Existing Marketing Practices, Problems and Way Forward: Evidence from Nepalese Nonlife Insurance Sector

• Insurance Service Marketing

In Oxford Dictionary meaning of service is intangible product (Simpson & Weiner, 1989). Service is taken as a deed, processes and performances that bring values/benefits for customers that are created in the form of convenience, healthiness, comfort, amusement, education, timeliness, security etc. for customers (Zeithaml et al., 2011). Insurance is a kind of offering security service to the customer. Insurance companies sell a promise of contract to the customer and compensate on the happening of event as prescribe in the contract. Insurance marketing as a service start with before selling, during and after selling.

In 1991 World Trade Organization (Awale, 2017) secretariat have classified service sector into twelve sectors (business services, communication, construction, distribution, educational, environmental, financial, health, tourism, recreational, transportation, other services). These twelve have been further divided into 160 sub sectors. World Trade Organization has only considered tradable services in its list, there are much more services that we can add to this list. Insurance is major part of financial services. Insurance services are further divided into following:

• All insurance and insurance-related services
• Life, accident and health insurance services
• Non-life insurance services
• Reinsurance and retrocession (reinsurance of reinsurance)
• Services auxiliary to insurance (including broking and agency services)

Insurance business is a form of risk management and designed to compensate against losses if predetermine event is occurred. The insurance company pays for losses to another in exchange for monetary compensation known as premium paid by policyholders. Insurance companies provide services by pooling of risk by underwriting insurance and annuities. Establishments engaged in this activity collect fees, insurance premiums, or annuity considerations; build up reserves; invest those reserves; and make contractual payments. Fees are based on the expected incidence of the insured risk and the expected return on investment (Gurung, 2017).

The word ‘market’ has been derived from the Latin word ‘mercatus’ which means ‘place of buying and selling’. Marketing has been still taken as advertising and selling (telling and selling) in laymen’s sense. In modern sense today, selling is taken as ‘just the beginning’ of marketing. There is marketing before selling as well as after selling.

1. Marketing Gaps in Insurance Sector

The study adopted a famous gap model by (Zeithaml et al., 2011) to find the gap in insurance sector marketing. This model is still seems very relevant in recent service marketing in insurance sector marketing. For this the study carried out interview with seven marketing personnel from corporate and branch office. For digging out the problems in marketing ins insurance sector in nonlife insurance market semi structured interview via Zoom is administered. The marketing personnel selected based on continent sampling. The participants have an experience ranging from minimum eight years to 25 years. Following are the gaps found from the discussion.

Generally, because of the wider gaps between objectives and outcomes the expected objectives are no are not fulfilled. Insurance service marketing can be learnt in the way how gaps in insurance services are fulfilled by Insurance Company.

To start with gaps can be broadly divided into two categories customer gap and Insurance company gaps.

1. Customer gap:

Customer gap is gap between what customer expectation from insurance service and what customer perceives in the insurance service.

2. Insurance company gaps:

Wider gaps in the insurance company part lead to unsatisfied customer. Insurance company need to address the gap on time. The reasons for company gap can be categorized into four parts. The details are presented below.

Reasons for Gap 1: Not knowing What Customer is Expecting

Gap between customer’s insurance service expectations and Insurance Company understands of customer’s insurance service expectations (gap between customer expectation and company understanding). That is, not knowing what customer is expecting. Reasons for not knowing what customers expect are due to

• Lack of research
• Lack of upward communication
• Lack of relationship

For sustainable development of insurance sector research is key. Research helps to identify the key problems and possible solution to overcome the problems. Nepalese insurance seems give very less priority in research. Insurance Company neither carryout research inner house nor hire experts from the market. Most of the products in offer are imitative one and compulsory one.

The communication is mostly downward. Company don’t seem to make the professional relationship with the customer. Due to intense and unhealthy competition in the market, marketing personnel are force to “Buy the insurance policy rather than sell” through rate cutting in nontariff rate. On the other hand marketing personnel has to meet the target so sometime they have no option selling the insurance policy on credit. Due to these reasons good long term relationship with the prospects customer is a very challenging for marketing personnel.

Reasons for Gap 2: Not Selecting Right Service Designs and Standards

Gap between what Insurance companies understands of customer’s insurance service expiations and insurance service designs and standards. That is, not selecting right insurance service designs and standards. Reasons for not selecting right service designs and standards are due to

• Lack of standard service quality based on customer perception
• Lack of proper coordination between customer and intermediary
• Lack of effective service development process/design

In Nepalese insurance sector marketing plans are not based on situation analysis of the business environment. Marketing programs are just the copy of competitors and following of the trends, not realizing competitive advantages and core competencies.

Reasons for Gap 3: Not Delivering to Service Standards

There is a wider gap between designed insurance service standard and delivered insurance services to customers. That is, not delivering to insurance service standards. Reasons for not delivering to service standards are due to

• Lack of HRM: E.g. due to lack of motivation and training, teachers are not using multimedia that have been arranged (designed) by college.
• Failure to manage demand and supply
• Customers not fulfilling the role
• Problems with intermediaries

In Nepalese insurance sector clearly lacks proper human resource management. Very few companies adopting succession plan. No clear plan to develop competent marketing personnel rather instead of retaining trained employee they are trying to pull employees from other companies for short term gains. Marketing personnel are forced to the field without proper training and equipment. One of the participants has quoted “भाड पेल धतुर पेल निकाल तोरिको तेल”. There is no comprehensive capacity development program. Most of the respondent reveals that they haven’t taken a single marketing specific training during their tenure till date. Marketing is done without prior analysis and planning. There is no clear career path for marketing employees, nepotism prevail in recruitment of employees

Insurance company lacks matching demand of the market. In some cases insurance is supply driven market i.e. enforce to buy the policy. No proper matching of demand and supply of insurance product in the market with proper market segregation. On the other hand, customer do not fulfil his/her role. Most of the customer are buying insurance policy because due to compulsion of banking loan, third party insurance law. Customers don’t tend to properly read the terms and conditions in the policy. As an insured, insured has to fulfil the various roles for claiming in future.

Insurance intermediary refers to banks, agents, surveyors. Due to the lack of communication and coordination sometimes insurance company finds problems with intermediaries.

Reasons for Gap 4: Not Matching Performance to Promises

Gap between what insurance services has been delivered to customer and what insurance services have been promised by the Insurance Company. That is, not matching performance to promises. Reasons for not matching performance to promises are due to

• Over promise (due Over competition, lack of resource)
• In appropriate pricing
• Adopt effective advertising programs

In Nepalese insurance sector due to unhealthy competition exaggeration, puffed of promotion is taking place. To meet the sales target propaganda, making infallible promises is taking place. Push sale applied with unreasonable incentives to the middlemen and customers too. Hook or crook is applied for selling insurance policies.

 Purposed prescription for resolving Gap

To address the above gap from the interview taken following are the possible prescription or purpose model to resolve the gap for the betterment of insurance industry in days to come.

Prescription for Closing Gap 1: To learn what customers expect.

The prescription to fulfil gap 1 can be summarize as 3Rs (Research, Relationship with customer, Recovery of failed service).

• Prioritizing Research
  • Need to understand customer expectations through research, complaint analysis, customer panels, etc.
  • Motivate customers to complain. Reward the complainer. Complain is good feedback for improvement of service. Failed insurance service recovery motivates customers to complain.
  • Company need to prioritize research in developing products, introducing innovative product, address the complaint of customer and to perform better than their competitors.
• Encourage upward communication
  • Improve upward communication from contact personnel to management. Give access to lower level employees to meet senior. Employees could give right information about customers
  • Increase direct interactions between managers and customers to improve understanding.
  • Set, communicate, and reinforce customer-oriented insurance service standards for all work units, to ensure insurance service design is feasible and producing desired results.
  • Practice Integrated marketing communications. All media and message used by the Insurance Company must match and support each other.
• Building good relationship with customer
  • Sufficient focus on relationship. If there is good relationship between Insurance Company and customers, customers are comfortable in giving the feedbacks and sincere information on insurance service requirements.
• Service recover
  • Turn information and insight into action (Insurance service Recovery). Because if complains are not addressed customers will not be interested to complain or feedback anymore in future.

 Prescription for Closing Gap 2: Establish the right insurance service quality standards.

Consideration of customer perception, coordination among stakeholders, following new product development process, blue printing service are the prescription for fulfilling gap 2.

• Establish better service quality
  • Establishment of insurance service quality standard based on customer perception.
  • Reliability as promised, Assurance, Physical evidence management, Empathy toward customers, Responsiveness toward customer must be the dimensions of insurance service quality.
  • Adapting standards globally (e.g. SERVICE: as is as abbreviation of Smile, Eye contact, Recognition of customer, Voice, Informed staff, Clean, Every one-Everywhere all the time show care toward guest is insurance service culture standard) and locally (accordingly with local taste, preferences, seasons, climate, whether, cultural values of location)
  • Develop Insurance Service Performance (SERVPERF) Indexes, setting customer defined standard that is measurable to drive employee behaviours. Establish clear insurance service quality goals (in terms of behaviours and actions) that are challenging, realistic, and explicitly designed to meet customer expectations. Goals must be specific
• Build better coordination with customer and insurance service provider
  • Insurance company goals must concern customer, insurance service provider and management. Employees know what is possible and what customer wants and what are Insurance company issues to be addressed to support the delivery. All three parties must be coordinated.
  • Managing insurance service through intermediaries, franchisees who delivers insurance services is important. Choose capable franchises, bind them with effective contract and monitor them to assure the right insurance service delivery.
  • Maintain better coordination and communication with the direct and indirect intermediary like banks, agents, surveyors.
  • Training agents and surveyors along with marketing personnel for providing better service to the clients.
• Priorities in developing new well designed quality standard insurance service
  • Follow all stages of new insurance service development process
  • Periodically update target levels and measures, since change is inevitable (change in taste, preference, marketing environment)
  • Insurance service standard must be predictive rather than reactive. Insurance company just reacting to the feedbacks are not enough. Insurance company must anticipate the customer requirement in advance.

• Standardize respective work tasks to ensure consistency and reliability by substituting hard technology (machines) instead of human contact and improving work methods, processes (Soft technology).

Prescription for Closing Gap 3: Ensure that insurance service performance meets standards.

Effective HRM, Intermediaries management, physical environment management are the prescriptions recommended for closing the gap 3

• Give High priority in to get competent HR marketing personnel
  • Be preferred Insurance Company for job seekers. Build the good image of the Insurance Company.
  • Develop innovative recruitment and retention method to attract the best people and build loyalty of the employees. Retain employees because it cost lots to train employees.
  • Recruiting enthusiastic person toward that particular job. If the employee is enthusiastic toward that particular job then he will enjoy that work, he works hard, he is happier and he is mostly successful in his job.
  • Enhance performance of the employees by selecting the most appropriate and reliable technology and equipment, administration system.
  • Train employees in interpersonal skills (mood, emotions, interest, empathy, love, kindness, mercy, cooperation, understanding, anger, fear, hate, sorrow, w
  • Measure employee performances and tie compensation and recognition (rewards) to delivery of quality insurance service.
  • Do effective internal marketing. Treat employees as internal customer. Happy employees will eventually make customers happy and vice-versa.
  • Build teamwork so that employees work well together and bring synergy effect. And use team rewards as incentives to promote teamwork.
• Manage demand and supply
  • Manage demand and supply by encouragement and discouragement to purchase; and expansion and contraction of number of intermediaries of the company.
  • Address the feedback given by marketing personnel in regard to fulfilment of customer changing demand.

• Educate Customers
  • Give more time to customer to clarify their doubt
  • Write the terms and conditions in big letters
  • Mention most important issues in the insurance policy
  • Use mobile, email, social media to communicate to customers
  • What is the role of customer in making successful claim? Must be frequently communicated.

Prescription for Closing Gap 4: Ensure that communication promises are realistic.

The prescription to fulfil gap 4 are management, Truthful, Demand Supply Management, Integrated Marketing Communication, and Pricing.

• Avoid over promising.
  • Manage customers’ expectations by letting them know what is and is not possible and the reasons why it is or is not possible.
  • Identify and explain uncontrollable reasons for shortcomings in insurance service performance to customer.
  • Offer customer different levels of insurance services, choices at different prices explaining the distinctions in insurance service packages.
• Charge fair insurance premium
  • Insurance company charge fair premium to the customer.
  • Price must reflect insurance service quality because customer expects insurance service based on price.
• Adopt effective advertising programs
  • Seek inputs (information on insurance service) from operation department’s personnel who deliver the insurance service when new advertising programs are being created.
  • Develop advertising that features real employees performing jobs. This will reflect exact insurance service delivery. College featuring real teachers and students in their advertisements is the example.
  • Ensure that advertising content accurately reflects those insurance service characteristics that are most important to customers in their encounters with the organization.
  • Create image of the Insurance Company through symbols and brands. E.g. Einstein academy (name of the college), Rhino as mascot for Ace Development Bank’s; golden egg and sharp pencil to portray the educational institute.
  • Prioritize personal selling (agents) is more effective since insurance is unsought product, it need more description for clarity.

1. Conclusion and Way forward

No doubt marketing is one of the important components of insurance company as it is one of the main sources of generating premium to the company. Thus every company wants competent marketing personal to get the business from the cut throat competition. Thus, demand of marketing personnel is higher than other staff such as underwriting, claim and reinsurance. Despite having such an importance role of marketing personal, Nepalese insurance sector is giving less priority to develop a long term HR in marketing rather focus on getting from the market with the short term perspective.

In addition insurance company was unable to identify the customer expectation and perception. Moreover, there is a wider gap in company too in terms of meeting customer expectation and deliberation of service as promised in the insurance contract. The study finds the four gaps in company as first one is not knowing a customer expectation, second not selecting right service design and standard, third not delivering to service standard and last one is not matching the performance to made promises. Prioritizing research, effective communication and maintain good relationship with the customer helps to close the gap one while providing better service quality, maintaining effective coordination with insurance intermediary and prioritizing better standard service are the prescription to address the second gap. Giving high priority in developing competent marketing personnel, matching demand and supply and educating customer about their role, avoiding over promise, charging fair insurance premium and integrated marketing communication across media are recommendation made for matching performance promises.

Insurance companies are more focus on getting business by hook or crook this leads to unhealthy completion like rate cutting and selling a policy in credit. Does this leads to sustainable growth of the company and satisfy the investors, shareholders and customers? Further, company is treating marketing personal as sales person rather than developing their skills, capacity and knowledge. Company should stop pulling of marketing employees from the rather make a long term plan and implement to retain competent human resources. Moreover, proper underwriting and timely claim settlements can also facilitate for attracting more customers. Finally, close monitoring and supervision by the regulator Beema Samiti to the insurance company can leads to build better insurable environment in insurance sector in upcoming days.

This article has been published in the Souvenir of Beema Samiti’s 53rd anniversary.