Pros and Cons of 5 Insurance Models for Financial Institutions

Banks and CUs: Are You Betting on the Right Insurance Strategy?

Consumers today expect more from their financial institutions.

Beyond checking and savings, they want financial protection—life insurance, accident coverage, identity theft protection, and more. This demand makes offering financial protection solutions both timely and a credible path for growth. Studies show nearly half of Americans would consider buying insurance from a bank or credit union if it were available.

With the global financial institution insurance market valued at $1.05 trillion in 2024 and projected to reach $1.71 trillion by 2030, banks and credit unions seeking to benefit must determine how they will deliver insurance. Insurance models vary in structure, integration, and complexity.

Consumers increasingly want financial options, education, products, and services that are simplified and unified for convenience. Insurance fits into this expectation:

• 44% of consumers are interested in buying insurance from an FI, including 63% of Gen Z and 60% of millennials.
• 24% of consumers cite trust in an FI as the most important factor in selecting an insurance provider.
• 75% of consumers with at least auto or health insurance want all of their insurance products from convenient, easy-to-access sources.

“Everyone in banking seems to have forgotten what the advantages of selling insurance have been in the 25 years since Gramm-Leach-Bliley.”
 —Kevin McKechnie, leader of ABA’s Office of Insurance Advocacy

Some distribution models involve trade-offs in brand control, operational burden, compliance exposure, and non-interest income potential—leading to one key question:

Which insurance models help financial institutions deliver the most value without stretching internal teams too thin?

Distribution Models: What Are the Options?

Banks and credit unions have several pathways to enter insurance and enhance their consumer value proposition. Not all strategies are created equal. Here are five models and how they work:

Referral Distribution Model

The financial institution refers consumers in exchange for a referral fee or revenue share.

• Pros: Low compliance risk, minimal operational lift, and no licensing or management responsibilities.
• Cons: Limited control over branding or customer experience, and lower revenue potential.

Agency (Licensed) Distribution

The institution becomes a licensed insurance agency (or owns one) and sells insurance directly to consumers.

• Pros: Full control over product selection and customer experience, with higher revenue potential.
• Cons: Licensing requirements, training, ongoing compliance, and greater operational complexity.

In-House Build

The institution builds or acquires its own digital insurance platform (rare, but possible for larger FIs).

• Pros: Full control, long-term asset creation, and brand differentiation.
• Cons: High upfront cost, long time to market, and heavy regulatory, staffing, and technology burdens.

Strategic Partnerships Between FIs and Insurers

The FI and insurer collaborate directly on product development, marketing, and sales to distribute. The FI often manages much of the sales and marketing.

• Pros: Alignment with a trusted insurance brand.
• Cons: Marketing responsibilities usually fall to the FI, which may lack expertise or resources. Staff training is time-consuming, products are limited to one carrier, and compliance requirements are significant.

White-Label / Co-Branded Distribution

The FI partners with a provider, such as Franklin Madison, to deliver insurance under the FI’s brand—or co-branded with the partner.

• Pros: Maintains brand trust while outsourcing complexity (licensing, product development, marketing, administration, compliance, customer service). Can source from multiple carriers and create a seamless consumer experience.
• Cons: Success depends on vendor alignment, especially in branding and compliance. Co-branded options may not always benefit from consumer trust unless the FI brand is featured prominently.

Marketing and Administration: Who Does the Heavy Lifting?

Success isn’t just about product—it’s about distribution: targeted marketing, seamless enrollment, efficient administration, and airtight compliance.

• Referral Model: Requires minimal resources but produces modest returns. Consumers are “handed off” to the referred provider. Marketing remains the FI’s responsibility, including staff training.
• Agency (Licensed): Resource-intensive. Marketing, compliance, and servicing all fall on staff, risking overburdened teams and inconsistent consumer experiences.
• In-House Build: Similar lift to an agency model but with even greater investment in time, money, and training.
• Direct Partnership: Responsibilities are shared, but cultural or operational differences can occur. Marketing typically stays with the FI, while administration falls to the insurer.
• White-Label / Co-Branded: The partner handles targeting, data analysis, marketing (digital, direct mail, omnichannel), administration, customer service, and compliance. Minimal internal lift other than approving marketing.

Navigating Regulatory Complexity

When institutions manage insurance in-house, compliance often falls to teams without specialized expertise. This can create gaps that increase risk of fines, failed audits, and reputational damage. Regulations also shift frequently, making it difficult for generalist teams to stay current.

A strong partner should bring decades of compliance experience. They monitor regulatory changes, manage licensing, ensure disclosures, and update protocols as laws evolve. This reduces risk, safeguards reputation, and ensures a seamless, compliant consumer experience.

The bottom line: By partnering with the right provider, financial institutions can focus on their strengths—building relationships and serving consumers—while relying on experts to mitigate risk and protect long-term growth.

Why White Label Wins

We might be biased, but we see a clear winner in the white-label model. This approach offers a balance of trust, efficiency, and compliance that neither referral nor in-house models can match.

• Trust at the Forefront: Consumers experience seamless coverage through their FI’s brand.
• Operational Relief: Teams avoid the burden of building an insurance arm from scratch.
• Marketing Expertise: Advanced analytics, segmentation, and targeted campaigns drive adoption, integrated into existing channels.
• Compliance Confidence: Experts manage regulatory requirements.
• Revenue Growth: Expand non-interest income without balance sheet exposure.
• Consumer Engagement: Messaging meets consumers where they are, with solutions that address their needs. Your financial institution can become more valuable in their eyes.

The insurance market for financial institutions is on a strong upward trajectory, with enormous potential for non-interest income and long-term consumer value.

Is your FI ready to take the next step?