marketing insurance

8/18/2019 Marketing Insurance

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Chapter 27

INSURANCE MARKETING

Chapter Objectives

After readin this chapter !"# $i%% be ab%e t" #nderstand& The Marketing Concept

Marketing of Insurance Products

Critical Success Factors for Insurance Players

Distribution Channels

Marketing Strategies of Insurance Players in India

The new millennium has exposed the insurance sector to new challenges of competition

and struggle for survival. The era of privatization, liberalization, deregulation and

globalization has let loose a sense of urgency and neo-activism. Indian politico-economicthink tank realised the obsolescence of remaining insular and monopolistic in the

insurance sector. The insurance services industry nationally and internationally is huge,

growing, and of critical signicance to the health of economy as well as of individual

businesses, investors, consumers and employees. The progress of Insurance business in

any developing country like ours is generally linked with the rapid industrialisation and

overall progress of the ountry. In the emerging scenario, the insurance sector must pay

attention to product innovation, appropriate pricing and speedy settlement of claims.

The marketing function of insurance is of uni!ue importance because the insurance

company can succeed only if it sells a large number of policies and spreads its risk

among the insureds. To accomplish this, it must rely on its marketing organisation. "o

matter how e#ciently an insurer manages all of its functions, its sales force is the key to

the company$s success.

27'( T)E MARKETING CONCE*T

%ver the years, marketing has undergone substantial changes both in nature, role

and functions. &odern concept of marketing is di'erent from the traditional concepts.

(nder the former, marketing is conducted the philosophy, that products made are

matched with markets, i.e., the rm takes the responsibility on itself to design, develop

and sell its products to suit the needs of its customer-the basic principle followed is

)*aveat +endor*, i.e., let the seller beware. The main obective behind this thinking is to

satisfy customer through constant study of their changing needs and wants. hile, under

the later, the rm does not take any responsibility for its goods- the philosophy that

works is of )aveat mptor*, i.e., let the buyer beware. The goods are produced as per

the decision of the marketing manager and are put on the market, and the purpose of

marketing ends.

M"dern +ie$s "n Mar,etin

-Mar,etin. has a specia% sini/cance in 0"dern 0anae0ent "f b#siness and ind#str!

and is "ne "f the i0p"rtant 0anaeria% c"ncepts' Un%ess it is pr"per%! #nderst""d and

p#t int" practice in the riht #se1 0an! "f the b#siness "r ind#stria% enterprise $i%%

c"%%apse "r pr"ve a fai%#re in their achieve0ents' This $i%% be c%ear $hen it is rea%ised

that 0ar,etin is a t"ta% s!ste0 "f interactin b#siness activities viz. 0ar,etin and

pr"d#cti"n 3 desined t" p%an1 price1 pr"0"te and distrib#te $ant4satisf!in pr"d#cts

and services t" the present and p"tentia% c#st"0ers' It 0eans in "ther $"rds1 thati3 b#siness decisi"ns sh"#%d be 50ar,et "r c#st"0er "riented6 rather than pr"d#ct

"riented earin their "perati"ns pri0ari%! t" the eective satisfacti"n "f c#st"0er


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$ants and needs8 ii3 0ar,etin is a d!na0ic b#siness pr"cess 9 a t"ta%1 interated

pr"cess "f 0atchin pr"d#cts in the 0ar,ets31 rather than a fra0ented ass"rt0ent "f

instit#ti"ns and f#ncti"ns' Mar,etin is n"t "n%! "ne activit!1 n"r it is e:act%! the s#0 "f

severa%8 rather it is the res#%t "f the interacti"n "f 0an! activities inv"%vin 0"ve0ent

"f ""ds and services fr"0 pr"d#cers t" #%ti0ate c"ns#0ers "r ind#stria% #sers8 and

a%s" th"se activities $hich are inv"%ved in 5eva%#atin these 0ar,ets and adj#stin

pr"d#ct characteristics t" 0ar,et needs6' iii3 the 0ar,etin pr"ra00e starts $ith the

er0inati"n "f the pr"d#ct idea and c"ntin#es ti%% the c#st"0ers. $ants are c"0p%ete%!

satis/ed1 $hich 0a! be s"0eti0e after the sa%e is 0ade8 iv3 0ar,etin pr"ra00e is

d"ne $ith a 0a:i0#0 "f eectiveness and a 0ini0#0 "f c"sts1 and v3 0ar,etin 0#st

increase pr"/tab%e sa%es "ver the %"n r#n'

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;iii< >esult oriented marketing5

27'2 MARKETING O< INSURANCE *RO=UCTS

The Indian Insurance Industry is poised for interesting and demanding time. Though

the industry has been serving customers since 0? th century, the nationalisation of the

industry in 0?@A titled the scales in favour of the provider, the Bife Insurance orporation;BI& and protability.

Issues in Insurance Marketing

The peculiar nature of the insurance industry creates implementation of marketing

strategy a di#cult task in the following ways5

D Insurance is unpatented, subective, re!uires prior experience and physical

evidence is di#cult to establish.

D There is a involvement of customers in production of services, mass

production is impossible.

D The services cannot be inventoried and standardised.

27'> CRITICA? SUCCESS


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to do everything possible to keep things under control and help the insurance

environment grow maturely.

Be%%4estab%ished =istrib#ti"n Net$"r,

Fistribution is going to be key area for the success of an insurance company in

Indian market. :ublic Gector banks like G2I, :"2 etc. can be one of the leaders in

distribution because of their huge network and long existence.

Trained *r"fessi"na%s t" #i%d and Se%% the *r"d#ct

onventionally, insurance agents are considered to be the only and best salesman

for insurance products. In wake of the growing competition, the players will re!uire an

excellent sales team to sell their products. There will be mass shifts in the industry, which

is evident from the fact the new players are poaching a lot of BI personnel.

Rati"na%e Appr"ach t" the Invest0ent Criteria

This is a very critical area as far as the government and the players are concerned.

I>F= has framed guidelines, which provide for the investment pattern for the players to

meet its social obligations. The players feel that the compulsion is unust and will a'ecttheir return on investments. This factors has been elucidated as a success factor as it is

in the larger interests of the society. The more the people insured, the better the

revenues, followed by better security, followed by better morale and productivity.

Strinent Acc"#ntin *ractice t" *revent


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saving in foreign exchange out/ow. In addition, they can assist the local insurers

to develop new products and accordingly increase the premium base.

27'D'2 Ne$ =istrib#ti"n Channe%s

The new channels of distribution for the Indian insurance industry are5

D *irect "arketing ompany owned sales team concept is now employed

by a maority of the new players and has proved e'ective sin customer creation

and retention.

D %rokers+Corporate Agents authorised by I>F= to sell and customised

products on behalf of insurance companies.

D Independent 'inancial Advisors =uthorised agents of insurance

companies having tie ups may be with more than one company.

D Telemarketing marketing through telephonic devices, generating leads

through cold calls and forwarding the leads to the main sales team of the

company

D ork site "arketing (nder this strategy, the seller sends his team to the

target group and explains the products and services suitable to them.

%rganisations such as the groups5 JFC, III, 3otak &ahindra are using this

kind of distribution strategy e'ectively.

D -etail Chains ross selling of products at retail outlets

D Internet "arketing internet based product o'erings.

D %ancassurance Fistribution of insurance products by banks ;this is

elaborated in detail in next section<

27'D'> ancass#rance

2ancassurance denotes a partnership between a life insurance company and abanking institution. The need ;for the insurance company < to access a large base of

customers and a desire ;on the part of the bank< to o'er arrange of nancial products

leads to these partnership in di'erent forms. = trusting relationship with customers,

branch name recognition, customer protability measurement systems in banks, cash

management relationship with corporations and the fact that 2ancassurance distribution

is more cost e'ective than traditional distribution are some of the key attractions of this

channel. 6K public sector banks and 0?A regional rural banks account for ?6L of the

branch network in India.

ith over AH,HHH branches of commercial banks and an average population served

per branch of 0@,HHH, 2ancassurance is expected to be a critical distribution strategy forthe insurance companies. In fact, the network includes 99,HHH rural branches and 0M,HHH

semi-urban branches, about AHL of the total number of branches.

3ey issues to be addressed to make 2ancassurance successful are5

D 2oth the bank and insurance company need to improve eectiveness o!

the sales channels by identifying and gaining access to target customers, adding

push to market pull, training of sales sta', di'erentiating performance from

competition and controlling selling cost per unit sold.

D /roduct needs to be tailored to meet the need of the customer base and

for new distribution channels.

D Communication needs to be streamlined to address any cultural issuesbetween the bank sta' and the insurance sta'. Gimilarly, di'erences in


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compensation structures need to be handled sensitively before these start

a'ecting the moral of the branch sta'.

D Traditional processes need to be redesigned not only to take advantage of

the new technology, but also to e'ect a streamlined system between bank and

the insurance company. Technology can be used to put e'ective use in sales

support function, sta' training. Gmoother processing, and online integratedinformation system.

D In!ormation system needs to be reviewed and performance measurement

parameters need to be specially adapted to 2anacassurance.

D Gkills need to be developed an reallocation of assets and resources

nancial and human may also be re!uired between the bank and Insurance

ompany.

!ancassurance Styles

2ank writing the risk themselves ;this is not likely to happen in India since >2I has

restricted this to a few bank like +ysya 2ank and G2I


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D Introduce new innovative products and services desired by targeted

customer segment.

D :roduce customised high !uality products and service at low cost and with

short lead times.

D &obilise employee skills and motivation for continuous improvements in

process capabilities, !uality and response times.

D Feploy information technology, databases and systems in an optimum

manner.

The marketing strategy cannot be taken up in isolation. &aor elements of the

organisation, viz., structure, systems, processes, employees, organisational cultures and

above all the shared values should be appropriately integrated in implementation of the

strategy. The basic tool for diagnosing competitive advantages and nding ways to

enhance is to enhance it is the value chain, which divides a company into discrete

activities it perform in designing, producing, marketing and distributing its products.

= business value design is the totality of how a company selects its customers,

denes the tasks it will perform itself and those it will out source, congure its resources,

goes to the market, creates utility to the customer and earning prots from the activities.

= strategy worth the name must take into account both the disaggregative as well

as aggregative aspects of the business value design of the company. ompetitive

advantage for a company stems from many discrete activities in the value chain. ach of

these activities can contribute to the companies$ relative cost position or create a basis

for a di'erentiation. Thus, the disaggregative aspects are important contributors to the

strategy formulation process.

oming to aggregative aspects, each generic strategy implies di'erent skills and

re!uirements for success, which commonly translates into di'erence in organisational

structure and culture. Jence marketing strategies in the insurance sector would revolvearound products and companies and their thrust areas would be a function of

environmental, competitive, and technological factors in a dynamic environment.

marketing insurance

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