CHAPTER 3.

MARKETING MIX OF LIFE INSURANCE

Marketing mix is one of the fundamental concepts in marketing management, in order to attract customer and for promoting sales every business organization has to concentrate on the basic element, they are Product mix, Price mix, Place mix, Promotion mix, People mix, Processes mix, Physical evidence mix. The life insurance marketing Emphasizes on the importance of consumer needs and hence a life insurance first analyses the nature of the customer needs. The entire life insurance marketing efforts focus attention around, the customers needs. According to Philip kotler marketing mix is the mixture of controllable marketing variable that the firm uses to pursue the sought level of sales in target market.

THE LIFE INSURANCE MIX Product mix Price mix Place mix Promotion mix People mix Processes mix Physical evidence mix

PRODUCT MIX
A product is what the seller has to sell and the buyer has to buy. An insurance company sells service and the policies are their product. Thus, the product is also called a bundle of utilities consisting of various product features and accompanying service. When a person or an organization buys an insurance police from the insurance company, he not only buys a policy, but along with it the assistance and advise of the agent, the prestige of the insurance company and the facilities of claims and compensation. Managing the product component involves product planning and development. The life insurance marketers must define their market in terms of product functions. It may offer a single product or several products. The product mix consists of the following: Product development, product range, individual scheme, group scheme, pension scheme, risk covered, product service, housing schemes, mutual fund scheme, investment on securities etc. Life insurance as product has to be designed keeping in view the expectations of the customers. In case of life insurance, the needs are in the form of two broad economic contingencies namely death of the breadwinner and the subsequent financial insecurity of his dependents and secondly, longer life insurance is sold as plan of life insurance companies. Life insurance companies several products specially suited for children, exclusive for woman, the handicapped, senior citizens to cover occurrence of terminal diseases, term assurance and pension plans.

TYPES OF LIFE INSURANCE PRDUCT 1. Term Insurance This type of life insurance policy is a contract between the insured and the life insurance company to pay the persons/s he has given entitlement to receive the money, in the case of his/her death, after a certain period of time. These policies can be taken for 5, 10, 15, 20 or 30 years. 2. Endowment Policy In an endowment policy, periodic premiums are received by the insured person and a lump sum is received either on the death of the insured or once the policy period expires. 3. Money Back Life Insurance Policy This policy offers the payment of partial survival benefits (money back), as is determined in the insurance contract, while the insured is still alive. In case the insured dies during the period of the policy, the beneficiary gets the full sum insured without the deduction of the money back amount given so far. 4. Group Life Insurance This is when a group of people have been named under a single life insurance policy. It is popular for an employer or a company to add employees under the same policy. Each member of the group has a certificate as legal evidence of insurance. 5. Unit Linked Insurance Plan ULIPs (Unit Linked Insurance Plan) offer the insured the double benefit of protection from risk and investment opportunities. ULIPs are linked to the market where the insureds money is invested to help earn additional monetary benefits.

PRICE MIX (PREMIUM CHARGE)

In life insurance price means the premium. It is another powerful element in life insurance marketing mix and vitally affects the volume of sales. Price is a valuation placed upon the product of the offerer. The various variable of price mix are insure sum, interest on loan, investment return, mode of payment, underwriting, commission, tax benefit, incentive etc. The Tariff advisory committee fixes the price for each policy. Hence all life insurance companies have to charge approximately similar premium on similar policies. However, different elements affect the rate of premium to be charged on each policy. The price for the same policy is different for different companies. There are various steps, which are followed in order to fix the price. They are as follows:

STEP 1 In the first step, the company decides where it wants to position its market offering. The clearer the firms objective, easier it is to set the p rice.

STEP 2 Each price will lead to a different level of demand therefore has a different impact on companys marketing strategy. In case of life insurance sector too, before fixing a price for a particular policy, the field officers are asked to find out the demand for various policies and on the basis of this demand, the price is fixed. STEP 3 Demand sets the ceiling whereas costs set the floor on the price the company can charge for its product/service. In case of life insurance sector, it comprises of costs of recruiting, training, motivating agents along with other fixed and variable costs. STEP 4 Within the range of possible prices determined by the market demand and company costs, the firm must take the competitors costs, prices and possible price reaction into account. In order to win the market share, such products/ services, which have not yet been created by the competitors, should be created by the company. LIC (India) offers a differentiated product in the form of Life insurance Policies especially for landless laborers and rickshawallas. STEP 5 In selecting the price in life insurance sector, the company must consider life expectancy of the person as well as his financial position. In case of Life Insurance, if the person while taking the policy is at a high risk of some terminal disease then he is charged a higher premium. At the same time, if a person who does not enjoy good financial condition cannot take a high price life insurance policy. Thus, every customer taking a policy should disclose all his medical as well as financial details in utmost good faith to the life insurance agent. In case of Non Life Insurance, correct financial evaluation of the cost of the goods which have been insured should be done by the life insurance agency because the customer may get the goods insured for a higher cost than they actually are and if the goods are damaged, then the life insurance company will have to pay a higher price than the actual cost of goods destroyed.

LIFE INSURANCE PRICING: The pricing in case of life insurance is done on the basis of: LIFE EXPECTANCY: In case of life insurance, the premium amount tends to be different for different customers. This differentiation is on the basis of age, medical history of a person. 1) Age E.g.: Low premium is charged for children and youngsters as it is

assumed that they are at a lesser risk of death as compared to the aged people. 2) Medical History The medical history should be revealed to the life insurance company by the customer in Utmost Good Faith i.e. the insured must provide to the insurer complete, correct and clear information of the subject matter of life insurance. E.g.: If in the medical history it is mentioned that the person has suffered from heart attack in the past or if he is suffering from any terminal disease like cancer or AIDS then, he is at a higher risk of death and hence higher premium is charged. However, if the insured doesnt reveal that he is suffering from terminal disease or has suffered a heart attack previously and he dies due to the disease or heart attack then, the life insurance company does not pay the claim for the same. Case: The pricing of the policies in LIC (India) is done by the Actuarial Department, which is at the corporate level. The prices of the policies are fixed depending on the following conditions: Rate of return on investment in the present market scenario Life expectancy of the customer

 DISCOUNT PRICING: In life insurance sector, discount is offered if group life insurance is opted for. Group Life insurance Scheme is meant to provide life insurance protection to groups of people. Administration of the scheme is on group basis and cost is very low. Under Group Life insurance Scheme, life insurance cover is allowed to all the members of a group subject to some simple insurability conditions without insisting upon any medical evidence. The

restrictions under a Group Term Life insurance Scheme mainly relate to size of the group, amount of cover allowable, minimum and maximum age limit for eligibility of cover (18 & 60), participation of minimum percentage (75%) of eligible members of the group at inception and compulsory participation of all new members. Discount is given on group life insurance scheme because the life insurance company gets a large number of customers at a time and hence it saves expenses on promotion and advertisement, which are to be incurred to attract new customers. Thus, discount is given in order to attract more customers at a time by this group life insurance scheme. The cost incurred on giving discount is much less as compared to the cost spend and advertising and promotion. Hence discounting is much more profitable for the company.

PLACE MIX (DISTRIBUTION CHANNELS)

Place mix can be defined as the Physical distribution i.e. the delivery of goods/ services at the right time at the rig ht place to the customers . In case of life insurance it is the combination of decisions regarding channels of distribution in, agent, development officer, retail finance service distributors, alliances with banks, tie-ups with non-governmental organization, corporation channel comprises of over 6.10 lakhs active agents and cover 19000 development officers. This is a great advantage in order to cover the vast Indian population which is diverse in nature and spread, for which a strong marketing network is necessary. In case of life insurance sector, the following channel of distribution is followed according to the target market:

CHANNELS
Agents Direct selling Financial advisors Call centers Bancassurance Partner selling Postal department Selling through corporate Life insurance on internet Electronic channels Information kiosks SMS

1) Direct Selling: Agents: The agents are selected and recruited by the development officer of the life insurance company. These agents inform the customers about the various life insurance policies offered by the company and convince them to buy these policies. Financial Advisors: The financial advisors are also consulted by the customers regarding their financial matters. These advisors suggest their clients to get their goods insured against any calamity or risk. Hence they act as a channel in distribution of life insurance. Call centers: The people who require life insurance call up the call centers. These call centers send their direct marketing agents who go to the customers place and sell the life insurance policy. 2) Partner selling: Bancassurance: With the evolution of interconnected financial services, banks are converting themselves into one stop financial supermarkets. This has promoted two big classes of financial institutions: banks and insurance companies to combine and deliver an innovative product i.e. Bancassurance. In Bancassurance, the life insurance products are sold through the banks network of branches. Postal Department: India has an extremely well developed postal network, which is even stronger than the network of banks in the country. Life insurance companies can tie up with the postal department to sell and distribute various insurance covers. This would certainly require upfront training costs, as the postal employees in turn need to educate and sell the concept and benefits of insurance to the people in rural areas. Such a tie up with the postal department would open up Indias rural areas, which are largely untapped for insurance sector. This can prove to be a sustainable source of growing revenues

 Selling Through Corporate: Insurance can be sold through corporate too. Electronic Channels: In the last decade, numbers of technological advances have taken place due to immense use of EDI (Electronic Data Interchange).

3) Electronic Channels: In the last decade, numbers of technological advances have taken place due to immense use of EDI (Electronic Data Interchange) LIC on Internet: They have their own site, which is very informative. They display information about them and its subsidiaries, the product they offer. The addresses/e-mail Ids of their zonal offices, zonal training centers, management development centers, overseas branches, Divisional offices and also all Branch offices with a view to speed up the communication process. Information kiosks: LIC have set up 150 interactive Touch screen multimedia KIOSKS in prime locations in metros and some major cities for dissemination information to general public on our products and services. These KIOSKS are enabling to provide policy details and accept premium payments. SMS: Sims through mobile phone is recently new technology introduced by the LIC to promote their product.

LOCATION: In insurance, location, the place where office situated is not so

important as mostly the agents of the insurance company goes to the place of the customers for doing most of that customers work. However they situate their office branches at important location, which is convenient for the customer to visit.

PROMOTION MIX (MARKETING STRATEGY)

The promotion mix of life insurance consists of personnel selling, advertising, publicity, sale promotion, social contact and public relations. The promotional activities are carried out by agent, development officers and branch offices. Calendars, diaries and bags etc are also given to policy holders as taken of gift. All such activity increases the volume of sales by expanding as well as retaining the market share for the insurance product. Growing a life insurance brokerage is a challenge faced by many agents. In order to do so, one must capture quality leads, run effective marketing campaigns, remain top of mind with existing customers and engage prospective clientele. This seemingly endless list of tasks could keep you working around the clock. This is why we have developed the four tips to effectively growing your life insurance brokerage. STEP 1: Identification of Target Market: The target market is the focus of deciding the promotion mix. The total number of groups is analyzed and decision is taken regarding which segment is to be targeted. In case of insurance sector, mass marketing is favorable however, different policies are targeted towards customers from different income groups. E.g.: LIC (India) has introduced a new life insurance policy especially for rickshawallas and landless laborers. STEP 2: Determination and Setting Objectives: Service marketers employ a range of promotional methods, so it is essential to What the promotion has to achieve. It is necessary to define marketing objectives clearly so that most effective type of promotion is designed and utilized.

In case of insurance sector, the main objectives of a promotion campaign will be: 1) To make all or maximum population aware of the various insurance

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

taking insurance. E.g.: LIC (India) conducts seminars and mass marketing campaigns in order to make the customers aware of insurance and why it is needed. STEP 3: Message development for right communication effect: The message is an instrument for converting a suspect into a prospect. To obtain an effective response from the target market, there is always need to plan an effective message such that promotional efforts cause: Building of brand image Service awareness The promotional message should aim: To provide knowledge for service/product To ensure that customer will have a positive perception for service/ goods promoted To build up preference for service/ goods offered In the insurance sector, LIC (India) and MetLife Insurance are examples of companies who have used promotion mix to promote insurance. E.g.: LIC (India) promotes its life insurance policies using the slogan Zindagi ke saath bhi, zindagi ke baad bhi This creates awareness of risk of death as well as the importance of insurance. The slogan creates a positive perception about life insurance in the minds of people.

STEP 4: Selection of communication mix: There should be a careful blend of promotion mix with the marketing strategy of the firm and each situation should be examined for its merits and demerits. The following are promotional techniques: Overall marketing objectives Nature of the service Activities of the competitors Characteristic of target customer Cost effectiveness Integration with other marketing elements Management Issues Legal and ethical considerations There are various methods and media through which the message can be communicated to the consumer. In case of life insurance, following media is used for promotion purposes: 1) Advertising: It is a paid form of non-personal communication. It is used to develop attitudes, create awareness and transmit information in order to gain a response from the target market. Various media channels can be used for advertisement such as print media, electronic media etc. E.g.: MetLife India insurance has aired a television advertisement with the caption line have you MetLife today? The advertisement shows that people are falling from high places but instead of falling on the ground and getting hurt, they are falling on a bed called MetLife. 2) Personal Selling: It is the most widely used method of promotion by all

life insurance companies. They recruit, train and motivate the insurance agents to convince the customers to buy insurance policies of that particular company. The agent also collects the monthly premium and settles the claims of the customers.

PEOPLE MIX (CRM AND HRM POLICY)

CUSTOMER RELATIONSHIP MANAGEMENT Customer Relationship Management focuses on acquiring, developing and creating satisfied loyal customer; achieving profitable growth; and creating economic value in companys brand. Customer Relationship Management strives to improve the customers experience of how they interact with the company and produce high customer equity .the more loyal customer, the higher are the customer equity. Recently CRM has taken a center stage in the business world with businesses concentrating on saving money and increasing profits by redefining internal processes and procedures. It costs a company dramatically less to retain and grow an existing client, than it does to court new ones. It is said that It is seven times more expensive to acquire a new customer than to keep an existing one , therefore the value of customer information and management should never be underestimated CRM (Customer Relationship Management) is something that is not restricted to any country or culture. Wherever customers are there, business cannot afford to keep them unhappy; and that is where CRM comes in as a strong requirement. The concept of CRM is relatively simple and familiar to insurers. The two points of the concept are: Understand your customers' unique requirements. Offer them the services and products over their life time that will maintain or increase their profitability and retain them as your customers. Life Insurance Company provides following facilities to keep the customers happy and satisfied. 1. The birth dates of the policyholders are recorded and on the day of the birth day, the policy holder is given a happy birth day call by the company. 2. The customers are reminded to pay their premium on time through SMS.

Relationship between CRM and customer loyalty in life insurance: An organization must give some advantages to loyal customers in order to keep relationship with customers, like reduction in policy cost when a new one is being issued, or reduction in executive costs. Empirical researches have proved that only one unit of increase in CRM in life insurance organizations can increase customer loyalty up to 94.5%. Insurance company must make sure that CRM and high-quality service will increase customer loyalty. Insurance measures and other services delivered to customers must be according to commitments. Insurance companies must train their employees because even one confrontation with customer must be accurate. The first confrontation of an employee. With customers will stick in customer's mind. Therefore, employees who have the first face-to-face confrontation must form the first positive impression in their minds. This is the best method to attract loyal customers. Structural policies of a system within an organization can distribute information and contact with customers and remove intra-organizational defects. Unfortunately, in some organizations do not treat their customers well or ignore them. In such conditions, organizations must contact their customers secretly and explain the reason for their mistreatments. Insurance companies can make customers loyal to them because they have a database of their customers. Insurance companies must fulfill their commitments in order to finally increase productivity and profit-making and competitiveness

HUMAN RESOURCE MANAGEMENT Human resource development is mainly concerned with developing the skills, knowledge and competencies of people and it is a people oriented concept. HRD can be applied both at the national level and organizational level. Human resources of life insurance sector: Employees are the backbone to an organization. Employees efforts tu rn corporate goals into realities. Employees with right skill for right jobs are real assets to an organization, keeping these facts in mind, the employees of the corporation are divided into four classes. Class I Covers branch managers and above cadres Class II Development officers Class III category covers supervisor and clerical staff Class IV Subordinate staff. Training programmers of life insurance sector: The life insurance companies has well establish training infrastructure to cater to the training needs of employees consisting of Managements Development Center for senior officials, Seven zonal Training Centers of Supervisors, line managers and for top salesmen. There are also provide Training Center to provide training to field sales personnel. The training programs are broadly divided into two categories1. In house training programs 2. External training programs

Customer service representatives: They, process insurance policy applications, changes, and cancellations. They review applications for completeness, compile data on policy changes, and verify the accuracy of insurance company records. They may also process claims and sell new policies to existing clients. Nowadays, these workers are taking on increased responsibilities in insurance offices, such as handling most of the continuing contact with clients. A growing number of customer service representatives work in call centers that are open 24 hours a day, 7 days a week, where they answer clients questions, update policy information, and providing potential clients with information regarding the types of policies the company issues. More than 28 percent of insurance workers are in management or business and financial operations occupations.

PROCESS MIX (CLAIMS SETTLEMENT PROCEDURES) In case of insurance sector, the process mix includes the various interactions that take place between the insurance agent and the customer in the process of selling the policy to the customer till the settlement of claims.
Claim settling Process: (Life Insurance) 1) Claim by maturity/ Installment Payment: The Company strives to settle maturity claims and make periodic payments, as in case of Money Back Policies, on date itself. The office which services the policy sends out an intimation regarding the payment along with the necessary discharge voucher for the execution by the assured approximately two months before the due date of such payment. 2) Death Claim: Intimation of Death: In the event of the death of the policy holder, the claimant or the nominee should immediately intimate the branch office where the policy is serviced, the fact of such death, along with the following particulars: (a) Policy number, (c) Date of death and (b) name of the life assured, (d) claimants relationship with the assured.

Claim Forms: Soon after the receipt of the intimation of death, the branch office will send the necessary claim forms for completion along with instructions regarding the procedure to be followed by the claimant. Evidence of Title: The claim is usually payable to the nominee as the case may be. However, if the deceased policy holder has not nominated or hasnt made a suitable provision regarding the policy money by the way of will, the claim is payable to the holder of a succession certificate or some such evidence of title from a court of law. Payment of Claim: The Company then makes payment to the rightful recipient.

PHYSICAL EVIDENCE
Companies try to demonstrate their service quality through physical evidence and presentation. However, in case of life insurance sector, the customer rarely visits the life insurance company. The customer comes mostly only in contact with the service provider hence the service provider (Life insurance agent) should. Look presentable. Have a pleasant personality. Have good communication skills. The physical evidence factor is directly proportional to the level of faith of customers as well as the employees in the organization. Physical evidence goes way beyond an individual. It includes the co mpanys advertisements, public relation, employee, and branches.