Should your school be a financial services provider? It's no longer enough to provide an education; many schools now provide credit, banking services, even insurance protection. But are financial service partnerships sweet deals for schools, or more trouble than they're worth?

University Business, Jan, 2003 by Elizabeth Gardner

Auto and property insurance, two growing areas for alumni associations, usually pay a smaller percentage to the school, but the premiums are so much larger that the revenue to the school can be substantial, says Meyer. These types of policies are now in demand, particularly by new grads who are no longer able to slay on their parents' auto policies and are also in need of renters' insurance for their first apartments.

Short-term medical insurance is an essential part of any alumni program, says Meyer, because it's so desperately needed by many recent graduates. Yes, the product does well when the economy stumbles, but it does poorly in a strong economic environment, he adds. "It's a friend-maker, not a moneymaker," he says, and those "friends" are in need right now: According to Raiola at Brown, the school's new short-term medical insurance program signed up 14 percent of a recent graduating class, a level she terms "unheard of."

Group health insurance is a poor bet for IHEs and participants, says Meyer. Though the group using it may start out healthy, the premiums tend to go up as members of the group get sick and file claims. Over time, the remaining healthy members may opt out and go to another program with lower premiums, leaving a group that's not profitable to insure at anything like an affordable price. The key for an alumni group is the continual aggressive selling of health insurance policies to the young and healthy, to keep the sick/well mix heavily weighted toward well people.

UCLA's Brant says his association still offers major medical, dental, and vision coverage. "But if you stop marketing it, you get that downward spiral," he agrees.

Marketing Makes It Work

Intensive targeted marketing makes IHE-provided financial and insurance programs successful, association directors say.

"Institutions are anxious not to appear to be taking advantage of their access to alumni, but if you've done your due diligence and entered into partnership with the vendor, you'd better market it," says Brown's Lisa Raiola. Her preference is to get the information to the audience in contexts that make sense, rather than through piecemeal direct-mail campaigns. For example, information on short-term medical insurance was included in packets that the association distributed to seniors during graduation week.

And Bonner at Wisconsin advises schools to be selective about who gets offered what. "It's critical to market to the subset of your population that's most likely to be interested in a certain service, instead of mailing or calling people to death."

To Offer or Not to Offer ...

For some schools, the possible gains from financial service offerings aren't worth the risk. Pomona College, one of Claremont McKenna's sister schools, doesn't offer its alumni any financial programs. Granted, with only 18,000 alumni, it's not the biggest plum on the tree for vendors, but Director of Alumni Relations Nancy Treser-Osgood has turned down her share of advances nonetheless.

"We're always struggling to increase the participation rate for alumni giving, and our concern is that anything we do might dilute our alumni contributions," she says. "They might think their credit card took care of their annual contribution." Treser-Osgood says there's a risk of alienating alumni who are already inundated with junk mail and telemarketing calls, if they see or hear the college's name attached to a pitch from a commercial venture. "I'm not comfortable surrendering any kind of marketing to outside vendors; I shudder to think that an outside vendor could contact our alumni with one more offer."