Introduction to Insurance and its operations
BRIM (PDBI-2001) UNIT-3
Insurance?
A contract of insurance is a contract under which the insurer (i.e. insurance company) in consideration of a sum of money paid by the insured (called the premium) agrees.
Insurance?
(i) To make good the loss suffered by the insured against a specific risk (for which the insurance is effected), such as fire or,
(ii) To pay a pre-fixed amount to the insured or his/her beneficiaries on the happening of specified event e.g. death of the insured.
INTRODUCTION
The term insurance marketing refers to the marketing of insurance service with the motto of customer-orientation and profit-generation.
The insurance marketing focuses on the formulation of an ideal mix for the insurance business so that the insurance organizations survive and thrive in a right perspective.
The quality of services can be improved by formulating a fair mix of the core and peripheral services.
INTRODUCTION
The marketing concept in the insurance business is concerned with the expansion of insurance business in the best interest of society vis-à-vis the insurance organizations.
Insurance companies tend towards a strong sales orientation, since the services they sell, although certainly necessary ones, rarely sell themselves.
Particularly in the developing countries like ours, the organizational
objectives advocate spreading of insurance services much more widely and in particular to the rural areas and specially to the economically backward classes with a view to reaching all insurable persons. This naturally necessitates an integral marketing strategy.
INTRODUCTION
Insurers have long struggled to attract and retain customers.
They do business in a highly competitive marketplace, and they sell a product that many consumers consider to be a commodity.
Customers often cite price as their main reason for buying an
insurance policy—particularly in property. Many consumers
now buy insurance through sites, rarely connecting directly
with the carrier or its agents.
Types of Customers from a Sales Perspective
1. Potential customer – The Potential Paul (already showed some interest in your business, either by filling out a contact form, signing up for a
newsletter or asking a question via your live chat tool)
How to deal with:
Show him value: You can capitalize on his interest by clearly showing him what he can get from your product. You can do this yourself or point him to a resource like a landing page or a case study that will do it for you.
Reveal yourself: Make sure to let the potential customer know that they can ask for help or advice at any time. Even if the customer won’t need it immediately, they will appreciate the offer.
Types of Customers from a Sales Perspective
2. New customer – New Neil (the fresh customer that just bought something from you. He is still learning the ropes of using your product. You need to do everything in your power to make that adoption period smooth)
How to deal with New Neil:
Guide them to success: You can earn a long-lasting customer by investing a bit of your time into explaining how your product works and making sure the new customer knows how to use it. You can do that with a proper onboarding
process.
Leave a contact option open: Even if you offer an automated onboarding to customers, have a live customer service option available. It will go a long way in situations when a customer has a question that’s not covered in the
onboarding.
Types of Customers from a Sales Perspective
3. Impulsive Customer – Impulsive Iggy (This is the type of customer that can make a buying decision in an instant, provided that the conditions are right.)
How to deal with Impulsive Iggy:
Clear the way to checkout: Make sure nobody needs a manual to make a purchase on your website. The less clicks and information needed to make a purchase, the better.
Quick and concise help: If you get a question from Iggy, make the answer short. Stick to the brass tacks. You also need to provide the response quickly. If you take too long, the buying impulse will fade and Iggy will leave your
website.
Types of Customers from a Sales Perspective
4. Discount customer – Discount Dan (Discount Dan is the type of customer that sees value in your product but won’t buy it at full price. Upselling your product to Dan is nearly impossible.)
How to deal with Discount Dan:
Explain the deal: Provide all the necessary details about the deal to avoid any confusion. Dan may also require help with entering a discount code or using a coupon so make sure your team knows the deal’s details.
Offer added value: To make sure Dan continues being one of your customers, you need to go beyond your initial offering. Add the cherry on top of the deal.
Something that they can’t get elsewhere. Stellar customer service can be one of such advantages that will help you keep Dan as a customer.
Types of Customers from a Sales Perspective
5. Loyal customer – Loyal Larry (This type of customers keeps coming back for more. Apart from having a significant impact on your revenue, Larry will be also your brand’s ambassador.)
How to deal with Loyal Larry
Give him a platform: You can help Larry spread the love and feature him in a case study. A bit of social proof like that will make your landing pages much more appealing to potential customers.
Learn from his experience: See what turned Larry into a loyal follower and make sure that happens more often with other customers.
Don’t mess it up: Whatever you do, make sure that Larry stays excited about your product and business.
How does insurance work?
The insurer and the insured get a legal contract for the insurance, which is called the insurance policy.
The insurance policy has details about the conditions and circumstances under which the insurance company will pay out the insurance amount to either the insured person or the nominees.
Insurance is a way of protecting yourself and your family from a financial loss.
Generally, the premium for a big insurance cover is much lesser in terms of money paid.
The insurance company takes this risk of providing a high cover for a small premium because very few insured people actually end up claiming the insurance. This is why you get insurance for a big amount at a low price.
Any individual or company can seek insurance from an insurance company, but the decision to provide insurance is at the discretion of the insurance company.
The insurance company will evaluate the claim application to make a decision. Generally, insurance companies refuse to provide insurance to high-risk applicants.
The Insurance Industry of India
The insurance industry of India consists of 57 insurance companies of which 24 are in life insurance business and 33 are non-life insurers.
Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers.
In addition to these, there is sole national re-insurer, namely, General Insurance Corporation of India (GIC Re).
Other stakeholders in Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims.
Market Size
Government's policy of insuring the uninsured has gradually pushed insurance penetration in the country and proliferation of insurance schemes.
Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48 billion) in FY18, with Rs 4.58 trillion (US$ 71.1 billion) from life insurance and Rs 1.51 trillion (US$ 23.38 billion) from non-life insurance.
Overall insurance penetration (premiums as % of GDP) in India reached 3.69 per cent in 2017 from 2.71 per cent in 2001.
In FY19 (up to October 2018), premium from new life insurance business increased 3.66 per cent year-on-year to Rs 1.09 trillion (US$ 15.46 billion).
In FY19 (up to October 2018), gross direct premiums of non-life insurers reached Rs 962.05 billion (US$
13.71 billion), showing a year-on-year growth rate of 12.40 per cent.
Investments and Recent Developments
As of November 2018, HDFC Ergo is in advanced talks to acquire Apollo
Munich Health Insurance at a valuation of around Rs 2,600 crore (US$ 370.05 million).
In October 2018, Indian e-commerce major Flipkart entered the insurance space in partnership with Bajaj Allianz to offer mobile insurance.
In August 2018, a consortium of WestBridge Capital, billionaire investor Mr
Rakesh Jhunjunwala announced that it would acquire India’s largest health
insurer Star Health and Allied Insurance in a deal estimated at around US$ 1
billion.
Investments and Recent Developments
In September 2018, HDFC Ergo launched ‘E@Secure’ a cyber insurance policy for individuals.
Insurance sector companies in India raised around Rs 434.3 billion (US$ 6.7 billion) through public issues in 2017.
In 2017, insurance sector in India saw 10 merger and acquisition (M&A) deals worth US$ 903 million.
India's leading bourse Bombay Stock Exchange (BSE) will set up a joint
venture with Ebix Inc to build a robust insurance distribution network in the
country through a new distribution exchange platform.
Government Initiatives
In September 2018, National Health Protection Scheme was launched under
Ayushman Bharat to provide coverage of up to Rs 500,000 (US$ 7,723) to more than 100 million vulnerable families. The scheme is expected to increase penetration of health insurance in India from 34 per cent to 50 per cent.
Over 47.9 million famers were benefitted under Pradhan Mantri Fasal Bima Yojana (PMFBY) in 2017-18.
The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue redesigned initial public offering (IPO) guidelines for insurance companies in India, which are to looking to divest equity through the IPO route.
IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1) bonds that are issued by banks to augment their tier 1 capital, in order to expand the pool of eligible investors for the banks.
Road Ahead
The future looks promising for the life insurance industry with several changes in regulatory framework which will lead to further change in the way the industry conducts its business and engages with its customers.
The overall insurance industry is expected to reach US$ 280 billion by 2020. Life insurance industry in the country is expected grow by 12-15 per cent annually for the next three to five years.
Demographic factors such as growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will support the growth of Indian life insurance.
Types of Insurance
Different Classes of Insurance
Life Insurance
Life insurance is a class of insurance that pays money to your beneficiary should you die. This money helps to pay for burial expenses, to pay estate taxes, and to give your family a substitute for the income that you were providing them so they are able to re-establish their financial situation. Life insurance can come alone, just with the coverage in the case of death, or it can have a savings element attached to it. If you survive after the time of
coverage is over, most companies also pay you the amount you were insured for.
Different Classes of Insurance
Health Insurance
Another class of insurance is health insurance. This is a very important type of insurance because it helps you to pay for medical expenses that you and your family might suddenly incur.
There are three different types of health insurance. The first is called "Fee for Service," and it is the most expensive. It covers almost any doctor and anything for which you might need a doctor or a treatment. If you have Preferred Provider Options, known as PPO, your insurer gives you a list of providers to choose from, and it covers many diseases and treatments you might need. A Health Maintenance Organization, HMO, is very cheap, but your insurer
assigns specific doctors to you, and the types of treatment you can receive are very strict.
Different Classes of Insurance
Auto Insurance
Auto insurance is a class of insurance that covers risks related to your vehicle. Most
states have laws requiring automobile insurance. This insurance gives you coverage for damage caused by an accident to you, to your car and to any person that was in the car with you. Auto insurance must protect you against liability, which means that, if you are at fault for an automobile accident, your insurance will pay for the damages done.
Different Classes of Insurance
Home Insurance
Home insurance protects your house against natural or human damage, such as fires, earthquakes, flood or theft. In any of these cases, the insurance company will pay you back for the damage your house receives. Some policies include rebuilding and resale costs and protection to other properties, such as the garage. Some policies stipulate a specific percentage of the damages that your insurer will pay for.
Different Classes of Insurance
Disability Insurance
Some companies offer insurance that protects you against the costs and loss of income that come with disability. You pay premiums for a specific amount of
coverage, and if you do receive an injury that results in disability, your insurer will pay out that much money. This amount can come in the form of monthly allowances or as a one-time payment, depending on your policy.
Different Classes of Insurance
Education Insurance
The child education insurance is akin to a life insurance policy which has been specially designed as a saving tool. An education insurance can be a great way to provide a lump sum amount of money when your child reaches the age for higher education and gains entry into college (18 years and above). This fund can then be used to pay for your child’s higher education expenses. Under this insurance, the child is the life assured or the recipient of the funds, while the parent/legal guardian is the owner of the policy.
What are the tax benefits on insurance?
Life insurance premium of up to ₹1.5 lakh can be claimed as a tax-saving deduction under Section 80C
Medical insurance premium of up to ₹25,000 for yourself and your family and ₹25,000 for your parents can be claimed as a tax-saving deduction under Section 80D
