Mass Merchandising

Mass merchandising is a method of selling insurance policies in which an employer, association or other organization agrees to assist in the sale of insurance policies to its respective employees or members.

Mass merchandising is most commonly associated with property and casualty insurance. It’s sometimes used for auto insurance as well. Insurers who use mass merchandising to sell insurance separate the experience rating from policies sold under this method from policies sold under other methods.

Mass merchandising involves working with a company or organization to offer a range of insurance policy offerings to employees or members. By working directly with a company, the insurer markets directly to a larger number of potential policyholders. For this reason, it’s sometimes more effective than other marketing methods. For insurers, this drives down underwriting costs. In this sense, mass merchandising is somewhat akin to the mass production of a product, in that the insurer uses single approach to obtain new clients rather than using customized approaches.

Insurers use mass merchandising for a broad array of businesses and other organizations. The way a policy is marketed depends on the type of peril being insured against, such as casualty, property or fire.

Of note, laws regulating mass merchandising vary from state to state. Some require each applicant to be underwritten individually. Others have rules that ensure rules used to calculate rates apply equally to all participating in a mass merchandising campaign.

Many rules that regulate insurance rates generally and ban discrimination in the industry also apply to mass merchandising. Also, most stipulate that participation in a plan can’t depend on first buying other insurance products from the company running a mass merchandising campaign.

Many insurers that reduce their marketing costs through mass merchandising pass along some of those savings to customers. Sometimes, rates are as much as 10% to 15% of what they might be otherwise. Also, many employers allow premiums to be paid through payroll deductions. For this reason, some government employees and  teachers unions pay notably less for insurance as a result of mass merchandising.

Most employers do not subsidize these types of policies, however. Also, not everyone will qualify. Everyone who meets the underwriting requirements of the insurer can participate, but those who do not are excluded.

One other drawback is that lesser-known insurance companies sometimes use mass merchandising. As a result, they might not be well-known by employees or members of the organization, or might not have many local representatives.