STRATEGIC MARKETING OF INSURANCE SERVICES

a) Marketing is referred to as the process of planning and creation of conception pricing,

promotion and the distribution of ideas, goods and services to create exchanges that
satisfy individual and organisational objectives. Kotler (1967) also defines marketing
as the science and art of exploring, creating, and delivering value to satisfy the needs
of a target market at a profit by identifying the unfulfilled needs and desires of potential
customers.

b) The marketing department and its overseer are responsible for marketing activities in
an insurance company but given the nature of the financial service offered by insurance
companies marketing is essentially the job of everyone in the insurance business for in
their conduct and services they directly or indirectly markets for the insurance company
and influence customer satisfaction. For example good or bad claims handling by the
claims officer can influence the opinion of a client.

c) Strategic marketing has four key components that aids in the development of a
marketing plan and these are:

i) The designation of specific desired objectives

Appropriate marketing objectives have to be specified and outlined in line with
nature of overall corporate strategy and should be meaningful in marketing
terms as they clearly states the marketing goals and identify the ways in which
the organisation will achieve those goals (Ennew et al. 2001). For example
objectives specified in a corporate plan in terms of returns to shareholders can
be specified in terms of or translate to specified growth numbers in assets or
accounts under management. This is known as the statement of objectives in the
overall marketing plan.

ii) The commitment of resources to the set objectives

According to the organisational resources guide issued by the Grantham
University (2019), any plan must be guided by a set of resources to ensure that
necessary steps are taken so as to implement processes that enable the
achievement of the set objectives. The commitment of organisational resources
to the objectives is therefore required as these need to come together to
 accomplish goals. For example the commitment of human resources in terms of
the staff responsible in the implementation and accountable in the processes, the
financial resources in terms of funding of processes, the physical and the
information resources (PMI, 2004).

iii) The evaluation of a range of environmental influences

The evaluation of environmental influences refers to the situational analysis that
has to be carried out to both the immediate marketing and macro environment
so as to understand the environment in which the organisation operates in
(Sanderson and Luffman, 1988). The macro environmental analysis can be
carried out by employing the PEST analysis that focus on the political,
economic, social and technological influences. Market level analysis can also
be carried out using the Porter’s five forces as it gives information relating to
the direct market itself (Porter, 1985). For example information relating to
bargaining power of suppliers and consumers, the barriers to entry, rivalry
between firms and competition from substitutes.

iv) The search for a match between environmental opportunities and

organisational capabilities

The intrinsic nature of a marketing strategy is to be able develop a significant

fit between an organisation and its environment hence the need for intensive
research and continuous analysis and unlimited understanding of the
environment in which an organisation operates, so as to promote a match
between the environment opportunities and the organisational capabilities
(Ennew et al. 2001). This can be achieved by employing the SWOT analysis
which the commonly technique for presenting collected information that relates
to the organisation’s marketing strategy. The analysis classifies the strength,
weaknesses, opportunities and threats to the organisation using information
derived from a marketing audit and researches. The organisation is able to
establish a match between the available opportunities and their capabilities.
Question 2

Several changes in many businesses have been known to be often instigated by marketing and
at the same time any marketing decisions that are related to either products, pricing, distribution
or promotions are also affected by other business functions the same way it also influences
most other business decisions. In an insurance company, changes and business decisions by
functions such as the finance, human resources, underwriting, claims, procurement, risk
management and compliance and the overall corporate strategy are greatly influenced by a
range of marketing inputs and certain considerations. The back and forth forces between
marketing and other business functions shows the interrelationships that exist hence the nature
of these interrelations examination follows.

Marketing and Finance

Most robust marketing plans of insurance companies include major financial dimensions that
require financial data from the finance departments such as the underwriting costs and profit
history of the insurance products or the company at large (Kopaneli, 2014). Budgeting and
profitability analysis are carried out within the financial department and are at the same time
key aspects of marketing planning and control since it requires resolution of important
financially oriented issues such as the profits definitions and distributions, for example, return
on investments, gross premium written and return on insurer’s equity.

The finance department is responsible for capital allocation and budgeting and ensuring that all
business units operates within their financial limits and the companies capabilities (Kopaneli,
2014). The marketing department works therefore together with the finance department to
ensure that there is an adequate budget to meet the needs for market research, insurance
promotions and insurance company’s product educational forums. Differences may arise in that
marketing may wish to overspend given the nature of insurance products which are hard to
market and the marketing department is likely to bank policy sales volume and their penetration
ratios thus, focus on building market share, while the finance department may be more focused
on the financial stability of the insurance company in terms of cash flows, meeting policy
holder obligations and investments. Most financial departments treat budgets as rigid
constraints and closely monitor how marketing spend their money, which is the reason why
marketing and finance constantly interact to ensure that capital allocation to marketing efforts
should not be based only on the evaluation of the expected return from marketing (Horne,
1969).
According to Wind (1981), marketing is used as a major tool for the achievement of financial
objectives by most insurance companies. For example the development of a marketing program
to sell new debt and equity issues. There also has been an increasing acceptance of marketing
as a guiding approach to the development of new services and promotional programs by
insurance companies (Wind, 1981).

Similarly, most financial concepts has been used as marketing tool and integral part of
insurance marketing programs with the bid to try and boast customer motivation. Given that
insurance companies enter into fiduciary contracts that are based on trust that the insurance
companies will pay out claims in the future, the financial reports showing good capital
provisions and financial stability have been used as a marketing point to existing and potential
clients since good financial soundness present better chances of the insurer meeting its policy
holder obligations and this actually improves on customer motivations and satisfaction. They
have also been used as marketing instruments for attraction of mergers and acquisitions.

Top Management and Marketing

Top management has always been at the centre of the insurance operations playing an important
role in the design and implementation of the marketing efforts through the setting of objectives
within which the marketing strategies are undertaken. Wind (1981), points out that the success
of many marketing actions such as the launch of new insurance products depends on the degree
of top management commitment and level of involvement, which is why top management
should be involved in providing guidance, inspiration, and control of the insurance company’s
marketing efforts. For example when Econet Insurance (PVT) Ltd launched the EcoSure
Moovah motor insurance cover, the management issued a statement in the Herald (2018), that
they were confident that the new product will disrupt the market and that they had approved
over USD1 million budget for marketing, in which they latter won the best-selling short-term
insurer award at the IIZ annual dinner and award ceremony awards given the market share they
had managed to get within the same year of launch (IIZ, 2019). This is why top management
should be involved in providing guidance, inspiration, and control of the insurance company’s
marketing and non-marketing efforts.

The marketing and top management relationship is crucial for the growth and survival of the
insurance company. Top management also set rewards and resources within which the
marketing strategies of the insurance company are undertaken and on the other hand monitor
the marketing strategy formulation to ensure a fit of the marketing strategies to the
organisational culture and that it does not breach the values of the firm. The top management
also relies on marketing reports to aid in corporate decisions and plans, therefore requires
information on the response functions to the company’s activities and perception of existing
and potential clients, for example, customer feedbacks on their motivations and information on
their unmet needs and competitors in the market which helps the insurance company to consider
into tapping into new markets or niche such as provision of micro-insurance products in
Zimbabwe insurance companies mainly focus on conventional Insurance. This information is
obtained from market research conducted by the marketing departments and this shows that an
effective marketing or top management interface is critical for the insurance companies.

Human Resource Management and Marketing

The human resource management is responsible for the recruitment of staff and providing
equipment and ensuring that the staff is highly motivated and supported (Haas and Holman,
2017). The staff is a crucial resource base of the insurance company and this is also an important
arm to the marketing of the firm. Marketing within the insurance business is essentially the job
of everyone in the insurance business for in their conduct and services, they directly or
indirectly market for the insurance company and influence customer satisfaction. The
marketing department therefore works or will need to work closely with the human resource
management to ensure that appropriate skills and staffing levels are in place.

Marketing and the human resource department share similar interest in ensuring that adequate
numbers are in place and that the staff has the appropriate skills to carry out research and
develop new product ideas in line with what the customers want. The research and development
of the insurance company should be closely related to the company’s marketing product
development efforts to ensure that products developed are not the marketer’s nightmare (Wind,
1981). The Human resource management have to balance its obligations to marketing and
create an ambitious and competent sales team.
Underwriting and Marketing

A study carried out by the LexisNexis Risk Solutions (2017) concluded that, insurance
underwriting and marketing teams who work together on acquisition and retention strategies
are able to attract and maintain more long-term and profitable customers. The marketing and
the underwriting departments depend heavily on each other although this cross team
collaboration is sometimes a challenge due to conflicting objectives. The very core functions
of the two explains their influence towards the other. Considering the mathematical principle
which governs the underwriting of new business and the insurance business which is the law
of large numbers it is greatly achieved when the volume of policies written increases. The sales
function of the marketing department becomes therefore of great importance as the marketing
efforts bring more business to the insurance company.

Marketing in the insurance business is not limited to internal marketing department within the
insurance company but can also be done by agents, brokers and even direct from the
underwriters (Etti et al. 2000). The understanding of common goals explains the
interrelationship that exist between underwriting and marketing. Marketing would want to
ensure that the underwriters are not too restrictive in their acceptance and classification of risk
so that prospecting for new business becomes easy and that the insurance company does not
lose clients to competitors (Haas and Holman, 2017). Marketing also need to work hand in
hand with underwriting to ensure that the development of new products are aligning with the
unmet needs of the clients in the market or are ideal for the current demand from their markets
research and also that the pricing of risk does not become their nightmare when selling. The
market analysis made by the marketing team might identify certain unmet needs that if
addressed, the underwriters can come up with products that directly addresses those needs and
make the sales function easy and be able to grow the market share. For example, a large gas
field was recently discovered in Mozambique which will surely increase the construction of
energy and power companies and in turn increase the need and demand for energy and power
insurance, erection all risks insurance for construction companies and this requires both
marketing and underwriting to come together and form segmentation strategies (CNN, 2017).

However differences arise because the sales teams from the marketing departments tend to
ignore the underwriting principles of the company and act outside their responsibilities.
Problems also arise from the underwriting department when they become too restrictive in their
pricing, acceptance and classification of risk to the extent that they make it difficult for the
sales team and end up losing potential customers.

Claims and Marketing

Marketing holds as the most important business function in creating customers and generating
demand and is of great importance in the insurance industry given that its purpose is to sell
intangible products that have to be backed by trust given the promise of future payment

(Njegomir, 2018). Trust in insurance is essential in the service offerings, thus, to create
customer confidence adequate management and compensation of claims are the natural
extensions of marketing functions in the insurance company and industry at large.

The marketing objectives are to create customer confidence so that the customers become loyal
to the brand and to successfully manage the marketing mix elements (Ross, 2019). The only
time that a policy holder or insurance customer gets to experience the true quality of a service
or product is when the time comes for the insurer to fulfil the promise of future payments upon
the occurrence of the adverse event (Hayes, 2019). The claims department has to ensure that
they honour the claims and have favourable turnaround times for it is unlikely for traditional
marketing to affect the insured’s confidence in the insurance company until the time the insurer
fails to honour the claim or delays payments.

The marketing team, therefore has to work closely with the claims officers to ensure that their
conducts during the clams handling process are not demarketing to the client for all marketing
efforts to restore the confidence at claim stages might be unfruitful (Njegomir, 2018). It is
therefore important for that the payment of claims be properly done and managed with a level
professionalism so as to reflect the aspiring promises of marketing claims and protect the
insurance company’s reputation. Good claims turn around can also be a good marketing and
selling point or marketing teams when presenting the benefits that clients can derive if they
insurer with the insurance companies and create some form of competitive advantage in the
insurance industry.

Marketing and Compliance

The main job of the compliance officer is to make sure that the insurance company adheres to
the requirements of any related regulations, standards, laws and policies (Accenture, 2016). In
that regard, it is important for marketing and compliance teams to work together to ensure that
the activities and marketing strategies used do not pose, create threats or violate laws and
certain insurance standards. The compliance function enhances regulatory watch and creates a
device that detects non-compliance risks and inform all company’s levels of the evaluation of
the regulatory framework applicable to insurance including the marketing department.

The most common law that links compliance and marketing activities is that of the minimum
requirements required for one to market or sale insurance products. For example in Zimbabwe
compliance with the Insurance Act, 1987 , the Insurance Regulation, 1989 (section 18) requires
one to apply an insurance agent general licence to sell insurance products and the minimum
accepted is a Certificate of Proficiency in Insurance from IIZ or a resource with an insurance
degree (IPEC, 2017). This is why the marketing or the compliance interface is important to
insurance company in terms of adhering to the legal environment.
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