Bba Service Sem 4

8/12/2019 Bba Service Sem 4

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CONSULTANCY SECTOR

USERS OF CONSULTANCY SERVI CES

The consultants in addition to other aspects also need to assign due weightage to the nature andtypes of users of the services. This makes it essential that they are well aware of the changing attitudes andbehavioural profile. This simplifies the task of understanding the expectations, developing the marketingresources in tune with their needs and requirements and making the marketing decisions proactive. Users

may be an individual or an institution. The motives may be personal and commercial. The providers aresupposed to make sure that customers and clients remain satisfied. At the same time, they have also to becareful that the services prove to be remunerative and very much instrumental in maintaining thecommercial viability. They are supposed to think for the clients, move with the clients, work for the clientsand go with the clients. The consultants are not supposed to lag behind their clients since they bear theresponsibility of supporting them vis-a-vis to remove the psychofobia as and when the circumstancesnecessitate so. They need to subserve the interests of their clients. An individual or an institution seekinglegal advice, technical or managerial suggestions or medical prescriptions needs support of consultants atdifferent stages. If the consultants move with the clients, we find development of a sense of confidenceamong them which keep on moving the process of retaining the business. The clients in a majority of thecases feel that their goals would remain unfulfilled, if consultants are not with them physically,

professionally and morally. This in a natural way increases the instrumentality of consultants.

. In the figure we find different categories of users using the services of different types of consultants:

The marketing strategies formulated on the basis of segment are found to be customer-oriented. In theconsultancy services an organization needs to segment the market on the basis of region, sector andgeographical conditions. In Figure 1.2, we find region wise segmentation.

1.2 Regionwise SegmentationTheCentral Zone, Eastern Zone, Northern Zone, Southern Zone and Western Zone are the differentmarket segments classified into different zones as per the requirements. Such segmentation helps


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consultancy organisations in studying the needs and requirements of different zones and thedevelopment of marketing resources are thus made optimal to the users representing a particular zone.

I n the figure 1.3, we find segmentation on the basis of sector. Such a sector wise segmentation isdivided in to five parts, such as Legal sector, Technical sector, Financial sector, Management sector andMedical sector.

1.3 Sectorwise SegmentationIt is quite natural that segmentation on the basis of sector helps the consultants and the consultancy

organisations in understanding the expectations of different categories of users in a different way. Thesectorwise segmentation presented in Figure 1.3 clarifies that in the consultancy services, a consultancyorganization needs to identify the needs and requirements of a client related to that segment. In some of theorganisations, the legal advice is to be given and like this in some other organisations, the financial andtechnical suggestions are needed.

I nFigure 1.4, we find segmentation on the basis of geographical considerations. In this respect, we findimportant categories as Rural, Urban, Individual and Organizational.

1.4 Geographical SegmentationThe aforesaid segment shown in Figure 1.4 clarifies that in the rural segment, the technologicalrequirements would not be so advanced as found in the urban sector. Like this, the individuals havedifferent expectations from the consultancy organisations.


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1. The Product MixIn the consultancy services, the important products are technical services,legal services, medical services and the managerial services. The providers and the clients may be anindividual or even an institution. Customer orientation is considered to be an integral part of productdevelopment strategies.

The formulation of a sound product mix makes it essential that the consultancy organisations makeefforts to design a sound product portfolio in

which different types of services are included. The medical consultants need tobe aware of the latest devices of treatment and to offer to the patients the world class medical aids. Thetechnical consultants also need to innovate their product mix in the face of technological sophistication andto eliminate the traditional services from the product mix. The legal consultants need to be aware of thelatest developments, such as amendments in laws, rules and regulations and to formulate the service mixaccordingly. Thus the elimination and inclusion processes need to be adopted even in the consultancyservices. The management experts not aware of the latest developments in the business world would hardlybe successful in serving the interest of their clients. These facts make it clear that' like other organisations,the consultancy organisations also need to make possible innovation in the face of multi-dimensionaldevelopments in the business environment.

PROMOTION

Advertising:We find advertising a paid form of persuasive communication. The latest developments inthe field of marketing communication technologies have made advertising a sharp-edged weapon in thehands of consultant and the consultancy organisations. The sensitivity in advertising is found increasedwhen the advertising slogans and messages prove to be creative. The advertising professionals having a

world class excellence can make it possible.The marketing experts feel that creativity paves avenues for sensitivity and sensitivity reserves elbow roomfor acceptability of the messages, slogans, appeals and themes. This makes it essential that messages havehigh degree of creativity.Publicity:We find publicity instrumental in activating the process of persuasion for which the advertisersare not supposed to pay anything. The public relations activities are found important while publicising.Like other organizations even the consultancy organisations are required to use this component ofpromotion. The ultimate object of publicity is to transmit to the masses the news and information related tothe effectiveness of the appeal. In the consultancy services, the publicity measures are required to beinnovated. This requires support of academics and professionals in the field of creating creative literature


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and getting them published in the important newspapers, magazines and journals preferred by the targetclients. The publicity measures simplify the task of consultative sales people, as the creative literaturewould be instrumental in raising the effectiveness. The services to be offered by a consultancy organizationwould be published in a reputed media having wider circulation. The technical, medical, legal'smanagement journal, and the important newspapers and magazines preferred by the prospects require dueattention of marketing professionals.Sales Promotion:This component of promotion bears the efficacy of touching the target with the help ofincentives offered to the middlemen and the clients or consumers. It is a temporary incentive with a certain

motive found instrumental in promoting the consultancy business. We need to mention that in theconsultancy business the middlemen are also used to offer the services to the clients. The leadingconsultancy organisations have branch and site offices where a number of personnel are found engaged inoffering the services to the clients. The services are offered directly to the users when we find an individualacting as a consultant. The marketing professionals are supposed to take decisions related to incentives tobe offered to the middlemen as well as to the users. The branch personnel, site-personnel play anincremental role in selling the consultancy services. We go through incentive measures to be offered toboth.Personal Selling:Personal selling needs personal excellence to influence the prospects. It has proved to bean important component of the promotion mix.The consultancy organisations find this constituent of the promotion mix effective in promoting the

business. How to build confidence is an important aspect of personal selling in which the consultative salespeople are required to perceive the changing expectations of clients or users in a right fashion. They aresupposed to perceive power, value and decision making system in the client's organisations. It is alsoessential that they develop personal relationship with the personnel engaged in the organisations of clients.In a true sense, they are required to move with the client. The success of personal selling substantiallydepends on the personality and excellence of an individual.Word-of-mouth Promotion: Quality of services is the main thing in promotion. If the services are ofworld class, the customers/users start promoting your product. Contrary to it, if your services are of poorquality even the most sophisticated promotional measures fail in sensitising the users. It is against thisbackground that we talk about this constituent of promotion mix. By word-of-mouth communication ouremphasis is on promoting the services by the hidden salesforce. It is pertinent to mention that the satisfied

groups of customers communicate to their close friends and relatives the outstanding properties of theservices availed by them. Since we trust on our friends and relatives, the process of stimulation is foundactivated. If you are satisfied with the services of a medical consultant since he/she has successfully curedyou on the basis of his/ her expertise and in addition, his/her behaviour has also been decent; you talk toyour friends and relatives regarding the same.

Telemarketing:Of late, we find telemarketing very much instrumental in promoting almost all types ofgood and services. We are aware of the fact that telemarketing is based on the contribution of telephonicservices and therefore, we can also call it marketing with the support of telephones. It is important tomention that with the satellite communication facilities, the telemarketing has,proved to be an effective as well as an economic component of promotion. In some of the areas, we find acombination of telephones and televisions for promoting the services. The main thing in telemarketing isthe instrumentality of telemarketers. He should have a high communicative ability in addition to the art oftelephonic talk. The consultancy organisations can use telemarketing for promoting the business. Anindividual consultant or the consultancy organisations need to recruit efficient personnel to act astelemarketers The personnel acting as telemarketers need an ongoing training. An in depth knowledge ofthe related services is found essential to the telemarketers. He bears the responsibility of answering to thequestions and queries of clients, transmitting to them the required information, removing their confusionand misunderstanding on the basis of his communicative ability. It is natural that for discharging his/herfunctional responsibilities in a right way, the consultancy organisations need to make it sure that thepersonnel working as telemarketers are professionally sound.


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2. The Price MixI nthe consultancy services when we talk about the price mix our emphasis is on fee or commission

charged by the consultants or the consultancy organizations for making available to the clients the servicesas per the promises or agreement. We agree with this view that a decision related to fee or commissionplays a significant role. In this context, it is essential that the consultants are aware of the pricingobjectives, which may be either price-competitor or non-price-competitor. In the price-competitorobjective, the consultancy organisations offer lower price since the pricing decisions are required to be

motivational. In the non-price competitor objective, we find stable price for individual services and formulti-service situation, a balance or an optimal point is searched in the high, medium and low price lines.Price Lining Strategy:In this strategy, the consultants and the consultancy organisations charge differentfee-structure since the services vary. This is possible in the retail business. As for example, we finddifferent price structure for shirts of different categories. Here it is essential that the consultants are in aposition to support price differentiation on the basis of service differentiation. The consultants serve in adifferent way such as they prepare feasibility report, daily project report, technical specification and so on.This strategy helps both the consultants as well as the clients in making cost analysis and revenueforecasting. The adjustment of fee is found difficult and therefore the consultancy organisations may facenumerous problems in the long run.

3. Leader Pricing Strategy: This pricing strategy helps in building volume and introducing as manyclients as possible. It involves substantial reduction in price charged for goods or services having frequentdemand. Here the objective is to market additional services as full price, especially to the clientsresponding favourably to the leader priced services. In this strategy the clientsprefer to purchase exclusively the leader service. A number of clients like to negotiate which raises thepossibility of shifting to other competitors. A dangerous stage like price war is expected which is notsuitable to the development of an organization. A stage like price war is to jeopardize everything.4. Prestige Pricing Strategy: In this strategy, the consultants charge fee higher than the market. This issupported by the logic that they offer qualityservices and therefore charge high for the superior quality and less for the inferior quality. We find feerepresenting the status and this limits the number of clients having fee and status consciousness. If you

offer world class services, the high fee structure is found judicious.5. Competition-based strategy:Such a strategy is based on competition.Here the consultants have three options, the first "to beat", second" to meet" and the third "to lead". In otherwords, in the "to beat" strategy, we find emphasis on lower price structure so that the price is used as amotivational tool and the clients are motivated. In the "to meet" strategy, we find focus on similar pricestructure whereas in the "to lead" strategy, we find emphasis on charging higher than the competitors. Butthis strategy is not suitable when the intensity of competition is high.6. Skimming strategy:In this strategy, the consultants recover their services and development costs. Herethe consultants get the maximum fee but the intensity of competition influences the pricing decisions. Thisstrategy help in the formation of a negative attitude where clients feel that fee has been reduced as theservices are of sub-standard quality.7. Penetration strategy:The penetration strategy focuses on break-even point. Here the fee structure isfound a bit higher than the average. Here themotto is to create trial, rapid acceptance and high volume of services for the consultants. In this strategy,the consultants and the consultancy organisations are required to increase the fee sooner or later which mayact as a demotivational tool and the clients may be discouraged. Here it is pertinent that the consultantsshow their excellence by justifying a change and this focuses our attention on modifying or improving theservices so that the clients don't develop a negative attitude.8. Discount Allowance strategy: Of course, we don't find discount allowance strategy suitable for theconsultancy organisations, however the consultants may offer discount or allowance when they act as sub-contractors to anotherconsultant. In this context, we find reduction in fee due to a reduction in the overhead costs.


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The Place Mix

I nthe consultancy services, the distribution mix also occupies a place ofoutstanding significance. The place mix on making available promises our emphasis promised services tothe clients on time

Branch Offices: If the consultancy organisations find that the relationship with the clients is ofpermanent nature or it is not possible to have a direct contact with the clients due to their unmanageable

number, cost ineffectiveness or constraints in transmitting the information; the providers need to think infavour of a full-fledged branch.Site Offices:To be more specific when there is a job contract, the opening

of site office is found essential. This brings momentum in the process of offering the services.Through A Representative:It is important to mention that while distributing the consultancy services, wemake an advocacy in favour of a representative where the establishment or opening of site office is notfound to be a commercially viable proposition.

INSURANCE SECTOR

INTRODUCTION

Insurance industry has always been a growth-oriented industry globally. On the Indian scene too, theinsurance industry has always recorded noticeable growth vis--vis other Indian industries.

The Triton General Insurance Co. Ltd. was the first general insurance company to be established in Indiain 1850, which was a wholly British-owned company. The first general insurance company to be set up byan Indian was Indian Mercantile Insurance Co. Ltd., which was established in 1907. There emerged manya player on the Indian scene thereafter.

The general insurance business was nationalised after the promulgation of General Insurance Business(Nationalisation) Act, 1972. The post-nationalisation general insurance business was undertaken by theGeneral Insurance Corporation of India (GIC) and its 4 subsidiaries:

1. Oriental Insurance Company Limited;2. New India Assurance Company Limited;3. National Insurance Company Limited; and4. United India Insurance Company Limited.

Towards the end of 2000, the relation ceased to exist and the four companies are, at present, operating asindependent companies.

The Life Insurance Corporation (LIC) was established on 01.09.1956 and had been the sole corporation towrite the life insurance business in India.

The Indian insurance industry saw a new sun when the Insurance Regulatory & Development Authority(IRDA) invited the applications for registration as insurers in August, 2000. With the liberalisation and


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opening up of the sector to private players, the industry has presented promising prospects for the comingfuture. The transition has also resulted into introduction of ample opportunities for the professionalsincluding Chartered Accountants.

The Indian Insurance industry is featured by the attributes: Low market penetration; Ever-growing middle class component in population. Growth of consumer movement with an increasing demand for better insurance products; Inadequate application of information technology for business. Adequate fillip from the Government in the form of tax incentives to the insured, etc.

The industry formations need to keep vigil on these characteristics of the Indian market and formulate theirstrategies to entail maximum contribution to the output of the sector.

The Indian life and non-life insurance business accounted for merely 0.42 percent of the world's life andnon-life business in 1997. The figures of the basic parameters of the industry's performance viz. InsuranceDensity and Insurance Penetration also are evident of the hitherto existing low-yield Indian marketconditions.

The term "Insurance Penetration" broadly measures the contribution of the insurance industry in relation toa nation's entire economic productivity. The figure of premium vis--vis the GDP of 1999 stood at 0.54percent for non-life insurance business and 1.39 percent for the life insurance business. The term

"Insurance Density" reflects the Insurance purchasing power. The premium per capita in India amounted toUS $ 2.40 for non-life insurance and US $ 6.10 for life insurance in 1999 but with the deregulation of thesector, a sea change in the scene is most likely.The insurance sector in India has come a full circle from being an open competitive market to

nationalisation and back to a liberalized market again. Tracing the developments in the Indian insurancesector reveals the 360-degree turn witnessed over a period of almost two centuries.

A BRIEF HISTORY OF THE INSURANCE SECTOR

The business of life insurance in India in its existing form started in India in the year 1818 with the

establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones inthe life insurance business in India are:

1912:The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurancebusiness.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statisticalinformation about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective ofprotecting the interests of the insuring public.

1956:245 Indian and foreign insurers and provident societies taken over by the central government andnationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5crore from the Government of India. The General insurance business in India, on the other hand, can traceits roots to the Triton Insurance Company Ltd., the first general insurance company established in the year1850 in Calcutta by the British.

Some of the important milestones in the general insurance business in India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of generalinsurance business.


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1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conductfor ensuring fair conduct and sound business practices.

1968:The Insurance Act amended to regulate investments and set minimum solvency margins and theTariff Advisory Committee set up.

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance

business in India with effect from 1 st January 1973. 107 insurers amalgamated and grouped into fourcompanies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., theOriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as acompany.

STRUCTURE OF THE INSURANCE INDUSTRY

The structure of the insurance industry comprises of the Operating department, Administrative departmentand the finance department. The Operating Department generally performs the basic functions pertainingto the designing of products, marketing thereof, servicing the insured, the the

the insured, management of portfolio, etc. The Administrative Department looks after the day-to-dayaffairs of the company. The Finance Department backs the operations and administration of the companyby accounting for the transactions, streamlining the flow of funds, materializing the managementdecisions, etc.

The Administration Department as well as the Finance Department, usually, functions through in-housesetup. The Finance Department functions in the areas of accounting, financial and management reporting,budgeting and controlling, etc. and thus renders enormous scope for finance professionals. The newentrants in the insurance sector are likely to call for the services of the Chartered Accountants for theirfinancial setup requirements. The Chartered Accountants have engaged themselves in the audit of

Insurance Companies since long. With the transition in the insurance sector, the horizons for theircontribution have broadened. There has, emerged a king-size pool of opportunities that the CharteredAccountants can explore and apply their professional wisdom and experience to.

BASIC FUNCTIONS OF THE INSURANCE INDUSTRY

1. Risk Perception and Evaluation:The fundamental function of an insurer is to provide a cover against the detriment caused to the insureddue to the happening of certain specified and agreed events. Thus, prior to providing such umbrellathrough a product, the insurer has to assess the risk involved in the transaction. The insurer has to identify

the element of risk prevalent in the concerned industry or a particular unit. The perception of risk requiresthe study of variables through various methods including the application of scientific and statisticaltechniques and correlation thereof with the industry or unit under study in light of their basicenvironmental and infra-structural characteristics. After the identification and categorisation of the risksperceived, the probability of happening of the loss-causing events and the severity of the loss has to beassessed.

2. Designing the Insurance Product:On the basis of the risks perceived, the insurer develops a product to cover the stipulated risks. While


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designing an insurance product, an insurer decides its cost to be charged from the insured in the form ofpremium, reduction thereof in certain cases like not lodging any claim during the previous coveredperiod(s), suggesting the implementation of risk-mitigating measures, etc. The features of a product shouldbe flexible enough to provide for the determination of premiums, rebates, additional premiums, etc.depending upon the risk benchmarks as determined.

3. Marketing of the Product:The core function of the marketing force of an insurance company is to generateawareness about the insurance products among the target market. But in the Indianscenario, where the insurance penetration is too low as compared to the other nations, themarketing force needs to perform the pro-active role in developing an insurance culture.It is through the efficiency of the sales force of an insurance company that thedesirability and the success of a product are determined.

In Indian insurance market, the function is, basically performed by the agents. The persons desiring tofunction as insurance agents have to obtain license to act as such from the IRDA or an officer authorisedby the Authority in this behalf. The agents approach the prospective buyers and apprise them of the basicfeatures of the products. In order to dispense with the functions, the agents need to possess adequate

knowledge of the insurance industry, products and the modalities attached therewith. Further, themarketing personnels should be adequately backed by the back-office setup.

4. Selling of the Products:The term selling in the context of insurance industry connotes the issuance of policies to the applicantproposer. The non-life insurance policy basically embodies the covenant between the insurer and theinsured wherein the former agrees to indemnify the latter for the loss caused to him on the happening ofthe certain agreed events up to a specified limit. The life insurance policy generally contains the agreementwhereby the insurer agrees to pay to the insured or the beneficiary of the policy an agreed amount on theexpiry of the term of the policy or in the event of the death of the insured respectively. The additional

benefits in the shape of Riders viz. Accidental Death Benefit, Double Sum Assured, Critical Illnessbenefits, Waiver of Premiums, etc. can also be appended with the policy on the payment of an additionalpremium.In Indian industry, the function is, generally performed by the insurer. In addition, the insurancecompanies depute their Direct Selling Representatives to look after the function. They receive the proposaldocuments, vet them and issue policies to the proposers.

5. Management of Portfolio:The management of the portfolio includes the assessment of requirement of funds, identification of varioussources of finance, the evaluation of the sources in the light of their cost, availability, timing, etc.,

reconciling the features of various sources with the needs of the company and the selection of appropriateconjunction of sources. The insurer possesses huge amount of funds, which need proper management. Themanagement of the portfolio of an insurance company requires the identification of investment avenues,evaluation thereof and the selection of the most appropriate mix of alternatives where the funds of thecompany can be invested. The selection requires the knowledge of finance related functions andtechniques apart from the in-depth know of the patterns of requirement of funds in the company as well asin the industry as a whole.


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INSURANCE SERVICE: ITS USERS

The formulation of creative marketing decisions is not possible unless the different categories of usersusing the services of insurance industry are known. The general users assign due weightage to their own

interest whereas the industrial users assign an overriding priority to the interests of their organizations.The emerging changes in the socio-economic conditions and governmental regulations influence theinterests of both the category of users. It is against this background that an in-depth study of users isfound significant to the insurance industry.

An individual or an institution, a person or a group of people availing the services is termed to be theactual users of the insurance industry. On the other hand both the categories of prospects having thepotentials, bearing the willingness but not using the service right now are termed as potentialusers/prospects. The services are made available by the Life Insurance Corporation of India and the

General Insurance Corporation and other private insurance companies are used by both categories ofusers.

The need and requirement cant remain static. The business environmental conditions influence theprocess of change. The professionals engaged in servicing the insurance organizations bear theresponsibility of understanding the changing level of expectations of the different categories.

Insurance Market Segmentation:

In insurance industry, profiling is very important in determining premium rates. Typically, insurers collect

every information available. However, analyzing thoroughly is not feasible since the number of variables isnormally large.The starting point is thus mass marketing. In mass marketing, the seller engages in the mass production,mass distribution and mass promotion of one product/ service for all buyers.A niche on other hand is a more narrowly defined group seeking a distinctive mix of benefits. Marketersusually identify niches by dividing a segment into sub segments.

Also, in terms of product complexity, insurance products can be categorized into low complexity and highcomplexity products.

INSTITUTIONAL


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Low complexity products: These are simple products with a standard set of covered risks, perils andhazards.High complexity products: They have a large number of riders and warranties and do not indemnifycertain causes of loss.

PRODUCT

COMPLEXITY

LOW HIGH

TARGET SEGMENT

Niche Market Fire Insurance (different risk profilesfor each), Marine Insurance

1. Weather Insurance2. Product Liability

Mass Market Householders comprehensivePolicy , Medical Insurance

Personal Accident InsurancePension Products

The distribution strategy should vary according to the type of policy. Insurance products with lowcomplexity can be sold through bank-assurance, but products with high complexity should not be soldthrough the same channels, as it would be very difficult (in terms of time, effort and cost) to train bankemployees in understanding the finer details of the complex policies.

Products with high complexity need a certain amount of customer hand holding in terms of explaining theterms, conditions, riders and warranties of the policy. In case of niche marketing, direct marketing can be

used in the form of e-mails and direct calls through agents to specific customers belonging to the targetsegment. For high complexity niche products, spreading awareness and selling through financial advisors,consultants and brokers would also be a good strategy.

Market Segmentation in Insurance

PRODUCT

COMPLEXITY

LOW HIGH

TARGET SEGMENT

Niche Market Direct marketing throughpersonalized e-mails

Advertise in area specificjournal with toll free numbers

to set up appointments Agents

1. Well trained agents2. Financial

advisors/consultants3. Brokers

Mass Market 1. Bancassurance2. Postal department3. Agents

1. Well trained agents2. Advertise in newspapers

with toll free numbers to setup appointments

Households

Industrial Sector

Trade Sector

Institutional Sector

Regional Wise

Rural Sector

Segment Sub Segment


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Flower of Services

Flower of services refer to a well-formed package of total services with all the supplementary servicesbeing well formulated along with the core services. The various petals of the flower are:

Information:A marketer needs to provide adequate information to his employees and his customers. This information isgeneral information provided through various communication channels.

In the insurance industry information is provided to the customers with the help of:

o Agentso Seminarso Web siteso Print mediao Radioo Television, etc.

Consultancy:This is additional customized information provided to the potential customers by the service provider. Inthe insurance industry it is provided by companys staff and agents.


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Example: In LIC when a customer enters asking of information about the policy, he is directed towards theassistant sales manager. Assistant sales manager will listen to the customers requirement and as per hisrequirement list the number of policies that are available. He will also ask the customer about the price andlimit the number of options for the customer, so that he can easily choose the policy without confusion.

Order taking:Order taking should be done without mistakes. In LIC order taking is generally done by:

o By Agentso On Web site (www.licindia.com)o By Assistant sales manager directly in the office.

Hospitality:Hospitality is a very pretty petal, reflecting pleasure at meeting new customers and greeting old ones whenthey return. Hospitality finds its full expression in face-to-face encounters.

In LIC customers directly come in contact with the sales manager. The customers are treated as guests. Thesales managers of LIC are given special training of how to sell the policies to the clients. It is only in LIC

that a customer can meet the chairman directly without any appointment.

Safe keeping:It is in the process and procedures used by marketers to safe guard and to maintain secrecy.

In LIC the data of the customers is very important. They feed the data of the customers in their Front andApplication Program Software which is connected with all the branches of LIC. The data is onlyavailable with the sales people and not shown to any person.

Exceptional:Exceptional service means service over and above customers expectations.

LIC has the fastest claim settlement in the worldthereby providing exceptional service. LIC also solvescomplains of the customers within 7days.

Payment:The payment of premium is normally through cheques. Customer can make payment in LIC through:

o Agentso Loanso Web siteso Standing instruction to banks:In this the account holder will give standing instruction to his bank to pay the amount of premium everymonth without his consent on the given date directly to LIC.

Billing:The billing should be done in such a way that there are no mistakes and if there are any they must beimmediately rectified. The billing should provide break-ups of premium charged, service charges, etc.

Product Mix
http://www.licindia.com/http://www.licindia.com/http://www.licindia.com/http://www.licindia.com/


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The Width of a product mix:It refers to how many different product lines are available. In case of insurance sector, there are generallythree different product lines i.e. Life Insurance, Marine Insurance and Fire Insurance.

The length of a product mix:Itrefers to the total number of items in the mix. In case of insurance sector, the following is the length ofproduct mix:

The depth of a product mix:The various products and various types of the products with distinct features. In the insurance sector, onepolicy can be made available in different variations. Some of the examples are as follows:

Life Insurance:

These product mix dimensions permit the company to expand its business.E.g.: It can add new product lines thus widening its product mix.

General Insurance:

Product levels:In this figure there is a nucleus or core in the center, which is supported by series of tangible and intangiblefeatures and benefits and these form a cluster around the core product.

Level Type of

service

Contents Insurance sector

1 Core service Basic service product LifeNon-life insurance policy

2 Expectedservice

Basic product and minimum purchaseconditions that must be met.

After sales serviceLow claim settling period.

3 Augmented Something different, which enables Technology

Whole Life

Insurance

Whole Life With

Profit Policy

Limited Payment

Whole Life Policy

Single Premium

Whole Life Policy

MarineInsurance

Time

Insurance

Voyage

Insurance

Port Risk

Insurance


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service one product to be differentiated fromother

Online premium paymentPayment through credit cardsStanding instruction to bank

4 Potentialservice

Features that attract the customers andare useful to them.

Maturity claims settled on or before thematurity date.

Loans

Price Mix

In the insurance business, the pricing decisions are concerned with the premium charged against thepolicies, interest charged for defaulting the payment of premiums & credit facilities, commission chargedfor underwriting & consultancy services

Premium:Premiums are the periodic payments usually monthly or quarterly that the policy holder pays to theinsurance company to purchase and keep a policy in force.For example in case of life insurance according to the policy it may be the amount payable during theendowment term of the policy or until the death of the life assured whichever is earlier.The basis on which the insurance company decides the amount of premium to be paid by each person isdetermined mainly by 3 factors:

Mortality Tables:All insurance companies refer to different mortality tables. These tables differ from country to country. Themortality table indicates the probability of a person dying in a particular age group. For e.g. in an age groupof 25-30 years, the probability might be just two, but this probability would increase for a higher age group

of 45-50 years.Life Insurance Company (LIC) with its long-standing presence has a mortality table, which is grosslyoutdated. Some other insurance companies have got their own tables but they are more or less in line withthat of LIC.

Expected Surplus:The premiums collected by the insurer are invested in capital markets. There is a fixed investment patternfor the insurer. Out of the surplus earned on the premiums invested, 95% is distributed to the policyholdersand the insurance company retains the balance 5%.

Expenses:An insurance company has to incur expenses in the form of commission to agents, office expense,advertising expense, salaries to employees. These expenses are to be managed by the company in the 5%

surplus earning which they earn as mentioned above.

Now the criterias on which the premium amounts are fixed are different from different types of

Insurances.

Life Insurance Pricing:The pricing in case of life insurance is done on the basis of:

Life Expectancy:In case of life insurance, the premium amount tends to be different for different customers. Thisdifferentiation is on the basis of age, medical history of a person.


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Age -E.g.: Low premium is charged for children and youngsters as it is assumed that they are at a lesser risk ofdeath as compared to the aged people.

Medical History -The medical history should be revealed to the insurance company by the customer in Utmost Good Faithi.e. the insured must provide to the insurer complete, correct and clear information of the subject matter ofinsurance.

Motor Vehicle Insurance:Car insurance companies take many factors into account when determining what premiums the insured willpay. Everybody does not pay the same premium. You pay a premium based on what the company assessesas the possible risk you pose. The major factor is the age and condition of the car. The other factors are asfollows:-

Multiple cars or policies:When you have more than one car on an insurance policy, most companies will give you what is known asa multiple line discount. Because you use the company for all of your auto insurance needs, they rewardyou.Distance and amount of driving you do:Most car insurance companies ask prospective clients how far, and to where, they do most of their driving

in a day. The thinking is that further you have to drive, and the more often you do it, the more likely youare to have an accident. The person who commutes 45 minutes to work every day is going to pay more thanthe person who drives 10 minutes to work. Likewise, a college student who walks to class, and drives homethree or four times a year will cost less than the college student who spends 30 minutes commuting to andfrom campus each day.

Location of your car:Car insurance companies rate areas according to the number of accidents or thefts that occur in a specifiedamount of time in that area. Sometimes, the company can even pinpoint a neighborhood. If you live in alarge city, your rates will be higher than if you live in a town.

Fire and Marine Insurance Pricing:

The principle of utmost good faithis applicable even for fire and marine insurance.E.g.: If a trader while taking a fire insurance policy does not disclose the previous occurrence of fire in thefactory, and subsequently after taking policy, there is another fire, the insurance company may refuse topay the compensation if it learns about the previous occurrence of fire which was not disclosed at the timeof taking the policy.The pricing in case of fire and marine insurance is done on the basis of:

Type of Building:In case of a building the rate of premium also depends on the type of construction. If it is woodconstruction the insurance premium is low as the cost in constructing a wood building is low in comparisonto a concrete building which has higher premium amount

Past Experience:If a fire or marine insurance company has a past experience of settling a claim successfully then, thecredibility of the company increases and it charges higher premium for similar policies. The customers areassured that the company will be able to handle the claim well as it was done in past and hence they areready to pay higher premium.

Discount Pricing:In insurance sector, discount is offered if group insurance is opted for. Group Insurance Scheme is meantto provide life insurance protection to groups of people. Administration of the scheme is on group basis andcost is very low.


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Discount is given on group insurance scheme because the insurance company gets a large number ofcustomers at a time and hence it saves expenses on promotion and advertisement, which are to be incurredto attract new customers.Thus, discount is given in order to attract more customers at a time by this group insurance scheme. Thecost incurred on giving discount is much less as compared to the cost spend and advertising and promotion.Hence discounting is much more profitable for the companyHowever, 65 per cent of the pricing is still determined by the government that is the Tariff AdvisoryCommittee. So the rates of premium are more or less the same. It is going to change over the next few

years. In non-tariff products like personal accident etc there is a lot of pressure on pricing. Companies willhave to be reasonable while determining a pricing structure because, across the globe, there are instances ofcompanies going bust while playing the game of undercutting state-run companies.

Place Mix

Channels:In case of insurance sector, the following channel of distribution is followed according to the target market:CHANNELS

Direct Selling

Agents Financial Advisors Call Centers

Partner Selling Bancassurance Postal Department Selling through Corporates

Direct Selling:

Agents:The agents are selected and recruited by the development officer of the insurance company. These agentsinform the customers about the various insurance policies offered by the company and convince them tobuy these policies.

Financial Advisors:The financial advisors are also consulted by the customers regarding their financial matters. These advisorssuggest their clients to get their goods insured against any calamity or risk.

Call centers:The people who require insurance call up the call centers. These call centers send their direct marketingagents who go to the customers place and sell the insurance policy.

Partner Selling:

Bancassurance:In bancassurance, the insurance products are sold through the banks network of branches.Om Kotak

Mahindra has tie-up with Dena bank, by which former doesn't entertain bancassurance with any other bankand the latter also doesn't distribute policies of any other insurance company

Postal Department:. Insurance companies can tie up with the postal department to sell and distribute various insurance covers.This would certainly require upfront training costs, as the postal employees in turn need to educate and sellthe concept and benefits of insurance to the people in rural areas. Selling Through Corporates:Insurance can be sold through corporates too.E.g.: When a customer purchases a Maruti car, he gets the insurance of the car free from the MarutiCompany itself. Thus this is termed as selling insurance through corporates.Electronic Channels:


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In the last decade, numbers of technological advances have taken place due to immense use of EDI(Electronic Data Interchange)

CHANNEL

Electronic channels LIC on internet Information Kiosks SMS

Information kiosks:LIC have set up 150 interactive Touch screen multimedia KIOSKS in prime locations in metros and somemajor cities for dissemination information to general public on our products and services.

SMS:SMS through mobile phone is recently new technology introduced by the LIC to promote their product.

Location:In insurance, location, the place where office situated is not as important as mostly the agents of theinsurance company goes to the place of the customers for doing most of that customers work.

Physical Evidence

Physical evidence is the environment in which the service is delivered and where the company and thecustomers interact and any tangible goods that facilitate the performance and communication of the service.Services are intangible and heterogeneous. Intangibility means that services cannot be displayed, physicallydemonstrated or illustrated; heterogeneity means that consumers cannot be certain about performance onany given day. It plays a major role in enhancing customers perception of the service quality.However, in case of insurance sector, the customer rarely visits the insurance company. The customercomes mostly only in contact with the service provider.

Insurance Service Tangibles as Physical Evidences

1 Policy Documents

2 Brochures

3 Periodic Statements

4 Renewal Notices

5 Business Cards

6 Stationary

7 Calendar, Diaries

8 Letters/Cards

9 Website


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People Mix.

Employees:

Employees are very crucial because:They are the serviceThey are the brandThey are the marketers

They are the organization in the eyes of the customers.

The various employees involved in providing service to the customer in insurance sector are:

Customer service representatives:They, process insurance policy applications, changes, and cancellations. They review applications forcompleteness, compile data on policy changes, and verify the accuracy of insurance company records.They may also process claims and sell new policies to existing clients.

Marketing and sales managers:These constitute the majority of managers in carriers local sales offices and in the insurance sales agentssegment. These employees sell insurance products, work with clients, and supervise staff.

Claims adjusters, appraisers, examiners, and investigators:These decide whether claims are covered by the customers policy, confirm payment, and, when necessary,investigate the circumstances surrounding a claim. Claims adjusters work for property and liabilityinsurance carriers or for independent adjusting firms. They inspect property damage, estimate how much itwill cost to repair, and determine the extent of the insurance companys liability; in some cases, they may

help the claimant receive assistance quickly in order to prevent further damage and begin repairs.

Underwriters:Underwriting is another important management and business and financial occupation in insurance.Underwriters evaluate insurance applications to determine the risk involved in issuing a policy. Theydecide whether to accept or reject an application, and they determine the appropriate premium for eachpolicy.

Insurance sales agents:About 15 percent of wage and salary employees in the industry are sales workers, selling policies toindividuals and businesses. Insurance sales agents, also referred to as producers, may work as exclusiveagents, or captive agents, selling for one company, or as independent agents selling for several companies.Through regular contact with clients, agents are able to update coverage, assist with claims, ensurecustomer satisfaction, and obtain referrals.

Lawyers:The insurance industry employs relatively few people in professional or related occupations, but those whoare so employed are essential to company operations. For example, insurance companies lawyersdefendclients who are sued, especially when large claims may be involved. These lawyers also review regulationsand policy contracts. Nurses and other medical professionals advise clients on wellness issues and on

medical procedures covered by the companys managed-care plan. Computer systems analysts,computer programmers,andcomputer support specialists:These are needed to analyze, design, develop, and program the systems that support the day-to-dayoperations of the insurance company.

Actuaries:These represent a relatively small proportion of employment in the insurance industry, but they are vital tothe industrys profitability. Actuaries study the probability of an insured loss and determine premium rates.

Customers:People mix not only includes employees but also customers. The customers are to be treated with respectand courtesy.
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Process Mix

In case of insurance sector, the process mix includes the various interactions that take place between theinsurance agent and the customer in the process of selling the policy to the customer till the settlement ofclaims.

The following process mix is followed by insurance companies in case of life insurance:

1. The insurance agent calls up the customerand informs him about the different policies offered by thecompany and the price mix of all the policies. If, the customer seems interested in taking the policythen, he fixes an appointment with the customer.

2. The insurance agent meets the customer and gives him some information about the insurancecompany and also about the benefits of the policy.

3. The customer is then asked to fill a financial review form (FRF) and the agent is asked to find out thestandard of living of the customer so that the insurance company gets a clear picture about the financialcondition of the customer and what kind of policy he can afford.

4. The insurance company offers various policies but they might not be suitable for the customer hence,on the basis of his requirements and financial status, the insurance agent suggests two or threepoliciesto the customer, which will be suitable for him.

5. The insurance agent explains the different policy plans in detail to the customer i.e. the amount ofpremium to be paid, the time interval at which the premium is to be paid, the benefits of each of thepolicy etc. A brochure is also provided to the customer wherein the entire description of all thepolicies is given.

6. Then, the insurance agent provides a feedback formto the customer and asks him to give his feedbackregarding the policies that he has been informed about. This feedback is taken in order to find outwhether the customer is satisfied with the plans of the policy or whether the company needs to makethe policy plans more attractive so that it may appeal to its future customers.

7. Then, the next appointment is fixed by the insurance agent with the customer and in this meeting; thecustomer selects the policy plan, which appeals to him. The customer is then asked to fill up theproposal form which contains various details of the payment and he is asked to make the firstpremium payment.

8. Then, the insurance agent submits the duly filled and signed form in the insurance office alongwith the other necessary documents. E.g.: Medical Reports in case of Life Insurance. Submission ofAge Proof is essential as the rate of premium payable on a life insurance policy generally varies withage, and therefore age is one of the most important factors in determining the rate of premium payablein an individual case. The following is accepted as age proof:

o Certified extract from municipal or local bodys records made at the time of birth.o Certificate of Baptism if it contains date of birtho Passport issued by passport authorities in India.o Certified Extract from school or college records, if date of birth is mentioned.

The customer must get himself examined from the approved doctor of LIC. The medical examination isnecessary to determine the physical fitness of the customer. If the medical report is favourable, thenonly LIC will issue the policy.


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9. An average twelve days time is taken by the company to verify the submitted documents. After the

twelve days period, the insurance agent meets the customer to provide him a policy document, whichconsists of the terms and conditions of the policy.This is because terms and conditions of the policydiffer for different customers due to differences in medical conditions of customers in case of lifeinsurance and due to differences in nature of goods and mode of transportation in case of marine andfire insurance.

10.Then, a reconfirmation is taken by the agent from the customer that he agrees with the terms andconditions of the policy.

11.The insurance agent then regularly collects the premiumfrom the customer whenever the premiumbecomes due.

Promotion Mix

Advertising:It is a paid form of non-personal communication. It is used to create awareness and transmit information inorder to gain a response from the target market. Forms of advertising are as follows:

o News Papers and Magazines:LIC give ads in the news papers and magazines round the year to continue its brand image and alsowhen new products are introduced. Normally its ads are published in Times of India.

o Electronic media:Insurance companies also advertise its services in theElectronic media like:

Internet (Websites):Companies like LIC (www.licindia.com), ICICI (www.iciciprudential.com)all have websites fromwhich people can get the information about their products, prices, various schemes, and lots of

other information. People can also purchase the product through this website. Television:Companies like LIC, Met Life India, advertise on television to make people aware of theirproducts and services. Radio:ICICI Prudential advertises on 92.5 red Fm.

o Hoardings:LICput its hoardings where there is a mass flow of people,especially outside the railway station or atthe backside of the bus.

When Met Lifewas introduced it has put his hoardings on the side of the train, to target huge number

of people.o Brochures:Companies provide brochures to the customers so that they can have a look on various schemes andtheir prices.

Public relations:Public relations are helpful for the companies to build their brand image, to maintain good relationshipwith customers, to make the people aware of its recent happenings, etc. Mediums of Public relations are:

o Press releases:This helps the company to convey its message to its customers and other people.o Seminars:
http://www.licindia.com/http://www.licindia.com/http://www.licindia.com/http://www.iciciprudential.com/http://www.iciciprudential.com/http://www.iciciprudential.com/http://www.iciciprudential.com/http://www.licindia.com/


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These are held to provide information about the new product launched, position of the company in themarket, etc.

Sales Promotion:Gifts:

LIC provides diaries, pens, booklets, etc to its customers.

o Sponsoring Events:Eg: Max New York Life Insurance Company has sponsored the recent India-Zimbabwe-New Zealandtri series.

Personal selling:o Agents:It is the most widely used method of promotion by all insurance companies. They recruit, train andmotivate the insurance agents to convince the customers to buy insurance policies of that particularcompany. The agent also collects the monthly premium and settles the claims of the customers.

Word of Mouth:Word of Mouth promotion plays the role of hidden sales force. The word of mouth promotion is normallycarried out by customers, agents and employees. It can be positive or negative depending upon theservice or experience they receive.

o Customers:It is important for the organization to provide customers with quality service so that he is satisfied andspread the good word of mouth. On the contrary if the customer is not satisfied with the service orexperience he spreads bad word of mouth.

Bba Service Sem 4

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