CONSULTANCY SECTOR

USERS OF CONSULTANCY SERVICES The consultants in addition to other aspects also need to assign due weightage to the nature and types of users of the services. This makes it essential that they are well aware of the changing attitudes and behavioural profile. This simplifies the task of understanding the expectations, developing the marketing resources in tune with their needs and requirements and making the marketing decisions proactive. Users may be an individual or an institution. The motives may be personal and commercial. The providers are supposed to make sure that customers and clients remain satisfied. At the same time, they have also to be careful that the services prove to be remunerative and very much instrumental in maintaining the commercial viability. They are supposed to think for the clients, move with the clients, work for the clients and go with the clients. The consultants are not supposed to lag behind their clients since they bear the responsibility of supporting them vis-a-vis to remove the psychofobia as and when the circumstances necessitate so. They need to subserve the interests of their clients. An individual or an institution seeking legal advice, technical or managerial suggestions or medical prescriptions needs support of consultants at different stages. If the consultants move with the clients, we find development of a sense of confidence among them which keep on moving the process of retaining the business. The clients in a majority of the cases feel that their goals would remain unfulfilled, if consultants are not with them physically, professionally and morally. This in a natural way increases the instrumentality of consultants.

. In the figure we find different categories of users using the services of different types of consultants:

The marketing strategies formulated on the basis of segment are found to be customer-oriented. In the consultancy services an organization needs to segment the market on the basis of region, sector and geographical conditions. In Figure 1.2, we find region wise segmentation.

1.2 Regionwise Segmentation The Central Zone, Eastern Zone, Northern Zone, Southern Zone and Western Zone are the different market segments classified into different zones as per the requirements. Such segmentation helps

consultancy organisations in studying the needs and requirements of different zones and the development of marketing resources are thus made optimal to the users representing a particular zone. In the figure 1.3, we find segmentation on the basis of sector. Such a sector wise segmentation is divided in to five parts, such as Legal sector, Technical sector, Financial sector, Management sector and Medical sector.

1.3 Sectorwise Segmentation It is quite natural that segmentation on the basis of sector helps the consultants and the consultancy organisations in understanding the expectations of different categories of users in a different way. The sectorwise segmentation presented in Figure 1.3 clarifies that in the consultancy services, a consultancy organization needs to identify the needs and requirements of a client related to that segment. In some of the organisations, the legal advice is to be given and like this in some other organisations, the financial and technical suggestions are needed.

In Figure 1.4, we find segmentation on the basis of geographical considerations. In this respect, we find important categories as Rural, Urban, Individual and Organizational.

1.4 Geographical Segmentation The aforesaid segment shown in Figure 1.4 clarifies that in the rural segment, the technological requirements would not be so advanced as found in the urban sector. Like this, the individuals have different expectations from the consultancy organisations.

1. The Product Mix In the consultancy services, the important products are technical services, legal services, medical services and the managerial services. The providers and the clients may be an individual or even an institution. Customer orientation is considered to be an integral part of product development strategies. The formulation of a sound product mix makes it essential that the consultancy organisations make efforts to design a sound product portfolio in which different types of services are included. The medical consultants need to be aware of the latest devices of treatment and to offer to the patients the world class medical aids. The technical consultants also need to innovate their product mix in the face of technological sophistication and to eliminate the traditional services from the product mix. The legal consultants need to be aware of the latest developments, such as amendments in laws, rules and regulations and to formulate the service mix accordingly. Thus the elimination and inclusion processes need to be adopted even in the consultancy services. The management experts not aware of the latest developments in the business world would hardly be successful in serving the interest of their clients. These facts make it clear that' like other organisations, the consultancy organisations also need to make possible innovation in the face of multi-dimensional developments in the business environment.

PROMOTION Advertising: We find advertising a paid form of persuasive communication. The latest developments in the field of marketing communication technologies have made advertising a sharp-edged weapon in the hands of consultant and the consultancy organisations. The sensitivity in advertising is found increased when the advertising slogans and messages prove to be creative. The advertising professionals having a world class excellence can make it possible. The marketing experts feel that creativity paves avenues for sensitivity and sensitivity reserves elbow room for acceptability of the messages, slogans, appeals and themes. This makes it essential that messages have high degree of creativity. Publicity: We find publicity instrumental in activating the process of persuasion for which the advertisers are not supposed to pay anything. The public relations activities are found important while publicising. Like other organizations even the consultancy organisations are required to use this component of promotion. The ultimate object of publicity is to transmit to the masses the news and information related to the effectiveness of the appeal. In the consultancy services, the publicity measures are required to be innovated. This requires support of academics and professionals in the field of creating creative literature

and getting them published in the important newspapers, magazines and journals preferred by the target clients. The publicity measures simplify the task of consultative sales people, as the creative literature would be instrumental in raising the effectiveness. The services to be offered by a consultancy organization would be published in a reputed media having wider circulation. The technical, medical, legal's management journal, and the important newspapers and magazines preferred by the prospects require due attention of marketing professionals. Sales Promotion: This component of promotion bears the efficacy of touching the target with the help of incentives offered to the middlemen and the clients or consumers. It is a temporary incentive with a certain motive found instrumental in promoting the consultancy business. We need to mention that in the consultancy business the middlemen are also used to offer the services to the clients. The leading consultancy organisations have branch and site offices where a number of personnel are found engaged in offering the services to the clients. The services are offered directly to the users when we find an individual acting as a consultant. The marketing professionals are supposed to take decisions related to incentives to be offered to the middlemen as well as to the users. The branch personnel, site-personnel play an incremental role in selling the consultancy services. We go through incentive measures to be offered to both. Personal Selling: Personal selling needs personal excellence to influence the prospects. It has proved to be an important component of the promotion mix. The consultancy organisations find this constituent of the promotion mix effective in promoting the business. How to build confidence is an important aspect of personal selling in which the consultative sales people are required to perceive the changing expectations of clients or users in a right fashion. They are supposed to perceive power, value and decision making system in the client's organisations. It is also essential that they develop personal relationship with the personnel engaged in the organisations of clients. In a true sense, they are required to move with the client. The success of personal selling substantially depends on the personality and excellence of an individual. Word-of-mouth Promotion: Quality of services is the main thing in promotion. If the services are of world class, the customers/users start promoting your product. Contrary to it, if your services are of poor quality even the most sophisticated promotional measures fail in sensitising the users. It is against this background that we talk about this constituent of promotion mix. By word-of-mouth communication our emphasis is on promoting the services by the hidden salesforce. It is pertinent to mention that the satisfied groups of customers communicate to their close friends and relatives the outstanding properties of the services availed by them. Since we trust on our friends and relatives, the process of stimulation is found activated. If you are satisfied with the services of a medical consultant since he/she has successfully cured you on the basis of his/ her expertise and in addition, his/her behaviour has also been decent; you talk to your friends and relatives regarding the same. Telemarketing: Of late, we find telemarketing very much instrumental in promoting almost all types of good and services. We are aware of the fact that telemarketing is based on the contribution of telephonic services and therefore, we can also call it marketing with the support of telephones. It is important to mention that with the satellite communication facilities, the telemarketing has, proved to be an effective as well as an economic component of promotion. In some of the areas, we find a combination of telephones and televisions for promoting the services. The main thing in telemarketing is the instrumentality of telemarketers. He should have a high communicative ability in addition to the art of telephonic talk. The consultancy organisations can use telemarketing for promoting the business. An individual consultant or the consultancy organisations need to recruit efficient personnel to act as telemarketers The personnel acting as telemarketers need an ongoing training. An in depth knowledge of the related services is found essential to the telemarketers. He bears the responsibility of answering to the questions and queries of clients, transmitting to them the required information, removing their confusion and misunderstanding on the basis of his communicative ability. It is natural that for discharging his/her functional responsibilities in a right way, the consultancy organisations need to make it sure that the personnel working as telemarketers are professionally sound.

2. The Price Mix In the consultancy services when we talk about the price mix our emphasis is on fee or commission charged by the consultants or the consultancy organizations for making available to the clients the services as per the promises or agreement. We agree with this view that a decision related to fee or commission plays a significant role. In this context, it is essential that the consultants are aware of the pricing objectives, which may be either price-competitor or non-price-competitor. In the price-competitor objective, the consultancy organisations offer lower price since the pricing decisions are required to be motivational. In the non-price competitor objective, we find stable price for individual services and for multi-service situation, a balance or an optimal point is searched in the high, medium and low price lines. Price Lining Strategy: In this strategy, the consultants and the consultancy organisations charge different fee-structure since the services vary. This is possible in the retail business. As for example, we find different price structure for shirts of different categories. Here it is essential that the consult- ants are in a position to support price differentiation on the basis of service differentiation. The consultants serve in a different way such as they prepare feasibility report, daily project report, technical specification and so on. This strategy helps both the consultants as well as the clients in making cost analysis and revenue forecasting. The adjustment of fee is found difficult and therefore the consultancy organisations may face numerous problems in the long run. 3. Leader Pricing Strategy: This pricing strategy helps in building volume and introducing as many clients as possible. It involves substantial reduction in price charged for goods or services having frequent demand. Here the objective is to market additional services as full price, especially to the clients responding favourably to the leader priced services. In this strategy the clients prefer to purchase exclusively the leader service. A number of clients like to negotiate which raises the possibility of shifting to other competitors. A dangerous stage like price war is expected which is not suitable to the development of an organization. A stage like price war is to jeopardize everything. 4. Prestige Pricing Strategy: In this strategy, the consultants charge fee higher than the market. This is supported by the logic that they offer quality services and therefore charge high for the superior quality and less for the inferior quality. We find fee representing the status and this limits the number of clients having fee and status consciousness. If you offer world class services, the high fee structure is found judicious. 5. Competition-based strategy: Such a strategy is based on competition. Here the consultants have three options, the first "to beat", second" to meet" and the third "to lead". In other words, in the "to beat" strategy, we find emphasis on lower price structure so that the price is used as a motivational tool and the clients are motivated. In the "to meet" strategy, we find focus on similar price structure whereas in the "to lead" strategy, we find emphasis on charging higher than the competitors. But this strategy is not suitable when the intensity of competition is high. 6. Skimming strategy: In this strategy, the consultants recover their services and development costs. Here the consultants get the maximum fee but the intensity of competition influences the pricing decisions. This strategy help in the formation of a negative attitude where clients feel that fee has been reduced as the services are of sub-standard quality. 7. Penetration strategy: The penetration strategy focuses on break-even point. Here the fee structure is found a bit higher than the average. Here the motto is to create trial, rapid acceptance and high volume of services for the consultants. In this strategy, the consultants and the consultancy organisations are required to increase the fee sooner or later which may act as a demotivational tool and the clients may be discouraged. Here it is pertinent that the consultants show their excellence by justifying a change and this focuses our attention on modifying or improving the services so that the clients don't develop a negative attitude. 8. Discount Allowance strategy: Of course, we don't find discount allowance strategy suitable for the consultancy organisations, however the consultants may offer discount or allowance when they act as subcontractors to another consultant. In this context, we find reduction in fee due to a reduction in the overhead costs.

The Place Mix In the consultancy services, the distribution mix also occupies a place of outstanding significance. The place mix on making available promises our emphasis promised services to the clients on time Branch Offices: If the consultancy organisations find that the relationship with the clients is of permanent nature or it is not possible to have a direct contact with the clients due to their unmanageable number, cost ineffectiveness or constraints in transmitting the information; the providers need to think in favour of a full-fledged branch. Site Offices: To be more specific when there is a job contract, the opening of site office is found essential. This brings momentum in the process of offering the services. Through A Representative: It is important to mention that while distributing the consultancy services, we make an advocacy in favour of a representative where the establishment or opening of site office is not found to be a commercially viable proposition.

INSURANCE SECTOR
INTRODUCTION Insurance industry has always been a growth-oriented industry globally. On the Indian scene too, the insurance industry has always recorded noticeable growth vis--vis other Indian industries. The Triton General Insurance Co. Ltd. was the first general insurance company to be established in India in 1850, which was a wholly British-owned company. The first general insurance company to be set up by an Indian was Indian Mercantile Insurance Co. Ltd., which was established in 1907. There emerged many a player on the Indian scene thereafter. The general insurance business was nationalised after the promulgation of General Insurance Business (Nationalisation) Act, 1972. The post-nationalisation general insurance business was undertaken by the General Insurance Corporation of India (GIC) and its 4 subsidiaries: 1. Oriental Insurance Company Limited; 2. New India Assurance Company Limited; 3. National Insurance Company Limited; and 4. United India Insurance Company Limited. Towards the end of 2000, the relation ceased to exist and the four companies are, at present, operating as independent companies. The Life Insurance Corporation (LIC) was established on 01.09.1956 and had been the sole corporation to write the life insurance business in India. The Indian insurance industry saw a new sun when the Insurance Regulatory & Development Authority (IRDA) invited the applications for registration as insurers in August, 2000. With the liberalisation and

opening up of the sector to private players, the industry has presented promising prospects for the coming future. The transition has also resulted into introduction of ample opportunities for the professionals including Chartered Accountants. The Indian Insurance industry is featured by the attributes: Low market penetration; Ever-growing middle class component in population. Growth of consumer movement with an increasing demand for better insurance products; Inadequate application of information technology for business. Adequate fillip from the Government in the form of tax incentives to the insured, etc. The industry formations need to keep vigil on these characteristics of the Indian market and formulate their strategies to entail maximum contribution to the output of the sector. The Indian life and non-life insurance business accounted for merely 0.42 percent of the world's life and non-life business in 1997. The figures of the basic parameters of the industry's performance viz. Insurance Density and Insurance Penetration also are evident of the hitherto existing low-yield Indian market conditions. The term "Insurance Penetration" broadly measures the contribution of the insurance industry in relation to a nation's entire economic productivity. The figure of premium vis--vis the GDP of 1999 stood at 0.54 percent for non-life insurance business and 1.39 percent for the life insurance business. The term "Insurance Density" reflects the Insurance purchasing power. The premium per capita in India amounted to US $ 2.40 for non-life insurance and US $ 6.10 for life insurance in 1999 but with the deregulation of the sector, a sea change in the scene is most likely. The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries. A BRIEF HISTORY OF THE INSURANCE SECTOR The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1 st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

STRUCTURE OF THE INSURANCE INDUSTRY The structure of the insurance industry comprises of the Operating department, Administrative department and the finance department. The Operating Department generally performs the basic functions pertaining to the designing of products, marketing thereof, servicing the insured, the the the insured, management of portfolio, etc. The Administrative Department looks after the day-to-day affairs of the company. The Finance Department backs the operations and administration of the company by accounting for the transactions, streamlining the flow of funds, materializing the management decisions, etc. The Administration Department as well as the Finance Department, usually, functions through in-house setup. The Finance Department functions in the areas of accounting, financial and management reporting, budgeting and controlling, etc. and thus renders enormous scope for finance professionals. The new entrants in the insurance sector are likely to call for the services of the Chartered Accountants for their financial setup requirements. The Chartered Accountants have engaged themselves in the audit of Insurance Companies since long. With the transition in the insurance sector, the horizons for their contribution have broadened. There has, emerged a king-size pool of opportunities that the Chartered Accountants can explore and apply their professional wisdom and experience to. BASIC FUNCTIONS OF THE INSURANCE INDUSTRY 1. Risk Perception and Evaluation: The fundamental function of an insurer is to provide a cover against the detriment caused to the insured due to the happening of certain specified and agreed events. Thus, prior to providing such umbrella through a product, the insurer has to assess the risk involved in the transaction. The insurer has to identify the element of risk prevalent in the concerned industry or a particular unit. The perception of risk requires the study of variables through various methods including the application of scientific and statistical techniques and correlation thereof with the industry or unit under study in light of their basic environmental and infra-structural characteristics. After the identification and categorisation of the risks perceived, the probability of happening of the loss-causing events and the severity of the loss has to be assessed. 2. Designing the Insurance Product: On the basis of the risks perceived, the insurer develops a product to cover the stipulated risks. While

designing an insurance product, an insurer decides its cost to be charged from the insured in the form of premium, reduction thereof in certain cases like not lodging any claim during the previous covered period(s), suggesting the implementation of risk-mitigating measures, etc. The features of a product should be flexible enough to provide for the determination of premiums, rebates, additional premiums, etc. depending upon the risk benchmarks as determined. 3. Marketing of the Product: The core function of the marketing force of an insurance company is to generate awareness about the insurance products among the target market. But in the Indian scenario, where the insurance penetration is too low as compared to the other nations, the marketing force needs to perform the pro-active role in developing an insurance culture. It is through the efficiency of the sales force of an insurance company that the desirability and the success of a product are determined. In Indian insurance market, the function is, basically performed by the agents. The persons desiring to function as insurance agents have to obtain license to act as such from the IRDA or an officer authorised by the Authority in this behalf. The agents approach the prospective buyers and apprise them of the basic features of the products. In order to dispense with the functions, the agents need to possess adequate knowledge of the insurance industry, products and the modalities attached therewith. Further, the marketing personnels should be adequately backed by the back-office setup. 4. Selling of the Products: The term selling in the context of insurance industry connotes the issuance of policies to the applicant proposer. The non-life insurance policy basically embodies the covenant between the insurer and the insured wherein the former agrees to indemnify the latter for the loss caused to him on the happening of the certain agreed events up to a specified limit. The life insurance policy generally contains the agreement whereby the insurer agrees to pay to the insured or the beneficiary of the policy an agreed amount on the expiry of the term of the policy or in the event of the death of the insured respectively. The additional benefits in the shape of Riders viz. Accidental Death Benefit, Double Sum Assured, Critical Illness benefits, Waiver of Premiums, etc. can also be appended with the policy on the payment of an additional premium. In Indian industry, the function is, generally performed by the insurer. In addition, the insurance companies depute their Direct Selling Representatives to look after the function. They receive the proposal documents, vet them and issue policies to the proposers. 5. Management of Portfolio: The management of the portfolio includes the assessment of requirement of funds, identification of various sources of finance, the evaluation of the sources in the light of their cost, availability, timing, etc., reconciling the features of various sources with the needs of the company and the selection of appropriate conjunction of sources. The insurer possesses huge amount of funds, which need proper management. The management of the portfolio of an insurance company requires the identification of investment avenues, evaluation thereof and the selection of the most appropriate mix of alternatives where the funds of the company can be invested. The selection requires the knowledge of finance related functions and techniques apart from the in-depth know of the patterns of requirement of funds in the company as well as in the industry as a whole.

INSURANCE SERVICE: ITS USERS

USERS OF INSURANCE SERIVCE

INDIVIDUAL

INSTITUTIONAL

The formulation of creative marketing decisions is not possible unless the different categories of users using the services of insurance industry are known. The general users assign due weightage to their own interest whereas the industrial users assign an overriding priority to the interests of their organizations. The emerging changes in the socio-economic conditions and governmental regulations influence the interests of both the category of users. It is against this background that an in-depth study of users is found significant to the insurance industry. An individual or an institution, a person or a group of people availing the services is termed to be the actual users of the insurance industry. On the other hand both the categories of prospects having the potentials, bearing the willingness but not using the service right now are termed as potential users/prospects. The services are made available by the Life Insurance Corporation of India and the General Insurance Corporation and other private insurance companies are used by both categories of users. The need and requirement cant remain static. The business environmental conditions influence the process of change. The professionals engaged in servicing the insurance organizations bear the responsibility of understanding the changing level of expectations of the different categories.

Insurance Market Segmentation: In insurance industry, profiling is very important in determining premium rates. Typically, insurers collect every information available. However, analyzing thoroughly is not feasible since the number of variables is normally large. The starting point is thus mass marketing. In mass marketing, the seller engages in the mass production, mass distribution and mass promotion of one product/ service for all buyers. A niche on other hand is a more narrowly defined group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments. Also, in terms of product complexity, insurance products can be categorized into low complexity and high complexity products.

Low complexity products: These are simple products with a standard set of covered risks, perils and hazards. High complexity products: They have a large number of riders and warranties and do not indemnify certain causes of loss.
PRODUCT COMPLEXITY TARGET SEGMENT Niche Market Mass Market LOW HIGH

Fire Insurance (different risk profiles 1. Weather Insurance for each), Marine Insurance 2. Product Liability Householders comprehensive Personal Accident Insurance Policy , Medical Insurance Pension Products

The distribution strategy should vary according to the type of policy. Insurance products with low complexity can be sold through bank-assurance, but products with high complexity should not be sold through the same channels, as it would be very difficult (in terms of time, effort and cost) to train bank employees in understanding the finer details of the complex policies. Products with high complexity need a certain amount of customer hand holding in terms of explaining the terms, conditions, riders and warranties of the policy. In case of niche marketing, direct marketing can be used in the form of e-mails and direct calls through agents to specific customers belonging to the target segment. For high complexity niche products, spreading awareness and selling through financial advisors, consultants and brokers would also be a good strategy.
PRODUCT COMPLEXITY TARGET SEGMENT Niche Market LOW HIGH

Mass Market

Direct marketing through personalized e-mails Advertise in area specific journal with toll free numbers to set up appointments Agents 1. Bancassurance 2. Postal department 3. Agents

1. Well trained agents 2. Financial advisors/consultants 3. Brokers

1. Well trained agents 2. Advertise in newspapers with toll free numbers to set up appointments

Market Segmentation in Insurance

Households Industrial Sector Trade Sector Segment Institutional Sector Regional Wise Rural Sector Sub Segment

Flower of Services Flower of services refer to a well-formed package of total services with all the supplementary services being well formulated along with the core services. The various petals of the flower are:

Information: A marketer needs to provide adequate information to his employees and his customers. This information is general information provided through various communication channels. In the insurance industry information is provided to the customers with the help of: o o o o o o Agents Seminars Web sites Print media Radio Television, etc.

Consultancy: This is additional customized information provided to the potential customers by the service provider. In the insurance industry it is provided by companys staff and agents.

Example: In LIC when a customer enters asking of information about the policy, he is directed towards the assistant sales manager. Assistant sales manager will listen to the customers requirement and as per his requirement list the number of policies that are available. He will also ask the customer about the price and limit the number of options for the customer, so that he can easily choose the policy without confusion. Order taking: Order taking should be done without mistakes. In LIC order taking is generally done by: o By Agents o On Web site (www.licindia.com) o By Assistant sales manager directly in the office. Hospitality: Hospitality is a very pretty petal, reflecting pleasure at meeting new customers and greeting old ones when they return. Hospitality finds its full expression in face-to-face encounters. In LIC customers directly come in contact with the sales manager. The customers are treated as guests. The sales managers of LIC are given special training of how to sell the policies to the clients. It is only in LIC that a customer can meet the chairman directly without any appointment. Safe keeping: It is in the process and procedures used by marketers to safe guard and to maintain secrecy. In LIC the data of the customers is very important. They feed the data of the customers in their Front and Application Program Software which is connected with all the branches of LIC. The data is only available with the sales people and not shown to any person. Exceptional: Exceptional service means service over and above customers expectations. LIC has the fastest claim settlement in the world thereby providing exceptional service. LIC also solves complains of the customers within 7days.

Payment: The payment of premium is normally through cheques. Customer can make payment in LIC through: o Agents o Loans o Web sites o Standing instruction to banks: In this the account holder will give standing instruction to his bank to pay the amount of premium every month without his consent on the given date directly to LIC. Billing: The billing should be done in such a way that there are no mistakes and if there are any they must be immediately rectified. The billing should provide break-ups of premium charged, service charges, etc.

Product Mix

 The Width of a product mix: It refers to how many different product lines are available. In case of insurance sector, there are generally three different product lines i.e. Life Insurance, Marine Insurance and Fire Insurance. The length of a product mix: It refers to the total number of items in the mix. In case of insurance sector, the following is the length of product mix: The depth of a product mix: The various products and various types of the products with distinct features. In the insurance sector, one policy can be made available in different variations. Some of the examples are as follows: Life Insurance:
Whole Life Insurance

Whole Life With Profit Policy

Limited Payment Whole Life Policy

Single Premium Whole Life Policy

These product mix dimensions permit the company to expand its business. E.g.: It can add new product lines thus widening its product mix. General Insurance:

Marine Insurance

Time Insurance

Voyage Insurance

Port Risk Insurance

Product levels: In this figure there is a nucleus or core in the center, which is supported by series of tangible and intangible features and benefits and these form a cluster around the core product.
Level 1 2 3 Type of Contents service Core service Basic service product Expected service Augmented Insurance sector

Life Non-life insurance policy Basic product and minimum purchase After sales service conditions that must be met. Low claim settling period. Something different, which enables Technology

service

Potential service

one product to be differentiated from Online premium payment other Payment through credit cards Standing instruction to bank Features that attract the customers and Maturity claims settled on or before the are useful to them. maturity date. Loans

Price Mix In the insurance business, the pricing decisions are concerned with the premium charged against the policies, interest charged for defaulting the payment of premiums & credit facilities, commission charged for underwriting & consultancy services Premium: Premiums are the periodic payments usually monthly or quarterly that the policy holder pays to the insurance company to purchase and keep a policy in force. For example in case of life insurance according to the policy it may be the amount payable during the endowment term of the policy or until the death of the life assured whichever is earlier. The basis on which the insurance company decides the amount of premium to be paid by each person is determined mainly by 3 factors: Mortality Tables: All insurance companies refer to different mortality tables. These tables differ from country to country. The mortality table indicates the probability of a person dying in a particular age group. For e.g. in an age group of 25-30 years, the probability might be just two, but this probability would increase for a higher age group of 45-50 years. Life Insurance Company (LIC) with its long-standing presence has a mortality table, which is grossly outdated. Some other insurance companies have got their own tables but they are more or less in line with that of LIC. Expected Surplus: The premiums collected by the insurer are invested in capital markets. There is a fixed investment pattern for the insurer. Out of the surplus earned on the premiums invested, 95% is distributed to the policyholders and the insurance company retains the balance 5%. Expenses: An insurance company has to incur expenses in the form of commission to agents, office expense, advertising expense, salaries to employees. These expenses are to be managed by the company in the 5% surplus earning which they earn as mentioned above. Now the criterias on which the premium amounts are fixed are different from different types of Insurances. Life Insurance Pricing: The pricing in case of life insurance is done on the basis of: Life Expectancy: In case of life insurance, the premium amount tends to be different for different customers. This differentiation is on the basis of age, medical history of a person.

Age E.g.: Low premium is charged for children and youngsters as it is assumed that they are at a lesser risk of death as compared to the aged people. Medical History The medical history should be revealed to the insurance company by the customer in Utmost Good Faith i.e. the insured must provide to the insurer complete, correct and clear information of the subject matter of insurance. Motor Vehicle Insurance: Car insurance companies take many factors into account when determining what premiums the insured will pay. Everybody does not pay the same premium. You pay a premium based on what the company assesses as the possible risk you pose. The major factor is the age and condition of the car. The other factors are as follows: Multiple cars or policies: When you have more than one car on an insurance policy, most companies will give you what is known as a multiple line discount. Because you use the company for all of your auto insurance needs, they reward you. Distance and amount of driving you do: Most car insurance companies ask prospective clients how far, and to where, they do most of their driving in a day. The thinking is that further you have to drive, and the more often you do it, the more likely you are to have an accident. The person who commutes 45 minutes to work every day is going to pay more than the person who drives 10 minutes to work. Likewise, a college student who walks to class, and drives home three or four times a year will cost less than the college student who spends 30 minutes commuting to and from campus each day. Location of your car: Car insurance companies rate areas according to the number of accidents or thefts that occur in a specified amount of time in that area. Sometimes, the company can even pinpoint a neighborhood. If you live in a large city, your rates will be higher than if you live in a town. Fire and Marine Insurance Pricing: The principle of utmost good faith is applicable even for fire and marine insurance. E.g.: If a trader while taking a fire insurance policy does not disclose the previous occurrence of fire in the factory, and subsequently after taking policy, there is another fire, the insurance company may refuse to pay the compensation if it learns about the previous occurrence of fire which was not disclosed at the time of taking the policy. The pricing in case of fire and marine insurance is done on the basis of: Type of Building: In case of a building the rate of premium also depends on the type of construction. If it is wood construction the insurance premium is low as the cost in constructing a wood building is low in comparison to a concrete building which has higher premium amount Past Experience: If a fire or marine insurance company has a past experience of settling a claim successfully then, the credibility of the company increases and it charges higher premium for similar policies. The customers are assured that the company will be able to handle the claim well as it was done in past and hence they are ready to pay higher premium. Discount Pricing: In insurance sector, discount is offered if group insurance is opted for. Group Insurance Scheme is meant to provide life insurance protection to groups of people. Administration of the scheme is on group basis and cost is very low.

Discount is given on group insurance scheme because the insurance company gets a large number of customers at a time and hence it saves expenses on promotion and advertisement, which are to be incurred to attract new customers. Thus, discount is given in order to attract more customers at a time by this group insurance scheme. The cost incurred on giving discount is much less as compared to the cost spend and advertising and promotion. Hence discounting is much more profitable for the company However, 65 per cent of the pricing is still determined by the government that is the Tariff Advisory Committee. So the rates of premium are more or less the same. It is going to change over the next few years. In non-tariff products like personal accident etc there is a lot of pressure on pricing. Companies will have to be reasonable while determining a pricing structure because, across the globe, there are instances of companies going bust while playing the game of undercutting state-run companies.

Place Mix Channels: In case of insurance sector, the following channel of distribution is followed according to the target market:
CHANNELS Direct Selling Agents Financial Advisors Call Centers

Partner Selling

Bancassurance Postal Department Selling through Corporates

Direct Selling: Agents: The agents are selected and recruited by the development officer of the insurance company. These agents inform the customers about the various insurance policies offered by the company and convince them to buy these policies. Financial Advisors: The financial advisors are also consulted by the customers regarding their financial matters. These advisors suggest their clients to get their goods insured against any calamity or risk. Call centers: The people who require insurance call up the call centers. These call centers send their direct marketing agents who go to the customers place and sell the insurance policy. Partner Selling: Bancassurance: In bancassurance, the insurance products are sold through the banks network of branches.Om Kotak Mahindra has tie-up with Dena bank, by which former doesn't entertain bancassurance with any other bank and the latter also doesn't distribute policies of any other insurance company Postal Department: . Insurance companies can tie up with the postal department to sell and distribute various insurance covers. This would certainly require upfront training costs, as the postal employees in turn need to educate and sell the concept and benefits of insurance to the people in rural areas. Selling Through Corporates: Insurance can be sold through corporates too. E.g.: When a customer purchases a Maruti car, he gets the insurance of the car free from the Maruti Company itself. Thus this is termed as selling insurance through corporates. Electronic Channels:

In the last decade, numbers of technological advances have taken place due to immense use of EDI (Electronic Data Interchange)
CHANNEL Electronic channels LIC on internet Information Kiosks SMS

Information kiosks: LIC have set up 150 interactive Touch screen multimedia KIOSKS in prime locations in metros and some major cities for dissemination information to general public on our products and services. SMS: SMS through mobile phone is recently new technology introduced by the LIC to promote their product.

Location: In insurance, location, the place where office situated is not as important as mostly the agents of the insurance company goes to the place of the customers for doing most of that customers work. Physical Evidence Physical evidence is the environment in which the service is delivered and where the company and the customers interact and any tangible goods that facilitate the performance and communication of the service. Services are intangible and heterogeneous. Intangibility means that services cannot be displayed, physically demonstrated or illustrated; heterogeneity means that consumers cannot be certain about performance on any given day. It plays a major role in enhancing customers perception of the service quality. However, in case of insurance sector, the customer rarely visits the insurance company. The customer comes mostly only in contact with the service provider.
Insurance Service 1 2 3 4 5 6 7 8 9 Tangibles as Physical Evidences Policy Documents Brochures Periodic Statements Renewal Notices Business Cards Stationary Calendar, Diaries Letters/Cards Website

People Mix. Employees: Employees are very crucial because: They are the service They are the brand They are the marketers They are the organization in the eyes of the customers. The various employees involved in providing service to the customer in insurance sector are: Customer service representatives: They, process insurance policy applications, changes, and cancellations. They review applications for completeness, compile data on policy changes, and verify the accuracy of insurance company records. They may also process claims and sell new policies to existing clients. Marketing and sales managers: These constitute the majority of managers in carriers local sales offices and in the insurance sales agents segment. These employees sell insurance products, work with clients, and supervise staff. Claims adjusters, appraisers, examiners, and investigators: These decide whether claims are covered by the customers policy, confirm payment, and, when necessary, investigate the circumstances surrounding a claim. Claims adjusters work for property and liability insurance carriers or for independent adjusting firms. They inspect property damage, estimate how much it will cost to repair, and determine the extent of the insurance companys liability; in some cases, they may help the claimant receive assistance quickly in order to prevent further damage and begin repairs. Underwriters: Underwriting is another important management and business and financial occupation in insurance. Underwriters evaluate insurance applications to determine the risk involved in issuing a policy. They decide whether to accept or reject an application, and they determine the appropriate premium for each policy. Insurance sales agents: About 15 percent of wage and salary employees in the industry are sales workers, selling policies to individuals and businesses. Insurance sales agents, also referred to as producers, may work as exclusive agents, or captive agents, selling for one company, or as independent agents selling for several companies. Through regular contact with clients, agents are able to update coverage, assist with claims, ensure customer satisfaction, and obtain referrals. Lawyers: The insurance industry employs relatively few people in professional or related occupations, but those who are so employed are essential to company operations. For example, insurance companies lawyers defend clients who are sued, especially when large claims may be involved. These lawyers also review regulations and policy contracts. Nurses and other medical professionals advise clients on wellness issues and on medical procedures covered by the companys managed-care plan. Computer systems analysts, computer programmers, and computer support specialists: These are needed to analyze, design, develop, and program the systems that support the day-to-day operations of the insurance company. Actuaries: These represent a relatively small proportion of employment in the insurance industry, but they are vital to the industrys profitability. Actuaries study the probability of an insured loss and determine premium rates. Customers: People mix not only includes employees but also customers. The customers are to be treated with respect and courtesy.

Process Mix In case of insurance sector, the process mix includes the various interactions that take place between the insurance agent and the customer in the process of selling the policy to the customer till the settlement of claims. The following process mix is followed by insurance companies in case of life insurance: 1. The insurance agent calls up the customer and informs him about the different policies offered by the company and the price mix of all the policies. If, the customer seems interested in taking the policy then, he fixes an appointment with the customer. 2. The insurance agent meets the customer and gives him some information about the insurance company and also about the benefits of the policy. 3. The customer is then asked to fill a financial review form (FRF) and the agent is asked to find out the standard of living of the customer so that the insurance company gets a clear picture about the financial condition of the customer and what kind of policy he can afford. 4. The insurance company offers various policies but they might not be suitable for the customer hence, on the basis of his requirements and financial status, the insurance agent suggests two or three policies to the customer, which will be suitable for him. 5. The insurance agent explains the different policy plans in detail to the customer i.e. the amount of premium to be paid, the time interval at which the premium is to be paid, the benefits of each of the policy etc. A brochure is also provided to the customer wherein the entire description of all the policies is given. 6. Then, the insurance agent provides a feedback form to the customer and asks him to give his feedback regarding the policies that he has been informed about. This feedback is taken in order to find out whether the customer is satisfied with the plans of the policy or whether the company needs to make the policy plans more attractive so that it may appeal to its future customers. 7. Then, the next appointment is fixed by the insurance agent with the customer and in this meeting; the customer selects the policy plan, which appeals to him. The customer is then asked to fill up the proposal form which contains various details of the payment and he is asked to make the first premium payment. 8. Then, the insurance agent submits the duly filled and signed form in the insurance office along with the other necessary documents. E.g.: Medical Reports in case of Life Insurance. Submission of Age Proof is essential as the rate of premium payable on a life insurance policy generally varies with age, and therefore age is one of the most important factors in determining the rate of premium payable in an individual case. The following is accepted as age proof: o Certified extract from municipal or local bodys records made at the time of birth. o Certificate of Baptism if it contains date of birth o Passport issued by passport authorities in India. o Certified Extract from school or college records, if date of birth is mentioned. The customer must get himself examined from the approved doctor of LIC. The medical examination is necessary to determine the physical fitness of the customer. If the medical report is favourable, then only LIC will issue the policy.

9. An average twelve days time is taken by the company to verify the submitted documents. After the twelve days period, the insurance agent meets the customer to provide him a policy document, which consists of the terms and conditions of the policy. This is because terms and conditions of the policy differ for different customers due to differences in medical conditions of customers in case of life insurance and due to differences in nature of goods and mode of transportation in case of marine and fire insurance. 10. Then, a reconfirmation is taken by the agent from the customer that he agrees with the terms and conditions of the policy. 11. The insurance agent then regularly collects the premium from the customer whenever the premium becomes due.

Promotion Mix Advertising: It is a paid form of non-personal communication. It is used to create awareness and transmit information in order to gain a response from the target market. Forms of advertising are as follows: o News Papers and Magazines: LIC give ads in the news papers and magazines round the year to continue its brand image and also when new products are introduced. Normally its ads are published in Times of India. o Electronic media: Insurance companies also advertise its services in the Electronic media like: Internet (Websites): Companies like LIC (www.licindia.com), ICICI (www.iciciprudential.com) all have websites from which people can get the information about their products, prices, various schemes, and lots of other information. People can also purchase the product through this website. Television: Companies like LIC, Met Life India, advertise on television to make people aware of their products and services. Radio: ICICI Prudential advertises on 92.5 red Fm. o Hoardings: LIC put its hoardings where there is a mass flow of people, especially outside the railway station or at the backside of the bus. When Met Life was introduced it has put his hoardings on the side of the train, to target huge number of people. o Brochures: Companies provide brochures to the customers so that they can have a look on various schemes and their prices. Public relations: Public relations are helpful for the companies to build their brand image, to maintain good relationship with customers, to make the people aware of its recent happenings, etc. Mediums of Public relations are: o Press releases: This helps the company to convey its message to its customers and other people. o Seminars:

These are held to provide information about the new product launched, position of the company in the market, etc. Sales Promotion: Gifts: LIC provides diaries, pens, booklets, etc to its customers. o Sponsoring Events: Eg: Max New York Life Insurance Company has sponsored the recent India-Zimbabwe-New Zealand tri series. Personal selling: o Agents: It is the most widely used method of promotion by all insurance companies. They recruit, train and motivate the insurance agents to convince the customers to buy insurance policies of that particular company. The agent also collects the monthly premium and settles the claims of the customers. Word of Mouth:

Word of Mouth promotion plays the role of hidden sales force. The word of mouth promotion is normally carried out by customers, agents and employees. It can be positive or negative depending upon the service or experience they receive. o Customers: It is important for the organization to provide customers with quality service so that he is satisfied and spread the good word of mouth. On the contrary if the customer is not satisfied with the service or experience he spreads bad word of mouth.