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Life Insurance Marketing in India

Life Insurance Marketing in India

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Published by: ankush1986 on Oct 07, 2009
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Life Insurance Marketing in India –AThe Changing Advertising & Promotion Norms
“Instead of pushing policies down the throat we educate the customer and offer guidance on how much insurance the individual needs, an approach that is slowly paying off.” 
- A private insurance advisor, in 2001..
In July 2002, India’s state owned insurer, Life Insurance Corporation of India (LIC) announcedaggressive marketing plans with a budget of around Rs 1 billion. The aim of this unusual decisionwas to woo customers across the country through a multimedia campaign including advertisementson the radio and the press media, the outdoor media and the television. However, this did not comeas a major surprise to industry observers who said that LIC did not have too many options.With the insurance bill being passed in 2000, the Indian insurance sector saw a host of privateplayers enter the market with multinationals as their partners. These new players resorted toaggressive marketing and advertisement strategies – something the market had never seen earlier.This sudden spurt of advertisements and awareness programs was visible on all themedia channels. Print, electronic and outdoor advertisements of the new privateinsurers flooded could be seen everywhere. This prompted many comparisons of such behavior of insurance companies with the advertising frenzy of the dotcoms inIndia not too long ago – with similar full-page advertisements, huge hoardings andcostly electronic media advertisements.According to a survey conducted by a leading marketing research firm, ORG Marg, brand awarenessof private insurers in India was increasing in the early 21st century. The difference in the level of awareness of these new players as compared to the hitherto monopoly of LIC was decreasing fastbecause of the aggressive advertising measures adopted by private insurers.
The life insurance industry in India dates back to 1818, when a British firm Oriental Life InsuranceCompany opened its office in Kolkata, followed by Bombay Life Assurance Company in 1823. Duringthe British rule in India, ‘The Indian Life Assurance Companies Act’ was enacted in 1912, which wasfollowed by the Indian Insurance Companies Act, 1928 enabling government to collect the dataregarding life and non-life business conducted by both Indian and foreign insurance companies. The1928 act was amended and a new act, Insurance Actwas formed in 1938.By the mid-1950s, 154 Indian insurers, 16 foreign insurers and 75 provident societies wereoperating in the country. The life insurance business was concentrated in urban areas and wasconfined to the higher strata of the society. In 1956, management of these companies was takenover 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 spread theinsurance cover and make it available to the lower segments of the society. In 1972, governmentformed General Insurance Corporation (GIC) when it took over management control of 106 privategeneral insurance companies. Over the years, LIC expanded its network all over the countryemerging as one of the largest corporations in India.Insurance industry’s growth in the India was minimal in 1960s and 1970s due to factors like lowsavings, low investment, inadequate infrastructure, and illiteracy. However, changes in the economyin 1980s, such as growth in the rate of industrialization, infrastructure, the capital markets, savingsrate and capital formation resulted in a tremendous growth in the life insurance industry, which inother words meant growth of LIC. Over the years, LIC launched several schemes aimed atexpanding its reach in the rural areas. Many group insurance and social security schemes were
started by the company to enhance its reach over the rural. LIC had seven zonal offices, 100divisional offices, 2,048 branch offices and army of agents totaling 6,28,031.Need for reforming the industry was felt in the early-1990s for providing better coverage to theIndians and to increase flow of long-term financial resources to finance the growth of infrastructure.In 1993, the Indian government constituted the ‘Malhotra Committee’ to suggest reforms in theindustry. The committee submitted its report in 1994, with recommendations for opening theinsurance sector to private players, improving service standards and extending insurance coverageto larger sections of the population.The committee’s suggestions faced stiff opposition from various labor unions andpolitical parties in the country. They opined that entry of private players would leadto job cuts by the nationalized players in order to compete with them. There were ahost of other arguments against these reforms. The government sought to addressthem by restricting foreign stake in insurance companies to only 26%, which waswell below 51% needed for the managing the company in the Insurance Bill.Though one of LIC’s basic objectives was to ‘provide insurance cover to all Indians,’ insurancepenetration in India was considered to be very low. According to reports, only 65 million peoplewere 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 insurablepopulation in 40 years,indicating the huge uncovered market potential in the country.It was reported that per capita insurance premium
in developed countries was much higher ascompared to India. In 1999, per capita insurance premium in India was only $8 while it was $4,800in Japan, $1000 in Republic of Korea, $887 in Singapore, $823 in Hong Kong and $144 in Malaysia.In the world market, in terms of gross insurance premium also, India’s share was only 0.3%,though population wise it ranked second in the world. The corresponding figures in 1999 for Japanwas 31%, European Union 25%, South Africa 2.3% and Canada – 1.7%. Further, in 2001, while theratio of insurance premium to the Gross Domestic Product (GDP)
was 9% for UK and Japan, and5% for US, it was only 1.9% in India.Attracted by the huge untapped potential, many private players entered the market after theInsurance bill was passed in late 2000. A majority of these were collaborations between an Indiancompany and a leading MNC insurance/financial services company (Refer Table I).
Birla Sun Life Aditya Birla Group Sun Life, Canada LifeOm KotakKotak MahindraFinanceOld Mutual, South Africa LifeHDFC-StandardLifeHDFC Standard Life, UK LifeRoyal Sundaram Sundaram Finance Royal Sun, UKLife and Non-LifeICICI-Prudential ICICI Prudential, UK LifeMax New YorkLifeMax India New York Life, USA LifeTata-AIG Tata Group AIG, USALife and Non-LifeING Vysya Vysya BankING Insurance,NetherlandsLifeAviva Dabur CGU Life, UK LifeMetLife IndiaJammu & KashmirBankMetLife, USA LifeBajaj Allianz Bajaj Auto Allianz Life & Non-Life
AMP Sanmar Sanmar Group AMP, Australia LifeSBI LifeInsuranceSBI Cardiff, France Life
According to industry observers, one of the main reasons for the low insurance penetration in Indiawas the ineffective distribution and marketing strategies adopted by LIC. The company reportedlynever had any strategic marketing gameplan, and due to its monopolistic nature the need forserious marketing efforts was never felt. The advertising initiatives were limited to some print andelectronic media advertisements, that typically talked about LIC’s products being great tax savingtool for salaried individuals who came under the income-tax bracket. Despite all this, LIC wassynonymous with insurance in India and it had established an enviable brand image for itself,especially in the rural areas and small towns. However, with the entry of new players, the insurancemarket changed almost overnight. Analysts commented that the private insurers seemed all set tomake the industry marketing-driven, wherein technical and service excellence would be the keyfactors of success. The private companies, in a bid to make their presence felt and their brandnoticed, initiated a series of aggressive marketing and promotion initiatives, something that buyersof insurance were not accustomed to. Such frenzy prompted IRDA to frame an advertisement codefor companies (Refer to Exhibit I).
The new insurance companies used all channels of advertising from newspapers and the televisionto insurance agents and direct mailers. A fierce battle seemed to have begun among Indianinsurance companies to make one’s own brand win over the other.
A majority of Indian customers being very conservative and averse to risk, trust was an extremelyimportant factor in the insurance business. Since LIC was a government owned body, there was anelement of security embedded in its services and products. This proved to be the biggest hurdle forthe new insurance companies as Indian customers were reportedly rather skeptical about them.Hence, the new companies focused their campaigns primarily on building an image of trustworthiness and reliability for themselves. Secondly, their advertisements focused on insuranceas an investment option and not a mere tax saving tool – another first for the Indian market. Mostof these advertisements carried messages like the family’s happiness, human bonding, etc., withunderlying emphasis on the security that insurance could provide. Also, instead of projecting theidea, that an insurance policy actually starts working only after the death of the insured, the newcampaigns projected that insurance protects people throughout their lives.In one of its TV commercials, ICICI Prudential showed a series of scenes depictingthe childhood, marriage and old age of an individual. The purpose of using thesevisuals was to translate the company’s message ‘I will protect’ into real-lifeincidents. In order to project its commitment towards consumers to ‘protect atevery stage of life,’ the company brought in the concept of sindoor
,whichsymbolizes protection. Sindoor was shown throughout the commercial as a mark of auspiciousness and protection, and at the end, it became the red line below theICICI Prudential logo (Refer to Exhibit II).Max New York also resorted to depicting positive emotions such as trust and protection in its printadvertisements. The company released two print advertisements. While one of them carried animage of the revered deity Goddess Durga, the other projected three teenagers standing together,with their faces painted green, white and saffron – like the Indian national flag. Reportedly, MaxNew York wanted to convey the message that ‘insurance is your partner for your life.’ Suhel Seth of Equus Advertising the ad agency, which created the advertisements for Max New York – said, “Wehad to break the clutter, as insurance as a category has largely communicated doom and fear.Therefore, the campaign lent itself better to an emotional route.” Max New York Life also carried out

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