Product Mix Mbi Ins

8/6/2019 Product Mix Mbi Ins

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PRODUCT MIX

The formulation of product mix for the insurance business makes it significant to take a look

at the services and schemes of insurance organisations. The product portfolio is known and

the process of formulating a package should be known. It is natural that the users expect a

reasonable return for their investments. It is quite natural that the insurance organisations

want to maximise profitability. Both of these dimensions are found interrelated.

It is well known that the key objectives of insurance business are mobilisation of savings

and channelisation of investments. This makes it essential that insurance business is made

lucrative so that the users /potential users get incentives to buy a policy or to invest in the

insurance organisations. The insurance organisations also need to promote the underwriting

activities, which would activate the process of arresting the regional imbalance. In the

context of formulating the product mix, it is essential that the insurance organisations

promote innovation and in the product portfolio include even those services and schemes

which are likely to get a positive response in the future.

The corporate objectives indicate that the insurance organisations are required to becareful, especially while launching a new policy. The policies should not only generate

enough premium but it is also important that the policies cover persons working in the

informal sector, serving as porter, working as manual labourers, or engaged in farm sector.

It is the need of the hour that the insurance organisations make their service internationally

competitive. This makes a strong advocacy in favour of innovative product mix strategy for

the public sector insurance organisations. Thus the formulation of product mix should be in

face of innovative product strategy. Strategies of foreign and private insurance companies

should be taken into consideration while initiating the innovative process.

The formulation of product strategy should assign due weightage to the rural segment

emerging as a big profitable segment especially in the 21st century. The policies andschemes should have rural orientation so that backward and neglected regions of the

country get priority attention and the regional imbalance is minimised.

In this context, it is also pertinent that the insurance organisation make possible welfare

orientation and include in the product portfolio even those policies and schemes which

become instrumental in safeguarding the interest of the weaker sections of the society.

The formulation of package is also found important. Designing a package on the basis of the

needs and requirements of the concerned segment would make the product mix more

competitive.

The partially tapped or totally untapped profitable segments of the future should beidentified and tapping the potentials optimally is also important.

A sound product portfolio is the need of the hour and therefore the regulatory barriers or

constraints in activating the innovation process should be minimised.

Product Planning & Development

The purpose of insurance business is to generate profits besides subserving the social


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interests. The present business is likely to be more competitive.

Product is like a stage on which the entire drama of successful marketing is acted. It is like

an engine that pulls the rest of the marketing programmes. It is in this context that the

product management in an insurance organisation needs an intensive care.

Yesterday, the policyholders had limited hopes and aspirations but today they expect more

and they would even like something more tomorrow. This focuses on the fact that strategicdecisions are influenced by the environmental conditions.

The product development needs a new vision, a new approach and a new strategy. Till now

the public sector insurance organisations have made possible an optimum utilisation of their

marketing resources especially in rural areas where tremendous opportunities are available.

Thus they should assign due weightage to the development services /schemes which cater

to changing needs and requirements of the rural segment.

In the development of product, the corporate investments need due priority.

Channelising the corporate investments influences the rate of profitability of insurance

companies and also contributes considerably to the socio-economic transformation process.

Thus the product planning and development should:Give due weightage to the socially and economically backward classes

Maximise the mobilisation of savings by offering lucrative schemes.

Assign due weightage to interests of investors.

Maintain economy in business by promoting cost effectiveness.

Act as a trustee of policyholders.

Keep in mind the emerging trends in business environment.

Improve the quality of customer / user services.

PROMOTION MIX

With the advent of private players in the insurance, companies resort to rampant

promotion. Promotion mix for this sector is as follows:

Advertisement

Advertisement can be done through the telecast media, broadcast media and print media.

Insurance companies have been making optimal use of all the three kinds. Use of World

Wide Web, as media is almost negligible and will not be very frequent in the near future

considering the fact that the majority of customer base of these companies is not yet

exposed to the Internet. The telecast media has been the most effective of all in case of the

insurance sector. Most of the companies have their separate advertising section to take care

of this aspect. An important consideration while making the decision as to the selection of

the media is budgetary constraint. Since the insurance companies work on a large scale,

usually this constraint does not stand as an obstacle.

Publicity

It is a device to promote business without making any payment and therefore it could be

also called as unpaid form of persuasive communication bearing a high rate of sensitivity.

Developing

rapport with the media is an important aspect of publicity. This makes it essential that the

PR officers working in the insurance organisations maintain contacts with the media


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personnel, organise press conference, and offer small gifts and momento to them. These

days LGD marketing is gaining popularity the world over. It also can be applicable here. At

the apex and regional levels, the PROs bear the responsibility of projecting positive image

of the organisation. Thus it is necessary to select suitable personnel for this. They should be

in particular taught to deal with people, simple things like talking, greeting etc.

Sales Promotion

Incentives to the end users for taking the policy play an important role in promoting the

insurance business. Since the insurance business is also related to achieving of a particular

target, it is pertinent that the policymakers assign due weightage to the same. The offering

of small gifts during a particular period, the rebate, discount, bonus can increase business of

organisation by leaps and bounds. Besides, there can be gifts for the insurance agents also.

Personal Selling

Personal selling in case of the insurance organisations is quite important considering the

existence of the insurance agents spread at all levels. Selection of these agents, their

training is responsibility of the organisation. There is difference in urban and rural market.Rural customers might be uneducated / uninformed etc. compared to the urban customer.

Hence the organisations will have to make selections of the rural and urban agents

accordingly.

Word of Mouth Promoting.

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, opinion leaders, the social reformists, the popular

personalities act as word of mouth communicators. The advertisement slogans may be

insensitive, the publicity measures may be ineffective but the positive feelings of friends and

relations communicated cannot be ineffective. This makes it clear that the most importantthing in the promotion of any business is the quality of services.

Telemarketing

With the development of satellite communication facilities and with the expansion of the

television network, we find telemarketing gaining popularity the world over. The insurance

organisations in general need to promote telemarketing. The foreign insurance companies

have been assigning due weightage to this and in India this is beginning to gain importance

with the advent of competition in this sector. The telemarketer is supposed to be well aware

of the telephonic code so that the task of satisfying the customers/their queries will not

consume much of time.

World Wide Web

In banking as well as insurance, more and more importance is being given to online contact

facilities whereby complaints/comments could be sent through an email. Email is fastest

written mode of communication and since it has been recognized legally, its use to clear

doubts has been in full swing.

PRICE MIX


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In the insurance business, the pricing decisions are concerned with the premium charged

against the policies interest charged for defaulting the payment of premiums & credit

facilities, commission charged for underwriting & consultancy services. The formulation of

pricing strategies becomes significant with the viewpoint of influencing the target market or

prospects. To be more specific in the Indian context where the disposable income in the

hands of prospects is found low, the increasing inflationary pressure has been instrumentalin contracting the discretionary income, the increasing consumerism has been making an

assault on the saving potentials of masses, it is pertinent that the insurance organizations in

general & public sector insurance organizations in particular adopt such a strategy for

pricing that makes it a motivational tool & paves the ways for increasing the insurance

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

This necessitates a new vision for setting premium structure & paying the bonus & charging

the interest.

The strategy may have a new vision in the sense that the insurance organizations prefer to

make a mix of high & low pricing strategy. The motive is to make the premium structure

commercially viable so that the insurance organisations succeed in having a sound productportfolio besides fuelling development orientation. The pricing decisions make it essential

that the insurers keep in their minds the nature of policy vis--vis the segment to which the

prospects belong.

In the tangible products, cost of production is taken as the basis for fixation of prices. Even

in the insurance business, it is found to be an important consideration & a dominating base.

This makes the cost of insurance a decisive factor for charging premium. The important

bases for determining the cost are rate of death, rate of interest & the expenses incurred on

the insurance business. The mortality table helps the determination of death rate. It is to

predict future mortality. The best method of construction of mortality table is to select a

large number of persons at attained age, which is meant age close to the birth rate. Thesecond important element is the rate of interest. On the basis of mortality rate, it is

estimated that when & how much amount is to be received as premium & would be paid as

claims but on the basis of interest rate, it is estimated that how much interest can be

earned by investing the insurance funds. The last element is cost which focuses on different

types of expenses. There are certain expenses, which incurred at the time of inception of

the policy. This necessitates determination of the nature of expenses. The determination of

expenses according to occurrence & equal distribution of the expenses every year for

equitable distribution of loading are found significant to make possible a sound management

of expenses.

The process of rate of fixation in the insurance organizations is not so scientific & identifiesthe cases of moral hazard. It is easier to identify the physical hazard but the task of

identifying the moral hazard is found difficult. The premium charged is to be made rational

to cater to the payment of claims on a priority basis including the catastrophic losses,

management expenses & margin of profit. It is essential that various related to both the

hazards are estimated in a scientific way. The actual process of rating consists of three

steps, e.g. classification, discrimination & scheduling.


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The price mix decisions are:

Making possible cost of effectiveness

Restructuring of premium

Due priority to profit generating investments.

Rationalizing or optimizing the social costs

Paving avenues for channelising the productive investmentsAssigning dude weightage to the policies meant for the socially & economically backward

classes

Making the ways for maximizing profit

PLACE

The first component of the marketing mix is related to the place decisions in which our focus

would be on the two important facets managing the insurance personnel and locating a

branch. The management of agents and insurance personnel is found significant with the

viewpoint of maintaining the norms for offering the services. This is also to process the

services to the end user in such a way that a gap between the services- promised and

services offered is bridged over. In a majority of the service generating organizations,such a gap is found existent which has been instrumental in aggravating the image

problem. The policy makers make provisions; the senior executives specify the standards

and quality and the branch managers with the cooperation of the front-line staff and others

bear the responsibility of making available the promised services to the end users. The

public sector insurance organizations have failed in both the areas. The agents, rural career

agents, the front-line staff and even a majority of the branch managers have become a

party gap.

The transformation of potential policyholders to the actual policyholders is a difficult task

that depends upon the professional excellence of the personnel. The agents and the rural

career agents acting as a link lack professionalism. The front-line staff and the branchmanagers are found not assigning due weightage to the degeneration process. The

insurance personnel if not managed properly would make all efforts insensitive. Even if the

policy makers make provision for the quality upgradation, the promised services hardly

reach to the end users. This makes it significant that the insurance organizations in general

and the public sector insurance organizations in particular keep their minds in changing the

expectations of customers and the prospects. The behavioral profile of insurance personnel

is studied in a right fashion and the changes required due to the changing perception of

expectation are incorporated. It is essential that they have rural orientation and are well

aware of the lifestyles of the prospects or users. They are required to be given adequate

incentives to show their excellence. While recruiting agents, the branch managers need to

prefer local persons and by conducting refresher courses to brush up their faculties to knowthe art of influencing the users/prospects. In addition to the agents, the front-line staff also

needs an intensive training programme. This makes it essential that the branch managers

organize an ongoing training programme, which focuses on behavioral management.

Another important dimension to the Place Mix is related to the location of the insurance

branches. While locating branches, the branch manager needs to consider a number of

factors, such as smooth accessibility, availability of infrastructural facilities and the


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management of branch offices and premises. In addition it is also significant that the branch

managers assign due weightage to the safety provisions. The management of offices makes

it significant that the branch mangers are particular to the office furnishing, civic amenities

and facilities, parking facilities and interior office decoration.

Thus the place management of insurance branch offices needs a new vision, distinctapproach and an innovative style. This is essential to make the work place conducive,

attractive and proactive to the generation of efficiency. The motives are to offer the

promised services to thee end users without any distortion and making the branch offices a

point of attraction. The branch managers need professional excellence to make place

decisions productive.

PEOPLE

People are most important component of marketing mix for the insurance industry.

Sophistication in the process of technological advances makes the ways for the personnel in

such a way that an organization succeeds in making possible a productive utilization of

technologies used or likely to be used. Professional qualification requirements change astechnological develops & evolves. The use of computers microcomputers, fax machines,

sophisticated telephonic service, e-mailing, intra-net service have been found throwing a big

impact on the perception of quality of service. This makes it essential that the insurance

organizations also think in favour of developing personnel in line with the development and

use of information technologies.

The front-line-staff as well as the branch managers are required to be given the training

facilities so that they in position to make possible an effective use of the technologies. The

insurance organizations bear the responsibility of developing the credentials of their

employees. In this context, it is also significant that they think about the behavioral profile

of insurance personnel. It is pertinent that the employees are well aware of the behavioralmanagement. They know & understand the changing level of expectations of users & make

sincere efforts to fulfill the same. In this context, it is also significant that the senior

executive while recruiting, training & developing the insurance personnel make it sure that

employees serving the organization have a high behavioral profile in which empathy has

been given due place. The psychological attributes become significant with the viewpoint of

influencing the prospects or retaining the users. It is in this context that the insurance

companies need a rational plan for the development of insurance personnel.

PHYSICAL EVIDENCE

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

reports & statements.

Introduction


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Global integration of financial markets resulted from de-regulating measures, technologicalinformation explosion and financial innovations. Liberalisation and Globalisation haveallowed the entry of foreign players in the Insurance sector. With the entry of private andforeign players in the Insurance business, people have got a lot of options to choose from.Radical changes are taking place in customer profile due to the changing life style and socialperception, resulting in erosion of brand loyalty. To survive, the focus of the modern

insurers shifted to a customer-centric relationship. The paper focuses the current position ofinsurance industry.

Liberalisation and Privatisation

India's economic development made it a most lucrative Insurance market in the world.Before the year 1999, there was monopoly state run LIC transacting life business and theGeneral Insurance Corporation of India with its four Subsidiaries transacting the rest. In thewake of reform process and passing Insurance Regulatory and Development Authority(IRDA) Act through Indian parliament in 1999, Indian Insurance was opened for privatecompanies.

Liberalisation on the Insurance sectors has allowed the foreign players to enter the marketwith their Indian partners. Most of the foreign Insurers have joined within the local market.India offers immense possibilities to foreign Insurers since it is the world's most populouscountry having over a billion people.

Insurance industry had ten and six entrants in life and non-life sector respectively in theyear 2000-2001. The industry again saw two and three entrants in the life and non-lifebusiness respectively in the year 2001-2002. One additional entrant was made both in thelife and in non-life business in 2004 and 2005 respectively. At present there are fourteencompanies each in Life and General Insurance. The Funds earlier generated by the stateowned insurers have been diversified with other new insurers. We should wait and see howthe new players are going to boost up our economy.

Competition

Private and Foreign entrants in the Insurance Industry made others difficult to retain theirmarket. Higher customer aspirations lead to new expectations and compel him to movetowards the insurer who provides him the best service in time. It becomes less viable forthem even to maintain the functional networks or competitive standards and services. Tosurvive in the Industry they analyse, the emerging requirements of the policyholders /insurers and they are in the forefront in providing essential services and introducing novelproducts. Thereby they become niche specialists, who provide the right service to the rightperson in right time.

The following table shows the market share of life and non-life insurers

MARKET SHARE (%)

LIFE INSURERS NON LIFE INSURERS

1. LIC 76.07 1. New India 21.41

2. ICICI Prudential 6.91 2. National 17.11

3. Bajaj Allianz 4.75 3. United India 17.11

4. HDFC Standard 2.98 4. Oriental 17.02


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5. Brila Sunlife 1.72 5. ICICI-Lombard

8.04

6. Tata AIG 1.66 6. Bajaj Allianz 6.15

7. SBI Life 1.46 7. IFFCO-Tokio 4.00

8. Max New York 1.28 8. Tata-AIG 2.89

9. Aviva 1.08 9. ECGC 2.5010. Kotak Mahindra Old Mutual 0.71 10. Royal

Sundaram2.17

11. ING Vysya 0.54 11. Cholamandalam

1.22

12. AMP Sanmar 0.46 12. HDFC-Chubb 0.89

13. Met Life 0.37 13. RelianceGeneral

0.75

14. Sahara Life 0.03 14. AgricultureInsurance Co.

--

Private total 23.93 Private total 27.35

Public total 76.07 Public total 72.65Grand total 100.00 Grand total 100.00

Source : www.irdaindia.orgIn the above table shows, the private players in the life insurance business have increasedtheir market share to 23.93 per cent. Among them ICICI prudential is ranked first incapturing the market followed by Bajaj Allianz and HDFC Standard. In the GeneralInsurance sector the private players have captured 27.35 per cent. Among them ICICI-Lombard is ranked first, followed by Bajaj Allianz and IFFCO-Tokio.The healthy competition in the sector enabled the State owned insurers of our mothercountry to reduce its market share to 76.07 per cent and 72.65 percent in life and non-lifebusiness respectively. Moreover, private insurers have planned to increase their market

share in the next five years. The public insurers have to enrich its approach to withhold itsshare.

Information Technology

Insurers are the earlier adopters of technology. Because of the Information revolution,customers are free to choose from a wide range of new and innovative products. TheInsurance companies are utilizing the Information technology applications for bettercustomer service, cost reduction, new product design and development and many more.

New technology gives the policyholders / insured better, wider and faster access to productsand services. The impact of Information Technology in Insurance business is being felt at an

accelerating pace. In the initial years IT was used more to execute back office functions likemaintenance of accounts, reconciling broker accounts, client processing etc. With the adventof "database concepts", these functions are better integrated in an administrative efficiency.

The real evolution is however emerged out of Internet boom. The Internet has providedbrand new distribution channels to the Insurers. The technology has enabled the Insurer toinnovate new products, provide better customer service and deeper and wider insurancecoverage to them. At present, Insurance companies are giving customers a distinct claim id


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to track claims on-line, entertaining on-line enrollment, eligibility review, financial reporting,and billing and electronic fund transfer to its benefit clan customers.

Product Innovations

Insurers are continuously innovating new products based on forward-looking models. They

have developed new products addressing the new challenges in society and products toaddress the hazards from new environmental issues. Companies will need to constantlyinnovate in terms of product development to meet ever-changing consumer needs.Understanding the customer better will enable Insurance companies to design appropriateproducts, determine price correctly and to increase profitability. Since a single policy cannotmeet all the Insurance objectives, one should have a portfolio of policies covering all theneeds. Product development is made possible by integrating actuarial, rating, claims andillustration systems. At present, the Life Insurers are concentrating on the pension schemesand the Non-Life Insurers on many innovative schemes of various realms and therebyenriching their market share. Moreover, with increased commoditization of insuranceproducts, brand building is going to play a vital role.

Distribution Network

While companies have been successful in product innovation, most of them are stillgrapping with right mix of Distribution Channels for capturing maximum market share tobuild brand equity, building strong and effective customer relationships and cost effectivecustomer service. While the traditional channel of tied up advisors or agents would be thechief distribution channel, insurer should innovate and find new methods of delivering theproducts to customers. Corporate agency, brokerage, Banc assurance, e-insurance,cooperative societies and panchayats are some of the channels, which can be tapped by theinsurers to reach the appropriate market segments. Now days, the urban masses aretapped with the new techniques provided by Information Technology through Internet. Ruralmasses are attracted by the consultative approach adopted by the Insurers. Moreover, theyattract the customers through telephone and mobile also.

Customer Education and Services

Insurance is a unique service industry. The key industry drivers are related to life styleissues in terms of perceiving insurance as a savings instrument rather than for risk cover,need based selling, quality of service and customers awareness.

In the present competitive scenario, a key differentiator is the professional customer servicein terms of quality of advice on product choice along with policy servicing. Servicing focus ison enhancing the customer's experience and maximizing his convenience. This calls theeffective CRM system, which eventually creates sustainable competitive advantage andenables to build long lasting relationship.

MODERN MARKETING APPROACH

Marketing strategies for insurance in the emerging scenario could be understood in terms ofthe following steps:

Having done market research and finalizing on segmentation, targeting and positioning thestrategy would focus on the marketing mix namely, Product, Price, Place and Promotion.While determining the implementation methodology, the four characteristics viz.


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Intangibility, Inseparability, Perish ability and Variability gives rise to certain uniquerequirements that deserve careful attention while formulating the marketing strategy forinsurance. After implementation, the insurers should concentrate on the effective controlthat would enhance their business.

In India Insurance is sold and not bought. The agents / Advisors by using various strategies

sell the product by convincing the customers. Moreover, they push Policies with the highestpremium to pocket a higher commission. The consultative approach to selling is the modernapproach, which helps customers and prospects to buy. A consultant makes calls and sellsjust like any other sales person. The difference is in their attitude, their approach and theircommitment. Here, the customer is seen as a person to be served and not a person to besold. It helps the purchaser to make an intelligent decision. The four-step process includes:

* Need discovery* Selection of the product* Need satisfaction presentation, and* Serving the sale

This approach to selling their products requires understanding of concepts and principlesborrowed from the fields of psychology, communications, and sociology and needs a lot ofpersonal commitments and self discipline from the seller.

The commitments referred are:

Finding and understanding the needs of the customers. Partnering with the customers. Helping the customers to achieve his business and other objectives by the purchase

of the product or service. Believing that your products / services are a great fit with your customer's needs,

and

Believing in yourself and your ability to help the customers in solving their problems.

Conclusion

A consultant is willing to forego short-term gains to achieve greater long term benefit tohim and to the customers he serves. He builds relationships on a foundation of trust,respect and performance. Moreover, consultants don't sell they're specialists who makerecommendations to help the prospect to buy. They act as a professional and offer realworld solutions that make sense to the customer. Today, the insurers adopt this techniqueand thereby go on increasing their market share.

Reference

Various issues of insurance journals Internet sources

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