Promotion of insurance products

To promote insurance products on the market, it is first of all necessary to understand which criteria or economic indicators matter to a potential policyholder when choosing an insurer. Without such analysis it is impossible to develop the insurance market effectively, and talk that the market is not developing because of a low insurance culture will remain nothing more than a sedative pill.

For those who are ready to act, the magazine's editorial team has conducted its own research, and we are ready to share our ideas on how to develop the retail insurance market.

LET'S START WITH THE BASICS

To sell any product, you need to awaken the interest of a potential buyer. The ways and means of getting through to the buyer can vary widely for different kinds of goods and services: beautiful, colourful packaging, mass advertising, pushy promoters and many other methods. Insurance products have certain features that cannot be ignored when they are created and offered: they are products of passive demand, and, as marketers say, promoting them requires "push mechanisms".

Put simply, the policyholder does not initially realize the need to buy an insurance product. The insurer's task is to create this need or, to put it very simply, to make them buy.

Saying "make them buy" is much easier than doing it, because an insurance product, as we are used to calling it, is not a good but a service that you cannot hold in your hands, taste or smell; moreover, it will only be provided when an unforeseen event occurs, the financial consequences of which will be minimized by the insurance service. But first you have to pay for this service! You will agree that a product with such consumer properties is a "tough nut to crack", and it is hard to explain to an ordinary citizen who "has been lucky in life so far" why they need to buy insurance.

The policyholder does not initially realize the need to buy an insurance product. The insurer's task is to create this need or, to put it very simply, to make them buy.

Compulsory insurance products are a different matter. Here, like it or not, if the law requires it, you have to buy it. But even here it is difficult for the policyholder to make a choice, because, in accordance with the law, rates for compulsory insurance products must be uniform across all insurance companies. And this is where standard promotion techniques come to the fore: advertising, discounts, gifts, tireless promoters (also known as insurance agents) and other "sales technologies". As promised, we are ready to share our research on which indicators are key for the policyholder when choosing insurance products and how significant they are.

In fact, there are not that many indicators that shape the image of an insurer in the policyholder's mind: reliability, service (when buying a product and when receiving an insurance payout), the product basket and the price of the product. Let us look at each of these indicators separately.

RELIABILITY

As we understand it, the term "insurer reliability" means a high degree of probability that the insurer will fulfil the obligations it has assumed. Why do we say probability? Only because the phrase "100% guarantee" is nothing more than an advertising ploy. Insurers choose ways of demonstrating this reliability depending on where they look "bigger" or "better". For example, some talk about their extensive experience in the market, some are the leader in insurance premium collection or pay out the most on their obligations, some have assets that reach sky-high levels, and some have simply received some kind of "medal" and consider it a competitive advantage confirming their reliability.

In fact, the most ordinary policyholder, who can only count the money in their pocket, should not need to understand what an insurer's assets, solvency margin or acquisition costs are in order to assess its financial stability. Few people understand the language of numbers and are able to analyze financial statements. But this is not necessary. As taxpayers and consumers, we have delegated our right to assess an insurer's financial stability to a government body — the National Bank of Kazakhstan, the financial regulator that regulates and licenses the insurance companies operating in the domestic market. The basic position of the mass consumer of insurance services should be as follows: "If an insurance company has a licence, it meets all the criteria of a reliable insurer from the regulator's point of view, and as a consumer I do not need to worry about the company's financial indicators." Financial indicators are more important to the regulator for making decisions about a particular insurer: whether to "tighten the screws" and suspend its licence or whether the company can operate normally. Today, the domestic financial regulation system has learned to respond to changes in insurers' financial position and has created early response mechanisms and guarantee funds to protect the rights of consumers of insurance services. Therefore, the "reliability" criterion, once this definition enters the policyholder's vocabulary in exactly the wording given above, can be removed from the list of competitive advantages. Reliability is the regulator's area of responsibility. If there is a licence, it is reliable!

SERVICE

Service is a category that depends much more on the policyholder's perceptions: liked it or didn't, satisfied or not. But here, too, there are certain features. At the very beginning we said that by insurer service we mean service when buying an insurance product and service when arranging an insurance payout. Let us first look at service when receiving an insurance payout.

To make the examples "straight from real life", let us take the most common product — compulsory civil liability insurance for vehicle owners, i.e. motor third-party liability (MTPL). The main question for this product is how much the insurer will pay to repair the car after an accident. In other words, what will the damage assessment be, and will this money be enough to repair the car? Today, damage is assessed by independent appraisers who hold the relevant licence and are accredited by the regulator. The methodology used for the assessment largely relies on the appraiser's expert opinion, so the estimated cost of repairs can differ "several times over" from one appraisal to another, as established practice shows. At the same time, the insurer, as a businessman, is interested in paying as little as possible, i.e. according to the lowest estimate. The policyholder's interest is the opposite — to get as much as possible, preferably with a margin; moreover, the tempting prospect of "something for nothing" attracts dishonest people, commonly called fraudsters, who are not averse to profiting at the insurers' expense. Therefore, the insurer is simply obliged to treat every policyholder who applies for an insurance payout as a fraudster until it becomes clear that they are a bona fide beneficiary.
Creating an insurance product is not difficult, and sometimes an abundance of products in an insurer's offering only confuses the policyholder, since every product has both pros and cons.
 
At first glance, such an attitude may seem strange, but by initially suspecting every policyholder of fraud, the insurer acts not only in its own interests but also in the interests of the market, since it prevents the insurance funds that have been built up from being used to enrich individual citizens at the expense of the "common pot". As we can see, a conflict of interest already arises at the stage of agreeing the amount of the insurance indemnity.
 
In general, when it comes to the claims payment process, under civil law an insurance company is in the position of a "bride to be" — it may accept or it may refuse. And then the policyholder faces a choice: either accept the insurer's terms or seek justice in court. In any case, the burden of collecting documents and proving the amount of damage lies entirely on the policyholder's shoulders. Even if an insurer declares that it provides some services for arranging payouts, this is most likely linked to certain products that do not guarantee a significant insurance indemnity and pursue mainly advertising goals.
 
Insurers that take a strict approach to organizing the claims process, without deliberately understating the cost of repairs, are probably doing the right thing, since they do not allow fraudsters to affect their loss ratio and, ultimately, their financial stability.
 
With this approach, it is hard to avoid policyholder dissatisfaction, but promising something that will not be delivered later is an even worse option, so service when arranging an insurance payout can be ruled out as a competitive advantage. The only option may be to provide additional services that make the policyholder's life at least somewhat easier after an accident (a tow truck, a temporary replacement car, reimbursement of certain expenses), but that is already a matter of additional services paid for by the policyholder rather than something within the price of compulsory insurance.
 
That leaves service when buying an insurance product. And this criterion is a genuine advantage and can become a field where there is room to show what you can really do. Convenient locations of sales points, convenient opening hours, fast service, delivery of the policy "to your door" and many other pleasant little things can earn an insurer a reputation as a serious market player. And the most important thing is not the beauty and functionality of the office premises but the staff who will competently offer a potential policyholder the full range of insurance products and convince them of the need to buy them.
 
PRODUCT BASKET
 
By and large, having a wide range of insurance products is no more than an advertising trick, and many policyholders are beginning to understand this. If you come to an insurance company with a clear intention and an understanding of what you want, you can get it at an individual price. Selling a "boxed" product rather makes the job easier for sales staff (they only need to know the specific options and risks) and for advertisers, who use the "attractive terms of the box" to lure policyholders into insurance company offices. Creating an insurance product is not difficult, and sometimes an abundance of products in an insurer's offering only confuses the policyholder, since every product has both pros and cons. Taking into account all of the policyholder's wishes and individually calculating and assessing the risks for each retail client requires additional time and effort from staff, and insurers generally try to avoid this.
 
That is why we only see advertisements for "boxed" insurance product offerings, which are even given names, and we have never come across an advertisement along the lines of: "Individual insurance programmes. Your risks are our responsibility" or something similar.
 
In short, an abundance of insurance products no longer surprises anyone, and many people already understand that a large number does not mean high quality. Consumers have no clear-cut attitude to the "breadth" of an insurance product line.
 
PRICES
 
Since the main purpose of insurance is to minimize financial losses when an insured event occurs, the cost of such a service should not be high. In this situation, dumping, i.e. reducing the price of insurance below the average market level, is beneficial for the policyholder. However, there are different ways of reducing the cost of an insurance product. If the insurer has controlled its business expenses and reduced this component of the product's cost, and has competently managed its loss ratio by attracting "high-quality" policyholders and through risk selection, that is one thing. But if the insurer has built in from the outset various mechanisms for "legally" reducing the insurance payout — and our legislation has quite a few "loopholes" for this, especially as regards damage assessment — or has paid up to 50 % commission to an insurance agent who, to increase sales, lured the policyholder with a low price, effectively giving back part of the agency commission built in from the start, then such "cheapness" may cost the consumer much more than the initial savings on insurance. The situation is ambiguous, and there is no simple answer to the question "Is it good or bad to have 'cheap' insurance?"
 
That is exactly why a savvy policyholder does not always opt for the lowest price. If the high cost of a product is clearly justified to the policyholder on the basis of its high-quality consumer properties, I can say with confidence that such a client will spend more on insurance than they had planned. Once again, the whole question lies in the way the offer is made and its quality.
 
Summing up our research, what we have "in the bottom line" is sales service plus two more factors — the product basket and price — but we have not obtained a clear answer about their optimal balance. In short, however much we study the advantages of an insurer and its products that will ultimately attract the policyholder, there remains one single, objective factor that the insurer is not always able to control — the seller of the insurance service. It is on their talent, knowledge and qualifications that the policyholder's decision will ultimately depend: whether to buy or not, and if so, from which provider. Therefore, instead of spending "gigantic budgets" on advertising and creating all kinds of trappings in the belief that this is what will set your business apart and attract policyholders, we would like to wish insurers to invest more effort and money in developing their sales staff, who are, in essence, the "face of the business". And in conclusion, we would like to recall a truism that simply has to be mentioned at the end: "Insurance is not bought, it is sold!"