My Blackbook (Insurance)

7 P’s OF INSURANCE
INTRODUCTION
A promise of compensation for specific potential future losses in exchange for a periodic
payment. Insurance is designed to protect the financial well-being of an individual, company or
other entity in the case of unexpected loss. Some forms of insurance are required by law, while
others are optional. Agreeing to the terms of an insurance policy creates a contract between the
insured and the insurer.
Insurance is a form of risk management primarily used to hedge against the risk of a
contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity
to another, in exchange for a premium, and can be thought of as a guaranteed and known small
loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance;
an insured or policyholder is the person or entity buying the insurance. The insurance rate is a
factor used to determine the amount to be charged for a certain amount of insurance coverage,
called the premium.
Everyone is exposed to various risks. Future is very uncertain, but there is way to protect
one’s family and make one’s children’s future safe. Life Insurance companies help us to ensure
that our family’s future is not just secure but also prosperous. Life Insurance is particularly
important if you are the sole breadwinner for your family. The loss of you and your income
could devastate your family. Life insurance will ensure that if anything happens to you, your
loved ones will be able to manage financially.
Insurance is basically risk management device. The losses to assets resulting from natural
calamities like fire, flood, earthquake, accident etc. are met out of the common pool contributed
by large number of persons who are exposed to similar risks. This contribution of many is used
to pay the losses suffered by unfortunate few. However the basic principle is that losses should
occur as a result of natural calamities or unexpected events which are beyond the human control.
Secondly insured person should not make any gains out of insurance.
T.Y.B.COM (Banking & Insurance) 2015-2016Page 1

The individual become more experience and mature as the advances in age. This raises
his earnings capacity and the purposes of life insurance are to protect the income to individual
and provide financial security to his family which is dependent of his income in the event of his
pre mature death.
It is natural to think of insurance of physical assets such as motor car insurance or fire
insurance but often be forget that creator all these assets is the human being whose effort have
gone a long way in building up to assets. In that scene human life is a unique income generating
assets. Unlike physical assets which decreases with the passage of time.
Insurance also has an element of saving in certain cases. Insurance is rupees 400 billion
business in India and yet its spread in the country is relatively thin. Insurance as a concept has
not being able to make headway in India. Presently LIC enjoys a monopoly in Life Insurance
business while GIC enjoys it in general insurance business.

HISTORY OF INSURANCE
In India, insurance has a deep-rooted history. Insurance in various forms has been
mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra) and Kautilya
(Arthashastra). The fundamental basis of the historical reference to insurance in these ancient
Indian texts is the same i.e. pooling of resources that could be re-distributed in times of
calamities such as fire, floods, epidemics and famine. The early references to Insurance in these
texts have reference to marine trade loans and carriers' contracts.
Insurance in its current form has its history dating back until 1818, when Oriental Life
Insurance Company was started by Anita Bhavsar in Kolkata to cater to the needs of European
community. The pre-independence era in India saw discrimination between the lives of
foreigners (English) and Indians with higher premiums being charged for the latter. In 1870,
Bombay Mutual Life Assurance Society became the first Indian insurer.
At the dawn of the twentieth century, many insurance companies were founded. In the
year 1912, the Life Insurance Companies Act and the Provident Fund Act were passed to
regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary that
the premium-rate tables and periodical valuations of companies should be certified by an actuary.
However, the disparity still existed as discrimination between Indian and foreign companies. The
oldest existing insurance company in India is the National Insurance Company, which was
founded in 1906, and is still in business.
The Government of India issued an Ordinance on 19 January 1956 nationalizing the Life
Insurance sector and Life Insurance Corporation came into existence in the same year. The Life
Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75 provident
societies—245 Indian and foreign insurers in all.
In 1972 with the General Insurance Business (Nationalizations) Act was passed by the
Indian Parliament, and consequently, General Insurance business was nationalized with effect
from 1 January 1973.
107 insurers were amalgamated and grouped into four companies, namely National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation
of India was incorporated as a company in 1971 and it commence business on 1 January 1973.
The LIC had monopoly till the late 90s when the Insurance sector was reopened to the
private sector. Before that, the industry consisted of only two state insurers: Life Insurers (Life
Insurance Corporation of India, LIC) and General Insurers (General Insurance Corporation of
India, GIC). GIC had four subsidiary companies.
With effect from December 2000, these subsidiaries have been de-linked from the parent
company and were set up as independent insurance companies: Oriental Insurance Company
Limited, New India Assurance Company Limited, National Insurance Company Limited and
United India Insurance Company Limited.
GUIDELINES PROVIDED BY IRDA TO INSURANCE COMPANIES :-
The insurance regulator, IRDA in November 2010 allowed insurance companies to sell
universal life plans on the basis of new guidelines. The new guidelines mentions that insurers
would have to offer a guaranteed return if the policy terms do not entitle the insured to receive a
bonus. The guidelines laid down by IRDA are as follows-
● The new guidelines specified that universal life plans have to be called 'variable'
insurance policies. The regulator with regards to life ULIPs, imposed a cap on charges as
well as the minimum surrender value that the insured is entitled to.
● According to the guidelines, if a policy is surrendered in the first three years, the
policyholder is entitled to receive the balance in the policy account as on the date of the
surrender which will be paid out after the lock-in period. The policyholder is eligible for
98% of the policy balance available in his or her account in case the policy is surrendered
in the fourth or fifth policy year. If the policy is surrendered after the fifth year the
balance in the policy account has to be paid out immediately.
● The maximum expenses that can be charged to the premium paid by the policyholder in
the first year were capped at 27.5% of the first-year premium. For the second and third-
year premium, the cap is 7.5% and 5% on subsequent years.
● If the policyholder decides to increase his contribution through a one-time top-up, the
insurance company can deduct at most 3% from the top-up by way of charges.
● The new norms require that death benefit equals the guaranteed sum assured, plus the

balance in the policy account. If the insured is alive when the policy matures he will get
whatever the balance is under the policy account, plus any terminal bonus.
MEANING AND DEFINITION OF INSURANCE
“Insurance is a contract in which a sum of money is paid to the assured as consideration

of insurer incurring the risk of paying a large sum upon a given contingency”
“Insurance is a cooperative form of distribution a certain risk over a group of persons

who are exposed to it”
“Insurance is a substitution for a small known loss for a large unknown loss which may
or may not occur”
“An arrangement by which a company or the state undertakes to provide a guarantee of

compensation for specified loss, damage, illness or death in return for payment of a specified
premium.”
Future is always uncertain and full of risk. It is not certain that what is going to happen
tomorrow. Therefore a man is always worried about security of property and life. Insurance is a
means of meeting out loss caused by future risks and uncertainties.
“Insurance is a contract between two parties whereby one party called insurer undertakes
in exchange for a fixed sum called premiums, to pay the other party called insured a fixed
amount of money on the happening of a certain event.”
According to Patterson :–

“Insurance is an agreement between two parties under which one party undertakes
specified future risk of another party and compensates the loss from that risk on payment
of some consideration known as premium payable by the later”.
FEATURES OF INSURANCE
1. Sharing of Risk:
Insurance is a device to share the financial losses which might befall on an
individual or his family on the happening of a specified event. The event may be death of
a bread-winner to the family in the case of life insurance, marine-perils in marine
insurance, fire in fire insurance and other certain events in general insurance, e.g., theft in
burglary insurance, accident in motor insurance, etc. The loss arising nom these events if
insured are shared by all the insured in the form of premium.
2. Co-operative Device:
The most important feature of every insurance plan is the co-operation of large
number of persons who, in effect, agree to share the financial loss arising due to a
particular risk which is insured. Such a group of persons may be brought together
voluntarily or through publicity or through solicitation of the agents.
An insurer would be unable to compensate all the losses from his own capital. So,
by insuring or underwriting a large number of persons, he is able to pay the amount of
loss. Like all co-operative devices, there is no compulsion here on anybody to purchase
the insurance policy.

3. Value of Risk:
The risk is evaluated before insuring to charge the amount of share of an insured,
herein called, consideration or premium. There are several methods of evaluation of risks.
If there is expectation of more loss, higher premium may be charged. So, the probability
of loss is calculated at the time of insurance.
4. Payment at Contingency:
The payment is made at a certain contingency insured. If the contingency occurs,
payment is made. Since the life insurance contract is a contract of certainty, because the
contingency, the death or the expiry of term, will certainly occur, the payment is certain.
In other insurance contracts, the contingency is the fire or the marine perils etc., may or
may not occur. So, if the contingency occurs, payment is made, otherwise no amount is
given to the policy-holder.
Similarly, in certain types of life policies, payment is not certain due to
uncertainty of a particular contingency within a particular period. For example, in term-
insurance then, payment is made only when death of the assured occurs within the
specified term, may be one or two years. Similarly, in Pure Endowment payment is made
only at the survival of the insured at the expiry of the period.
5. Amount of Payment:
The amount of payment depends upon the value of loss occurred due to the
particular insured risk provided insurance is there up to that amount. In life insurance, the
purpose is not to make good the financial loss suffered. The insurer promises to pay a
fixed sum on the happening of an event.
If the event or the contingency takes place, the payment does fall due if the policy

is valid and in force at the time of the event, like property insurance, the dependents will
not be required to prove the occurring of loss and the amount of loss. It is immaterial in
life insurance what was the amount of loss at the time of contingency. But in the property
and general insurances, the amount of loss as well as the happening of loss, are required
to be proved.
6. Large Number of Insured Persons

To spread the loss immediately, smoothly and cheaply, large number of persons
should be insured. The co-operation of a small number of persons may also be insurance
but it will be limited to smaller area. The cost of insurance to each member may be
higher. So, it may be unmarketable.
Therefore, to make the insurance cheaper, it is essential to insure large number of
persons or property because the lesser would be cost of insurance and so, the lower would
be premium. In past years, tariff associations or mutual fire insurance associations were
found to share the loss at cheaper rate. In order to function successfully, the insurance
should be joined by a large number of persons.
7. Insurance is not a gambling:

The insurance serves indirectly to increase the productivity of the community by
eliminating worry and increasing initiative. The uncertainty is changed into certainty by
insuring property and life because the insurer promises to pay a definite sum at damage
or death.
From a family and business point of view all lives possess an economic value
which may at any time be snuffed out by death, and it is as reasonable to ensure against
the loss of this value as it is to protect oneself against the loss of property. In the absence
of insurance, the property owners could at best practice only some form of self-insurance,
which may not give him absolute certainty.
Similarly, in absence of life insurance, saving requires time; but death may occur
at any time and the property, and family may remain unprotected. Thus, the family is
protected against losses on death and damage with the help of insurance.
From the company's point of view, the life insurance is essentially non-
speculative; in fact, no other business operates with greater certainties. From the insured
point of view, too, insurance is also the antithesis of gambling.
Nothing is more uncertain than life and life insurance offers the only sure method of
changing that uncertainty into certainty.
Failure of insurance amounts gambling because the uncertainty of loss is always
looming. In fact, the insurance is just the opposite of gambling. In gambling, by bidding
the person exposes himself to risk of losing, in the insurance; the insured is always
opposed to risk, and will suffer loss if he is not insured.
By getting insured his life and property, he protects himself against the risk of
loss. In fact, if he does not get his property or life insured he is gambling with his life on
property.
8. Insurance is not Charity:

Charity is given without consideration but insurance is not possible without
premium. It provides security and safety to an individual and to the society although it is
a kind of business because in consideration of premium it guarantees the payment of loss.
It is a profession because it provides adequate sources at the time of disasters only by
charging a nominal premium for the service.

IMPORTANCE OF INSURANCE
The process of insurance has been evolved to safeguard the interests of people from
uncertainty by providing certainty of payment at a given contingency. The purpose and need of
insurance can be understood from the point of view of an individual, a group of individuals, a
business or industry and a society as a whole. Following points state the importance of insurance
in context of all these factors:
1. Safety and Security:

The insurance provides safety and security against the loss on a particular event. The
property of insured is secured against loss at a given contingency.

2. Affords Peace of Mind:

The security wish is prime motivating factor. The security vanishes fear and uncertainty,
fire, windstorm, automobile accident, damage and death are almost beyond the control of human
agency and in occurrence of any of these events, may frustrate or weaken the human mind. By
means of insurance, however, much of the uncertainty that centres about the wish for security
and its attainment may be eliminated.
3. Eliminates Dependency:
At the death of husband or father, the destruction of family needs no elaboration.
Similarly at the destruction of property and goods, the family would suffer a lot. The insurance is
her to assist them and provides adequate amount at such times.
4. Business Continuation:
Any particular partnership business may discontinue at the death of any partner although
the surviving partners can restart the business, but in both the cases the business and the partners
will suffer economically. The insurance policies provide adequate funds at the time of death.
Each partner may be insured for the amount of his interest in the partnership and his dependents
may get that amount at the death of the partner.
5. Encourages Savings and Investment:

Life insurance is a way by which the policyholder has to compulsorily pay the premiums
on time which act as his savings and then latter on turn to be his investments. Endowment policy,
multipurpose policies, pension plans create a future income to the policyholder. Thus, insurance
acts as an avenue for savings as well as investments.

6. Economic Growth of the Country:

Insurance provides strong hand and mind, protection against loss of property and
adequate capital to produce more wealth. Insurance protects cattle and crop for farmers, property
like machines and factories for businessmen and also employee’s interest with pension plans, etc.
thus it meets all requirements of the economic growth of the country.
7. Reduction in Inflation:
Insurance extracts money by way of premiums from the public and it provides sufficient
funds for production. Thus, it narrows down the inflationary gap in the economy.
8. Wealth of the Society is Protected:

The loss of particular wealth can be protected with the insurance. Life insurance protects
loss of human wealth. Similarly, loss due to fire, accident, etc. can be well indemnified by
property insurance. Thus we can say that the present, future and potential human and property
resources are well protected. The happiness and prosperity are observed everywhere with the
help of insurance.
METHODS OF INSURANCE
In accordance with study books of The Chartered Insurance Institute, there are the
following types of insurance:

1. Co-insurance :-
Risks shared between insurers.
2. Dual insurance :-
Risks having two or more policies with same coverage.
3. Self-insurance :-
Situations where risk is not transferred to insurance companies and solely retained
by the entities or individuals themselves.
4. Reinsurance :-
Situations when Insurer passes some part of or all risks to another Insurer called
Reinsurer.
TYPES OF INSURANCE

There are various types of insurance as the difference in the financial risks. Today we
will discuss common types of insurance.
Marine Insurance
Marine insurance is an agreement between the insurer and the insured by which the
former undertakes to indemnify the latter, in the manner they have agreed, the financial loss
caused by a certain sea perils in consideration to a certain premium paid periodically or in lump
sum. It is believed that it was the first developed form of insurance. In the ancient times,
international trade used to be done mainly through sea routes and the sea routes were subject to
various risks like collision of a ship with rocks or other ships, attack by sea pirates etc.
Such risks were attached both to the ship and cargo. Hence, the marine insurance was felt
necessary to be secured from the loss of ship, cargo etc. In course of time other types of
insurance were also developed gradually.

There are mainly three components (types) of marine insurance viz, cargo insurance, hull
insurance and freight insurance.
1. Cargo Insurance :-
Cargo Insurance is the insurance of the goods loaded into the ship for delivery that he
party authorized.
2. Hull insurance :-
Hull Insurance refers to the insurance of the full body of the ship against the
probable loss caused by any specified sea perils during a particular journey or for a
certain period of time.
3. Freight insurance :-
Freight Insurance refers to the insurance of the probable loss of freight charges for
the non-delivery of goods by means of any specified sea perils.
Life Insurance
Life insurance came into existence after the development of the marine insurance. The
first life insurers were the marine insurers who started issuing life insurance policies on the life
of the merchants, ship captains and the crew of the ship sailing along with the goods.
Every human beings wants the financial security of his/her life on one hand and the
financial security of his dependent after his death on the other. So it is a contract to recover the

financial uncertainty of the human life in some extent from business valuation method. It is not a
contract of indemnity like other insurance. Hence, life insurance may be defined as the insurance
by which the insurer undertakes to pay the fixed sum of money on the happening of some events
against the receipt of the premium. Thus life insurance contains the elements of security as well
as investment. There are commonly four types of life insurance, I have briefly introduced below.
Whole life policy
It refers to the insurance policy made for the whole life of the insured. In this policy, the
insured has to pay the premium throughout his life or up to certain years usually up to the
retirement age and the insurer compensates the specified amount to the nominee or dependent
after the death of the insured.
Endowment policy
It is the policy which is made for a fixed period of time say, 15, 20 and 25 years etc. In this
policy, the insured has to pay a certain premium up to the specified period and sum insured is
receivable to the insured on the maturity date or to his nominee or dependent on his death
whichever is earlier. It is done for the financial security of the insured at the old age or to his
dependent after his death.
Term policy
It is such a policy, which is made for a dependent only on the death of the policy holder. If
he/she remains survived till the specified period the insurer will not be liable to pay the sum. It is
neither saving nor investment.

Multipurpose policy
It is the one, which covers several benefits through a single policy such as, old age benefit,
retirement age benefit, income assurance benefit, dependent protection benefit etc. against the
payment of a certain premium.
Fire Insurance
Fire insurance is a measure, which provides security against the risk of fire. It was initiated from
England when London city was caught by fire devastation in 1666 A.D. Fire insurance is a
contract between the insurer and insured by which, the former undertakes to indemnify the latter
the financial loss caused by fire in consideration to a certain premium paid periodically or in
lump sum. In this policy, the insured must prove that the loss is caused by fire and that must be
unintentional accident case. It is generally made by the owners of cinema house, business
premises, residential house etc.
Miscellaneous Insurance
There are many other types of insurance policies for different financial risks.
1. Motor insurance
The insurance which is made to compensate the loss of the vehicles by means of
the pre decided events which may be caused by accident or other causes is known as
motor insurance.

2. Burglary/theft insurance
The insurance which is made for getting the compensation of the losses of
property caused by dacoit, burglary or theft that must not be by negligence of the insured
is called burglary insurance.
3. Credit insurance
It is the insurance in which a person or business firm is assured by the insurer to
compensate the loss incurred due to the insolvency of the debtor in consideration to the
payment of a certain premium.
4. Personal accident insurance

It is the insurance, which provides safety to the insured against the risk of
disability due to accident against the payment of a certain premium.
5. Health insurance
It is the insurance under which the insured is paid with a sum of money to cover
his/her hospitalization and medical expenses in case of health loss against the payment of
a certain premium.
6. Aviation insurance
The insurance, which is made to compensate the financial loss caused by aviation
risks and accidents is known as aviation insurance.

PRINCIPLES OF INSURANCE
When a company insures an individual entity, there are basic legal requirements.
Several commonly cited legal principles of insurance include:
1. Principle of Indemnity :-
The insurance company indemnifies, or compensates, the insured in the case of certain
losses only up to the insured’s interest. Indemnity means security or compensation against
loss or damage. The principle of indemnity is such principle of insurance stating that an

insured may not be compensated by the insurance company in an amount exceeding the
insured’s economic loss.
In type of insurance the insured would be compensation with the amount equivalent to
the actual loss and not the amount exceeding the loss. This is a regulatory principal. This
principle is observed more strictly in property insurance than in life insurance. The purpose
of this principle is to set back the insured to the same financial position that existed before
the loss or damage occurred.
Indemnity means security, protection and compensation given against damage, loss or
injury. According to the principle of indemnity, an insurance contract is signed only for
getting protection against unpredicted financial losses arising due to future uncertainties.
Insurance contract is not made for making profit else its sole purpose is to give
compensation in case of any damage or loss. The amount of compensations is limited to the
amount assured or the actual losses, whichever is less.
The compensation must not be less or more than the actual damage. Compensation is not
paid if the specified loss does not happen due to a particular reason during a specific time
period. Thus, insurance is only for giving protection against losses and not for making profit.
However, in case of life insurance, the principle of indemnity does not apply because the
value of human life cannot be measured in terms of money.
2. Principle of Insurable interest :-

The principle of insurable interest states that the person getting insured must have
insurable interest in the object of insurance. A person has an insurable interest when the
physical existence of the insured object gives him some gain but its non-existence will give
him a loss.
In simple words, the insured person must suffer some financial loss by the damage of the
insured object. Under this principle of insurance, the insured must have interest in the subject
matter of the insurance. Absence of insurance makes the contract null and void. If there is no
insurable interest, an insurance company will not issue a policy. The insured typically must
directly suffer from the loss.
Insurable interest must exist whether property insurance or insurance on a person is

involved. The concept requires that the insured have a “stake” in the loss or damage to the
life or property insured. What that “stake” is will be determined by the kind of insurance
involved and the nature of the property ownership or relationship between the persons.
3. Principle of Utmost good faith :-

The insured and the insurer are bound by a good faith bond of honesty and fairness.
Material facts must be disclosed. Under this insurance contract both the parties should have
faith over each other. As a client it is the duty of the insured to disclose all the facts to the
insurance company. Any fraud or misrepresentation of facts can result into cancellation of
the contract.
In principles of insurance, principle of utmost good faith is a contract. In this insurance

contract, the risk loss of is transferred from insured to the insurer. Consequently, there should
be a good trust between the insurer and the insured. The insured must disclose every material
fact about the subject matter of the insurance contract in the proposal form of insurance. The
full, correct and reliable information must be submitted by the insured. In case of any
concealment of fact or false statement, the insurer can declare the contract void, and he will
not be liable for paying any compensation.
4. Principle of Contribution :-
Insurers which have similar obligations to the insured contribute in the indemnification,
according to some method. Principle of Contribution is a corollary of the principle of
indemnity. It applies to all contracts of indemnity, if the insured has taken out more than one
policy on the same subject matter.
According to this principle, the insured can claim the compensation only to the extent of
actual loss either from all insurers or from any one insurer. If one insurer pays full
compensation then that insurer can claim proportionate claim from the other insurers. So, if
the insured claims full amount of compensation from one insurer then he cannot claim the
same compensation from other insurer and make a profit. Secondly, if one insurance
company pays the full compensation then it can recover the proportionate contribution from
the other insurance company.
5. Principle of Subrogation :-
The insurance company acquires legal rights to pursue recoveries on behalf of the
insured; for example, the insurer may sue those liable for the insured’s loss. The principle of
subrogation enables the insured to claim the amount from the third party responsible for the
loss. It allows the insurer to pursue legal methods to recover the amount of loss, For example,
if you get injured in a road accident, due to reckless driving of a third party, the insurance
company will compensate your loss and will also sue the third party to recover the money
paid as claim.
Subrogation means substituting one creditor for another. Principle of Subrogation is an

extension and another corollary of the principle of indemnity. It also applies to all contracts
of indemnity. According to the principle of subrogation, when the insured is compensated for
the losses due to damage to his insured property, then the ownership right of such property
shifts to the insurer. This principle is applicable only when the damaged property has any
value after the event causing the damage. The insurer can benefit out of subrogation rights
only to the extent of the amount he has paid to the insured as compensation.
6. Principle of Mitigation :-
In case of any loss or casualty, the asset owner must attempt to keep loss to a minimum,
as if the asset was not insured. When the event insured against takes place, the policy holder
must do everything to minimize the loss and to save what is left. This principle makes the
insured more careful in respect of this insured property.
In principles of insurance, a principle of mitigation of loss is the fundamental principle.

Under this principle, the insured must give his 100% to save his property and not just sit and
watch destruction of his property. All tough his property is insured his effort should be there
to minimize the losses.

FUNCTIONS OF INSURANCE :-
The function of insurance may vary with its nature and types. It means the functions of
fire or marine insurance may differ from that of life insurance etc. Today I am going to discuss
some common function of the insurance.
Providing financial losses
Insurance provides assurance for the compensation of pre-decided and accidental

financial losses against the premium paid by the insured.

Reducing financial losses
Human beings are exposed to different kinds of risks in their personal as well as business
life. Such risks may cause great financial loss. Insurance acts as a mechanism to reduce or
eliminate the financial loss due to various risks by forecasting the chances of such happenings
and suggesting for their controlling measures.
Mobilization of capital
Insurance accumulates fund in terms of insurance premium from the parties willing to get
secured from the financial losses. Compensation is made to the insured who are actually suffered
and productive sectors. Hence, insurance accumulates fun and mobilized into different areas.
Maintaining Financial stability
Risks and uncertainties create instability in the financial sector. Insurance companies help
to maintain financial stability by assuring for the compensation of the losses caused by various
risks and thus, promotes the performance efficiency, which leads to financial stability.

ADVANTAGES AND DISADVANTAGES OF INSURANCE
Advantages :-
1. Assures for financial compensation

Insurance provides financial security to the insured. It gives guarantee of
compensation against large financial losses in return of small premium.

2. Reduction of risks
Human beings are exposed to different kinds of financial risks, which may cause
large financial losses. It is not possible to eliminate the risks but it can be forecasted and
reduced by applying some precautionary measures. Insurance helps in reducing risks by
suggesting for pre caution measures on one side and by sharing the losses to a group of
person who has agreed to join the common pool.
3. Encouragement to saving and investment

In the insurance agreement, the insured has to pay a certain regular premium to
the insurer in return to the compensation of the probable future loss or compensation at
old age or compensation after his/her death.
Insurance is thus a method of collecting saving from the parties willing to get
secured from the financial risks. Hence, it encourages persons to make regular savings.
4. Basis of credit
An insured can easily get loan by pledging insurance policy as a security from the
insurance company itself. Besides, financial institutions grant credit facilities on the
pledge of the properties which are being insured.
5. Maintains economic stability

Financial risks and uncertainties pushes the entire economy into instability. It is a
very bad sign to total business and social sectors. Insurance assures the compensation of
the financial losses caused by the specified future events and considerably helps in

maintaining economic stability.
6. Promotes business activities

Business sector is more risky sector. The chances of fire in the go down, loss of
stocks by theft, explosion in the ship, train or plane etc. are more frequent in this sector.
Insurance takes away these risks and promotes and develops business activities in
consideration to a nominal charge i.e. premium.
7. Provides employment opportunities

As insurance has become business in the modern day business world, hundreds of
entrepreneurs and thousands of employees have been engaging in this line. Hence, by
establishing and developing insurance companies, it has provided employment
opportunities to thousands of people as per their qualification and calibre.
Disadvantages of Insurance :-
Besides a number of benefits, insurance has also some limitations.
● Insurance leads to negligence as the insured feels that he/she can be compensated for any

loss or damage.
● Insurance companies do not make the compensation promptly on maturity of the policy
or for the financial losses as the expectation of the insured.
● It may lead to the crimes in the society as the beneficiaries of the policy may be tempted
to commit crimes to receive the insured amount.
● Although insurance encourages savings, it does not provide the facilities that are
provided by bank.
INTRODUCTION TO 7 P’S OF INSURANCE

Wherever there is uncertainty there is risk. We do not have any control over uncertainties
which involves financial losses. The risks may be certain events like death, pension, retirement
or uncertain events like theft, fire, accident, etc. Insurance is a financial service for collecting the
savings of the public and providing them with risk coverage. The main function of Insurance is
to provide protection against the possible chances of generating losses. It eliminates worries and
miseries of losses by destruction of property and death.
It also provides capital to the society as the funds accumulated are invested in productive
heads. Insurance comes under the service sector and while marketing this service, due care is to
be taken in quality product and customer satisfaction. While marketing the services, it is also
pertinent that they think about the innovative promotional measures.
It is not sufficient that you perform well but it is also important that you let others know
about the quality of your positive contributions. The term Insurance Marketing refers to the
marketing of Insurance services with the aim to create customer and generate profit through
customer satisfaction. The Insurance Marketing focuses on the formulation of an ideal mix for
Insurance business so that the Insurance organization survives and thrives in the right
perspective.
The best meet the needs of its targeted market. The Insurance business deals in selling
services and therefore due weight-age in the formation of marketing mix for the Insurance
business is needed. The marketing mix includes sub-mixes of the 7 P's of marketing i.e. the
product, its price, place, promotion, people, process & physical attraction.
Role of 7 P’s in Marketing in Insurance Sectors
1. Globally the growth of insurance is encouraging, and same is true with the Indian
Insurance Sector.
2. Insurance is emerging as one of the fastest vehicle in the panorama of the burgeoning
service sector in India.
3. Insurance is practically a necessity to business activity and is important for the growth of
the economy.
4. The Insurance business deals in selling services where the product is intangible and
requires a considerable amount of explanation of the intricacies of various products and
therefore due weightage must be given to the formation of marketing mix for the
Insurance business.
5. The marketing mix includes sub-mixes of the 7 P’s of marketing i.e. the product, its
price, place, promotion, people, process & physical evidence.
6. The present paper focuses on the performance of the Indian Insurance sector in the recent
past and further examines the role of marketing mix in marketing insurance services in
India.
7. It is important for marketers to understand the needs of the market and formulate a
marketing mix which can help the in attracting and retaining customers.

BRIEF INFORMATION ABOUT ALL 7 P’S
PRODUCT :-
A product means what we produce. If we produce goods, it means tangible product and
when we produce or generate services, it means intangible service product. A product is both
what a seller has to sell and a buyer has to buy. Thus, an Insurance company sells services and
therefore services are their product. In India, the Life Insurance Corporation of India (LIC) and
the General Insurance Corporation (GIC) are the two leading companies offering insurance
services to the users. Apart from offering life insurance policies, they also offer underwriting and
consulting services. The intangibility of the service and their non-transferability is applicable to
insurances services also.

Each service product in insurance is specific to the service customer for it has been
designed, to which the financial bonus etc., in case the insurance industry refers to the product
insurance policies that are sold to the customer along with the risk coverage. The risk coverage is
the intangibility for the happening that may not even take place hence the tangibility is provided
by a policy to the customer.
The formulation of product mix for the insurance business makes it significant to take a
look at the services and schemes of insurance organisations. The product portfolio is known and
the process of formulating a package should be known. It is natural that the users expect a
reasonable return for their investments. It is quite natural that the insurance organisations want to
maximise profitability. Both of these dimensions are found interrelated.
It is well known that the key objectives of insurance business are mobilisation of savings
and channelisation of investments. This makes it essential that insurance business is made
lucrative so that the users /potential users get incentives to buy a policy or to invest in the
insurance organisations. The insurance organisations also need to promote the underwriting
activities, which would activate the process of arresting the regional imbalance. In the context of
formulating the product mix, it is essential that the insurance organisations promote innovation
and in the product portfolio include even those services and schemes which are likely to get a
positive response in the future.
The corporate objectives indicate that the insurance organisations are required to be
careful, especially while launching a new policy. The policies should not only generate enough
premium but it is also important that the policies cover persons working in the informal sector,
serving as porter, working as manual labourers, or engaged in farm sector. It is the need of the
hour that the insurance organisations make their service internationally competitive. This makes
a strong advocacy in favour of innovative product mix strategy for the public sector insurance
organisations. Thus the formulation of product mix should be in face of innovative product
strategy. Strategies of foreign and private insurance companies should be taken into

consideration while initiating the innovative process.
The policies have been adding on values, new proposals, and new selling USPs with the
introductions of global competition in the Indian insurance industry. The current list some of the
policy offers reads as under :-
1. Life insurance policy

2. Life endowment policy
3. Term life policy
4. Equity linked policies
5. Tax saving policies
6. Investment growth and life insurance linked policies
7. Accident insurance policy
8. Health insurance policy
9. House and insurance policy
10. Liability insurance policy
11. Travel and in transit insurance policy
12. Commercial insurance policy
13. Automobile and vehicle insurance policy
14. Baggage and personal belonging insurance policy
15. Cattle and live stock policy
16. Engineering insurance
17. Marine cargo insurance
18. Air cargo insurance
In fact the insurance policy changes its face almost everyday with the insurance
companies adding on values to the existing policies, innovating new ways of attracting customers
for their innovative policies could also be linked to the tax saving motivations or even earning
more returns through managing of investments by the insurance companies. That means the

insurance products now have a constituent of the financial management besides the normal
components of the life and property of the customers.
➢ Thus the product planning and development should:
1. Give due weightage to the socially and economically backward classes.

2. Maximise the mobilisation of savings by offering lucrative schemes.
3. Assign due weightage to interests of investors.
4. Maintain economy in business by promoting cost effectiveness.
5. Act as a trustee of policyholders.
6. Keep in mind the emerging trends in business environment.
7. Improve the quality of customer / user services.
➢ Product Planning & Development
1. The purpose of insurance business is to generate profits besides subserving the social
interests. The present business is likely to be more competitive.
2. Product is like a stage on which the entire drama of successful marketing is acted. It is
like an engine that pulls the rest of the marketing programmes. It is in this context that the
product management in an insurance organisation needs an intensive care.
3. Yesterday, the policyholders had limited hopes and aspirations but today they expect
more and they would even like something more tomorrow. This focuses on the fact that
strategic decisions are influenced by the environmental conditions.
4. The product development needs a new vision, a new approach and a new strategy. Till
now the public sector insurance organisations have made possible an optimum utilisation

of their marketing resources especially in rural areas where tremendous opportunities are
available. Thus they should assign due weightage to the development services /schemes
which cater to changing needs and requirements of the rural segment.
PRICE :-
In the insurance business, the pricing decisions are concerned with the premium charged
against the policies interest charged for defaulting the payment of premiums & credit facilities,
commission charged for underwriting & consultancy services. The formulation of pricing
strategies becomes significant with the viewpoint of influencing the target market or prospects.
To be more specific in the Indian context where the disposable income in the hands of prospects
is found low, the increasing inflationary pressure has been instrumental in contracting the
discretionary income, the increasing consumerism has been making an assault on the saving
potentials of masses, it is pertinent that the insurance organizations in general & public sector
insurance organizations in particular adopt such a strategy for pricing that makes it a
motivational tool & paves the ways for increasing the insurance business. Of course, a
motivational pricing strategy is required to be given due weightage. This necessitates a new
vision for setting premium structure & paying the bonus & charging the interest.
The strategy may have a new vision in the sense that the insurance organizations prefer to
make a mix of high & low pricing strategy. The motive is to make the premium structure
commercially viable so that the insurance organisations succeed in having a sound product
portfolio besides fuelling development orientation. The pricing decisions make it essential that
the insurers keep in their minds the nature of policy vis-à-vis the segment to which the prospects
belong.
Following are the Pricing strategies made by Insurance company :-

i. The premium charged against the policies,

ii. Interest charged for defaulting the payment of premium and credit facility, and
iii. Commission charged for underwriting and consultancy activities.
In the tangible products, cost of production is taken as the basis for fixation of prices.
Even in the insurance business, it is found to be an important consideration & a dominating base.
This makes the cost of insurance a decisive factor for charging premium. The important bases for
determining the cost are rate of death, rate of interest & the expenses incurred on the insurance
business. The mortality table helps the determination of death rate. It is to predict future
mortality. The best method of construction of mortality table is to select a large number of
persons at attained age, which is meant age close to the birth rate. The second important element
is the rate of interest.
On the basis of mortality rate, it is estimated that when & how much amount is to be
received as premium & would be paid as claims but on the basis of interest rate, it is estimated
that how much interest can be earned by investing the insurance funds.
With a view of influencing the target market or prospects the formulation of pricing
strategy becomes significant. The pricing in insurance is in the form of premium rates. The three
main factors used for determining the premium rates under a life insurance plan are mortality,
expense and interest. The premium rates are revised if there are any significant changes in any of
these factors.
1. Mortality (deaths in a particular area) :-

When deciding upon the pricing strategy the average rate of mortality is one of

the main considerations. In a country like South Africa the threat tolife is very important
as it is played by host of diseases.
2. Expenses :-
The cost of processing, commission to agents, reinsurance companies as well as
registration are all incorporated in to the cost of installments and premium sum and forms
the integral part of the pricing strategy.
3. Interest:-
The rate of interest is one of the major factors which determines people's
willingness to invest in insurance. People would not be willing to put their funds to invest
in insurance business if the interest rates provided by the banks or other financial
instruments are much greater than the perceived returns from the insurance premiums.
The process of rate of fixation in the insurance organizations is not so scientific &
identifies the cases of moral hazard. It is easier to identify the physical hazard but the task of
identifying the moral hazard is found difficult. The premium charged is to be made rational to
cater to the payment of claims on a priority basis including the catastrophic losses, management
expenses & margin of profit. It is essential that various related to both the hazards are estimated
in a scientific way. The actual process of rating consists of three steps, e.g. classification,
discrimination & scheduling.
The price mix decisions are:
1. Making possible cost of effectiveness.

2. Restructuring of premium.
3. Due priority to profit generating investments.
4. Rationalizing or optimizing the social costs.

5. Paving avenues for channelising the productive investments.
6. Assigning dude weightage to the policies meant for the socially & economically
backward classes.
7. Making the ways for maximizing profit.
PLACE :-
This component of the marketing mix is related to two important facets
i) Managing the insurance personnel, and
ii) Locating a branch.
The management of agents and insurance personnel is found significant with the view
point of maintaining the norms for offering the services. This is also to process the services to the
end user in such a way that a gap between the services- promised and services - offered is
bridged over. In a majority of the service generating organizations, such a gap is found existent
which has been instrumental in making worse the image problem. The transformation of
potential policyholders to the actual policyholders is a difficult task that depends upon the
professional excellence of the personnel. The agents and the rural career agents acting as a link,
lack professionalism.
The insurance personnel if not managed properly would make all efforts insensitive.
Even if the policy makers make provision for the quality upgradation, the promised services

hardly reach to the end users. This makes it significant that the insurance organizations in general
and the public sector insurance organizations in particular keep their minds in changing the
expectations of customers and the prospects. The behavioral profile of insurance personnel is
studied in a right fashion and the changes required due to the changing perception of expectation
are incorporated. It is essential that they have rural orientation and are well aware of the
lifestyles of the prospects or users. They are required to be given adequate incentives to show
their excellence.
While recruiting agents, the branch managers need to prefer local persons and by
conducting refresher courses to brush up their faculties to know the art of influencing the
users/prospects. In addition to the agents, the front-line staff also needs an intensive training
programme. This makes it essential that the branch managers organize an ongoing training
programme, which focuses on behavioral management.
Another important dimension to the Place Mix is related to the location of the insurance
branches. While locating branches, the branch manager needs to consider a number of factors,
such as smooth accessibility, availability of infrastructural facilities and the management of
branch offices and premises.
In addition it is also significant that the branch managers assign due weightage to the
safety provisions. The management of offices makes it significant that the branch managers are
particular to the office furnishing, civic amenities and facilities, parking facilities and interior
office decoration.
Thus the place management of insurance branch offices needs a new vision, distinct
approach and an innovative style. This is essential to make the work place conducive, attractive

and proactive to the generation of efficiency. The motives are to offer the promised services to
the end users without any distortion and making the branch offices a point of attraction. The
branch managers need professional excellence to make place decisions productive.
PROMOTION :-
The insurance services depend on effective promotional measures. In a country likeIndia,

the rate of illiteracy is very high and the rural economy has dominance in the nationaleconomy.
It is essential to have both personal and impersonal promotion strategies. In promoting insurance
business, the agents and the rural career agents play an important role.Due attention should be
given in selecting the promotional tools for agents and rural career agents and even for the
branch managers and front line staff. They also have to be given proper training in order to create
impulse buying. Advertising and Publicity, organisation of conferences and seminars, incentive
to policyholders are impersonal communication. Arranging Kirtans, exhibitions, participation in
fairs and festivals, rural wall paintings and publicity drive through the mobile publicity van units
would be effective in creating the impulse buying and the rural prospects would be easily
transformed in to actual policyholders.

With the advent of private players in the insurance, companies resort to rampant
promotion. Promotion mix for this sector is as follows:
Advertisement
Advertisement can be done through the telecast media, broadcast media and print media.
Insurance companies have been making optimal use of all the three kinds. Use of World Wide
Web, as media is almost negligible and will not be very frequent in the near future considering
the fact that the majority of customer base of these companies is not yet exposed to the Internet.
The telecast media has been the most effective of all in case of the insurance sector. Most of the
companies have their separate advertising section to take care of this aspect. An important
consideration while making the decision as to the selection of the media is budgetary constraint.
Publicity
It is a device to promote business without making any payment and therefore it could be
also called as unpaid form of persuasive communication bearing a high rate of sensitivity.
Developing rapport with the media is an important aspect of publicity. This makes it essential
that the PR officers working in the insurance organisations maintain contacts with the media
personnel, organise press conference, and offer small gifts and momento to them. These days
LGD marketing is gaining popularity the world over. It also can be applicable here. At the apex
and regional levels, the PRO’s bear the responsibility of projecting positive image of the
organisation. Thus it is necessary to select suitable personnel for this. They should be in
particular taught to deal with people, simple things like talking, greeting etc.

Sales Promotion
Incentives to the end users for taking the policy play an important role in promoting the
insurance business. Since the insurance business is also related to achieving of a particular target,
it is pertinent that the policymakers assign due weightage to the same. The offering of small gifts
during a particular period, the rebate, discount, bonus can increase business of organisation by
leaps and bounds. Besides, there can be gifts for the insurance agents also.
Personal Selling
Personal selling in case of the insurance organisations is quite important considering the
existence of the insurance agents spread at all levels. Selection of these agents, their training is
responsibility of the organisation. There is difference in urban and rural market. Rural customers
might be uneducated / uninformed etc. compared to the urban customer. Hence the organisations
will have to make selections of the rural and urban agents accordingly.
Word of Mouth Promoting.
The word – of- mouth communications result into wider publicity, which substantially
sensitise the process of influencing the impulse of users/prospects of the insurance services. The
satisfied group of customers, opinion leaders, the social reformists, the popular personalities act
as word of mouth communicators. The advertisement slogans may be insensitive, the publicity
measures may be ineffective but the positive feelings of friends and relations communicated
cannot be ineffective. This makes it clear that the most important thing in the promotion of any
business is the quality of services.

Telemarketing
With the development of satellite communication facilities and with the expansion of the
television network, we find telemarketing gaining popularity the world over. The insurance
organisations in general need to promote telemarketing. The foreign insurance companies have
been assigning due weightage to this and in India this is beginning to gain importance with the
advent of competition in this sector. The telemarketer is supposed to be well aware of the
telephonic code so that the task of satisfying the customers/their queries will not consume much
of time.
World Wide Web
In banking as well as insurance, more and more importance is being given to online
contact facilities whereby complaints/comments could be sent through an email. Email is fastest
written mode of communication and since it has been recognized legally, its use to clear doubts
has been in full swing.
PEOPLE :-
People are most important component of marketing mix for the insurance industry.
Sophistication in the process of technological advances makes the ways for the personnel in such
a way that an organization succeeds in making possible a productive utilization of technologies
used or likely to be used. Professional qualification requirements change as technological
develops & evolves. The use of computers microcomputers, fax machines, sophisticated
telephonic service, e-mailing, intra-net service have been found throwing a big impact on the
perception of quality of service.

This makes it essential that the insurance organizations also think in favour of developing
personnel in line with the development and use of information technologies. The front-line-staff
as well as the branch managers are required to be given the training facilities so that they in
position to make possible an effective use of the technologies.
The insurance organizations bear the responsibility of developing the credentials of their
employees. In this context, it is also significant that they think about the behavioral profile of
insurance personnel. It is pertinent that the employees are well aware of the behavioral
management. They know & understand the changing level of expectations of users & make
sincere efforts to fulfill the same.
In this context, it is also significant that the senior executive while recruiting, training &
developing the insurance personnel make it sure that employees serving the organization have a
high behavioral profile in which empathy has been given due place. The psychological attributes
become significant with the viewpoint of influencing the prospects or retaining the users.
It is in this context that the insurance companies need a rational plan for the development
of insurance personnel. Understanding the customer better allows to design appropriate products.
Being a service industry which involves a high level of people interaction, it is very important to
use this resource efficiently in order to satisfy customers.
Training, development and strong relationships with intermediaries are the key areas to
be kept under consideration. Training the employees, use of IT for efficiency, both at the staff
and agent level, is one of the important areas to look into. Human resources can be developed
through education, training and by psychological tests. Even incentives can inject efficiency and
can motivate people for productive and qualitative work.
PROCESS :-
The process should be customer friendly in insurance industry. The speed and accuracy
of payment is of great importance. The processing method should be easy and convenient to the
customers. Installment schemes should be streamlined to cater to the ever growing demands of
the customers. IT & Data Warehousing will smoothen the process flow.

IT will help in servicing large no. of customers efficiently and bring down overheads.
Technology can either complement or supplement the channels of distribution cost effectively. It
can also help to improve customer service levels. The use of data warehousing management and
mining will help to find out the profitability and potential of various customers product
segments.
1. Flow of activities :-
All the major activities of banks follow RBI guidelines. There has to be adherence
to certain rules and principles in the banking operations. The activities have been
segregated into various departments accordingly.
2. Standardization :-
Banks have got standardized procedures got typical transactions. In fact not only
all the branches of a single-bank, but all the banks have some standardization in them.
This is because of the rules they are subject to. Besides this, each of the banks has its
standard forms, documentations etc. Standardization saves a lot of time behind individual
transaction.
3. Customization :-
There are specialty counters at each branch to deal with customers of a particular
scheme. Besides this the customers can select their deposit period among the available
alternatives.

4. Number of stores :-
Numbers of steps are usually specified and a specific pattern is followedto
minimize time taken.
5. Simplicity :-
In banks various functions are segregated. Separate counters exist with clear
indication. Thus a customer wanting to deposit money goes to deposits counter and does
not mingle elsewhere. This makes procedures not only simple but consume less time.
Besides instruction boards in national boards in national and regional language help the
customers further.
PHYSICAL EVIDENCE :-

Distribution is a key determinant of success for all insurance companies. Today, the
nationalized insurers have a large reach and presence in India. Building a distribution network is
very expensive and time consuming. Technology will not replace a distribution network though
it will offer advantages like better customer service. Finance companies and banks can emerge as
an attractive distribution channel for insurance in India. In Netherlands, financial services firms
provide an entire range of products including bank accounts, motor, home and life insurance and
pensions. In France, half of the life insurance sales are made through banks. In India also, banks
hope to maximize expensive existing networks by selling a range of products. The physical
evidences include signage, reports, punch lines, other tangibles, employee‘s dress code etc.
1. Tangibles :-
Banks give pens, writing pads to the internal customers. Even the passbooks,
chequebooks, etc. reduce the inherent intangibility of services.
2. Punch lines :-
Punch lines or the corporate statement depict the philosophy and attitude of the
bank. Banks have influential punch lines to attract the customers. Banking marketing
consists of identifying the most profitable markets now and in future, assessing the
present and future needs of customers, setting business development goals, making plans-
all in the context of changing environment.
3. Signage :-
Signage personifies the insurance company. It gives an identity by which users
recognize the company. A signage depicts the company’s philosophy and policy.

Physical evidence is the environment in which the service is delivered and where the
company and the customers interact and any tangible goods that facilitate the performance and
communication of the service.
Services are intangible and heterogeneous. Intangibility means that services cannot be
displayed, physically demonstrated or illustrated; heterogeneity means that consumers cannot be
certain about performance on any given day. It plays a major role in enhancing customers’
perception of the service quality.
However, in case of insurance sector, the customer rarely visits the insurance company.
The customer comes mostly only in contact with the service provider.
Companies try to demonstrate their service quality through physical evidence and
presentation. However, in case of insurance sector, the customer rarely visits the insurance
company. The customer comes mostly only in contact with the service provider hence the service
provider (insurance agent) should
● Look presentable
● Have a pleasant personality
● Have good communication skills

CASE STUDY
7 P’S IN LIC (LIFE INSURANCE CORPORATION) :-
Life Insurance Corporation of India or simply known as LIC is an Indian company that
deals in insurance and investments. This largest company of insurance is an Indian state owned
company and has its headquarters in Mumbai, India. Life Insurance Corporation was established
in the year 1956 after the Indian parliament passed an act to nationalize the industry of private
insurance.
Nearly two hundred and forty five companies of insurance were merged in order to create
this company LIC. Since that time until the year 2000, the sector of insurance has been under the
monopoly of LIC. The main objective of nationalization of LIC- Life Insurance was to remove
the risk of loss and to provide the policyholder the protection in terms of money.
Product in the 7 P’S of LIC
LIC- Life Insurance has designed several products in accordance with the requirements of
the common people. Insurance is mainly taken out with the purpose of providing for the family
members in case of death by natural causes or accident to the breadwinner of the family. LIC-
Life Insurance offers its customers various insurance products such as the following-
• Life Insurance
• Investment Management
• Health Insurance
• Mutual Fund
• Property Insurance
• Auto Insurance
• Home Insurance
• Casualty Insurance
•Liability Insurance
•Credit Insurance
Besides this, various pension plans, annuities, group schemes, special plans and unit-
linked plans are also in place for the benefit of consumers. LIC- Life Insurance has also launched
several products especially for children, senior citizens, women and handicapped. LIC also has
schemes for people who are on the borderline of poverty.
Place in the 7 P’s of LIC
As LIC- Life Insurance is a service industry, the distribution of its products and facilities
is done through various channels – direct and indirect. Numerous routes are taken to reach the
potential customers. The most important and basic channel member until this date has been the
“Insurance agent”. Taking various innovative routes in order to reach the corner that is the
farthest and remotest is the objective of the LIC Company. Physical distribution of the service
products, which in this case is funds and support at the right time and place is an important factor
of marketing policy of LIC- Life Insurance Company.
The organization’s channel of distribution consists of agents, brokers, development

officers, retail services related to finance, branch office, alliance with banks and distributors,
corporate agencies and proper and well-maintained infrastructure. Presently LIC- Life Insurance
distributive channel consists of numerous development officials, agents and service branches
who are active participants. Presently the number of zonal offices LIC has is eight, divisional
offices are 109, satellite offices is 992, branches is 2,048 and numerous corporate offices. It also
has a network of corporate agents that are 242, individual agents that are 1,337,064, referral
agents that are79, brokers that are 98 and tie-ups with 42 banks.

organization’s channel of distribution consists of agents, brokers, development officers,

retail services related to finance, branch office, alliance with banks and distributors, corporate
agencies and proper and well-maintained infrastructure.
Presently LIC- Life Insurance distributive channel consists of numerous development

officials, agents and service branches who are active participants. Presently the number of zonal
offices LIC has is eight, divisional offices are 109, satellite offices is 992, branches is 2,048 and
numerous corporate offices. It also has a network of corporate agents that are 242, individual
agents that are 1,337,064, referral agents that are79, brokers that are 98 and tie-ups with 42
banks.
Price in the 7 P’s of LIC
A suitable pricing policy is a very important factor in the successful running of an

insurance company as it is the pricing policy that affects the sales volume of a company. Price is
actually the valuation that is offered for the product by the offerer. For any LIC- Life Insurance
policy, the policyholder has to pay a premium that is paid either annually, half-yearly, quarterly
or in some cases monthly. The management takes the decision of fixing the premium of every
policy relating to a particular period.
A complete market analysis is done and information about various facts are collected like
how much money can an individual afford for a particular scheme, and what is the economic and
financial condition of the market at that particular time. This data helps in making the fair and
reasonable pricing policies. The management also makes pricing decisions about the premium
mode, premium level, investment return, loan interest and the commissions. If you compare LIC
products with other insurance products, then you will find that LIC is very much a value for

money product. With its excellent brand value, and service quality, a customer can get full value
as per the price paid for an LIC product.
Promotions in the 7 P’s of LIC
The promotional strategy of LIC- Life Insurance is very simple and straightforward. Its
main aim is to inform the consumers about its various policies and about its brand. In order to
fulfill this it has taken steps like personal selling, exhibitions, demonstrations at events,
advertising and new schemes. Bags, diaries calendars are distributed as gifts and incentives to the
policyholders. Advertisements are shown on televisions, newspapers, billboards as promotional
activities.
A mobile van for publicity roams across the rural areas creating awareness about the
company. LIC- Life Insurance has its own website and webpage where all the detailed
information about every possible query is supplied to satisfy the consumers. The majority of
advertising is driven towards insurance which can be purchased by the common man so as to
increase the reach of the company and at the same time, the sale of the product. Thus, product
introduction and product retention in the mind of the customers is the major objective of
promotions by Life insurance corporation.

7 P’S IN BAJAJ ALLIANZ :-
Product in the 7 P’s of Bajaj Allianz
Following are the products provided by Bajaj Allianz company :
1. Motor Insurance
2. Asset Insurance
3. Health Insurance
4. Travel Insurance
5. Corporate Insurance
Price in the 7 P’s of Bajaj Allianz
The price structure is based on the type of policies of Bajaj Allianz company. The three
main factors used for determining the premium rates under a life insurance plan are mortality,
expense and interest. The premium rates are revised if there are any significant changes in any of
these factors.
Place in the 7 P’s of Bajaj Allianz

Thus in Bajaj Allianz the place management of insurance branch offices needs a new
vision, distinct approach and an innovative style. This is essential to make the work place
conducive, attractive and proactive to the generation of efficiency.
Promotion in the 7 P’s of Bajaj Allianz
1. Huge advertisements on Television and radios.

2. Tele-marketing
3. Promotion in front of corporate offices

4. Internet marketing
5. Hoardings and brochures
People in the 7 P’s of Bajaj Allianz
People are the main assets of financial organizations because of service factor attached to
it. . Training the employees, use of IT for efficiency, both at the staff and agent level, is one of
the important areas to look into. Human resources can be developed through education, training
and by psychological tests.
Process in the 7 P’s of Bajaj Allianz
The prestigious awards itself speaks the smooth functioning of the insurance activity. The
processing method should be easy and convenient to the customers. Installment schemes should
be streamlined to cater to the ever growing demands of the customers.

Physical Evidence in the 7P’s of Bajaj Allianz
The physical evidences include signage, reports, punch lines, other tangibles, employee‘s
dress code etc.
Research analysis
Questionnaire with answers

Conclusion
In India, banks hope to maximize expensive existing networks by selling a range of

products. It is anticipated that rather than formal ownership arrangements, a loose network of
alliance between insurers and banks will emerge, popularly known as bank assurance. Another
innovative distribution channel that could be used are the non-financial organisations.
We can‘t deny the fact that if foreign banks are performing fantastically, it is not only due
to the sophisticated information technologies they use but the result of a fair synchronization of

new information technologies and a team of personally committed employees. The development
of human resources makes the ways for the formation of human capital. This background, the
study is done to analyse the profitability of select private sector banks in India. It is identified
that banks differ in terms of Interest Spread, Return on Long Term Fund (%), Return on Net
Worth, Return on Assets Excluding Revaluations, Interest Expended / Interest Earned, Operating
Expense / Total Income and Selling Distribution Cost Composition.
This may be due to the managerial and administrative differences across various banks.
Further, it is attempted to find the difference in profitability aspects of banks over a period of
time. Adjusted Cash Margin (%) and Net Profit Margin ratio showed a significant difference
over the years. It shows that there is a change in total income and net profit. This is due to the
growth and advances made by these banks over the same period.
APPENDIX
QUESTIONNAIRE
Gokhale Education Society’s
SHRI BHAUSAHEB VARTAK ARTS, COM. AND SC. COLLEGE
AND
SHETH K. V. PAREKH ARTS COMMERCE JR COLLEGE
Gokhale Mahavidyalay Marg, Borivali (W),
Mumbai -400 091

(NAAC: B & ISO 9001 2008 CERTIFIED)
Questionnaire on Insurance Company survey
Name of Insurance Company : ________________________________________
Branch : _________________________________________________________
Address : __________________________________________________________
__________________________________________________________
_________________________________________________________.
1. What support, tools/ resources, skills or empowerment do you need to be

more effective?
Ans.:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________.
2. How long you are using the internet?

Less than a month
Less than a year

1-2 years
2-4 years
More than 4 years
3. Do you think brand equity plays any role?

Yes
No
4. What according to you helps us take any decision?

Price Factor Quality of Printing
Per Page Cost All the Factor
5. Do you submit financial report of the company to a state institution?

Yes
No
6. Is there any product or service that you require that is currently not offered?
Ans.:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________.
7. How is the quality of customer service you received?
Very poor

Average
Superior
8. How satisfied are customer with your products?
Very poor
Average
Superior
9. How long has your company been operating in the Indian Market?
Less than a month

Less than a year
1-2 years
2-4 years
More than 4 years
10.With how many other companies your company is competing in Insurance

Market?
Ans.:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________.

11.While advertising what is the main message that you wish to convey about
insurance to your customer?
Ans.:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________.
12.What have been the growth strategies of your company?
Focus on Advertising
Focusing on proper channel mix for distribution of product
Brining out products that suit specific needs of the buyer.
Managing the marketing mix in an integrated manner.
13.What is your current market share of the Insurance business being done in
India?
Ans.:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________.
14. Which are the different modes that have been adopted by your company to
deliver the brand message in an effective and efficient manner?
Advertising in electronic and print media.

Stressing long term relationships with the customers and creating
brand loyalty.

Using the brand value proposition as the key deriver of your

company’s strategy.
Making use of tools like PR sponsorship events and getting media to
talk about brand.
15.Which are the different methods of promotional mix strategies had been
adopted by your company?
Advertising in electronic and print media

Word of mouth
Telemarketing
Sales promotion
Combination of all of them
16. Can you express in terms of increase in volume of business, percentage of

growth and/or average of new lives?
Ans.:
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________.


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7 P’s OF INSURANCE

T.Y.B.COM (Banking & Insurance) 2015-2016Page 1

T.Y.B.COM (Banking & Insurance) 2015-2016Page 2

GUIDELINES PROVIDED BY IRDA TO INSURANCE COMPANIES :-

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MEANING AND DEFINITION OF INSURANCE

“Insurance is a contract in which a sum of money is paid to the assured as consideration

“Insurance is a cooperative form of distribution a certain risk over a group of persons

“An arrangement by which a company or the state undertakes to provide a guarantee of

T.Y.B.COM (Banking & Insurance) 2015-2016Page 6

T.Y.B.COM (Banking & Insurance) 2015-2016Page 7

T.Y.B.COM (Banking & Insurance) 2015-2016Page 8

6. Large Number of Insured Persons

7. Insurance is not a gambling:

8. Insurance is not Charity:

T.Y.B.COM (Banking & Insurance) 2015-2016Page 10

1. Safety and Security:

T.Y.B.COM (Banking & Insurance) 2015-2016Page 11

2. Affords Peace of Mind:

5. Encourages Savings and Investment:

T.Y.B.COM (Banking & Insurance) 2015-2016Page 12

6. Economic Growth of the Country:

8. Wealth of the Society is Protected:

T.Y.B.COM (Banking & Insurance) 2015-2016Page 13

T.Y.B.COM (Banking & Insurance) 2015-2016Page 14

T.Y.B.COM (Banking & Insurance) 2015-2016Page 15

T.Y.B.COM (Banking & Insurance) 2015-2016Page 16

Whole life policy

T.Y.B.COM (Banking & Insurance) 2015-2016Page 17

T.Y.B.COM (Banking & Insurance) 2015-2016Page 18

4. Personal accident insurance

T.Y.B.COM (Banking & Insurance) 2015-2016Page 19

T.Y.B.COM (Banking & Insurance) 2015-2016Page 20

2. Principle of Insurable interest :-

T.Y.B.COM (Banking & Insurance) 2015-2016Page 21

Insurable interest must exist whether property insurance or insurance on a person is

3. Principle of Utmost good faith :-

In principles of insurance, principle of utmost good faith is a contract. In this insurance

Subrogation means substituting one creditor for another. Principle of Subrogation is an

In principles of insurance, a principle of mitigation of loss is the fundamental principle.

T.Y.B.COM (Banking & Insurance) 2015-2016Page 24

Providing financial losses

Insurance provides assurance for the compensation of pre-decided and accidental

T.Y.B.COM (Banking & Insurance) 2015-2016Page 25

Reducing financial losses

Maintaining Financial stability

T.Y.B.COM (Banking & Insurance) 2015-2016Page 26

ADVANTAGES AND DISADVANTAGES OF INSURANCE

1. Assures for financial compensation

T.Y.B.COM (Banking & Insurance) 2015-2016Page 27

3. Encouragement to saving and investment

5. Maintains economic stability

T.Y.B.COM (Banking & Insurance) 2015-2016Page 28

maintaining economic stability.

6. Promotes business activities

7. Provides employment opportunities

Besides a number of benefits, insurance has also some limitations.

T.Y.B.COM (Banking & Insurance) 2015-2016Page 29

INTRODUCTION TO 7 P’S OF INSURANCE

T.Y.B.COM (Banking & Insurance) 2015-2016Page 30

Role of 7 P’s in Marketing in Insurance Sectors

T.Y.B.COM (Banking & Insurance) 2015-2016Page 33

BRIEF INFORMATION ABOUT ALL 7 P’S

T.Y.B.COM (Banking & Insurance) 2015-2016Page 34