Sell value not Price
– Philip Kotler
Price is one element in the marketing mix that produces revenue; all the other elements produce costs. Prices are easiest marketing mix elements to adjust; product features, channels and even promotion take more time. Price also communicates to the market the company’s intended value positioning of its product or brand.
In the insurance sector, every company has to deposit an initial fixed capital of about Rs. 100 crore with Insurance Regulatory Development Authority, which is considered as the apex body of Insurance sector. The company gets periodic interest on this amount. With this interest amount, the company pays for the recruitment, training and development of the agents.
The price in case of insurance sector refers to the premium charged on the policy.
The Tariff advisory committee fixes the price for each policy. Hence all insurance companies have to charge approximately similar premium on similar policies. However, different elements affect the rate of premium to be charged on each policy.
The price for the same policy is different for different companies.
The company must set its price in relation to the value delivered and perceived by the customer. If the price is higher than the value received, the customer will not be willing to pay so high and the company will loose potential profits. If the price is less than the value received then, the company will fail to receive the profit that it deserves for providing a good service.