Chapter – II

MARKETING OF LIFE

INSURANCE SERVICES
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
 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.54

2.2 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.31.
55
Philip Kotler, Marketing Management, Sixth Edition, New Delhi: Prentice Hall
of India, 2001, p.11.

34
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
driving force of the life insurance company of India in the present
globalised economic scenario.

2.3.1 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. 22-26.

36
The essential steps identified are:

ó Understanding customer expectations

ó Setting strategy and service standards

ó Interaction between agents and customers

ó Ability to match offerings with customer needs

ó Back-end support system at the company

ó Post-sale service and

ó 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. Price

iii. Promotion

iv. Physical distribution

v. People

vi. Physical evidence

vii. Process

37
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:

2.5.1 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 2.1.

38
 TABLE 2.1

Various Plans of LIC

WHOLE LIFE POLICIES TERM ASSURANCE PLANS

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

Source: Annual Reports of LIC

39
 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.

2.5.2 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.115.

40
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 single premium ( Ax ) X Annuity due

Net level premium ( Px ) =
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
expenses of business and loading for bonus if the policy is a participating
one.

2.5.3 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 pre-
consumption 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 2.2.

42
 FIGURE 2.2

Promotion Mix of LIC Services

Personal Advertising Public Sales

Selling (A) (B) Relations (C) Promotion (D)

Word of
Mouth TV, Radio,
Internet

Newspapers
Magazines

Brochures
&
Pamphlets

Electronic
and Painted
Displays

Direct
Mail
Tele
Marketing
Fax/
E-mail

Source: Vasanthi Venu Gopal and V.N. Raghu, Services Marketing, Seventh Edition,
Mumbai : Himalaya Publishing House, 2009, p.122.

43
The promotion efforts include the marketing communication through

1. Advertising

2. Sales Promotion

3. Personal Selling and

4. Public Relations

2.5.3.1 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.

Ø Usage measurement is done through measuring business growth,

interviewing policyholders.

Ø Measuring recalls can be either unaided recall or aided recall –

which assesses the extent to which advertisements are retained in
customers’ mind.

Ø Psychological measurement can be measured through interviews.

44
 Ø Attitude measurement is done through structured interviews or
attitude scales.

Ø Measuring awareness is done by pre and post advertisement

figures of premium, first-year premium, profitability, etc.

2.5.3.1.1 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
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.

2.5.3.2 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
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
 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.

2.5.3.3 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.

2.5.3.4 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
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.

2.5.4 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 2004. 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 2.3

49
 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
2.5.5.1 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.

2.5.4.2 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 2009-10 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
complex products require greater knowledge and understanding. These
products can be better marketed through certified insurance facilitators or
agents.

2.5.5.3 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.

2.5.5.4 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 co-
operatives, 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.

2.5.5.5 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
the fact that they are restricted to sell a single insurer’s products. There are
more than 1,000 corporate agents in the country.

2.5.5.6 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
 TABLE 2.2
Bancassurance Tie-ups in India
Life Insurance Companies Banks
Life Insurance Corporation of India Ø Corporation Bank
Ø Indian Overseas Bank
Ø Centurion Bank
Ø Yeotmal Mahila Shakari Bank
Ø Vijaya Bank
Ø Lakshmi Vilas Bank
Ø Karur Vysya Bank
Ø Oriental Bank of Commerce
Ø PandianGram Bank
Birla Sun Life Insurance Company Ltd. Ø Bank of Rajasthan
Ø Andhra Bank
Ø Bank of Muskat
Ø Development Credit Bank
Ø Deusche Bank
Ø Catholic Syrian Bank
Ø Citibank
AVIVA Life Insurance Company Ltd. Ø Canara Bank
Ø Lakshmi Vilas Bank
Ø American Express Bank
Ø ABN Amro Bank
HDFC Standards Life Insurance Ø Union Bank of India
Company Ltd. Ø HDFC Bank
Ø Indian Bank
ICICI Prudential Life Insurance Ø Lord Krishna Bank
Company Ltd. Ø ICICI Bank
Ø Bank of India
Ø Citibank
Ø Allahabad Bank
Ø Federal Bank
Ø South Indian Bank
Ø Punjab and Maharashtra
Co-operative Bank
Met Life Insurance Company Ltd. Ø Karnataka Bank
Ø Dhanalakshmi Bank
Ø Jammu and Kashmir Bank
SBI Life Insurance Company Ltd. Ø State Bank of India and
its Associate Banks
Tata AIG Life Insurance Company Ltd. Ø HSBC
Ø Bank of Rajasthan
Allianz Bajaj Life Insurance Company Ø Standard Chartered Bank
Ltd. Ø Syndicate Bank

Source: Annual Reports of LIC

54
 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.58

2.5.4.7 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.31.
58
Avirup Nag, “Hope, Hype and Harsh Realities : An Effective Bancassurance
Model for the Indian Market”, The Insurance Times, November 2006, pp. 35-39.

55
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.

2.5.5 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.172.

56
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
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.

2.5.6 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

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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

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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.

2.5.7 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

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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

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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.

2.6.1 Standards for fairness in dealing with customers

· Strive to deal with customers in an open and transparent manner

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 · 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.

2.6.2 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.

2.6.3 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

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 · 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

2.6.4 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.

2.6.5 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.

2.6.6 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.

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 · 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. 27

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 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.

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