Marketing Financial Products


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Marketing Financial Products Textbook | Courseware

Life Insurance - Chapter 8

The life insurance business differs from the non-life insurance business on several aspects that range from product nature, risk covers provided, and the agent's role. Life insurance products cater to the needs of the individual and groups of individuals. Generally, insurance products are categorized broadly under term life, whole life, endowment, money back, annuities and pensions, and unit linked schemes.

New product development can play an important role and serve as a key differentiating factor for the insurance marketer. The new product development process consists of a series of steps. They are idea generation (from internal and external sources), idea screening, concept development and testing, business analysis, marketing mix development, test marketing, and commercial launch. Corporate branding is more common in life insurance than product branding. Brand communication is cautiously done by the insurer to project the right kind of image in the minds of the customer. Customer expectations form a key element of the brand strategy based on which a suitable brand positioning is evolved. The pricing of insurance products not only affects the sales volume and profitability but also influences the perceived quality in the minds of the consumers. There are several different methods for pricing insurance, based on the insurance marketer's corporate objectives. They are the survival approach, the sales maximization approach, and the profit maximization approach. To determine the insurance premium, marketers consider various factors such as mortality rate, investment earnings, and expenses, in addition to the individual risk profile based on age, health, etc., and the time period/ frequency of payment.

The process of assessing the risk profile of the individual and then fixing the rate of premium is called risk classification or underwriting. In general, the risk can be classified into four categories -- preferred, standard, rated, and declined. The insurance rating methods used to assess the price to be paid by a buyer are -- class rating, merit rating, and judgment rating (more applicable for non-life insurance).

In the promotional mix of life insurance products, where ad spending on the media is concerned, it is more on television than on print ads. The benefits associated with insurance advertising include -- reaching a wide range of population, communicating new product launches, and enhancing the brand image of the insurers and their products. Advertising in the insurance sector has to adhere to the norms set by the IRDA. Public Relations (PR) activities generally include seminars, awareness workshops, and social initiatives.

Insurance marketers and agents are restricted from using traditional sales promotional tools like free gifts, coupons, contests etc. However, they may use riders, which are add-on features of an insurance policy, to customize the product for the customer. The inclusion of riders may provide a larger cover and other instant benefits in times of risk. Agents and the sales force play an important role in both the promotion and the distribution of life insurance products.

The distribution system is composed of the traditional and the alternate channels. The fact that greater reliance is laid on the traditional channels of distribution is due to the nature of the life insurance products, which requires personal interaction. The direct distribution channels adopted are the direct sales force appointed by the company, insurance agents, and the branch network of the insurers. Cross-selling and bancassurance are alternate channels of distribution. Cross-selling is a mutual agreement between two companies to sell each other's products as a part of their distribution process. Bancassurance involves the selling of insurance products through banks. Bancassurance is suitable for the insurer if it can achieve cost effectiveness, avoid over-dependency on a single bank, increase the level of market penetration, and enhance the service quality of the marketer.

Chapter 8 : Overview

Introduction to Life Insurance
Differences between Life and Non-Life Insurance Products
Types of Life Insurance Products

New Product Development and Branding of Life Insurance Products
New Product Development (NPD)
Idea Screening to Product Launch
Branding of Life Insurance Products

Pricing of Life Insurance Products
Importance of Pricing
Pricing Approaches

Rating Methods

Promotional Mix in Life Insurance Marketing
Sales Promotion
Public Relations (PR)
Personal Selling

Distribution Channels for Life Insurance Products
Direct Sales Force
Network of Agents and Brokers
Branch Network
Cross-selling Life Insurance Products