Assignment 7: Insurance Marketing and Distribution Flashcards
Distinguishing Characteristics that Drive Consumer Demand for Insurance Products and Services
- Insurance Needs
- Knowledge of the Insurance Market
- Methods of Accessing the Insurance Market
- Negotiating Ability
- Access to Alternative Risk Financing Measures
P&C Insurance Customer
- Individuals
- Small Businesses
- Middle Markets
- National (or larger) Accounts
Characteristics of Individuals
- Least complex insurance needs (similar across individuals)
- Least knowledgeable about insurance market
- Direct access (websites, apps, call centers) or agents
- Little, if any, negotiating ability
- Retention or going to a competitor are the only alternatives
Characteristics of Small Businesses
- Somewhat complex insurance needs
- Some knowledge about insurance market
- Access through agents or small brokers
- Little, if any, negotiating ability
- Few alternatives, including risk retention groups or purchasing groups
Characteristics of Middle Markets
- Complex insurance needs (varies considerably based on products/services
- May have risk manager on staff – more knowledgeable about insurance market
- Access through brokers (small/regional/national)
- Some negotiating ability
- Increasing access to risk financing alternatives (large deductible plans, rent-a-captives, risk retention groups, etc.)
Characteristics of National Accounts
- Most complex insurance needs
- Full-time risk management department – most knowledgeable about insurance market
- Access through regional/national brokers
- Most negotiating ability
- Wide variety of risk financing alternatives (e.g. captives)
Insurer Marketing Differentiations
- Customer Focus
- Products and Services
- Size
- Geographic Area
- Distribution System
Changes in Insurance Environment
- Economic Forces
- Regulatory Controls
- Demands for Technology
- Underwriting Cycles (hard/soft markets)
- Unanticipated Catastrophic Losses
Hard Insurance Market
Characterized by periods of decreased competition, with rising prices and increased insurer’s profitability
Soft Insurance Market
Occurs as competition increases and insurers lower premiums to compete, which eventually leads to diminished profitability and the need to increase pricing
Insurer Marketing Activities
- Marketing Research
- Market Development
- Marketing Information
- Marketing Planning
- Product Development
- Advertising and Promotion
- Customer and Public Relations
- Sales Fulfillment
Market Research Methods
Includes both qualitative studies (such as focus groups and observer impressions) and quantitative studies (using primary & secondary data and predictive analytics)
Secondary Data vs. Primary Data
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.
Focus Group
A small group of customers or potential customers brought together to provide opinions about a specific product, service, need, or other issue
Predictive Analytics
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
Predictive Scores
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)
Market Segmentation
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
Target Marketing
Focusing marketing efforts on a specific group of consumers
Niche Marketing
A type of marketing that focuses on specific types of buyers who are a subset of a larger market
Cross-Selling
Identifying existing policyholder groups to whom efforts to sell additional policies will be most successful
Types of Market Segmentation
- Behavioristic
- Geographic
- Demographic
- Psychographic
Market Segment Selection Considerations
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
Market Development
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
Marketing Information
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
Internal Accounting System
Provides report and analysis capability based on transactions associated with sales activity
Market Monitoring System
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
Market Planning
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
Product Development
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)
Advertising
Intended to build and reinforce the company’s image as an acceptable choice in the minds of target customers; expensive
Sales Promotion
Reinforces the image and positioning created by the insurer’s advertising efforts when carried down to the agency level
Customer Relations
This function provides a forum for communications to the insurer initiated by customers, including complaints, suggestions, and questions
Public Relations
Activities include communications with the public on behalf of the insurer to ensure a strong public image
Sales Fulfillment
The satisfactory delivery of the products and services that result from the product development activity
Distribution Systems
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
Distribution Channels
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
Independent Agency and Brokerage Marketing Systems
An insurance marketing system under which producers (agents or brokers), who are independent contractors, sell insurance, usually as representatives of several unrelated insurers
Independent Agency
A business, operated for the benefit of it owner(s), that sells insurance, usually as a representative of several unrelated insurers
Insurance Broker
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
Agency Expiration List
The record of an insurance agency’s present policyholders and the dates their policies expire (agency’s most valuable asset)
Countersignature Laws
Laws that require all policies covering subjects of insurance within a state to be signed by a resident producer licensed in that state
Independent Agent Networks
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.
Managing General Agents (MGAs)
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
Surplus Lines Broker
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
Exclusive Agency Marketing System
An insurance marketing system under which agents contract to sell insurance exclusively for one insurer (or for an associated group of insurers)
Direct Writer Marketing System
An insurance marketing system that uses sales agents (or sales representatives) who are direct employees of the insurer
Brokered Business
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
Group Marketing
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
Affinity Marketing
A type of group marketing that targets various groups based on profession, association, interests, hobbies, and attitudes
Call Centers
Sell insurance products and services through telemarketing; staff can also respond to general inquiries, handle claim reporting, answer billing inquiries, and process policy endorsements
Insurance Portals
The objective of insurance portals is to deliver leads to the insurers whose products they offer through their sites
Financial Institutions as Beneficial Strategic Partners
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
Omnichannel Marketing System
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
Functions of Insurance Producers
- Prospecting
- Risk Management Review
- Sales
- Policy Issuance
- Premium Collection
- Customer Service
- Claim Handling
- Consulting
Prospecting
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
Cold Canvass
Contacting a prospect without an appointment – a method of prospecting
“Loss Run”
A review of previous losses which, at a minimum, includes lists of losses and their total cost – part of risk management review
Agency Bill Process
After deducting their commissions, producers send the net premiums to the insurers – a form of premium collection
Direct Bill Process
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
Claim Kit
Informs policyholders about the proper procedures and contacts in the event of a loss
Major Advantages of Claim Handling
- Quicker service to policyholders
- 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
Customers’ Needs and Characteristics
Examples include:
- Products and services (low/high expectations?)
- Price (to what degree is it a factor?)
- Response time (quickness)
Insurer’s Profile
It includes:
- Strategies and goals
- Strengths
- Existing and target markets
- Geographic location
- Degree of control over producers it needs or desires
Insurer Strengths
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
