Chapter II MARKETING OF LIFE INSURANCE SERVICES

Transcription

1 Chapter II MARKETING OF LIFE INSURANCE SERVICES

2 2.1 Introduction 2.2 Services Marketing 2.3 Marketing of Life Insurance Services 2.4 Services Marketing Mix 2.5 Marketing Mix in LIC 2.6 Service Quality 2.7 Summary

3 CHAPTER II MARKETING OF LIFE INSURANCE SERVICES 2.1 INTRODUCTION In India, insurance is sold and not bought. The agents sell the product to the customers by using various strategies. Moreover, they push those policies with highest premium to pocket a higher commission. The constructive approach in selling is the modern approach, which helps customers to buy. A consultant makes calls and sells just like any other sales person. The difference is in their attitude, their approach and their commitment. Here, the customers are seen as persons to be served. Today, the insurers depot this technique and thereby go on increasing their market share. Moreover, the expectations from the life insurance organisations have changed. To fulfill the raising aspirations, life insurance companies have to bring a change in their working methodology and their attitude. The insurance sector today has changed from suppliers market into buyers market. To operate successfully in this environment, life insurance companies need to adopt innovative marketing strategies and pursue it vigorously SERVICES MARKETING Marketing is a systematic and professional approach of satisfying customer s needs in mutually beneficial manner. Philip Kotler advocated four Ps of marketing that laid stress on product, price, promotion and physical distribution. 55 Product deals with the question of what to produce. 54 Mc Donald, Marketing Strategies to Meet Challenge, Facts For You, December 1990, p Philip Kotler, Marketing Management, Sixth Edition, New Delhi: Prentice Hall of India, 2001, p

4 Price refers to the amount of consideration for which the product may be offered. Promotion determines the strategy to popularise the product so as to promote its sale. Physical distribution refers to distribution outlets or channels. The modern theorists of marketing have added additional three Ps which denotes people, process and physical evidence. 2.3 MARKETING OF LIFE INSURANCE SERVICES In the marketing of life insurance services, the service providers are supposed to influence and satisfy the customers or users. When the consumers buy services, in a true sense, they buy the time, knowledge, skill or resources. The main thing in the life insurance marketing is the application of appropriate marketing principles; which would initiate qualitative transformation and simplify their task of increasing the market share and thereby establish leadership. The life insurance organisations have realised the interest of customers. So, life insurance marketing is being made with the motto of customer orientation and profit generation. Unlike the product marketing, the life insurance marketing has much complication in decision making as the service reaches the customer directly and immediately. In life insurance marketing, the customer does not merely buy the service but they become the instant user of the service. Life insurance marketing, should focus on the overall operation of the company as it tries to figure out not only how to sell what it makes but also what to make and what to sell. Life insurance marketing has to start the process rather than end it. It is the systematic work that a life insurance company has to do to work out what its target market aims at. On the functional level, areas like purchasing and production are equally as important as functional marketing. But strategic marketing must be the 35

5 driving force of the life insurance company of India in the present globalised economic scenario Essentials of Life Insurance Marketing The essential steps in designing appropriate marketing strategy for life insurance services are given in Figure 2.1. FIGURE 2.1 Essentials of Life Insurance Marketing Source: B.M. Ghodeswar, Customer Connections: A Key Advantage in Life Insurance Sector, Yogakshema, September 2006, pp

6 The essential steps identified are: ó ó ó ó ó ó ó Understanding customer expectations Setting strategy and service standards Interaction between agents and customers Ability to match offerings with customer needs Back-end support system at the company Post-sale service and Long-term relationship with customer. 2.4 SERVICES MARKETING MIX Marketing mix is the policy adopted by the life insurance company to succeed in the field of marketing. It is the method of identification of demand and supply and it involves various functions of marketing to attain success in the market. In other words, marketing mix is a mode of developing suitable marketing strategies. The essential elements of marketing mix involve seven Ps such as: i. Product ii. iii. iv. Price Promotion Physical distribution v. People vi. vii. Physical evidence Process 37

7 2.5 MARKETING MIX IN LIC A successful and effective marketing strategy would depend on the correct marketing mix. This should be taken care of by the insurance companies to achieve their marketing objectives. The component elements of marketing mix in LIC are discussed below: Product LIC offers a basket of schemes to meet the various needs of an individual and his family. Basically LIC issues whole life policies, endowment policies and term assurance policies. These in turn may be with profits or without profits. All polices make available certain attractive benefits and also have certain limitations. No policy could be labeled as the best and the attractiveness of the policy will depend on the requirement of the investor. The various plans of LIC are shown in Table

8 TABLE 2.1 Various Plans of LIC WHOLE LIFE POLICIES Whole Life Policy Whole Life Policy Limited Payment Whole Life Policy Single Premium Jeevan Tarang ENDOWMENT ASSURANCE POLICIES Endowment Assurance Policy Endowment Assurance Policy Limited Payment Jeevan Mitra (Double cover) Jeevan Mitra (Triple cover) Jeevan Anand New Janaraksha Plan Jeevan Amrit PLANS FOR HANDICAPPED DEPENDANTS Jeevan Asdhar Jeevan Vishwas SPECIAL PLANS Bima Nivesh 205 New Bima Gold Jeevan Saral Jeevan Madhur Bima A/C I Bima A/C II PENSION PLANS Jeevan Nidhi Jeevan Akshay VI New Jeevan Dhara I New Jeevan Suraksha I JOINT LIFE PLAN Jeevan Sathi Plus Jeevan Sathi MONEY BACK PLANS Jeevan Sneha Jeevan Sanjay Bima Bachet SOCIAL SECURITY SCHEME Janashree Bima Yojana Shiksha Sahayao Yojana TERM ASSURANCE PLANS Two year Temporary Assurance Policy Convertible Term Assurance Policy Anmol Jeevan 1 Amulya Jeevan 1 CHILDREN PLANS Jeevan Anurag CDA Endowment vesting at 18 Jeevan Kishore Child Career Plan Child Fortune Plus Komal Jeevan Marriage or Education Annuity Plan Jeevan Chhaya PLANS FOR HIGH GROWTH INDIVIDUALS Jeevan Shree 1 Jeevan Pramukh UNIT PLANS Market Plus I Profit Plus Fortune Plus Money Plus I Child Fortune Plus GROUP SCHEME Group LIC s Superannuation Plus Group Term Insurance Scheme Group Gratuity Scheme Group Super Annuation Scheme Group Savings linked Insurance Group mortgage Redemption Assurance Group Critical Illness Rider HEALTH PLANS Health Protection Plus Health Plus SPECIAL MONEY BACK FOR WOMEN Jeevan Bharathi I HEALTH PLAN Health Production Plus Health Plus Source: Annual Reports of LIC 39

9 LIC is continuously innovating new products based on forward looking models. It has developed new products to address the new challenges in society and to tackle the hazards from new environmental issues. Since a single policy cannot meet all the insurance objectives, one should have a portfolio of policies covering all the needs. At present, LIC is concentrating on the pension schemes Price The pricing of life insurance products is different from the pricing of tangibles where they figure out the cost of inputs. Life insurance is the business of buying risk related to the life of an individual. Therefore, most people think in terms of what they pay for buying a risk cover and what they have paid for the level. When an insurer sells a policy, he does not know what will be the realised cost of the policy because it depends upon the number of years after which the buyer has losses and if so how large they are. This is the reason that different people are charged different prices for policies providing the same kinds and amounts of insurance. A fundamental principle of insurance pricing is that if insurance companies are to sell coverage willingly, they must receive premiums that are sufficient to fund their expected claim costs and administrative cost and provide an expected profit to compensate the cost of obtaining the capital necessary to support the sale of coverage. 56 A fair premium is just sufficient to afford the insurer s expected cost and provide insurance company owners with a fair return on their invested capital. 56 Harington and Niehans, Insurance and Risk Management, New Delhi : Tata Mc Graw Hill Publishers, 2007, p

10 Actuaries generally calculate the premium in two terms: Net premium Gross premium The two premiums are further sub divided into two parts. Single premium and Level premium The net premium is based on the mortality and interest rates whereas the gross premium depends upon the mortality rate, the assumed interest rate, the expenses and the bonus loading. Single premium is paid in one lump sum while the level premium is paid periodically in installments. Net single premium is that premium which is received by the insurer in a lump sum and is exactly adequate, along with the return earned thereon, to pay the amount of claim whenever it arises whether at death or at maturity or even at surrender. It does not provide for expenses of management and for contingencies. The net single premium is calculated differently in different types of policies. Net level premium is calculated by adopting the following formula: ( ) Net level premium Px = ( ) Net single premium Ax X Annuity due ( ) Purchased price of Annuity due ax The gross premium is that premium which is charged by the insurer to meet the amount of claims and expenses. Thus, the gross premium includes the net premium and loading. Loading is the process to add the expense to net premium. The loading may add a certain amount to meet the bonus charges on participating policies. The policyholders are required to pay this gross premium and they even do not know the net premium. Therefore, the gross premium is also known as office premium. The policyholders are, thus, required to pay an amount to meet the cost of claim, 41

11 expenses of business and loading for bonus if the policy is a participating one Promotion Promotion is a general term used for the communicative efforts of the firm that are directed towards achieving the objectives of a marketing strategy. It is basically an exercise in information, persuasion and communication. The elements of promotion serve as the link between LIC and the target segment of its market (policyholders). Promotion can have a profound effect on the service experience. They can be used in the preconsumption choice process to attract new customers. Promotions can be used to teach the customers the consumption process so as to use the service effectively. Promotion also has a major impact on post consumption evaluation because they can be a source of the expectation against which perception are compared. Promotion mix of LIC services are illustrated in Figure

12 FIGURE 2.2 Promotion Mix of LIC Services Personal Selling (A) Advertising (B) Public Relations (C) Sales Promotion (D) Word of Mouth TV, Radio, Internet Newspapers Magazines Brochures & Pamphlets Electronic and Painted Displays Direct Mail Tele Marketing Fax/ Source: Vasanthi Venu Gopal and V.N. Raghu, Services Marketing, Seventh Edition, Mumbai : Himalaya Publishing House, 2009, p

13 The promotion efforts include the marketing communication through 1. Advertising 2. Sales Promotion 3. Personal Selling and 4. Public Relations Advertising Advertising is the technique of creative communication. It ensures co-ordination and application of various branches of art and profession to achieve a pre-determined end i.e. to communicate a message to the public in general or to the desired segment of public in particular. Advertising is significant both as a social and economic force. Advertising serves as mouthpiece for the organisation s objectives to be made public. In simple words, advertisement makes use of communication process with inbuilt psychological and sociological contents which influence the buyer s behaviour in advertiser s favour through a process cycle of stimuli, response, motivation and reward. Although advertising is a very effective and most frequently used promotional tool in marketing of LIC services, it is desirable to measure the effectiveness of an advertisement campaign. To measure the effectiveness of advertising the following criterion can be used. Usage measurement is done through measuring business growth, interviewing policyholders. Measuring recalls can be either unaided recall or aided recall which assesses the extent to which advertisements are retained in customers mind. Psychological measurement can be measured through interviews. 44

14 Attitude measurement is done through structured interviews or attitude scales. Measuring awareness is done by pre and post advertisement figures of premium, first-year premium, profitability, etc Advertising efforts of the LIC Various efforts are adopted by LIC for advertising to both potential and existing customers. The following are the various advertising efforts of LIC. i) Mela Mela means a festival. Such melas are loan mela and festival mela proposed for a specific period. LIC celebrates every first week of September as the Insurance Week. It is also a type of promotional activity in LIC. It provides loan at concessional rates of interest. During the mela period, the borrowers need not pay any processing charge. The loans are provided at once after receiving the necessary documents from the borrowers. ii) Stall The term stall refers to a shop opened by LIC during the special or specific occasions like summer exhibition or festival times. During this period, LIC offers various pamphlets, brochures and advertisements. This type of promotional activity creates awareness in the customers and it gives an opportunity to know about the various innovative schemes introduced by LIC. iii) Meet LIC arranges for various meets between different classifications or sectors of people. The branch manager provides valuable suggestions and advice to the customers who face problems and to avail themselves of 45

15 various schemes of policy and loan and advances. The LIC conducts monthly and quarterly meets for the welfare of the customers. iv) Customise the Product LIC provides plus services to the specific sectors of the people like women, children, retiring people through schemes like Jeevan Balya, Bal Vikas, Jeevan Kishore, Pension plans such as Jeevan Dhara, Jeevan Akshay, Jeevan Suraksha. Under this scheme, each category of the people receives benefits. Besides, the following are some of the other advertising efforts adopted by LIC to boost their marketing services. Advertising through papers and magazines Advertisement through radio, TV and internet Advertising through bill boards and hoardings Pamphlets and brochures Electric display Cross selling technique Festival offer Communicating news and information about organisations through press Sponsoring various efforts to publicise specific products or services. Issuing of journals and magazines like Southern Splendour, Magarantham, Yogashema Sales Promotion Sales Promotion acts as a link between advertisement and personal selling. They are often coordinated with other selling efforts. As the name suggests, sales promotion is a collective name given to all measures used to 46

16 promote the sales. Any sales by an intending seller of a product presuppose a corresponding buyer and therefore, to sell anything, the buyer has to be made aware about the product and its advantages. The visible benefits of the product have to be demonstrated to facilitate buyer s decision to buy that product. In a controlled economy and market if the competition is low or less, sales promotion may not be necessary but in a competitive market place, the importance of sales promotion cannot be undermined. In the Indian context in general and in marketing of LIC services in particular during the launching of a product, sales promotion is an important task. Before deciding the sales promotion strategy it is important to keep in mind the following three essentials: i) Product Knowledge The employees and specialised staff promoting a scheme must have the thorough knowledge of both the advantages and disadvantages of the product. Only after ensuring the market demand and specific needs of customers, the scheme has to be launched in a better way. ii) Market information The market information about the people who will buy the product, the period for which they will buy and the reasons for buying the product gives an idea about the probable market share and enables to decide promotion strategy to specific segment of the market. This also enables the seller to decide on the advertising through proper media keeping in view the specific needs of the potential buyers. iii) Reaching the customer After ascertaining the market and ensuring proper product knowledge to all concerned when it s time to reach the customer, the campaign has to take into account : 47

17 a) TIMING to launch the product b) APPEAL to target audience and c) GEOGRAPHICAL TIMING- to ensure that when the customers respond, in adequate quantity, product will be available at all probable locations of demand Publicity Publicity is the quality of being public, the condition or fact being open to public observation or knowledge- the business of making goods or persons publicly known. The publicity differs from advertising not in its aim but in its techniques. While the latter has a more specific job to do i.e. inform and motivate, publicity seeks to interest and draw attention, without essentially motivating or informing the public Personal Selling Personal Selling is an oral presentation of the service in a conversation with one or more prospective purchasers for the purpose of making sales. For insurance services marketers use this technique. The consumer decision making, is predominantly rational and which is possible through the one-to-one contact where faith building and creating relationship is highly possible. In life insurance products or similar products where the agent gets a big commission on sales, he usually has an incentive to produce extensively, in order to convert potential customers into actual sales and earn a commission. Insurance products like life and medical insurance are very amenable to the direct selling route because of the customer s aversion to these products. However, it is not necessary that promotion should be done through direct channels. The initial awareness could be easily built through mass media because usually the target population is quite large and spread out, at least in the urban and semi-urban areas. However, it usually 48

18 requires the persuasion to convert a potential customer into a buyer, which could be best done by an agent who can be a friend, relative or community member close to the customer. In India, life insurance companies normally rely a lot on a favourable word- of- mouth communication Physical Distribution Physical distribution refers to distribution of product or service or place of insurance. It includes channels of distribution and inventory control. Distribution channels are divided into three heads namely wholesalers, retailers and mercantile agents. In insurance business the wholesalers, like the Zonal office, are the sanctioning authority for taking important decisions and giving huge amount of policy. If the policy amount is low, Divisional offices and Branch offices themselves have the authority like the retailers. Services of agents are also available in LIC. LIC traditionally sold its business using tied agents. All life insurers have tied agents working on a commission basis only and the majority of private sector insurers have followed this approach in distributing life products. Nevertheless as banks are now able to sell insurance products, Bancassurance has made a major impact in life sales. Almost all private sector insurers have formed alliances with banks, with a few of the insurers using Bancassurance as the major source of new business. For example, in 2003, SBI Life and AVIVA life insurance companies sold more then half of their policies through banks. Private insurers have been selling more than 30 per cent of their policies through the banking channel from In India, banks are being used only as a channel of distribution because current law prohibits bank employees from accepting commission for selling insurance policies. The various distribution channels used in the LIC of India are given in Figure

19 FIGURE 2.3 Distribution Channels in LIC of India DISTRIBUTION CHANNELS IN LIC OF INDIA Direct Marketing Channels Agents Brokers Third Parties Corporate Agents Bancassurance 50

20 Direct Marketing Channels Direct marketing channel or zero level channel consists of a company selling the goods directly to the final customer. In other words, service providers are more likely to visit corporate customers at their premises than to visit individuals in their homes, reflecting the larger volume associated with business - to - business transactions. LIC has adopted the direct marketing approach to develop the group assurance market. As such, it has succeeded in keeping the cost ratios under group policies at very low levels. Private insurers are also engaged in direct marketing to high net worth individuals through channels like work site marketing, a relatively inexpensive and easy launch potential distribution channel Agents Agents work under the control of development officer. These people do not take title to goods and services and perform only a few functions. These people are not on the role of the company and the customer. Their main function is to facilitate buying and selling for which they earn a commission on the selling price. Generally, they are specialised in product line or customer type. Now a days, the role of the agent is becoming more and more important. He is no longer looked upon as simply as agent but also seen as a financial adviser. Though SBI Life and AVIVA India have successfully sold their products through the Bancassurance channel, they both feel the need to extend their distribution sales and focus on the agency force. LIC, the monolithic organisation has had an agency force of 14,02,807 during and the productivity of each active agent stands at `51 crores. In case of ICICI Prudential Life too, 70 per cent of its business in the financial year 2008 came through direct agency force. This shows that the agency force has immense potential due to the fact that many of the insurance products are highly complex and the selling of these 51

21 complex products require greater knowledge and understanding. These products can be better marketed through certified insurance facilitators or agents Brokers Brokers are like agents, but with a difference. While agents get the license to sell policies of only one life insurance company and one non-life insurance company at a time, a broker can sell policies of several life and non life insurance companies at the same time. Brokers are like consultants who analyse a client s needs and provide solutions. There are around 165 brokers in the country and they earn as much as 12 per cent commission. But they are found to be passing on a certain percentage of their commission to policyholders to attract business. The brokers are expected to submit monthly statements on brokerage received and payments made out of this brokerage on a continuous basis Third Parties Distribution through third parties means that it is those companies rather than the insurers who often reap the benefits of customer royalty. This accelerates the shift of insurance to a commodity product. It is a fact that private insurance companies are relying heavily on third parties like post office, car dealers, super markets, travel agencies including sugar cooperatives, trade unions, micro finance in agencies and even welfare organisations like help-age. Oriental Insurance Company has tied up with the postal department to sell its products Corporate Agents This involves tie-ups with non banking finance companies to act as corporate agents. This enables insurers to cross sell with other financial services. The corporate agency system works a lot like brokers except for 52

22 the fact that they are restricted to sell a single insurer s products. There are more than 1,000 corporate agents in the country Bancassurance It symbolises the convergence of banking and insurance. The term involves distribution of insurance products through a bank s branch net work. In concrete terms, bancassurance which is also known as All finanz describes a package of financial services that can fulfill both banking and insurance needs at the same time. Bancassurance as a means of distribution of insurance product is already in force in India in some form or the other. Table 2.2 shows some of the bancassurance tie-ups in India. 53

23 Life Insurance Companies Life Insurance Corporation of India Birla Sun Life Insurance Company Ltd. AVIVA Life Insurance Company Ltd. HDFC Standards Life Insurance Company Ltd. ICICI Prudential Life Insurance Company Ltd. Met Life Insurance Company Ltd. SBI Life Insurance Company Ltd. Tata AIG Life Insurance Company Ltd. Allianz Bajaj Life Insurance Company Ltd. Source: Annual Reports of LIC TABLE 2.2 Bancassurance Tie-ups in India Banks Corporation Bank Indian Overseas Bank Centurion Bank Yeotmal Mahila Shakari Bank Vijaya Bank Lakshmi Vilas Bank Karur Vysya Bank Oriental Bank of Commerce PandianGram Bank Bank of Rajasthan Andhra Bank Bank of Muskat Development Credit Bank Deusche Bank Catholic Syrian Bank Citibank Canara Bank Lakshmi Vilas Bank American Express Bank ABN Amro Bank Union Bank of India HDFC Bank Indian Bank Lord Krishna Bank ICICI Bank Bank of India Citibank Allahabad Bank Federal Bank South Indian Bank Punjab and Maharashtra Co-operative Bank Karnataka Bank Dhanalakshmi Bank Jammu and Kashmir Bank State Bank of India and its Associate Banks HSBC Bank of Rajasthan Standard Chartered Bank Syndicate Bank 54

24 In a research carried out by FICCI, this is visualised that in less than 5 years, 50 per cent of the insurance business has been done through bancassurance, 20 per cent by the brokers and corporate agents and 30 percent remain with the agents. Earlier the agents were the only medium of insurance distribution in India. 57 The regulatory regime in India permits commercial banks with a net worth of `500 crores to enter into insurance business on a risk basis, but other banks with networth less than `500 crores, co-operative banks/regional rural banks/micro finance institutions etc., are only allowed to operate as insurance agents for insurance companies Place The concept of place normally refers to the branches of the Life Insurance Organisation. The term place has undergone a sea change. The branch ambience has transformed from a commercial, functional ambience to a customer friendly boutique ambience to enhance the value for the customer. Place strategy has shifted from a transaction centre for the customer to experience and feel insurance business, which will lead to customer s delight. The concept of place has shifted from the branch to off site location where the strategy is on customer convenience. Convenience is an important criterion for a customer to choose his life insurance organisation. Insurance companies have to critically examine as to what extent, their delivery channels provide convenience to customers. Place compromises location of the branches, parking space, customer space, customer support, structure inside the office, signboards for easy 57 Jagendra Kumar, Upheavels in Insurance Industry of India, The Insurance Times, Vol. XXVI, No.10, October 2006, p Avirup Nag, Hope, Hype and Harsh Realities : An Effective Bancassurance Model for the Indian Market, The Insurance Times, November 2006, pp

25 identification of customers and so on. Today, life insurance organisations have created alternative delivery channels for providing services. New technological tools have redefined and expanded the scope of Place in marketing. Customers access their policy accounts through internet. Direct selling agents have emerged as a major channel sale outlet. The design, layout and marketing orientation of these delivery channels are critical for effective marketing. In fact, multi-channel distribution and marketing of insurance products have been the strategy of new players in the Indian insurance market People The people component in the marketing mix of the life insurance services reflects the important role played by individuals in the provision of services. People are also one of the important elements in the marketing mix. The behaviour and attitude of the personnel providing services will influence the customer s overall perception of satisfaction of the life insurance service. 59 Life insurance services require personal inter-actions between the policyholders and the firm s employees and agents. These interactions strongly influence the customer s perception of service quality. The people component of life insurance service marketing mix also includes the management of the firm s customer mix. Service needs to be uniform and universal because one s satisfaction with the service is sure to be influenced by other customers who are being served at that time. In a life insurance organisation, employees and agents are considered as internal customers. This is because only when these internal customers are satisfied and well motivated, they can serve the external customers properly. As it has been observed earlier, unsatisfied and unmotivated 59 Vasanthi Venu Gopal and V.N. Raghu, Services Marketing, Seventh Edition Mumbai : Himalaya Publishing House, 2009, p

26 internal customers will provide unacceptable level of service leading to negative word of mouth. The sources of marketing a life insurance service are tied closely to the selection, training, motivation and management of people. The importance of people in the marketing of life insurance services has led to great interest in internal marketing. Internal marketing is nothing but selling the firm to its employees or the process of attracting, developing, motivating and retaining qualified employees through job-products that satisfy their needs. In other words, internal marketing is the building of customer orientation among employees by training and motivating both customer contact and support staff to work as a team. In life insurance services, the people aspect has three dimensions, one is policyholders the next two are agents and workers in life insurance organisation. The policyholders satisfaction is the result of a process of evaluation of the delivery of service obtained from several difficult objects (e.g.) employees and agents. The specific contribution of this view is that life insurance service system is not a homogeneous entity. Rather it is composed of multiple objects or factors such as the life insurance organisation, agents, workers and the policyholders. It is necessary that both employees and agents in a life insurance organisation are trained to provide quality service to the policyholders with a human touch using state-of-art technology. The objective of providing quality service to policyholders can be achieved by motivating employees to be efficient, dedicated and loyal to the organisation, providing regular on- the-job training of employees to ensure continuous improvement in life insurance services, utilising services of professionally competent agents and using latest technology. Only if the agents and other employees in the life 57

27 insurance organisation are satisfied and motivated, the policyholders will be satisfied. The success therefore depends mainly on the quality, excellence and the efficiency of service provided by able, agile, well informed, knowledgeable, customer-friendly employees. In turn, the employees ought to remain satisfied to deliver good service. There are many things like recognition, job security, promotion, inter-personal relationship that are to be considered to keep the work force happy and contented. Internal customer satisfaction is influenced by many factors like C Working hours C Passion for his/her profession C Relationship between work and family life C Behaviour and attitude of policyholders C Reputation in the field There would be tremendous gain to LIC if Customer Relationship Management (CRM) is focussed with due seriousness. The commitment of LIC to technological advances needs to be paramount and it should be used in a way that it provides greater services to their insured and individuals. While marketing life insurance, a strong relationship should be built with the policyholders. CRM should be implemented not only by the adoption of the right software package but also by truly believing in the philosophy of building a viable long-term relationship with customers. This helps not only to gain new customers but to retain them as well. In order to ensure such environment, internal marketing is to be promoted at any cost Process Process is the set of activities that take an input, convert it and add value to the input and finally create an output. Processes are designed by 58

28 blue prints, which set a standard for action to take place and to implement the service. The process by which services are created and delivered to the customer is a major factor of life insurance marketing mix as service customers will often perceive the service delivery system as part of the service itself. All work activities follow a process. Processes in LIC involve the procedures, tasks, schedules, mechanics, activities and routines by which service is delivered to the customer. It involves policy decisions about customer involvement and employee discretion. Identification of process management as a separate activity is a pre requisite of service quality improvement. The importance of this element is especially highlighted in insurance business where inventories can not be stored. As people element is critical in the insurance marketing mix, reluctant and careless efforts of employees will result only in unsatisfactory process performance. Thus by identifying process as a separate marketing mix element, its importance in service quality becomes evident. If the service operation runs efficiently, the insurance provider will have a clear advantage over less efficient competitors. The choice of processes can therefore be a source of competitive advantage for an insurance organisation. In a life insurance organisation the process is divided into three phases. Firstly, the joining phase which includes contact with an agent to become a policyholder and get the policy details and the registration process as policyholder. Next is the intensive consumption phase, where the premium payment, transfer of policy, nomination procedures, revival of lapsed policy payment of bonus to the policyholders are made. The third phase is the detailed phase where the follow up procedures are made about premium payment and claims settlements are made to the policyholders if the period expires or death occurs. After these three phases in the process of getting a life insurance service, the policyholder is now in a position to 59

29 provide feedback about the service offered and the quality of treatment he or she has received. Information Technology (IT) as a process tool has gained significant importance in the past decade and has changed the concept of servicing through branches. The scope for process improvement is endless and process improvement strategies have to be adopted by the life insurance organisations based on their competency and their ability to enhance their competency to face the challenges emerging in the technology front. The main complaints from the policyholders about the life insurance organisation are irresponsible behaviour of officers, long waiting time in getting registered and at the cash counter while claiming settlement, personal attitude of employees and lack of cleanliness Physical Evidence LIC needs to provide signs of tangibility to obtain and retain customers and to develop a consistent, understandable image in the minds of customers and prospects. Physical evidence overlaps with the promotional mix because the signs of tangibility are often part of the communication mix. Physical evidence also overlaps with distribution because part of a firm s image is created by the physical space in which transactions occur, or the vehicles and uniforms used while providing the service. Physical evidence is the environment in which the service is delivered and where the firm and the customer interact and any tangible commodities facilitate performance or communication of the service. The physical evidence of services includes all the tangible representations of the service such as brochures, letterheads, business cards, report formats, signage and equipment. In some cases, it includes the physical facility where the service is offered. Physical evidence makes a huge impact on the customer. Physical evidence provides customers a 60

30 means of evaluating the services. Corporate image plays an important role in terms of physical evidence. Modern life insurance organisations need to create a good ambience. Right from the reception, a customer should experience cordiality and comfort. The staff may follow a dress code to show professionalism and to maintain discipline. The staff may be trained to be understanding, warm and comforting. It is necessary for a life insurance organisation to be well organised and all higher officials should be provided with a well equipped cabin. The entire life insurance organisation needs to be with good lighting and ventilation. Special care should be taken to maintain hygiene, cleanliness. A life insurance organisation has to keep in mind both the aspects of physical evidence that are essential and that are peripherals. This expanded marketing mix addresses the tangible components of the service experience and the firm s image. Physical surroundings and other tangible or visible cues which include physical facility, modern equipment and appearance of personnel can have a profound effect on the impressions of the customers. Physical evidence is particularly important for communicating about credence services and those dominated by experience attributes. Customers often rely on tangible cues or physical evidence to evaluate the service before its purchase and to assess their satisfaction with service during and after consumption. In life insurance organisation, the service scape includes building exterior, parking lot signs, waiting areas, registration, office, modern equipment, physical facility such as parking lots, covered entrance, accessible drinking fountains, other water supply, telephone and toilet, etc. Other tangibles are reports, stationery and billing statements. Physical setting is important because it enhances not only policyholders and life insurance provider s mood, but also employee s 61

31 mood to create a memorable heading experience. Hence, physical evidence strategy is primarily aimed at tangibilising the intangible nature of life insurance services. The successful marketers will be those, who will be effectively changing the intangible nature of the life insurance services into tangible ones. The various marketing mixes of LIC can thus be effectively used to achieve a greater market impact. All the life insurance companies offer identical services and provide almost the same kind of marketing mix. So, it is best for LIC to use service quality to differentiate its performance from the other firms. Service quality is crucial to both the customers and LIC. Service quality can be used by LIC for maintaining competitive advantage and it is also useful to the policyholders to differentiate between competitors. 2.6 SERVICE QUALITY Service quality is anticipation and identification of customer s needs and expectations and taking action for positive customer satisfaction. The definition of quality started from an emphasis on product quality and has been extended to include services. The importance of quality is recognised in different areas of life insurance marketing namely quality of the output, quality of the process, quality of the delivery system and quality as a general philosophy of the organisation. Quality can be viewed from the point of view of the service provider as to set up standards or specifications in the manufacturing process as well as the output which is totally objective and technological in nature. LIC strives to improve the quality of their services by fixing the standards Standards for fairness in dealing with customers Strive to deal with customers in an open and transparent manner 62

32 Explain the rationale behind its decisions, consistent with requirements relating to business principles Continuously expand its product line and services to afford wider choice Waive or allow payment of interest as a measure of compensation wherever service deficiency occurs which is distributable to the policyholders Standards for easy access to information for customers Educate the customers and the public of the various options available in the area of products and services. Make available to the customers the literatures and brochures relating to products and services in the regional languages. Enlarge the access of the customers to reach out to the organisation through different channels like Help line, Call centers, Internet, etc. Make available various information on products and services through web page on the Internet, Interactive Voice Response System (IVRS), Information Kiosks, etc. Enhance the content, frequency and quality of our communication with the customers especially through the mass media like press, television, radio, etc Standards for policy servicing Strive to achieve and excel the benchmarks set forth in the charter as displayed in branch offices and those prescribed by the Regulatory Authority in respect of various aspects of policy servicing. Review the standards of servicing annually with a view to improve the benchmarks, wherever necessary Respond to all customer enquiries promptly 63

33 Afford the customers, opportunities to provide the organisation with feedback about their perception of services and to suggest improvements through customer surveys and customer meets Enhance customers conveniences through adoption of higher technologies in the areas of information and communication, simplification of processes, review and revamp of the systems and methods Standards for servicing of Salary Saving Schemes (SSS) Improve communication with the customers under SSS polices in order to keep them informed periodically of the policy status and the gaps and defaults, if any. Enhance the frequency of its liasion with the employers to render high quality of services free from errors and omissions Standards for claims settlement Strive to settle all maturity claims well in time preferably on or before the due date, on receipt of all requirements from the policyholders Strive to settle all death claims, which do not require investigation, within 30 days of submission of all requirements by the claimants. If there is a delay which is beyond the stipulated days, it pays interest for the delayed period as prescribed by IRDA Standards for redressal of customer grievances Provide opportunity to its customers to meet the designated grievance redressal officer in all offices of the organisation without prior appointment during the second half of the working hours on all Mondays and with prior appointment on other working days. 64

34 Register all grievances received, strive to dispose off the same within seven days of their receipt. In case of delay beyond this period, LIC explains the reasons for delay on request. Enable a claimant whose claim has been repudiated by the Divisional office, the opportunity of appealing for a review by the Claims Review committees functioned at the zonal and central levels. Provide information to the aggrieved customers about the availability of the external grievance redressal machinery in the form of ombudsman. Quality can also viewed from the point of view of the beneficiary as service quality occurs only when the service firm provides services to the specifications that satisfy their needs. The dimesions of service quality have made the determination of what constitutes quality that is much more difficult and thereby its measurement less than complete. There are ten general dimensions of service quality as identified by Parasuraman, et.al. 60 They are reliability, responsiveness, competence, credibility, courtesy, access, communication, security, empathy, and tangibles. 2.7 SUMMARY The scope for marketing insurance services is vast and thereby marketing of insurance services needs a re-look. There are number of impending changes that are likely to make this sector more dynamic. Marketing strategy is the heart of marketing plan which is designed to meet the needs of the customers. Marketing strategies generally involve the determination of marketing objectives, generating alternative marketing mix, selecting profitable marketing mix and creating conditions for implementing the marketing mix. 60 ibid, p

35 There are seven Ps involved in the elements of marketing mix and they are Product, Price, Place, Promotion, People, Process and Physical evidence. LIC adopts all these marketing mix effectively. Policies and services are the products of LIC. Price involves premium charged by the LIC on policies and charges for various types of transaction and services. Promotion involves mela, stall, meet, advertisement through papers, magazines, radio and television, festival offer and the like. Physical distribution involves a variety of channels used for distributing the life policies and also branch office location, access to the location, visibility of the location, competitor s location and so on. People refers to internal customers and external customers of the life insurance company. Internal customers are employees and agents and external customers means customers of the life insurance company. Ambience, decoration, air conditioning, dress code of the staff, cleanliness of the office, arrangement and colour of building and furniture and so on are physical evidences. Single window system, intranet connection among the branches and WAN are also physical evidences. Process means by which the concepts are actively converted into action. However, only a satisfied customer can help the life insurance company to reach new heights of glory by way of increased profitability and performance. This requires an effective provision of the existing facilities on the one hand and the introduction of new innovative services on the other. Therefore, life insurance companies have been focusing their attention on customer evaluations of services to find out ways to improve service quality. 66