1. Innovative Channel Strategies in
Insurance Industry
Introduction
Suddenly Insurance has come to be a way of life. Even though many of the
private Insurance Companies came into the market during 2001, only now
the market is highly dynamic. In India, Insurance has been synonymous with
LIC. Life Insurance Corporation (LIC) was created as an entity in 1956
through LIC Act. Since then, until recently (2000), the insurance sector, both
life & non-life was monopolised by public sector Insurance corporations.
Now, with the impact of LPG (Liberalisation, Privatisation and
Globalisation), many private business houses have come up as joint
ventures, with partnerships from multinational insurance companies. The
Private players are introducing innovative insurance products, appointing
qualified persons as agents and advisors. They are aggressively promoting
their products and are going for multi-channel distribution.
Insurance, a service industry needs to address seven marketing mix
elements, unlike the 4Ps in manufacturing industry. The service marketing
mix known as 7Ps consists of Product, Price, Promotion, Place, People,
Physical evidence and Process.
Though all mix elements are equally important, the more conspicuous and
dynamic mix elements of Insurance at present are product, promotion and
place. A number of innovative products have come up in the industry and to
make the consumers aware, the promotion campaigns fill much of the
Insurance companies' budget. Though there are distinct strategies in product
and promotion mixes, this paper focuses on exploring the innovations in
distribution mix.
REACH – REACH – REACH – The
mantra…in Insurance industry

2. Although distribution has its own mix, Insurance, being a service industry
the prime distribution mix element is channel mix. This paper concentrates
on the innovative channels surfacing in Insurance industry.
To deliver the services, players in Insurance take various routes to reach and
service the customers. With just 70 million insured out of 1000 million,
there is enormous potential in the industry.
Traditionally, the Channel member has been the 'Insurance agent'. Some
private insurance companies now call them advisors. Never the less agents
form the prime front line force with all insurance companies and they remain
to be the most basic and most important channel members to reach the
customers. Tata AIG is one of the major users of agents among the private
players. Presently Tata-AIG has 9000 agents and has already set a medium
term target of having an agency force of five lakhs agents in the next five
years.
Apart from agents, the insurance companies take various innovative routes
to spearhead their marketing plans and to capture a larger pie of market
share.
Innovative Channels
"Spreading the tentacles to the longest length and the remotest corner" is the
mantra of Insurance players. To reach this objective, their distribution
channel strategies have taken different 'avatars' like
Corporate agents, Bancassurance and Retailassurance etc.
A peep into each of the above would help in understanding them better.
Corporate Agents
Corporate agency is a cross selling type of channel. Insurance companies tie-
up with business houses in other industries to sell insurance either to their
employees or their customers.

3. Insurance industry, during the past 2 years has witnessed a number of such
strategic tie-ups and alliances. Corporate agents have become a major force
to reckon with in distributing insurance products.
The following table throws light on the extent of utility of corporate agents.
Table.1. Corporate agencies (Life & Non life):
Insurance provider
Corporate agent
Type of Insurance
TATA AIG General
CEAT
Personal accident insurance cover scheme on two wheeler tyres.
HPCL
Motor insurance at petrol fitting statutory
Thomas Cook
Travel Care – a travel insurance
Bajaj Allianz
General
Maruti Udyog, Hyundai & Ford
Auto Insurance
HDFC Standard life
JRG Financial Services
Marketing of life insurance & pension products
AMP Sanmar
Trade wings (a travel agency), Dhandapani Group & Karvy Consultants.
Marketing of life insurance policies
Bancassurance
Simply put, Bancassurance means distribution of insurance products through
banks. This mode of selling risk products through banks is fast gaining
ground. Almost all insurance players have married to one or more banks for

4. wider reach and increased trust. Bancassurance may sell insurance as
customised solutions or in the form of bundled products along with bank
products. Even though banks are considered as one among the corporate
agents, bancassurance has gained a great importance that it needs to be
discussed separately.
The importance can be understood from the fact that even SBI life is
associating with public, private sector and co-operative banks for providing
life insurance to the account holders, in spite of being an offshoot of Indian's
largest bank.
Last year's amendment in the Insurance bill allowed bancassurance to piggy
back on nearly 66,700 bank branches with over 18 crore accounts. Also,
there are advantages of speedy reach to market and lower infrastructure
costs. Banks get 7-15% commission. While bancassurance's share in
insurance is 50% in Europe, 20% in US; in India we are utilising <5% of the
total number of bank branches. ICICI prudential is the topper in
bancassurance with 15% and with a contribution of Rs.470 crore.
Bancassurance is poised to become a key determinator / differentiating
factor in the Insurance industry. With banks are all set to encourage their
staff to sell policies, with enough training, this will take of to great heights.
Realising the importance of bancassurance, both life and non-life insurance
companies have started piggy backing on banks for pushing their policies.
The present status of bancassurance can be understood from the following
display.
Table.2. Bancassurance: Win-Win Relationships
Insurance Company
Partner Banks (Total No. of Branches)
ICICI Prudential
ICICI Bank, Bank of India (2,524), Citibank (15), Allahabad Bank, Federal

5. Bank (120), South Indian Bank, Lord Krishna Bank, Punjab and
Maharashtra Co-Operative Bank.
SBI Life
SBI (9,000), associate banks (4,000)
Birla Sunlife Insurance
Development Credit Bank (62), Deutsche Bank (3),
Citibank (15), Bank of Rajasthan (348), Andhra Bank,
Catholic Syrian Bank (329), Bank of Muscat (1)
ING Vysya Life
Vysya Bank (450)
Aviva Life Insurance
ABN Amro (12), Lakshmi Vilas Bank (212),
American Express (6), Canara Bank (2,421)
Royal Sundaram Alliance
Standard Chartered (63), ABN Amro (12), American Express (6),
Citibank (15)
United India Assurance
Indian Bank, South Indian Bank (372), Andhra Bank (1,018)
HDFC Standard Life
Union Bank, Indian Bank
Life Insurance Corporation
Corporation Bank (800), Central Bank (3,115), Bank of
Punjab (20), Andhra Bank (1,018), Nedungadi Bank (150)
Retailassurance
'Insurance Products are being sold at retail outlets'. This news should convey
the message that Indian Insurance industry is really boiling. Not only the
Insurance players but also their distribution partners are very much
interested in this kind of game plan. The office of the Chief Post-Master
General, Chennai has mooted the idea of selling some of the insurance
products through Post Offices. With 1.53 lakh post offices in the Country,

6. more than twice the number of bank branches, it can really be a channel with
very great potential. Medicine shoppe, a pharma chain store group and Bajaj
Allianz have tied up to provide free insurance cover of Rs.2/- on every
purchase of pharma products worth Rs.1/-. This scheme is open to 5-25
years age group, and distributed through its 40 outlets.
Also insurance selling has gone the 'corner shop' way, with TATA –AIG's
plans to sell the policies at petrol bunks.
Conclusion:
It is certain that Indian Insurance players along with their foreign partners
are trying to grab the under explored Indian market. Though these are few
innovations in the marketing Channels of Indian Insurance Industry, it is
expected that they will try more innovative Channels as the industry grows.
Innovatively, SBI life has offered group insurance to the employees of
public sector companies, including their spouses. Also similar covers were
offered to even the state Governments for their liabilities. Given the
aggression with which they progress, surely these innovations are going to
be a big hit and a metamorphosis of Indian Insurance sector is very much on
its course.