MARKETING IN LIFE

INSURANCE

INTRODUCTION TO INSURANCE

WHAT IS INSURANCE?

The business of insurance is related to Definition of

the protection of the economic values of the Insurance:
assets. Every asset has a value. The asset
Insurance in
would have been created through the efforts
its basic form is
of the owner. The asset is valuable to the
defined as “A
owner, because he expects to get some
contract between
benefits from it. The benefit may be an
two parties
income or some thing else. It is a benefit
whereby one
because it meets some of his needs. In the
party called
case of a factory or a cow, the product
insurer undertakes
generated by is sold and income generated. In
in exchange for a
the case of a motor car, it provides comfort
fixed sum called
and convenience in transportation. There is no
premiums, to pay
direct income.
the other party
called insured a
Every asset is expected to last for a
fixed amount of
certain period of time during which it will money on the
perform. After that, the benefit may not be happening of a
available. There is a life-time for a machine in
a factory or a cow or a motor car. None of
them will last forever. The owner is aware of this and he can so manage
his affairs that by the end of that period or life-time, a substitute is made
available. Thus, he makes sure that the value or income is not lost.
However, the asset may get lost earlier. An accident or some other
unfortunate event may destroy it or make it non-functional. In that case,
the owner and those deriving benefits there from, would not have been
ready. There is an adverse or pleasant situation. Insurance is a mechanism
that helps to reduce the effect of such adverse situations.
 MARKETING IN LIFE
INSURANCE

HISTORY OF INSURANCE

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 in the life insurance business in India

are:

 1912: The Indian Life Assurance Companies Act enacted as the

first statute to regulate the life insurance business.
 1928: The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life and
non-life insurance businesses.
 1938: Earlier legislation consolidated and amended to by the
Insurance Act with the objective of protecting the interests of the
insuring public.
 1956: 245 Indian and foreign insurers and provident societies taken
over by the central government and nationalised. LIC formed by an
Act of Parliament, viz. LIC Act, 1956, with a capital contribution
of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace
its roots to the Triton Insurance Company Ltd., the first general insurance
company established in the year 1850 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 general insurance business.
 1957: General Insurance Council, a wing of the Insurance
Association of India, frames a code of conduct for ensuring fair
conduct and sound business practices.
 1968: The Insurance Act amended to regulate investments and set
minimum solvency margins and the Tariff Advisory Committee set
up.
 MARKETING IN LIFE
INSURANCE

 1972: The General Insurance Business (Nationalisation) Act, 1972

nationalised the general insurance business in India with effect
from 1st January 1973.
 107 insurers amalgamated and grouped into four companies viz.
the National Insurance Company Ltd., the New India Assurance
Company Ltd., the Oriental Insurance Company Ltd. and the
United India Insurance Company Ltd. GIC incorporated as a
company.

In 1993, Malhotra Committee headed by former Finance Secretary

and RBI Governor R.N. Malhotra was formed to evaluate the Indian
insurance industry and recommend its future direction.The Malhotra
committee was set up with the objective of complementing the reforms
initiated in the financial sector. The reforms were aimed at "creating a
more efficient and competitive financial system suitable for the
requirements of the economy keeping in mind the structural changes
currently underway and recognizing that insurance is an important part of
the overall financial system where it was necessary to address the need
for similar reforms.

Thereafter many changes have taken place in the insurance sector.

Insurance sector in India was liberalized in March 2000 with the passage
of the Insurance Regulatory and Development Authority (IRDA) Bill,
lifting all entry restrictions for private players and allowing foreign
players to enter the market with some limits on direct foreign ownership.
There is a 26% equity cap for foreign partners in an insurance company.
There is a proposal to increase this limit to 49%. The opening up of the
insurance sector has led to rapid growth of the sector. Presently, there are
16 life insurance companies and 15 non-life insurance companies in the
market. The potential for growth of insurance industry in India is
immense as nearly 80% of Indian population is without life insurance
cover while health insurance and non-life insurance continues to be well
below international standards.

Furthermore, over the medium and long term, India’s insurance

market will continue to experience major changes as its operating
 MARKETING IN LIFE
INSURANCE
environment increasingly deregulates. On the one hand, a mix of new
products, new delivery systems and a greater awareness of risk will
generate growth. On the other hand, competition will remain intense as
private sector insurers and those about to enter India seek to win market
share from the more established public sector entities.

PURPOSE & NEED OF INSURANCE

Assets are insured, because they are likely to be destroyed, through

accidental occurrences. Such possible occurrences are called perils. Fire,
flood, breakdowns, lightning, earthquakes, etc, are perils. If such perils
can cause damage to the asset, we say that the asset is exposed to that
risk. Perils are the events. Risks are the consequential loses or damages.
The risk to an owner of a building, because of the peril of an earthquake,
may be a few lakhs or a few crores of rupees, depending on the cost of
the building and the contents in it. The risk only means that there is a
possibility of loss or damage. The damage may or may not happen.
Insurance is done against the contingency that it may happen. There has
to be an uncertainty about the risk. Insurance is relevant only if there are
uncertainties. If there is no uncertainty about the occurrence of an event,
it cannot be insured against. In the case of a human being, death is
certain, but the time of death is uncertain. In the case of a person who is
terminally ill, the time of death is not uncertain, through not exactly
known. He cannot be insured.

Insurance does not protect the asset. It does prevent its loss due to
the peril. The peril cannot be avoided through insurance. The peril can
sometimes be avoided, through better safety and damage control
management. Insurance only tries to reduce the impact of the risk on the
owner of the asset and those who depend on that asset. It only
compensates the losses- and that too, not fully.

Only economic consequences can be insured. If the loss is not

financial, insurance may not be possible. Examples of non-economic
 MARKETING IN LIFE
INSURANCE
losses are love affection of parents, leadership of managers, sentimental
attachments to family heirlooms, innovative and creative abilities, etc.

HOW INSURANCE WORKS

The mechanism of insurance is very simple. People who are

exposed to the same risks come together and agree that, if anyone of them
suffers a loss, the others will share the loss and make good to the person
who lost. All people who send goods by ship are exposed to the same
risks, which are related to water damage, ship sinking, piracy, etc. those
owning factories are not exposed to these risks, but they are exposed to
different kinds of risks like, fire, hailstorms, earthquakes, lightning,
burglary, etc. like this, different kinds of risks can be identified and
separate groups made, including those exposed to such risks. By this
method, the heavy loss that anyone of them may suffer (all of them may
not suffer such losses at the same time) is divided into bearable small
losses by all. In other words, the risk is spread among the community and
the likely big impact on one is reduced to smaller manageable impacts on
all.

If a Jumbo Jet with more that 350 passengers crashes, the loss
would run into several crores of rupees. No airline would be able to bear
such loss. It is unlikely that many Jumbo Jets will crash at the same time.
If 100 airline companies flying Jumbo Jets, come together into an
insurance pool, whenever one of the Jumbo Jets in the pool crashes, the
loss to be borne by each airlines would come down to a few lakhs of
rupees. Thus, insurance is a business of ‘sharing’.

There are certain principles, which make it possible for insurance

to remain a fair arrangement. The first is that it is difficult for any one
individual to bear the consequences of the risks that he is exposed to. It
will become bearable when the community shares the burden. The second
is that the peril should occur in an accidental manner. Nobody should be
 MARKETING IN LIFE
INSURANCE
in a position to make the risk happen. In pother words, none in the group
should set fire to his assets and ask others to share the costs of the
damage. This would be taking unfair advantage of an arrangement put
into place to protect people from the risks they are exposed to. The
occurrence has to be random, accidental, and not the deliberate creation
of the insured person.

The manner in which the loss is to be shared can be determined

before-hand. It may be proportional to the risk that each person is
exposed to. This would be indicative of the benefits he would receive if
the peril befell him. The share could be collected from the members after
the loss has occurred or the likely shares may be collected in advance, at
the time of admission to the group. Insurance companies collect in
advance and create a fund from which the losses are paid.

The collection to be made from each person in advance is

determined on assumptions. While it may not be possible to tell
beforehand, which person will suffer, it may be possible to tell, on the
basis of past experiences, how many persons, on an average, may suffer
losses. The following two examples explain the above concept of
insurance.

Example-1

In a village, there are 400 houses, each valued at Rs. 20,000. Every
year, on the average, 4 houses get burnt, resulting into a total loss
of Rs. 80,000. If all the 400 owners come together and contribute
Rs. 200 each, the common fund would be Rs. 80,000. This would
be enough to pay Rs. 20,000 to each of the 4 owners whose houses
got burnt. Thus, the risk of 4 owners is spread over 400 house-
owners in the village.

Example-2

There are 1000 persons who are all aged 50 and are healthy. It is
expected that of these, 10 persons may die during the year. If the
economic value of the loss suffered by the family of each dying
 MARKETING IN LIFE
INSURANCE
person is taken to be Rs. 20,000, the total loss would work out to
Rs. 2,00,000. If each person in the group contributed Rs. 200 a
year, the common fund would be Rs. 2,00,000. This would be
enough to pay Rs. 20,000 to the family of each of the ten persons
who die. Thus the risks in the case of 10 persons are shared by
1000 persons.

Introduction To Life Insurance

Human life is subject to risks of death
Definition of life
and disability due to natural and accidental
Insurance:
causes. When human life is lost or a person
is disabled permanently or temporarily, Life
there is a loss of income to the household. insurance is a
The family is put to hardship. Sometimes, contract between
survival itself is at stake for the dependants. two parties
Risks are unpredictable. Death/disability whereby one
may occur when one least expects it. party agrees to
pay to the other
Though Human life cannot be valued, a
party, a certain
monetary sum could be determined which is
amount of money
based on loss of income in future years.
as premium to
Hence in life insurance, the Sum Assured
make good the
(or the amount guaranteed to be paid in the
event of a loss) is by way of a ‘benefit’ in
the case of life insurance.

It is the uncertainty that is risk, which gives rise to the necessity for
some form of protection against the financial loss arising from death.
Insurance substitutes this uncertainty by certainty. The primary purpose
of life insurance is the protection of the family. Insurance in its various
forms protects against such misfortunes by having the losses of the
unfortunate few paid by the contribution of the many that are exposed to
the same risk. This is the essence of insurance –the sharing of losses and
substitution of certainty for uncertainty.
There are a variety of life insurance products to suit to the needs of
various categories of people—children, youth, women, middle-aged
persons, old people; and also rural people,etc. Life insurance products
 MARKETING IN LIFE
INSURANCE
could be purchased from registered life insurers notified by the IRDA.
Insurers appoint insurance agents to sell their products.Public who are
interested to buy life insurance products should receive proper advice
from insurance agents/insurer so that a right product could be chosen to
suit particular financial needs.

NEED OF LIFE INSURANCE

The business of insurance is related to protection of the

economic values of the assets. Every asset is of some value and is
expected to last for a certain period of time during which it will deliver
that value. In case the asset is destroyed it ceases to provide the value to
the owner thus leading to an unpleasant situation. Insurance is a
mechanism to reduce the affect of such unpleasant situation.

Human life is considered to be a value generating asset and is

also subject to risks. Assets are insured because there if a possibility that
perhaps they might get destroyed, through accidental occurrences. Such
possible occurrences are called perils. If such perils can cause damage to
the asset we say that the asset is exposed to risk. To be more précised
Perils are the events and risks are the consequential losses or damages.
The risk only means that there is a possibility of a loss or damage, the
loss may or may not happen. Insurance is done against the contingency
that it might happen. Insurance is relevant only if there are uncertainties.
If there is no uncertainty about the occurrence of an event, it cannot be
insured against. In case of human beings death is certain; however the
time of death is uncertain.

Insurance doesn‘t protect the asset. It doesn‘t prevent the loss

due to its peril. The perils can sometime be avoided by ensuring better
safety and damage control management. Insurance only tries to reduce
the impact of the risk on the owner of the asset and those who depend on
that asset. Only economic consequences can be insured. If the loss is not
financial, insurance may not be possible. Moreover insurance is backed
up with many economic benefits which can be enlisted as follows.
 MARKETING IN LIFE
INSURANCE
 Life insurance provides financial security to the family in case of
untimely or premature death.

 Life insurance is also a potent instrument for saving.

 Life insurance provides financial independence in old age.

 Organizations or individuals, who are in credit business, can ensure

for themselves recovery of loan in case their debtor dies.

 A partnership firm can insure partners to the extent of capital

invested by each in the business.

 Under ‘key man’ insurance, an organization can insure the lives of

their executives, whose expertise greatly contributes to their
profits.

 Organizations can purchase group insurance policies as a part of

their employee- welfare program.

 Life insurance also provides tax benefits to the holder.

 Life insurance policies create an estate.

 Life insurance policies also create thrift. I.e. a compulsory saving.

 A policy of life insurance can b used as a collateral security for

procuring loans from the market.

ADVANTAGES OF LIFE INSURANCE

 MARKETING IN LIFE
INSURANCE
Many people perceive about life insurance as an investment or a
means of saving, which is not entirely correct. When a person saves, the
amount of funds at any time is equal to the amount set aside in the past,
plus interest. This happens in a fixed deposit of a bank, in national
savings certificates, in mutual funds, etc. even if there no loss, the
available fund at any time is the amount invested plus appreciation. In life
insurance, however the funds available is not the total of the savings
already made i.e. the premium paid, but the amount one wishes to have at
the end of the savings period say 20 or 30 years. Thus, one is paying from
his savings, for the later, only as long as he/she lives or for a lesser period
if so chosen. Thus there is no substitute to life insurance which provides
this kind of benefits.

Following are few more of the benefits which no other

saving instrument can provide the investor with:

 In the event of death, the settlement is easy. The heirs can collect
the moneys quicker, because of the facility of nomination and
assignment. The facility of nomination is now available for some
bank accounts.

 There is a certain amount of compulsion to go through the plan of

savings. In other forms, if one changes the original plan of savings,
there is no loss. In insurance, there is a loss.

 Creditors cannot claim the life insurance moneys. They can be

protected against attachments by courts.

 There are tax benefits, both in income tax and in capital gains.

 Marketability and liquidity are better. A life insurance policy is

property and can be transferred or mortgaged. Loans can be raised
against the policy.
The following tenets help agents to believe in the benefits of
life insurance: Such faith will enhance their determination to sell and
their perseverance.
 MARKETING IN LIFE
INSURANCE

 Life insurance is not only the best possible way for family
protection. There is no other way.

 Insurance is the only way to safeguard against the unpredictable

risks of the future. It is unavoidable.

 The terms of life are hard. The terms of insurance are easy.

 The value of human life is far greater than the value of property.
Only insurance can preserve it.

 Life insurance is not surpassed by many other savings or

investment instrument, in terms of security, marketability, stability
of value or liquidity.

 Insurance, including life insurance, is essential for the conservation

of many businesses, just as it is in the preservation of homes.

 Life insurance enhances the existing standards of living.

 Life insurance helps people live financially solvent lives.

 Life insurance perpetuates life, liberty and pursuit of happiness.

 Life insurance is a way of life.

INTRODUCTION TO MARKETING

WHAT IS MARKETING?
 MARKETING IN LIFE
INSURANCE

Marketing can be examined from both points of view as

also from a managerial process perspective. Marketing professes a broad
philosophical sweep with focus on customer satisfaction, which becomes
the hub fulcrum for successful trading, and recommends the usage
employment of management practices to identify and respond to
customer needs.

Marketing is a societal process that is needed to discern consumers'

wants; focusing on a product/service to those wants, and to mould the
consumers towards the products/services. Marketing is fundamental to
any businesses growth. The marketing teams (Marketers) have the task to
create the consumer awareness of the products/services through
marketing techniques; unless it pays due attention to its products/services
and consumers' demographics and desires, a business will not usually

DEFINITION:-

Marketing is the management process responsible for

identifying, anticipating and satisfying customer
requirements profitable.
-The Charted Institute of Marketing, UK.

Marketing is the process of planning and executing the

conception, pricing, promotion and distribution of ideas,
goods and services to create exchanges that satisfy individual

prosper long-term.

CHARACTERISTICS OF MARKETING
 MARKETING IN LIFE
INSURANCE

Life Insurance Marketing Strategies

 A very common way to promote a Life insurance company through

Life Insurance Marketing is to make the name of the company familiar
to others by means of television commercials, handling out pamphlets,
hanging banners in populated areas and by providing exciting offers.
 MARKETING IN LIFE
INSURANCE
 Telephone marketing is another way of Life Insurance Marketing.
One can see the telephone companies send messages about various
offers and they even make phone calls. Web Insurance Marketing is
another good strategy to promote insurance policies. The pop ups that
one sees while using Internet are actually a very effective way of
sending messages across the potential insurance customers.

 One should listen to the existing Life Insurance Policy Holders as

well as the potential Life insurance policy holders and listen to what
people who actually matters have to say. One common problem that the
insured persons face is that the insurance companies do not inform its
clients about the hike in the premium rates. These things should be kept
in mind. Not only that, a client should be informed about everything
related to his policy and the Life insurance company should keep the
transparency as much as possible.

 Community Life Insurance Marketing is another different way to

get promotion and a high recognition for the Life insurance company.
Eminent workers join local community institutions, such as Chamber of
Commerce, and by signing up there one can help out various projects
that take place. These kinds of activities and social works on behalf of
the Life insurance company helps the company to get free publicity as
their names are published in news paper and in media also. Doing
charity works also helps the Life insurance companies to come across
various people who act as volunteers and can act as their potential Life
insurance clients. People also like to deal with like minded people and
companies and this is how many deals are made.

 A Life Insurance Company should not charge different Life

insurance client different charges for the same policy. This kind of
policy gives the Life insurance policy holders the feeling that they are
being treated unfairly and also that the Life insurance companies are
only looking for profits and not the betterment of customer welfare.

 When a Life insurance claim is filed, especially for a very big hefty
amount, the Life insurance company should help out the policy holder
in processing out the paperwork. One should not let bureaucracy enter
and make it so difficult for the one making the claim so that he gives
 MARKETING IN LIFE
INSURANCE
his claim .This has always been a common tactic on the insurance
company's part to avoid paying claims claimed by the policy holder.
This though makes a short term profit for the company but it hurts in
the long run as the reputation of the company is hampered severely.

 People in this Life insurance industry should always try to keep in

constant contact with the existing customers as well. The competition
in the insurance market is so fierce today that no company wants to
loose out on a customer to another company. Clients who are not
contacted for a longer period of time normally fail to remain loyal to
the insurance company and look for a different Life insurance
company. The company can keep the records of the client's birthday
and days like anniversary and sent him or her small tokens of love or
loyalty at a regular basis. If the company can afford a little more it can
send dinner coupons to the Life insurance policy holder. These things
play a major role and can be considered as an effective Life Insurance
Marketing strategy.

 May be the most crucial thing in insurance marketing is to always

speak about unity and honesty while dealing with a business. A Life
Insurance Holder can find so many frauds in various life insurance
companies today, that life insurance customers are going for products
and services which are trustworthy to them. Feeling safe is about
insurances and other things are most important as far as the insurance
holder is concerned. So, if a company remains loyal to its customers it
will itself do Life Insurance Marketing for itself. So, only by remaining
loyal to its customers the company can do a world of good to its
reputation and this would in itself bring more potential Life Insurance
Holders to the company, because the customers prefer safety more than
anything else these days.

7 P’s of Life Insurance Marketing Mix.

 MARKETING IN LIFE
INSURANCE
Marketing Mix is a set of marketing tools that a firm uses to pursue
its marketing objectives. The service marketing mix comprises off the 7
P’s.

PHYSICAL
PEOPLE PROCESS
EVIDENCE

Product MARKETING
Product
variety
MIX
Quality
Design
Features
Brand name

Promotion
Price Place
Sales
List price promotion Channels

Discounts Advertising Coverage

Allowances Sales force Assortment

Payment Public Locations

period relations
Credit terms

Product Mix
 MARKETING IN LIFE
INSURANCE
A product mix is the set of all products and items that
a particular seller offers for sale. In case of insurance sector, the product
mix comprises of Life and Non – life insurance policies that are offered
to the customer by the company. A company‘s product mix has certain
width, length, depth and consistency. The length of a product mix refers
to the total number of items in the mix. In case of insurance sector, the
following is the length of product mix:

 Whole Life Policy

 Limited Payment Life
 Convertible Whole Life Policy
 Joint Life Endowment Policy
 Double Endowment Policy
 Jeevan Saathi
 Money Back Policy
 Annuity Plans
 Group Insurance Policy
 Bima Sandesh
 With or Without Profit Policy

The depth of a product mix refers to how many variants

are offered of each product in the line. In the insurance sector, one policy
can be made available in different variations.

Price Mix.

Price is one element in the marketing mix that produces revenue; all the
other elements produce costs. Prices are easiest marketing mix elements
 MARKETING IN LIFE
INSURANCE
to adjust; product features, channels and even promotion take more time.
Price also communicates to the market the company‘s intended value
positioning of its product or brand. In the insurance sector, every
company has to deposit an initial fixed capital of about Rs. 100 crore
with Insurance Regulatory Development Authority, which is
considered as the apex body of Insurance sector. The company gets
periodic interest on this amount. With this interest amount, the company
pays for the recruitment, training and development of the agents. The
price in case of insurance sector refers to the premium charged on the
policy. The Tariff advisory committee fixes the price for each policy.
Hence all insurance companies have to charge approximately similar
premium on similar policies. However, different elements affect the rate
of premium to be charged on each policy. The price for the same policy is
different for different companies.

The company must set its price in relation to the value delivered and
perceived by the customer. If, the price is higher than the value received,
the customer will not be willing to pay so high and the company will
loose potential profits. If the price is less than the value received then, the
company will fail to receive the profit that it deserves for providing a
good service.

There are various steps, which are followed in order to fix the price. They
are as follows:
 MARKETING IN LIFE
INSURANCE

Place Mix.

Place mix can be defined as the ―Physical distribution i.e. the delivery of
goods/ services at the right time at the right place to the customers. Place
decisions involve building relationships with the wholesalers, retailers
and through these intermediaries building relationships with the
customers. Products and services must be at the right place, at the right
time in order to be consumed. Probably the best way to perceive place is
to think of the flow of products from manufacturer through intermediaries
to the consumer or user. This flow can be thought of as a channel used to
move goods and services.

The channel of distribution is a component of the place mix:

 MARKETING IN LIFE
INSURANCE

Channels: According to Philip Kotler,

“ Channels are sets of

interdependent organizations involved in the process of making the
product or service available for use or consumption”

Marketing channel decisions are among the most critical decisions facing
the management. The channels chosen intimately affect all the other
marketing decisions. In case of insurance sector, the following channel of
distribution is followed according to the target market:

1) DIRECT SELLING:

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

 Financial Advisors:
The financial advisors are also consulted by the
customers regarding their financial matters. These advisors suggest their
clients to get their goods insured against any calamity or risk. Hence they
act as a channel in distribution of insurance.
 Call centers:
The people who require insurance call up the call centers.
These call centers send their direct marketing agents who go to the
customer‘s place and sell the insurance policy.

2) PARTNER SELLING:
 MARKETING IN LIFE
INSURANCE
 Bancassurance:
With the evolution of interconnected financial
services, banks are converting themselves into ‗one stop financial
supermarkets‘. This has promoted two big classes of financial
institutions: banks and insurance companies to combine and deliver an
innovative product i.e. Bancassurance. In Bancassurance, the insurance
products are sold through the banks network of branches.

 Postal Department:

India has an extremely well developed postal

network, which is even stronger than the network of banks in the country.
Post offices have been established even in the interior parts of the
country. 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
sell the concept and benefits of insurance to the people in rural areas.
Such a tie up with the postal department would open up India‘s rural
areas, which are largely untapped for insurance sector. This can prove to
be a sustainable source of growing revenues.

 Selling Through Corporate:

Insurance can be sold through corporate too.
E.g.: When a customer purchases a Maruti car, he gets the insurance of
the car free from the Maruti Company itself. Thus this is termed as selling
insurance through corporate.

3) Electronic Channels:
In the last decade, numbers of
technological advances have taken place due to immense use of EDI
(Electronic Data Interchange)
 MARKETING IN LIFE
INSURANCE

 LIC on Internet:

They have their own site, which is very informative.

They display information about them and its subsidiaries, the product
they offer. The addresses/e-mail Ids of their zonal offices, zonal training
centers, management development centers, overseas branches, Divisional
offices and also all Branch offices with a view to speed up the
communication process.

 Information kiosks:

LIC have set up 150 interactive Touch screen

multimedia KIOSKS in prime locations in metros and some major cities
for dissemination information to general public on our products and
services. These KIOSKS are enabling to provide policy details and accept
premium payments.

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

Promotion Mix.

‘Promotion’ is a descriptive term for the mix of communication

activities, which a service organization carries out in order to influence
the public on whom their sales depend. It is an element in an
 MARKETING IN LIFE
INSURANCE
organization‘s marketing mix that serves to inform, persuade, or/ and
remind people about an organization or individual goods, service, image,
ideas, community involvement or impact on the society. It is used in
hopes of influencing the recipients feeling, belief or behavior through any
form of communication. Steps to create a favorable awareness amongst
the target audience:

STEP 1: Identification of Target Market:

The target market is the
focus of deciding the promotion mix. The total number of groups is
analyzed and decision is taken regarding which segment is to be targeted.
In case of insurance sector, mass marketing is favorable however,
different policies are targeted towards customers from different income
groups. E.g. LIC (India) has introduced a new life insurance policy
especially for rickshawallas and landless laborers.

STEP 2: Determination and Setting Objectives:

Service marketers
employ a range of promotional methods, so it is essential to ‗What the
promotion has to achieve‘. It is necessary to define marketing objectives
clearly so that most effective type of promotion is designed and utilized.
In case of insurance sector, the main objectives of a promotion campaign
will be:

1) To make all or maximum population aware of the various insurance

policies of the company.
2) To promote the advantages of all the insurance policies.
3) To make the people aware of the risks involved and the importance of
taking insurance.

E.g.: LIC (India) conducts seminars and mass marketing campaigns in

order to make the customers aware of insurance and why it is needed.

STEP 3: Message development for right communication effect:

 MARKETING IN LIFE
INSURANCE
The message is an
instrument for converting a suspect into a prospect. To obtain an effective
response from the target market, there is always need to plan an effective
message such that promotional efforts cause:

 Building of brand image

 Service awareness

The promotional message should aim:

 To provide knowledge for service/product

 To ensure that customer will have a positive perception for service/
goods promoted
 To build up preference for service/ goods offered

In the insurance sector, LIC (India) and MetLife Insurance are examples
of companies who have used promotion mix to promote insurance. E.g.:
LIC (India) promotes its life insurance policies using the slogan “Zindagi
ke saath bhi, Zindagi ke baad bhi” This creates awareness of risk of death
as well as the importance of insurance. The slogan creates a positive
perception about life insurance in the minds of people.

STEP 4: Selection of communication mix:

There should be a careful
blend of promotion mix with the marketing strategy of the firm and each
situation should be examined for its merits and demerits. The following
criteria should be considered while devising different promotional
techniques:

 Overall marketing objectives

 Nature of the service
 Activities of the competitors
 Characteristic of target customer
 Cost effectiveness
 Integration with other marketing elements
 Requirements for effective implementation
 Management Issues
 MARKETING IN LIFE
INSURANCE
 Legal and ethical considerations

 Advertising:
It is a paid form of non-personal communication. It is used
to develop attitudes, create awareness and transmit information in order
to gain a response from the target market. Various media channels can be
used for advertisement such as print media, electronic media etc.

E.g.: MetLife India insurance has aired a television advertisement with

the caption line ―have you MetLife today?‖ The advertisement shows
that people are falling from high places but instead of falling on the
ground and getting hurt, they are falling on a bed called MetLife. This
advertisement assures the customer that the risk is covered efficiently by
the policies of MetLife insurance company.

People Mix.

 Employees
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 for
completeness, 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. Nowadays, these workers are taking on
increased responsibilities in insurance offices, such as handling most of
the continuing contact with clients. A growing number of customer
service representatives work in call centers that are open 24 hours a day,
7 days a week, where they answer clients‘ questions, update policy
 MARKETING IN LIFE
INSURANCE
information, and providing potential clients with information regarding
the types of policies the company issues.

 Marketing and sales managers

They constitute the majority of
managers in carriers‘ local sales offices and in the insurance sales agents
segment. These employees sell insurance products, work with clients, and
supervise staff. Other managers who work in their companies' home
offices are in charge of functions such as actuarial calculations, policy
issuance, accounting, and investments.

 Claims adjusters, appraisers, examiners, and investigators

They decide
whether claims are covered by the customer‘s policy, confirm payment,
and, when necessary, investigate the circumstances surrounding a claim.
Claims adjusters work for property and liability insurance carriers or for
independent adjusting firms. They inspect property damage, estimate how
much it will cost to repair, and determine the extent of the insurance
company‘s liability; in some cases, they may help the claimant receive
assistance quickly in order to prevent further damage and begin repairs.
Adjusters plan and schedule the work required to process claims, which
may include interviewing the claimant and witnesses and consulting
police and hospital records.

 Insurance investigators
They handle claims in which companies
suspect fraudulent or criminal activity, such as suspicious fires,
questionable workers‘ disability claims, difficult-to-explain accidents,
and dubious medical treatment. Investigators usually perform database
searches on suspects to determine whether they have a history of
attempted or successful insurance fraud. Then, the investigators may visit
claimants and witnesses to obtain a recorded statement, take photographs,
inspect facilities, and conduct surveillance on suspects. Investigators
often consult with legal counsel and are sometimes called to testify as
expert witnesses in court cases.
 MARKETING IN LIFE
INSURANCE

 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.
They decide whether to accept or reject an application, and they
determine the appropriate premium for each policy.

 Insurance sales agents

About 15 percent of wage and salary
employees in the industry are sales workers, selling policies to
individuals and businesses. Insurance sales agents, also referred to as
producers, may work as exclusive agents, 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, ensure customer satisfaction, and obtain referrals.
Insurance sales agents may sell many types of insurance, including life,
annuities, property-casualty, health, and disability insurance. Many
insurance sales agents are involved in ―cross-selling‖ or ―total account
development,‖ which means that, besides offering insurance, they have
become licensed to sell mutual funds, annuities, and other securities.
These agents usually find their own customers and ensure that the
policies sold meet the specific needs of their policyholders.

 Lawyers

The insurance industry employs relatively few people in

professional or related occupations, but those who are so employed are
essential to company operations. For example, insurance companies‘
lawyers defend clients who are sued, especially when large claims may be
involved. These lawyers also review regulations and policy contracts.
Nurses and other medical professionals advise clients on wellness issues
and on medical procedures covered by the company‘s managed-care plan.

 Actuaries
 MARKETING IN LIFE
INSURANCE
They represent a relatively small proportion of employment in
the insurance industry, but they are vital to the industry‘s profitability.
Actuaries study the probability of an insured loss and determine premium
rates. They must set the rates so that there is a high probability that
premiums paid by customers will cover claims, but not so high that their
company loses business to competitors.

 Customers

People mix not only includes employees but also customers. The
customers are to be treated with respect and courtesy. LIC (India) ltd.
provides following facilities to keep the customers happy and satisfied.

 The birth dates of the policyholders are recorded and on the day of
the birthday, the policyholder is given a “happy birthday” call by
the company.
 The customers are reminded to pay their premium on time through
sms.

Physical Evidence.

Companies try to demonstrate their service quality through physical

evidence and presentation. However, in case of insurance sector, the
customer rarely visits the insurance company. The customer comes
mostly only in contact with the service provider hence the service
provider (insurance agent) should.

 Look presentable.
 Have a pleasant personality.
 Have good communication skills.

The physical evidence factor is directly proportional to the level of faith

of customers as well as the employees in the organization. Physical
 MARKETING IN LIFE
INSURANCE
evidence goes way beyond an individual. It includes the company‘s
advertisements, public relation, employees, and branches.

Insurance Tangibles as Physical Evidences

Service

1 Policy Documents

2 Brochures

3 Periodic Statements

4 Renewal Notices

5 Business Cards

6 Stationary

7 Calendar, Diaries

8 Letters/Cards

9 Website

Process Mix.

In case of insurance sector, the process mix includes the various

interactions that take place between the insurance agent and the customer
in the process of selling the policy to the customer till the settlement of
claims. The following process mix is followed by insurance companies in
case of life insurance:
 MARKETING IN LIFE
INSURANCE

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

2) The insurance agent meets the customer and gives him some
information about the insurance company 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 the standard of living of the customer so that
the insurance company gets a clear picture about the financial condition
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 three policies to 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 of premium to be paid, the time interval at
which the premium is to be paid, the benefits of each of the policy etc. A
brochure is also provided to the customer wherein the entire description
of all the policies is given.

6) Then, the insurance agent provides a feedback form to the customer

and asks him to give his feedback regarding the policies that he has been
informed about. This feedback is taken in order to find out whether the
customer is satisfied with the plans of the policy or whether the company
needs to make the policy plans more attractive so that it may appeal to its
future customers.
 MARKETING IN LIFE
INSURANCE

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

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

The following is accepted as age proof:

 Certified extract from municipal or local body‘s records made at

the time of birth.
 Certificate of Baptism if it contains date of birth
 Passport issued by passport authorities in India.
 Certified Extract from school or college records, if date of birth is
mentioned.

9) The customer must get himself examined from the approved doctor of
LIC. The medical examination is necessary to determine the physical
fitness of the customer. If the medical report is favorable, then only LIC
will issue the policy.

10) 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, which consists of
the terms and conditions of the policy. This is because terms and
conditions of the policy differ for different customers due to differences
in medical conditions of customers in case of life insurance and due to
 MARKETING IN LIFE
INSURANCE
differences in nature of goods and mode of transportation in case of
marine and fire insurance.

11) Then, a reconfirmation is taken by the agent from the customer that
he agrees with the terms and conditions of the policy.

12) The insurance agent then regularly collects the premium from the
customer whenever the premium becomes due.

4 I’s for Life Insurance

Life insurance has four major characteristics that greatly affect the
marketing programs.
 MARKETING IN LIFE
INSURANCE

1. Intangibility:
Unlike products, services cannot be held, touched,
or seen before the purchase decision thus, they should be made tangible
to a certain extent. Marketers should ―tangibilize the intangible‖ to
communicate service nature and quality. This can be done through:

 Environment
 Uniforms
 Paperwork
 Brochures

Insurance is a guarantee against risk and neither the risk nor the guarantee
is tangible. Hence, insurance rightly come under services, which are
intangible. Efforts have been made by the insurance companies to make
insurance tangible to some extent by including letters and forms

2. Inconsistency:
Service quality is often inconsistent. This is because
service personnel have different capabilities, which vary in performance
from day to day. This problem of inconsistency in service quality can be
reduced through standardization, training and mechanization. In
insurance sector, all agents should be trained to bring about consistency
in providing service or, the insurance process should be mechanized to a
certain extent. E.g.: the customers can be reminded about the payment of
premium through e-mails and sms instead of agents.

3. Inseparability:
Services are produced and consumed simultaneously.
Consumers cannot and do not separate the deliverer of the service from
the service itself. Interaction between consumer and the service provider
varies based on whether consumer must be physically present to receive
the service. In insurance sector too, the service is produced when the
 MARKETING IN LIFE
INSURANCE
agent convinces the consumer to buy the policy and it is said to be
consumed when the claim is settled and the policyholder gets the money.
In both the above cases, it is essential for the service provider (agent) and
the consumer (policy holder) to be present.

4.Inventory:
No inventory can be maintained for services. Inventory
carrying costs are more subjective and lead to idle production capacity.
When the service is available but there is no demand, cost rises as, cost of
paying the people and overhead remains constant even though the people
are not required to provide services due to lack of demand. In the
insurance sector however, commission is paid to the agents on each
policy that they sell. Hence, not much inventory cost is wasted on idle
inventory. As the cost of agents is directly proportionate to the policy
sold.

A Study of the Industry

A Sectoral study
 MARKETING IN LIFE
INSURANCE
Insurance is suddenly gaining all the attention and what used to be a
strange would in it is a household name, thanks to opening up of the
industry, while there are several reasons for opening up of insurance
sector the foreign investors are eyeing it as a very lucrative prospect.
After the opening up, several private insurers have started operating in
life insurance, especially in metro areas. New marketing channels like
Bancassurance, brokers, etc. are also in the offing.

Key Market Indicators

Size of market life & non life $16 billion

Total Global insurance premium (as $2408.25 billion(-1.5% as against

on 2001) 2000)

Rate of annual growth 2002-03 Life- 11.27%

Non life- 23%

Geographical restriction for new None. Players can operate all over
players the country.

Registration restriction Composite registration not

available.

Equity restriction in the new Indian Foreign investor can hold up to

insurance company 26% of the equity.

Number of registered companies. Public sector – 01 Private sector –

13
Life insurers in India.

As an answer to globalization of economy and the increasing pressure of

the WTO regulations, the govt. appointed the Malhotra Committee. After
considering all aspects, the government ultimately enacted Insurance
Regulatory and development authority and vested the authority to
formulate regulations for insurance industry. IRDA and the LIC allowed
 MARKETING IN LIFE
INSURANCE
the entry of foreign investors on a condition that they enter in
collaboration with a local company.

Public sector Private sector

Life Insurance Corporation of 1. Allianz bajaj life insurance

India(LIC) Company limited.
2. Birla sun life insurance
Company limited.
3. HDFC standard life insurance
company limited.
4. ICICI Prudential life insurance
Company limited.
5. Reliance life insurance Company
limited.
6. ING vysya life insurance
Company limited.
7. Max New York life insurance
Company limited.
8. MetLife insurance company
limited.
9. Om kotak mahindra life
insurance co. ltd.
10. SBI insurance company limited
11. TATA-AIG life insurance
Company limited.
12. AMP-Sanmar Assurance
Company limited.
13. Aviva Life insurance company
limited

Performance of the Industry

Post-Privatization, the life insurance industry grows by leaps and bounds.

The attitude of people towards life insurance itself is changing. People are
becoming more and more aware of the advantages of the Life insurance
policies. Generally performance in life is measured in terms of first year
 MARKETING IN LIFE
INSURANCE
premium collection and no. of lives covered. In 2003-04 Life Industry
grew by 10.5% in terms of first year premium. It is showing steady
growth rate in the current financial year as well. The sector witnessed a
growth of over 50% for the month of April 2004, vis-à-vis April 2003.
The premium In comparison, LIC underwrote premium of Rs.72,304.62
lakh i.e., a market share of 82.33%. In terms of policies Underwritten, the
market share of the private players was 17.88% as against 82.17% of
LIC. The premium underwritten by the private players for individual
policies stood at Rs.12,107.63 lakh, towards 89,918 policies with group
premium accounting for Rs.3,411.30 lakh towards 84 schemes. The
number of lives covered under group schemes was 1,01,392. ICICI
Prudential continued to lead amongst the private players with premium at
6.15% and policies at 4.85%. In terms of number of lives covered, OM
Kotak led with 21,325 lives viz., 5.83% of the total lives covered.
Premium underwritten by LIC under Varishtha Bima Yojana during the
month of April, 2004 was Rs.26, 734.25 lakh towards 13899 policies of
which 29.60%, in terms of both premium and policies, was underwritten
in the rural sector.

From the opinion that it was an instrument intended to provide monetary

support at the time of the death of an individual, life insurance life
insurance grew up to be a major financial instrument during the past 50
years in our country. There has also been a change in the consumer
outlook with regards to life insurance as very beneficiary financial tool as
against the orthodox thinking of unfruitful use of money. Increasing
number of people has been opting for it. The number of policies issued by
the LIC of India since 1995-96 is a clear indication of the popularity
gained by life insurance.

Table year. No. of policies (total) No. of policies (rural)

1995-96 1.10rore 52.57 lacs.

1996-97 1.23crore 60.33 lacs.

 MARKETING IN LIFE
INSURANCE

1997-98 1.33 crore 68.40 lacs.

1998-99 1.48 crore 81.23 lacs.

1999-2000 1.70 crore 97.04 lacs.

2002-2003 2.42 crore 45.23 lacs.

Form the above table it is eminent that the importance of life insurance
has grown gradually over a period of time not only in metro areas but also
in rural areas.
As there has been a dramatic increase in the importance of life insurance,
the number of policies issued per annum has also increased, thus leading
to a great change in the total premium amount collected. The total amount
mobilized by LIC during the past few years‘ stands witness to the
growing importance of insurance.

Total market share of LIC as compared to other private players.

 MARKETING IN LIFE
INSURANCE

Sales

LIC
I PRU
SUNLIFE
BIRLA
TATA AIG
OTHERS

From the above figure it is eminent that LIC has the largest market share
in the life insurance industry till date.