Equipment manufacturer achieves 99% penetration rate on leasing programme via affinity insurance

The challenge

A leading global manufacturer of construction and mining machinery faced a substantial increase in insurance rates on its equipment leasing programme. As insurance is a critical element of the manufacturer’s financing for clients, any rise in insurance costs adversely affects the price paid by the end customer. To stay ahead in what was an exceptionally competitive local leasing market, the manufacturer recognised the need for a more efficient insurance solution and turned to Marsh.

The solution

Marsh collaborated with the client to develop a tailored affinity insurance programme. The process involved three important steps:

Assessment of needs: Marsh began by thoroughly understanding the manufacturer's requirements and expectations.
Market engagement: Marsh approached the insurance market, eventually engaging in detailed discussions with three insurers, two of which were shortlisted.
Selection of insurer: The insurance company offering the best price and coverage was selected, after joint meetings between the manufacturer, Marsh, and the insurers.

Key coverages required

The insurance programme underpinning the manufacturer’s leasing offering included several key coverages, such as:

Contractor’s plant machinery insurance: Covers damage to and physical loss of construction equipment.
Business interruption insurance: Covers the cost of replacing machinery or up to three instalments to lease replacement equipment.
Machine breakdown insurance: Covers the costs relating to the breakdown of machinery.
Compulsory third-party motor vehicle liability insurance: For machines not registered as a vehicle, but that may be driven on the road occasionally.

Integrating insurance into sales and distribution channels

A key consideration for the manufacturer was to incorporate the new insurance programme into existing sales and distribution channels in order to preserve its market differentiation. The challenge was to retain the coverage conditions that were unique to the manufacturer's offer and seamlessly include these in the new customer sales journey. These coverage conditions included high limits for risk transfer, theft provisions, and anti-theft requirements for the machines and construction sites. The manufacturer's centralised structure and generally standardised leasing contracts for machinery helped facilitate integration of the insurance coverage.

The results

The affinity insurance programme significantly improved the manufacturer's business operations, enhanced customer satisfaction, and increased financial performance. The manufacturer reported:

High penetration rates: A 99% penetration rate was achieved on new leasing programmes from the affinity insurance programme introduced by Marsh.
Geographical expansion: Following a high insurance take-up in the targeted market, the programme was rolled out in three countries in the region with plans for further expansion in another three countries.
Enhanced customer satisfaction: The insurer adapted to the manufacturer’s specific needs, ensuring the smooth running of claims processes leading to improvement in customer satisfaction.

Conclusion

The manufacturer’s leasing programme became more competitive after adopting Marsh’s affinity insurance solution. As a result of the programme, the manufacturer achieves cost efficiencies, offers more value-added services, and has the ability to introduce future enhancements to its service, such as providing insurance to customers at the end of their lease.

Marsh's industry knowledge, data analytics capabilities, and advisory services were pivotal in the success of the programme. Lease purchases and the performance of the leased equipment are now tracked. If, for example, the claims ratio (the percentage of claims costs incurred in relation to the premiums earned) on a particular piece of business increases, Marsh can provide insight into whether a few big claims or one end customer are contributing to the uptick and into the availability of strategies to mitigate the upsurge in claims.

The strong relationship between the manufacturer and Marsh also ensured parties were aligned. Additionally, the manufacturer was able to expand the insurance programme in other markets, with Marsh’s client engagement teams providing global, regional, and local support.

The success of programme set a precedent for broader regional implementation, highlighting the importance of strategic collaboration and industry expertise in achieving business goals.

For more information, read our additional insight: Five ways embedded insurance is changing the heavy machinery industry.