PROBLEMS OF INSURANCE MARKETING.

CHAPTER 1
INTRODUCTION
Insurance
Man has always been in search of security and protection from the beginning of
civilization. This urge in him to lead to the concept of insurance. The basis of
insurance was the sharing of the losses of a few amongst many. Insurance
provides financial stability and strength to the individuals and organization by
the distribution of loss of a few among many by many by building up over a
period of time.

Even if we try to control to avoid, control and prevent risk will still exist.
Therefore, insurance is the most practical method for handling a major risk.
Insurance, in law and economics, is a form of risk management primarily used
to hedge against the risk of a contingent loss. Insurance is defined as the
equitable transfer of the risk of a loss, from one entity to another, in exchange
for a premium. Insurer, in economics, is the company that sells the insurance.

Insurance rate is a factor used to determine the amount, called the premium, to
be charged for a certain amount of insurance coverage. Risk management, the
practice of appraising and controlling risk, has evolved as a discrete field of
study and practice.

Insurance may be described as a social device to ensure protection of economic

value of life and other assets. Under the plan of insurance, a large number of
people associate themselves by sharing risks attached to individuals. The risks,
which can be insured against, include fire, the perils of sea, death and accidents
and burglary. Any risk contingent upon these, may be insured against at a
premium commensurate with the risk involved. Thus collective bearing of risk
is insurance.

Insurance is a contract whereby, in return for the payment of premium by the

insured, the insurers pay the financial losses suffered by the insured as a result
of the occurrence of unforeseen events. The term "risk" is used to describe the

PROBLEMS OF INSURANCE MARKETING.

possibility of adverse results flowing from any occurrence or the accidental

happenings, which produce a monetary loss.

Insurance is a pool in which a large number of people exposed to a similar risk

make contributions to a common fund out of which the losses suffered by the
unfortunate few, due to accidental events, are made good. The sharing of risk
among large groups of people is the basis of insurance. The losses of an
individual are distributed over a group of individuals.

PROBLEMS OF INSURANCE MARKETING.

CHAPTER 2
DEFINITION OF INSURANCE
The legal definition of insurance is that, it is a contract between the insurer and
insured whereby, in consideration of payment of premium by the insured the
insurer agrees to make good any financial loss the insured may suffer due to
consideration of an insurance peril.

The financial definition of insurance is that insurance is a social device in which

a group of individual (insured) transfer risk to another party (insurer) in order to
combine loss experience, which permits statistical prediction of losses and
provides for payments of losses from funds contributed (premiums) by all
members who transfer risk.

DEFINITION OF MARKETING
There are many definition of marketing. The better definition are focused upon
customer orientation and satisfaction of customer needs:

According to Philip kotler,

Marketing is a social process by which individual and group obtained what they
need and want to creating and exchanging products and value with others.

According to P. F. Drucker,
Marketing is not only much broader than selling, its not a specialised activity at
all it encompasses entire business. Its a whole business seen from the point of
view of the final result, that is, from the customers point of view. Concern and
responsibility for marketing much therefore permeate all areas of enterprise.

PROBLEMS OF INSURANCE MARKETING.

CHAPTER 3
CONCEPT OF INSURANCE
In our daily lives, there is a risk involved when there is uncertainty. Instinct of
security against such risks is one of the basic driving force for determining the
attitude of human beings. You must as a sequel of this quest, the concept of
insurance has been born for security. Urge to provide insurance and protection
against loss of life and property, you must have been promoted to do some sort
of people willing to sacrifice the cooperation of the population, to achieve
security. In this sense, the story of insurance is probably as old as the
storyofmankind.
Life insurance, against the risk of premature death of its members to earn
income, especially to provide protection to home. Life insurance is also modern,
provides protection against the risk of (health insurance) and disease and
disability (i.e. risk of outliving source of income) of such risks, such as livingrelated and other longevity. The product is to provide a longevity annuity and
pension (insurance against old age). Non-life insurance provides protection
against accident liability, property damage, and other theft. Compared to the life
insurance contract, non-life insurance contract, the duration, but typically
shorter. In the bundle, is peculiar of life insurance coverage risks and Ministry
together. To provide both life insurance and investment protection.
Insurance is good news on the business problem. Insurance, which provides
short and long-distance relief. Short-term relief, by distributing the loss among
large numbers of people through the medium of Risukubeara specialty, such as
the Insurance Company, and is intended to protect the insured from loss of life
and property. Therefore, to enable business people to face the unexpected loss
of, he need to worry about the possibility of loss is not available. The object for
which long-term growth of the country's economic and industrial investment of
funds by insurance companies with a huge organizational and commercial
industry to be able to use.

PROBLEMS OF INSURANCE MARKETING.

CHAPTER 4
HISTORY OF INSURANCE
In some sense we can say that insurance appears simultaneously with the
appearance of human society. We know of two types of economies in human
societies: money economies (with markets, money, financial instruments and so
on) and non-money or natural economies (without money, markets, financial
instruments and so on). The second type is a more ancient form than the first. In
such an economy and community, we can see insurance in the form of people
helping each other. For example, if a house burns down, the members of the
community help build a new one. Should the same thing happen to one's
neighbour, the other neighbours must help. Otherwise, neighbours will not
receive help in the future. This type of insurance has survived to the present day
in some countries where modern money economy with its financial instruments
is not widespread (for example countries in the territory of the former Soviet
Union).

Turning to insurance in the modern sense (i.e., insurance in a modern money

economy, in which insurance is part of the financial sphere), early methods of
transferring or distributing risk were practiced by Chinese and Babylonian
traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese
merchants travelling treacherous river rapids would redistribute their wares
across many vessels to limit the loss due to any single vessel's capsizing. The
Babylonians developed a system which was recorded in the famous Code of
Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing
merchants. If a merchant received a loan to fund his shipment, he would pay the
lender an additional sum in exchange for the lender's guarantee to cancel the
loan should the shipment be stolen.

Achaemenian monarchs were the first to insure their people and made it official
by registering the insuring process in governmental notary offices. The
insurance tradition was performed each year in Norouz (beginning of the
Iranian New Year); the heads of different ethnic groups as well as others willing
to take part, presented gifts to the monarch. The most important gift was
presented during a special ceremony.

PROBLEMS OF INSURANCE MARKETING.

When a gift was worth more than 10,000 Derrik (Achaemenian gold coin
weighing 8.35-8.42) the issue was registered in a special office. This was
advantageous to those who presented such special gifts. For others, the presents
were fairly assessed by the confidants of the court. Then the assessment was
registered in special offices.

The purpose of registering was that whenever the person who presented the gift
registered by the court was in trouble, the monarch and the court would help
him. Jahez, a historian and writer, writes in one of his books on ancient Iran:
"Whenever the owner of the present is in trouble or wants to construct a
building, set up a feast, have his children married, etc. the one in charge of this
in the court would check the registration. If the registered amount exceeded
10,000 Derrik, he or she would receive an amount of twice as much."

A thousand years later, the inhabitants of Rhodes invented the concept of the
'general average'. Merchants whose goods were being shipped together would
pay a proportionally divided premium which would be used to reimburse any
merchant whose goods were jettisoned during storm or sinkage.

The Greeks and Romans introduced the origins of health and life insurance c.
600 AD when they organized guilds called "benevolent societies" which cared
for the families and paid funeral expenses of members upon death. Guilds in the
Middle Ages served a similar purpose. The Talmud deals with several aspects of
insuring goods. Before insurance was established in the late 17th century,
"friendly societies" existed in England, in which people donated amounts of
money to a general sum that could be used for emergencies.

Separate insurance contracts (i.e., insurance policies not bundled with loans or
other kinds of contracts) were invented in Genoa in the 14th century, as were
insurance pools backed by pledges of landed estates. These new insurance
contracts allowed insurance to be separated from investment, a separation of
roles that first proved useful in marine insurance. Insurance became far more
sophisticated in post-Renaissance Europe, and specialized varieties developed.

Toward the end of the seventeenth century, London's growing importance as a

centre for trade increased demand for marine insurance.

PROBLEMS OF INSURANCE MARKETING.

In the late 1680s, Mr. Edward Lloyd opened a coffee house that became a
popular haunt of ship owners, merchants, and ships captains, and thereby a
reliable source of the latest shipping news. It became the meeting place for
parties wishing to insure cargoes and ships, and those willing to underwrite such
ventures. Today, Lloyd's of London remains the leading market (note that it is
not an insurance company) for marine and other specialist types of insurance,
but it works rather differently than the more familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which
in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas
Barbon opened an office to insure buildings. In 1680, he established England's
first fire insurance company, "The Fire Office," to insure brick and frame
homes.

The first insurance company in the United States underwrote fire insurance and
was formed in Charles Town (modern-day Charleston), South Carolina, in 1732.

Benjamin Franklin helped to popularize and make standard the practice of

insurance, particularly against fire in the form of perpetual insurance. In 1752,
he founded the Philadelphia Contributionship for the Insurance of Houses from
Loss by Fire. Franklin's company was the first to make contributions toward fire
prevention. Not only did his company warn against certain fire hazards, it
refused to insure certain buildings where the risk of fire was too great, such as
all wooden houses.

In the United States, regulation of the insurance industry is highly Balkanized,

with primary responsibility assumed by individual state insurance departments.
Whereas insurance markets have become centralized nationally and
internationally, state insurance commissioners operate individually, though at
times in concert through a national insurance commissioners' organization. In
recent years, some have called for a dual state and federal regulatory system for
insurance similar to that which oversees state banks and national banks.

In the state of New York, which has unique laws in keeping with its stature as a
global business centre, former New York Attorney General Eliot Spitzer was in

PROBLEMS OF INSURANCE MARKETING.

a unique position to grapple with major national insurance brokerages. Spitzer

alleged that Marsh & McLennan steered business to insurance carriers based on
the amount of contingent commissions that could be extracted from carriers,
rather than basing decisions on whether carriers had the best deals for clients.
Several of the largest commercial insurance brokerages have since stopped
accepting contingent commissions and have adopted new business models.

CHAPTER 5

PROBLEMS OF INSURANCE MARKETING.

EVOLUTION OF INSURANCE
In the days of yore insurance was in its crude form and was cooperative
and voluntary in nature. When, where and how it originated is still a matter of
research in one way or the other was prevalent in olden days. We can trace its
history from the evolution society from hunting stage to the modern industrial
age. A word YAGCHHEM occurs in the worlds most ancient Hindu Scripture
Rig Veda.
The word YAGCHHEM means insurance. It clearly indicated that
about four thousand years ago insurance was prevalent in its crude form. It was
cooperative and voluntary in nature. People formed different groups of
organizations to share the loss among themselves incase of a particular risk.
Each member contributed some amount to a common fund to meet the
unforeseen losses. Sometimes they also contributed equally to compensate
person as and when he suffered a loss. Traces of insurance in the ancient world
are also found in the form of marino trade loans or carriers contracts which
included an element of insurance.
Evidence is on records that arrangements embodying the idea of
insurance were made in Babylonia and India at quite an early period.
References were made to the concept of insurance in Manus code Manu
Smrity. It was akin to Yagakshemo of Rigveda in which the well being and
security of the community was aimed at. However, there is no evidence that
insurance in its present farm was practiced prior to twelfth century.

CHAPTER 6

PROBLEMS OF INSURANCE MARKETING.

INSURANCE SECTOR REFORM

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI
Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry
and recommend its future direction.
The Malhotra committee was set up with the objective of complementing the
reforms initiated in the financial sector. The reforms were aimed at creating a
more efficient and competitive financial system suitable for the requirements of
the economy keeping in mind the structural changes currently underway and
recognizing that insurance is an important part of the overall financial system
where it was necessary to address the need for similar reforms.
1997:- Insurance regulator IRDA set up.
2000:- IRDA starts giving licenses to private insurers: Kotak Life
Insurance ICICI prudential and HDFC Standard Life insurance first
private insurers to sell a policy.
2001:- Royal Sundaram Alliance first non life insurer to sell a
policy 2002 Banks allowed selling insurance plans.
In 1994, the committee submitted the report and some of the key
recommendations included:1. STRUCTURE: Government stake in the insurance companies to be brought
down to 50%.
Government should take over the holdings of GIC and its
subsidiaries so that these subsidiaries so that these subsidiaries
can act as independent corporations.
All the insurance companies should be given greater freedom
to operate.

2. COMPETITION:-

PROBLEMS OF INSURANCE MARKETING.

Private companies with a minimum paid up capital of Rs.1

billion should be allowed to enter the industry.
No company should deal in both life and general insurance
through a single entity.
Foreign companies may be allowed to enter the industry in
collaboration with domestic companies.
Postal life insurance should be allowed to operate in the
rural market.
Only one state level life insurance company should be
allowed to operate in each state.
3. REGULATORY BODY: The insurance act should be changed.
An insurance regulatory body should be set up.
Controller of insurance should be made independent.
4. INVESTMENTS: Mandatory investments of LIC life fund in government
securities to be reduced from 75% to 50%.
GIC and its subsidiaries are not to hold more than 5% in
any company.
5. CUSTOMER SERVICE: LIC should pay interest on delays in payments beyond
30 days
Insurance companies must be encouraged to set up unit
linked pension plans.
Computerization of operations and updating of
technology to be carried out in the insurance industry.
The committee emphasized that in order to improve the
customer services and increase the coverage of the
insurance, industry should be opened up to competition.

But at the same time, the committee felt the need to exercise caution as
any failure on the part of new players could ruin the public confidence in the

PROBLEMS OF INSURANCE MARKETING.

industry. Hence, it was decided to allow competition in a limited way by

stipulating the minimum capital requirement of Rs. 100 crores. The committee
felt the need to provide greater autonomy to insurance companies in order to
improve their performance and enable them to act as independent companies
with economic motives. For this purpose, it had proposed setting up
independent regulatory body.

CHAPTER 7

PROBLEMS OF INSURANCE MARKETING.

INSURANCE MARKETING IN INDIAN

ENVIRONMENT
The nature and behaviour of business is governed by environmental changes. In
a developing economy where financial institutions are accepted to shoulder
multi-faceted social burdens in addition to the task of mobilizing and
channelizing resources, it is necessary that professionalism should be
developed. Due to mounting problems of regional backwardness and regional
imbalances like making of marketing decisions and complicated in insurance
business.
Risk and uncertainties move upward due to increased sophistication. After the
nationalization of LIC in 1956 and GIC in 1974 there have been changes in the
organizational objectives. It was in this background that insurance business was
attempted to be expanded in rural areas. The purpose was to reach all the
potential users of the services. In this context it is significant to mention that the
extent of dependence of insurance business on the services of agent and rural
career agents is of high magnitude. The service conditions of rural agents and
agents in general are to be enriched. In the Indian condition the task of
motivating the rural prospects is more difficult as majority of them are illiterate.

Marketing of insurance services needs a rational approach, which means the

following:
1.
2.
3.
4.
5.
6.

Knowing the market.

Suitable pricing decisions.
Product to be developed as per needs.
Designing of sensitive promotional strategy.
Scientific management of agents.
Proficiency in management.

CHAPTER 8

PROBLEMS OF INSURANCE MARKETING.

THE INSURANCE REGULATORY AND

DEVELOPMENT AUTHORITY (IRDA)
The Insurance Act, 1938 had provided for setting up of the Controller of
Insurance to act as a strong and powerful supervisory and regulatory authority
for insurance. Post nationalization, the role of Controller of Insurance
diminished considerably in significance since the Government owned the
insurance companies.
But the scenario changed with the private and foreign companies foraying in to
the insurance sector. This necessitated the need for a strong, independent and
autonomous Insurance Regulatory Authority was felt. As the enacting of
legislation would have taken time, the then Government constituted through a
Government resolution an Interim Insurance Regulatory Authority pending the
enactment of a comprehensive legislation.
The Insurance Regulatory and Development Authority Act, 1999 is an act to
provide for the establishment of an Authority to protect the interests of holders
of insurance policies, to regulate, promote and ensure orderly growth of the
insurance industry and for matters connected therewith or incidental thereto and
further to amend the Insurance Act, 1938, the Life Insurance Corporation Act,
1956 and the General insurance Business (Nationalization) Act, 1972 to end the
monopoly of the Life Insurance Corporation of India (for life insurance
business) and General Insurance Corporation and its subsidiaries (for general
insurancebusiness).
The act extends to the whole of India and will come into force on such date as
the Central Government may, by notification in the Official Gazette specify.
Different dates may be appointed for different provisions of this Act.
The Act has defined certain terms; some of the most important ones are as
follows
appointed day means the date on which the Authority is established under the
act. Authority means the established under this Act.
Interim Insurance Regulatory Authority means the Insurance Regulatory
Authority set up by the Central Government through Resolution No. 17(2)/ 94lns-V dated the 23rd January, 1996.

PROBLEMS OF INSURANCE MARKETING.

Words and expressions used and not defined in this Act but defined in the
Insurance Act, 1938 or the Life Insurance Corporation Act, 1956 or the General
Insurance Business (Nationalization) Act, 1972 shall have the meanings
respectively assigned to them in those Acts.
A new definition of "Indian Insurance Company" has been inserted. "Indian
insurance company" means any insurer being a company
1) Which is formed and registered under the Companies Act, 1956
2) In which the aggregate holdings of equity shares by a foreign company,
either by itself or through its subsidiary companies or its nominees, do
not exceed twenty-six per cent. Paid up capital in such Indian insurance
company
3) Whose sole purpose is to carry on life insurance business, general
insurance business or re-insurance business?

PROBLEMS OF INSURANCE MARKETING.

PROTECTION OF THE INTEREST OF POLICY

HOLDERS
Towards achieving the objective of protecting the interest of insurance policy
holders, the authority has taken the following steps:
IRDA has notified Protection of Policyholders Interest Regulations 2001
to provide for: policy proposal documents in easily understandable
language; claims procedure in both life and non-life; setting up f
grievance redressal machinery; speedy settlement of claims; and
policyholders` servicing. The Regulation also provides for payment of
interest by insurers for the delay in settlement of claim.
The insurers are required to maintain solvency margins so that they are in
a position to meet their obligations towards policyholders with regard to
payment of claims.
It is obligatory on the part of the insurance companies to disclose clearly
the benefits, terms and conditions under the policy. The advertisements
issued by the insurers should not mislead the insuring public.
All insurers are required to set up proper grievance redress machinery in
their head office and at their other offices.
The Authority takes up with the insurers any complaint received from the
policyholders in connection with services provided by them under the
insurance contract.
In December, 2000, the subsidiaries of the General Insurance Corporation
of India were restructured as independent companies and at the same time GIC
was converted into a national re-insurer. Parliament passed a bill de-linking the
four subsidiaries from GIC in July, 2002.
Today there are 14 general insurance companies including the ECGC and
Agriculture Insurance Corporation of India and 14 life insurance companies
operating in the country.
The insurance sector is a colossal one and is growing at a speedy rate of
15-20%. Together with banking services, insurance services add about 7% to the

PROBLEMS OF INSURANCE MARKETING.

country`s GDP. A well-developed and evolved insurance sector is a boon for

economic developments as it provides long-term funds for infrastructure
developments at the same time strengthening the risk taking ability of the
country.

PROBLEMS OF INSURANCE MARKETING.

CHAPTER 9
MARKETING MIX FOR INSURANCE
ORGANIZATION
The Insurance business deals in selling services and therefore due weight age in
the formulation of marketing mix for the Insurance business is needed. The
marketing mix includes sub-mixes of marketing such as the people, the process
and the physical attraction. The public sector insurance organizations have not
been formulating and innovating the marketing mix to cater to the changing
needs and requirements and increasing level of satisfaction of the users.
Majority of the policyholders and dissatisfied with the service-profile and they
often complain regarding the detonating quality of services. Due to this the
foreign insurance companies and private insurance players are snatching away
the business of the public sector insurance organization.

PRODUCT MIX

MARKETING MIX
PLACE
MIX

PROMOTION MIX

PRICE
MIX

PROBLEMS OF INSURANCE MARKETING.

PRODUCT PLANNING AND DEVELOPMENT

The purpose of insurance business is to generate profits besides sub serving the
social interests. The present business environment is volatile and even the
insurance business is likely to be more competitive. Product is like a stage on
which the entire drama of successful marketing is acted. It is like an engine that
pulls the rest of the marketing programmes. It is this context that the product
management in an insurance organization needs an intensive care. Yesterday, the
policy holders had limited hopes and aspirations but today they expect more and
they would like even something more tomorrow. This focuses on the fact that
strategic decisions are influenced by the environmental conditions. The product
development needs a new vision, a new approach and a new strategy. Till now
the public sector insurance organization have not made possible an optimum
utilization of their marketing resources especially in rural areas where
tremendous opportunities are available. Thus they should assign due weightage
to the development services/ schemes which cater to changing needs and
requirements of the rural segment. In the development of product, the cooperative investments need due priority. Channelizing the co-operate investment
influences the rate of profitability of insurance companies and also contributes
considerably to the socio economic transformation process.
Thus the product planning and development should
Give due weightage to the socially and economically backward classes.
Maximize the mobilization of saving by offering lucrative schemes.
Assign due weightage to interest of investors.
Maintain economy in business by promoting cost effectiveness.
Act as a trustee of policy holders.
Keep in mind the emerging trends in business environment.
Improve the quality of customers/user services.

PROBLEMS OF INSURANCE MARKETING.

PROMOTION MIX
The formulation of product mix for the insurance business makes it significant
to take a look at the services and schemes of insurance organizations. The
product portfolio is known and the process of formulating a package should be
known. It is natural that the users expect a reasonable return for their
investments. It is quite natural that the insurance organizations want to
maximize profitability. It is well known that the key objectives of the insurance
business are mobilization of savings and channelisation of investments. This
makes it essential that the insurance business is made lucrative so that the users/
potential users get incentives to buy a policy or to invest in the insurance
organizations. The insurance organizations also need to promote the
underwriting activities, which would activate the process of arresting the
regional imbalance. In the context of formulating the product mix, it is essential
that the insurance organizations promote innovation an din the product portfolio
include even those services and schemes which are likely to get a positive
response in the future. The policies to be launched should not only generate
enough premium but it is also important that the policies cover persons working
in the informal sector, serving as porters, working as manual laborers, or
engaged in farm sector. The formulation of product strategy should assign due
weightage to the rural segment emerging as a big profitable segment especially
in the 21st century. The policies and schemes should have rural orientation so
that backward and neglected regions of the country get priority attention and the
regional imbalance is minimized. The formulation of package is also found
important. Designing a package on the basis of the needs and requirements of
the concerned segment would make the product mix ore competitive.

PROBLEMS OF INSURANCE MARKETING.

With Advent of private players in the insurance field, it has now become
imperative for all the insurance companies to resort to rampant promotion.
Promotion mix for this sector is as follows
Advertising
Advertising can be done through the telecast media, broad cast media and print
media. Insurance companies have been making optimal use of all the three
kinds. Use if World Wide Web, as a media is almost negligible and will not be
very frequent in the near future considering the fact that the majority of
customers base of these companies is not yet exposed to the internet. The
telecast media has been the most effective of all I case of insurance sector. Most
of the companies have their separate advertising section to take care of this
aspect. An important consideration while making the decision as to the selection
of the media is budgetary constraint. Since the insurance companies work on
large scale, usually this constraint does not stand as an obstacle.
Publicity
It is a device to promote business without making any payment and therefore it
could be also called unpaid form of persuasive communication bearing a high
rate of sensitivity. Developing rapport with media is an important aspect of
publicity. This makes it essential that the PR officers working in the insurance
organization maintain contacts with the media personnel, organize press
conference, and offer small gifts and memento to them. These days LGD
marketing is gaining popularity the world over. It also can be applicable here. At
the apex and regional levels, the PROs bear the responsibility off projecting
positive image of the organization. Thus it is necessary to select suitable
personnel for this. They should be in particular taught to deal with people,
simple things like talking, greeting etc.
Sales Promotion
Incentives to the end users for taking policy play an important role in promoting
insurance business. Since the insurance business is also related to achieving of a
particular target, it is pertinent that the policymakers assign due wieghtage to
the same. The offering of small gifts during a particular period, the rebate
discount, bonus can increase the business organizations by leaps and bounds.
Besides these there can be gift for insurance agents also.

PROBLEMS OF INSURANCE MARKETING.

Personal Selling
Personal selling in the case of insurance organizations is a quite important
considering the existence of insurance agents spread at all levels. Selection of
these agents, their training is responsibility of the organization. There is a
difference in the urban and the rural market. Rural customers may be
uneducated/ uninformed etc compared to the urban customers. Hence the
organizations will have to make selections of the rural and urban agents
accordingly.
Word of mouth promotion
The word of mouth communication result into wider publicity, which
substantially sensitizes the process of influencing the impulse of users/
prospects of the insurance services. The satisfied group of customers opinion
leaders the social informants ,the popular personalities act as a word of
communication .The advertisement slogans may be incentives the publicity
measures may be ineffective but the positive feeling of friends and relations
communicated cannot be ineffective>this make it clear that the most important
thing of any business is the quality of services.
Telemarketing
With the development of satellite communication facilities and with the
expansion of the television network, we find telemarketing gaining popularity
the world over. The organization in general need to promote telemarketing. the
foreign insurance company have been assigning due to wieghtage to this end in
India this is beginning to gain importance with the advent of competition in the
sector>the telecommunicate is supposed to be well aware of the telephonic code
so that the task of satisfying the customer with their queries will not consume
much of time.
World Wide Web
In banking as well as Insurance, more and more importance is being given to
online contract facilities whereby complaints/comments could be sent through
an email. Email is fastest written mode of communication and since it has been
recognized legally, its use to clear doubts has been in full swing.

PROBLEMS OF INSURANCE MARKETING.

PRICE MIX

In the insurance business, the pricing decision are concerned with the premium
charged against the policies interest charged for defaulting the payment of
premiums & credit facilities, commission charged for underwriting &
consultancy services. The formulation of pricing strategies becomes significant
with the viewpoint of influencing the target market or prospects. To be more
specific in the Indian context where the disposable income in the hands of
prospects is found low, the increasing inflationary pressure has been
instrumental in contracting the discretionary income, the increasing
consumerism has been making an assault on the saving potentials of masses, it
is pertinent that the insurance organizations in general & public sector insurance
organizations in particular adopt such a strategy for pricing that makes is a
motivational tool & paves the ways for increasing the insurance business. Of

PROBLEMS OF INSURANCE MARKETING.

course, a motivational pricing strategy is required to be given due weightage.

This necessitates a new vision for setting premium structure & paying the bonus
& charging the interest.
The strategy may have a new vision in the sense that the insurance organizations
prefer to make a mix of high & low pricing strategy. The motive is to make the
premium structure commercially viable so that the insurance organizations
succeed in having a sound product portfolio besides fuelling development
orientation. The pricing decisions make it essential that the insurers keep in their
minds the nature of policy vis--vis the segment to which the prospects belong.
In the tangible products, cost of production is taken as the basis for fixation of
prices. Even in the insurance business, it is found to be an important
consideration & a dominating base. This makes the cost of insurance a decisive
factor for charging premium. The important bases for determining the cost are
rate of death, rate of interest & the expenses incurred on the insurance business.
The mortality table helps the determination of the death rate. It is to predict
future mortality. The best method of construction of mortality table is to select a
large number of persons at attained age, which is meant age close to the birth
rate. The second important element is the rate of interest. On the basis of
mortality rate, it is estimated that when & how much amount is to be received as
premium & would be paid as claims but on the basis of interest rate, but on the
basis of interest rate, it is estimated that how much interest can be earned by
investing the insurance funds. The last element is cost which focuses on
different types of expenses. These are certain expenses, which are incurred at
the time of inception of the policy. This necessitates determination of the nature
of expenses. The determination of expenses according to occurrence & equal
distribution of the expenses every year for equitable distribution of loading are
found significant to make possible a sound management of expenses.
The process of rate of fixation in the insurance organization is not so scientific
& identifies the cases of moral hazard. It is easier to identify the physical hazard
but the task of identifying the moral hazard is found difficult. The premium
charged is to be made rational to cater to the payment of claims on a priority
basis including the catastrophic losses, management expenses & margin for
profit. It is essential that various related to both the hazards are estimated in a
scientific way. The actual process of rating consists of three steps. E.g.
classification, discrimination & scheduling.

PROBLEMS OF INSURANCE MARKETING.

The price mix decisions are:

Making possible cost of effectiveness
Restructuring of premium
Due priority to profit generation Investments.
Rationalizing of optimizing the social costs
Paving avenues for channelising the productive investments
Assigning the weightage to the polices meant for the socially and
economically backward classes.
Making the ways for maximizing profitability.

PLACE MIX

PROBLEMS OF INSURANCE MARKETING.

Another component of the marketing mix is related to the place decision in

which our focus would be on the two important facets managing the insurance
personnel and locating a branch. The management of agents and insurance
personnel is found significant with the view point of maintaining the norms for
offering the services. This is also to process the services to the end user in such
a way that a gap between the services-promised and services offered is bridged
over. In majority of the services generating organizations such a gap is found
existent which has been instrumental in generating aggravating the image
problem. The policy makers make provision: the senior executives specify of
making available the promised services to the end users. The public sector,
insurance organization has failed in both the areas. The agents rural career
agents, front-line-staff and even a majority of the branch managers become a
party gap.
The transformation of potential policyholders into actual policyholders is a
difficult task that depends upon the professional evidence of personal. The
agents and the rural career agents acting as link lack professionalism. The Frontline-staff & the branch managers are found not assigning due weightage to the
degeneration process. The insurance personnel if not managed properly would
make all of efforts incentive. Even if the policy makers make provisions for
quality upgradation, the promised services hardly reached to the end users. This
makes it significant that the insurance organizations in general and public sector
organization in particular keep in their mind the changing expectations of
customers and the prospects. The behavioural profile of insurance personnel is
studied in a right fashion and the changes required due to the changing
perception of expectations are incorporated. It is essential that they have rural
orientation and are well aware of the lifestyles of the prospects or users. They
are required to be given adequate incentives show there excellence. While
recruiting agents, the branch manager needs to prefer local persons and by
conducting refresher courses to brush up their facilities so that they know the art
of influencing the users/ prospects. In addition to the agents, the front-line-staff
also need an intensive training programme. This makes it essential that ongoing
training programme is organized by the branch managers which focus on the
behavioural management.
Another important dimension of the place mix is related to the location of
insurance branches. While locating branches branch managers need to consider
a number of factors, such as smooth accessibility, availability of infrastructural
facilities and the management of branch offices and premises. In addition to it is
also significant that the branch manager assign due weightage to the safety
provisions. The management of offices makes it significant that the branch

PROBLEMS OF INSURANCE MARKETING.

managers are particular to the office furnishing, civic amenities & facilities,
parking facilities and interior decoration.
Thus the place management of insurance branch offices needs a new vision,
distinct approach and an innovative strategy. This is essential to make work
place conducive, attractive, and pro-active to the generation of efficiency. The
motives are to offer the promised services to the end users without any
distortion and making the branch offices a point of attraction. The branch
managers need professional excellence to make place decision productive.

THE PEOPLE

PROBLEMS OF INSURANCE MARKETING.

People are most important component of marketing mix for the insurance
industry. Sophisticated in the process of technological advances makes the way
for the development of personnel in such a way that an organization succeeds in
making possible a productive utilization of technologies used or likely to be
used. Professional qualification requirements change as technology develops
and evolves. The use of computers micro-computers, fax machines,
sophisticated telephonic services, and e-mailing, inter-net and intra-net services
have been found throwing a big impact on the perception of quality of services.
This makes it essential that the insurance organizations also think in favour of
developing personnel in line with the development and use of information
technologies. The front line staffs as well as the branch managers are required to
be given the training facility so that they are in position to make possible and
effective use of the technologies. The insurance organization
bear the
responsibility of the developing the credentials of their employees. In this
context, it is also significant that they think about the behaviour profile of
insurance personnel. It is pertinent that the employees are well aware of the
behavioural management they know and understand the changing level f
expectations of users and make sincere efforts to fulfill the same. In this context,
it is also significant that the senior executive while the recruiting, training and
developing the insurance personnel make it sure that employees serving the
organizations have a high behavioural profile in which empathy has been given
due place. The psychological attributes becomes significant with the view point
of influencing the prospect a retaining the users, it is in this context that the
insurance companies need a rational plan for the development of insurance
personnel.

PHYSICAL EVIDENCE

PROBLEMS OF INSURANCE MARKETING.

Physical evidence includes facility design, equipment signage, employee dress,

tangibles, reports and statements.

Signage
Signage personifies the insurance company. It gives a identity by which users
recognize the company. A signage depicts the companys philosophy and policy.
Following are some of the examples

Tangibles
Insurance companies give their customers and agents various tangible items like
pen, letter pad, calendars. Such things try to reduce the intangibility
characteristics of this industry.

Statements
The statements are punch line which briefly depicts the vision and attitude of a
insurance company towards its users/potentials. It also indicates their business
motive.

PROCESS

PROBLEMS OF INSURANCE MARKETING.

Flow of activities
Since major activities are conducted through the agents, the agents are given
training and refreshers courses etc. There are branches of insurance
organizations were this agents go for processing of proposals/ claims etc.
Standardization
The proposal/ claim forms an other formalities are standardized. In case of each
branch 0f an organization. Standardization here implies procedural
standardizations. But the proceedings may differ from case to case in case of
claim.

Customization
As stated earlier, each case has its own peculiarities. Hence amount of premium,
proceedings of a claim etc. are quite subjective

Number of Steps
Clients of a insurance company differ from an individual policy-holder to a
large conglomerate. Number of steps in case of each group will definitely differ.
However, in case of individual customer, the agents handle the proceedings.
Thus the actual customer is not involved in proceedings for a majority of steps.
In case if the corporate, usually separate officer to take care of each case.
Standardization reduces many steps as well as the time taken.

Simplicity
Use of national language/ regional language, customer friendly forms and
instructions manuals. Segregations of various departments into counters, etc.
Has made entire process quite simple.

Complexity

PROBLEMS OF INSURANCE MARKETING.

Insurance works on spread of risk principle the company have to use others
money and hence they are very careful while processing the claims but also
while accepting the proposals in the first place. Because of some stringent
norms, the process of obtaining and furnishing documents proofs etc. Becomes
complex; but it has been quite simplified by the existence of the agents.

Customer involvements
Customer involvement in case of insurance organization is quite limited. The
insurance agents act as pros for the company, they perform majority of the
necessary formalities. The customers are only involved in case of formalities
like medical examination, interviews etc. But the organization makes it a point
to let the customer express their concerns through the customer complaint cells
and mail/email contact.

CHAPTER 10
INSURANCE MARKETING

PROBLEMS OF INSURANCE MARKETING.

The term insurance marketing refers to the marketing of insurance services with
the aim to create customer and generate profit through customer satisfaction.
The insurance marketing focuses on the formulation of an ideal mix for
Insurance Business so that the insurance organization survives and thrives in the
right perspective. The organizations can successfully increase the market share,
maximize the profitability and keep on the process of development with the help
of marketing.

In Indian perspective where rural orientation needs a prime attention, the

insurance marketing may prove to be a deice for combating regional imbalance
by maintaining the sectoral balance as an investment institution; the rural
development oriented projects make ways for the transformation of rural
society. It is right to mention that the marketing concept in both bank and
insurance business is a matter of recent origin. The marketing concept in the
insurance business is concerned with the expansion of insurance business in the
best interest of the society vis--vis the insurance organization. The selection of
risks (product planning), policy writing (customer service) rating or actuarial
(pricing) and agency management (distribution)- all marketing activities make
up an integrated marketing strategy. We cant negate that during the yester
decades, there have been considerable developments in the perception of
customer servicing firms like banking and insurance companies. The marketing
concept in the insurance business focuses o the formulation of marketing mix or
a control over the whole marketing activities that make up an integrated
marketing strategy.

In a view of the above, we observe the following facts regarding the concepts of
insurance marketing:
It is a managerial process
It is a conceptualization of marketing principles.
It is a process of formulating the marketing mix.
It is an advice to make possible customer orientation.
It is another name of marketing professionally.

PROBLEMS OF INSURANCE MARKETING.

It is even a social process that paves avenues for social transformation.

It is to make possible product attractiveness.
It is to energize the process of quality upgradation.

CHAPTER 11

PROBLEMS OF INSURANCE MARKETING.

MARKETTING STRATEGIES IN INSURANCE

In today's economy, the financial services industry is exposed to increasing
performance pressure and competitive forces. Modern media, such as the
internet, have created new challenges for this industry. New business concept, a
change in client sophastication, and an increasing number of new competitors
entering into the market, such as independent financial consultants, have
changed the business models and the competitive forces that established
financial services organisations are facing today worldwide. A marketing
strategy serves as the foundation of a marketing plan. A marketing plan contains
a list of specific actions required to successfully implement a specific marketing
strategy. A strategy is different than a tactic. While it is possible to write a
tactical marketing plan without a sound, well considered strategy, it's is not
recommended. Without a sound marketing strategy, a marketing plan has no
foundation. Marketing startegies serves as the fundamental underpinning of
marketing plans designed to reach marketing objectives. It's important that these
objective have measurable results. A good marketing strategy should integrate
an organization's marketing goals, policies, and action sequence into a cohesive
whole. The objective of marketing strategy is to provide a foundation form
which a tactical plan is developed.
The following techniques are implemented to device the marketing strategy for
the product and services.
- segmentation
- targeting
- positioning
Segmentation
Market segmentation is widely defined as being complex process costing into
two main phases as follows
- Identification of broad, large market
- segmentation of these markets in order to select the most appropriate target
market and developed marketing mixes accordingly.
Positioning
Simply, positioning is how your target market defines you in relation to your
competitors a good positioning is

PROBLEMS OF INSURANCE MARKETING.

- what makes you unique

- this is considered by your target market.

Positioning is important because you are competing with all the noise out there
competing for your potential fans attention if you can stand out with unique
benefits, you have changed their getting their attention. It's important to
understand your product from the customer's point of view relative to
competition.
Targeting
Targeting involves breaking a market into segament and then concentrating your
marketing efforts on one or few key segaments. Target marketing can be the key
to small business's success. The beauty of target marketing is that makes the
promotion, pricing and distribution of your product and services easier and
more cost effective. Target marketing provides a focussed to all of your
marketing activities.

PROBLEMS OF INSURANCE MARKETING.

4 IMPORTANT STRATEGIES

These are the 4 most important strategies for online insurance marketing. First,
building links to your website is the best thing you can do to help your website
rank better. The reason links are so important is because they count as a vote
for your site to the search engines. When search engines rank websites they take
into account the number of links (votes) pointing at that site and the quality of
those links.
To maximize your results from link building, your marketing plan should
include building links from a number of different, yet relative, online sources.
Some places you can get these links are from forum posts, blog comments, local
directories for your city, or even writing articles for article directories. Make
sure to choose to build links at websites that are also trusted by Google that
will be seen as high quality by the engines. Links from spammy looking
sites wont do you a bit of good.
Article Writing
The concept here is to write 400 to 500 word articles about an insurance topic
and post it at various article directories. If you are afraid you wont know what
to write just focus on the questions that you are most commonly asked by your
clients and start writing from there. Pretend youre answering those questions as
you write each article.
You create the link back to your website through these article directories by
using the resource or authors box located beneath the finished article that is
provided by the website. So, youre getting a trusted back link and sharing some
of your insurance acumen.

PROBLEMS OF INSURANCE MARKETING.

Website Tweaks
There are a lot of bad websites out there on the Internet today and unfortunately
the word bad doesnt refer to the graphic design or appearance, but something
more important. In order for your website to rank well for, lets say Your Town
Auto Insurance, you need to have that keyword in the right quantities on your
website.
You should add the key phrase to your sites meta description, meta keywords,
the h1 headline tag and the pages title tag. While its true that only about 20%
of how the search engines view your website comes from the website itself (the
rest is from those back links), it would be short sighted to correct this easy
problem. Every little bit helps, especially when your sites rank is on the line.
Forum Posting
Posting at online forums can be a fun way to add back links to your site. Find a
forum for your niche (maybe your town has a forum, or find an insurance
forum) and contribute to that community with your knowledge. Most of the
online forums provide a space for you to add a link in your signature line.
While this may seem pretty straight forward, some have abused this technique
and just spammed these website with junk comments and posts. You should be
careful not to fall into that trap. Try to be a trusted insurance professional
(shouldnt be a stretch) while answering peoples questions. Dont just promote
your site with stuff like hey, if anyone wants a quote, visit blahblah.com. Not
only will you probably be ignored but youll also very likely get banned.
There are other insurance marketing techniques to get your website to the top of
the search engines. But the four that Ive outlined here are my personal
favorites.

PROBLEMS OF INSURANCE MARKETING.

CHAPTER 12
LIMITATION OF INSURANCE MARKETING
Some of the difficulties and limitations faced by me during my training
are as follows:

Lack of awareness among the people

This is the biggest limitation found in this sector. Most of the people are
not aware about the importance and the necessity of the insurance in their
life. They are not aware how useful life insurance can be for their family
members if something happens to them.

Perception of the people towards insurance sector

People still consider insurance just as a Tax saving device. So today also
there is always a rush to buy an Insurance Policy only at the end of the
financial year like January, February and March making the other 9
months dry for this business.

PROBLEMS OF INSURANCE MARKETING.

Insurance does not give good returns

Still today people think that Insurance does not give good returns. They
are not aware of the modern Unit Linked Insurance Plans which are
offered by most of the Private sector players. They are still under the
perception that if they take Insurance they will get only 5-6% returns
which is not true nowadays. Nowadays most of the modern Unit Linked
Insurance Plans gives returns which are many times more than that of
bank Fixed deposits, National saving certificate, Post office deposits and
Public provident fund.

Lack of awareness about the earning opportunity in the

insurance sector
People still today are not aware about the earning opportunity that the
Insurance sector gives. After the privatization of the insurance sector
many private giants have entered the insurance sector. These private
companies in order to beat the competition and to increase their Insurance
Advisors to increase their reach to the customers are giving very high
commission rates but people are not aware of that.

Increased competition
Today the competition in the Insurance sector has became very stiff.
Currently there are 14 Life Insurance companies working in India
including the LIC (life insurance Corporation of India). Today each and
every company is trying to increase their Insurance Advisors so that they
can increase their reach in the market. This situation has created a
scenario in which to recruit Life insurance Advisors and to sell life
Insurance Policy has became very very difficult.

PROBLEMS OF INSURANCE MARKETING.

CHAPTER 13
CONCLUSION

PROBLEMS OF INSURANCE MARKETING.

CHAPTER 14
REFERENCE