Tesco puts assurance into customer-friendly arena

Supermarket shoppers are used to being bombarded by "two for the price of one", offers as soon as they push their trolleys through the automatic doors, writes Laura Slattery

This autumn, Tesco customers will have one new item of marketing material to stuff into their fully recyclable green bags - a brochure for Tesco life assurance.

The Tesco life product was piloted in 10 Tesco stores earlier this year and is now on sale throughout the State.

The company currently has the cheapest life assurance product available on the market.

The supermarket uses three sales channels: its store network; direct mail to members of its Clubcard loyalty programme; and the internet.

The ready-made venues make direct selling easier and more cost-effective for the company, says Mr David Crimmins, marketing manager for Tesco Personal Finance in Ireland. Some 15,000 Tesco customers now hold its credit card, which has a 5.9 per cent APR on balance transfers fixed for the first six months and a rate of 16.9 per cent APR for purchases. Customers earn more Clubcard points if they use the card to pay for groceries than they would if they paid by another method.

"The Tesco personal finance customer is more loyal to Tesco stores than the non-personal finance Tesco customer, so it drives business back into the store," says Mr Crimmins. "Before we came into the market, there were some doubters about whether you could get people to buy financial products through a supermarket," he adds.

Last year, Tusa, the only in-store bank in the Irish market, closed due to mounting losses and "customer inertia". The bank, a joint venture launched by TSB and Superquinn in 1999, operated in 14 Superquinn stores throughout the State. Despite offering a competitive mortgage rate, Tusa succeeded in attracting only 500 mortgage customers and a total of just 10,000 customers.

"The Tusa model and the Tesco model are completely different," explains Mr Crimmins. "We don't have the same overheads that they did because we don't have anyone in-store."

The key to Tesco's success so far has been simplicity, he argues. "The products have to be easy to understand for the consumer, because we don't have any face-to-face selling," he says.

It won't be a case of going straight from the checkout queue to the banking services queue - there won't be one. Shoppers browsing the Tesco aisles have to be able to just pick up the leaflets, stick it in their shopping baskets, then ring the lo-call contact number at a later date.

In Ireland, Tesco joins Quinn Life and An Post subsidiary One Direct in the direct sales market for life assurance. "Current trends indicate that simple straightforward products such as term insurance are moving away from the traditional domain of the broker," Mr Crimmins believes.

At Tesco, term assurance of €200,000 for 25 years will cost a male non-smoker age 39 next birthday €32.85 a month and a female non-smoker age 39 next birthday €23.07.

The next cheapest policy for the same type of cover is the Hibernian Life and Pensions product. Hibernian also underwrites the Tesco product, so effectively the one company has two different prices, one available through brokers and one in supermarkets.

Brokers will be able to sell the Hibernian product at lower, variable rates of commission, which should succeed in lowering the premiums consumers pay, according to Mr John Geraghty of LA Brokers.