Life insurance industry of this country has so many players now. The industry was opened up for private players ten years ago. We now have a plethora of products in the market. Innovative services are also on offer for the customers.
Insurers are visible everywhere thanks to the catchy advertisements placed by them in all the print and electronic media. The industry is also growing. It registered a growth of 10% in the last financial year. Yet, fact remains that still about 72% of the insurable population is left outside the ambit of life insurance.
There are many reasons why insurers are still unable to bring greater number of people under the fold of insurance cover. Here I shall mention one very important reason. The insurers do not know their customers well. If a doctor fails to diagnose the patient, he administers wrong treatment to the patient.
The patient will be spending a lot on medicines and diagnostic tests. The doctor and the diagnostic centre will keep prospering but the patient will not recover. The patient will lose faith in the doctor. If there are too many such doctors in a town, people will lose faith in the system itself. At the end, all doctors will suffer. An insurer needs to understand the market like the way a doctor tries to understand the system of his patient.
A life insurer needs to carry out deep research to understand why people still prefer not to buy insurance. They need to understand what the people feel about life insurance in general and the individual insurers in particular. Although market researches are still taking place, I am rather sorry to say no insurer is really doing the type of research this industry requires now.
What is Market Research?
Market Research can be defined as a systematic and objective study and analysis of the pulse of the market for the purpose of better decision making related to the identification and solution of problems of a marketer.
I would emphasise certain points related to the above definition. Market Research has to be systematic. It means, systematic planning is required in the matter of data collection and data analysis. The procedure has to be methodologically sound. Market Research has to be objective.
This means, the result of the research must not be influenced by the researcher’s own philosophy or biases of the management. Market Research can be made either for identifying the problem or for solving the problem. Many a time a marketer does not know what the problems are. If he tries to solve problems without knowing the problem, he will either be solving some different problem or will not be solving any problem at all!
We all know that insurance penetration in the country is low as compared to the other emerging markets of the world. Is that a problem for the insurer? No, that is just the outcome of some deep rooted problems. The insurers have to find out why so many people still prefer not to buy insurance in spite of having the insurance need and affordability and in spite of availability of so many products, distribution channels and hassle-free channels of paying the premia.
This is problem identification. This is a different kind of research from the problem solving one. Here one has to go deep into the minds of people and find out the root causes. The researcher has not only to meet the target segments of the market, he also has to meet the decision makers and industry experts. He has to analyse secondary data as well.
Once problems are correctly identified, it is easier for the researcher to identify variables that are relevant to solving the problems. He can then put appropriate questions in the questionnaire, select a representative sample and collect data by meeting a greater number of respondents.
Quantitative analysis is done promptly today by many softwares like SPSS and the researcher gets his result very fast. It is fun to use the modern software and get smart solutions (which are however not always the best ones)! A lot depends on whether problems have been correctly identified and whether all relevant variables put in the questionnaires to understand the relative merits of each one of them.
Need of the hour: Qualitative Research
I have mentioned that it is more important for an insurer to define a problem. The problem of an insurer may be falling market share in the metro areas or high level of attrition of the agents. It can also be high level of first year lapsation. An insurer usually thinks that he knows the reasons of his own problems. But, he may not be aware of many of the basic reasons.
An insurer tries to feel the pulse of the market through the opinions and feedbacks of the agents, Development Officers and sales managers. The insurer gets some feedback from the existing customers as well. But these feedbacks may not answer to all his problems. If an insurer’s problem is that it is not accepted as a preferred insurer by the young people below 30 years of age, then the insurer needs to talk to some such youngmen who can articulate their views on the issue.
If the agents or sales managers have not discussed insurance with these young people or if there are too few customers who are below 30 years of age, then the insurer really does not have the real feedbacks. To get into the minds of the people of target segment, the insurer has to arrange for certain researches which are different from conventional quantitative ones.
Quantitative research generates information under pre-determined categories. The people are asked the same set of questions and they get little opportunity to express their own views on the subject. The researcher never fully gets to know why that person behaves in a particular way. Qualitative research emphasises more on feelings than on figures.
And, we all know that insurance is not a tangible product and a person only gets some feelings like a sense of security, pride and confidence when he buys insurance. So, when a person buys insurance (or buys insurance from other insurers) or when he does not buy insurance, certain things happen at the level of personal feelings. The researcher’s job is to know why a person behaves in a certain way. To know all this, the researcher will have to spend more time on the people he is interested in and get facts which are not necessarily quantitative in nature.
Methods of Qualitative Research
Secondary Data: An insurer has to study secondary data. These are the data compiled by the independent bodies like IRDA or NCAER. An insurer must know how to read data. Various research institutions are conducting researches and their findings are available publicly. The insurers have to procure these reports and make some sense out of them. These are unbiased reports and can therefore be relied on.
Industry Experts: An insurer needs to make regular interactions with industry experts, to get new perspectives on the market. Such officials need not be top persons of the insurance companies. They can be Professors of finance or experienced market observers or retired industry personnel. The objective is to know the market more intimately from sources which give honest and unbiased opinions.
Focus Group: A Focus Group is an interview conducted by a trained moderator in a non-structured and natural manner with a small group of correspondents. Here the moderator initiates the discussion but do not interfere much in the discussion that takes place between a group of people. If an insurer is interested to know why the young generation is averse to life insurance, the focus group must consist of people below 30 or 35 years of age. The rationale of focus group is that people belonging to the same group tend to interact freely among themselves and there is every possibility that the researcher can get into the crux of the problem.
In a focus group, respondents should ideally be from similar social and economic background. An insurer may have to pay some fees to the respondents as they have to spend some time for the exercise. A Focus Group should be completed within 45 minutes to one hour. Size of the group should not exceed 12. Every member of the group has to contribute to the discussion.
Focus Groups are successfully held in western countries. Marketers get a lot of valuable information through Focus Groups. In a typical questionnaire based interview, the respondents are forced to think within certain limits. In the matter of buying insurance, a lot of personal beliefs and opinions come into play. An ordinary agent is never able to know what is hidden inside a person’s mind. The agent is more interested in speaking than listening patiently. In Focus Group, a person can be expected to share his innermost feelings with the people who are at similar stages of life.
Depth Interviewing: This is a special type of one-to-one interviewing. A depth interview is an unstructured interview in which a highly skilled interviewer tries to uncover the respondent’s underlying motivations, beliefs and feelings. The questions are such that there can be no one word answers. The respondent is encouraged to come out of his shell and express his opinion frankly. This is a freewheeling interview and second question depends on the answer to the first question.
In focus group, the respondents are forced to socialize with a group of unknown but similar people. A respondent may not reveal his true self before others. But, in depth interview, a respondent feels more relaxed and can share a lot of his own feelings and experiences on the issue. But, the interviewer has to be specially trained in mapping the consumer’s view by asking a series of relevant and probing questions.
Depth interview is very important for a service industry because in case of a service, the consumer may not always be able to express the quality in quantifiable terms. Insurance is a product that gives the purchaser certain feelings like security or protection or even confidence. It can also mean some different things to a different set of people.
A particular insurer was perhaps very dear to the father of the respondent. But that particular insurer may not necessarily earn the loyalty of the son. Here, the depth interviewer can discover why the insurer fails to impress the young prospect and what change in the brand image or product features may enable the young man to buy insurance policies from the insurer which was considered as favourite by the older people.
Human psychology acts in peculiar ways and insurance is more a psychological product than a physical product. A product may have attractive features but still may not sell. Different market segments have different needs. Products may not sell if some prospects do not find the agent advisors to be reasonably sophisticated and knowledgeable.
Some segment may need more personalized service and may in fact prefer to buy insurance from a corporate agent like a bank. Some segments may want a product that has the benefits of both life and non-life insurance. All this can be explored by an expert qualitative researcher.
Integration of Qualitative and Quantitative Researches
Life insurance is a different kind of product. The buying or not buying of life insurance depends more on emotional factors and one can not quantify emotional factors with any reasonable degree of reliability. Quantitative research in insurance is guided by the preconceptions and biases of particular researcher and if the researcher does not have full knowledge of the market, assumptions will be wrong and the wrong assumptions will give rise to wrong variables and ultimately, wrong conclusions for the insurer. It is very difficult to have a full knowledge of the market unless one makes a good deal of qualitative research.
Insurers surely do not know various market segments intimately; otherwise they could have been able to insure a much larger portion of the insurable population. Insurers need to discover a lot of things about the market. In quantitative research, insurers assume that they know what determines the sale of insurance policies or what determines the preference of a person towards a particular insurer. There is little opportunity to be surprised by new discoveries.
Again, it is almost impossible to get quantitative data for marginalized communities of the country. We have published data of the incomes and saving habits of the people having occupation in the organized sector. But, 90% of the people of this country work in the unorganized sector and we know very little about their preferences, beliefs and values.
Quantitative analysis is less effective in understanding a process. Buying insurance is a more complicated process than buying scooter or refrigerator. Quantitative analysis of research findings is useful only when there is clear statistical relationship between variables. In insurance, the variables that affect the ultimate buying decisions are not so clearly inter-related.
I do not suggest doing away with the quantitative research techniques at all since quantitative analysis has its own advantage of getting elegant report which can be readily understood by all. We can see the relative strength of each variable and this can help the decision makers in developing products, launching new services and measuring the level of customer satisfaction.
But, quantitative method should be used only when the insurer is sure that what he is measuring will be of use. That is why the insurers need exploratory approach in market research. Even qualitative or exploratory research may not always give the correct result. Validation of findings is necessary in market research. Validity of a research method is done by triangulation.
Under this method, different types of tests are made to test the findings, e.g. the insurer has to see whether the results of depth interview and focus groups are yielding similar results. Also, the same respondents are to be contacted at different periods of time to see whether the responses are consistent. Different researchers can meet the same subjects to rule out any possible biasedness on the part of some researchers.
Qualitative research is time consuming and painstaking also. But, in insurance, this is necessary since we need to understand the process that takes place before a prospect decides to buy or not to buy insurance. In case of life insurance, the process is even more complicated and an insurer needs to deploy qualified researchers who know the industry at the same time know the techniques of exploring the deeper feelings of the prospects.
Nirjhar Majumdar, LIC
