advertisement in insurance sector

8/11/2019 Advertisement in Insurance Sector

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CHAPTER 1

MARKETING AND ADVERTISING

Meaning of marketing

Marketing is the process of communicating the value of a product or service to

customers. Marketing might sometimes be interpreted as the art of selling

products, but selling is only a small fraction of marketing. Marketing is aboutidentifying and understanding your customer and giving them what they want. It's

not just about advertising and promoting your business.

Definition of marketing

Marketing is a human activity directed towards satisfying needs and wants

through exchange process.

MARKETINGMIX

Marketing mix is one of the most fundamental concepts in marketing

management. The marketing mix is often crucial when determining a product or

brand's offering for attracting consumers and for sales promotion, every

manufacturer has to concentrate on four basic elements or components these

are as follows

1. Product

2. Pricing


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3. Distributive channels (place)

4. Sales promotion techniques

DEFINITIONS OF MARKETING MIX

According to Philip Kotler, marketing mix is the mixture of controllable marketing

variables that the firm uses to pursue the sought level sales in the target market.

Service Marketing Mix

The service marketing mix is also known as an extended marketing mix

and is an integral part of a service blueprint design. The service marketing mix

consists of 7 Ps as compared to the 4 Ps of a product marketing mix. The

product marketing mix consists of the 4 Ps which are Product, Pricing,

Promotions and Placement.

These are discussed in my article on product marketing mix the 4 Ps.

The extended service marketing mix places 3 further Ps which include People,

Process and Physical evidence. All of these factors are necessary for optimum

service delivery


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PRODUCT

The product in service marketing mix is intangible in nature. Like physical

products such as soap or a detergent, service products cannot be measured.

Insurance industry is the excellent example. At the same time service products

are heterogeneous, perishable etc. The service product thus has to be designed

with care. Generally service blue printing is done to define the service product.

PRICING

In the insurance business the pricing decisions are concerned with:

i) The premium charged against the policies,

ii) Interest charged for defaulting the payment of premium and credit facility, and

iii) Commission charged for underwriting and consultancy activities.

With a view of influencing the target market or prospects the formulation of

pricing strategy becomes significant. In a developing country like India where the

disposable income in the hands of prospects is low, the pricing decision also

governs the transformation of potential policyholders into actual policyholders.

The pricing in insurance is in the form of premium rates.

PLACE

This component of the marketing mix is related to two important facets --

i) Managing the insurance personnel, and

ii) 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 making worse the image problem.


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PEOPLE

Understanding the customer better allows designing appropriate products.

Being a service industry which involves a high level of people interaction, it is

very important to use this resource efficiently in order to satisfy customers.

Training, development and strong relationships with intermediaries are the key

areas to be kept under consideration. Training the employees, use of IT for

efficiency, both at the staff and agent level, is one of the important areas to look

into.

PROCESS

The process should be customer friendly in insurance industry. The speed

and accuracy of payment is of great importance. The processing method should

be easy and convenient to the customers. Installment schemes should be

streamlined to cater to the ever growing demands of the customers. IT & Data

Warehousing will smoothen the process flow.

PHYSICAL DISTRIBUTION

Distribution is a key determinant of success for all insurance companies.

Today, the nationalized insurers have a large reach and presence in India.

Building a distribution network is very expensive and time consuming. If the

insurers are willing to take advantage of India's large population and reach a

profitable mass of customers, then new distribution avenues and alliances will be

necessary. Initially insurance was looked upon as a complex product with a high

advice and service component.


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Promotion

Promotion is one of the market mix elements, and a term used frequently

in marketing. Promotion is a very important concept in marketing .It represents all

of the methods of communication that a marketer may use to provide information

to different parties about the product. Promotion comprises elements such as:

advertising, public relations, personal selling and sales promotion.

Publicity

Free promotion through news stories in newsletters, newspapers,

magazines and television

Sales Promotion

all forms of communication not found in advertising and personal selling,

including direct mail, coupons, volume discounts, sampling, rebates,

demonstrations, exhibits, sweepstakes, trade allowances, samples and point-of

purchase displays In designing a promotional plan, clearly spell out:


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CHAPTER 2

ADVERTISING AND INSURANCE SECTOR

Meaning of advertising

Advertising is nothing but a paid form of non-personal presentation or

promotion of ideas, goods or services by an identified sponsor with a view to

disseminate information concerning an idea, product or service. In Latin,

advertise means to turn the mind toward. Advertising is a form of

communication for marketing and used to encourage or persuade an audience

(viewers, readers or listeners; sometimes a specific group) to continue or take

some new action. The purpose of advertising may also be to reassure employees

or shareholders that a company is viable or successful. The most important

aspects of promotion is advertising.Advertising is an indispensable part of the

marketing strategy of any product or service. A proper advertisement has a great

impact on the sales of the product and that is why companies spend huge

amount of money to make effective advertisements.

DEFINITION OF ADVERTISMENT

According to Wood, "Advertising is causing to know to remember, to do."

According to Richard Buskirk, "Advertising is a paid form of non-personal

presentation of ideas, goods or services by an identified sponsor."

The above definitions clearly reveal the nature of advertisement. This is apowerful element of the promotion mix. Essentially advertising means spreading

of information about the characteristics of the product to the prospective

customers with a view to sell the product or increase the sale volume.


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BACKGROUND

The earliest forms of advertising would have been through word of mouth.

Advertising for sales, and lost and found was commonly created on papyrus in

ancient Egypt, Greece and Rome. Commercial adverting through wall or rock

paintings that goes back to 4000 BC has been found in many parts of India,

Africa and South America.

Commercial and political advertising displays have been recovered from

the ruins of the ancient Pompeii, a roman city destroyed by the volcano Mount

Vesuvius in 79 AD as education became an apparent need and reading, as well

as printing, developed advertising expanded to include handbills.

In the 18th century advertisements started to appear in weekly

newspapers in England. These early print advertisements were used mainly to

promote books and newspapers, which became increasingly affordable with

advances in the printing press; and medicines, which were increasingly sought

after as disease ravaged Europe. However, false advertising and so-called

"quack" advertisements became a problem, which ushered in the regulation of

advertising content.

The main features of advertise are as under:

It is directed towards increasing the sales of business.

Advertising is a paid form of publicity

It is non-personal. They are directed at a mass audience and nor at the

individual as is in the case of personal selling.

Advertisements are identifiable with their sponsor of originator which is not

always the case with publicity or propaganda.


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Objective / Functions of advertising

The purpose of advertising is nothing but to sell something -a product, a

service or an idea. The real objective of advertising is effective communication

between producers and consumers. The following are the main objectives of

advertising:

Preparing Ground for New Product

New product needs introduction because potential customers have never used

such product earlier and the advertisement prepares a ground for that new

product.

Creation of Demand

The main objective of the advertisement is to create a favorable climate for

maintaining of improving sales. Customers are to be reminded about the product

and the brand. It may induce new customers to buy the product by informing

them its qualities since it is possible that some of the customers may change

their brands.

Facing the Competition

Another important objective of the advertisement is to face to competition. Under

competitive conditions, advertisement helps to build up brand image and brand

loyalty and when customers have developed brand loyalty, becomes difficult for

the middlemen to change it.

Creating or Enhancing Goodwill


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Large scale advertising is often undertaken with the objective of creating or

enhancing the goodwill of the advertising company. This, in turn, increases the

market receptiveness of the company's product and helps the salesmen to win

customers easily.

Informing the Changes to the Customers

Whenever changes are made in the prices, channels of distribution or in the

product by way of any improvement in quality, size, weight, brand, packing, etc.,

they must be informed to the public by the producer through advertisement.

Neutralizing Competitor's Advertising

Advertising is unavoidable to complete with or neutralize competitor's advertising.

When competitors are adopting intensive advertising as their promotional

strategy, it is reasonable to follow similar practices to neutralize their effects. In

such cases, it is essential for the manufacturer to create a different image of his

product.

Barring New Entrants

From the advertiser's point of view, a strongly built image through long

advertising helps to keep new entrants away. The advertisement builds up a

certain monopoly are for the product in which new entrants find it difficult to enter.

In short, advertising aims at benefiting the producer, educating the consumer and

supplementing the salesmen. Above all it is a link between the producer and the

consumer.


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FUNCTIONS OF ADVERTISMENT

It promotes sale of goods and services.

It helps introduction of new product in the market.

It encourages a business firm to do mass production.

It stimulates research and development activities.

It provides revenues to press and other medium of advertisement like

television, newspaper, magazines etc

It builds reputation of the advertiser.

Importance of Advertisement:

Advertising broadens the knowledge of the consumers. With the aid of

advertising, consumers find and buy necessary products without much waste of

time. This speeds up the sales of commodities, increases the efficiency of labor

in distribution, and diminishes the costs of selling.

It is an accepted fact that without market stimulus of heavy advertising,

consumers might have waited another sixty years for the product evaluation that

took place in less than ten years - it took after all over sixty years from the

invention of the safety razor before the first acceptable stainless steel blades

appeared in the market. These words are more than enough to testify the

potentialities of advertising in the field of modern marketing system.

1. Crucial for a launch

Advertising is very crucial for launching (introducing) a new product,

service and/or idea in the market. If advertisement of any concerned product,

service and/or idea is done properly at a right place, through proper media, and

within a specific time constraint, can attract new-customers. This helps to capture


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the market and increase sales of an advertiser. Advertising is also essential for

announcing an upcoming event. Advertising an open invitation maximizes the

chances of event attendance. However, if people are unaware of any such

happening, they may not show up. As a result, the event may not get an

expected response. Hence, advertising contributes to the success of an event.

2. Source of revenue

Advertising is a prime source of revenue for publishers of mass-media like

newspapers, TV channels, magazines, websites, etc. The input cost involved in

processing any valuable information is usually higher than its selling price. A

publisher's cost rises due to various data gatherings and information-processing

activities like research (investigation), professional writing, editing, proof-reading;

publishing in form of printing or digital web hosting, and distribution. Advertising

pays publishers their input costs and in return use their media platform as a

medium to reach maximum people. Indirectly, because of it, customers of

publishers (who are mostly readers and/or viewers) also get an affordable access

(or sometimes even a free access) to high-quality information databases.

3. Sales promotion

Advertising is done to promote goods, services, ideas and/or events.

Advertising is used for the promotion of: Goods falling under categories like

cosmetics, electronics, eatables, stationary, jewelry, textiles, etc. Services

provided under banking, insurance, hospitality, air travel, consultancy, health

care, education, etc

4. Increases sales

Advertising sparks an interest in masses about advertised products and/or

services of its advertiser. This interest creates demand in the market. The

growing demand soon results in higher sales. Eventually, the advertiser fulfills his

main goal of investing in an advertisement. However, to continue with such a


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growth in sales, the advertiser must also maintain a good price-quality ratio along

with regularly continuing his ad campaigns.

5. Maximizes profit

Advertising helps in increasing sales and control the cost borne by the

advertiser. It helps to widen the gap between his sales and incurred cost. With

maximizing sales and lowering cost, the profit of an advertiser grows. Thus,

advertising aids in maximizing the profit of its advertiser.

6. Consumer awareness

Advertising creates awareness by informing consumers.

Awareness: Advertising creates awareness among consumers about an

availability of any specific product and/or service in the market. It attempts to

convey them why an advertised product and/or service is better than other

alternatives currently available in the market.

Information: Advertising informs a consumer, mainly about; various features,

benefits, price and use of an advertised product and/or service. It also givesinformation about the brand name or trade-mark used, address of a manufacture

or a service provider, and other relevant details to the consumer.

While creating awareness and supplying relevant information, advertising

ultimately helps a consumer to make a right choice in his or her purchase.

7. Demands creativity

Advertising is impossible without creative thinking. In other words,

creativity is the essence (main ingredient or soul) of advertising. For an


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advertisement to be a success; it must have some fundamental aspects or

characteristics in it. An advertisement (ad) must be:

Creative,

Original,

Not a copied one,

Artistic, and also

Attractive to large masses.

8. Element of marketing mix

Advertising is an important element of marketing mix. It supports sales

promotion. In today's competitive world, it is getting difficult to sale something.

Consumers now-a-days are more cautious and better aware about things they

buy and use. They don't easily break their loyalty towards their favorite goods

and/or service unless and until somethings allure them in unique way and

compels them to at least give a try.

9. Target oriented

Advertising is target-oriented in nature. Target oriented means to focus on

(or target one's attention to) only a specific thing, at one time.In context ofadvertising, it means to focus on (target), or deliver attention towards, only a

specific group or class of consumers.


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10. Monitor demand and supply

Advertising, if done repetitively, helps in generating higher demand in the

market for advertised products and/or service. Rising demand must be met with

an equivalent amount of supply of products and/or efficient delivery of services.

Proper care must be taken to monitor the demand and supply function, so that

none of the demands are skipped. If supply is not made at par with an increasing

demand, the market may soon lose confidence and downfall of demand may take

place. If this happens, the sale will fall down, and money spent on advertising

may not be recovered. This may add to losses.

Thus, when advertising results in higher demands, an appropriate supply

must be also ready to compensate it. To see that such compensation is done

properly, the demand and supply function must be well monitored.

11. Builds brand's image

Advertising creates goodwill and helps in building a brand's image in the

market. Repeated advertisements make brands very popular. Generally, people

tend to show a more trustworthy attitude towards advertised brands over non-

advertised ones. Well-known branded products are usually made from high-

quality raw-materials and hence are always preferred by most consumers. This

increases demand for such products. Rise in popularity and building trust

gradually helps to increase the value of the brand. This eventually boosts sales

of such branded products. It also increases the reputation of that entity who owns

these brands.

12. Generates employment

Advertising agencies are constantly in search of newer creative ideas to

cope with the rising demands from their clients (advertisers). Each ad

assignment (project) demands a high-level of mental labour. There are dead

lines within which projects must be completed and submitted. Furthermore, the


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concept of ad must be also welcomed (approved) by the advertiser. Overall, this

creates a huge demand of creative people and thus opens new employment

opportunities in the field of advertising.

Advertising provides employment to deserving candidates who are mainly

creative thinkers, directors, artists, graphic designers, sales representatives and

managers.

BENEFITS OF ADVERTISMENT

TO THE INSURANCE COMPANY

It encourages agents and brokers to sell insurance companies product.

It enhances an insurance companys public image.

It supports introduction of new products.

It influences public and legislative opinion on issues of importance to the

insurance industry.

Establish and maintain your distinct, identity, and brand

TO THE POLICYHOLDER:

Remind customers and potential customer of the benefits of the product

and services.

It predispases customers to be receptive to sales calls.

It provides an opportunity to the customers to compare the merits and

demerits of other companies insurance product.

It helps the customer to know when and were and what are the

procedures in obtaining the policies.


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DIFFERENT CATEGORIES OF ADVERTISING

Advertising can be classified into different categories they are as under:

Personal- In this kind of advertising individual and families buy space in

newspapers and magazines to sell personal belongings like cars, home etc.

Classified advertisingThe term classified advertising is a type of advertising

usually classified under heading such as job vacant, cars etc.

Manufacturersconsumer advertisingThis refers to high spending repetitive

advertisement on television. it is the way in which large manufacturers

communicate directly with their end users i.e., customer

Service advertising It refers to advertisement of intangibles, like banking

services, insurance service etc.

Industrial (business to business advertising) This kind of advertising of

goods and services for commerce, industry, government and other institutions.

The customers are executives and official taking discussions to purchase such

has a factory equipment, office equipments etc.

Product advertising -Normal characteristics of advertising is to create demand

for product rather then the brand. It refers to advertising of the product, i.e.,

goods and services provided by the organization.

Institutional advertising where the objectives of advertising is to project the

image of the company it takes the firm of institutional advertisement.


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ADVERTISERS

Advertisers refer to an entity that advertises. Advertisers can be classified as

follows:

Consumer advertisersthey are those who manufactures consumable goods,

durables or non durables and services

Industrial advertisers These advertisers predominately manufactures market

product for industrial market

RetailersThey advertise locally for store patronage.

ADVERTISMENT IN INSURANCE

Insurance is a fast-paced field with a wealth of opportunities to offer

motivated professionals and talented salespeople, and having the right personal

skills coupled with a great attitude and the proper credentials can make for agreat beginning to a successful career in insurance. But there are other

components necessary for launching or improving an effort in selling insurance,

no matter the specific type or line involved.

Among these, insurance advertising is a central necessity that can make

or break a campaign, no matter how great or well-prepared its other elements

may turn out to be. Understanding advertising as a standalone concept can be

helpful in the quest to gain an advantage in the insurance world, but being able to

apply advertising principles to insurance while staying up to date on the newest

trends and ideas in both fields are sure ways to realize productive advertising

campaigns.


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Insurance advertising has typically based its primary methodologies and

attributes on the type of insurance that is being sold. Because emotional content

is an important part of selling insurance, it's imperative to have a good idea of the

feelings and thoughts associated with different types of plans.

People interested in purchasing disability or final expense insurance

probably won't be as responsive to overly-enthusiastic, unsympathetic

advertising, whereas those shopping for business insurance likely don't wish to

focus on worst-case scenarios, but rather have a positive spin put on the aspects

of the plan or package they're considering. There is ample market research

available for studying the emotional triggers and associations involved with

different types of insurance, though local surveys may be of use to especiallyambitious agents.


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CHAPTER 3

TYPES OF ADVERTISMENTUSED IN INSURANCE

Virtually any medium can be used for advertising. Commercial advertising

media can include wall paintings, billboards, street furniture components, printed

flyers and rack cards, radio, cinema and television adverts, web banners, mobile

telephone screens, shopping carts, web popups, skywriting, bus stop benches,

human billboards and forehead advertising, magazines, newspapers, town criers,

sides of buses, banners attached to or sides of airplanes ("logojets"), in-flight

advertisements on seatback tray tables or overhead storage bins, taxicab doors,

roof mounts and passenger screens, musical stage shows, subway platformsand trains, elastic bands on disposable diapers, doors of bathroom stalls, stickers

on apples in supermarkets, shopping cart handles (grabertising), the opening

section of streaming audio and video, posters, and the backs of event tickets and

supermarket receipts. Any place an "identified" sponsor pays to deliver their

message through a medium is advertising.

TELEVISION ADVERTISMENT

A television advertisement or television commercial is a span of television

programming produced and paid for by an organization that conveys a message .

it is the latest and fast growing medium of advertising it makes appeal through

both eyes and ears

ADVANTAGES

Television permits you to reach large numbers of people on a national or

regional level in a short period of time.


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Independent stations and cable offer new opportunities to pinpoint local

audiences.

Television being an image-building and visual medium, it offers the ability

to convey your message with sight, sound and motion.

DISADVANTAGES

Targeting your market is difficult.

These can an inappropriate medium for some businesses.

It is difficult to find items that are appropriate for certain businesses.

Longer lead time in developing the message and promotional product

Possibility of saturation in some items and audience.

Wrong choice of product or poor creative or poor creative may cheaper the

image of advertiser.

NEWSPAPER

It refers to daily publication containing news and opinions about current

events and feature articles. Newspapers are one of the traditional mediums used

by businesses, both big and small alike, to advertise their businesses.

ADVANTAGES

Allows you to reach a huge numbers of people in a given geographic area.

One has the flexibility in deciding the ad size and placement within the

message. Ad can be as large as necessary to communicate as much of a story as

you care to tell.

Exposure to the ad is not limited; readers can go back to your message

again and again if so desired.

Free help in creating and producing ad copy is usually available.


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Quick turn-around help your ad reflect the changing market conditions the

ad you decide to run today can be in your customers hand in one to two

days.

DISADVANTAGES

Ad space can be expensive.

Poor photo reproduction limits creativity.

Newspapers are a price oriented medium; most ads are for sales.

Ads have a short shelf life, as newspapers are usually read once and

then discarded.

Newspapers are a highly visible medium so your competitors can quickly

react to your prices.

With the increasing popularity of the internet, newspaper faces declining

readership and market penetration. A growing number of readers now

skip the print version of the newspaper (and hence the print ads) and

instead lead the online version of the publication.

MAGAZINES

Magazines or periodical are an excellent medium of advertisement when a

high quality of printing and colors is desired in an advertisement

ADVANTAGES

Allows a better targeting of audiences, as one can chose magazines

publication that caters to your specific audience or whole editorial

content specializes in topic of interest to your audience.

High reader involvement means that more attention will be paid to the

advertisements.

Better quality paper permit better color reproductive and four-color ads.


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The smaller page (generally 81/2by 11inches) permits even small ads

to standout.

DISADVANTAGES

Long lead times means that one has to make plans weeks or months in

advance.

The slower lead time hightens the risk of the ad getting overtaken by

events.

There is limited flexibility in terms of ad placement and format.

Space and ad layout cost are higher.

Examples: Life Insurance Corporation uses this medium vastly to advertise their

product.

RADIO

Radio is ancient yet unique, growing and pervasive medium.Radio is

with its audience when one wakes up in the morning, goes to jog, commutes toand from jobs, at workstations and goes to bed. It can be broadcasted to highly

targeted audience.

ADVANTAGES

Radio is a universal medium enjoyed by people at one times or another

during the day at home, at work, and even in the car.

Gives the business personality through the creations of campaigns using

sound & voices.

Free creative help is often available

Rates can generally be negotiable.


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During the past ten years, radio rates have seen less inflation that those for

other media.

DISADVANTAGES

Because radio listeners an spread over many stations, one may have to

advertise simultaneously on several stations to reach your targets

audience.

Listeners cannot go back to the ads to go over important points.

Ads are an interruption in the entertainment because of this, a radio ad

may require multiple exposures to break through he listeners tune -out

factor and ensure message retention.

Radio is a background medium. Most listeners are doing something else

while listening, which means that the ad has to work hard to get their

attention.

Examples: Bharti Axa life insurance effectively uses this medium.

WORD OF MOUTH ADVERTISMENT

Word of mouth or viva voce is the passing of information from person to

person by oral communication.Oral tradition is cultural material and traditions

transmitted by word of mouth through successive generations.Word-of-mouth

depends on the extent of customer satisfaction with the product or service.It

lies on the added credibility of person-to-person communication, a personal

recommendation.

Word-of-mouth advertising is important for every business, as each happy

customer can steer dozens of new ones your way. And it's one of the most

credible forms of advertising because a person puts their reputation on the


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line every time they make a recommendation and that person has nothing to

gain but the appreciation of those who are listening.

ONLINE ADVERTISING

Online marketing, also known as online advertisement, internet marketing,

online marketing or e-marketing, is the marketing and promotion of products

or services over the Internet.Online advertising is a form of promotion that

uses the Internet and World Wide Web to deliver marketing messages to

larger audience. Online advertising is a form of promotion that uses the

Internet and World Wide Web to deliver marketing messages to attract

targeted customers.

OUTDOOR ADVERTISMENT

DIRECT MAIL ADVERTISMENT

Advertising mail, also known as direct mail, junk mail, or ad mail, is the

delivery of advertising material to recipients of postal mail.The delivery of

advertising mail forms a large and growing service for many postal services,

and direct-mail marketing forms a significant portion of the direct marketing

industry. Some organizations attempt to help people opt out of receiving

advertising mail, in many cases motivated by a concern over its negative

environmental impact. Numerous polls have found that Americans consider

advertising mail to be intrusive.

POINT OF PURCHASE ADVERTISMENT

It refers to advertising that is built around impulse purchasing and that

utilizes display designed to catch a shopper's eye particularly at the place where

payment is made, such as a checkout counter. There are various types of point-

of-purchase displays, including window displays, counter displays; floor stands

display bins, banners of any kind, and all types of open and closed display cases.


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Generally, these displays are created and prepared by the manufacturer for

distribution to wholesalers or retailers who sell the manufacturer's merchandise.

Often, a manufacturer will discount the cost of merchandise or in some other way

compensate the retailer for using a point-of-purchase display.

SELECTING THE ADVERTISING MEDIUM

Advertising media selection is the process of choosing the most cost-

effective media for advertising, to achieve the required coverage and number of

exposures in a target audience. For the purpose of choosing the appropriate

medium or media of advertisement in insurance following factors should be taken

into consideration

NATURE OF PRODUCT- Nature of product plays a vital role. In case of

insurance nature of product can be classified depending on different types of

policies. Like in case of health insurance television advertising is more effective

than any other medium because detailing of the cause is possible.

NATURE OF MARKET- Nature of market can be determined by various

factors like geographical region, size of population. The market can be either

local or national. Outdoor advertising is more suitable for local market and

newspapers are most suitable for advertising insurance product on national level.

LIFE OF ADVERTISING- Outdoor advertising magazines and direct mail have

suffientlly longer life but the life of newspaper, radio and television advertising is

very short unless they are repeated occasionally. So considering these factors

also an advertising medium has to be selected by the insurance company.

FINANCIAL CONSIDERTIONThe cost of advertising media is a very important

consideration and it should be considered in relation to

The amount of funds available.

The circulation of media.


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CHAPTER 4

PLANNING OF ADVERTISMENT CAMPAIGN

The advertising agency in charge of the campaign must study the

marketing plan to know, the direction of the company is taking the strategic

decisions for the future, before working on advertising campaign. Some

advertising agencies are involved by some companies in preparing their

marketing plans also.

The planning of an advertising campaign involves the following procedure:

1. APPRAISAL OF ADVERTISING OPPORTUNITY:

The advertising is planned the advertisers must determine whether

the advertiser has a role to play in a particular marketing situation. To

evaluate advertising opportunities is really difficult task. The below

mentioned condition are to be considered to evaluate the advertising

opportunities.

Presence of a favorable primary demand trend must be there. If

consumer likes to purchase the basic product category the insurance

company advertising that product will succeed. If the trend of the product

is declining than advertising cannot reverse the trend and therefore it

wont succeed.

Eg: The unit link plan offered by LIC of India (money plus policy) has

more advertising prospects rather than their traditional product.

There should be good chance of product differentiation. Product

differentiation provides opportunity to consumers to prefer one brand over

another by distinguishing unique or exclusive qualities.

E.g. AVIVA life insurance has variety of products to offer to their

customers which increases their scope of advertising.


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Powerful emotional buying motives must be present. An advertising

message that touches the core of what the consume really wants if likely

to succeed.

E.g.Max New York Life Insurance child plus plans

There must be hidden qualities in the insurance product. Like in case of

Life Insurance their can is the concept of bonus on the policies taken. This

works as a surprise package.

Adequacy of funds is another important condition for appraising the

advertising opportunities of an insurance company. High advertising

budget obviously increases the scope of advertising.

E.g.- the Bharti Axa Life Insurance has a very high advertising budget.

2. Analyzing the market

The second step in planning process is to analyze the market

closely the target market for the product. Once the target market of

consumer is known an advertising campaign to suit those people may be

designed.

The target audience is the rural area so advertise should be

designed in such a manner that the people in rural areas are convinced

with the product and its benefit. IFFCO- TOKIO Rural Insurance Schemes

are advertised to connect to the mentality to people residing in rural areas.

3. Determining advertising objectives

In the absences of objectives nothing can be planned. The ultimate

advertising objectives are to increase the share of the market of theinsurance companys product. The ultimate responsibility for determining

the long range advertising objectives and short term advertising or

marketing goals should rest with the management of the company

controlling the advertising functions.


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4. Establishing budget and necessary control system

Once the advertising objectives are determined the fund necessary

to achieve the objectives must be provided for. A large sum is being spent

on advertising in the modern insurance business. In order to spent sum

on advertising wisely a specific amount of money is assigned to various

department.

5. Developing the strategy

Having laid down the objectives of advertising an appropriate strategy is to

be developed to achieve these objectives. Advertising strategy is creativity

applied to knowledge for

a. Selecting Media The media selection process can be described as

matching the audience for specific medium with the media. A large portion

of the budget appropriations is spent for the use of media as

recommended by the advertising agency.

b. Creating advertising messageadvertising message are at the core

of advertising planning. It can be held the value of excellent message is

many times greater than a mediocre message. Creating of an effective

advertising message is one of the primary functions of the advertising

agency. An effective advertising message must answer the following

questions

what business goal does the company seeks to accomplish ?

how do those people now thinks, feel, and believe our product, the

company and its competition?

What kind of people do we now sell to and what kind of people should the

Insurance company sell to?

What kind of thought do we put into the minds of those people to make

them feel, think, believe and do what the company wants?

What tone of voices will get those people to hear and believe the?


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6. Co-ordinating advertising with other promotional method

Advertising to be fully effective, needs active support from the channels of

distribution and other non advertising components.

E.g ICICI prudential life insurance had a tie up with movie cheeni kum to

promote their life insurance policy. The punch line of the advertisement is

jeete raho was used quite often in the movie.

7. Evaluating advertising result as soon as the campaign is under way it is

advisable to be tested within the stimulated market environment. there are two

types of testing :

a. Pre-testing Pre-testing is done before an may influence the buying of

media and the creative steps yet to come. The goal of pre-testing is to

eliminate the errors or weakness up the campaign before considerable sums

of money are invested in the effort.

b. Post-testing The main objective of post-testing is to learn from the

weakness and success of the existing campaign and use such knowledge in

planning the future campaign more effective. The purpose of finding the most

effective way of achieving the end. Strategy issues arises in two major areas

of advertising.


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CHAPTER 5

ADVERTISING STRATEGIES

Insurance companies need to advertise their products and thereorganization on the whole to make their products reach the consumers. The job

of advertising the product is a specialized one that requires lots of professional

skills. An insurance company cannot do this job individually. So it hands over the

responsibility of creating and making and advertisement to the advertising

agency

Advertising services provide a way for an insurance company to inform the

public about a product or service they want to sell. Advertisers hire

establishments, such as ad agencies or marketing companies, to sell a clients

product or service to the most likely buyers. Advertising services can include

consulting, creating, and producing the actual ads; media placement and account

handling.

The goal of advertising is to target the segment of a population who has a

special need for a particular product or service and finding ways to provide that

product or service in the most effective means available. The function of

advertising and marketing companies is to professionally promote individual

business and organization. Advertising agencies and marketing firms are

dedicated to the development of the most innovative and effective means of

business promotion available.

When life insurance is being talked of, it is one of the hottest picks in the

insurance industries. Keeping this in the view, insurance companies try to pull

crowds towards life insurance and go for different advertisement technique to

attract people.

Life insurance companies are employing new means to advertise

themselves and their products. A most obvious but expensive form of advertising.

Effective and continuous advertising is one of the important functions of any

successful business. It is imperative that the products or services of any

insurance business receive the proper exposure, and the way to achieve


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exposure is through advertising. Whether it is on the national or local level ,

advertising campaigns are necessary to let people know about an insurance

companys business. A most obvious but expensive form of advertising is the

advertisement being employed by them on the television . a huge number of

people are glued to the television ,so insurance companies target this medium on

a prime basis ; they build distinct advertisements that arrest the attraction of the

viewers , thus putting a mark on them about the importance of life insurance and

what they have to offer. Television advertisements are very effective since target

audience both see and listen to what is being told at the same time.

Advertising about life insurance in news paper is also an effective way to

advertise and market the agency since the companies try to build brand name

recognition for themselves.

An advertisement for health insurance should be promising for the viewers

otherwise it would be mere failure. If the health insurance advertising company or

companies are successful in convincing the audience about there past

successful records and able to introduce different flexible possible for the well

being of different range of customer, success in inevitable. The policyholder must

be acquainted with the risk involved if any.

We may sometimes find a health insurance ad on wed page we surf. This kind of

advertising by the ad agencies is all right until it doesnt pose any integrity

questions, because, health insurance is a sensitive matter. Health insurance

advertisements campaigns not only help the masses for giving them a secured

life but also to built a nation with greater life expectancy. The advertisers

basically count on the important or the highlighting factors to make their ads. The

ad basically revolves around the USP (unique selling point) of the insurance

product

So these firms lay there advertisements in movie halls when people are

out with their family to watch a film, typically coming up when viewers are sitting

in their seats waiting for their movies to start life insurance companies are also

finding different innovative ways of advertising their product. They are distribution

newsletters so as to reach target customer in person. These firms are also


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advertising life insurance through their business stationery and supplies. They

distribute stuffs like pen, paperweight, calendar, etc with their names embarked

on their stuffs. These firms are also employing online advertisements on popular

web portals. Along with publicizing their brand names, the life insurance

companies also keep reminding people about the importance of getting life

insurance.

Health insurance advertisement is a best way to propagate the idea of

insurance among the general public. The main aim of insurance company is to

advertise health insurance effectively by all possible means. Now days most

advanced methods are being used to advertise for health insurance.

Advertising for health insurance in television, newspaper and radio is very

effective. Although its cost a bit for health insurance television advertisement, it is

most powerful tool for large scale or wide spread campaign. Advertising health

insurance must be carefully dealt with because of the sensitive issues involved in

spite of it being a business. An ad for health insurance must appeal to the

audience in a positive manner.

WORK OF AN ADVERTISING AGENCY

A unique aspect of advertising is the advertising agency, which in most

cases makes the creative and media decisions. It often supplies supportive

market research and is involved in the total marketing plan. Full advertising

services often began with defining and advertisers target audience, or the

demographic profile of consumers most likely to buy their type of product.

These statistics usually include age group, gender, education level,

location, job type, income and family living situation. Knowing these facts better

enables agencies to come up with a plan to sell the product to a specific

audience. This up-front work eliminates wasting time and money advertising to

people who would not be interested in the product. After determining the


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consumer profile, a campaign concept is created and in- house or sub-contracted

agency employees use advertising services expertise to decide which media best

reaches the client customers. Media time or spaces purchased by the agency for

the advertiser. Media planners and buyers determine the best television and/or

radio channels, internet sites, or periodicals that will support the campaigns goals

of reaching customer. Todays media choices are more numerous than ever

because of the prevalence of Internet use.

Another advertising service that my be offered is the creative work

performed to produce the advertising. Art directors, graphic designers,

photographer and copywriters are a few of the key players on a print ad creative

team, with broadcast media requiring producers, directors, scriptwriters, video

editors, and camera operators. Behind the scenes, other advertising services

staffs finds and book talent for ads and commercials, voice talent, models, and

actors. Coordinating all aspects of an advertisers account, an account executive

keeps abreast of the campaignsprogress and communicates details and statues

to the advertisers. The agency has all round skills and experience.

However there are certain drawbacks of advertising agencies. They

generally lack specific knowledge if business. They cannot devote all their time

on the insurance companys project. They are expensive.

CREATIVE THEMES OF ADVERTISING IN INSURANCE:

PRESTIGE: These themes very effectively in the insurance advertise. It

presents the concept of self respect. This theme can be used to show how

by having a particular insurance policy one can be self dependent.

E.g the HDFC Standard Life Insurance works on these theme with its

punch line of Sar Uthake Jiyo.


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Health this theme is very useful in advertising of health insurance

scheme. Such kind of ads shows the effect of sudden physical

contingencies to promote their policies.

E.g.ICICI Lombard Health Insurance Policy.

Comfort this scheme is used in advertising of pension plans. This

concept shows that by the virtue of having a retirement policy of a

particular insurance company one can have a comfortable life after

retirement. E.g.AVIVA Pension Plus Plan.

Parental affection this scheme can be effectively used in advertising of

child plans.

E.g.Max NewYork Life Insurance Child Plus Plan.

Fearthis scheme is used effectively to advertise life insurance product.

This theme explains about the uncertainties of life and its consequences.

E.g.the Life Insurance Corporation of India uses the theme.

Using endorser in advertising an endorser can be used to advertise a

product. Endorsers usually are a celebrity in its own right. He or she can

be an actor, politician any famous sport personality etc. the consumers

now a days are much influenced are in a way of such celebrities and when

they get to see their favorite celebrity using a particular product, they get

very much influenced to see that product themselves a research from

market evaluators determine the likeable personality and celebrity based

on various surveys and there popularity in general. Based on these

studies, they approach an endorser usually known as a brand

ambassador to endorse there product.

E.GAVIVA Life Insurance as Sachin Tedulkar as its Brand ambassador.


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5.4 STRAGIES ADOPTED BY DIFFFERENT INSURANCE COMPANIES

Recently the one that made an impact recently was the full-page ad

for Apollo Munich health Insurance. The promise of an uncomplicated

insurance is likely to resonate only too well with consumers.

Recently, Bharati Axa General Insurance took a similar stance

attempting to re-position competitive offers as insensitive towards the

consumer. The advertisement outlined the promise of cashless facility

and no medical checkups upto 55 years of age as the justification for the

claim. Such promises ( in fact similar promises) get a mention in the press

ad, which eventually creates more impact.

Bajaj Allianz has launched its latest advertising innovation on child

insurance plans. For the first time on television, Bajaj Allianz will display its

Groovy kids innovation in promoting child insurance during the India-

Australia match in Hyderabad in 2 slots for 10 seconds each. It is a media

innovation, showing a father and son duo, which takes the campaigns

central idea into the field and breaks away from the clutter through an

activity within the match, as opposed to a usual commercial break. The

innovation, showcasing the son endorsing his father on planning his

future, is designed to take the central promotion campaign to an all

together new level. Mr Mehrotra further added, the campaign provokes

parents to start planning their childrens education. Bajaj Allianz offers a

host of insurance plans specifically suited to help parents plan their childs

higher education, marriage and provide funds for contingencies. Our super

Agent is key custodian and friendly advisors who provide excellent service

and information to the customer for their future and insurance planning.

This is the first time an insurance brand has taken the media

innovation route to its product offering directly on to a platform as broad

based as a cricket match.


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CHAPTER 6

IRDA REGULATION WITH REGARDS TO ADVERTISING

IN INSURANCE

OVERVIEW

These guidelines issued are intended to protect the interest of the insuring public,

enhance their level of confidence on the nature of sales material used and

ultimately encourage fair business practices. They are considered as the

minimum standards to be adhered to, in addition to compliance with the IRDA

(Insurance Advertisement Disclosure) regulations, 2000 (herein after referred to

as Advertisement Regulation) and the code of conduct prescribed by the

Advertisement Standard Council of India (ASCI) and any other regulations as

applicable. These guidelines reinforce extant regulations on all promotional

communications with policyholders/prospective policyholders or targeted market

segment with the objective of soliciting insurance business or otherwise.

CATEGORIES OF ADVERTISEMENT

For the purpose of these guidelines an advertisement may be classified into two

types:

1. Institutional advertisement: this is advertisement of any nature which is not,

either directly or indirectly, intended to solicit the insurance business, but only

promotes the brand image of the insurance companies and/or its intermediaries

and may contain the registered name, address, toll free number, logo or

trademark thereof. Advertisement issued in any mode including those that

highlight sponsorship fall under these categories


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2. Insurance advertisement: any advertisements issued with the specific

purpose of soliciting insurance business, and/or to influence the choice, opinion

or behavior of the prospective policyholder will fall under this category.

Advertisement, for this purpose, means insurance. Advertisement as defined in

a advertisement regulation and is classified as under:

Invitation to Inquire: this is an advertisement which highlight the basic

features of insurance/insurance products issued through recognized

marketing media in any mode to create a desire to inquire further about

them.

Invitation to Contract: this is an advertisement containing the detailed

information regarding the insurance/insurance product mainly to inducethe public to purchase, increase, modify, reinstate or retain a policy.

GUIDELINES TO ADVERTISEMENT

These guidelines are to be complied with by

All the insurers (life insurers, non-life insurers and health insurers).

The insurance intermediaries.

COVERAGE: these guidelines apply to advertisements, issued through all

recognized marketing media, in any mode including printed material, radio,

television, e-mails, hosting on the internet and any other audio/visual electronic

media.

General Requirements are( Dos )

Communications are clear, fair and not misleading whatever is the mode

of communication. They should use material and design (including paper

size, color, font type and font size, tone and volume) to present the

information legibly and in an accessible manner.


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Sales material and advertisement are comprehensible in the light of the

complexity of the product being sold.

Brand names of the product as proposed in the File and Use application

are adhered to.

When issued in vernacular languages, the mandatory disclosure are also

in the same vernacular language.

(Donts ):

The design, content or format shall not disguise, obscure or diminish the

significance of any statement, warning or other matter which an

advertisement should contain as required by these guidelines.

Use or denigrate names, logos, brand names, distinguishing marks,

symbols etc, which may be similar to those already used by others in the

market that may lead to confusion in the market place.

SPECIAL GUIDELINES TO INVITATION OF CONTRACTS.

Doss : advertisement should ensure that :

Any expression of opinion of the insurers is a fair and honest

representation.

Any statement of fact, promise or projection disclose all the relevant

assumptions ; and indicates in a clear and prominent way significant

limitations / criteria on which any special offer are available.

Where attention is drawn to insurers past financial performance it should

indicate that the past performance is not an indication of future

performance.


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The content should necessarily include:

The nature of the insurance contract and there type of the product.

The risks involved ; the limitation and exclusions of the contract; Illustrations, which indicate the exact costs and projections (e.g., disclose

date of NAV);

The commitment of the insurer and policyholder under the contract (e.g.

the minimum amount to be invested; minimum and/ or maximum sum

assured; lock-in period; the reasonable safety norms to be adopted in

case of non-life insurance products etc.,)

ADVERTISING THROUGH AND OTHER ELECTRONIC MEDIUM:

INTERNET

In case of communications on/through internet an insurer should ensure

that the recipients/viewers have the opportunity to view the full text of therelevant key features; terms and conditions; any other applicable risk

information required by these guidelines and they shall not be hidden awy

in the body of the text. It shall be easily obtained, before any application

form is offered. In case of e-mails communications there should be a

provision to unsubscribe from the mailing list.

Insurers should take an undertaking from the prospective policyholders

that they have read the entire text, features, disclosures, terms and

conditions, etc., while applying for insurance on-line.

Mandatory provision of a helpline or help number to further provides all

information that a policyholder would reasonably expect.

Insurers should provide hard copy of the necessary information on

request.


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TELEPHONIC INTERACTIVE MODE:

Promotional activities through Cold- calls shall be preferably by a licensedintermediary. In case it is done other than license intermediary,

responsibility of compliance with advertisement regulation and the

guidelines vests with the insurer/ intermediary that has outsourced this

activity.

The telephone caller shall take necessary steps to ensure that they do not

introduce into the privacy of the receivers. They should disclose their

identity and proceed to converse only after permission.

A reference on the access to full information about the available products

and the importance of financial need analysis along with the contact

phone numbers, which can provide such information, shall be placed

before closing the call.

Every insurer shall facilitates an access to do not call registry with the

contact numbers of the persons who wish not to be contacted, which

should be referred to, before every call.

Draw attention to favorable tax treatment without stating that they are

subject to changes in the taxes laws.

Highlight the positive financial condition of the parent (or promoting

partner) company without mentioning the financial condition of the insurer

and/or indicate that the assets of parent company can be banked upon

when desired.

Disclose benefits partially without disclosing the corresponding limitations/

conditions/ implications.

Indicate that acceptance of risk and/or settlement of claims is liberal and

generous without intent to do so.


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Use ambiguous words or phrases which are likely to exaggerate the

underlying benefits of the policies or plans and/ or capable of limiting the

actual exclusions or the limitations of the underlying benefits of the plan.

Denigrate or damage the reputation of the competitors or the industry.

Mandatory disclosure in invitation to inquire:

Every advertisement in the nature of invitation to inquire should disclose

the following statement for more details on risk factors, terms and conditions

please read sales brochure carefully before concluding a sale.

6.6 JOINT SALE ADVERTISING (JS)

Any insurance advertisement brought out jointly by an insurer either with its

corporate agent or with a micro-insurance agent would fall under this category.

These could relate to promotional activities where the logo/trademark/trade

names of the participating parties are displayed jointly.

Joint sale advertisements in the nature of insurance advertisements can

be released only after obtaining prior approval from the Authority. Every

application for approval shall carry a certificate from the Appointed Actuary

that it presents the same features of the product as cleared under file and

use.

The contents of these guidelines will apply in mutandis to all the JS

advertisements, as applicable. These guidelines super cede the circular

IRDA/ADVT/2004 dated 6th December 2004 regarding Product Co-

branded with Corporate Agents/Broker.


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BRANDING WITH THIRD PARTIES (THIRD PARTY FOR THIS PURPOSE

SHALL MEAN ANY INDIVIDUAL/ ASSOCIATION /ENTITY OTHER THEAN

INSURANCE INTERMEDIEARY)

Branding can be used on any advertisement of insurance

company/intermediary only when it does not urge the prospect or a

policyholder to purchase, renew, increase, retain or modify a policy of

insurance.

An exemption is however, given to insurance schemes sponsored/

subsidized by Central/ State government (s) in which case branding is

permissible in any category of advertisements.

The bonus vests with the insurer as to the compliance requirements oftime, in such cases.

RATING/ RANKING/ AWARDS

Any claim of rating/ award should be based only on those declared by

entities which are independent of the insurance company and its affiliates.

Insurance company and its affiliates should not however, procure services

from such independent entities so as to get a rating/award. Source of such rating/ award is to be disclosed conspicuously and legibly

in such advertisements.

No claim of ranking by an insurance company, as regards its position in

the insurance market, based on any criteria (like premium income or

number of policies or branches or claims settlements etc., ) is permissible

in any of the advertisements.


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OTHER IMPORTANT GUIDELINES

Mandatory disclosure as specified by advertisement regulation and

applicable guidelines as may be specified from time to time should be

clear, conspicuous and legible and should find at least 10% of the total

space utilized for the advertisement in print/visual mode with a minimum

print equivalent to font Times New Roman No.7. In case of audio mode,

these disclosures should be spelt for at least 10% of the total time slot of

the advertisement.

All the advertisements should carry a unique identifiable reference number

Where material is filed with the Authority

in accordance with the advertisement regulations, in other than English /Hindi language, true translation of the same in English / Hindi duly certified

by an Authorized officer of the insurer, is to be enclosed.

In Unit Linked business, advertisements should also adhere to the

advertisements inconsistent with the provisions of these guidelines should

be withdrawn within 2 months of the guidelines coming into force


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CHAPTER 7

CASE STUDY

Life Insurance Marketing in India the Changing Advertising &

Promotion Norms

In early 2002, India's state owned insurer, Life Insurance

Corporation (LIC), announced tie-ups with Corporation Bank, Oriental

Bank of Commerce, Bank of Punjab and Nedungadi Bank for sale of its

products through their branches. The aim of the tie-ups was to diversify

LIC's distribution channels and increase product penetration. Industryobservers were not surprised by this move. They felt that LIC had no

option but to explore new channels of distribution to maintain its position

as the market leader.

The liberalization of the Indian insurance industry in 2000 led to the entry of

private insurance companies with MNC as their partners. Reaching anywhere

near LIC's vast network, built over decades, was going to be extremely tough

for the new players.

Consequently, private insurers decided to rely on aggressive advertising and

promotional measures and use hitherto untried distribution channels. Private

insurers began exploring the various distribution channels available instead of

concentrating on individual agents, a channel LIC had been using for decades.

To minimize cost, these companies tied up with established financial services

companies and used their distribution network instead of setting up their own

network.

According to insurance industry observers, distribution was expected to emerge

as one of the key factors for the success of private insurers in India. They also

felt that insurance intermediaries and new distribution channels would become


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the strongest drivers of growth for the insurance sector and that multi-channel

distribution would become the norm. With even LIC adapting these new channels

of distribution, the distribution of insurance products/services seemed all set to

undergo a radical overhaul.

The 'Indian Life Assurance Companies Act' was passed in 1912; this was

followed by the Indian Insurance Companies Act, 1928. These acts allowed the

government to collect data regarding life and non-life businesses conducted by

both Indian and foreign insurance companies. Later, the 1928 act was amended

and a new act, the 'Insurance Act' was passed in 1938. By the mid-1950s, 154

Indian insurers, 16 foreign insurers and 75 provident societies were operating in

the country. The life insurance business was concentrated in urban areas andwas confined to the higher strata of society. In 1956, the management of these

companies was taken over by the Government of India. LIC was formed in

September 1956 through the LIC Act 1956, with a capital of Rs 50 million. One of

the main objectives of forming LIC was to make insurance cover available to a

large number of people, particularly to the lower segments of society.

In 1972, the government took over management control of 106 private general

insurance companies and formed the General Insurance Corporation (GIC). Over

the years, LIC expanded its network all over the country and became one of the

largest corporations in India. LIC had seven zonal offices, 100 divisional offices,

2,048 branch offices and army of agents totaling 6,28,031. Growth in Indian

insurance industry was minimal in the 1960s and 1970s because of low savings

and the low level of literacy. In addition, the insurance industry lacked sufficient

funding and infrastructure. However, changes in the economy in the 1980s, such

as growth in the rate of industrialization, improvement in infrastructure, the capital

markets, increase in the savings rate and substantial capital formation resulted in

tremendous growth in the life insurance industry.


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Over the years, LIC launched several group insurance and social security

schemes to enhance its reach in the rural areas. In the early 1990s, the

government felt it necessary to reform the industry, provide better coverage to

the citizens and to increase the flow of long-term financial resources to finance

the growth of infrastructure. In 1993, the Indian government set up the Malhotra

Committee to suggest reforms in the industry. The committee, which submitted

its report in 1994, recommended opening of the insurance sector to private

players, improving service standards, and extending insurance cover to larger

sections of the population. Various labor unions and political parties in the

country opposed the committee's suggestions.

They felt that the entry of private players would lead to job cuts by the

nationalized players to make them more competitive. There were a host of other

arguments against these reforms. As a result, the government decided to restrict

foreign stake in insurance companies to only 26%, which was well below the

51% required by the Insurance Bill for controlling the management of the

company. Though one of LIC's basic objectives was to 'provide insurance cover

to all Indians,' insurance penetration in India remained very low. According to

reports, only 65 million people were covered by insurance. R N Jha, LIC's former

Executive Director, commented in his book, Insurance in India, "Insurance

coverage has been extended only to about 25% of the insurable population in 40

years". In other words, the insurance market in India was largely untapped.

However, the fact remained that more than 75% of the Indian insurable

population was untapped. According to industry observers, one of the main

reasons for the low insurance penetration was the poor distribution and

marketing strategies adopted by LIC. Prior to liberalization, due to its monopoly

status, LIC seemed to have had no strategically devised distribution strategies in

place. It depended entirely on individual agents, which it had trained over the

years to distribute its products. LIC made no efforts to use other distribution


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channels (Refer Exhibit I for various distribution channels for selling life

insurance).

LIC's agents were not well qualified for their work. Prior to liberalization of the

Indian insurance industry, no minimum qualification was laid down for people

who wanted to become insurance agents. Agents generally acted like brokers;

they cared more for their commissions than the needs of the customer. As a

result, they did not make the effort to educate customers about the insurance

products being offered.

To distribute insurance products, LIC employed a large number of marketing

people as 'Development Officers'. These officers employed and trained a number

of agents. Development Officers received bonuses from the business generated

by their agents, in addition to their salary.

Consequently, LIC ended up paying bonuses and commissions twice for every

new policy and subsequent renewal of premiums to both agents and

Development Officers. It was reported that after only a few years of recruitment

of agents, Development Officers earned huge amounts as commissions. Despite

this, the attrition rate among the agents was very high, largely because LICselected the wrong kind of people in the first place.

LIC's bid to implement strict incentive schemes and 'career agent' type of

distribution failed due to the powerful Union of Development Officers. However,

with the entry of new players, the insurance market changed dramatically.

Analysts commented that the private insurers seemed all set to make the

industry market-driven, wherein technical expertise and service excellence would

be the key success factors. The private companies, to make their presence felt

and expand their reach, experimented with new distribution channels.


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According to analysts, it not only helped insurance companies increase market

penetration and premium turnover, it also helped banks increase their Return on

Assets (ROAannual earnings divided by total assets). This was because, even

with a constant asset base, bancassurance contributed to enhanced ROA

through fee income. (Refer Table III for various bancassurance agreements).

Allianz Bajaj Life Insurance (Allianz Bajaj) planned to build a multi-channel

distribution network, which included agents, corporate agents and strategic

alliances with banks, Bajaj Auto network and other direct marketing initiatives. In

late 2001, it signed a Memorandum of Understanding (MOU) with Standard

Chartered Bank for an exclusive bancassurance distribution agreement.

According to reports, Standard Chartered was to act as the corporate agent for

the company, and the partnership was expected to leverage the bank's 60

branches across the country

Standard Chartered Finance (a subsidiary of Standard Chartered Bank) was also

expected to market Allianz Bajaj's products. Companies such as HDFC Standard

Life, ICICI Prudential Life, and SBI Life insurance planned to leverage the branch

network of their parent companies, HDFC, ICICI Bank and SBI respectively, for

distributing their products.

Reaching out to the bank's existing customers would be very easy for the

insurance companies as the banks already had a well-established relationship

with their customers.

Since SBI had a network of over 9,000 branches, SBI stood to gain a lot by

utilizing the bancassurance channel. It was reported that by the end of 2001, 21

branches of SBI were distributing SBI-Cardiff's group policies.

Many analysts believed that bancassurance would play a very important role in

India because banks were familiar with the target customers' needs, had a strong

service delivery mechanism, good quality administration, complete integration of

insurance and bank products and services, qualified personnel and an organized


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tracking system for reporting on agents' time and the results of bank referrals.

However, it was also pointed out that the partnership between insurers and

banks could run into problems.

The most common problems that partners could face were inefficient manpower

management, lack of sales culture within the bank, lack of branch personnel's

involvement, insufficient product promotions, failure in integrating marketing

plans of both bank and insurance company, limited database expertise of the

bank and inadequate incentives to the bank personnel involved in sales of

insurance products. Despite the growing thrust on bancassurance, most of the

players believed that individual agents would continue to play a major role in the

Indian insurance industry.

According to Anuroop Singh, CEO, Max New York Life, the new distribution

channels would not be able to completely replace individual agents. He said,

"Over 90% of the life insurance schemes the world over are sold through

individual agents. Agents will be the primary channel of distribution in India and

so we have invested substantially in training our life insurance agent advisers

here." Max New York worked towards making the quality of its agents its main

differentiating factor. The company adopted the career agent system instead of

LIC's general agent system. Max New York paid attention to the agent selection

process so as to recruit the best talent available. The selection process

comprised four stagesscreening, psychometric tests, career seminars and final

interview. Agents were trained in the various products the company offered and

the insurance needs of the customers so that they were in a position to offer

them sound advise.

The training covered 152-hours, instead of the mandatory 100 hours stipulated

by IRDA. The program involved modules on understanding the consumer psyche

and the financial market, and developing selling skills and the right attitude.


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Commenting on the need for training agents, Mr. Debashis Sarkar, senior vice

president, marketing, Max New York, said, "Internal employees are all opinion

shapers and indirect brand-builders and brand promise needs to be replicated

down the chain at every customer touch point.

The company also made training an ongoing process, and ensured that the

training program addressed the needs of agents through development of skills

and knowledge through a program spreading over 500 hours over two years.

HDFC Standard Life decided to rely on individual consultants and corporate

agents for distributing its products. According to company sources, individual

consultants were expected to play a key role in the sales process. The company

therefore invested 20 man-months in developing training programs for

consultants.

The company also trained its consultants through institutions approved by IRDA.

In addition, HDFC Standard Life tied up with corporate agents all over country. It

had already tied up with HDFC and some other banks to distribute its products.

To increase its coverage in rural areas, HDFC Standard Life held talks with

NGOs that were involved with HDFC's housing schemes in rural areas.

Birla Sun Life announced the appointment of Village Extension Workers (VEWs)

who would help create awareness about insurance in villages. Generally, these

VEWs were from social improvement projects promoted by the Aditya Birla

Group of companies. Each VEW was put in charge of a cluster of 10-15 villages.

Many other major private insurers were laying emphasis on the recruitment and

development of quality agents to enhance their brand image in the market and

attract customers. LIC ran an advertisement campaign that featured one of its

most successful agents to highlight its belief in the individual agent system.

Meanwhile, the Government of India opened up yet another avenue for

distributing insurance products in August 2002: brokers (Refer Exhibit II). Foreign

brokerage firms were also allowed, but only through a tie-up with an Indian


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partner and a 26% cap on equity. IRDA planned to finalize regulations by

September 2002 and issue licenses to four categories of brokers - direct general

insurance broker, direct life insurance broker, reinsurance broker, composite

broker, and insurance consultant.What Lies Ahead

After the decision to allow brokerage firms was announced, many Indian and

foreign firms expressed their interest in entering the Indian insurance market.

HSBC Bank announced its intention to set up an insurance brokerage firm in

India.

The Tatas also planned to enter the insurance brokerage business, focusing on

both corporate and retail clients (reportedly through a strategic partnership with

the Hong Kong based Jardine Matheson group).

As marketing, distribution and technical superiority were expected to be the

decisive factors for success in the Indian insurance sector in the future, the new

players seemed to have a good chance.

With the growing popularity of new distribution channels in the Indian insurance

market, Private insurers hoped to effectively leverage the strengths of the new

distribution channels. The above belief was strengthened by the emergence of

another new channelthe Internet. According to reports, in 2001, around 12% of

the insurance products were sold through the Internet, and this figure was

expected to grow as Internet penetration increased.

Because of increasing competition in a crowded market, private insurers were

trying to leverage every possible medium. According to analysts, in the not-too-

distant future, even departmental stores, ATMs, Internet kiosks and

supermarkets would be selling insurance


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SURVEY

Life Insurance Corporation of India is a public sector giant in the life

insuranceindustry in India. For almost five decades LIC is monolithic company inthe life insurance sector. Since nationalization LIC has built up a vast network of

2048 branches, 109 divisions.

The largest life insurance company in India, Life Insurance Corporation is

fully owned by the government. It provides individual life insurance, group

insurance and pension plans. Today the company is on the Internet and is

utilizing Information Technology in servicing its clients.

Survey analysis

A sample survey was conducted of 3o people about there preference of LIC over

other insurance company. The following are the result of the survey conducted.

1. Which method of advertising do you find attractive (rank

them).

10- Highest 1- least attractive

TV. Internet

Radio Mobile/sms

Newspaper Pam plates

Magazines Direct mail

Hoardings Transits ads


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Most of the people prefer TV as a more attractive advertising and the least

attractive advertising goes to the transits ads. Because nowadays, people are

more influenced by watching television.

2. Do you feel that advertisement influences people to buy

insurance?

a) Always. b) Sometimes.

c) Occassionaly d) Never.

30%

8%

8%

12%

22%

8%

5%4% 2% 1%

Ratings

TV

Newspaper

Hoardings

Mobile/sms

Radio

Pam plates

Magazines

Direct mail

Internet

Transits ads


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Most of the people say sometime insurance advertisement influence to buy

insurance. Few of them says they never get influenced by the advertisement.

3. Which age group get most influenced by advertising?

a) 1-15 yrs. b) 16-30 yrs. c) 31-45 yrs.

d) 46-60 yrs e) 61-75yrs f) 75yrs & above.

30%

51%

10%

8%

Always

Sometimes

Occassionaly

Never


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Age group of 16-30 years get most influenced by advertising whereas the age

group of 61-75 years are less influenced but the least age group is 75 & above

years.

4. How do you find ads in insurance sector?

a) Rational b) emotional c) both.

18%

50%

22%

7%3% 0

1-15 yrs

16-30 yrs

31-45 yrs

46-60 yrs

61-75 yrs

advertisement in insurance sector

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