Branded Marketing LLC is trying to combat churn by offering free insurance policies to users of its prepaid cards.
The move furthers a trend: other prepaid card marketers have introduced add-on services such as direct deposit and online bill payment to extend the shelf life of a product that many people use a few times and then toss out.
Branded Marketing, of Haskell, N.J., announced Tuesday that all users of its MasterCard Inc.-branded prepaid card, which is targeted to Hispanics, will automatically receive accidental death and accident hospital insurance.
"Down the road we would like to add more and more features," said Anthony Uva, Branded Marketing's chief marketing officer. "That's how prepaid debit cards pretty much stay with customers, by the amount of features that they have."
Through a partnership with the insurer Chubb Corp., Branded Marketing is providing up to $25,000 in coverage for accidental loss of life, limb, speech, sight or hearing to users of its Pr1macard Prepaid MasterCard. Cardholders also can receive coverage for hospital stays resulting from an accident for up to 14 days, subject to a daily maximum.
Cardholders are automatically enrolled in the coverage when they sign up for a card, Uva said. Existing Pr1macard cardholders also are being enrolled.
"As long as they use the card and they have a dollar balance on the card each and every month, they will have" access to the insurance coverage, Uva said in an interview. "There is no cost to the cardholder." (Cardholders can call to opt out of the coverage.)
Prepaid cards are growing in popularity, especially among the underbanked. Users loaded $247.7 billion on to prepaid cards in 2008, up 12.4% from 2007, according to a 2009 study from Mercator Advisory Group.
Prepaid card companies are increasingly offering added services including credit lines and savings accounts to extend the lifetime of the product.
"They're doing it pretty much for the same reason that the credit issuers and debit card issuers are doing it — to reward their cardholders" and motivate them to use the cards more, said Terry Maher, a partner in the Baird Holm LLP law firm in Omaha and general counsel for the Network Branded Prepaid Card Association.
It also provides an entry point to move underbanked and unbanked consumers into more traditional banking relationships.
"One of the things that we have found is that the underbanked and underserved need additional services and products … that sometimes are more difficult to come by," said Jim Tingey, an executive vice president with Palm Desert National Bank, which issues the Pr1macard Prepaid MasterCard.
"This is an additional service, an additional product, that can be delivered to those individuals," he said.
Branded Marketing introduced its Pr1macard in September 2008, Uva said. It sells the cards primarily online and in check-cashing stores in New Jersey. It has distributed about 50,000 Pr1macards. Of those, roughly 3,000 are active, meaning they have been used in the last month, Uva said.
New and existing cardholders will receive a form in the mail to specify the beneficiary of their policy, Uva said.
Branded Marketing isn't the first prepaid company to offer insurance to cardholders.
NetSpend Corp. of Austin offers accidental death and dismemberment insurance to its prepaid cardholders who have enrolled in direct deposit with their cards.
The coverage is available to cardholders in 27 states for free, said NetSpend spokesman Brad Russell. In the event of a claim, the policy pays a cash benefit each month for up to 12 months that is equal to the amount of money an eligible cardholder had directly deposited to their accounts during the prior 35 days, he said. The coverage is provided through Stonebridge Life Insurance Co.
"It's another value-added product feature that makes our product stand out in the marketplace," Russell said. "For us it is a retention tool, because when they're enrolled in this it becomes something that they can find value in, so they're more likely to stick with us as their provider. It also encourages the direct deposit behavior."
Green Dot Corp. has received proposals from insurance providers to offer coverage through its card products but has "shied away from such programs, because we couldn't get comfortable with either the insurance companies behind the programs or couldn't get comfortable with the policy's exclusions and limitations," Steve Streit, the chairman and chief executive of the prepaid card provider, said by e-mail.