INSURANCE MARKETING
Large employers often obtain their group life and
AGENTS AND BROKERS A successful sales force is the key to
success in the financial services industry. Most insurance policies
sold today are sold by agents and brokers. Agents: An agent is
someone who legally represents the principal and has the authority
to act on the principals behalf. Brokers: A broker is someone who
legally represents the insured even though he or she receives a
commission from the insurer.
Agents
An agent has the authority to represent the insurer based on
express authority, implied authority, and apparent authority.
Express authority refers to the specific powers that the agent
receives from the insurer. Implied authority means the agent has
the authority to perform all incidental acts necessary to exercise
the powers that are expressly given. Apparent authority is the
authority the public reasonably believes the agent possesses based
on the actions of the principal.
Agents Important difference between a property and casualty
insurance agent is: A property and casualty agent has the power to
bind the insurer immediately with respect to certain types of
coverage. In contrast, a life insurance agent normally does not
have the authority to bind the insurer. Binder is temporary
insurance until the policy is actually written.
Brokers A broker legally does not have the authority to bind the
insurer. Instead, he or she can solicit or accept applications for
insurance and then attempt to place the coverage with an
appropriate insurer. But the insurance is not in force until the
insurer accepts the business. A broker is paid a commission by
insurers where the business is placed.
Brokers Brokers are extremely important in commercial property
and casualty insurance, Large brokerage firms have knowledge of
highly specialized insurance markets, provide risk management
and loss-control services, and handle the accounts of large
corporate insurance buyers. Brokers are also important in the
Surplus Lines markets.
Brokers Surplus lines refer to any type of insurance for which
there is no available market within the state, and the coverage
must be placed with a non-admitted insurer . A non-admitted
insurer is an insurer not licensed to do business in the state . A
surplus lines broker is a special type of broker who is licensed to
place business with a non-admitted insurer . Brokers are
important in the area of Employee Benefits, especially for larger
employers.
medical
TYPES OF MARKETING SYSTEMS Marketing systems refer to the
various methods for selling and marketing insurance products.
These methods of selling are also called distribution systems . An
efficient distribution system is essential to an insurance companys
survival.
9. Life Insurance Marketing Distribution systems for the sale of life
insurance have changed dramatically over time. Major life
insurance distribution systems: Personal selling systems
Financial institution distribution systems Direct response system
Other distribution systems
10. Life Insurance Marketing 1-Personal Selling Systems: The
majority of life insurance policies and annuities sold today are
through personal selling distribution systems and include the
following: Career agents are full-time agents who usually
represent one insurer and are paid on a commission basis.
Multiple Line Exclusive Agency System, Under this system, agents
who sell primarily property and casualty insurance also sell
individual life and health insurance products.
11. Life Insurance Marketing Independent property and casualty
agents are independent contractors who represent several insurers
and sell primarily property and casualty insurance. A personal-
producing general agent (PPGA) is an independent agent who
receives special financial consideration for meeting minimum sales
requirements. Brokers are independent agents who do not have
an exclusive contract with any single insurer or an obligation to sell
the insurance products of a single insurer.
12. Life Insurance Marketing 2-Financial Institution Distribution
Systems: Many insurers today use commercial banks and other
financial institutions as a distribution system to market life
insurance and annuity products. 3-Direct Response System: is a
marketing system by which life and health insurance products are
sold directly to consumers without a face-to-face meeting with an
agent. Potential customers are solicited by television, radio, mail,
newspapers, Internet.
13. Life Insurance Marketing Advantages of Direct Response
System Gain access to large markets; Acquisition costs can be
held down; Uncomplicated products, such as term insurance, can
be sold effectively Disadvantage Complex products are often
difficult to sell because an agents services may be required.
14. Life Insurance Marketing 4-Other Distribution Systems:
Worksite Marketing. Individual sales interviews on site with
employees interested in purchasing life insurance products Stock
brokers are licensed to sell life insurance products. Financial
Planners provide advice to clients on investments, estate planning,
taxation, wealth management, and insurance.
15. Property and Casualty Insurance Marketing Independent
agency system Exclusive agency system Direct writer Direct without having to expand their sales forces or pay commissions to
response system Multiple distribution systems
16. Property and Casualty Insurance Marketing 1-Independent
agency system: has several basic characteristics. It is a business
firm that usually represents several unrelated insurers . It owns
the expirations or renewal rights to the business . It is
compensated by commissions that vary by line of insurance . In
addition to selling, independent agents perform other functions like
adjust small claims, loss control services, bill the policyholders and
collect the premiums
17. Property and Casualty Insurance Marketing 2-Exclusive Agency
System represents only one insurer or a group of insurers under
common ownership. They do not usually own the expirations or
renewal rights to the policies but independent agency systems
have complete ownership of the expirations. They generally pay
a lower commission rate on renewal business than on new business
but independent agency system typically pay the same commission
rate on new and renewal business. They provide strong support
services to new agents.
18. Property and Casualty Insurance Marketing 3-Direct Writer:
Technically, a direct writer is an insurer in which the salesperson is
an employee of the insurer, not an independent contractor . 4-
Direct Response System: Sells directly to the public by television,
telephone, mail, newspapers, and other media. 5-Multiple
Distribution Systems:(new ways to sell ) To increase profits, many
property and casualty insurers use more than one distribution
system to sell insurance. These systems are referred to as multiple
distribution systems .
GROUP INSURANCE MARKETING Many insurers use group marketing
methods to sell individual insurance policies to members of a group
like employers, labor unions, trade associations... Life insurers
typically sell and service group life insurance products through
group representatives. Some property and casualty insurers use
mass merchandising plans to market their insurance. Mass
merchandising is a plan for selling individually underwritten
property and casualty coverage to group members; auto and
homeowners insurance are popular lines that are frequently used in
such plans.
Banc Assurance An arrangement in which a bank and an insurance
company form a partnership so that the insurance company can
sell its products to the bank's client base. This partnership
arrangement can be profitable for both companies. Banks can earn
additional revenue by selling the insurance products, while
insurance companies are able to expand their customer base
insurance agents or brokers.
STRATEGIC MANAGEMENT In general, strategic management is a
process of formulating, choosing, and implementing strategy to
reach organizations missions or objective accompanying with the
analyses of internal and external factors.
22. STRATEGIC MANAGEMENT PROCESS Strategic management
processes begin first with environment scanning where mangers
scan the external and internal factors that affect the operation of
the organization. Afterwards, strategy management will be
performed in three parts: strategic formulation, strategic
implementation, and strategic evaluation.
23. STRATEGIC MANAGEMENT PROCESS After determining the
strategy to adopt, managers come to the strategy implementation
stage, where the chosen strategy should be actualized. In other
words, a series of programs or activities should be defined into
detailed actions and movements. Strategy evaluation, the final
stage of the strategic management process, refers to collect
information about the strategy, and to obtain feedback for later
improving.
MARKETING STRATEGY Marketing is the primary links between
companies and their customers. Therefore, marketing positions and
market mixes should be seriously considered by managers
(Wheelen & Hunger 2008). Market positions:In order to access to
the most profitable customer group,companies adopt the STP
process to choose its target customers.The STP process includes
three steps: 1)Segmentation : categorize the potential customers 2)
Targeting: choose the target customers to serve and 3) Positioning:
implement marketing plan to reach the target group.
25. MARKETING STRATEGY The marketing mix is the combination
of marketing activities that an organization engages in so as to best
meet the needs of its targeted market. The Insurance business
deals in selling services and therefore due weight age in the
formation of marketing mix for the Insurance business is needed.
The marketing mix includes the 7 Ps of marketing i.e. the product,
its price, place, promotion, people, process & physical attraction.
26. MARKETING STRATEGY PRODUCT: A product means what we
produce. An Insurance company sells services and therefore
services are their product. PRICING: The cost for consumers to
receive the goods or service.In the insurance business the pricing
decisions are concerned with: 1-The premium charged against the
policies 2-Interest charged for defaulting the payment of premium Marketplace highly competitive meeting point between customers
and credit facility 3-Commission charged for underwriting and needs and insurers abilities
consultancy activities. Customer needs, knowledge, methods of assessing, market
27. MARKETING STRATEGY PROMOTION: The activities a market negotiating, alternates
could utilize to provide information about their products and service Individuals insurers are able to pool loss exposures to determine
to attract consumption and increase sales.The insurance services premiums
depend on effective promotional measures.Advertising and Small Business usually limited knowledge
Publicity, organization of conferences and seminars, incentive to Middle Markets may have risk manager
policyholders are impersonal communication. PHYSICAL National Accounts Fortune 500 companies, chemical and
DISTRIBUTION( place):Activities that make the product available to manufacturing organizations, large municipalities
target consumers.Distribution is a key determinant of success for Comparison of Insurance Customers
all insurance companies. Marketing Differentiation
Level of Competition
THIRD PARTY ADMINISTRATOR Third party administrator insurance Customer Focus
is insurance that has been outsourced to an outside company. Products and Services
Although any company or organization can use a third party Size
organization to handle claims, they are most often used by Geographic Area
companies that are self-insured. The third party insurance Distribution System
organization does not carry any insurance risk, they simply handle
paperwork. Unique Factors
29. THIRD PARTY ADMINISTRATOR A third party administrator Economic Forces
insurance company may handle: Claim processing Collection of Regulatory Controls
premiums Manage workers' compensation Disability programs Demand for Technology
Also administer retirement and saving plans for employees Underwriting Cycles
Unanticipated Catastrophe Losses
Insurance Marketing and Distribution
Definitions Marketing Activities
Insurance Consumer Marketing Research
All buyers of insurance, including individuals, families, business, Systematic gathering and analyzing data on project basis
government bodies, and others Research Methods predicative analysis
Distribution Systems Segmentation to differentiate themselves
Communicate information between buyer, buyer and seller Target Marketing
Move the product between seller and buyers of the seller Niche Marketing
Intermediary Behavioristic
An agent, broker or employee of the seller who performs these Geographic
functions Demographic
Agent Psychographic
A person or firm in an agency relationship authorized by the Market Segment Selection
principal (insurance company) to act on behalf of the principal Market Development
Broker Entering a new market, territory, customer type, new product
An independent business owner or firm that represents Project managers generate and screen ideas
policyholders and prospective policyholders in their dealing with Market Information
insurers Delivering timely and cost effective information essential to
decision making
Property Casualty Insurance Major Types
Internal Accounting can provide report and analysis capability by Direct Writer Marketing
product of systems that keep track of commissions and billings Internet
Market Monitoring provides intelligence about external Call Centers
environment providing current, unfiltered and unbiased information Direct Response
Group Marketing
Other Marketing Activities Financial Institutions
Planning provides tools for management Mixed
Development what products and services to be sold and to which Distribution Systems
market Functions Performed by Producers
Advertising and Promotion mass media or none at all Prospecting referrals, advertising, telephone, cold canvass (calls)
Customer and Public Relations provides a forum for Sales commissions on sales source of income
communication Risk Analysis determining prospects needs
Sales Fulfillment satisfactory delivery Policy issuance
Functions Performed by Agent (cont.)
Product Development Steps Collections of Premiums
Distribution Systems and Channels Direct billing
The necessary people and physical facilities to report the sale of Agency billing
insurance products and services Claims all agents involved to some degree
Main Insurance Distribution Systems Consulting part of ongoing risk analysis
Independent Agency and Brokerage System Customer service
Exclusive Agency Marketing System Distribution Systems and Conduits For Insurance Marketing
Direct Writer Marketing System Customers Needs and Characteristics
Key Factors
Other Products and Services customer expectations
Internet Price always a factor?
Call Center Response Time speedy response expected
Direct Response Insurers Profits
Group Marketing Insurer Strategies and Goals
Financial Institution Insurer Strengths
Independent Agency and Brokerage Marketing System Financial Resources
Are independent contractors Core Capabilities
Can be sole proprietorship, partnership, corporation Expertise and reputation of producers
Ownership of agency expirations an agencys most valuable asset Existing and Target Markets
Compensations Geographic Location
Flat percent commission Degree of Control Required
Contingent on profit sharing Most central-direct writer
Disclosure creates transparency All systems require insurer control
National and Regional Brokers Direct response insurer complete control
Requires sophisticated knowledge and services
Regional, Nationally and Internationally Convergence of Traditional
(see list as handout) Marketing Systems
Others Exclusive agency and direct writer serve individual needs
Independent Agent Networks General concerns are on price
MGAs Insurers driven by competition
Surplus Line Brokers (NAPSLO) Gramm Leach Bliley lifted any restrictions on bank holding
Exclusive Agency Marketing companies
More toward multiple distribution channels Vertical integration
Allstate, Farmers, Nationwide, Progressive exclusive agents and
independent agents