?1. Analyze the various players in the insurance markets. There are two kinds of players in the insurance market. They include: Those who want to sell their products and services, i. e. the insurance companies Those who would like to take advantage of the insurance and insure themselves or their products, i. e. clients. According to the differences in the behavior and attitude of clients, five consumer groups have been identified. They are as follow: The well-off crowd: these are mass clients who are clients of only one insurance company and they are not really open to any new things.
The members of this group do not look for any information considering the different kinds of insurance, so they can be influenced only by the opinion and recommendations of their friends and relatives. Those who belong to this consumer group are skilled workers, professional subordinates, people who have taken their school-leaving examination at a secondary school and people leaving in cities and belonging to the group of C1 – wealth-status. The crowd below average: the members of this group have usually taken out only one insurance policy, so they belong to just one insurance company, and they are not willing to change this company.
Their name come from that their income is below average income level. These people are mainly older than 40years having D-status and lower education. The innovative people or lateral thinkers: the people, who belong to this group, search information about the insurance companies, their services and their premium from plenty of sources e. g. on the internet, from call centers, from the radio, TV as well as newspapers, also they are well-informed about the insurance market. These people are mainly 30-49 years old leaving in bigger cities, they belong to the AB or C2 – wealth status group.
The steady people: they are loyal to their insurance company and they are willing to change only if another company offers them outstanding quality and that company is able to satisfy their unique needs. The members of this group usually have complete insurance portfolio and do not plan to take out new insurance policies. These people are mainly professionals, employers holding a leading post or white-collar workers belonging to the AB wealth status group with higher income. The outsiders: the people, who belong to this group, usually do not have any insurance and thus do not have relationship with ant insurance companies.
Only a very little proportion of them want to take out an insurance policy in the future. These people are mainly students, pensioners, inhabitants of villages and the capital. 2. Explain the porter’s competition structure (the five forces model). Michael Porter identified five factors that determine the long-term attraction of the market. The factors include: Attack of new entrants: in case of analyzing new entrants, the economic as well as political and legal factors must be taken into considering.
The most important is to analyze which factors motivate the entry of new competitors and how those insurance companies, who have already been in the market, can restrict their entry. Paying attention to the legal factors, one can say that the modification of the Act 1997/CLV has made the entry of new insurance companies easier because it reduced the sum of the starting capital of the insurance companies. Bargaining position of suppliers: the bargaining position of suppliers also influences the competition between companies in the market, so its proper analysis is essential for them.
In case of insurance it is especially important that the companies have enough and proper information about the environment, the market, the competitors and the clients. A part of this information is obtained by the companies themselves, however, to get the other part they often take advantage of firms dealing with market research because acquiring accurate and proper information is very difficult and time-consuming for them. The information obtained often needs to be processed and stored and for this appropriate computer technology is necessary.
To sum it up, there is a significant competition in the market of the suppliers as well. There are a lot of suppliers who intend to break into the market or widen its clientele, and thus the insurance companies get plenty of offers from them which they can choose. Substitute products and services: basically, the substitute products come from the competitors, from other insurance companies. The various kinds of insurance methods offered by different insurance companies have different advantages that have better conditions.
In case of insurance it is important to mention that some of the clients consider insurance as a way of savings and the companies offer them products like life insurance combined with savings units or pension insurance. In this case banks and pension savings banks can offer substitute products that the client can choose instead of insurance. Bargaining position of buyers: buyers have a strong position in the market. in case of the insurance market the situation is similar. The insurance companies fight and compete with each other to acquire new clients and keep the current ones.
They often carry out marketing actions by which they offer price reductions or some rewards if the consumer takes advantage of their services and thus attract the clients of their competitors as well. The bargaining position of the individual consumers is strong because the demand for insurance comes mostly from them. They create the biggest part of the clientele of the insurance companies. Competition among existing companies: it is especially important for the insurance companies to be aware of who their competitors are and analyze as well as evaluate their activity continually.
In a wider sense, those companies that offer any investment opportunities such as banks, real estate agencies and pension savings banks. In a tighter sense, the competitors of an insurance company are those insurance companies who offer similar services as the given company. 3. Discuss the various factors that make up the external environment of insurance companies. Analyzing the external environment provides the company with a number of advantages. For instance, by the analysis the company can predict possible problems and future happenings.
The STEEP analysis is one of the best solutions to analyze the external environment. The various factors must be considered in preparing a STEEP analysis. Social factors: this includes the demographical elements such as size and growth rate of the population, birth rate etc. it is essential for insurance companies to pay attention to the demographical changes because most of the insurance policies like life, home, accident and motor insurance are connected to individuals. Also the insurance companies have to analyze the following: Size of the population and how it changes,
Composition of the population according to e. g. age, domicile, gender, profession and marital status, Change of the composition and the reasons for that. Technological factors: technology influences our lives to the largest degree and it can also contribute to the efficient work and success of the insurance companies. New technologies have the aim to make the consumers more satisfied by offering better opportunities that ease their life and make it more convenient as well as they can make the work of the consumers more efficient and easier.
In case of insurance companies, the development of computer technology and the internet have the most important roles because of relationships with media agencies, advertising agencies, insurance brokers and other partners that they have to work with. Ecological factors: the ecological deterioration and the protection of the natural environment are one of the most important issues nowadays because the environmental pollution has reached dangerous levels in many places around the world. That is why the role of ‘green’ parties aiming to protect the environment is increasing.
They try to reduce those industrial activities that damage the environment to the largest degree and try to call the attention to the importance of the renewable energy resources. Economic factors: the economic environment either directly or indirectly influences the activity of the insurance companies. There are factors that have significant effect on these activities. They are: GDP, The rate of inflation, The level of unemployment, The level of income of the population, The rate of savings and consumption expenditures of the population, The amount of credits granted.
Political and legal factors: marketing decisions can be influenced by changes and development of the political legal environment that is why it is important to analyze these factors. Concerning the legal environment, there are laws and rules prepared by the state that influences directly or indirectly the work of the insurance companies and the services offered by them. Keeping the direct laws is compulsory for the companies, while the indirect elements try to drive them into that direction that has favourable effects on the macro economy. 4.
Discuss the elements that makes up the communication policy in the marketing mix of an insurance company. To able to achieve its marketing aims, the company has to communicate with its current and potential customers as well as send messages and signals to them. This communication can be done in a personal or impersonal way. The impersonal communication mainly refers to the advertising and promotional activities of the firm while the personal communications can be carried out by the help of intermediaries, namely the sales staff.
The means of the communication policy, by which the company can create an effective communication mix, are the following: Advertising: to be able to influence the market, the current and potential consumers, one of the most effective and most used mean is the advertising. Because of the special characteristics of insurance, the role and type of advertisements differ from the ads of physical products and even from services. In insurance the advertising has the following functions: Preparing the sale of insurance Making the need of insurance to be realized Introducing the company Creating a positive professional image Supporting the activity of the distribution channels
One way by which a company can advertise itself is through the following: Media analysis: to be able to plan and arrange an effective advertising campaign, the media market tendencies and the possible future expectations of the company must be taken into consideration. E. gs. of the media are radio, TV, press, the public domain market and the internet. Public relations: public relations are a mean of information, organizing, building and forming relationships, building company image, keeping contact with the publicity and showing reliability and responsibility.
Public relations does not directly support sales but it aims to build a good relationship between the company and its environment. The public relations activity of the insurance companies always turn to a given group and not the whole environment in general. Based on the target groups, internal and external PR can be differentiated. Internal PR: this refers to the communication between the company and its employees. Building good relationships with its employees is especially important for the company to be able to achieve its goals and be successful in the market.
Furthermore, it has the function to increase the profitability of the company, contribute to the efficiency of the work, inform the employees about the aims, activity and results of the company, influence their opinion and motivate them. The main elements of internal PR are the following: Communication between organizational units, Communication between the leadership and the management, Management support and advising, Labour force recruitment, Human relations, Information of the company employees about the most important firm news, events and happenings.
External PR: well-built and good relationship with the external environment has special importance for the companies because it influences how successful they are and will be. These relationships have to include not the relationships with the clients but the good contacts with the business, government, financial institutions and organizations as well. The media is an important mean of influencing the public opinion. Its tasks are the following; Media monitoring, To organize press conferences, To publish articles that propagate the company, To support business aims, To build the image of the company.
Personal selling: this field is especially important in case of insurance because most of the insurance are sold to the clients by salespeople. in case of salespeople the success is guaranteed if they combine their sales value and convincing power efficiently. They have to realize that consumers are sensitive and usually well-informed as well as they have the opportunity to choose and nobody can make them buy. The salespeople should have the aim to ‘give’ contentment to their clients by satisfying their needs, because the satisfied consumer will buy again and take advantage of further services as well.
The process of sales should take place in the follow ways: Identification of potential clients, Preparation, Approach, Presentation, Coping with and overcoming counter-arguments and questions, Finishing. Sales promotion: this contains all those elements that contribute to and support sales, but are not the elements of Advertising, Public relation and Personal selling. Sales promotion is a marketing- communicational activity aiming that the current and potential clients continue taking advantage of the insurance services, to take out further insurance policies or by it the insurance company attracts clients for its services.
It has special importance mainly when there is oversupply in the market, which is true for the insurance market as well. Sponsorship: sponsorship has the aim to communicate with the consumers while they are entertaining or doing their favourite activities and hobbies. It is an essential part of the communication of the company and it has the following main aims: To make the company more widely known in the circle of the population, To support the introduction of a new product or service, To contribute to and support sales, To position the products.