Tag: Modern Marketing Bangalore University BBA Notes

Management Notes

Optimization champion

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Except when it’s time to move on

Some organizations will never adopt marketing optimization. The culture may be too entrenched in old ways. I cringe when I see companies start on the path of testing and then turn around and redesign their website wholesale without considering the progress and learning they’ve already made.

Never give up

As Winston Churchill said in a famous speech, “never, never, never, never give up.” testing and optimization are not one-time events. You’ll face opposition, confusing results, and disappointments, but they will melt away when you experience big wins.

Be a leader

You have a decision to make about what you stand for in your career. Every idea you want to sell depends on the influence you have with colleagues, friends, and clients. The foundation of that influence will be based on what I’ll call soft or hard credibility. Soft credibility is based on your personality, charisma, and personal connections, whereas hard credibility is the data, evidence, and goal alignment that you bring.

Share successes far and wide

Many of clients have used our results analysis presentations to create an internal event in the organization. The champion invites members from throughout the company to see the results of tests, guess the winners, and discuss what was learned. The presentations are a lot of fun, especially for those departments that aren’t normally involved in external communications. Make sure to invite people from all functional areas.

Tie results to revenue

When you present results, don’t just show the improvement in conversion rate or KPIs. Tie the results to revenue to show real cash impact.

Involve other departments

You’ll need the support of others to get your tests running: it, finance, marketing, branding, and more may present barriers. Save yourself surprises by involving them early.

Conduct skunkworks tests

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try an under-the-radar approach. Pick a few target pages with low political visibility to gain some quick wins. Landing pages outside the main website can be good candidates for this. Then, use the winning results from those tests as ammunition in your campaign for support to move on to more important optimization areas.

Use expert support and insights

Bring in a conversion-optimization expert to tell decision-makers how your website needs to improve. The credibility of a third party can carry more weight than internal voices alone, even if were bringing a similar message.

Create a tangible opportunity

Get support for testing by creating a tangible problem that testing solves. Gather visitor (dis)satisfaction survey results, show real quotes, and record feedback from real customers. Videos of customer frustration can be powerful motivators.

Get senior-level buy-in for testing

No matter how strong your project results are, you’ll face an uphill battle without senior management support.

What is success for your senior decision-makers? Start by finding out how they’re incentivized so you can show how optimization will help them reach their goals. If you can help them look (and get paid) like rock stars, they’ll support your projects and reward you in return.

Management Notes

Setting CRO

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Qualitative tools to uncover why things happen

Qualitative tools help you collect qualitative (non-numerical) data to learn why your website visitors behave in a certain way. They include:

  • Website feedback tools (on-page and external link surveys) where visitors are asked questions about their experience
  • Website session recording/replay tools that show how individual users navigate through your website
  • Usability testing tools where a panel of potential or current customers can voice their thoughts and opinions on your website
  • Online reviews where you can read more about people’s experience of your brand and product.

Quantitative tools to uncover what is happening

Quantitative tools allow you to collect quantitative (numerical) data to track what is happening on your website.

  • General analytics tools that track website traffic (e.g., Google Analytics)
  • Website heat map tools that aggregate the number of clicks, scrolls, and movement on a page
  • Funnel tools that measure when visitors drop off from a sales funnel
  • Form analysis tools that track form submissions
  • Customer Satisfaction (CSAT) tools that measure customer satisfaction on a scale from 1 to 10
  • Tools that use the Net Promoter System to measure the likelihood of people recommending your website/product to someone else on a scale from 0 to 10.

Tools to test changes and measure improvements

After you’ve collected quantitative and qualitative feedback and developed a clear sense of what’s happening on your website, testing tools allow you to make changes and/or report on them to see if your conversion optimization efforts are going in the right direction. They include:

  • A/B testing tools that help you test different variations of a page to find the best performer (recommended for high-traffic sites, so you can be certain your results are statistically valid)
  • Website heat map + session recording tools that allow you to compare different variations of a page and the behavior on it
  • Conversion-tracking analytics tools that track and monitor conversions
  • Website feedback tools (like visual feedback widgets or NPS dashboards) that help you collect qualitative feedback and quantify it, so you can compare the before/after response to any change you made.

Stage 1: Research Phase: Identifying the areas of improvement

Only one in every seven A/B tests gives a winning result.

As a general practice, most marketers tend to copy CRO strategies that yielded results for other firms thinking the same would work for them. But, they fail because every orange button cannot convert and every long form page cannot falter.

  1. Analyze what are your visitors doing?

Analytics allows you to make decisions based on facts and figures rather than pure instincts. In the CRO process, there are multiple ways to derive data to understand your results. For instance, you can fetch relevant information from your web analytics tools such as real-time data tracking, bounce rate, incoming website traffic sources, audience, demography, site behavior, and much. Google Analytics is one of the best tools to obtain in-depth quantitative data on what people are doing on your site.

  1. How page features shape user behavior?

By using visitor behavior analysis tools such as heatmaps, session recordings, interview feedbacks, customer surveys, analytics, net promoter score, and so forth, see how different features on a page are influencing user behavior. For instance, you might find that the search tool placed on your landing page is getting you more conversions than the showcased product categories. Getting such insights can significantly help you eliminate unwanted features and focus more on the ones that convert users better.

Understanding User Behavior/Qualitative

Customer psychology typically lays down the fundamental ground rules for CRO elements to follow.

Two essential elements that aid in understanding customer psychology are:

  1. Principles of Persuasion: Human beings are highly susceptible to suggestions and cognitive biases. To quote an example here, knowing that an item is popular amid the masses becomes even more popular no matter it’s actual worth. At the same time, the rarer and more exclusive an item is, the more valuable it becomes. Understanding such human psychology is essential to effectively define your goals and draft a CRO plan that adds to your company’s profits.

Furthermore, adding social proofs in the form of reviews and testimonials on your landing page or wherever relevant can add to your efforts. As most case studies published over the internet report, social proofing aids in more conversions!

  1. Customer Behavior: A research carried out by NN Group states that most people browsing through the internet don’t read; they merely skim through the posts. Another study reveals that younger people are more interested in browsing through flat designs as they are more “trustworthy” than their older counterparts.

Studying the behavior of your target audience gives an insight into “why they do what they do” over the internet, and how you can use this information to build a better-converting website.

There are two primary ways to study the behavior of your target audience:

  • Conducting tests and taking in-person interviews: Conducting tests and taking in-person interviews: Closely watching your customers interact with your website in real-time can give you significant data and insights on a plethora of things. These can include, the pages they most visit, the amount of time they spend on your website, the areas where they’re facing maximum problems such as finding difficulty in filling a form, unable to generate passwords, payment drop-off, and much more.
  • Reading case studies and following guidelines on user behavior: Many existing pieces of research and case studies can vastly aid in understanding the collective psyche of your customers, which can, in turn, serve as an excellent source for improving your website’s overall look and feel and increase conversions.

Google Analytics

Google Analytics is an integrated it tool that offers numerical data about your website’s overall performance, reports on visitor activities, engagement, traffic inflow sources, content performance, and ecommerce sales.

Customer Surveys

Customer surveys reveal information about the actual psychological thinking of customers – what convinced them to buy a product, what drew them away from the site, and so forth. It’s one of the best ways to learn strategies for effective site optimization.

Usability Tests

Usability testing is a smart way to evaluate the ease of using a website from a customer’s point of view, their engagement rate on a particular page, stumble spots and similar fall-off. It’s a powerful weapon that only aids in crafting a better user experience but increasing conversions.

User Interviews

Interviews provide deep insights about your site, respective pages, and target audience. They’re more about gathering qualitative data than its quantitative data. Interviews can effectively lead to drafting campaign-changing test hypotheses.

Stage 2: The Hypothesis Phase: Construct an Educated Hypothesis

Using the information gathered in the research phase, you can now draft your hypothesis. At its core, a hypothesis is a proposed explanation of your research that typically comprises of 3 parts.

  • A particular change: based on insights derived from quantitative and qualitative data
  • A particular effect: a goal, a conversion metric or a similar element, which needs improvement.
  • A particular reason: the thinking behind why a specific change can bring about the desired effect.

Stage 3: The Prioritization Phase: Choose an Order

Here, a number of frameworks can help you through the process. Of these, the P.I.E. framework formulated by Chris Goward at WiderFunnel is what we most recommend:

Stage 4: The Testing Phase: A/B, Split, or Multivariate?

Before running a test, understand the basics:

What is statistical significance, and why is it critical?

How long do you need to run a test?

What should I use—A/B, Split, or Multivariate test?

Management Notes

Understanding Conversion Rate Optimization (CRO)

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Conversion rate optimization (CRO) is the practice of increasing the percentage of users who perform a desired action on a website. Desired actions can include purchasing a product, clicking ‘add to cart’, signing up for a service, filling out a form, or clicking on a link.

At a very high level, the CRO process involves:

  • Conducting qualitative research and user behavior analysis
  • Conducting quantitative research
  • Conducting a heuristic evaluation for the site
  • Conducting competitive analysis
  • Prioritizing problem areas on the site and creating a conversion roadmap for your website (what pages need to be fixed)
  • Creating new designs based on the testing hypothesis
  • Conducting AB testing (or multivariate testing)
  • Creating a testing hypothesis
  • Analyzing the testing results

Conversion rate is the percentage of visitors who complete a desired action on a website, during a time period. Any valuable engagement your visitors make may count as a desired action, as long as it fulfills your webpage’s goal. Remember, every page should have a primary goal.

Conversion Rate = (Number of Conversions / Total number of Visitors) *100

  • Conversion rates differ wildly depending on the conversion goal (ad clicks, checkout completions, newsletter signups, etc.)
  • Most people don’t share their conversion data publicly anyway.
  • Every website, page, and audience is different.

There is no actual, ultimate industry figure you can rely on or compare yourself against with 100% confidence. Obsessing over an average percentage figure, and trying to squeeze as many conversions as possible just to stay in line with it, is not the best way to think about conversion rate optimization. Once again, you’re better off focusing on developing an in-depth understanding of what actually matters to your users, so you can give it to them and then, conversions will naturally follow.

Product pages have two conversion goals:

  • Macro conversion rate for product pages is total orders for the website divided by the number of visitors who visit the product pages.
  • Micro conversion rate for product pages is total clicks on the “add to cart” button divided by the number of visitors who visit the product pages.

The same concept applies if you are SaaS website. Your website conversion rate is the total number of monthly subscriptions divided by the total website monthly visitors. The SaaS pricing page, where you list the different plans for your product, has two conversion rates:

  • SaaS pricing page macro conversion rate: total number of visitors who “subscribe” divided by the number of visitors who visit the pricing page.
  • SaaS pricing page micro conversion rate: total number of visitors to click on the “subscribe” button on the page divided by the number of visitors who visit the pricing page.

Conversion Testing is the process of conducting an AB or multivariate test to increase the website conversion rate.

An iterative process by nature, CRO helps you in making assumptions about your website visitors and then testing these assumptions to measure how your market actually responds.

As a long-term process, CRO achieves sustainable, repeatable, and consistent increases on conversion rates through researching, testing, and analyzing visitors’ behaviors on your website. A good CRO program increases your site’s revenue month to month, reaching significant cumulative annual growth.

Management Notes

Understanding Target Audience

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Being successful online is all about cultivating as many new customers as possible. With that fact in mind, it’s no wonder that many organisations assume that they should try to share their message with as many different people as possible. After all, the wider your reach, the more potential customers you can get.

Content marketing success starts with knowing how to find your target audience. After all, how can you begin creating content before you know who your audience is.

Good content marketing takes time. A lot of it. You can’t afford to waste that time with content that isn’t perfectly focused on your target market. You need to find who your people are.

In the modern, digital world of the day, we’re constantly bombarded with huge amounts of information. In fact, users on WordPress are producing about 82.6 million new posts a month. If you’re not out there speaking to a specific group of people, there’s a good chance your message will end up drowning in that sea of unfocused noise.

It’s true that great content tends to naturally attract an audience. It does not, however, guarantee that it will be the best audience for your brand. That means visitors that are likely to:

  • Connect your content to your product.
  • Buy your product because of your content.

Before you can start listing your target audience demographics or browsing through the types of target audience, you need to understand why you’re segmenting your list of would-be traffic in the first place. A target audience profile is simply a specific group of customers most likely to respond positively to your promotions, products, and services.

How To Understand Your Target Market

What do customers stand to gain from choosing us (instead of a competitor)? What features do you offer that no one else does? Is there something you can do better than anyone else?

Who is my competition? It’s likely you know who your obvious competitors are. However, some quick searches on Google and social media (particularly on Facebook and Twitter) can often reveal upstart competition you may not have been aware of. Try searching a keyword or two that are related to your industry.

Who are our current customers? If you’re not sure who buys your product or service, someone in your organization almost certainly does. Consider asking your company’s executives or sales teams for this information. It may also be necessary to segment your types of customers.

What problems does my company’s product or service solve? If you’ve been in business for any length of time, you should have some understanding of why your product or service exists. Your content should be related to that purpose, too (that means resisting the urge to share irrelevant memes just because they’re funny if it’s not connected to your mission, it doesn’t belong in your content marketing).

Often, your target audience analysis will be based on specific factors like location, age, income, and so on. For instance, if you’re a makeup company, there’s a good chance you’ll want to appeal to women who can afford your products and live in an area you can ship to.

So, why is a target audience important? The simple answer to that question is that the channels, language, and information you use to connect with your audience might not be as effective with one demographic as it is with another. Finding your target audience definition will help you to create a tone of voice that really speaks to your customer.

Essentially, a target audience analysis gives you direction for your marketing and ensures more consistency in your messaging, so you can build stronger relationships with customers. After all, if you know:

  • What kind of people you’re talking to, you’ll know how to speak to them, where to find them, and what they want from your brand?
  • How those people talk, you’ll be able to adapt your keywords and SEO strategies to rank for the right words and phrases.
  • What your customers want, you’ll be able to adapt your value proposition so that your brand is relevant to a specific need or problem.
  • How they compare and choose products, you can adjust your marketing campaigns to make your offering seem the most compelling.

Considering your target audience demographics

There are countless different types of target audience out there. In fact, the market for any single brand is likely to be unique to that company. After all, every company has a different set of values, a different purpose, and a one-of-a-kind strategy for sales. As you begin to discover the answer to the question: “Why is a target audience important?” you’ll learn that you often have to combine numerous characteristics to get an effective user persona. Aside from the things mentioned above, remember to look at:

  • Income or job title.
  • Family or relationship status.
  • Needs and aspirations.
  • Problems and concerns.
  • Which social media websites they use.
  • Favourite websites.
  • Buying motivation.
  • Buying concerns.

Personality-driven target audience profile

Personality is a critical component of effective marketing, and it’s something that should show up in all your campaigns. When you’re thinking about how to identify a target audience, it’s always worth thinking about what’s valuable to your customer, and what isn’t. How do your clients spend their free time? What issues do they care about? For instance, if you decide you want to connect with a millennial audience that cares about social responsibility, you might invest more into showing off your ethical side.

A geographical or “local” target audience profile:

There are very few brands that can afford to target customers from around the world. Not only is it more difficult to earn attention when your scope is that large, but you probably won’t be able to deliver your services and products to people from every country anyway. Unless you offer digital services, think about how you can connect with new customers locally. How far can you afford to travel to offer services, and what’s the maximum distance for shipping your products?

An age-based target audience profile:

People of different ages act in different ways. Interestingly, the person most likely to use your product won’t always be the person you target. For instance, if you’re conducting a target audience analysis for a baby, then your target audience is more likely to be parents, than newborns. When you don’t have an obvious age-range for your customers, as in the case above, try and keep your target market as narrow as possible. For instance, if you sell enterprise-level software, research the most likely ages of CEOs in your industry. This will help you to design promotional strategies that appeal to the right age-range.

Management Notes

Factors affecting Insurability

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It is essential that in the event of your unfortunate demise, the financial concerns of your dependents, be they familial or professional are looked after.

That is why it is recommended that every individual and family avail a life insurance policy that can help safeguard their futures and provide some much-needed peace of mind. However, one must consider that while a life insurance policy is a universal recommendation for all, the particulars of each policy differs from person to person.

A great way to help and protect your loved ones, is with Life Insurance which can be a huge investment as well. A lower premium paid can yield to a good amount of savings over a period of few years. Life insurance premiums are based on a number of factors, and it can be quite tedious for a few people to understand why and what the charges are, and why they pay a rate that may not be the same as another.

The Individual Policy:

Lastly but most importantly, a major factor in your life insurance premiums is the insurer from whom you opt to avail your policy in the first place. It is recommended to opt for an insurer that provides you extensive coverage at the most economical premium amounts.

Gender:

Another factor that determines the amount of your premiums is your gender. This factor is rooted in scientific and statistical evidence which states that women are likely to live an average of 5 years more than men . This translates to women availing their policies for a longer tenure than men, and hence, as mentioned above, this means they can avail lower life insurance premiums.

Medical Records:

Life insurance policies typically come with an underwriting process that includes conducting a thorough medical exam of the policyholder. The findings of this medical exam shed light on the status of your physical health and raise flags about potential illnesses you might contract in the future. Therefore, these medical records and their results also play a key part in determining the exact premium amount you will pay for your life insurance.

Tobacco Use:

An important factor that most people might not consider when thinking about life insurance premiums, is an individual’s smoking habits. According to research, people who smoke are more likely to contract various illnesses and have a higher mortality rate as well. Hence, the term insurance premiums for smokers reflect these risk factors and tend to be higher than for their non-smoker counterparts.

Family History:

It is widely known that certain diseases are considered hereditary, which means that they have a tendency to run in the family. Other types of diseases might not be considered hereditary, but might have a higher chance of affecting members of a family due to common lifestyle choices. All of these risks are reflected in your family medical history, and also play a part in determining your life insurance premium amounts.

Age:

The primary factor influencing the life insurance premiums of a policyholder is his or her age. From the perspective of the insurer, a young individual has a higher chance of continuing the life insurance policy for years to come. He or she is also less likely to suffer from an age-related disease and pass away prematurely. This makes them less of a liability for the insurer and hence, more likely to be eligible for low premiums. Hence, as a general rule, it is preferable to avail a life insurance policy as early on in your career as possible to avail the lowest premiums possible for you.

Management Notes

Guiding principles of Underwriting

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Underwriting has to do with the selection of subjects for insurance in such a manner that general company objectives are met. The main objective of underwriting is to see that the risk accepted by the insurer corresponds to that assumed in the rating structure. There is often a tendency toward adverse selection, which the underwriter must try to prevent. Adverse selection occurs when those most likely to suffer loss are covered in greater proportion than others. The insurer must decide upon certain standards, terms, and conditions for applicants, project estimated losses and expenses through the anticipated period of coverage, and calculate reasonably accurate rates to cover these losses and expenses. Since many factors affect losses and expenses, the underwriting task is complex and uncertain. Bad underwriting has resulted in the failure of many insurers.

The primary purpose of careful selection is to avoid adverse selection, to reject those insurance applicants who are posing as a standard risk, even though they are actually a higher risk.

The 2nd underwriting principle is to have proper balance within each rate classification, meaning that those with higher than expected losses should be offset by those with lower than expected losses. Insurance applicants with similar loss-producing characteristics are grouped together.

Each member of the class is charged the same rate, but not all will have the same actual losses. Therefore, the basis for establishing the premium will not be valid unless those with higher actual losses are offset by those with lower actual losses.

The final underwriting principle is that there must be equity among policy owners, where the same rate should be charged for each insurance applicant that has the same expected losses. Otherwise, charging the same rate to a group where the individuals have a different expected loss would create a situation where those with lower losses or subsidizing those with higher losses. Eventually, the overcharged subgroup will eventually find lower insurance rates offered by other companies, leaving the individuals with higher expected losses in the subsidized group, which will create losses for the insurance company.

  • Prudent underwriting reduces the chances of Physical, Moral, and Morale hazards.
  • To reduce the possibility of adverse selection against the insurer.
  • Underwriting helps in determining the expected loss potential of the proposed insured and selecting a price in line with this expected loss.

Principles:

Understanding

People make mistakes. We understand this happens even to the best people. Our task is to identify and forgive the occasional oversight.

Reputation

We look for people who have made a significant investment in their education and career, and are a pillar in their community. This demonstrates a commitment to your future and a desire to keep the promises you make to yourself.

Growth

Reward stability and consistent achievement but also look for personal growth. Every person has a different route to personal and professional success. At Earnest we are not as concerned with which road you choose, only that you are building for your life ahead.

Potential

We believe where you are going is more important than where you have been.

People are unique. Understanding our clients is part of what makes our work a mission, not a job. We love the singular complexity of every Earnest applicant. A single credit score can only tell one part of your financial story. It takes every part of your profile to gain an understanding of who you are. There is no one thing that drives the Earnest process.

Fairness

We believe that financial responsibility, not wealth, should be the primary driver of your access to the tools and resources that enable you to build your life. It is not about your income level, it is about living within your means, putting a little away in savings each month, and working hard to make that next step in life.

Affordability

It makes sense for people to only take out a loan they can afford. We work hard to understand not only your background and future potential but also what will fit into your budget each month. This ensures you are primed for success and protects us all against the dangers of an unstable and over-leveraged financial system.

Trust

Trust is at the heart of all lifelong relationships. We believe trust is built through getting to know one another honestly, which is why we ask so many questions about you. Trust is a two-way street, and at Earnest we believe in being open and transparent about who we are, what we do, and how we do it. If you have any questions, just call and ask. We love hearing from you.

Management Notes

Insurance vis-à-vis- Investment in the Units Mutual Funds

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ULIP is an insurance product that combines insurance and investment benefits in a single plan. ULIP, or Unit Linked Insurance Plan, offers life cover which is a major benefit over the traditional wealth creation tools. It not only helps your money grow but also protects your loved ones’ future from life’s unexpected turns.

When you make an investment in ULIP, the insurance company invests part of the premium in shares/bonds etc., and the balance amount is utilized in providing an insurance cover. There are fund managers in the insurance companies who manage the investments and therefore the investor is spared the hassle of tracking the investments. ULIPS allow you to switch your portfolio between debt and equity based on your risk appetite as well as your knowledge of the market’s performance. Benefits like these which offer investors the flexibility of switching is a huge factor contributing to the popularity of these investment instruments.

To get a mix of both of these characteristics of financial planning, ULIP is one of the suitable options. In ULIP investment, a small portion of money is invested towards securing your life and rest is invested in equities.

One of the changes brought about by the Insurance Regulatory and Development Authority of India (IRDAI) in the year 2010 as regards ULIPs, was to increase the lock in a period from 3 years to 5 years. However, insurance being a long-term product, as an investor you may not really reap the benefits of the policy unless you hold it for the entire term of the policy which can range from 10 to 15 years.

Benefits:

Greater Rewards for Staying Invested:

Your money grows further as the insurance company adds to your savings through bonuses/ additions and are available to you in ULIPs in different forms.

Potential for Growth:

There is a potential of earning higher returns from the power of equity and debt funds. This will help you achieve your life-goals such as buying a new home, your dream car, funding your child’s higher education and much more.

Tax Benefits:

Investment in ULIPs is eligible for deduction from taxable income under Section 80C of the Income Tax Act, 1961 up to ₹ 1.5 lakh per annum. The maturity proceeds of the ULIP are also exempt from tax under Section 10(10D) of the Income Tax Act subject to conditions specified therein. If the ULIP investor dies during the term of the ULIP he/she will be entitled to the death benefit specified in the ULIP policy and the amount received on death is exempt from tax u/s 10(10D) of The Income Tax Act 1961. Switching between ULIP funds also does not attract any tax.

Protection:

ULIPs provide the protective benefit of a Life Cover, which keeps your family secure in your absence. ULIPs provide the protective benefit of a Life Cover, which keeps your family secure in your absence.

Flexibility of Investment:

You will have flexibility and control of your money through the following ways:

  • Fund Switch: An option to move your money between equity, balanced and debt funds
  • Premium Redirection: An option to invest your future premium in a different fund of your choice
  • Partial Withdrawal: An option that allows you to withdraw a part of your money
  • Top-up: An option to invest additional money to your existing savings

Protection:

ULIPs provide the protective benefit of a Life Cover, which keeps your family secure in your absence. ULIPs provide the protective benefit of a Life Cover, which keeps your family secure in your absence.

Regular Savings:

ULIPs inculcate the habit of regular and disciplined savings, which is the key to successful long-term financial planning. With regular premium payments, you can enjoy the benefits of wealth creation for your loved ones.

Funds that ULIPs invest in

Equity Funds: Where the premium paid is invested in the equity market and thereby is subject to higher risk.

Debt Funds: Where the premium is invested in debt instruments which carry a lower risk but in turn also offer a lower return.

Balanced funds: Where the premium paid is balanced between the debt and the equity market to minimise the risk for investors.

Consideration for Investing:

Compare ULIP offerings: Once you have determined your financial goal and the type of ULIP that will help you achieve it, the next step would be to compare the ULIP offerings in the market. Look for a comparison in the form of background expenses, premium payments, ULIP performance, etc. Also, investigate the nature of funds that the ULIP invests in to ascertain the returns from investments in the particular ULIP.

Personal financial goals: If your financial goal is about wealth creation and you want to save money for retirement, ULIP is one of the best options available.

Risk factor: Since ULIP investment is not as diversified as compared to ELSS, the risk in ULIP is probably a bit high compared to schemes like ELSS.

Investment horizon: ULIPs have a lock-in period of 5 years. If a ULIP is surrendered in the first three years, the insurance cover would cease immediately. However, the surrender value can be paid only after three years.

Management Notes

Laws affecting Underwriting

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Underwriting requires the following skills:

  • Knowledge of individual risk peculiarities.
  • Assessing how the risk & a peril produce potential losses.
  • Estimating magnitude of losses – peril-wise.
  • Estimating insured‘s systems & capabilities for prevention.
  • minimization of losses.
  • Prescribing rates, terms & conditions.
  • Deciding on retention & risk transfer.

Consideration of application.

The Board shall take into account for considering the grant of a certificate, all matters which are relevant to or relating to underwriting and in particular the following, namely, whether the applicant:

(a) Has the necessary infrastructure, like adequate office space, equipment’s and manpower to effectively discharge his activities

(b) Has any past experience in the underwriting or has in his employment minimum two persons who had the experience in underwriting;

(c) Any person, directly or indirectly connected with the applicant has not been granted registration by the Board under the Act.

(d)  Fulfils the capital adequacy requirements specified in regulation 7.

(e) Any of its director, partner or principal officer is or has at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence.

General responsibilities of an underwriter.

(1)  The  underwriter  shall  not  derive  any  direct  or  indirect  benefit  from  underwriting the issue other than the commission or brokerage payable under an agreement for underwriting.

(2)  The total underwriting obligations under all the agreements referred to in clause (b) of rule 4 shall not exceed twenty times the net worth referred to in regulation 7.

(3) Every underwriter, in the event of being called upon to subscribe for securities of a body corporate pursuant to an agreement referred to in clause (b) of sub-regulation (1) of regulation 9A] shall subscribe to such securities within 45 days of the receipt of such intimation from such body corporate.

Management Notes

Life Insurance in Individual Financial Planning

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Financial Planning refers to a comprehensive plan of your long term or short-term objectives for financial security. The purpose of financial planning is to form the foundation for a specific goal or destination in your life.

Life insurance is still a nascent idea and most people do not think about it until a major life change causes them to consider what might happen to their loved ones in case of any unforeseen circumstances. While the main objective of buying a life insurance policy is to protect oneself from unforeseen circumstances, it can also help in wealth accumulation, preservation, and give access to liquidity at the right time, if added as a component of financial planning.

Most of us usually get confused on how much to invest and where to invest; stocks, bonds, real estate and many others. Life insurance is a good investment tool, which is comparatively simpler, more affordable and most importantly caters to the different stages of the individual’s lifecycle.

Caring for a special needs child or aging parents

Life insurance plays a critical role in a financial plan if you have a special needs child or ageing parents that depend on your for financial support. Without the resources to provide for their continual care, family members will be forced to take on a stressful and lifelong financial burden. Life insurance proceeds can provide the financial support needed for these special individuals in your life.

Paying off a mortgage

Payments, taxes, insurance and interest. For most people, a mortgage is one of their largest expenses. For this reason, most couples shoulder this long-term financial commitment together. But if you were gone tomorrow, could your family afford such a large expense without your income? A life insurance policy can help provide your family with a lump sum of money to pay off mortgage debt, eliminating this large financial stress, as well as the possibility of a loan default or eventual foreclosure.

While the basic premise of life insurance has always been ‘protection’ , certain insurance products also provide the flexibility of it being used as a long term savings and wealth creation tool. These products allow the individual to systematically save over the long run and generate returns to create a corpus that can be used to fund different milestones such as child’s education, marriage or retirement. However, an oversight which many households typically make is that they benchmark the returns from life insurance products with other forms of investing options. In doing so, what they completely fail to comprehend is that the primary purpose of insurance is protection followed by returns and not the other way round.

  • Income replacement for your survivors
  • Investment/forced savings for you
  • Reduced income and transfer tax liability
  • A ready source of cash at a time when it’s likely to be needed most
  • Funding of small business buy/sell agreements
Management Notes

Competition of Life Insurance

indiafreenotesby indiafreenotes0

The top 10 competitors in LIC’s competitive set are HDFC Life, SBI Life, ICICI Prudential Life Insurance, IDBI Federal, Bajaj Allianz, Tata AIA, Max Life insurance, PNB MetLife, Exide Life Insurance, Aegon Life. Together they have raised over 1.3B between their estimated 139.2K employees. LIC’s revenue is the ranked 1st among it’s top 10 competitors. The top 10 competitors average 7.8B. LIC has 114,498 employees and is ranked 1st among it’s top 10 competitors. The top 10 competitors average 15,855.

LIC has for a long period of time has enjoyed a dominant market of life insurance and the fact cannot be denied that LIC has a pre accomplished market leadership which makes it difficult for the new players to compete. While the new players struggle to increase their market in India, LIC continue to leverage advantage of its old establishment and government support for maintaining its growth. Life Insurance is the fastest growing sector in India since 2000 as Government allowed Private players and FDI up to 26%. Life Insurance in India was nationalised by incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time were taken over by LIC.

LIC enjoys this dominance because it is obvious that investors want a guarantee of their money irrespective of cycles of market. They know that it would be a safe play to invest in LIC as the government guarantee to bail out in case of any mishap. This denies the life insurance market from a level playing field to the competitors. The private players have been in the market for 10 years now but could not bring a big change in market share of life insurance. People ‘s trust is build up with LIC due to such sovereign guarantee. The fact that LIC has not used this benefit of sovereign guarantee but this definitely helps them grow their market size because of the faith people lay in them being a state-owned enterprise.

Investments and Recent Developments

The following are some of the major investments and developments in the Indian insurance sector.

Companies are trying to leverage strategic partnership to offer various services as follows:

  • In FY21 (until March 2021), premium from new business of life insurance companies in India stood at US$ 31.9 billion.
  • In FY21, LIC achieved a record first-year premium income of Rs. 56,406 crore (US$ 7.75 billion) under individual assurance business with a 10.11% growth over last year.
  • In India, gross premiums written of non-life insurers reached US$ 26.52 billion in FY21 (between April 2020 and March 2021), from US$ 26.49 billion in FY20 (between April 2019 and March 2020), driven by strong growth from general insurance companies.
  • In May 2021, Max Life Insurance Co. Ltd. launched ‘Max Life Saral Pension’, a non-linked, individual immediate annuity plan.
  • In March 2021, health insurance companies in the non-life insurance sector increased by 41%, driven by rising demand for health insurance products amid COVID-19 surge.
  • In February 2021, Bharti AXA General Insurance launched its ‘Health AdvantEDGE’ health insurance scheme to provide holistic cover against accelerating costs associated with medical requirements and other healthcare facilities.
  • In February 2021, ICICI Lombard General Insurance, a non-life insurance firm in the private sector, has been authorised by the International Financial Services Centre (IFSC) to establish an IFSC Insurance Office (IIO) in GIFT City in Gandhinagar, Gujarat.

Government Initiatives

The Government of India has taken number of initiatives to boost the insurance industry. Some of them are as follows:

  • Union Budget 2021 increased FDI limit in insurance from 49% to 74%. India’s Insurance Regulatory and Development Authority (IRDAI) has announced the issuance, through Digilocker, of digital insurance policies by insurance firms.
  • Under the Union Budget 2021, Finance Minister Nirmala Sitharaman announced that the initial public offering (IPO) of LIC will be implemented in FY22, as part of the consolidation in the banking and insurance sector.Though no formal market valuation has been undertaken, LIC’s IPO has the potential to raise Rs. 1 lakh crore (US$ 13.62 billion).
  • In February 2021, the Finance Ministry announced to infuse Rs. 3,000 crore (US$ 413.13 million) into state-owned general insurance companies to improve the overall financial health of companies.
  • Under Union Budget 2021, fund of Rs. 16,000 crore (US$ 2.20 billion) has been allocated for crop insurance scheme.
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