Innovative Channel Strategies in Insurance Industry
Innovative Channel Strategies in Insurance IndustryIntroductionSuddenly Insurance has come to be a way of life. Even though many of theprivate Insurance Companies came into the market during 2001, only nowthe market is highly dynamic. In India, Insurance has been synonymous withLIC. Life Insurance Corporation (LIC) was created as an entity in 1956through LIC Act. Since then, until recently (2000), the insurance sector, bothlife & non-life was monopolised by public sector Insurance corporations.Now, with the impact of LPG (Liberalisation, Privatisation andGlobalisation), many private business houses have come up as jointventures, with partnerships from multinational insurance companies. ThePrivate players are introducing innovative insurance products, appointingqualified persons as agents and advisors. They are aggressively promotingtheir products and are going for multi-channel distribution.Insurance, a service industry needs to address seven marketing mixelements, unlike the 4Ps in manufacturing industry. The service marketingmix known as 7Ps consists of Product, Price, Promotion, Place, People,Physical evidence and Process.Though all mix elements are equally important, the more conspicuous anddynamic mix elements of Insurance at present are product, promotion andplace. A number of innovative products have come up in the industry and tomake the consumers aware, the promotion campaigns fill much of theInsurance companies budget. Though there are distinct strategies in productand promotion mixes, this paper focuses on exploring the innovations indistribution mix. REACH – REACH – REACH – The mantra…in Insurance industry
Although distribution has its own mix, Insurance, being a service industrythe prime distribution mix element is channel mix. This paper concentrateson the innovative channels surfacing in Insurance industry.To deliver the services, players in Insurance take various routes to reach andservice the customers. With just 70 million insured out of 1000 million,there is enormous potential in the industry.Traditionally, the Channel member has been the Insurance agent. Someprivate insurance companies now call them advisors. Never the less agentsform the prime front line force with all insurance companies and they remainto be the most basic and most important channel members to reach thecustomers. Tata AIG is one of the major users of agents among the privateplayers. Presently Tata-AIG has 9000 agents and has already set a mediumterm target of having an agency force of five lakhs agents in the next fiveyears.Apart from agents, the insurance companies take various innovative routesto spearhead their marketing plans and to capture a larger pie of marketshare.Innovative Channels"Spreading the tentacles to the longest length and the remotest corner" is themantra of Insurance players. To reach this objective, their distributionchannel strategies have taken different avatars likeCorporate agents, Bancassurance and Retailassurance etc.A peep into each of the above would help in understanding them better.Corporate AgentsCorporate agency is a cross selling type of channel. Insurance companies tie-up with business houses in other industries to sell insurance either to theiremployees or their customers.
Insurance industry, during the past 2 years has witnessed a number of suchstrategic tie-ups and alliances. Corporate agents have become a major forceto reckon with in distributing insurance products.The following table throws light on the extent of utility of corporate agents.Table.1. Corporate agencies (Life & Non life):Insurance providerCorporate agentType of InsuranceTATA AIG GeneralCEATPersonal accident insurance cover scheme on two wheeler tyres.HPCLMotor insurance at petrol fitting statutoryThomas CookTravel Care – a travel insuranceBajaj AllianzGeneralMaruti Udyog, Hyundai & FordAuto InsuranceHDFC Standard lifeJRG Financial ServicesMarketing of life insurance & pension productsAMP SanmarTrade wings (a travel agency), Dhandapani Group & Karvy Consultants.Marketing of life insurance policiesBancassuranceSimply put, Bancassurance means distribution of insurance products throughbanks. This mode of selling risk products through banks is fast gainingground. Almost all insurance players have married to one or more banks for
wider reach and increased trust. Bancassurance may sell insurance ascustomised solutions or in the form of bundled products along with bankproducts. Even though banks are considered as one among the corporateagents, bancassurance has gained a great importance that it needs to bediscussed separately.The importance can be understood from the fact that even SBI life isassociating with public, private sector and co-operative banks for providinglife insurance to the account holders, in spite of being an offshoot of Indianslargest bank.Last years amendment in the Insurance bill allowed bancassurance to piggyback on nearly 66,700 bank branches with over 18 crore accounts. Also,there are advantages of speedy reach to market and lower infrastructurecosts. Banks get 7-15% commission. While bancassurances share ininsurance is 50% in Europe, 20% in US; in India we are utilising <5% of thetotal number of bank branches. ICICI prudential is the topper inbancassurance with 15% and with a contribution of Rs.470 crore.Bancassurance is poised to become a key determinator / differentiatingfactor in the Insurance industry. With banks are all set to encourage theirstaff to sell policies, with enough training, this will take of to great heights.Realising the importance of bancassurance, both life and non-life insurancecompanies have started piggy backing on banks for pushing their policies.The present status of bancassurance can be understood from the followingdisplay.Table.2. Bancassurance: Win-Win RelationshipsInsurance CompanyPartner Banks (Total No. of Branches)ICICI PrudentialICICI Bank, Bank of India (2,524), Citibank (15), Allahabad Bank, Federal
Bank (120), South Indian Bank, Lord Krishna Bank, Punjab andMaharashtra Co-Operative Bank.SBI LifeSBI (9,000), associate banks (4,000)Birla Sunlife InsuranceDevelopment Credit Bank (62), Deutsche Bank (3),Citibank (15), Bank of Rajasthan (348), Andhra Bank,Catholic Syrian Bank (329), Bank of Muscat (1)ING Vysya LifeVysya Bank (450)Aviva Life InsuranceABN Amro (12), Lakshmi Vilas Bank (212),American Express (6), Canara Bank (2,421)Royal Sundaram AllianceStandard Chartered (63), ABN Amro (12), American Express (6),Citibank (15)United India AssuranceIndian Bank, South Indian Bank (372), Andhra Bank (1,018)HDFC Standard LifeUnion Bank, Indian BankLife Insurance CorporationCorporation Bank (800), Central Bank (3,115), Bank ofPunjab (20), Andhra Bank (1,018), Nedungadi Bank (150)RetailassuranceInsurance Products are being sold at retail outlets. This news should conveythe message that Indian Insurance industry is really boiling. Not only theInsurance players but also their distribution partners are very muchinterested in this kind of game plan. The office of the Chief Post-MasterGeneral, Chennai has mooted the idea of selling some of the insuranceproducts through Post Offices. With 1.53 lakh post offices in the Country,
more than twice the number of bank branches, it can really be a channel withvery great potential. Medicine shoppe, a pharma chain store group and BajajAllianz have tied up to provide free insurance cover of Rs.2/- on everypurchase of pharma products worth Rs.1/-. This scheme is open to 5-25years age group, and distributed through its 40 outlets.Also insurance selling has gone the corner shop way, with TATA –AIGsplans to sell the policies at petrol bunks.Conclusion:It is certain that Indian Insurance players along with their foreign partnersare trying to grab the under explored Indian market. Though these are fewinnovations in the marketing Channels of Indian Insurance Industry, it isexpected that they will try more innovative Channels as the industry grows.Innovatively, SBI life has offered group insurance to the employees ofpublic sector companies, including their spouses. Also similar covers wereoffered to even the state Governments for their liabilities. Given theaggression with which they progress, surely these innovations are going tobe a big hit and a metamorphosis of Indian Insurance sector is very much onits course.