Insurance marketing in Indian environment

MEANING:
The nature and behavior of business is governed by
environmental changes. In a developing economy where financial
institutions are expected to shoulder multi-faceted social burdens in
addition to the task of mobilizing and channelising resources, it is
necessary that professionalism should be developed. Due to mounting
problems of regional imbalances like making of marketing decisions
are complicated in insurance business.

Risk and uncertainties move upward due to increased

sophistication. After the nationalization of LIC 1956 and GIC in 1974
there have been changes in the organizational objectives. It was in this
background that insurance business was attempted to be expanded in
the rural areas. The purpose was to reach all the potential users of the
services. In this context it is significant mention that the extent of
dependence of insurance business on the services of agent and rural
carrier agents is of high magnitude. the service conditions of rural
agents in general are to be enriched. In the Indian condition the task of
motivating the rural prospects is more difficult as majority of them are
illetrate. Marketing of insurance services needs a rational approach
which means the following:

 Knowing the market:

Market should be properly segmented on the basis of age, sex,
demographics, geographical condition etc. after segmentation
proper products should be made available to meet the
requirements of the targeted customers.

 Suitable pricing decision:

Price in insurance is the premium attached to the policy, after
knowing the customer, the price of the commodity should be
fixed. pricing decision will affect the sales ,hence price should
be effective as well as should suit the customer.

 Product to be developed as per need:

After segmenting the market products should be tailor made as
per the needs requirements of that targeted customers. For eg
pension products should be made available to old as well as
retired people.
There are also other elements of insurance which are as follows:

• Designing of sensitive promotional strategy.

• Scientific management of agents.
• Proficiency in management
• Professionalism and
• Profitable investment.

Privatization of insurance sector:

The new millennium has exposed the insurance sector to new

challenges of competition and struggle for survival in the era of
privatization, liberalization, deregulation and globalization. The Indian
government nationalized private insurance companies in 1956 [life
insurance corporation of India (LIC) followed by general insurance in
1972] to bring this sector under government control.Two governments
fell over the issue of liberalization of insurance sector. After 40 years of
government protectionism of the massive sector, the present
government has initiated the process of opening this sector to private
Indian business houses as well as the international players. Although
the growth of the Indian insurance industry has been slow owned
insurance companies has grown creating only inefficiency.

o The idea of insurance was first conceptualized in the 12th

century. At that time it was used more as a tool for
protection against financial loss of seafarers involved in
foreign trade. Since then, the concept has undergoes
several changes. It is basically the unforeseen
contingencies of human life that have given a totally new
look to the industry.

o Gradually as competition increased, the benefit given by

the industry to its customers improved by leaps and
bounds. The opening up the sector has posed new
challenges for the public sector insurance companies.

o Prior to liberalization, the regulatory environment was

primarily based on consolidated provision of the insurance
 act, 1938 and the controller of insurance were abridged for
operational convenience of state owned LIC and GIC. In
1993, malhotra committee was constituted to review
insurance regulations and carry our reforms.

o All attempts to even suggest letting private players into

vital sector were met resistance from the powerful
insurance employees unions. Despite several development
that have taken place in the industry in the post-
liberalization era, per capita premium for life insurance is a
low as $6 and that for non life insurance is at a level of $2
it accounts for 2 percent of the GDP compared to the
words average of 7.8 percent.

o Insurance investors developed economies, particularly

from Western Europe and US, find Indian market as having
greater growth potential than their domestic markets.
Therefore, a high level of interest exits for these
companies to acquire insurance concerns. Many
international players are eyeing the vast potential of the
Indian market and are already making plans to enter.

o The entry of the foreign players in the sector with more

financial resources, better experience and lower
operational costs will have an advantage over the Indian
companies involved in the business. The bigger private
players claims that opening up insurance will give
policyholders better products and service, the opponents
of privatization argue that in a poor country like India
insurance needs to have social objectives and new comers
will not have that commitment.

o Better experience provides them with the wherewithal to

have a better product mix and more operational flexibility.
Moreover, they will operate with a lean staff and lower
operational cost. The domestic insurance industry will as a
result, have to fast a greater competition. But the
resources with the foreign players are limited, as they can
invest up to 40 percent of the equity of their joint-venture
with Indian firms. This is a great hindrance for them to
perform at their optimum level. IRDA is working out to
gradually dismantle the tariff structure.
 o Not much treat is perceived as to any price war since the
new companies will stress more on the non-actuarial
product differentiation. However, the Indian insures due to
their extensive branch networking and long standing
association with the client still have an advantage.

o Further, insurance products can become a competing

investment product vis-à-vis other saving, etc. already LIC
has launched equity linked indexed insurance policies,
which have been received quite well. The new players are
expected to bring in spate of such products.

o Insurance is viewed as a tax saving instrument rather than

protecting ones own kith and kin from the vagaries of the
future. The rush for insurance policies to save tax bills can
be seen at the end of the financial year. With the entry of
private and global players like HDFC Standard life, ICIC
Prudential, Kotak Mahindra Club Insurance, Hindustan Time
commercial Union to name a few, the insurance industry is
going to provide many jobs and is going to witness
phenomenal growth.

Bancasssurance

Bancassurance symbolizes the convergence of banking and insurance.

The term involves distribution of insurance products through a banks
branch network. It concrete terms, bancassurance which is also known
as Allifinanz- describes a package of financial services that can fulfill
both banking and insurance need at the same time. While
bancassurance has become a success story in Europe, it is a relatively
a new concept in Asia. For instance, bancassurance represents
over65% of the premium income in life insurance in spain, 60% in
france, 50% in Belgium and italy.

 Bancassurance penetration is expected to substantially increase

in asia over the next five years, potentially accounting for 13%
life insurance premiums.
  A key factor driving the development of bancassurance in asia is
the relaxation of stringent regulations.

 Markets where bancassurance was previously prohibited,

including japan, south korea and the Philippines are taking a
more accommodating stance towards bank distribution of
insurance products.

 Bancassurance as a means of distribution of insurance products

is already in force in India in some form or the other. Banks are
selling personal accident and baggage insurance directly to their
customers as a value addition to their products.
 Bank are also participating in the distribution of mortgage linked
insurance products like fire, motor or cattle insurance to their
customers.

 Even IRDA bill in India his stimulated the growth of

bancassurance by allowing the use of multiple distribution
channels by bank and insurance companies.

Benefits of bancassurance:

 Insurance companies see bancassurance as a tool for increasing

their market penetration and premium turnover.

 The customer sees bancassurance as a bonanza in terms of

reduced price, high quality product and delivery at doorsteps.

 Banks and insurance companies have complementary strengths.

In their natural and traditional roles and with their current skills,
neither banks nor insurance companies could effectively mount a
bancassurance start-up alone. Collaboration is the key to making
the new channel work.

 For banks, bancassurance is a means of product diversification

and a source of additional fee income.

 Insurance companies see it as a tool for increasing their market

penetration and premium turnover. Expenses ratio in insurance
activities though bancassurance is very low.

 Banks and the insurance companies benefit from the same

distribution channels and people.
 Above all a back shows that banks could collectively be looking at a
fee-based income of anywhere between Rs.13500 crore and Rs.22000
crore over the next five years. Banks are thus looking at tie-ups with
insurance companies to boost their non-interest income. In turn,
insurance companies are keenly eyeing the spread of bank branches
and potential to tap 18 crore customer accounts. SBI Life insurance
company, a predominant player in bancassurance, a positive about the
channel bringing about the transformation in the way insurance has
been sold so far. The company is banking heavily on bancassurance
and plans to explore the potential of state bank of India’s 9000 plus
branches spread across the country and also its 4000 plus associate
banks. OM Kotak Mahindra Life insurance has tied up with their Dena
bank besides its own Kotak Bank for bancassurance. The company is
targeting around 10% of the business during its startup phase.
Bancassurance makes use of various distribution channels like salaried
agents, bank employees, brokerage firms, direct response, internet
etc.

Banks and insurance companies have complementary strengths. In

their natural and traditional roles Bancassurance if of great benefit to
the customers. It leads to the creation of one-shop where a customer
can apply for mortgages, pensions, savings and insurance products.
The customer gains from both sides as costs get reduced.
Bancassurance for the customer as a bonanza in terms of reduced
premium charges, a high quality product and delivery at the doorstep.