Asda's decision to sell life insurance is a bold attempt to catch up with rival chains, which have stolen a march on it in the sale of financial products. The strategy could also prove beneficial for life providers, who will see it as a means of broadening their customer base.

The distribution of financial services products is a 'key strategic priority' for Asda, as it seeks to build on its recent advancement to the position of the UK's second largest retailer. The launch of life insurance in the UK is a worldwide first for Asda's parent company, Wal-Mart, but it follows the company's recent move to make its existing insurance products available in all 263 UK stores.

Rival chains such as Tesco and Sainsbury have sold financial services to their customers for much longer than Asda. Its move to distribute complex financial products such as life insurance clearly reflects the company's intention to become a serious player in the market.

Asda's financial range will follow the chain's proven strategy of offering value for money. Through a deal with Scottish Widows, Asda aims to provide a range of simple and straightforward products that will appeal to its existing customers.

Supermarket chains are posing a threat to traditional life distribution channels, especially to direct sales forces. Retail chains are well placed to exploit awareness of their brand in selling cover, as are high street banks, some of which have signed similar deals to Asda. This trend highlights providers' need to expand their distribution network, and companies with a broad consumer base are ideal partners as they help life providers sidestep the costly and time-consuming customer acquisition process.

This type of relationship is beneficial to both parties and is likely to be popular in future. Supermarkets will attract customers to consolidate their financial dealings and providers gain more balanced sales figures through a diversified distribution portfolio. Asda is just the second supermarket chain after Tesco to offer life products. However, to keep up with the competition, other retailers are likely to offer similar products soon.

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