Insurance Market Segmentation:

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In insurance industry, profiling is very important in determining premium rates. Typically, insurers collect every information available. However, analyzing thoroughly is not feasible since the number of variables is normally large.

The starting point is thus mass marketing. In mass marketing, the seller engages in the mass production, mass distribution and mass promotion of one product/ service for all buyers.

A niche on other hand is a more narrowly defined group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments.

 

Also, in terms of product complexity, insurance products can be categorized into low complexity and high complexity products.

Low complexity products:  These are simple products with a standard set of covered risks, perils and hazards.

High complexity products:  They have a large number of riders and warranties and do not indemnify certain causes of loss.

 

PRODUCT COMPLEXITY              LOW                  HIGH
TARGET SEGMENT    
Niche Market Fire Insurance (different risk profiles for each), Marine Insurance
  1. Weather Insurance
  2. Product Liability
Mass Market Householder’s     comprehensive Policy , Medical Insurance Personal Accident Insurance

Pension Products

 

The distribution strategy should vary according to the type of policy. Insurance products with low complexity can be sold through bank-assurance, but products with high complexity should not be sold through the same channels, as it would be very difficult  (in terms of time, effort and cost) to train bank employees in understanding the finer details of the complex policies.

 

Products with high complexity need a certain amount of customer hand holding in terms of explaining the terms, conditions, riders and warranties of the policy. In case of niche marketing, direct marketing can be used in the form of e-mails and direct calls through agents to specific customers belonging to the target segment. For high complexity niche products, spreading awareness and selling through financial advisors, consultants and brokers would also be a good strategy.

 

PRODUCT COMPLEXITY            LOW          HIGH
TARGET SEGMENT    
Niche Market
  • Direct marketing through personalized e-mails
  • Advertise in area specific journal with toll free numbers to set up appointments
  • Agents
  1. Well trained agents
  2. Financial advisors/consultants
  3. Brokers
Mass Market
  1. Bancassurance
  2. Postal department
  3. Agents
  1. Well trained agents
  2. Advertise in newspapers with toll free numbers to set up appointments

 

 

 

 

 

 

 

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1 Comment
  1. Can you tell us more about this? I’d care to find out some additional information.

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