EXECUTIVE SUMMARY The primary data has been collected through questionnaire method. The questions were asked to the employees of marketing department of SBI life insurance and



ICICI prudential. The secondary data has been collected through various books related to insurance marketing such as Marketing in Banking and Insurance and Services Marketing, brochures collected from SBI life insurance and ICICI prudential, weekly journals such as Professional Banker, Insurance chronicle, etc. The project report contains information related to introduction of insurance marketing, marketing mix i.e. information about product, price, promotion, place etc., marketing of life insurance, distribution channels i.e. marketing intermediaries, financial institution and direct response. Bancassurance and the future of life insurance marketing are also covered under this project. Thus the project report clarifies that the direct selling method of marketing of life insurance product is the most profitable and inexpensive method. Bancassurance in India is growing day by day and it can be used as better marketing tool in future also. Direct marketing also helps the insurance company to promote their product in rural market. Bancassurance and telemarketing helps the company to provide useful information to their customer and to maintain proper database of the customer.





sales is certainly no exception.1 INTRODUCTION TO INSURANCE MARKETING There are insurance marketing strategies that can take any insurance agency from mediocre to success when utilized correctly. especially when it comes to financial system sales. Getting an education and training is very important in every industry. This article serves to give a few helpful hints and to encourage those in this career to seek further and find the right system or push for their business. and that their business would be greatly appreciated. Letters and phone calls are 4 . they also want a personal relationship.4 CH. Also. solid customer service will be part of the over-all package. such as various insurances. All successful sales agents understand that consumers need to be contacted again and again in order to make a vital connection. thought of. financial markets sales personnel can become extremely successful. Breaking into a new business climate and finding customers is hard work. Key insurance marketing strategies will always include an in-depth review of a value of follow-up. Those selling insurance will want begin their careers with the very best tools of the trade and those with already established businesses that are in need of a motivational push will also gain great benefits by researching and learning new insurance marketing tips. The consumer today not only wants a product at a great price. but when equipped with innovative ideas and proven techniques. Follow-up says to a consumer that they are important. great follow-up protocol lets the potential customer know that good.


gentle reminders that the salesperson intends to serve with his or her whole heart. And, once a sale is secured, a thank you call is strongly advised. Those in this industry will also want to keep constant contact with existing customers, too. The competition is fierce today, and no one wants to loose a customer to the next guy or service to come along. Clients that have had no contact for a period of time loose loyalty. Keep birthday and anniversary postcards going into the home on a regular basis. Keeping a name before a consumer will keep a name in their conscience. A small gift or token of appreciation is also a means for keeping customers loyal. Christmas goody packages or dinner out certificates will leave lasting impressions on consistent customers. Consumers today value information. We live in the information age, and the savvy, faithful customer is one that has knowledge about the products and services offered. The next most valuable insurance marketing tips include the salesperson being the source of financial information for the client. Newsletters, email updates, and notifications will keep customers informed about issues surrounding insurance and other financial programs. There are creative ways to approach these insurance marketing strategies. Newsletters could include contests, special interest areas for kids, safety concerns, and economic updates. There could even be an area for customer spotlights, or encouraging testimonies of how the customers were helped through the office. Of course, all new products and services should be showcased in any informative hard copy or email communication.


Community marketing is another great way to get advertising and name recognition. Successful net workers join local community agencies, such as the local Chamber of Commerce, and sign up to help in activities. This is a great way to get name and photographs listed in newspaper articles and other media avenues. Also, charity work cannot only be greatly beneficial to the community and those served, but may also open doors to communicating with other volunteers, who could be potential clients. People enjoy using services extended by like-minded providers. Creating a sense of community is extremely important to insurance marketing strategies. There are other insurance marketing tips and resources available and insurance agents may find investigating several options to be beneficial. Many marketing support companies offer email or publication updates, sharing information and techniques that are proven to bring in success. Agents may want to browse the Internet and find a few different insurance marketing tips programs to choose from. Not only will these resources help keep salespersons abreast of the latest strategies, but these support programs can also create a sense of community and an opportunity for agents to share their own struggles and challenges with others in the field. Perhaps the most important insurance marketing tips are tips that speak of integrity and honest business dealings. There are so many scams in various industries today; consumers are looking for products and services that they can trust. It is of the utmost importance that Christian insurance agents conduct their businesses as unto the Lord, himself. God's Word is extremely clear about how He feels when there is


misconduct in business transactions. "Lying lips are an abomination to the Lord: but they that deal truly are his delight."


1. To know about the marketing strategies of life insurance sector. 2. To know about different role of intermediaries such as agents, franchisers in life insurance marketing.

To know about insurance marketing in Indian environment.8 3. 4. Study of insurance marketing in global market. 2.e. 5. To know about the bancassurance as a tool of insurance marketing. 8 . Study of Customer Relationship Management (CRM) program. the project does not include the following:1. To know about the promotional policies adopted by life insurance companies. LIMITATIONS OF THE STUDY The scope of the project “The Study of Role of Marketing in Life Insurance Sector” has been restricted to some extent i.

COLLECTION OF SECONDARY DATA 9 . Study of role of marketing in general insurance sector. Study of comparison of life insurance marketing and general insurance marketing. RESEARCH METHODOLOGY COLLECTION OF PRIMARY DATA The primary data has been collected from various sources which are as follows: • Questionnaire method • Surveys in insurance companies • Survey in insurance related offices such as agent’s office. 4.9 3. franchiser’s office etc.

• Brochures of various insurance companies.10 The secondary data has been collected from various sources which are as follows: • Various books related to insurance marketing. • Weekly journals. • Articles in newspapers. 10 .

A product is any combination of goods and services offered to satisfy the needs and wants of consumers. The four elements of the marketing mix are sometimes referred to the four Ps of marketing.—consists of numerous sub elements. such as a computer. A tangible product is one that consumers can actually touch. The marketing mix shapes the role of marketing within all types of organizations. 2 MARKETING MIX The term marketing mix refers to the four major areas of decision making in the marketing process that are blended to obtain the results desired by the organization. a product is anything tangible or intangible that can be offered for purchase or use by consumers. An intangible product is a service that cannot be touched. Marketing managers make numerous decisions based on the various sub elements of the marketing mix. such as computer repair. Each element in the marketing mix—place.11 CHAPTER NO: 2 MARKETING MIX CH. Thus. price product promotion. income 11 . both profit and nonprofit. PRODUCT The first element in the marketing mix is the product. and. all in an attempt to satisfy the needs and wants of consumers.

12 tax preparation. like being able to get around in deep snow in the winter. 12 . The final. For example. For example. or an office call. The first level is often called the core product. Rather. Examples of durable goods include automobiles. the state tourism department in New Hampshire might promote New Hampshire as a great place to visit and by doing so stimulate the economy. Typically. and houses. parts. These components provided the benefits to consumers that they seek at the first level. packaging. Other examples of products include places and ideas. or actual product. consumers don't just buy trucks. as has the idea of recycling to help reduce the amount of garbage placed in landfills. Products are classified by how long they can be used—durability—and their tangibility. features. and styling. that is built around the core product. By contrast. For example. Cities also promote themselves as great places to live and work." The idea of wearing seat belts has been promoted as a way of saving lives. California. Next is the second level. level of the product is the augmented component. Products that can be used repeatedly over a long period of time are called durable goods. furniture. Examples of augmented product components are technical assistance in operating the product and service agreements. is "It's a great day in San Bernardino. the slogan touted by the Chamber of Commerce in San Bernardino. The augmented component includes additional services and benefits that surround the first two levels of the product. a product is divided into three basic levels. The actual product consists of the brand name. consumers buy the benefit that trucks offer. what the consumer actually buys in terms of benefits. or third.

such as bread and milk that consumers buy on a consistent basis. In addition. impulse. Staple goods are products. and unsought goods. Consumer goods are purchased by final consumers for their personal consumption. milk. candy. An example of an emergency good would be a shovel during the first snowstorm of the winter. The shopping patterns of consumers are also used to classify products. Products sold to the final consumer are arranged as follows: convenience. Impulse goods like candy and magazines are products that require little planning or search effort because they are normally available in many places. Convenience goods are products and services that consumers buy frequently and with little effort. Most convenience goods are easily obtainable and low-priced. Convenience goods can be further divided into staple. items such as bread. soap. and emergency goods. and soft drinks. specialty. Another way to categorize products is by their users. services are activities and benefits that are also involved in the exchange process but are intangible because they cannot be held or touched. shopping. and shampoo. Emergency goods are bought when consumers have a pressing need. Some examples of nondurable goods are food. 13 . Examples of intangible services included eye exams and automobile repair.13 goods that are normally used or consumed quickly are called nondurable goods. Final consumers are sometimes called end users. Products are classified as either consumer or industrial goods.

factors such as price. buyers do not compare specialty goods with other similar products because the products are unique. With shopping goods. Industrial goods are those products used in the production of other goods. and services. Examples of industrial goods include accessory equipment. Specialty goods are products with distinctive characteristics or brand identification for which consumers expend exceptional buying effort. Often. Typically. Unsought goods are those products or services that consumers are not readily aware of or do not normally consider buying. component parts. and suitability are used as bases of comparison. operating supplies.14 Shopping goods are those products that consumers compare during the selection and purchase process. Major appliances such as refrigerators and televisions are typical shopping goods. installations. Shopping goods are further divided into uniform and no uniform categories. Uniform shopping goods are those goods that are similar in quality but differ in price. No uniform goods are those goods that differ in both quality and price. Accessory equipment refers to movable items and 14 . Life insurance policies and burial plots are examples of unsought goods. consumers usually take considerable time and effort in gathering information and making comparisons among products. raw materials. unsought goods require considerable promotional efforts on the part of the seller in order to attract the interest of consumers. Typically. quality. style. Specialty goods include specific brands and types of products. Consumers will try to justify price differences by focusing on product features.

Office furniture and fax machines are examples of accessory equipment. and logs are examples of raw materials in need of further processing before being used in products. iron ore. For example. Component parts are frequently custom-made for the final product of which they will become a part. such as cleaners. Organizations sometimes require the use of services. just as individuals do. Installations are capital goods that are usually very expensive but have a long useful life. Component parts are products that are turned into a component of the final product that does not require further processing. file folders. power generators. Price is simply the amount of money that consumers are willing to pay for a product or service. The last category of industrial goods is services. Raw materials are goods sold in their original form before being processed for use in other products. paper. and mainframe computers are examples of installations.15 small office equipment items that never become part of a final product. PRICE The second element in marketing mix is price. In earlier times. crude oil. Operating supplies are similar to accessory equipment in that they do not become part of the finished product. the price was 15 . and pens. Examples of services sought by organizations include maintenance and repair and legal counsel. Trucks. Operating supplies include items necessary to maintain and operate the overall firm. a computer chip could be produced by one manufacturer for use in computers of other manufacturers. Crops.

businesses can use either market-penetration pricing or a price-skimming strategy. volume. Pricing new products and pricing existing products require the use of different strategies.16 determined through a barter process between sellers and purchasers. As a component of the overall business objectives. videocassette recorders. With a meeting-thecompetition pricing strategy. Under profitability objectives. Meeting the price level of competitors is another pricing strategy. and other technical items with high development costs frequently use a price-skimming strategy. when pricing a new product. Profitability pricing objectives mean that the firm focuses mainly on maximizing its profit. By contrast. a company increases its prices so that additional revenue equals the increase in product production costs. Using volume pricing objectives. pricing objectives usually take one of four forms: profitability. The focus of volume pricing objectives is on increasing sales rather than on an immediate increase in profits. meeting the competition. a company aims to maximize sales volume within a given specific profit margin. In modern times. A market-penetration pricing strategy involves establishing a low product price to attract a large number of customers. For example. the focus is less on price and more on nonprice competition 16 . pricing methods and strategies have taken a number of forms. a price-skimming strategy is used when a high price is established in order to recover the cost of a new product development as quickly as possible. Manufacturers of computers. Pricing objectives are established as a subset of an organization's overall objectives. and prestige.

17 . location of sale. Products priced below cost are sometimes called loss leaders. seasonal discounts. In addition to the four basic pricing strategies. products are priced high and consumers purchase them as status symbols. For example. Discriminatory pricing occurs when companies sell products or services at two or more prices. The goal of promotional pricing is to increase short-term sales. Discount pricing and allowances include cash discounts. and psychological pricing. trade-in allowances. Geographical pricing is based on the location of the customers. and promotional allowances. functional discounts. Psychological pricing considers prices by looking at the psychological aspects of price.17 items such as location and service. organization membership. consumers frequently perceive a relationship between product price and product quality. discriminatory pricing. or season. With prestige pricing. promotional pricing. there are five price-adjustment strategies: discount pricing and allowances. geographical pricing. Promotional pricing happens when a company temporarily prices products below the list price or below cost. These price differences may be based on variables such as age of the customer. Products may be priced differently in distinct regions of a target area because of demand differences. time of day.

businesses need to plan promotional activities with the communication process in mind. Thus. Publics are those individuals and organizations that have an interest in what the business produces and offers for sale. Promotion is a communication process that takes place between a business and its various publics. in order to be effective. The elements of the communication 18 .18 PROMOTION Promotion is the third element in the marketing mix.

receiver. comparative. Advertising can be further divided into six subcategories: pioneering. Advertising is also classified as to its intended purpose. Pioneering advertising aims to develop 19 . sales promotion. decoding. For instance. Symbols are formed to represent the message. advertising is described as paid. Encoding involves putting a message or promotional activity into some form. competitive. Media are methods the sender uses to transmit the message to the receiver. There are four basic promotion tools: advertising. Feedback occurs when the receiver communicates back to the sender. reminder. nonpersonal communication by an organization using various media to reach its various publics. Decoding is the process by which the receiver translates the meaning of the symbols sent by the sender into a form that can be understood. and personal selling. message. media. and noise. Each promotion tool has its own unique characteristics and function. visit a location. The sender refers to the business that is sending a promotional message to a potential customer. The sender transmits these symbols through some form of media. The purpose of product advertising is to secure the purchase of the product by consumers. The receiver is the intended recipient of the message. The purpose of advertising is to inform or persuade a targeted audience to purchase a product or service.19 process are: sender. encoding. advocacy. public relations. or adopt an idea. feedback. The purpose of institutional advertising is to promote the image or philosophy of a company. Noise is anything that interferes with the communication process. and cooperative advertising.

Sales promotion has 20 . Competitive advertising seeks to develop demand for a specific product or service. sweepstakes. contests. Reminder advertising seeks to keep a product or company name in the mind of consumers by its repetitive nature. trade. Sales promotions are short-term incentives used to encourage consumers to purchase a product or service. premiums. The second promotional tool is sales promotion. price packs. advertising allows organizations to control the message. Further. Tradepromotion tools include discounts and allowances directed at wholesalers and retailers. rebates. which means the message can be adapted to either a mass or a specific target audience. Consumer promotion tools include such items as free samples. Business-promotion tools include conventions and trade shows. point-of-purchase coupons. patronage rewards. causes. There are three basic categories of sales promotion: consumer. Cooperative advertising occurs when wholesalers and retailers work with product manufacturers to produce a single advertising campaign and share the costs. and games. Advantages of advertising include the ability to reach a large group or audience at a relatively low cost per individual contacted. Advocacy advertising is an organizational approach designed to support socially responsible activities.20 primary demand for the product or product category. coupons. Comparative advertising seeks to contrast one product or service with another. or messages such as helping feed the homeless. Disadvantages of advertising include difficulty in measuring results and the inability to close sales because there is no personal contact between the organization and consumers. and business.

and increase short-term sales. handling objections. and events. and follow-up. Organizations have at their disposal a variety of tools. approach. Personal selling does provide a measurement of effectiveness because a more immediate response is received by the salesperson from the customer. lobbying. and counseling to develop image. product publicity. measure the results. An organization builds positive public relations with various groups by obtaining favorable publicity. closing. pre-approach. Public relations activities have the drawback that they may not provide an accurate measure of their influence on sales as they are not directly involved with specific marketing goals. and handling or heading off unfavorable rumors. official communications. stories. Public relations tools are effective in developing a positive attitude toward the organization and can enhance the credibility of a product. The last promotional tool is personal selling. attract more attention and create product awareness. Personal selling involves an interpersonal influence and information-exchange process. 21 . Another advantage of personal selling is that salespeople can shape the information presented to fit the needs of the customer. presentation and demonstration. Public relations is the third promotional tool.21 several advantages over other promotional tools in that it can produce a more immediate consumer response. such as press releases. There are seven general steps in the personal selling process: prospecting and qualifying. establishing a good corporate image.

For a promotion to be effective. and possession. who in turn place the product in front of consumers. Place utility occurs when a 22 . including the product itself. place. wholesalers. Within the promotional mix there are two promotional strategies: pull and push. organizations should blend all four promotion tools together in order to achieve the promotional mix. and retailers. PLACE The fourth element of the marketing mix is place. Each participant in the channel of distribution is concerned with three basic utilities: time. These groups are involved with making a product or service available for use or consumption. Pushing strategy. Time utility refers to having a product available at the time that will satisfy the needs of consumers. and budget. Pull strategy occurs when the manufacturer tries to establish final consumer demand and thus pull the product through the wholesalers and retailers. in contrast. Place refers to having the right product. occurs when a seller tries to develop demand through incentives to wholesalers and retailers. in the right location. This proper placement of products is done through middle people called the channel of distribution. at the right time to be purchased by consumers. Advertising and sales promotion are most frequently used in a pulling strategy.22 Disadvantages are the high cost per contact and dependence on the ability of the salesperson. the product life-cycle stage. The channel of distribution is comprised of interdependent manufacturers. The promotional mix can be influenced by a number of factors.

23 . and move products to customers at the right time and at the right place is referred to as physical distribution. computers. Channels of distribution operate by one of two methods: conventional distribution or a vertical marketing system. perishable products. and paper goods. and air. books. truck. and auto mobiles. product transportation. and retailers in a channel. The vertical marketing system requires that producers. Water transportation is good for oil. minerals. sand. water. wholesalers. Rail transportation is typically used to ship farm products. there can be one or more independent product manufacturers. Pipeline transportation is best when shipping products such as oil or chemicals. handle. and important documents. and product warehousing. food. Air transport works best when moving technical instruments. manufacturers need to review issues such as distribution objectives. gravel. which means that wholesalers and retailers in the channel of distribution provide services to consumers with as few obstacles as possible. and retailers to work together to avoid channel conflicts. Truck transportation is most suitable for transporting clothing. sand. wholesalers. grain.23 firm provides satisfaction by locating products where they can be easily acquired by consumers. coal. metallic ores. Choosing the mode of transportation requires an understanding of each possible method: rail. In considering physical distribution. The last utility is possession utility. How manufacturers store. chemicals. and other heavy items. In the conventional distribution channel. pipeline.

24 Another issue of concern to manufacturers is the level of product distribution. Under exclusive distribution. select number of wholesalers and retailers. Selective distribution occurs when manufacturers distribute products through a limited. 24 . selective. Normally manufacturers select from one of three levels of distribution: intensive. or exclusive. Intensive distribution occurs when manufacturers distribute products through all wholesalers or retailers that want to offer their products. only a single wholesaler or retailer is allowed to sell the product in a specific geographic area.


Today insurers seek ways to argument and enhance the service provided by the agent. As this new marketing concept was adopted by more and more companies. To be successful today. marketing is the largest in terms of both personnel requirements and costs and is critical to success. including production. 26 . this was done by the agent. the recent intense competition within the life insurance business and the growing competition from other financial services organizations substantially heightened its importance.26 A life insurance company’s success reflects the consolidated effort of all its activities. Historically. it began to spread to services industries generally and the life insurance industry specially. a life insurance must create a satisfied customer and then turn that customer into a client. Life insurers historically considered marketing to be synonymous with selling and most insurers considered their customers to be their agents. The concept involves: • Focusing on consumer needs • Integrating all activities of the organisation. These activities may be arranged into three major functional classifications – marketing. coming to some national markets later than others. By the middle of the twentieth century. to satisfy these needs • Achieving long-term profits through satisfaction of consumer needs Although life insurers were late in adopting this concept. Of these three areas. investments and administration. a customer-oriented philosophy began to emerge in business generally.

Once the insurer’s marketing plan is initially documented. price. The elements of a marketing program include an analysis of the markets available to or desired by the insurer. A distribution channel is the means by which products or services are provided to customers and encompasses the entirely of a company’s marketing network. and database management techniques can materially increase a marketing program’s effectiveness. distribution and promotion strategies that a company will follow to reach its target markets and to satisfy their needs. Distribution channels are also called distribution systems or marketing channels. A marketing plan must also include the design of a sales compensation system. identification of the nature of the perceived competition. and the special administrative systems and support needed by a particular market segments or products. ad the capabilities and core competencies of the 27 .27 DEVELOPING AND MAINTAINING A MARKETING PROGRAM We define marketing as the provision of products well suited to customers’ needs through effective. data mining. a basic pricing strategy. The development and maintenance of a realistic marketing program is the primary responsibility of senior marketing executives. appropriate distribution channels. A marketing program is a tactical plan that deals primarily with the product. management evaluates its growth and profits goals. and determination of the distribution techniques to be used. The marketing plan is then utilized to develop a product portfolio and project future production by product and amount. Use of sophisticated data warehousing.

geographic concentration. however. and a product portfolio established. and so on. specific goals set down. The results of this planning and development activity will be a quantification of what the company wants to achieve. This assessment leads to broad or narrow product portfolios. The marketing plan should reflect a realistic assessment of the company’s strengths and weaknesses in relation to factors considered critical to the plan’s success. the distribution channel comes first. and the tentative decisions regarding distributions significantly influence the process of developing a product portfolio.28 home office and marketing operations. that is. 28 . a close coordination with the investment function is essential. different distribution channel structures. the stage is set for selecting and utilizing one or more distribution channels to deliver products to the markets selected. the search for a competitive advantage. It should be noted that. reflecting a balance between long-term and short-term goals. Typically. with the competitive emphasis on rates of return for interest-sensitive products and for separate-account business such as variable life and annuities. With priorities established.

29 CHAPTER NO: 4 29 .

for most insurers. there are practical limits to the implementation of this philosophy. life insurers have evolved an almost bewildering array of distribution systems. As will be seen. To simplify this complexity. we structure our discussion around three broad categories of distribution channels: • Marketing intermediaries • Financial institutions • Direct response 30 . In this section. we present the major distribution channels found in life insurance.30 DISTRIBUTION CHANNELS CH. the great variety of distribution systems found in life insurance suggests that insurers continue to strive toward this elusive goal. Even so.4 DISTRIBUTION CHANNELS An insurer that considers itself to be truly market driven (in contrast to product or distribution driven) would use distribution channels that reflected the ways that its customers wanted to interact with the insurer. Of course.

Most life insurance worldwide is sold through new individual life insurance sales and for majority shares of other life and health insurance sales. or telephone. They include commercial banks. and other financial firms that sell insurer’s products.31 Marketing intermediaries are individuals who sell an insurer’s products. life insurance sales. credit unions. No face-to-face contact from the insurer. With the direct response distribution channel. This distribution channel accounts for about 2 percent of total U. such as through the mail. typically on a face-to-face basis with customers and usually for a commission on each sale. with other financial institutions having small shares. and other insurers. Banks are important distribution channels in some of the overall U. investment banks.S. although their share of variable products. thrifts. Thus. These three categories of distribution systems are distinguishable based on the life insurer’s relationship with the customer. Financial institutions are deposit-taking. life insurance market is less than 5 percent. television. Agents and brokers are marketing intermediaries. the customer deals directly with the insurer without benefit of any intervening intermediary or firm.S. mutual fund organizations. investment. with marketing intermediaries. the 31 .

as we discuss throughout this section. the distinctions between the various channels are not always crisp because marketing evolution has blurred formerly distinct demarcation lines. DISTRIBUTION THROUGH MARKETING INTERMEDIARIES We can divide marketing intermediaries into two broad classes. depending on whether the insurer is attempting to build its own agency sales force. Under this strategy. they rely on established agents for their sales. Such insurers are heavily involved in recruiting individuals new to the insurance business. With financial institutions. Our orientation is the United States. The following discussion classifies all life insurance distribution into one of these three categories. the insurer seeks experienced 32 . many insurers have an agency-building distribution strategy under which they recruit. house. of course. Other insurers follow a non-agency-building distribution strategy under which they do not seek to build their own agency sales force. Instead. Insurers often use many distribution channels. Thus. train. much overlap exists between the systems. finance. the relationship is direct.32 customer’s relationship with the insurer is direct but often closely identified with the insurer. Additionally. however. As a practical matter. the relationship also is indirect but usually with the customer identifying more with the institution than with insurer. and supervise their agents. With direct response.

Agency-Building Distribution Most students of the industry agree that life insurers utilizing the agency-building distribution strategy have been responsible for the widespread acceptance of life insurance. Four types of agency-building distribution channels exist: 1. relying on this agency-building distinction. Most of these agents are 33 . The reason for multiple distribution strategies is to serve several markets effectively. an insurer may use several distribution channels. multiple-line exclusive 3. We cover each next. and providing office facilities. financing. Figure 24-2 shows the various divisions of agency-building and non-agencybuilding distribution channels. salaried Each of these channels relies on agents who are commissioned or salaried sale people who hold full-time contracts to represent the insurer. home service 4. These insurers have provided the initial training essential to successful intermediary marketing. career agency 2. A market-driven strategy calls for an optimal market-product-distribution linkage. Of course.33 salespersons and avoids expenses associated with training.

Career Agency: Career agents are commissioned life insurance agents who primarily sell one company’s products. They are probably the most commonly known life insurance agents. meaning that they represent a single insurer only. Assistants are responsible for specific functions or for units of agents. life insurers using the career agency distribution channel include Metropolitan to career agency distribution are found: branch offices and general agencies. or they may provide overall assistance to the head of the agency.34 exclusive agents (also called tied or captive agents). Under the branch office system. The office manager is particularly important in the branch office system. supervisors. Agency managers may be assisted by an office manager. applications for policy loans. each headed by an agency manager who is an employee of the insurer. specialist unit managers. also called the managerial system. assist in filing proofs of loss. or district managers. answer all communications from 34 . and payment of cash values on surrenders. We discuss each next. the insurer establishes agencies in various locations. Well known U. The largest life insurers worldwide tend to use the branch office system. He or she is expected to keep all office records. The agency manager is charged with the responsibility of recruiting new agents within a given territory and training and otherwise helping and encouraging them in their work as solicitors. look after all correspondence in connection with applications and policies.S. The branch office system. assistant managers.

managing his or her agency and meeting all operational expenses from override commissions. The GA is responsible for agent recruitment. The company-appointed general agent (GA) typically represents the company within a designated territory over which he or she is given control. Routine administrative matters today usually are handled by a separate 35 . the GA operated more or less as an independent entrepreneur. in its pure form. Agents contract with the insurer through the GA and are paid a commission by the insurer for their sales. as with the agency manager. The GA also receives a commission on agent’s sales.35 policy owners not sufficiently important to be referred to the home office. is the older of the two career agency systems and aims to accomplish through agency managers. Agency-building systems (either general agency or managerial) also are used by fraternal organizations that offer life and health insurance to their members. The general agency system. The general agent’s contract requires that the insurer pay a stipulated commission on the first year’s premiums plus a renewal on subsequent premiums. which. In the past. is only theoretical today in the United States. The general agency system. and supervise the clerical staff. The agents of these religious and social groups may sell policies only to members of the fraternal society. In return. the general agent agrees to build the company’s business in that territory. called an override or overriding commission. and supervision. training.

36 group of persons located in the general agent’s office or in separate offices throughout the country and are directly responsible to the home office. companies now make substantial expense reimbursements allowances. This is done to discourage the closing of the office. It is also now common for the insurer to pay the office rent directly. also known as the combination or debit distribution system. which relies on exclusive agents who are assigned a geographic 36 . well – known insurers using the multiple-line exclusive distribution channel include State Farm and Alistate. Although other agency-building systems are stagnant or declining. Home Service. which would leave the insurer without representation. One reason for this growth is the economies realized through multiproduct distribution and through higher customer loyalty. A third agency-building life insurance distribution channel is the home service distribution system. multipleline riod from 1981 to 1996. MLEAs often are not all housed in the same office. The second major agency-building life insurance distribution channel is the multiple-line exclusive agents (MLEAs) are commissioned exclusive agents who sell the life and health and property and liability insurance products of a single group of affiliated insurers. Rather each agent has his or her own office with clerical support that services clients and supplements the agent’s personal sales efforts. Multiple-Line Exclusive Agency. In the United States. In addition. As contrasted with other agency-building distribution systems.

as less of the business requires collection of premiums by the agent.` Group insurance actually involves three very distinct products lines – retirement. Today almost all of the new sales consist of ordinary insurance with premiums collected on a monthly basis or billed through the mail. The target market for home service distribution is lower-income consumers. The fourth agency-building life insurance distribution channel is use of salaried insurer employees. For example. Many insurers have since abandoned this distribution system as being too costly. Massachusetts. savings bank life insurance is sold in the states of Connecticut. The home service distribution system at one time was the largest and was used by the largest life insurers. including Prudential and Metropolitan. however.37 territory. although the trend is for the savings banks to use more conventional approaches. The number of home service agents has fallen by 76 percent during the past 15 years. and New York through salaried bank employee-agents. At one time. The insurer typically markets through 37 . The most important salaried distribution. Originally. a small share is sold by agents who are paid mostly or exclusively by salary. much of the business consisted of industrial insurance with weekly collections of premium. occurs in group insurance. but the collection aspect has been deemphasized by many companies. The assigned territory is becoming a sales region. and group health products. group life. Even though most life insurance is sold by commissioned salespeople. agents collected renewal premiums on business in force in their territory (called their debit). Salaried.

third party administrators.38 group sales representatives who are salaried employees of the insurer charged with promoting and possibly servicing the insurer’s group business. Effective field management is essential to the success of agency-building distribution systems. credit card solicitations. Sales to other employeremployee cases and association groups tend to be made through specialized brokers or. Most of the smaller-sized cases are sold through career agents. An agency head’s responsibility is to 38 . in some instances. independent benefit consultants. group sales representatives call on their own career agents. Association group. and worksite marketing are examples. Group sales representatives usually are also paid incentive bonuses based on achievement of production goals. Agency Management. Many of the recent developments in distribution systems reflect a continuing effort to find more effective ways to deliver insurance products and service larger numbers of customers. and agents of other companies. frequently involving an agent. either the insurer’s own career agents or agents of other companies. written directly with the employer. Thus. The group representative’s responsibilities may be to sell group products directly to customers or to promote the insurer’s group sales through its own or other insurer’s marketing intermediaries to whom commissions are paid. independent property and liability agents. various forms of mass marketing have developed. In addition to group insurance as such. national brokerage organizations.


manage resources to achieve the common objectives of the agency and the company. In terms of activities, these duties consist of: • manpower development, including product and sales skills training • supervision of agents • motivation of agents and staff • business management activities (e.g. office duties, public relations activities, interpreting insurer policy, and expense management) • personal production Personal production by the agency head has a low priority in agencybuilding companies. Although it is usually permitted, the need for growth and the design of the agency manager’s or GA’s compensation formula both mitigate against significant activity of this type. Agent recruiting usually is the agency manager’s or GA’s most important responsibility. The turnover rate of agents in many markets is 25 percent per year, so the agency head has to replace a fourth of the agency’s sales force each year just to maintain the agency’s size. Recruiting is not one activity but a process, the steps of which include 1. finding sources of prospective agents 2. determining acceptable qualifications 3. approaching prospective agents 4. using selection tools



5. interviewing candidates 6. contracting with qualified individuals The manager may attempt to locate several (three to five) prospective agents at one time. As there is always fallout in the selection process, the group techniques usually allow some recruits to be added to the agency from each recruiting effort. Recruiting a group rather than one agent at a time also is a more efficient use of a field manager’s time. Considerable effort has been made in raising the standards for new agents and in increasing their productivity. One strategy that has proven helpful is precontract or preappointment training. It refers to a period of time before the prospective agent is this period is a full-time contract offered. Most insurers have become increasingly careful in their selection of new agents. They also devote much attention to the training of their agents in the nature and users of life and health insurance and sales methods. In view of the broad range of interest-sensitive and traditional products on the market today, the agency head has a significant challenge in adequately training an agency force. Agency managers and Gas do, however, have access to a wealth of training materials. In addition to those made available by the company, a wide array of material is must maintain an appropriate and effective continuing education program for all agents, those recently established as well as experienced professionals. One-half the U.S. states require that agent pursue some form of continuing education to maintain their licenses.



The level of supervision provided for agents is a function of the agent’s experience and length of service. Close supervision is particularly helpful to a new agent until he or she develops good work habits and feels comfortable in the working relationship with the supervisor. Experience has shown that agents react positively to supervision in which they will be with their agents. The relationship that develops between an agent and the agency head is an important factor in the success or failure of a new agent. In the sales management process, an agency head provides the stimulus to make an agent feel motivated to take action that results in sales and related goals. Agency heads demonstrate personal interest in each agent, use formal in-depth reviews and group meetings, encourage attendance at industry organization meetings, provide special office privileges, and conduct sales contests, all to create an environment in which agents will feel motivated. Each of these motivational activities is intended to demonstrate to agent to higher production. In addition to these basic activities, the agency head also must carry out many normal business management activities including expense management, managing the office, public relations activities, and interpreting company policy. As the agency grows, the functions for which his or her personal involvement is not essential. Otherwise, he or she will be unable to give adequate personal attention to matters that are critical to the success of the agency.


Thus. as noted earlier. or technical support persons in specialized areas. some agencies have added functional specialists. To provide this support. Four common non-agency-building distribution channels are: • brokerage • personal-producing general agents • independent property and casually agents • producer groups 42 . Non-Agency-Building Distribution The other major classification of life insurance marketing channels relying on marketing intermediaries is called non-agency-building distribution. the agency head must provide increasingly management support and expertise as the agency grows. an agency might have a brokerage specialists in various product lines.42 As the field office administers a broad range of financial products.

Insurers that market through nonexclusive agent strategies provide products or services to agents who are already engaged in life and health insurance selling. In other countries. the key to this strategy is to gain access to the producer. jurisdiction. The term broker. good compensation. the term broker in life insurance refers to a full-time intermediary who 43 . a life broker actually is an agent for the insurer but subject to less supervision and control than that found with career agents. a broker usually represents the client rather than the insurer. The producer’s loyalty is retained by quality service.S. refers to a commissioned salesperson who works independently of the insurer with whom the brokerage business is placed & who has no minimum production requirements with that insurer.S. concept of independent financial advisors (IFAs) is akin to U. lexicon of life insurance distribution. with some countries having no parallel to the non-agency-building system. they sell for more than one insurer. Both of these individuals are authorized to appoint brokers on behalf of the insurer. terminology may differ. Direct contracting in response to trade press advertising also is used. In property and casualty insurance. Thus.S. often called a brokerage representative or supervisor. the U.K. Brokerage: Brokerage insurers gain access to agents through a company employee. as used in the U. who acts as the insurer’s representative. or through an independent brokerage general agent who performs the same function. In most U. Not all of these channels exist in every country. and sound personal relationships.43 Agents selling through these channels are always nonexclusive. for example. brokerage. In markets where they exist.

The term broker can refer to at least three different distribution channels. As used as a verb in this way. At one time. if not all.44 offers policies from several. Third. the term broker refers to a salesperson whose primary products is not insurance but who sells insurance as an ancillary service to his or her customers. These brokers usually are former career agents who have become independent producers. or (3) the customer wants quotes from more than one insurer. Often they are among the most knowledgeable marketing intermediaries. First. This category can include real estate agents. (2) their primary insurer has declined or offered highly rated coverage. Second. automobile dealers. accountants. lawyers. most career agents broker business.S. it refers to the practice of full-time agents of one company occasionally selling the policies of other insurers. The U. situation can be still more complex. not the insurer. meeting their own office and other expenses. life insurers in the market and who usually is the legal representative of the applicant. the term broker refers to independent life insurance producers who have primary affiliation with no particular insurer and who specialize in particular products or (typically) high-end target markets. Career agents may sell for other insurers because (1) their primary insurer does not offer the policy or coverage needed by the customer. Today the range of products for which companies using the 44 . and financial consultants. insurers that utilized a brokerage strategy and sold through independent life agents and representatives of other companies specialized in term and sub-standard business.

and (3) direct contracting with individuals identified through trade press advertising. although most do not.45 brokerage strategy compete has broadened to include almost all lines of insurance. Companies seeking economic efficiencies through spreading their fixed cost have increasingly looked at supplementing their traditional channels of distribution with additional distribution outlets. (2) independent contractorsmanaging general agents. Many insurers that traditionally have been career agent “shops” exclusively are now aggressively pushing their brokerage business. experienced life agents are hired under contracts that provide both direct and override commissions plus some type of expense allowance. commissioned agents who typically work alone and focus on personal production. For this. Innovative products. Although personal-producing general 45 . PPGA insurers gain access to producers through an organizational structure that is similar to the one used by brokerage insurers: (1) company-employed regional directors of PPGAs. the PPGAs supply their own office facilities and receive technical assistance in the form of computer services and advanced sales support. Personal-Producing General Agents: A second type of marketing intermediary falling within the non-agency-building category is the personal-producing general agent. The PPGA strategy has two variations. Some PPGAs appoint subagents. In the more traditional regional director approach. Both regional directors and managing general agents are authorized to appoint PPGAs. pricing commission and service are the competitive tools involved. Personal-producing general agents (PPGAs) are independent.

companies using the traditional approach try to be the PPGA’s primary carrier. Often the property and casualty insurers that the agent represents will have life insurer affiliates. Independent Property and Casualty Agents: A third type of marketing intermediary using the non-agency-building approach is the independent property and casualty agent. Both strategies can operate simultaneously in the same insurer. Technically. 46 .46 agents usually have contracts with more than one insurer. a clear difference at the producer level between the brokerage and the PPGA strategy is in the commission schedule. Independent property and casualty agents are commissioned agents whose primary business is the sale of property and casualty insurance for several insurers. The managing general agent approach typically specializes in single products. independent property and casualty agents who sell life insurance unusually do so either as brokers or PPGAs. Additionally. and is essentially franchised to appoint PPGAs for the company in a territory. However. because of their importance and uniqueness. unaffiliated life insurers often seek independent property and casualty agents as salespeople. Another difference is that brokerage business from a single agent often is sporadic. Although there are philosophy differences in approach. The former resembles a career agent contract and the latter has elements of general agent contract. whereas PPGA business is intended to be continuing. such as universal life or disability income. along with others. we present them as a separate distribution channel. and as contrast with the MLEA. sell life insurance for them.

Under its contracts with insurers. and case management (after submission) to the producer. Producer groups are distinguished by three characteristics: 1. 3. 47 . it receives maximum compensation with virtually no market support services. having negotiated special commission rates with several insurance companies. presubmission underwriting. Specialized software and other strong computer and research support are hallmarks of producer groups. Minimum production requirements apply to members. Membership is composed of independent life agents who specialize in high-end markets. often affording their members a competitive advantage. 2. Most producer groups have created their own reinsurance companies-an additional source of profitability.47 Producer Groups: A fourth variation of the non-agency-building distribution strategy has been the development of producer groups. Producer group provide the necessary sales and marketing support systems to the member agents. part of the negotiation with direct-writing insurers focuses on terms and conditions under which the insurer cedes business to its reinsurance company. The marketing organization typically provides its own continuing education program. administration. It also provides market-specific or salesconcept support. The group is self-supporting. illustration services. With such producer groups. which are independent marketing organizations that specialize in the high-end market.

48 The M Financial Group is the oldest and largest producer group. the Hemisphere Group. 48 . Others include The Partner Group. and Forth Financial Resources. First Financial Resources.


which are by far the most important such institution in terms of assets. we mean a financial intermediary engaged in bringing together investors and issuers of securities. More than 4.50 The U. By investment banks. deposits are engaged in marketing insurance products. principally because of legal restrictions.S. financial services business has traditionally been segmented. with insurance and banking experiencing forces in market economies as the global economy has evolved. and any other specialized deposit-taking arrangement. Today commercial and investment banks and other financial institutions have become important marketing channels for annuities and some life and health insurance products in the United States.S.S. credit unions. we mean any financial intermediary engaged in accepting deposits from and making loans to the pubic. This category includes commercial banks. Today regulatory barriers are being dismantled. This category includes marketing 50 . commercial financial institutions holding 70 percent of all U. We classify life insurance distribution via financial institutions into three categories as follows: • Deposit-taking institutions • Investment banks • Other financial institutions By deposit-taking institutions. but it also includes thrifts.000 U.

Many banks rely on various direct-response techniques. branch managers and customer service representatives). banks market annuities and the proportion are growing.S. U. Deposit-Taking Institutions U. According to the Association of Banks-in-Insurance. and disability income insurance. Annuities and life and health products are distributed primarily by agents employed by commercial banks or subsidiaries and by bank staff (e. New individual annuity sales by banks are estimated to be at least 20 percent of totals sales. Third-party marketers-sales representatives’ 51 . deposit-taking institutions have been active in marketing annuity products since the mid-1980s.S. deposit-taking institutions efforts to sell life and health insurance policies have not been as successful as with annuities. More than one-half of the largest U. and insurers. with the changing regulatory environment they will strengthen marketing efforts related to term life insurance.g. long-term care insurance. producing significant growth in the last decade. pension funds. and can be sold by commercial banks stimulated their marketing efforts. often in addition to agents. The Supreme Court’s unanimous decision in 1995 that annuities are financial products.S. cashvalue life insurance. Other financial institutions include mutual fund organizations.51 intermediaries whose primary business is the sales of securities.. not insurance products. 86 percent of those who purchased annuities through financial institutions and 91 percent f those who live in rural areas were first-time buyers.

life. and health insurance product sales. Investment Banks Investment banks and their retail marketing divisions are important distribution channels for variables and fixed annuities as well as some life and health insurance. Other Financial Institutions We are witnessing the evolution of mutual fund organizations as a life insurance distribution channel. Already. This classification also includes insurers. several no-load mutual fund organizations offer life and health insurance with. Stock-brokers often are classified and treated as insurance brokers because their primary sales activity is other than insurance and they may often sell for multiple companies. One stockbroker firm already is the second largest writer of single-premium variable life insurance in the United States. An increasing number of companies have discovered that it is not economical for them to manufacture all the 52 . It is estimated that they account for approximately one-third of new variable annuity sales and 5 percent of variable life sales.52 employed by an outside marketing company-also are involved in bank annuity. Their Web sites invite inquiries regarding insurance purchases. one such organization already being licensed to sell life insurance in almost all states. and we can expect sales transaction via the Internet soon. for example.

53 . one half of the U. Disability income insurance is the most commonly imported product. as sectoral barriers continue to fail. They have sought to import certain products developed by other companies. These arrangements are mostly to fill out a product line.S. The result has been increased interest and activity in manufacturer-distributor relationships. Over time. more financial institutions will undoubtedly develop or acquire life insurance companies and operate them as subsidiaries (and vice versa). Financial institutions are gaining market share as more and more institutions develop relationships with life insurance companies and strengthen their own distribution system. In one study. or that they cannot be competitive in all areas.53 products that their agents believe they need. as sales account for only 5 percent of new premiums. life insurance companies surveyed stated that they distribute one or more products manufactured by other companies. Such manufacturerdistribution relationships are less common in other markets worldwide.


an upsurge in telemarketing of life insurance products in the United Kingdom has peaked the interest in the United States and elsewhere. the Internet. of course. required relatively small premium outlays. direct response is the least important as measured by premiums written. but. The principal differences to the consumer are usually cost and service. the potential exists for greater personal service if an agent is involved in the transaction. The products were simple. They were easy to understand. and so on. At one time. life insurance sold by direct-response marketing was primarily supplement coverage (i. Also.. 55 . Direct marketing offers the consumer some of the same coverages available from marketing intermediaries. Direct-response marketing can take many forms. broadcast media.e. but in a broad sense it means that the sales is made from the company direct to the customer without involving a face-to-face meeting between buyer responds directly to the company because of solicitation via mail. it helped to fill the gaps in basic coverages). The same level of coverage sold through an agent may sometimes cost more than when sold through an efficient direct-response marketing program. There is growing interest in direct-response marketing of life and health insurance because some companies that specialize in direct-response sales have been able to sell as many new policies as the largest career agent companies with thousands of agents.55 Of the three major categories of distribution channels in life insurance.

Direct mail is the oldest method of direct-response marketing. More recently. the client frequently deals with the insurer on a direct basis. Premiums are paid by mail or automatic bank draft and at times claims are filed and benefit checks are delivered by mail. A sponsored arrangement – under which the insurer arranges with 56 . annuities. cash-value life insurance. At least one successful insurer sells automobile insurance. it can offer a broader range of relatively complex products. Direct-response marketing can be accomplished through several media. In this sense. This approach favors the sale of a large number of small policies. but is a concept that is common to all elements of the insurance business. and other products through directresponse marketing methods. It utilizes professional. Regardless of how the sale has been completed – by an agent or directresponse marketing – from that point on. salaried salesperson in a telemarketing arrangement. issuance. and administration. demographic. Premium notices are sent by mail. Where direct-response marketing is targeted to a select group of consumers. and other characteristics of individuals on the lists. Today lists can be created that are specific as to the economic.56 and were serviced through the economies of computerized solicitation. and the insurer has an affinity agreement with the consumer. the direct-response concept – whereby the insurer deals directly with the consumer – is not restricted to a few direct-response specialty companies. estate planning. It depends on the availability of mailing lists that may be obtained from many sources. and annuities to its customer base and does it effectively. companies have begun to offer comprehensive life and health insurance protection.

The importance of this medium is evidenced by the proliferation of toll-free numbers. broadcast surpasses all other media. Much discussion centers on the concept of shopping for financial products and services using electronic media. is popular for two reasons. The prevalent direct – response media in use today (direct mail. First. the size of the audience is staggering in its potential. Second. but justification for this higher cost is found in relatively high response rates. utilizing well-known personalities as sponsors. and broadcast media) have begun to be combined with telemarketing – the use of the telephone to solicit life and health insurance sales. Telemarketing laso is personal once a consumer makes the initial telephone call. Opponent’s claims that the material often is misleading and the products are high in price. Newspapers. is mailed solicitations. the use of such “stars” to sell insurance products has come under attack. Telemarketing is a high unit-cost medium. and other print media reach large numbers of consumers but only on a broad basis.57 an association or similar group to offer products to its membership. magazines. However. or advertisements are placed in the association’s magazine or newsletter. In terms of total numbers reached. direct-response specialists have learned how to reach specialized groups of viewers efficiently. The direct – response marketing use of television. Personalization and mass marketing are combined in telemarketing. Commercial on-line networks and the Internet are now utilized by all forms of marketing intermediaries as well as by financial institutions 57 . thus improving marketing effectiveness. print media.

Electronic sales of any but simple life and health insurance products should not be expected to make significant competitive inroads against other means of distribution in the near future. The process of adopting automated teller machines required more than a decade after their appearance. Making and accepting payments cause concerns from the standpoint of security – particularly on the Internet.58 provide on-line premium quotations and accept applications for coverage. Life Insurance Distribution Worldwide In Canada. about 60 percent of life insurance premium income is generated by full-time career agents. As in other industries. although usage is not yet widespread. Most have created sites on the Internet’s World Wide Web that perform some or all of these functions. Meanwhile. networks will play a significant role as sources for communication and information. Brokers account for approximately one-third of premium income. Most knowledgeable observers believe that network users will be content to make payments and receive delivery of products and file claims electronically. the time lag between introduction and widespread adoption of innovations in insurance tends to be long. and multiple-line agents 3 58 . The effects will be felt in the other distribution channels through customers being better informed. independent marketing organizations for 4 percent. Electronic banking and securities transactions already are a reality with lost large firms.

There also has been a significant increase in the use of the direct-response channel. In these markets. particularly in personal lines. disclosure regulations. IFAs (insurance brokers. Most insurers have switched to IFAs. In France. Appointed and company representatives sell only their company’s products. market shares have changed dramatically with the development of bancassurance. Brokers have traditionally been stronger than in other European countries. building societies. brokers and independents are taking market share from career agents. with the number of career agents having fallen by more than 50 percent. Distribution channels in the United Kingdom have been in a state of flux since the late 1980s because of regulatory changes. As a result of fines. but they too are losing market share to banks and building societies. Today. banks. and adverse publicity. the traditional tied agent sales force has been decimated. lawyers. the post office.59 percent. or the Treasury compared with19 percent in 1983. As is true in almost all developed markets. and accountants) are required by law to survey the market to find the best product to meet the needs of their clients. it is difficult for a new entrant to again a significant market presence because there are relatively few independent distribution networks. The Financial Services Act of 1986 resulted in a clear distinction between independent financial advisors (IFAs) and appointed and company representatives. Swiss and German life insurers rely primarily on exclusive agents for distribution. more than 50 percent of life insurance policies were sold at banks. This has led to acceleration in the number of 59 .

several emerging markets have experienced strong growth in career agents. Although the 1990s witnessed a decline in the hiring of career agents in several developed market economy countries. Nevertheless.. Because agent commissions traditionally were set by the Ministry of Finance (MOF). marketing organizations.60 megamergers and acquisition within Europe among insurance companies as well as between insurance companies and banks. 60 . as Japan. In the Pacific Rim countries. however. in Taiwan the three largest domestic companies maintain most of their 80 percent market share). there is widespread use of exclusive agents Both Taiwan and Korea recently have opened their markets to foreign insurers. brokers. In recent years. Distribution in Japan remains dominated by the industry’s large network of female exclusively agents. interdependent agents. Several companies recruit full-time university graduates and have been modestly successful. the largest domestic insurers still dominate the market (e. career agents have been the traditional distribution channel. In most Latin American countries.g. This is particularly true for China and Indonesia and many Latin American and Eastern European Countries. although this changing. Distribution practices vary widely. agent almost never left one company for another. and international brokers have developed.

61 61 .


which heightens price sensitivity. Compensation for consumers’ savings is also intensifying. Companies are trying either to significantly reduce the cost of their distribution system or are looking for other lower-cost methods of distribution. Changing demographics are creating a greater demand for asset accumulation products. The production challenge Surveys of life insurance executives consistently rank the need to improve distribution and to reduce distribution costs as among the greatest challenges they face. Marketplace dynamics are shaping the current distribution difficulties. There are significant differences in marketing costs for different distribution channels. Distribution systems in developed countries have been influenced significantly by the cost pressures that continue to drive much of the merger and acquisition activity. primarily from outside the mainstream of the life industry. All of these factors have contributed to greater cost transparency and a more informed and demanding consumer. The financial services evolution has masked the remarkable changes taking place in the provision of insurance services themselves. This is unsurprising because distribution-related costs may 63 . Consumers want more information. Additionally. insurance executives report that distribution costs are too high and productivity to low.63 The marketing since continues to change at an unprecedented rate.

the typical agent in the United States averages less than one policy sale per week. Executives also complain about agent recruiting and retention. agent.000. The typical insurer must hire five to seven agents to yield one productive agent four years later. rises enormously. retention. Moreover. Although improving agent retention is more difficult than improving persistency and productivity. The traditional heaped first-year commission arrangement has been the norm for decades. The size of a company’s investment in new agents and the period of time to recover it depend on several factors such as agent productivity. capital spent in this area has the potential for much higher returns. persistency. and most importantly. An even greater distribution issue relates to the appropriate alignment of customer. Additionally. even those who survive to their fourth year often leave as their value to other insurers. This low retention rate puts enormous cost pressure on the system. Public trust of the life insurance business and its agents is low. and insurer interests. especially those relying on a non-agency-building distribution strategy. Its rationale stems from the belief that life insurance has to be sold-it is not bought (voluntarily) by consumers – and the concomitant belief that a high initial commission is essential if agents are to have sufficient motivation to sell. inflation. Insurer investment in a new career agent can easily exceed $100.64 account for two-thirds to three-fourths of an insurer’s total expense. 64 .

it is not self-evident that the only way to motivate agents to sell life insurance is through the heaped commission approach.65 The belief that consumers will not purchase life insurance on their own volition or. Ill-advised replacement and churning are the unfortunate but not expected consequences. Moreover. he or she need not necessarily be compensated through a heaped commission structure. Possible Compensation Solution Many life companies have turned to compensation-based solutions rather than making more fundamental and. Moreover. It is probably true that the great majority of consumers need not be a commissioned agent. more difficult changes in their distribution systems. This emphasis on new sales can encourage a short-run perspective – one that many executives believe is compatible with building long-term customer relations (and trust) for the insurer and the agent. except through a commissioned agent. and if the person is an agent. Some insurers will use alternative approaches to complement existing distribution channels. therefore. either to generate leads or to 65 . it is not self-evident that the only way to motivate agents to sell life insurance. as a variation of this theme. Many others are exploring the use of alternative distribution channels consistent with a market-driven marketing philosophy. is today open to question.

still aim at reducing the more visible agent commission. and field benefits. thus. marketing support. Agent commissions are perhaps the most visible form of distribution costs and. Ultimately. however. receive the most attention.66 provide product to market segments not reached by agents. Current efforts in compensation. total product margins are driven by the perceived by the agent. spurred on by financial institution and direct-response distribution successes. Increased sophistication of both consumers and insurers should produce a closer alignment of agent compensation with the value of services delivered. Insurers and distributors of life insurance are exploring the following nontraditional approaches to agent and manager compensation: • Level commissions • Assets under management • Salary plus bonus • Partnering These alternatives relate mostly to agency-building distribution systems because companies selling through non-agency-building distribution channels have less 66 . Yet other distribution costs often exceed the cost of agent commissions. Other insurers may take more drastic actions. These include but are not limited to field manager income and agency expenses.

which would increase distribution costs. Transition from the traditional to a level commission approach is not easy. Improved policy persistency could enhance value. This may be offset by lower sales (as agents have less immediate incentive). However. so long as the total value of the commission paid is the same as under the traditional scale. do not offer huge financial benefits. other channels will inevitably be affected. and consumer’s interest in it growing worldwide. allowing for a decrease in omissions that could be shared between the company and the consumer. if the discounted value of the levelized commission scale is the same as the value of the heaped scale. Levelized commissions. the change will release little value. Level Commissions Many insurers are considering adoption of levelized commissions.67 leverage to affect agent compensation. which can minimize the loss incurred on business not in force for a long enough period to recover initial expenses. in themselves. Whether levelized commission plans actually lead to increased value to the company or to the consumer will depend on the way they are implemented. Level commissions also can achieve a better alignment of the insurer’s agent’s. Assets Under Management 67 . Moreover.

however. A growing number of annuity contracts offer an asset-based commission option to the retail distributor. It may also be more suitable for a multiproduct distribution. Even though such plans probably 68 . Under an AUM plan. agents and managers are paid to align their goals with those of the company by customer approach than is implicit in traditional compensation approaches. Their rationale is that the most profitable business is that wherein the underlying assets remain with the insurer. which have more of a transactional orientation. Lately. individuals responsible for the sale of life insurance receive a salary with an incentive bonus tied to performance. Salary Plus Bonus Under salary plus bonus plans. agents have come to see that asset-based payments can be quite attractive if the block of business grows with sustained high investment returns. an AUM approach offers greater potential for veteran agents.68 Traditional life and annuity commissions are based on premium. aside from the financial institution distribution channel. However. most distributors seem to prefer up-front commissions. Several commercial banks consider this approach desirable. Although similar to levelized commissions. Future pay plans could combine levelized commissions with an AUM design. Some insurers are now considering an asset under management (AUM) approach for certain types of life insurance products.

as specialty roles within a selling and planning organization.g. This approach lends itself to the division of labor. It should also reflect both company goals and customer needs. Although compensation still tends to be variable.69 more applicable to home office direct sales personnel than to field agents. it should be consistent with the company strategy. more of the revenue is allocated for these purposes. bank annuity marketing to customers with maturing CDs). the overall payout is reduced to reflect the value created through lead generation. senior members of the group receive percentages of cases or percentages of profits. more organizations are considering this approach. That is. cross selling acquisition and retention. 69 . net or gross profit. supportive of its values. and economically viable.. Partnering Some agencies and producer groups have adopted the concept of partnering. Incentive bonuses can be based on multiple factors. Choosing the Right Distribution Model An effective life company distribution model should be customer focused. Thus. In situations in which the organization generates leads (e. including gross revenue. these plans recognize that much of the revenue generated by a marketing organization (such as a financial services boutique) is attributable to the marketing effort and infrastructure support of the organization as a whole. In such an arrangement.

70 . During this same period. many life insurance products are less transparent. the proportion of insured households has dropped. As consumers become better informed. However.S. The model should provide the company adequate control of sales activities to ensure they are consistent with company goals and objectives and meet compliances standards. In 1960. Most importantly. the percentage of households with group life insurance grew dramatically. households owing some form of life insurance has grown. their purchasing decisions regarding financial products and services will be increasingly influenced by the level and pattern of sales compensation priced into products loads. households owned agent-sold individual life insurance. The Life Insurance Market of the Future One fact with which insurers must deal is a decline in the households owing individual life insurance in many developed markets. The marketplace eventually determines what amounts will be paid for products and services.70 while satisfying customer demands for value. less than one-half do.S. including the United States. It should also include appropriate incentives to produce desired behaviors. Although the number of U. it should be cost-effective. This overall decline in the percentage of insured is entirely due to a dramatic drop in ownership of individual life insurance. today. which somewhat disguises the loads for distribution costs. almost three in four U.

There is a clear trend toward increasing growth in spending to guard against the risk associated with poor health and. however. Although concerns for retirement security. public continues to believe that life insurance is the most appropriate vehicle for the protection of the family in the event of the breadwinner’s death. Life insurance. Life insurers are increasingly being called on to support an aging customer. Increasing pressure for financial security can be expected if needs are to be met through private-sector spending.71 The primary mission of the life insurance industry is changing in most developed nations. has lost ground in terms of its recognition by the public as a suitable means of accumulating funds for children’s education and for retirement. outliving one’s assets in retirement in contrast to protection against premature death. the ability of governments to pay for them at current levels is questioned. Many life insurers have responded to these shifts in public perceptions and preferences by establishing broker-dealers to facilitate their marketing of investment products such as 71 . thus customer service has shifted from the insured’s’ heirs to the insureds themselves. It is clear that the public’s evolving security needs differ structurally from those of previous decades. The public sector provides more than 60 percent of the expenditure for personal economic security in the United States and even higher percentages in many other countries. health.S. The U. The focus of support and. The relatively recent practice of early payment of death benefits to those terminal diseases underlines how much the focus has shifted. and long-term care will continue to grow.

either in identity or in methodology. Second. Approximately 40 percent of all U.72 mutual funds. Third. 72 . as noted earlier. More than one-half of individual annuity premiums are from variable contracts sales. Government’s reduced inclinations to assume full responsibility for individual security have caused individuals to become more concerned about providing independently for their personal financial security. many companies have focused their efforts on the high-end markets. because of basic inefficiencies. and variable universal life products. variable annuities. variable life. the real rate of growth in market potential is expected to increase for several reasons: 1. These markets may be oversold while unmet needs exist in less upscale areas. In the context of a growing market. Growing proportions of the populations will be senior citizens. They are the most security-conscious demographic segment. 3. First.S. many new products’ profit margins are believed by many to be inadequate by historical standards. the industry is considered by many to be inefficient in its delivery of products. The retirement and health care side of the life insurance industry is expected to grow because a natural set of consumer needs remains unfulfilled. One reason is that corporations will continue to seek ways to reduce their own employee benefit cost increases. agents are licensed to sell variable products. Corporations will continue to be active in assisting employees in achieving a measure of financial security at the employee’s expense. 2. In fact. there are reasons why the providers of services could change.

and it will continue to use a range of life insurance and other financial products. insurers are likely to make more use of variable expense. Successful competitors will focus on needs and will supplement and support their distribution systems effectively. Its growth rate probably will not change materially (unless taxed away).73 As a result. and that traditional agency insurers can remain competitive only in defined niches. along with basic 73 . mid-scale market will probably grow materially for many of the reasons indicated. using the Internet. Furthermore. This means it is likely that some middletier insurers will rise to the top via growth coupled with mergers or acquisition. Current assumption and variable products should be featured. financial institutions. and other third-party intermediaries. Multiline insurers that can effectively cross-sell multiple products will have a cost advantage in this market. With respect to the upscale market – with a focus on planning and tax implications. Agents may move to greater fee based compensation as they emphasize advice and service more than the actual sale of products.relatively little change is expected to occur in terms of the nature of services demanded.S. non-agency-building distribution channels. The size of the U. This market will remain an agent-served market. The new distribution model will likely be built around the concept that life insurance is part of a broader plan integrating multiple financial products. and more efficient. more market focused. that many fringe companies will disappear. telemarketing. it is likely that the successful insurer of the future will be larger.

Annuities supported by continued favorable tax treatment should continue to grow. worksite marketing. 74 . and government programs. Direct-response marketing is expected to play a more important role in the future. but it will be in a continuing state of contraction.74 term insurance and cash value products with traditional guarantees. Their experience with cost plus and administrative services only group plans taught them that direct contact is possible and cost-effective. Large corporations can be served directly by insurers. An extension of direct corporate purchase could be the negotiation of rates and products for distribution directly to corporate purchase could be the negotiation of rates and products for distribution directly to corporate employees. retirement plans. Many have unmet needs for group insurance. Small business is served predominately by career agents. Downscale markets will probably be served by simple security products. There are an estimated 5 to 6 million firms in the United States with less than 100 employees. and many business owners have no individual business life or disability income insurance to insure business continuation in the event of death or disability. and business insurance. especially as relates to the Internet as an information and advertising source and possibly as a source of sales. perhaps financial institution marketing. It is believed that corporate markets will grow at a rate exceeded only by that of the mid-scale market. possibly multiple-line exclusive agents. Many small firms do not offer their employees any group products. The home service business will probably survive.

To address effectively the many productivity issues faced by life insurance executives. important role because of this major trend. In addition to the introduction and effective management of newer distribution channels. Without alignment between the insurer’s goals and its compensation package. Advisors and consultants could play a new. alignment will be the most important force shaping trends in compensation and distribution.75 Most of these buyers will come from themed-scale segment. it risks getting more of what it may not want. consideration must be given to both agent and field management compensation. while paying a great deal for it. 75 .

76 PRIMARY DATA & ITS ANALYSIS Q.1 Which strategy is most useful for sales promotion/marketing of product in the market? □ Direct response □ Advertising □ Bancassurance □ Other (if other please mention) TABLE: Insurance company ICICI Prudential SBI life Insurance Direct Response 65% 70% Advertising 15% 20% Bancassuranc Other e 20% 10% 0% 0% GRAPH: - 76 .

2 To what extent the agent contributes (in Percentage) to the total sales of the co.7 0.3 0.4 0.8 0.2 0.1 0 Ad ve rti sin g Di re ct Re sp on s e Ba nc as su ra nc e O th er ICICI Prudential SBI life Insurance EXPLANATION:The above table and graph tells us that approximately 65 to 70 % of products are promoted through direct response strategy. Q.5 0. 15 to 20 % through advertising and remaining 10 to 20 % are promoted through bancassurance.77 0. Only 15 – 20 % of the respondent says that advertising is most useful for sales promotion or marketing of the product.? □ 26 – 50 % □ 75 – 100 % □ 0 – 25 % □ 51 – 75 % 77 .6 0.

6 0.78 Insurance company ICICI Prudential SBI life Insurance GRAPH:- 0 – 25 % 65% 70% 26 – 50 % 15% 20% 51 – 75 % 20% 10% 75 – 100 % 0% 0% 0.3 0. 78 .5 0.4 0.2 0.1 0 0 – 25 % 26 – 50 % 51 – 75 % 75 – 100 % ICICI Prudential SBI life Insurance EXPLANATION:The above table and graph tells us that approximately 65 – 70 % of the respondent says that the agent contributes only 0 – 25 % of the total sales.7 0. 15 – 20 % says that agent contributes only 26 – 50 % and 10 – 20 % says that agents contributes only 51 – 75 % of the total sales.

79 Q.3 co.? Out of total profit how much amount is expended on marketing of product of the □ 0 – 25 % □ 51 – 75 % □ 26 – 50 % □ 76 – 100 % TABLE: Insurance company ICICI Prudential 0 – 25 % 50% 26 – 50 % 25% 51 – 75 % 20% 75 – 100 % 0% 79 .

5 0. Q.80 SBI life Insurance GRAPH: - 60% 20% 10% 0% 0.3 0.4 Can bancassurance be used as better marketing tool in future? □ No □ To some extent □ Yes □ Can’t say 80 .2 0.1 0 0 – 25 % 26 – 50 % 51 – 75 % 75 – 100 % ICICI Prudential SBI life Insurance EXPLANATION: The above table and graph tells us that 50 – 60 % of the respondent says that 0 – 25 % of total profit is expended on marketing of product.4 0.6 0. 20 – 25 % says that 25 – 50 % is expended on marketing of product and remaining 10 – 20 % says that 51 – 75 % is expended on marketing of product.


5 Through which marketing strategy we can reduce the total cost of sales promotion? □ Direct response □ Telemarketing □ Bancassurance □ Other (if other please mention) TABLE:Insurance company ICICI Prudential SBI life Insurance GRAPH: Direct Response 10% 20% Advertising 10% 0% Bancassuranc Other e 70% 80% 10% 0% 82 .82 The above table and graph tells us that 60 – 70 % of the respondent says that the bancassurance can be used as better marketing tool in the future. 10 % says that it cannot be used as better marketing tool in the future 10 – 20 % says can’t say and 10 – 20 % says to some extent. Q.

1 0 ICICI Prudential SBI life Insurance Bancassurance Other Direct Response Advertising EXPLANATION: The above table and graph tells us that approximately 70 – 80 % of the respondent says that bancassurance can be used to reduce the total cost of sales promotion. 10-20% says direct response marketing.3 0. Q. 10% says advertising and 10% says through other marketing strategies such as internet or e-mail. to sell life insurance products to illiterate people or people from rural area? □ Direct marketing □ Telemarketing □ Bancassurance □ Other (if other please mention) TABLE: Insurance company ICICI Prudential SBI Life insurance 83 .7 0.8 0.83 0.4 0.6 Which method of marketing helps the co.2 0.5 0.6 0.

84 .2 0.3 0.5 0.84 Direct response Advertising Bancassurance Other GRPAH: 0.1 0 Direct response 10% 20% 70% 0% 20% 0% 80% 0% Advertising Bancassurance Other ICICI Prudential SBI Life insurance EXPLANATION: The above table and chart tells us that the 70 – 80 % of the respondent says that bancassurance is the most useful marketing strategy to sell life insurance product to the illiterate people or people from rural area.4 0. and 20 % says advertising.8 0. 10 – 20 % says direct response marketing.6 0.7 0.

7 Which method of marketing is better with a view to provide information to customer? □ Direct marketing □ Telemarketing □ Bancassurance □ Other (if other please mention) TABLE: Insurance company ICICI Prudential SBI Life insurance Direct response 10% 20% Advertising 30% 20% Bancassurance 60% 50% Other 0% 0% 85 .85 Q.

86 GRAPH:0. SECONDARY DATA & ITS ANALYSIS 86 . 20 – 30 % says advertising is a better source of information and 10 – 20 % says in direct response marketing gives complete information to the customer.1 0 ICICI Prudential Direct response Advertising SBI Life insurance Bancassurance Other EXPLANATION: The above table and chart tells us that approximately 50 – 60 % of the respondent says that through bancassurance marketing strategy we can provide maximum information to the customer.6 0.4 0.2 0.5 0.3 0.

There are basically four consumer marketing channels such as zero level channels. This is because direct distribution is so costly and it is beyond the reach of marketers. one level channel.87 In today’s market. marketers use different distribution channels to display. two level channels and three level channels. Hence. there are two intermediaries. in a two level channel. They can sell directly to the buyers or use one. most producers do not sell their goods directly to the final consumer. two level channels is 87 . They include distributors. two or three level channels. On the other hand. The growth and development of organizations to a large extent depends upon effective and efficient distribution system due to the fact that distribution creates time value. Marketing channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. wholesalers. retailers and agents. sell or deliver the physical product or service to the buyers or users. In consumer market. A zero level channel also known as direct marketing channel consists of a manufacturer selling directly to the final customer while a one level channel contains one selling intermediary such as a retailer. Channel levels Organizations have many alternatives for reaching a market. A distribution system is a key external resource. place value and utility value and utility value to goods and services.

in some cases the agents may be trained in the creation and production of services and then franchised to sell it. which one can notice in the service sector. A three level channel contains three intermediaries. actual product is not transferable and therefore tangible representations are created and transferred. However.88 widely prevalent. This type of channel is used for marketing insurance services where a contact document exists as a physical and tangible representation of the service. LIC has developed a huge agency force of more than 10 lakhs in 88 . The major function of these agents and brokers is like any other intermediary – to bring the producer of service and the user or consumer together. There are distinct channel configurations. Channels normally describe a forward movement of products/services from source to user. In case of certain services. agents can be identified and deployed with selling as the chief function to be performed by them. For instance. For certain services. Distribution Channels in the Insurance Sector The Indian insurance industry relied heavily on the traditional distribution channel. with a large number of varying levels of professionalism and productivity until 1999. Rathmell has suggested the dominant channel configuration in the service sector where agents and brokers play the key role in the distribution of services. These agents can be compared with the agents of goods and they are classified as brokers or sales agents.

an attempt is made to assess the contribution of each channel to the overall performance of the LIC. The newly emerged channels in the insurance sector are corporate agents.89 2004-05.21%. the new business procured by the LIC through agents is as high as 98. With the entry of new players. agents have to enroll with the insurance company to be authorized to work as an agent. its new business performance from these channels is quite miniscule. The newly emerged channels in the insurance sector of new players in the Indian insurance market. Multi-channel distribution and marketing of insurance products have been the strategy of new players in the Indian insurance market. which are cost-efficient and which can offer better benefits for policyholders. For instance. Agents Insurance business both life and non-life is procured through individuals who are called as agents. referrals. This is one of the most popular ways to produce business among insurers. After obtaining the license. Individuals who want to become insurance agents have to obtain license from the controller of insurance. alternative distribution channels have been developed. Though the LIC avails the newly emerged distribution channels. brokers.79% while the business procured through the newly emerged distribution channels is quite low at 1. and direct business besides the traditional agency force. An agent is trained and 89 . in view of these facts.

Table 1: New Business (life) Underwritten through Various Intermediaries by LIC Agents Corporate agents Brokers Referrals Direct Busine Year ss Others Banks 99. Agents also play an important role in assisting the insured in completing the formalities for claims. the share of agents constitutes as high as 98. Agents help in filling the proposal form and submit it to the insurance company. agents are the lifeline of LIC. The agents are highly qualitative in view of their productivity or efficiency.048 branches of the corporation. This shows that agency force has immense potential due too the fact that many of the insurance products are highly complex and the marketing of these products require greater knowledge and understanding. of the total new business underwritten by the LIC. The corporation has a huge agency force of 10.02 - 90 .11 0.41.09 0.79% during 2004-05. These products can be better marketed through certified insurance facilitators or agents. which shows that the major strength of LIC is its agents. In short. Sometimes.90 qualified to advise on which policy is best suited for an individual.737 during 2004-05. Table is indicative of the new business underwritten by the LIC through various intermediaries including agents. These agents are dispersed throughout the country working under the 2. For instance.78 2003-04 0. They also ensure that policy documents are issued to policyholders. agents do remind policyholders from time to time about when one is supposed to pay the first premium or renewal premium.

However. The term involves distribution of insurance products through a bank’s branch network. South Korea and Philippines. Banks and insurance companies in India have already learnt from European bancassurance who have decades of experience in managing their subsidiaries.30 0. In other words. While bancassurance has become a success story in Europe. bancassurance has grown significantly in Asia due to the relaxation of rules and regulations. In view of this. Bancassurance symbolizes the convergence of banking and insurance. As per the system. Bancassurance Bancassurance has evolved as a strong distribution channel in many countries including India. For instance. it is relatively a new concept in Asia. a brief discussion is made here under about corporate agents such as banks and other organizations. In other words. banks help in fulfilling the banking and insurance needs of customers at the same time.87 0.04 Compiled from the Annual Reports of IRDA - Corporate Agents IRDA introduced the Corporate Agency System during 2002-03. banks and other organizations such as Micro Credit Organizations plus welfare organizations such as Help Age are also allowed to undertake insurance business.91 2004-05 98. a bank can act as an agent on behalf of one life and non-life insurance company. countries like Japan. which prohibited bancassurance earlier recognized its importance and allowed them to distribute insurance plans.79 0. Insurance 91 .

In fact.11% in 2003-04 and 0. expense ratios in insurance activities through bancassurance are very low. Having realized the importance of bancassurance and also to overcome the threat from new entrants in the insurance business.87% in 2004-05. For instance. As such.92 companies see bancassurance as a tool for increasing their market penetration and premium income. It is a fact that private insurers are relying heavily on others/third parties like Micro Credit Agencies and even welfare organizations like Help Age. As such. But its business from this channel is highly meager at 0. Others/Third Parties Distribution through others or third parties means it is those companies rather than the insurers who often rep the benefits of customer loyalty. the LIC started channelizing sales through bancassurance partners such as Corporation Bank. they offer a broad range of products from different insurers to consumers. Oriental Bank of Commerce. Further. which indicates that the LIC failed to utilize the bancassurance channel effectively and efficiently. Even the customers see bancassurance as a great benefit in terms of availability and accessibility or service at doorsteps. private insurers made as much as 92 . they make a significant amount of insurance business from this channel. It is a fact that pure financial service retailers are on the rise and most of the m do not have owned products. the LIC has tied up with as many as 31 banks to distribute its plans. This accelerates the shift of insurance to a commodity product. among a host of others. Central Bank.

In other words. identify the optimum insurance policy structure. The introduction of this intermediary in the insurance market has resulted in improvement in customer service and transfer of 93 . Table 2 presents the new business underwritten by players through various intermediaries.75 1.30% respectively during the same period.23 6. Table 1: New Business (life) Underwritten by Private Players Various Intermediaries Agents Corporate agents Brokers Referrals Direct Busine Year ss Others Banks 60.37 10. carry out the preparatory work for entering into the insurance contracts.09% and 0.93 6.25 Compiled from the Annual Reports of IRDA Brokers Insurance brokers are professional who assess risk on behalf of their clients.39 2003-04 2004-05 10. The brokers are retained by the insured’s and are thus primarily responsible to them. brokers represent the interest of the clients.05 59. and facilitate processing where claims arise.75% business from other sources or third parties in 2003-04 and 2004-05 while the business of the LIC is abysmal at 0. provide advice on mitigation of the said risk.86% and 7.57 6.30 15.86 0.50 14. bring together the insurer and the insured.31 7.42 7.

which should not exceed the agency commission allowed under 94 . While agents the license to sell policies of only one life insurance company and one non-life insurance company at a time.04% in 2004-05. While entering into a referral. and with the sole purpose of making available customer database for soliciting the business of their members only. but with a difference. it is to be ensured that such arrangements are entered only with registered groups subject to a written agreement. as per IRDA norms. The referral fee is subject to a ceiling rate.94 international know-how on insurance into the country. As a part of this. which indicates that the newly emerged channel (brokers) is not an effective channel for LIC. 10 lakh is required for undertaking brokerage in life insurance business. Brokers are like agents. it has helped in increasing the insurance penetration besides improving the retention levels within the country. Referrals IRDA permitted banks to undertake referral business. A referral fee is charged by the respective bank on the basis of premium collected. Further. But the business of LIC through brokers s very low at 0.02% in 2003-04 and 0. banks provide physical infrastructure and other facilities in their branch premises to insurance companies so that the latter can market their insurance plans. Further. minimum capital of Rs. a broker can sell policies of several life and non-life insurance companies at the same time.

For instance. The private players have adopted the direct marketing approach and captured a significant chunk of the insurance market. 1938.95 the Insurance Act.50% and 6. private players are far ahead of the LIC.37% and 10. The regulations also require banks to file referral arrangements with the Reserve Bank of India and also with IRDA. 95 .05% share of the total new insurance business through direct marketing approach while the new business performance of the LIC through this channel is nil. Direct Marketing Channel Direct marketing channel or zero level channels consists of a company selling directly to the final customer. In other words.25% share of the total new insurance business through referrals in 2003-04 and 2004-05 while the business of the LIC through this channel is nil. It is evidence from the fact that private players made 14. private players captured 7. With regard to new business procured through referrals. service providers are more likely to visit corporate customers at their premises due to the larger volume associate with business-to-business transactions.

Direct marketing and Telemarketing helps the company to sell life insurance products to illiterate people or people from rural area. 3. Direct marketing strategy can be used to reduce the total cost of sales promotion. 2.96 FINDINGS AND CONCLUSION 1. Bancassurance is growing day by day and it can be used as better marketing tool in future also. 96 . Direct selling strategy or direct response marketing strategy is most useful for sales promotion / marketing product in the market. 5. 6. Agents contributes 0 – 25 % of the total sales of the company. Approximately 0 – 25% of the total profit is expended on marketing of product of the company. 4.

To improve direct response marketing technique as companies marketing is mostly depended on it. To examine marketing strategies adopted by the competitors. 3. To develop some innovative techniques of marketing. 4. 5. SUGGESTIONS & RECOMMENDATIONS 1. To give more importance to bancassurance as the financial institution is directly related to its customers. 2. Telemarketing is better with a view to provide information to customer. 97 .97 7. To appoint qualified agents.

BIBLIOGRAPHY 98 . To study customer relationship management program. 3. 5. 2. 4. To study of role of marketing in general insurance sector. To study insurance marketing in global market. To study bancassurance as a key distribution channel. To study marketing mix in general insurance sector.98 SUGGESTIONS FOR FUTURE RESEARCH 1.

org www.estrategicmarketing .com 99 .icfai. Web Sites: www. Skipper Jr.apa.99 Books / Articles / Journals: Life And Health Insurance [Third Edition] By – Kenneth Black Jr.co. & Harold D.uk [Association of Publishing Agencies] www.

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