marketing of financial services part 2
TRANSCRIPT
-
7/28/2019 Marketing of Financial Services Part 2
1/66
Amity Business School
MARKETING OFFINANCIAL SERVICES
Module II
InsuranceRamesh Bagla
-
7/28/2019 Marketing of Financial Services Part 2
2/66
Amity Business School
Introduction Insurance is pooling of risks.
In a contract of Insurance, the Insurer
(insurance company) agress/undertakes, inconsideration of a sum of money (premium),to make good the loss suffered by the insuredagainst a specified risk such as fire or
compensate the insured/beneficiaries on thehappening of a specified event such asaccident or death.
-
7/28/2019 Marketing of Financial Services Part 2
3/66
Amity Business School
Introduction Two parties to an insurance contract:
I. Insurer/assurer/underwriter
II. Insured/assured/beneficiary The document laying down the terms of thecontract is called Insurance Policy
The property which is insured is called the
subject matter of insurance The interest that the insured has in thesubject matter is called insurable interest
-
7/28/2019 Marketing of Financial Services Part 2
4/66
-
7/28/2019 Marketing of Financial Services Part 2
5/66
Amity Business School
Nature of Insurance Risk sharing and risk transfer
Co-operative device
Risk assessment in advance
Compensation at the occurrence of contingency
Amount of payment depends upon the actualloss
Huge no. of Insured persons It is very different from charity or gambling
-
7/28/2019 Marketing of Financial Services Part 2
6/66
Amity Business School
Types of Insurance Life Insurance
Term Policy
Whole Life Policy Endowment
Annuities
Unit Linked Policy Group Life Insurance
-
7/28/2019 Marketing of Financial Services Part 2
7/66
Amity Business School
Meaning of Life Insurance The life branch of insurance includes
insurance that pays benefits on a
persons:
- Death
- Living a certain length of time
- incapacity
- injury or incurring a disease
-
7/28/2019 Marketing of Financial Services Part 2
8/66
Amity Business School
Basic elements of a life InsurancePolicy
Risk Cover benefit payable in the eventof death/incapacity
Saving benefit payable in the event of
survival.
-
7/28/2019 Marketing of Financial Services Part 2
9/66
Amity Business School
Term Life Insurance Plans It gives protection for a limited number of years atthe end of which the policy expires, meaning itterminates with no maturity value.
The face value of the policy is payable only if the
insureds death occurs during the policy period. Such policies can be issued for as less as 1 year,but conventionally are being issued for a number ofyears.
Types of Term Insurance
Level Term InsuranceDecreasing Term Insurance Increasing Term Insurance Renewable Term Insurance Convertible Term InsuranceTerm Insurance with Return of Premium
-
7/28/2019 Marketing of Financial Services Part 2
10/66
Amity Business School
Whole Life Insurance Plans The risk is covered for the entire life, no
policy term is specified
The sum assured is paid to the nomineeonly on the death of the insured
Premiums have to be paid throughout the
life of the insured or for a shorter period asper the terms of the conract
There is no survival benefit
-
7/28/2019 Marketing of Financial Services Part 2
11/66
Amity Business School
Endowment Insurance Plans Pure endowment insurance is a plan in which
the benefit is payable to the insured only on
survival after the specified term.
Endowment policies which combine thefeatures of pure endowment and term
insurance, pay the assured sum either on thedeath of the assured or after a fixed term.
Thus, claims under an endowment policy
may arise either on death or on maturity
-
7/28/2019 Marketing of Financial Services Part 2
12/66
Amity Business School
Annuities Annuity is a form of pension in which an
insurance co. makes a series of periodicpayments to a person(annuitant)/his
dependents over a number of years(term)in return of a payment either inlumpsumor in instalments
Types of annuities Immediate Annuity
Deferred Annuity
-
7/28/2019 Marketing of Financial Services Part 2
13/66
Amity Business School
Unit Linked Insurance Policy(ULIP)
ULIP combines the benefits of insuranceprotection and return on investment inmanaged fund
Each premium paid by the insured is splitin 2 parts
Premium for insurance cover
Investment in mutual funds units
-
7/28/2019 Marketing of Financial Services Part 2
14/66
Amity Business School
Group Life Insurance Products
Group Insurance covers a similar/homogeneous group of individuals under asingle Master Policy
It is normally taken by an employer, alabour union or a voluntary association
Individuals covered in the GroupInsurance Scheme are not parties to theInsurance Contract
-
7/28/2019 Marketing of Financial Services Part 2
15/66
Amity Business School
Types of Insurance
Non Life/General Insurance
Fire
Marine Motor/Accident
Health/Medical
Liability
-
7/28/2019 Marketing of Financial Services Part 2
16/66
Amity Business School
Features of General insurance Policy cover for absolute value
Normally annual contracts Insurable interest is of prime importance
Insurance can be taken for self or third-
party The sum assured is the actual/assessed
value
-
7/28/2019 Marketing of Financial Services Part 2
17/66
Amity Business School
Fire Insurance Fire Insurance provides for financial loss due
to fire and other specified hazards
Examples of property covered under Fire
Insurance Buildings & their contents
Goods in the open
Dwellings & their contents
Furniture/fixtures/fittings
Pipelines located inside/outsidebuildings/compounds
-
7/28/2019 Marketing of Financial Services Part 2
18/66
Amity Business School
Fire Insurance Examples of fire hazards covered under a typical
fire insurance policy Fire Explosion/implosion
Aircraft Damage Lightening Riots,Strikes,malicious and terrorism damage Impact damage
Subsidence & lanslide incl road slides Missile testing operations Flood, earthquake, storm, tempest, tornado,cyclones Bursting of water tanks, apparatus and pipes
-
7/28/2019 Marketing of Financial Services Part 2
19/66
-
7/28/2019 Marketing of Financial Services Part 2
20/66
Amity Business School
Motor/Accident Insurance Statutorily mandated under the Motor Vehicles Act, totake care of those who may get injured in an accident.
The insurance of damage to the vehicle is notmandatory
Liabilities normally covered are Any liability arising in respect of death/bodily injury to any
person incl. the owner of the vehicle Any liability arising in respect of damage to any property
of a third party
Any liability arising in respect of death/bodily injury of anypassenger of a public vehicle
Any liability arising under workmens compensation act forinjury to a paid driver/conductor
-
7/28/2019 Marketing of Financial Services Part 2
21/66
Amity Business School
Health/Medical Insurance It covers mainly two types of benefits
Reimbursement of medical expenses relatedto specific diseases
Hospitalisation
Types of Policies available
Individual Mediclaim Policy
Group Mediclaim Policy
Cancer Insurance by ICS & CPAA
Overseas Medical cover
-
7/28/2019 Marketing of Financial Services Part 2
22/66
Amity Business School
Liability Insurance
Liability Insurance covers
Employee liabilities Employee state insurance liability
Non industrial risks
Professional liabilities
Product liabilities
-
7/28/2019 Marketing of Financial Services Part 2
23/66
Amity Business School
Micro Insurance Micro-insurance is the insurance for the low-income groups
It is different from insurance in generalinasmuch as it is a low value product(involving modest premium and benefitpackage) which requires different design and
distribution strategies such as premiumbased on community risk rating (as opposedto individual risk rating),
-
7/28/2019 Marketing of Financial Services Part 2
24/66
Amity Business School
Micro Insurance There is an active involvement of an
intermediate agency representing the targetcommunity
Micro Insurance is fast emerging as animportant risk covering tool for the low-income people engaged in wide variety of
income generation activities, and whoremain exposed to variety of risks mainlybecause of absence of cost-effective riskhedging instruments.
-
7/28/2019 Marketing of Financial Services Part 2
25/66
Amity Business School
Miscellaneous Insurance Loss of profit
Engineering construction all risk, industrialall risk, machinery breakdown etc.
Apart from standard covers, GeneralInsurance Companies also offer customizedor tailor-made policies based on the
personal requirements of a customer.
-
7/28/2019 Marketing of Financial Services Part 2
26/66
Amity Business School
Legal Framework for Insurance Sector
The main acts governing insurance are
The Insurance Act 1935
IRDA Act 1999
IRDA (micro- insurance) Regulations 2005
-
7/28/2019 Marketing of Financial Services Part 2
27/66
Amity Business School
IRDAInsurance Development & RegulatoryAuthority(IRDA) was constituted under IRDAAct 1999, with the following objectives:
To protect the interests of the policyholders
To regulate, promote and ensure orderlygrowth of the insurance industry and for
matters connected therewith or incidentalthereto.
-
7/28/2019 Marketing of Financial Services Part 2
28/66
Amity Business School
Composition of IRDA
The Authority is a ten member teamconsisting of
A Chairman Five whole-time members
Four part-time members
- all appointed by the Government of
India
-
7/28/2019 Marketing of Financial Services Part 2
29/66
Amity Business School
Duties, Powers and Functions of IRDA
(a) issue to the applicant a certificate of registration,renew, modify, withdraw, suspend or cancel suchregistration;
(b) protection of the interests of the policy holders inmatters concerning assigning of policy, nominationby policy holders, insurable interest, settlement ofinsurance claim, surrender value of policy and otherterms and conditions of contracts of insurance;
(c) specifying requisite qualifications, code of conductand practical training for intermediary or insuranceintermediaries and agents;
-
7/28/2019 Marketing of Financial Services Part 2
30/66
Amity Business School
Duties, Powers and Functions of IRDA
(d) specifying the code of conduct forsurveyors and loss assessors;
(e) promoting efficiency in the conduct of
insurance business;(f) promoting and regulating professional
organisations connected with the insurance andre-insurance business;
(g) levying fees and other charges for carrying outthe purposes of the IRDA Act;
-
7/28/2019 Marketing of Financial Services Part 2
31/66
Amity Business School
Duties, Powers and Functions of IRDA
(h)calling for information from, undertakinginspection of, conducting enquiries andinvestigations including audit of the insurers,intermediaries, insurance intermediaries and
other organisations connected with theinsurance business;
(i) control and regulation of the rates, advantages,terms and conditions that may be offered by
insurers in respect of general insurancebusiness not so controlled and regulated by theTariff Advisory Committee under section 64U ofthe Insurance Act, 1938 (4 of 1938);
-
7/28/2019 Marketing of Financial Services Part 2
32/66
Amity Business School
Duties, Powers and Functions of IRDA
(j) specifying the form and manner in which books ofaccount shall be maintained and statement ofaccounts shall be rendered by insurers and other
insurance intermediaries;(k) regulating investment of funds by insurance
companies;
(l) regulating maintenance of margin of solvency;(m) adjudication of disputes between insurers and
intermediaries or insurance intermediaries;
-
7/28/2019 Marketing of Financial Services Part 2
33/66
Amity Business School
Duties, Powers and Functions of IRDA
(n) supervising the functioning of the Tariff AdvisoryCommittee;
(o) specifying the percentage of premium income of theinsurer to finance schemes for promoting andregulating professional organisations referred to inclause (f);
(p) specifying the percentage of life insurance businessand general insurance business to be undertaken by
the insurer in the rural or social sector; and(q) exercising such other powers as may be prescribed.
-
7/28/2019 Marketing of Financial Services Part 2
34/66
Amity Business School
Insurance Ombudsman The position of Insurance Ombudsman was created by a
Government of India Notification in November 1998.
The main function of the Ombudsman is to quicklydispose of the grievances of insured customers andlessen the problems involved in redressing complaints.
This institution is vital and relevant to protect theinterests of policyholders and also shape their belief inthe system.
The existence of an Insurance Ombudsman has helpedgenerate and sustain faith and confidence amongst bothconsumers and insurers alike.
-
7/28/2019 Marketing of Financial Services Part 2
35/66
Amity Business School
Insurance Ombudsman
Ombudsmen are chosen from various fields such as theCivil Services, Insurance Industry and J udicial Services.
They are appointed for a term of three years or till theyturn sixty-five years of age.
Currently there are twelve Insurance Ombudsmenappointed in different parts of the country. They all havedefined jurisdictions.
-
7/28/2019 Marketing of Financial Services Part 2
36/66
Amity Business School
Risk management
At the most general level, risk is used todescribe any situation where there is
uncertainty about what outcome mayoccur. Risk can be thought of as :
- Expected Risk
- Unexpected Risk.
-
7/28/2019 Marketing of Financial Services Part 2
37/66
Amity Business School
Risk Management Risk may be defined as the possibility that a future
occurrence may cause harm or losses
Risk may also provide opportunities. By taking risks,companies sometimes achieve considerable gains.
However, companies need Risk management to analyzepossible risks in order to balance potential gains againstpotential losses and avoid expensive mistakes.
Risk management is best used as a preventive measure
rather than as a reactive measure. Companies benefitmost from considering their risks when they areperforming well and when markets are growing in orderto sustain growth and profitability.
-
7/28/2019 Marketing of Financial Services Part 2
38/66
Amity Business School
Types of Risks
Material Risk- Building, Plant &
Machinery,Furniture,Fixtures,fittings,Stocks.
Consequential Risk- Loss of production, Lossof profit, Loss of market, Good will.
Social Risk Loss of reputation/Social
StatusLegal Risk- Product liability, Public liability.
Political Risk- Subsidies, Sanctions etc.
-
7/28/2019 Marketing of Financial Services Part 2
39/66
Amity Business School
Types of Risk facing Business
Business Risk
Price Risk Credit Risk Pure Risk
Commodity price risk Exchange rate risk Interest risk Damage to assets Legal Liability Worker injury Employee benefits
-
7/28/2019 Marketing of Financial Services Part 2
40/66
Amity Business School
Types of Risk facing individuals
Personal Risk
Earnings Medical expenses Liability Financial AssetsPhysical assets Longevity
-
7/28/2019 Marketing of Financial Services Part 2
41/66
Amity Business School
Risk ManagementRisk management process:
1. Establish the context and Identify the risks
2. Evaluate the potential frequency and
severity/magnitude of loss3. Develop and select methods for managing
the risks
4. Implement the chosen methods
5. Monitor the performance of chosen
methods and develop strategies on an
ongoing basis.
-
7/28/2019 Marketing of Financial Services Part 2
42/66
Amity Business School
Marketing Mix Strategy for Insurance
Product
Scan Existing Products/services offered bydomestic & international Insurance Cos.
Identify Segments & Services not covered rural & unorganised sector
Design innovative products having strong
USPs for the needs of target segmentcomplying with environmental and regulatoryconditions
Strong product positioning
-
7/28/2019 Marketing of Financial Services Part 2
43/66
Amity Business School
Marketing Mix Strategy for Insurance
Price
In the insurance business, the pricingdecisions are concerned with:
Premium Interest for default in premium payment
Commission payable to intermediaries
Pricing to take care of the nature of riskcoverage, paying capacity of the targetsegment and commercial viability
-
7/28/2019 Marketing of Financial Services Part 2
44/66
Amity Business School
Marketing Mix Strategy for Insurance
Place Location of the insurance branches should ensure:
Coverage of target segment Smooth accessibility Availability of infrastructural facilities
Safety and security
Personal selling is the most effective way for selling ofinsurance products. An insurance agent should have: Local orientation Thorough knowledge of products and services
Never say die attitude High level of motivation and service aptitude Personal selling is the most effective way for selling of
insurance products
-
7/28/2019 Marketing of Financial Services Part 2
45/66
Amity Business School
Marketing Mix Strategy for Insurance
Promotion Advertisement
Choice of media print/television/radio/internet Visuals & Copy effective communication of USP to
the target audience Cost effectiveness Support to product positioning
Publicity Focus on target segment
Projecting the image of socially responsible customercaring organisation
Organisation of camps & events Demonstration/articulation of product benefits
-
7/28/2019 Marketing of Financial Services Part 2
46/66
Amity Business School
Marketing Mix Strategy for Insurance
Promotion Word of mouth
Influencing the opinion leaders Aiming for customer delight for positive word of mouth
Strong service recovery mechanism to check negativeword of mouth Happy channel partners do make a difference
Sales promotionThoughtful Freebies to customers & agents
Rebates/discounts/bonus Free add-on features in policies
-
7/28/2019 Marketing of Financial Services Part 2
47/66
Amity Business School
Marketing Mix Strategy for Insurance
Process Well defined processes and service
standards for underwriting, processing &
settlement of claimsStrong process orientation of Agents and staff
at all levels
Regular mapping of service delivery against
the service standards to identify and rectifythe service quality gaps
Continuous technology upgradation forprocess revamping and better service delivery
-
7/28/2019 Marketing of Financial Services Part 2
48/66
Amity Business School
Marketing Mix Strategy for Insurance
People Most important component of marketing mix
for the insurance industry
Behavioral profiling at the time of recruitmentto ensure that front line staff and agents havestrong service aptitude and customerorientation
Regular training and knowledge updation ofinsurance personnel to ensure that theyunderstand the changing levels of customerexpectations
-
7/28/2019 Marketing of Financial Services Part 2
49/66
Amity Business School
Marketing Mix Strategy for Insurance
Physical evidence
Company logo and signage should personifyand convey the company policy and ethos
Product information brochures must furnishall important information in easy and lucidlanguage and should contain answers toFAQs
Office interiors and staff disposition mustcreate a warm and customer friendlyenvironment
-
7/28/2019 Marketing of Financial Services Part 2
50/66
Amity Business School
Marketing Channels in the Insurance
Sector in India In today's scenario, insurance companies have
moved from selling insurance to marketing an
essential financial product. The distributors haveto become trusted financial advisors for theclients and trusted business associates for theinsurance companies.
This has been the result of :- enhanced customer exposure
- increased competition
- evolution of newer channels of distribution
-
7/28/2019 Marketing of Financial Services Part 2
51/66
Amity Business School
Marketing Channels in the Insurance
Sector in India The distinction of channels is based on:
- personal distribution systems
- direct response systems Personal Distribution Systems agents, brokers,
corporate agents such as bancassurance, and worksitemarketing channels
Direct response systems channels whereincustomer purchases insurance directly. These channelsutilize media channels like Internet, telemarketing, directmail, call centers, etc
-
7/28/2019 Marketing of Financial Services Part 2
52/66
Amity Business School
Marketing Channels in the Insurance
Sector in India
Traditionally tied agents have been the
primary channels. However, with growing impact of IRDA
and competition, alternative channels are
not only being considered but also heavilyfocused upon.
-
7/28/2019 Marketing of Financial Services Part 2
53/66
Amity Business School
Agents
An insurance agent solicits/procures insurancebusiness for an insurer in consideration for acommission
A license must be obtained from IRDA to act asan insurance agent
Today's insurance agent has to know whichproduct will appeal to the customer, and also
know his competitor's products in the samespace to be an effective salesman who can sellhis company, the product, and himself to thecustomer
-
7/28/2019 Marketing of Financial Services Part 2
54/66
Amity Business School
Brokers An insurance broker is an independent insurance
agent who works with many insurance companies tofind the best available policies for his/her clients.
A typical insurance agent works for one specificcompany, and chooses from within that company'spolicies for clients.
An insurance broker is different from the typical agentin this regard, the two are otherwise similar. Bothstructure policies, settle claims, and usually work on acommission basis.
The main eligibility criteria to become a directinsurance broker is minimum a bachelors degree anda capital of Rs.50lac
-
7/28/2019 Marketing of Financial Services Part 2
55/66
Amity Business School
BrokersFunctions of a Broker obtaining detailed information of the client's business
and risk management philosophy rendering advice on appropriate insurance cover and
terms maintaining detailed information base of availableinsurance products
providing requisite underwriting information asrequired by an insurer in assessing the risk to decide
pricing terms and conditions for cover submitting quotation received from insurer/s for
consideration of a client
-
7/28/2019 Marketing of Financial Services Part 2
56/66
Amity Business School
Brokers providing services related to insurance
consultancy and risk management
assisting in the negotiation of the claims
maintaining proper records of claims
-
7/28/2019 Marketing of Financial Services Part 2
57/66
Amity Business School
Bancassurance 'Bancassurance', is the term used to describe the
partnership or relationship between a bank and aninsurance company whereby the insurancecompany uses the bank sales channel in order tosell insurance products
Bank staff and tellers, rather than an insurancesalesperson, become the point of sale/point ofcontact for the customer. Bank staff are advisedand supported by the insurance company throughproduct information, marketing campaigns and
sales training. Both the bank and insurance company share thecommission. Insurance policies are processed andadministered by the insurance company.
-
7/28/2019 Marketing of Financial Services Part 2
58/66
Amity Business School
Internet and call centers
Insurance companies have portals and call centres tosell insurance on the Net These channels arepredominantly used for selling personal insuranceproducts
However, these channels have had only limitedsuccess in India The variety and complexity of theinsurance product does not make it easily amenable toon-line sale
The commercial/industrial client require the services ofan intermediary.It is also increasingly being realisedthat technology can be used only for policy servicingand not for actual sales.
-
7/28/2019 Marketing of Financial Services Part 2
59/66
Amity Business School
Internet and call centers
In India, the levels of penetration are nothigh at the moment
Even all those who have access to theInternet have not started transacting onthe Net for fear of security breaches
-
7/28/2019 Marketing of Financial Services Part 2
60/66
Amity Business School
Marketing Strategies in Indian
Insurance Sector Value For Money
Sea change in the way the basic insurance products arepackaged Insurance products are innovatively tailor made to
provide a bundle of desired benefits to the customersThis is done through the introduction of riders, which
have added value to the risk cover at minimal cost.Riders are nothing but add-ons coming along with thebase policies for a slightly additional premium
-
7/28/2019 Marketing of Financial Services Part 2
61/66
Amity Business School
Marketing Strategies in Indian
Insurance Sector Tapping the Niche Markets
Private insurers are concentrating on designing attractiveproducts by investing heavily on research - studying lifeexpectancy and health statistics across age groups, incomelevels, professionals and regions on their own instead ofrelying on data with state insurers
The products are designed with a technical team of actuaries
and a product development team working closely together totarget the niche market. The innovations for the niche marketsare abound
-
7/28/2019 Marketing of Financial Services Part 2
62/66
Amity Business School
Marketing Strategies in Indian
Insurance Sector Tapping the Niche Markets
The segments, which have attracted almost all
the players, are the women and the childrensegments. Though the State insurer has hadthese products sufficiently for a longer time, it
faces stiff competition from the private players inthese segments.
-
7/28/2019 Marketing of Financial Services Part 2
63/66
-
7/28/2019 Marketing of Financial Services Part 2
64/66
Amity Business School
Marketing Strategies in Indian
Insurance Sector Tapping the Niche Markets Tata AIG General Insurance, for the first time in the country, has also
launched a specialized product for Accountants after the success withspecialized products such as Directors and Officers policy in India, inits bid to segment the market for professional indemnity policies
The policy has been designed with the assistance from BombayChartered Accountants Society. This policy covers claims pertaining
to professional mistakes committed in the performance of duties. Italso provides for coverage of all legal expenses incurred in defendingsuch claims
-
7/28/2019 Marketing of Financial Services Part 2
65/66
Amity Business School
Marketing Strategies in Indian
Insurance Sector Thrust to the rural markets Towards ensuring equitable distribution of insurance policies in
every corner of the country, IRDA stipulates the rural obligations to
be met by the players over the years. The rural obligation on part of the new private insurance companies
is incremental in nature. It goes from 5% to 15% over the period of 5years for life insurance and from 2% to 5% in case of generalinsurance. IRDA has also defined what it meant by rural
1. The place should have a population of less than 50002. Secondly, the density of the population should be less than 400persons per square kilometer.3. 75% of the male population should be engaged in agriculturalpursuit.
-
7/28/2019 Marketing of Financial Services Part 2
66/66
Amity Business School
Marketing Strategies in Indian
Insurance Sector Tapping unconventional distribution
channels
All the players depend heavily on their agentsforce to reach out - LIC has reached a figure of8,50,000 agents and planned to increase it to 1million
Now they are trying out other distributionchannels also, like corporate agents such asbanks, internet and call centers for directmarketing