Chapter 12

Insurance Marketing

Overview• Introduction to Industry• Marketing Mix (8 P’s)

1. Product (Product levels & Service Flower)2. Price3. Place (Channels of Distribution)4. Promotion5. People (Employees & Customers i.e. market

segmentation)6. Physical Evidence7. Process (Service Blueprint)8. Productivity & Quality (Service Quality

Dimensions / RATER Analysis)

Overview

• SWOT Analysis

• PEST Analysis

• Recent Developments

• University Questions

Introduction to Insurance Industry• The Indian insurance industry, ever since it came into

existence, has been dominated by the public sector i.e. LIC & GIC

• In 2000, the government decided to liberalise the sector and allowed foreign equity participation of upto 49%

• Insurance Regulatory Authority (IRA) – a statutory body was established to regulate the market and promote a healthy market sector.

• IRA’s role comprises following 3 functions.– To protect the consumers interest– To ensure financial soundness and solvency of the insurance industry– To ensure healthy growth of the insurance sector.

Insurance – the concept• Contract between the insurer and the insured

under which the insurer undertakes to compensate the insured for the losses arising from the risk insured against.

• The insured agrees to pay a premium regularly.

• The person whose risk is insured is called “Insured” or “Assured”. The person who agrees to compensate called the “Insures” or “Assures” or “Underwriter”

Marketing Mix of InsuranceIndustry

Product• Product Mix

Product• Product Levels

Product• Service Flower

CORE: PROVIDE INSURANCE POLICIES

Information

Consultation

Order taking

Hospitality

Exception

Safe Keeping

Billing

Payment

SUPPLEMENTARY SERVICES

Price• In an insurance business, the pricing decisions are

concerned with:– The premium charged against the policies, – Interest charged for defaulting the payment of premium

and credit facilities– Commission charged for underwriting and consultancy

services• For general insurance (Auto) the premium depends on– Make of the vehicle– Year of manufacture– Place of registration– Current showroom price of the vehicle

Price• For life insurance the premium depends on three

factors– Costs: Fixed percentage of insurer’s office expenses,

salaries, computers, and maintenance of buildings, commissions to be paid to the agents

– Mortality: Mortality tables allow the insurer to calculate the average chance of someone dying within one year

– Interest: The insurance firm receives interest on the premium payment, from the time of policy taken, up to the maturity/death. When the period is longer , the effects on interest income is more

• Discounts may be offered for existing clients renewing the policy

Place - Channels of distribution

Promotion

People

Market Segmentation (External Customers)[Univ Q – Nov 02, 05, 08 & May 08(5 marks); May 04 & 07(10 marks)]

Market Segmentation(External Customers)

Physical Evidence[Univ Q – Nov 07(5 marks)]

Process (Service Blueprint)

• Customer friendly

• Speed and accuracy of payment is of great importance

• Installment schemes should be streamlined to cater to the ever growing demands of the consumers

Process (Service Blueprint)

Productivity & Quality(Service Quality Dimensions/RATER Analysis)

SWOT Analysis

PEST Analysis

Recent Developments• Dozen private players• Rising awareness levels• Innovative products• Increased penetration• Customer-focused service and professional

advice • Integral part of financial planning kit v/s tax

saving tool• Number of distribution channels• Multiple touch points

Environmental factors affecting the Insurance Industry

[Univ Q - May 06(10 marks)]

• Economic development• Growing consumer awareness• Education• Increasing Longevity• Declining Interest Rates• IRDA• Liberalisation & privatisation of insurance

Privatization of Insurance [Univ Q – Nov 04(10 marks)]

• Insurance has always been a politically sensitive subject in India.• Within less than 10 years of independence, the Indian government

nationalized private insurance companies in 1956 to bring this vital sector under government control to raise much needed development funds.

• Since then, state-owned insurance companies have grown Inefficient and have been criticized for their huge bureaucracies, but still have millions of policy holders.

• Any attempt to even suggest letting private players into this vital sector has met with resistance and agitation from the powerful insurance employees unions.

• However, today this sector has been opened to the private sector• The bigger private players claim that opening up insurance will give policy

holders better products and service• The opponents of privatization argue that in a poor country like India

insurance needs to have social objectives and newcomers will not have that commitment.

• Many international players are eyeing the vast potential of the Indian market and are already making plans to come in.

University Questions• How do you segment insurance? Nov 02, 05, 08(5

marks); May 04 & 07(10 marks)]

• Physical evidence in insurance sector. Nov 07(5 marks)]

• Insurance is no more public sector monopoly in India. Comment. [Nov 04(10 marks)]

• Define Insurance. Explain the environmental factors affecting the insurance industry. [May 06(10 marks)]

• Discuss consumer decision – making process for purchasing buying a life insurance product. [Nov 06(10 marks)]