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CAS Online Course 1 > Assignment 7: Insurance Marketing and Distribution > Flashcards

Assignment 7: Insurance Marketing and Distribution Flashcards

1
Q

Distinguishing Characteristics that Drive Consumer Demand for Insurance Products and Services

A
  1. Insurance Needs
  2. Knowledge of the Insurance Market
  3. Methods of Accessing the Insurance Market
  4. Negotiating Ability
  5. Access to Alternative Risk Financing Measures
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2
Q

P&C Insurance Customer

A
  • Individuals
  • Small Businesses
  • Middle Markets
  • National (or larger) Accounts
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3
Q

Characteristics of Individuals

A
  1. Least complex insurance needs (similar across individuals)
  2. Least knowledgeable about insurance market
  3. Direct access (websites, apps, call centers) or agents
  4. Little, if any, negotiating ability
  5. Retention or going to a competitor are the only alternatives
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4
Q

Characteristics of Small Businesses

A
  1. Somewhat complex insurance needs
  2. Some knowledge about insurance market
  3. Access through agents or small brokers
  4. Little, if any, negotiating ability
  5. Few alternatives, including risk retention groups or purchasing groups
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5
Q

Characteristics of Middle Markets

A
  1. Complex insurance needs (varies considerably based on products/services
  2. May have risk manager on staff – more knowledgeable about insurance market
  3. Access through brokers (small/regional/national)
  4. Some negotiating ability
  5. Increasing access to risk financing alternatives (large deductible plans, rent-a-captives, risk retention groups, etc.)
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6
Q

Characteristics of National Accounts

A
  1. Most complex insurance needs
  2. Full-time risk management department – most knowledgeable about insurance market
  3. Access through regional/national brokers
  4. Most negotiating ability
  5. Wide variety of risk financing alternatives (e.g. captives)
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7
Q

Insurer Marketing Differentiations

A
  • Customer Focus
  • Products and Services
  • Size
  • Geographic Area
  • Distribution System
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8
Q

Changes in Insurance Environment

A
  • Economic Forces
  • Regulatory Controls
  • Demands for Technology
  • Underwriting Cycles (hard/soft markets)
  • Unanticipated Catastrophic Losses
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9
Q

Hard Insurance Market

A

Characterized by periods of decreased competition, with rising prices and increased insurer’s profitability

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10
Q

Soft Insurance Market

A

Occurs as competition increases and insurers lower premiums to compete, which eventually leads to diminished profitability and the need to increase pricing

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11
Q

Insurer Marketing Activities

A
  1. Marketing Research
  2. Market Development
  3. Marketing Information
  4. Marketing Planning
  5. Product Development
  6. Advertising and Promotion
  7. Customer and Public Relations
  8. Sales Fulfillment
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12
Q

Market Research Methods

A

Includes both qualitative studies (such as focus groups and observer impressions) and quantitative studies (using primary & secondary data and predictive analytics)

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13
Q

Secondary Data vs. Primary Data

A

Secondary data is low cost and immediately available, so it is typically the starting point for research.

Primary data is more costly and is used afterward to address issues specific to the marketing research project.

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14
Q

Focus Group

A

A small group of customers or potential customers brought together to provide opinions about a specific product, service, need, or other issue

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15
Q

Predictive Analytics

A

Statistical and analytical techniques used to develop models that predict future events or behaviors.

Additional applications include cross-selling, target marketing, individualized customer support, new agent contracting, and designing and evaluating marketing campaigns

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16
Q

Predictive Scores

A

Typically used to measure the risk or opportunity associated with a specific customer or transaction (higher score = higher likelihood the given behavior or event will occur)

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17
Q

Market Segmentation

A

The process of identifying and dividing the groups within a market that share needs and characteristics and that will respond similarly to a marketing action

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18
Q

Target Marketing

A

Focusing marketing efforts on a specific group of consumers

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19
Q

Niche Marketing

A

A type of marketing that focuses on specific types of buyers who are a subset of a larger market

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20
Q

Cross-Selling

A

Identifying existing policyholder groups to whom efforts to sell additional policies will be most successful

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21
Q

Types of Market Segmentation

A
  • Behavioristic
  • Geographic
  • Demographic
  • Psychographic
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22
Q

Market Segment Selection Considerations

A

Each marketing segment should be:
- Accessible
- Substantial
- Responsive

Internal marketing environment:
- Technical resources
- Type of products sold
- Age of product
- Product mix
- Distribution channels
- Corporate ownership
- Company size and resources

External marketing environment:
- Market segmentation competition
- Economic environment
- Social environment
- Regulatory environment

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23
Q

Market Development

A

Market development activities provide leadership when an insurer enters a new market. It includes development and implementation of:
- Training programs
- Problem resolution
- Process documentation
- Funding assistance
- Technical assistance
- Public relations campaigns

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24
Q

Marketing Information

A

Serves the company best when it can deliver timely and cost-effective information essential to decision making; it can be divided into internal accounting and market monitoring

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25
Q

Internal Accounting System

A

Provides report and analysis capability based on transactions associated with sales activity

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26
Q

Market Monitoring System

A

Provides intelligence about the external environment to inform senior management about important developments and changing conditions – current, unfiltered, unbiased information about customers, producers, and competitors

27
Q

Market Planning

A

All plans serve the fundamental purpose of providing the “roadmaps” necessary to profitably and effectively acquaint sellers with potential buyers.

A market plan might include:
- Product proposal and sales goals
- Situational analysis
- Marketing goals
- Marketing strategies
- Projected outcome

28
Q

Product Development

A

It includes six main steps:
1. Opportunity assessment
2. Development of contract, underwriting, and pricing
3. Business forecast
4. Regulatory requirements
5. Distribution requirements
6. Introduction (of the product into the market)

29
Q

Advertising

A

Intended to build and reinforce the company’s image as an acceptable choice in the minds of target customers; expensive

30
Q

Sales Promotion

A

Reinforces the image and positioning created by the insurer’s advertising efforts when carried down to the agency level

31
Q

Customer Relations

A

This function provides a forum for communications to the insurer initiated by customers, including complaints, suggestions, and questions

32
Q

Public Relations

A

Activities include communications with the public on behalf of the insurer to ensure a strong public image

33
Q

Sales Fulfillment

A

The satisfactory delivery of the products and services that result from the product development activity

34
Q

Distribution Systems

A

The necessary people and physical facilities to support the sale of insurance products and services

Many types are used based on an insurer’s organizational structure, business and marketing plans, growth goals, technological capabilities, staffing, and other resources necessary to support the selected system(s)

The main types are:
- Independent Agency and Brokerage Marketing Systems
- Exclusive Agency Marketing System
- Direct Writer Marketing System

35
Q

Distribution Channels

A

The channel used by the producer of a product or service to transfer that product or service to the ultimate customer.

This includes:
- Internet
- Call Centers
- Direct Response
- Group Marketing
- Financial Institutions

36
Q

Independent Agency and Brokerage Marketing Systems

A

An insurance marketing system under which producers (agents or brokers), who are independent contractors, sell insurance, usually as representatives of several unrelated insurers

37
Q

Independent Agency

A

A business, operated for the benefit of it owner(s), that sells insurance, usually as a representative of several unrelated insurers

38
Q

Insurance Broker

A

An independent business owner or firm that sells insurance by representing customers rather than insurers – shop among insurers to find the best coverage and value for their clients

39
Q

Agency Expiration List

A

The record of an insurance agency’s present policyholders and the dates their policies expire (agency’s most valuable asset)

40
Q

Countersignature Laws

A

Laws that require all policies covering subjects of insurance within a state to be signed by a resident producer licensed in that state

41
Q

Independent Agent Networks

A

Also known as agent groups, agent clusters, or agent alliances, they consist of independent agencies and brokerages that join together to gain advantages normally available only to large national and regional brokers

Some benefits include countersignature law, increasing market share, generating additional sales revenue, etc.

42
Q

Managing General Agents (MGAs)

A

Also referred to as management general underwriters (MGUs), they are authorized agents of the primary insurer that manage all or part of the primary insurer’s insurance activities, usually in a specific geographic area

Advantages include a low fixed cost, specialty expertise, and the assumption of insurer activities

43
Q

Surplus Lines Broker

A

A person or firm that places business with insurers not licensed (nonadmitted) in the stat in which the transaction occurs but that is permitted to write insurance because coverage is not available through standard market insurers

44
Q

Exclusive Agency Marketing System

A

An insurance marketing system under which agents contract to sell insurance exclusively for one insurer (or for an associated group of insurers)

45
Q

Direct Writer Marketing System

A

An insurance marketing system that uses sales agents (or sales representatives) who are direct employees of the insurer

46
Q

Brokered Business

A

A sales agent (employee of the insurer) may act as a broker by contacting an agent who represents another insurer and applying for insurance through that agent, who usually shares the commission with the direct writer sales agent – insurance sold this way is brokered business

47
Q

Group Marketing

A

Distributing insurance to specifically targeted groups, which can be known by a number of terms such as:
- Affinity marketing
- Mass marketing or mass merchandising
- Worksite marketing or payroll deduction
- Sponsorship marketing

48
Q

Affinity Marketing

A

A type of group marketing that targets various groups based on profession, association, interests, hobbies, and attitudes

49
Q

Call Centers

A

Sell insurance products and services through telemarketing; staff can also respond to general inquiries, handle claim reporting, answer billing inquiries, and process policy endorsements

50
Q

Insurance Portals

A

The objective of insurance portals is to deliver leads to the insurers whose products they offer through their sites

51
Q

Financial Institutions as Beneficial Strategic Partners

A

They are viewed this way because of the following qualities:
- Strong customer base
- Predisposition to product cross-selling
- Strength at processing transactions
- Efficient use of technology for database mining geared to specific products and services

52
Q

Omnichannel Marketing System

A

Allows insurers to market to customers in multiple channels and meet the needs of customers seeking alternative methods to purchase insurance

However, several issues must be considered:
- Maintaining consistent customer communications
- Providing a consistent customer experience
- Matching the type of insurance with an appropriate channel

53
Q

Functions of Insurance Producers

A
  1. Prospecting
  2. Risk Management Review
  3. Sales
  4. Policy Issuance
  5. Premium Collection
  6. Customer Service
  7. Claim Handling
  8. Consulting
54
Q

Prospecting

A

A function which involves locating persons, businesses and other entities that may be interested in purchasing the insurance products and services offered by the producer’s principals

55
Q

Cold Canvass

A

Contacting a prospect without an appointment – a method of prospecting

56
Q

“Loss Run”

A

A review of previous losses which, at a minimum, includes lists of losses and their total cost – part of risk management review

57
Q

Agency Bill Process

A

After deducting their commissions, producers send the net premiums to the insurers – a form of premium collection

58
Q

Direct Bill Process

A

When the customer (usually for personal insurance or small commercial accounts) is directed to send premium payments to the insurer, bypassing the producer – a form of premium collection

59
Q

Claim Kit

A

Informs policyholders about the proper procedures and contacts in the event of a loss

60
Q

Major Advantages of Claim Handling

A
  1. Quicker service to policyholders
  2. Lower loss adjustment expenses to the insurer

However, if the producer is not properly trained in how to handle claims, overpayment of claims can offset the savings

61
Q

Customers’ Needs and Characteristics

A

Examples include:
- Products and services (low/high expectations?)
- Price (to what degree is it a factor?)
- Response time (quickness)

62
Q

Insurer’s Profile

A

It includes:
- Strategies and goals
- Strengths
- Existing and target markets
- Geographic location
- Degree of control over producers it needs or desires

63
Q

Insurer Strengths

A

An insurer selects distribution systems and channels that maximize its opportunities to capture market share and minimize its weaknesses.

The insurer may analyze
- Financial resources (e.g. online distribution channels have high costs)
- Core capabilities
- Expertise and reputation of producers

CAS Online Course 1 (16 decks)

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