,” is a fairly common approach to selling insurance. She also learns that, although all employees are eligible to apply for the program, there is no guarantee that any individual employee will be approved.