CHAPTER : 3

Marketing Strategies of Insurance

Company (Part-II
 [ 89 ]

CHAPTER : 3

MARKETING STRATEGIES OF
INSURANCE COMPANY PART-II

PROMOTION STRATEGIES
Product planning, pricing and distribution are marketing activities that are performed
mainly within the company, or between the company and its marketing partners. However
in its promotional activities, the firm gets its chance to communicate with potential
customers. Promotional mix is a combination of personal selling, advertising, sales
promotion and public relations. These are the promotional tools that help an organization
to achieve its marketing objectives. The statement that "nothing happens until somebody
sells something" expresses rather well the place of promotional activities in today's
business scene.

Promotion is the element in an organization's marketing mix that is used to inform

and persuade the market regarding the organization's products and services. Basically
promotion is an exercise in information, persuasion, and communication. These three are
related because to inform is to persuade, and conversely, a person who is being persuaded
is also being informed and persuasion and information become effective through some
form of communication.

The promotion strategies have been discussed under sales promotion, personal
selling, public relations and advertising.

Sales promotion
The sales promotion strategy is an important element in the overall marketing
strategy particularly in promotional strategy. It aims directly at inducing purchasers to buy
a product or service. It is a device to promote sale to meet a certain target. It is a temporary
device which is withdrawn after a particular period. It is meant for both the end users
of the services and the channels found instrumental in promoting the services. In the
insurance business, the incentives to the policy holders, users or to the agents, rural career
agents or even to the insurance personnel for promoting the business are the sales
 [ 90 ]

promotion tools. Almost all the organizations are found using the tools of promotion in
a different way. Since the business environment is likely to be more competitive, it is
pertinent that the insurance organizations .offer innovative tools of sales promotion and
increase or decrease the duration depending upon the business conditions vis-a-vis the
emerging trends in business. It is against this background that we make a strong advocacy
in favour of sales promotion for promoting the insurance business. It is upon the senior
executives and the policy makers to think in favour of innovative tools.

Incentives to the end users for taking a policy play an incremental role in promoting
the insurance business. It is in this context that we need to think about the tools of sales
promotion for the policyholders. Since the insurance business is also related to the
achievement of a particular target, it is pertinent that the policy makers assign due weight-
age to the same and the senior executives as well as the branch managers promote the
same and on a priority basis. In addition, the branch managers as well as the agents and
the rural career agents should also accept the responsibility of making this component of
the promotion mix popular vis-a-vis proactive. Offering of small gifts during a particular
period, the rebate, discount, bonus can be instrumental in increasing the business of
insurance organizations. It is right to mention that such incentive to the policyholders /
prospects would be successful in increasing the business. It is the responsibility of the
insurance professionals that they keep on activating the process of innovation so that other
insurance companies find it difficult to compete with the organization.

The agents and the rural career agents play an incremental role in promoting the
insurance business. It is against this background that we need to promote them for getting
more business. The promotional tools for the agents and the rural career agents and even
for the branch managers and the front-line-staff need due attention of the senior
 [ 91 ]

executives of the insurance organizations. Since they bear the responsibility of promoting
the insurance business, it is judicious as well as logical that the promotional tools for them
are frequently innovated. Such an incentive would help the insurance organizations in
many ways. If we feel that rural segment needs an intensive care, they should be given
more incentives for promoting the business in the rural areas. This makes it clear that
incentive, to the users/policyholders as well as to the agents and the rural career agents
would be instrumental in promoting the insurance business, provided the insurance
professionals innovate the same, much earlier than their competitors.

Sales promotion is assorted, noncurrent and non-personal selling efforts. It is a

diverse collection of incentive tools to stimulate quickly for a greater purchase. Sales
promotion is mainly an incentive by way of premium discounts, warrantees, bonuses,
prices off, and other incentives. The sales force are offered commission, allowances,
contests, sales competition, promotion avenues and so on. Advertising provides reasons
to purchase and sales promotion provides incentives to purchase.

Sales promotion has been considered more effective tool of increasing sales. A large
number of new insurance coverages are provided by the insurance companies to meet
different requirements of the prospects. The emergence of nontraditional policies is one
of the several effective forms of sales promotion. The insurance industry has a very
limited form of sales promotion. Many of them are as part of contract. The premium-
discount for purchasing a higher volume policies, discounts for single payments of
premium, group insurance discounts etc. Additional premiums are charged for additional
risks. Comprehensive policies are comparatively cheaper to motivate policyholders to
insure a large number of risks. No-claim discount is also prevalent to motivate the
policyholders to reinsure and protect the property insured. The insurance companies
should announce patronage rewards. The policyholders who have individual insurance at
higher values should be announced by the companies.

The sales force competition should continue in more vigour and zeal. The winner's
name should be published in the newspaper. The prizes should be given to a large number
of sales force to motivate them to acquire more business. The top five insurance agents
should be allowed to have free travel in India every year. The first top agent should be
 [92]

allowed to participate in insurance seminars and conferences free of cost to be held

abroad. The policy warrantees should be made more liberal to motivate people. The
promotion-avenues to sales force should be opened .more liberally to motivate them to
procure more business. The training of sales force may build more competence in the
areas of insurance business. The allowances and expenditure reimbursement facilities
should be increased to include a larger number of sales force. The booklets, brochures,
calendars, pads, pencils and other items should be provided free of cost to stimulate the
agents and development inspectors to contact a large number of prospects. The distinctive
image of agents should be increased by offering certain bags, clothes packages etc.
bearing the name of the company to let them feel that they are representatives of certain
reputed company. The facilities of vehicles at interest free loan, vehicles allowances and
such other facilities may make them feel proud of belonging to such company. The
development inspectors should be given travel allowances and other facilities to partici­
pate in certain charitable gatherings, social meetings, academic conferences, trade
meetings, competition participation and so on. This .practice increases the image of the
company as well as the popularity of the insurance policies. Facilities of loan for house
construction, telephone etc. help the sales force to participate more productively in
business transactions.

Participating in trade shows and conventions is not very common in insurance

industry in India. Organizing shows and exhibitions at important gatherings, business
exhibitions, fairs, social and religious gatherings in important cities and towns will give
more business to the insurance companies. They should start it at a comprehensive level.
Motion pictures, audio-visual materials, publications etc. may yield good results. Trade
shows and exhibition should be organized on regular annual basis.

Use of shop windows, point of purchasing displays, vehicles of company etc. may
also be very useful to enhance insurance business. They attract the prospects, identify
what is sold, create interest in the insurance coverage, arouse desire to purchase, change
the habits of anti-image and stimulate to take action of purchasing the insurance policies.
Sales promotion in designed to break the brand loyalty or image of the company. Sales
promotions give faster responses in sales. Sales promotion programmes should be tested
before launching them. The consumer surveys will reveal the effectiveness of the sales
 [ 93 ]

promotion. Insurance company should strengthen their promotion programme to inform

the prospects arouse interest in them.

Personal selling
The personal selling through sales force is very effective in insurance industry. The
sales representatives i.e. agents and development inspectors evolve professional occupa­
tion. They are more concerned with helping the prospects. They advise and assist the
prospects in purchase decision of insurance covers. They adopt creative selling and
missionary approach to persuade the prospects to purchase the policies. They adopt
prospecting approach, presentation, demonstration, handling objectives, closing and
follow up.

. The prospecting involves identifying the potential policyholders. It requires help of

previous policyholders, friends, neighbour, colleagues, and others to find out the potential
prospects. The finding of real prospects is the first step in personal selling. All the
prospects are not approached for the presentation of sales agreement. Only those prospects
are approached who are qualified for the purpose. They should have insurable interest and
premium capacities. They should have the needs of the insurance and have premium
capacities. Unqualified prospects are not approached to avoid time,- labour and money in
convincing them. The qualified prospects are approached with initial contact of the sales
agent. The presentation starts the moment the agent tells about the company and its
insurance covers. The agent should have a clear, concise and positive presentation. They
have certain arguments which are to be put to the prospects. Demonstration is the real
presentation of the policies and their respective advantages. The prospects are allowed
to raise objections because insurance industry has certain anti-image. The objections
should be replied in befitting manners. If the prospects are satisfied with the answers of
the objections, they act to purchase the policies. Immediately the agent should try to fill
the personal forms and collect the premium for the prospects to deposit with the
respective office. The agent should not go away after completing the proposals. The post
sales services-are essential to make the policyholders satisfied with the purchase decision.
The post sales services have been more useful to increase the agents- business. In this way
 [ 94 ]

the image of the agent increases. People rely on his arguments and try to purchase policies
at the persuasion.

The proper selection, training, supervision and compensation are eventual to have
effective sales force. The sales force size in decided on the basis of present and potential
needs of the companies. The compensation should be adequately managed. If the agents
are paid for vacations, sickness, accidents etc. they get more initiative to increase
business. The agents and development inspectors should be trained in providing adequate
presale and post sale services. Service is the best method of advertising in insurance.
Satisfied policyholders become instrument to expand insurance benefits to prospective
prospects. They will carry good image of the company and the insurance policies. It is
observed that the policyholders are generally dissatisfied. They create bad image of the
company. Therefore, it is very essential that the agents and the inspectors should be ready
to provide required services to the policyholders and prospective people. Policyholders
complain that the office staff is not cooperative. It is very essential that the office staff
should be encouraged to provide adequate services to the field staff.

We can't deny the fact that out of all the components of promotion mix, the personal
selling occupies a place of outstanding significance. This is due to the fact that the
insurance business is substantially influenced by the instrumentality of agents and the real
career agents. If they are aware of the art of informing, sensing and persuading the
potential policyholders, the task of insurance organizations is simplified considerably. It
is in this context that we talk about this component of the promotion mix.

We are well aware of the fact that personal selling is based on the excellence of an
individual. This focuses our attention on the ability of an individual to influence the
impulse by activating the persuasion process. This makes it significant that the agents as
well as the rural career agents have certain outstanding properties or attributes,, such as
patience, communicative ability, attractive personality and commitment to the profession.
The insurance business can't exist if the agents stop working. Hence the insurance
organizations are supposed to assign due weightage to the excellence in an individual who
is assigned this responsibility. While recruiting agents, the insurance professionals need
to be careful so that persons with high communicative ability, an attractive physique and
 [ 95 ]

everlasting patience are assigned the responsibility of acting as an agent. The branch
managers bear the responsibility of managing and developing the agents by monitoring
their contributions to the process of increasing the insurance business. They are supposed
to organize refresher courses to develop the agents so that the emerging trends in the
investment potentials of a command area vis-a-vis the changing level of expectations of
the policyholders/ prospects are transmitted to them in a right fashion and on time.

Since we find the rural segment likely to emerge as a profitable segment in the near
future, it is the prime responsibility of the rural career agents that they perform the
responsibility of informing, sensing and persuading the rurl prospects. It is quite natural
that the business conditions in the rural segment is to be a bit different. The rural
prospects in the majority of cases are found illiterate unorganized and ill informed. They
don't know about the insurance business. The public sector insurance organizations bear
the responsibility of promoting the rural segment and therefore it is pertinent that they
develop and promote the rural career agents. The real career agents should have high
communicative ability and a hero of regional language. Almost all the segments in the
rural areas have tremendous potentials and the rural career agents are supposed to
capitalize on the opportunities optimally. The personal selling thus requires an intensive
care. It is high time that 'the Career Agents Schemes' and the 'Rural Career Agents'
Schemes' are promoted.

Advertising
Advertising is a paid form of persuasive communications is found important to
promote the insurance business. Of late, we have sophisticated devices to advertise. In
addition, we have executives having world class professional excellence. The advertising
professionals bear the responsibility of making the advertisement slogans, appeals,
campaigns creative so that the proceed of sensitizing the prospects is found proactive. We
talk about a group of target audience found unconscious, unorganized, illiterate, insen­
sitive or so. This increases the functional responsibilities of advertisement professionals.
It is in this context that we make a strong advocacy in favour of creativity.

We advertise through telecast media, broadcast media and the print media. We can't
negate that the insurance organizations need to make possible an optimal use of all the
three media. So far as the vulnerable sections of the society are concerned, we find the
telecast media more effective in the sensitizing process. With the help of audio/visual
exposure, the rate of acceptability of the messages can be increased sizeably. If the
advertising professionals are well aware of the receiving capacity of the prospects, they
can make the advertisement slogans, and messages creative. We can't deny that the
telecast media in expressive but to promote the insurance business we have no option but
to assign due weightage to the same.

The broadcast media can also be used for that very purpose. Since we have a big
transition network and a well developed system, the insurance organizations are supposed
to use even the broadcast media. If we find the messages sensitive the rate of acceptability
would also be high. Another benefit of this media is to reach the messages even to the
remotest parts of the country. It is the responsibility of insurance professionals that they
with the support of advertisement professionals make possible creativity in the messages
and slogans and increase the effectiveness of broadcast media. The media being economic
in nature offers additional benefit that would collect more support on the financial ground.

The print media can also be used for promoting the insurance business. Being
economic in nature and impressive in expression, the print media of late, has been found
gaining popularity. The sophistication in the print technologies has made the media more
attractive. It is against this background that now almost all the organizations assign due
weightage to this. The insurance organizations need to promote the print media since this
would simplify their task of making the appeals effective by using regional languages.
The detailed explanation is another property that requires due place while making
decisions related to the selection of a suitable vehicle for travelling the messages.

An important consideration while making the decision is the budgetary constraint.

Since we find insurance organizations working on a large scale, we don't find this
constraint standing as an obstacle. They can afford even the expensive telecast media and
therefore they should assign top priority to the acceptability factor of course, we find the
public sector insurance organizations advertising properly, but there must be a close
relation between the services offered and the services-advertised. It we find a gap or
exaggeration, the sensivity rate of our messages would go down. This focuses our
 [ 97 ]

attention on building up of a positive image by offering the promised services to the users.
Advertisement helps us in projecting a positive image'but if we find nothing positive in
our accounts to advertise, the sensitivity in messages is not possible.

We can’t deny the fact that private insurance companies are found instrumental in
building up of a positive image since, the quality of their services is found of world class.
It is unpleasant to comment that the public sector organizations have not been assigning
due weightage to the quality upgredation and therefore whatever they advertise are not
positive in effect of course, they need to advertise but their advertisement messages
should have a close link with the quality of services they offer. It is against this
background that the insurance professionals while advertising services need to make the
advertisement message realistic. The main thing is creativity and this necessitates seeking
the cooperation of world class advertising professionals who show their excellence.

In view of the above, it is right to mention that advertisement, an important

dimension of the promotion mix requires due attention of senior executives so that
whatever the lapses we find in the advertisement programming are sorted out. We need
to use this tool in a right fashion. We need to avoid the misuse of this tool of late, there
are a number of devices to make possible sophistication in promotion and the insurance
professionals are supposed to remember it. There must be a proportionate use of the
different components of promotion.

Public Relations
The public relations department is located at the head office of the company. This
department deals with the public. It performs various functions such as pressrelations,
product publicity, companies communication lobbying, with government officials and
counselling to the management of the company. Public relation department disseminate
communication. The task of publicity is also vested to the PRD (Public Relations
department). It assists in the launch of new products, assists in repositioning a matured
product, builds up interest in product strategy. The PRD is used to build awareness and
brand knowledge for the new as well as existing products. It creates memorable impact
on public awareness by developing and circulating the stories. If the stories are
 [ 98 ]

interesting, it is picked up by all the news media without cost. It works miracles in many
cases.

Insurance industry should recognize the needs to provide public information as well
as to develop public understanding and goodwill. The PRD have broader objectives than
those of other promotional strategy. Publicity and public relations are interwoven.
Publicity is an information activity of public relations. Publicity releases covering
products for inclusion in newspaper magazines etc. The PRD has several activities such
as news, speeches, written material, audio-visual material, corporate identity, media,
events and public service activities.

The PRD creates favourable news about the company and the insurance scheme.
News generation requires skill in developing a story. The manager of PRD understands
the need of the press for stories. He may call press conferences to explain the views. The
press releases depend on interspersonal skills. The talks and speeches of trade association
or sales meeting are circulated. The information about the product and the company, the
written materials are used to inform the public about the progress, new products and uses
of the existing products through annual reports, brochures, articles, news letters, maga­
zines etc. The brochures are published generally in regional languages by the insurance
company to inform about the new products. New India has been taking lead in this
context. Company newsletters and magazines are used to build up its image. It conveys
important news to target markets through the written material. Audiovisual materials such
as slides, video, and audio cassetes are being commonly used to inform the public. The
companies materials are required to be separately looked to identity the company. The
public should immediately recognize the company. Such identities are reflected by
building rolling stock, business cards, sign brochures, stationary business cards, etc.
These will have long lasting effect if they are attractive, distinctive and memorable.
Insurance companies draw attention towards certain events such as, news, conferences,
seminars, outings, exhibits, competition etc. The public service activities such as helping
hospitals, educational institutions and social organizations develop good public relations.
.The PRD should provide platform for building awareness, credibility and stimulating the
sales force and dealers. The present PRDs in insurance companies are not very effective
to create image and stimulate sales force.
 [ 99 ]

News stories are very rare in India. No interesting events are coming out. The PRD
should propose newsworthy events. News is rarely created. Invitation to academic
developing news conferences, celebrations, art, exhibition hosting dinners to social and
academic gatherings are never obeyed in insurance industry, The news edition are not
influenced by story-presentation. The industry has not tried personal relation through
press. The number of exposures created by PRD is very nominal. The personal relation
have been very effective to insurance industry in foreign countries. They have developed
a wide network of personal relations. They have created news, stories, exhibits, messages
and so many other forms of personal relations. The Indian insurance companies should
take some lessons from their working in the ensuing years.

Optimal Promotional Mix

The promotional mix involves personal selling and non-personal selling. The non­
personal strategies includes advertising, sales promotion and public relations. Advertising
is a non-personal sales presentation usually directed to a large number of prospective
buyers. The same promotional message is directed to a large number of audience.
Advertising involves mass media e.g. Newspaper, television, radio, magazines and other
forms of mass communication. Public relation refers to companies communication with
public specified for the purpose. The specific groups to which the public relation is
directed may be customers organisation, employees, Government institutions, public
sector and so on. Sales promotion includes all those marketing activities except those of
personal selling, advertising and personal relations. Sales promotion is non-repetitive one.
It includes displays, shows and exhibitions, demonstrations and other selling efforts. The
suitable promotional mix in decided on the basis of factors affecting the mix. The nature
of each promotional tool, costs and benefits, types of the product and promotional
strategies are the important factors which are influencing the promotional mix.

Public relations have high credibility as people rely on their presentation. It may
influence those people who avoid the advertising and sales people. It becomes as a news
rather than as sales directed communication. The public relation of life insurance has
become very effective. Advertisement is a widely used mode of communication. It is
 [ 100 ]

pervasive media that permits the seller to repeat a message many time. The artful
presentation is possible. The company can spend significantly a higher amount on
advertisement because it is a mode of mass communication. The per audience expenditure
is relatively low. The personal selling is the most effective tool of promotion in insurance
industry. It provides the opportunity for individual conversation, face to face discussion
and understanding the mood of the audiences. The communicator can use the psychologi­
cal technique to behave with the prospective buyers and can motivate them to purchase
the suitable policies. The costs and benefits of each component should be evaluated to
find out the best mix of promotion. The cost in calculated as per capita audience.
Advertisement may involve high cost but the cost per capita will be comparatively low.
On the reverse the expenditure on personal selling appears to be nominal but the cost per
capita is comparatively very high. The type of product influences the promotion-mix.
Group insurance can be developed through personal approach. The traditional insurance
covers may be propagated by individual approach whereas the non-traditional coverage
may be popularized through advertisement. The mass advertisement can become more
effective if the individual sales force inform the public about the theme and utility of the
policy. Class advertisement should be supported by mass advertisement. The prospects
who are unaware of the company or policies may refuse to meet the sales-representative.
Some of the explanations of new policies may be effectively made by advertisement. If
prospects are aware of the insurance coverages, reminding through advertisement will be
fruitful. The promotional funds are divided between advertisement and personal selling
on the basis of selling functions. Personal selling is more useful in insurance because it
requires assessment of individual needs and sujjestions of suitable insurance coverage
accordingly.

Promotional strategy determines the promotional mix. Generally there are two types
of strategy viz. push strategy and pull strategy. The push strategy calls for using the sales
force and trade promotion to push up the sale of insurance policies. Aggressive selling
is done by the agents and development officers. The sales force may provide certain
financial and technical advice to stimulate the prospects to purchase the policies.
Individual selling is more useful for push strategy. Pull strategy believes in massive
advertisement and creating demands so that the prospects may recall to the seller. It
 [ 101 ]

emphasises the demand building. The prospects are effectively informed and persuaded
to decide the purchase action. Pull strategy assumes advertisement on comprehensive line.
The time of selling is also an important factor to decide promotion-mix. Presale period
may be useful for advertisement. The closing of approach is effectively done by personal
selling. The actual sale action is motivated and insulated by sales force. The post-sale
satisfaction can be provided by advertisement. The advertisement and public relation play
on important role in the awareness stage while the cold calls are more effective by sales
representatives. The personal selling has become more effective than the advertisement
in insurance industry.

These days some new forms of promotion have been introduced in the market by
the insurance companies to increase sale of their products. They are word-of-mouth12
promotion and telemarketing.

1. Word-of-Mouth promotion :

It you serve well, if you behave well, if you perform well, the customers/users have
no option but to assign due weightage to .your contributions may be not today, may be
not even tomorrow but must a day after tomorrow. If the organizations serve well, the
users have no option but to appreciate their contributions and to adopt them. It is against
this background that we talk about this component of the promotion mix in the context
of insurance services.

The word-of-mouth communications result into wider publicity which substantially

sensitise the process of influencing the impulse of users prospects of the insurance
services. The satisfied group of customers, the opinion leaders, the social reformists, the
popular personalities act as word-of-mouth communicators. The insurance organizations
like the banking organizations need to assign due weightage to the quality of services
made available to the users so that the satisfied group of customers accepts the
responsibility of promoting the services. The insurance professionals are also supposed
to seek the cooperation of opinion leaders, vocal persons for promoting the business and
for that the offering of small gifts to them is required essential. The branch managers bear
the responsibility of identifying the popular personalities in their command areas and to
,z S.M.Jha Services Marketing.
 I 102 ]

motivate them to promote their business. The word-of-mouth communicators are also
known as the hidden sales force who promote the insurance business sizeably. It is in this
context that we talk in favour of this component of the promotion mix.

Another dimension of this component of the promotion mix- is to seek the coopera­
tion of users who are satisfied with the services. They are habitual users and therefore
it is natural that they talk to their friends and relatives about your positive contributions.
The advertisement slogans may be insensitive, even the sales promotion measures may
be ineffective but the positive feelings of your friends and relations communicated to you
can't be ineffective. This makes it clear that the most important thing in the promotion
of any business is the quality of services that you offer to your users / customers.

Thus the word-of-mouth promotion makes it significant that the senior executives,
the branch managers keep on moving the proceed of improving the quality of services
and at the same time also identify the opinion leaders and vocal persons in a command
area. In almost all the segments and in almost all the command areas, we find such
persons having a domination on the behavioural profile of the select segment, command
area. The hidden sales force become very much instrumental is publicizing your services
for which you need to develop a rapport with them. It is essential that you organize a
meeting of opinion leaders and offer to them small gifts that may activate the process of
promoting your business. Thus with a nominal investment you succeed in getting the big
business.

In view of the above, it is right to opine that this component of the promotion mix
needs due care of the insurance professionals. We can't deny the fact that the private
insurance companies have been found promoting their business with the support of hidden
sales force. The public sector insurance organizations need to assign due weightage to
this component of the promotion mix which till now is found neglected.

Telemarketing
Of late, we find telemarketing emerging so an important component of the promotion
mix. We are aware of the fact that this dimension of the promotion mix promotes business
 [ 103 ]

with the support of two communication devices, viz. telephones and televisions. The
foreign banking and insurance companies have been seen assigning due weightage to this
component of the promotion mix and they have also received a positive response. This
makes it essential that the public sector insurance organizations also think in favour of
this component.

The telemarketing is a device to promote business in which person with a high

communicative ability acts as a telemarketing and keeps on moving the process of
informing, sensing and persuading the customers / users / prospects. The queries,
questions asked by the prospects / users are suitably answered and the telemarketers
attempt to convince them. With the development of satellite with the expansion of
television network, we find telemarketing gaining popularity the world over. We can't
deny the fact that telemarketing may help the insurance professionals substantially.

In this context, it is pertinent that they recruit a persons or a group of persons bearing
the potentials of communicating efficiently. He / she is supposed to be well aware of the
telephonic language / code so that the task of satisfying the customers / users of answering
to the queries / questions of the users / prospects or even others is not to consume much
more time. This is found helpful in informing and sensing the users and therefore, the
telemarketers are required to talk intelligently, professionally so that the projection of a
positive image is also possible. Of later we have advanced communications network and
therefore it is presumed that almost all the branches of insurance organizations have the
sophisticated telephonic devices to promote telemarketing. We can't deny the positive
contributions of sophisticated system in getting the desired results.

In view of the above, it is right to mention that telemarketing an important

component of the promotion mix is required to be promoted. Since, for getting the best
output, it is pertinent that efficient personnel and sophisticated technologies are available,
it is essential that the insurance organizations think in favour of developing the same on
a priority basis. The foreign insurance companies have been seen developing telemarketers
since they have realized the outstanding contributions of this component of the promotion
mix.
 [104]

Distribution Strategies
The importance of place or location and distribution is part of a marketing mix is
due to the fact that it facilitates accessibility to the service offer. It is the most mysterious
of all element of the marketing mixes. While all other marketing mix variables (Product,
Price and Promotion) create or enhance demand, place or distribution in the only one that
satisfies demand.

The inseperability of services makes it imperative for both the service provider and
the customer to meet to complete the service transactions and to create service benefits.
In other words, service cannot be produced by one person in one place and be distributed
by someone else in some other place. A service, by extension, cannot be produced in a
place where the cost in lower and delivered to another place where the demand in higher.
This is the fundamental difference between goods and services that affect distribution
strategies. All location strategies should be directed to make the encounter possible.

The normal decisions of locations and channels are :

(a) How to deliver the service to the customer?

(b) When and where should the delivery of service take place?

(c) What roles do intermediaries or middleimen have to play in the service delivery
process?

(d) How can a marketer juggle the delivery of the tangible and intangible components
of a service offer?

For the service consumer, the first two of the above mentioned decisions themselves
become the most important perceived benefits. What is a distribution channel-espeeially
in services? A distribution channel consists of a set of people or firms who are
intrinsically involved in the transfer of goods or services from the producer to the end
user. The end user could either be an individual consumer or an industrial consumer. A
channel of distribution includes the producer of the goods and services the consumer of
the same and series of middlemen like wholesales, dealers, retailers, agents etc.
 [ 105 ]

Role of Distribution Channels :

The concept of a distribution channel in insurance could well 'be as old as the concept
of insurance itself. This is because of the fact that the ubiquitous gap in the perception
of the insured and insurer that distribution channel could never be dispensed with, the
world over.

It is common knowledge that distribution channels are the prime drivers of growth
for any organization. Distribution channels are the enabling mechanism through which
organizations ensure that their products and services reach the market. The speed with
which you reach the market place, the quality of interactions the constituents of the
distribution channels i.e. the intermediaries have at the market place will decide the
growth graph of the company, so organizations globally are continuously engaging
themselves in upgrading the capabilities of their intermediaries.

One very interesting dimension of the whole process of intermediating in insurance

industry is that, world over the tied agency channel has yielded place to multiple
distribution channels. This is primarily to ensure that the reach is increased to have an
adequate channel mix for different segments of market and to ultimately ensure growth
in volumes. This transformation has happened not without any basis for today markets
are moving from being product driven to customer driven. Hence it has become essential
for companies to reinvent themselves in their run to be ahead of the competitors.

The insurance industry in India is undergoing a major transformation after the advent
of deregulation and entry of new players into the market. The new players who have come
into the country, through their foreign partners have brought in new technology, new
products and at the same time have ushered in multiple distribution channels, in order
to have economies of scale. The intermediation process in India, in the insurance industry
prior to opening of the sector was wedded to tied agency channel mainly due to the
structure followed by LIC and the four PSU non life companies (GIC).

However, the transformation which has been brought in by the opening of the sector
has changed the value proposition for the distribution channels. Today the customer
 [ 106 ]

multiplicity of choices of service providers; of products and services; distribution

channels etc. As a sequel to this, the distribution channel have to be customer focused
as compared to product focused; keep in mind the long term results as against the low
hanging fruits; migrate from a push orientation to a pull orientation and move to strategy
driven activities vis-a-vis transactions driven activities.

Besides the tied agency channel, the distribution channel matrix comprises of other
entities like corporate agents, Brokers, Bancassurance channel, Direct marketing, Tele
marketing, Net Marketing, worksite marketing etc. Other than the tied agency channel,
all other constituents go by the generic name of Alternat (Alternative) Distribution
channels. The new companies which have come into India, are drawing their strength on
alternative channels of distribution as compared to tied agency channels.

Insurance globally and in emerging markets has always depended upon the skills of
the distributor. In case of corporate customer particularly the role of the intermediary goes
beyond nearly identifying the insurance needs of the client. There is a need for
comprehensive amendment of the several risks that they are exposed to; and accordingly
work an a total risk management package.

The insurance intermediary would do well to appreciate that the business interests
would last for a long time and accordingly ensure that the clients are well served. Thus
the distributor has to gear up himself to the task of advising his clients about the role
of insurance in the larger scheme of things. It can thus be seen that insurance interme­
diation has undergone total change and this poses new challenge for the intermediary.

In a competitive environment, with customer occupying the centre stage, the

cornerstone of success will depend on matching the appropriate customer segment with
the right distribution channel.

Life insurance industry is expected to do very well in taking a lion's share of

household savings. Distribution channels will necessarily play a crucial role in giving the
customers the best value in products and services for their money's worth.
 [107]

Types of Insurance Distribution Systems :

The distribution systems employed by property liability insurances fall into four
main types : (1) The independent agency system (2)The exclusive agency system. (3) The
direct writer system and (4) the direct response system. The basis for distinguishing one
distribution system from the other are : (1) The extent to which the agent is tied to the
insurers represented (2) the methods of compensating the agents and (3) The ownership
of expirations.

Independent Agency System :

The independent agency system of distribution in insurance uses agents who are
independent contractors and usually free to represent as many insurers as they want.
Independent agents have ownership of expirations for the policies they sell. Therefore,
independent agents can switch business among the insurance companies which they
represent but this would be subject to the approval of the policyholder.

An independent agency system include insurance brokers and managing general

agents. Insurance brokers represent the policyholders and not the insurers. The same
person can act both as an agent and as a broker in different transactions. The compen­
sation schemes for independent agents and brokers are different. Brokers are paid a fee
for their services while independent agents are given commissions. Managing general
agents function as the intimacies between insurers and agents. The duties and responsi­
bilities of managing general agents are decided by the contract that they enter into with
the insurers.

Exclusive Agency System :

An exclusive agency system of distribution into insurance uses exclusive agents who
are also referred to as captive agents. These agents are not employed by the insurance
company. Exclusive agents are bound by contract to represent only a single insurance
company. The insurance company can therefore exercise greater control over exclusive
 [ 108]

agents. Exclusive agents are usually paid commission. In the exclusive agency system,
the commission rate varies, depending on whether it is new business or renewal business.
The commission rate for renewal business is usually lower than the rate for getting new
business. In contrast to this, the commission rate that is paid to independent agents is
usually the same for new as well as renewal business. If independent agents were also
paid a lower commission rate for renewal business they would be tempted to shift
business to another insurer (a renewal) in order to get a higher rate of commission

Exclusive agents do not have ownership of expiration. Some insurance companies,

however, do grant limited ownership of expirations to their exclusive agents. This applies
only as long as the agency contract is in force. Once the contract between the insurance
company and the exclusive agent is terminated, the ownership of expiration reverts back
to the insurance company.

Direct Writer System :

The direct writer system of distribution in insurance uses sales agents to market the
product. The sales agents are employees of the insurance companies they represent. In
this system of distribution, agents may be paid a salary, or a commission or a combination
of the two.

Direct Response System :

The direct response system is also called the mail order system. In this system of
distribution, the insurance company does not employ sales agents to contact the policy
holders or prospective policy holders. Instead, the information regarding the policies
offered by the insurance company is conveyed through direct mail or telephone and
through radio, television, newspaper and magazine ads.

Combination System :
No single system of distribution can be considered to be the most advantageous for
 [ 109 ]

all insurance, companies or for all classes of insurance consumers. The independent
agency system may be the most appropriate distribution system for consumers having very
complex insurance needs and who rate 70 independent agents may prove very effective
in extending the reach of insurance companies to consumers located in small towns and
rural area.

On the other land, the exclusive agency system and direct writer system are more
suitable for insurance consumers who have relatively simple needs and who are more
concerned with price than the service provided.

Insurance companies have historically used only one type of distribution system to
market their products. The independent agency system distribution has been the most
commonly used distribution system. It is only in the past four or five decades that there
has been a dramatic increase in the use of the other types of distribution system.

The difficulties faced by some insurers in successfully reaching consumers using

traditional marketing systems have led them to adopt more than one marketing system.
Thus, most insurance companies are increasingly using mixed marketing systems.
Vertical integration by insurance companies and acquisition of brokerage firms are also
becoming more and more common in the present times.

Distribution Channels in Life Insurance :

In developed countries, life insurance is one of the preferred instruments of savings.
One of the distinctive features of the life insurance business in India is that, life insurance
has to be sold and in seldom bought.

The distribution system for life insurance involves three types of intermediaries
between the insurer and the insurance consumer. These are:

(1) Agents

(2) Broker

(3) Corporate Agents

 [ 110 ]

1. Agents :
The distribution channel for life insurance in India primarily involves agents. This
is because a majority of the insurable population in India is uneducated, there is no well-
developed infrastructure, awareness about insurance products among the insuring public
is low, and there is no competition in the life insurance market. Moreover, since agents
usually reside in the same locality as their clients and interact with them on a regular
basis, they are able to gain the confidence of the prospects and policyholders.

As insurance products are intangible in nature, their benefits are not obvious to the
majority of the insurable population who has a low level of education as well as low
awareness about insurance. These people prefer to invest their savings in gold, real estate
and other such traditional savings instruments. The agents have to visit the prospective
customers a number of times in order to persuade them to purchase the insurance
products.

Also, with the entire insurance process being so complex, the customer has to depend
on the agent to understand various aspects of it.

Though bancassurance and the internet are considered to be alternative channels of

distribution of insurance products, most of the new players in the industry are going the
traditional way and relying on agents. The emphasis is on building a strong field force
trained to get people thinking about their family's financial security and to recommend
appropriate policies for their needs. The agents are trained to be sensitive to the important
issues in any family's life (example getting the children educated and married). Most
agents try to sell the concept of 'pre-planning your life'.

Agents may be

(i) attached agents (or tied agents);

(ii) Direct agents; or

(iii) Career agents.

 [ 111 ]

Attached agent is the agents who are tied to the development officers. A development
officer recruits, trains and supervises the work of agents. Career agents are primarily
direct agents. They are selected on the basis of a written test and interview and work on
a commission basis. The practice of using agents as intermediaries for the distribution
of insurance products has its own shortcomings. Life insurance requires a need based
selling approach, i.e., the consumer must be guided and assisted in purchasing the product
that best satisfies his needs. But in some cases, the salesman puts his own need above
the customers need. The selling of life insurance must be in tune with the customers
aspirations. But some agents tend to sell what they tend to sell, father than what best
satisfies the customers needs. The outcome of this is a lot of wrong selling and a high
degree of policy lapses. A correct approach in selling would ensure a regular inflow of
premium for the insurance organization. Wrong selling of products by insurance agents
can be attributed to the prevailing remuneration system for agents that is based on
commissions. The present commission structure is designed in such a way that the sale
of certain products gives the agent a higher commission initially in comparison to others
where the commissions are spread out over a longer duration of time. The agents are
naturally tempted to sell more of certain types of insurance products, on which they get
a higher commission. In order to overcome this shortcoming, the rate of commission itself
has to be restructured so that agents cannot derive any benefit in promoting a certain
product over another for their own short-term financial gain.

Brokers :
It has been more than five years now since insurance brokers have become a part
of the fabric of the Indian insurance market. The first set of broking licenses were issued
in Jan 2003 and expectations were naturally high as stake holders in the industry
anticipated a paradigm shift in the way insurance was being bought and sold. In a country
used to dealing with are the ubiquitous "Agent" (who by definition is an agent of and
represented the insurers interest), who are a sophisticated, knowledgeable alternative-a
person who worked on behalf of his clients.

As we look back at these five years we need to . do an assessment on what progress

 [ 112 ]

brokers have made. Have they been able to fulfill the expectations of insurers, clients and
the regulator? Where do we go from here and how do we ensure a healthy growth ?

Indian Broking Industry- Some quick statistics growth in

numbers :
If we look at the statistics pertaining to the growth of insurance brokers in India,
we find that as against 40 brokers as on 31st march, 2003 (when the broking industry
was born), we now have 263 insurance brokers, (as on August, 2008). In a little over five
years, the number of insurance brokers has increased manifold. And, the party is still on
with more and more adding to the numbers.

How it started : Forty Insurance brokers as on 13st March 2003.

- Direct Brokers - 24
- Composite Brokers - 12
- Reinsurance - 4

. Where it is now : 263 Insurance brokers as on 4th August 2008.

- Direct Brokers - 225

- Composite Brokers - 32
- Reinsurance Brokers - 6

The number of new licenses issued by IRDA was 26 in 2005, declined to 22 in 2006,
slightly improved to 27 in 2007, and is at 10 as of August, 2008.'

Business Volumes :
The most significant measure of any industry's growth and presence is the volume
of business it has done. For insurance broking, we could take at aggregate premium placed
or brokerage as a benchmark.

Volumes indicate that insurance broking in India is slowly becoming a force to

 [ 113 ]

reckon with. It has been slow, but we must admit it has been rather steady and there have
been no major surprises or upsets so far.

The total premium of Bajaj Allianz in 2007-08 was 2800 crore approximately and
brokered premium was 500 crore approximately.

6000

5000
H Brokered
Premium 2007-08
4000 Sw □ Total
OL.
O
Premium 2007-08
3000 -
0)
a:

2000

1000
Tata AIG
United India

Bajaj Allianz
New India

Oriental

HDFC Ergo
Reliance
National

ICICI Lombard

Royal Sundarm

Fig.

Evolution of the Role of an Insurance broker :

When we run down the memory lane, we remember those days when a broker was
considered a glorified postmen delivering policies and endorsements from the insurer to
the customer. As time passed, brokers realized that they needed to exceed the expectations
of their customers to remain in business. Some caught on to it have become indispensable
to their clientele. Large insurance buyers have also begun to rely on the qualified
 [ 114]

professionals in insurance brokerage houses to represent their interests in the insurance

marketplace, albeit with perhaps greater oversight and involvement than in the past.

IRDA journal conducted a survey in June 2008 on the "Role of an insurance broker
and the perception of their services". The survey participants were a mix of corporate
clients, insurers, TPA's insurance surveyors and others who are involved in the insurance
industry. The survey results offer insights on brokers'and their role in this ever-changing
insurance environment.

Role of an insurance broker in India

□ Quite similar to an agent

EH A match maker between the insurer and
the client
H One who helps me shop around and gets
me lowest price
■ A risk consultant providing various value
added services
H All of the above and more

Fig. 3*a

Main Findings of the Survey :

What is your perception on the role of an insurance broker in India?

A majority of the participants (49%) feel that the role of an insurance broker has
evolved from being that of a matchmaker between the insurer and the client to a risk
consultant providing various value added services. These services include loss control,
claims management, contract reviews, safety program, recommendations and other risk
management services that go beyond the structuring and placement of insurance cover.
Initially, when the concept of insurance broking was introduced in the market by IRDA,
most of the people considered the role of a broker very similar to that of as insurance
agent. Over a period of time, their views have changed and this evolution is in tandem
with the changing risk landscape.
 [ 115 ]

Q. How do you rate the importance of insurance brokers in today's market ?

Importance of insurance brokers in today's market

□ Very Important
□ Important
gi Occasionally useful
■ Others

43% of survey participants consider insurance broker to be important in today's

market while 35% view them as very important. Brokers have become important
in today's market because their clients are benefiting from their clear and unbiased
advice, which may be hard otherwise to come by. They feel brokers reduces the
time, mind space and search costs incurred by insurance buyers when they have
to look at multiple insurers for placement of the policy.

It is also observed that large companies having insurance portfolio greater than 25
lakhs consider the role of a broker as very important. This may reflect both the complexity
of larger firms and their awareness of the benefits of using a broker. Although the
awareness of the concept of a broker has been increasing, different people and different
organizations can have a significantly different understanding of it.
 [ 116 ]

3. Parameters critical for deciding an insurance broker?

25%

■ 0% Lowest price with best

available coverage

■ 5% Excellent claims
hendlingwith sort TAT

■ 10% Proper Placement of

Policy

■ 15% Quick response to

queies

Lowest price with best available coverage, excellent claims handling with short turn
around time (TAT) and proper placement of policy are the three aspects that were valued
highly by the participants. Lowest price with best available coverage was valued most,
with 21% vote for this, while excellent claims with short turn around time (TAT)
occupied the second spot 20% (missing the top slot by a narrow margin), proper
placement of policy occupied the third slot white 18% voting for it.

4. Future prospects of brokers in the Indian market?

It appears that all parties view the future prospects of brokers as good and critical
to the insurance business in India. 43% of respondents feel that they have "very bright"
prospects while 54% feel that they have good future prospects. The insurance boom
sweeping India is coming as manna from heaven for the insurance broking community.
 [ 117 ]

Future prospects of brokers in the Indian Market

1%

The results of the survey reaffirm the fact that brokers are making a difference to
their customers business daily by anticipating trends, understanding program, extending
the cover, solving problems and management of claims and reducing cost for a majority
of commercial and retail customers who trust their brokers for expert advice and unbiased
opinion.

Bancassurance :
Imagine you enter into a bank and suddenly out of the blue an employee of the bank
who has been maintaining the account approaches you with a broad smile and introduces
himself or herself as an insurance facilitator with the bank. He starts checking up on your
risk potential and starts giving you advice which you never expected? Does this sound
weirdly? Yes, today it does sound a bit weird. But very soon it is going to be a reality.
In fact it has already in a few banks and may become a common sight in all banks in
the near future through bancassurance.
 [ 118]

What is Bancassurance?
What does this Bancassurance13 mean? In simple terms it means that the insurance
company and the bank come together to offer insurance products from the counter of the
banks to the common person who is the bank's customer. In bancassurance, the insurance
company makes use of the vast network of the bank branches, its customer base, which
is very important 'raw material' for life insurance, and infrastructure of the bank, including
the staff is utilized to identify the insurance needs of their customers and try and meet
the same through the various products the insurance company can provide.

Origin of Bancassurance :
This is already prevalent in a big way in the European countries and is picking up
very fast in India. From the statistics available almost 60% of the total business in life
insurance is generated from Bancassurance. If we trace back the history of Bancassurance
it all originated around the 1980 in France. The word Banque meaning Bank and
Assurance which denotes insurance these two words have joined to form the word
"Bancassurance".

Various models operating Bancassurance :

World wide this business is run on 4 models which are running very well :

Model :
1. Pure distributor : The Bank acts as an intermediary offering products of more than
one insurance company.

2. Strategic alliance : The bank sells the products of only one insurance company.

3. Joint Venture : The bank and the insurer establish a jointly owned insurance
company or distributor thus creating a new entity.

4. Financil Holding Company : A holding company owns both an insurer and a bank.

13 Insurance Marketing, ICRIM.

 [119]

Banks can enter into any one of the two relationships with one life and one non­
life partner for distributing the insurance products purely on a "Non-Risk participating
basis". The two relationship that the banks could enter are :

(a) Corporate Agency Arrangement: In this arrangement the bank employees would
be identified, they would undergo the IRDA mandatory training programmes pass the
IRDA exam and then get licensed. Only on completion of the same they would be
authorized to sell the products of the insurance companies to their customers. The
relationship in this arrangement would be that of a bank being a pure distributor while
that of the insurer being a pure manufacturer of the insurance products. The bank would
get a "commission" on the sale of the business.

(b) Referral Arrangement : In this arrangement the bank would provide the insurer
all the infrastructural support and "refer" the customers who are interested in buying
insurance plans to the representative of the insurance company, placed in the bank
premises, who would then sell the required plan to the customer. For referring the
customer of the bank to the insurance company, the bank would be paid a "Referral Fee"
on the business actually booked as per IRDA norms.

Choosing the right partner in Bancassurance :

The most important or critical factor for a successful Bancassurance partnership is

(a) Full commitment from both the partners in a deal : Here the commitment levels
from the banker and the insurer at all levels is very crucial. It has been seen that
internationally also many "marriages" between the banker and the insurer have
landed up in divorce due to the lack of the commitment from either of the partners
in the deal. Then it is more of a blame game where the bank blames the insurer
for lack of support and the insurer blames the bank for the lack of commitment
in this activity.

(b) Brand / Franchise : The brand of the bank is very important as many customers
are bound by the bank for its brand value and name.
 [120]

(c) Large customer base : Customers are the raw material in life insurance business
and this is one of the important criteria in choosing the right partner.

(d) Capital strength : The requirement of capital in the banking core business is always
on a rise and this will then be an important factor for a growing bank. All banks
in India must have a strong capital base or must be in a position to go to the market
to get one if required.

(e) Complementary products and services and new economy distribution system : The
bank looking for such a Bancassurance arrangement must have a robust distribu­
tion system in place for its own product which can then be used for distribution
of insurance products also the only difference being that banking products are
"Pull" products, while insurance products are "Push" products.

(f) Regional Technology platform : This is again very important as at a later stage
this technology can be made use of for customer service. This would include the
common IT platform, which can connect all the bank branches on a single common
platform, their ATM network for various requests from the customer and also for
payment of renewal premium etc. Both banks and insurance companies can at a
later stage also think of integrating the servers for rendering service to the banks
customer at the counters of the bank itself which can turn the entire service concept
into "Customer Delight".

Challenges in Bancassurance Business :

For the bank and its employees who will be selling the products :

(a) Conflicts with banks own products.

(b) Development of internal culture of the bank towards selling third party products.

(c) Cultural integration of two sales force and handling conflict situations.

(d) Cultural differences between banks and the insurance companies. Banks tend to
 [ 121 ]

be service and transaction oriented while these non-banking financial companies

are more sales oriented.

(e) Reduced individual visits to the bank branch due to ATM's internet banking.

(f) Having agreements with multiple principals can create cultural difference within
the various principles and also their strategies which might be difficult to
overcome for the insurer.

For Insurer :

(a) Biggest challenge is to train and negotiate the bank staff to sell insurance products.

(b) . Handling bank customers' dissatisfaction.

(c) Development of bank specific products. (Very few insurances have developed
bank specific products).

(d) Lack of trained and professional bank staff to sell these "Push" products.

(e) Multi-tasking is difficult to manage in the bank staff. Needs a totally different
mindset.

(f) Commitment from the top management has to cascade down to the lowest level
in the bank and all of them have to think alike to get success in this venture.

(g) Development of the right product should not only, meet the customer's needs but
also help the banks income flow in the long run.

(h) Not integrating these products with the banks core products.

(i) Non-existence of or very minimal incentive / compensation for the bank staff who
are involved in this distribution.

"Mantra" for a successful Bancassurance model having complied with all the above
mentioned points and identifies a partner, which are as per the most successful business
models globally; the important ingredients for a successful bancassurance are :
 I 122 ]

Products :
Products sold through bancassurance channel should be simple to understand, simple
to sell and simple to buy. Some of them can be sold by everyone and anyone in the bank,
some sold as a combination along with the banks core banking products, with least or
no underwriting requirements.

Usually, there are three states in the development of Bancassurance products:

(a) Credit life products : These are very simple products which can give the "Volume
added" base to the bank's core lending products. These products protect the
outstanding amounts of the loan in the eventuality of the death of the borrower,
to the extent of the original outstanding as per the original EMI schedule. This also
builds in the confidence in the banker that he can also sell the insurance products.

(b) Low advice "Over the counter" (OTC) products : Next are those products which
can be sold over the counter in the banks. These are pure term, or term with return
of premium or simple savings cum protection products with low or no underwrit­
ing, or predefined underwriting norms.

(c) High Advice sales : Once having gained the confidence of selling insurance
product it is time when high end consultative heed based selling can be done. This
will need the banner to fully understand the needs of the customer and accordingly
suggest the right insurance product. These could be high end ULIP, universal life
kind of products.

Processes :
One has to ensure that the process that is to be used by the banker while selling
insurance is simple and short. The lengthy forms, lengthy processes, tough underwriting
norms, cumbersome health check up will put off the customer as they are used to having
simple and faster approvals. One has to remember that any lapse on the part of the insurer
can have a negative impact on the relationship with the banker. This can also put off the
banker completely, which may also result in the banker not selling the insurance product.
 [123]

Banker over a period of time have devised their own system and procedures in their
line of business. They have also devised methods to have their own checks and balances.
Insurers have to try and fit in their process within the banks process so that the whole
thing is simple and the banker does not see it as an "additional burden" in his routine
work.

Emergence of New Vehicles for Distribution :

Traditionally, insurance companies have relied heavily on their own network of
agents or licensed brokers for their sales distribution. In recent years, however, internet
and telephone have been successfully used for distribution. Following are some new
vehicles for distribution:

(a) Online social networks : A new avenue to individual agents : The emergence of
web-based social networks which allow the public to interact with one another
across the globe, provides a new avenue to individual agents to interact with
various sections and elicit their insurance needs and preferences. These web based
services, which are already popular amongst younger section of society, are
expected to be gaining more popularity in the coming decades. That is why,
perhaps, big business houses are also drawing their plans to enter into this arena.
Tech-savvy individual agents will best utilize the opportunity through these
networks to expand their business circle. Apart from individual agents, companies
also will get some referral leads through these networks, as member are required
to enter these networks through their e-mail IDs where under the portal may
reserve the right to use the same for furthering their business interests.

(b) Mallassuranee : The emergence of diversified players in the insurance arena has
ushered in the evolution of novel nomenclature. From bancassurance to
shopassurance to mallassuranee14, the new players do not leave any stone unturned
in spreading the concept of insurance for furthering their business interests. The
entry of multinational players into retail' segments and raising income levels have
heralded the emergence of big malls which are one-stop-sale points to all
household needs of families. Thus these insurers are planning to put up their direct
14 Insurance Marketing, Insurance Chronicle.
 [ .124 ]

outlets in these malls to increase their market shares. It is estimated that over 14
crore customers visited retail outlets of Future group alone in the last year and this
number is expected to cross 20 crores in the current year. (Source : The Economic
times, October 25, 2007) through the concept of mallassurance majority of these
visitors are likely to be doing window-shopping of insurance outlets. Tracking the
market conduct and ensuring transparency at their outlets is altogether a different
regulatory concern that deserve to be examined.

(c) Online sales : Companies are increasingly using their web portal not only for
display of product information but also to offer online sale to various customers.
While some simple products are offered right though Web Portals, for other leads
are collected for closure of sale by trained insurance sales personnel. Increasing
penetration of internet and availability of internet services across the country drive
the role of online sale and post sale services in the insurance sector. While direct
marketing channel reduces the distribution costs, certain intricate aspects like
security / privacy of information provided and reliability of information furnished
are to be dealt with efficiently by insurers. Security and privacy of information
provided and reliability of information furnished are to be dealt with efficiently
by insurers. Security and privacy of information provided is a righteous job of a
prudent insurer as trustee of its policyholders, the later issue deserves a regulatory
attention for more disclosure for an informed decision. Though, section 45 of
Insurance Act, in its present form safeguards the interests of life insurers against
■ a possible suppression of material fact, which is material for underwriting a policy
and known to the policyholder at the time of making such statement, if the
recommendation of law commission taking away the genuine right of life insurers
to deny a claim, even on valid grounds of suppression of material fact, five years
after the commencement of policy becomes effective, will have to impact on the
online sales strategies of insurance companies. In fact, for those sales that are
routed through online sale through the web portals of insurers, more stringent
norms shall apply dissuading the policy holders from supporting known material
facts. However, the business interests of insurers outweigh the legislature /
regulatory prescriptions. Insurers will incorporate sufficient built-in features like
 [ 125]

higher margins for adverse mortality deviations, better disclosures, eliciting more
information and reserving right to recheck the information provided etc. for those
policies that are sold online directly.

The process of distribution comprises all the decisions and activities that are
involved in making products available to the consumer when and where they want to buy
them. A number of intermediaries, performing a variety of marketing function are usually
present between the producer and the final users. They constitute the marketing channel
also termed the trade channel, or distribution channel.

A marketing channel in defined as a set of interrelated organization or individuals

involved in the process of making a product or service available to consumer for use or
for consumption.

A firm may have to use different channels in different markets. The channel system
evolves in response to local opportunities and conditions. After choosing the channel, the
firm has to select, train, motivate and evaluate each channel intermediary.

Marketing strategies of General Insurance Corporation :

The General Insurance Corporation is managed and controlled by the Union
Government and therefore, the responsibility of qualitative improvements or even a
degeneration in quality is found on their shoulders. It was nationalized in 1971.

Market Structure and Behavior :

The consumer behaviour has not been analyzed by GIC or any of its subsidiaries.
They adopt annual plans just on the basis of past performance.

. The targets are decided at meeting. They are motivated to fix higher targets without
showing the market potential of the area and of the specific insurance policy.

The insurance market is segmented generally on the basis of urban and rural
population, office workers, industry, business, regular income class and so on. Each
market has different demand and so different marketing strategy are formulated to suit
the demand.
 [126]

Product Strategies :
The General Insurance Corporation through its four, main subsidiaries offers fire and
marine insurance services. Its fire insurance policies are-Valued, Average Reinstatement,
Floating, Declaration, Adjustable, Maximum Value, Discount, excess loan, ordinary,
Special perils Consequential, Comprehensive and Sprinkler Leakage Policies. Marine-
term policy are Voyage, Valued, Unvalued Cargo, Named, floating, All Risks, Single
Vessel Fleet, Contstruction Freight, Wager Interest. Special services are : Crop insurance,
Aviation, insurance, Re-insurance, Cattle insurance. Miscellaneous services are : Motor
insurance, Employers liability insurance, Fidelity guarantee, personal Accident, Burglary
Insurance, Engineering Insurance, Export Risk Insurance, Plate Glass Insurance. These
are the various policies and services provided by the GIC. But we can't negate the GIC
requires to innovate their services, specially to make them productive and internationally
competitive. The four subsidiaries of GIC are-National Insurance, New India Insurance,
Oriental Fire and General Insurance and United India Fire and General Insurance.

It has not adopted suitable strategies for launching new product. The product
identification and packaging is very weak in insurance industry. The same is the case with
GIC.

Pricing Strategies :
The list pricingis the main pricing policy. List prices are determined on the basis
of cost plus formula. The premium calculation involves estimation'of risks and loading.
The rate fixation differs from policy to policy.

Distribution Strategies :
The channel members are branch managers, development officers and agents. The
organizational structure is mainly based on centralization. Maximum powers are vested
to divisional officers whereas the branch officers are in the direct link with policyholders.
 [127]

The gross direct premium is closely related with the number of development officers.
The agent is remunerated for his services by way of commission as a percentage of the
premium coined by the company on the proposals put by the agent.

Promotion Strategies :
The costs and benefits of each component of promotion mix should be evaluated to
find out best mix of promotion. The cost is calculated per hundred audiences.

Publicity : Personal relation department is located at the head office of the company
to perform various functions such as press relations, product publicity, companies
communication and so on. The task of publicity is also vested to the public relation
department. The publicity of GIC is also carried out by its PRD.

Sales Promotion : GIC allows group discounts, high sum assured discounts, single
payment discounts, non-claim discount, bonuses and so on. The sales force are offered
commission allowances, contests, sales competition, promotion avenues and so on.

Advertising : The GIC and its four subsidiaries have not bothered to measure the
effectiveness of advertising. They don't use this tool of promotion much.

Personal Selling : Personal Selling through sales force is very effective in insurance
industry. They advise and assist the prospects in purchase decision of insurance covers.

Marketing strategies of (LIC) Life Insurance Corpora­

tion :
The LIC of India is the well-established public sector insurance organization was
nationalized in 1956. The objectives of LIC of India are to spread Life Insurance much
more widely and particular to the rural area and to socially and economically backward
classes with a view to reaching all insurable persons in the country and providing them
adequate financial cover against death at a reasonable cost to maximize the mobilization
of people's savings by making insurance linked savings.
 [ 128 ]

Product strategies of LIC :

The policies of LIC are found of different types which have been designed to cater
to the needs and requirements of different segments. Different policies of LIC are whole
Life Policy, Ordinary Policy, Limited payment, convertible, Anticipated, Endowment.
Special policies of LIC are Triple Benefit, Progressive Protection, Multipurpose, Mar­
riage, Education Policy, Medicare, Endowment, Mortgage Redemption, Salary Saving
Money Back, Nan Raksha, Jeevan Mitra, Bima Raksha15. etc.

The introduction of rural career agent scheme by LIC has been found instrumental
in inducing the rural prospects. It is high time that the policy makers and the senior
executives think in favour of profitable policies and schemes for rural masses. This would
be instrumental in mobilizing the rural savings.

Pricing strategies of LIC :

In the 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.

Distribution strategies of LIC :

Another component of the marketing mix is related to the place decisions in which
our focus would be on the two important facets-managing those insurance personnel and
locating a branch.

In LIC agent and corporate agents are only used as distribution tool. No other source
of distribution mix is used. In LIC agents and rural career agents play very important role
in increasing insurance business.

15 S.M.Jha Services Marketing.

 [129]

Promotion strategy :
In the formulation of marketing mix, the promotion mix occupies a place of
outstanding significance. Like other organizations, the insurance organizations are also
supposed to realize the instrumentality of this sub mix of the marketing mix which would
help them substantially.

Like other insurance organization LIC also uses different sub mixes of marketing
mix i.e. advertising, publicity, sales promotion and personal selling. LIC advertises its
products through print media, television, radio etc. Public relation of LIC is not as
effective as that of private insurance companies.

The insurance business is mainly carried out by personal selling method. The
personal selling is done by the agents of the company. The insurance business can't exist
if the agents stop working.