MARKETING OF INSURANCE SERVICES AND INSURANCE COMPANIES
FEATURES OF THE INDUSTRY
The insurance market is extremely complex in terms of structure and types of market participants, differences between various types and forms of insurance, peculiarities of insurance for individuals and legal entities, variations across economic sectors, government regulation, and more. Naturally, marketing of insurance services can vary significantly depending on the specialization of insurance companies. In this article, we will try to outline the general features of marketing strategies and marketing mixes used by leading successful companies. However, first and foremost, let's consider the main characteristics of the insurance market that define the marketing of insurance companies. Here are the main ones:
- Low insurance culture in society. The penetration of insurance in some countries is relatively low, with the ratio of insurance premiums to GDP in 2022 starting from 0.1% in some countries, compared to the world average of 6.6%. This indicates that many countries have very low insurance culture, manifested in limited awareness among citizens about the importance of insurance and a lack of knowledge about insurance products in general. Additionally, insufficient trust in insurance companies, complex insurance terms, and uncertainty regarding compensation also contribute to the formation of a low insurance culture, requiring systemic measures to increase public awareness and understanding of its importance.
- Consumer perception. Consumer attitudes toward the insurance market vary depending on their status as individuals or legal entities. Generally, "ordinary" people may not perceive insurance as necessary for protecting their health, property, or financial well-being due to personal immaturity, irresponsibility, inability to assess risks, etc. until something bad happens in their lives. Therefore, mandatory insurance of major risks, such as auto insurance, travel insurance, and medical insurance, is a common phenomenon worldwide. On the other hand, legal entities view insurance as a strategic risk management tool, seeking insurance solutions to protect against potential losses related to business activities.
- Sensitivity to economic conditions. The insurance business is highly sensitive to economic conditions, as its result is closely tied to economic activity and the financial state of the national economy. During periods of economic instability and crises, reduced business activity and decreased population income lead to a decline in demand for insurance services. There is a clear connection with the loan market, as one of the essential conditions for bank lending is mandatory insurance of the property for which the loan is allocated, such as vehicles, housing, commercial real estate, etc. Economic downturns result in a reduction in both the loan market and insurance agreements.
- Government regulation. Government regulation of the insurance market is crucial for ensuring transparency in the ownership structure of insurers, the financial condition of their owners, setting requirements for the assets of insurance companies and accounting standards, overseeing compliance with legislation and regulatory requirements. However, unstable legislation and constant changes negatively impact the insurance market, complicating forecasting and risk management for insurance companies. Continuous adaptation to new rules requires significant resources from insurance companies and affects their competitiveness, making the insurance market particularly sensitive to changes in legislation and regulatory norms.
- Development of InsurTech. InsurTech, or insurance technology, significantly transforms the user experience in the industry, making it more accessible, fast, and intuitively understandable. Users can now obtain insurance policies through mobile applications within minutes, make online payments, and interact with insurers through chatbots and personal accounts. This enables consumers to receive personalized insurance solutions conveniently and quickly. On the other hand, the optimization of internal processes through InsurTech is also significant. Modern data analytics systems and the use of artificial intelligence automate routine tasks, simplify risk assessment, and streamline the handling of insurance cases. This leads to increased operational efficiency, contributing to cost reduction and improving the competitiveness of insurance companies in the market.
- Direct and indirect sales. The traditional distribution system for insurance products includes two main strategies: direct and indirect sales. Direct sales involve the interaction of the insurance company directly with the client, often through agents, brokers, or their own online platforms, where consumers can obtain information and enter into agreements without intermediaries. Indirect sales involve the use of independent intermediaries, for whom the sale of insurance products is not their main activity, such as banks, car dealerships, travel agencies, gas station chains, etc.
- Reinsurance. Reinsurance is a key element of the insurance industry, where insurers transfer a portion of their risk to other companies to reduce financial pressure in the event of major losses or catastrophes. This process allows insurers to manage risks more effectively and ensures the financial stability of the industry, enabling companies to offer a broader range of insurance products and compete more effectively in the market.
Of course, considering the complexity of the insurance business, the list of features can be extended when examining various types of insurance and different economic sectors in more detail. However, for understanding the logic of building effective marketing for insurance services and companies, the mentioned features above are fundamental. So, how to compete in such conditions and how to develop an effective marketing mix in the insurance business? How to avoid common marketing mistakes, especially those made by large companies with in-house marketers without realizing the damage it causes to the company's profits and success in the market?SOME GENERAL STRATEGIES AND APPROACHES
In the field of insurance services the following marketing strategies, approaches, and tools are commonly used:
- Wide spectrum or niche specialization. Insurance companies often try to establish a clear market positioning targeting a specific customer segment or type of insurance, such as auto insurance, health insurance, or life insurance, etc. The choice of a particular specialization may depend on the company's resources and capabilities, as well as be a conscious strategic decision to achieve success in a specific market segment. However, even in such cases, experienced marketers know how to combine niche positioning in segments without abandoning a more promising broad market positioning.
- Focus on risks. While a prudent person would say that the best insurance policy is the one you never have to use, human psychology complicates sales in the insurance industry. The intangibility of the product is often perceived not as good news, but as a challenge to make potential customers understand the importance of insurance services, overcome the perception of them as unnecessary expenses, and dispel the notion of wasting money. Marketers face the challenging task of convincing potential clients of the necessity of purchasing services, mainly achieved by focusing on probable risks, describing similar starting positions and negative consequences faced by similar clients. However, unlike a private conversation with a salesperson, communicating such messages to a wide audience requires a well-thought-out marketing strategy and practice.
- Additional services and privileges. To eliminate the consumer perception of wasting money, insurance companies actively use additional services and privileges in marketing, such as roadside assistance, primary medical consultation, legal support, etc. These services expand standard insurance packages and provide additional value for clients through practical services. Furthermore, to differentiate their product, service components are positioned separately as privileges for regular and elite clients, such as a personal agent or manager, 24/7 support, enhanced coverage, exclusive products, and other offers to enhance interaction and create a sense of privilege.
- Packaged or individual solutions. In the insurance business, both packaged and individual solutions exist, each making sense and having advantages in specific conditions for a particular client. Packaged solutions offer a standardized set of coverage for standardized risks, providing clients with convenience and time savings. However, other clients or the same clients in different circumstances may be more interested in individual solutions and approaches. The task of marketers is to create an image of their services that demonstrates care for the convenience and time of the client through packaged offers but maintains the necessary level of flexibility, capability, and willingness to accommodate the client in more complex situations when needed.
- InsurTech tools. The use of InsurTech in the insurance industry significantly transforms the distribution system of insurance services, facilitating interaction between insurers and clients, especially in the direct sales segment. Digital technologies allow insurance companies to create convenient and efficient online platforms for contract negotiation, rapid access to information and calculations, and personalization of insurance products to meet individual customer needs. Overall, the implementation of InsurTech tools simplifies the contract negotiation processes, makes them more accessible and intuitive, thereby optimizing the distribution system and increasing the competitiveness of insurance companies. The task for marketers is to develop an optimal digital marketing ecosystem for successful utilization of InsurTech tools.
- Digital marketing and sales ecosystem. The digital marketing ecosystem is a comprehensive approach to using information technologies to integrate all aspects of marketing strategy and distribution systems. It seamlessly combines elements of direct marketing and sales (such as websites, mobile applications, social media pages, email newsletters, personal accounts, etc.) with the necessary digital infrastructure for effective collaboration with intermediaries (such as banks, car dealerships, travel agencies, gas station networks, etc.).
- Online advertising. Online advertising of insurance services has become a crucial component of the marketing strategy for insurance companies, as it allows for effective targeting of the desired audience and directs them to the company's digital ecosystem for information about offers and terms. Using digital platforms such as social media, search engines, and specialized websites enables marketers to precisely target advertising messages and tailor offers to specific target audiences.
- Content marketing. Within the promotion in digital channels, special attention should be given to creating interesting and useful content to attract and retain the attention of the target audience. Insurance companies use blogs, videos, infographics, and other formats to provide information about risks, explain insurance products, and share advice in the field of insurance. Content marketing faces the challenging task of overcoming the low insurance culture among the population, as mentioned earlier.
- Traditional advertising. Traditional advertising in the insurance industry includes television, radio, newspapers, and outdoor media, traditionally used to attract the attention of potential clients. Experienced marketers know which type of advertising is most effective for a specific type of insurance and plan advertising campaigns accordingly.
- PR activities. PR activity in the insurance industry includes strategies aimed at creating and maintaining a positive image of the insurance company in the eyes of the public and clients. It involves organizing events, sponsoring socially significant initiatives, collaborating with the media, writing and publishing press releases, and other tools aimed at increasing awareness of the company's insurance services.
Also, it is necessary to note that within the scope of one article, we cannot show all the pitfalls or demonstrate all the marketing methodologies and tools specific to the insurance industry. These are just a few examples of quite general marketing approaches that can be applied to insurance services. From a practical point of view, everything is much more complex - the choice of a specific marketing strategy and tools depends on the target audience, competitive environment, and unique advantages of the insurance company, etc. At the same time, it is desirable to understand that marketing of insurance products may face a number of specific problems that are unique to each individual case and require an individual approach to their solution.
Achieving the commercial objectives of a company through effective marketing requires a deep understanding of the market situation, consumer needs, the ability to analyze and explore alternatives, and a creative approach to problem-solving. Our company has extensive experience in defining optimal marketing strategies for our clients' businesses, creating a strong brand and market positioning, as well as developing a marketing mix and implementing the chosen strategy. You can familiarize yourself with the services and solutions our company offers on the "Services
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