Auto Insurance Market: How Does it Work?  

There are various definitions for “Market”. Our definition of the Insurance Market is a place where the buyers and sellers gather or come together for commercial purposes. It may be a physical marketplace or a virtual market. 

The main players in the insurance market are the buyers of insurance and the sellers of insurance. The buyers are called insured and the sellers are known as the insurance companies, brokers, or agents. Apart from the buyers and sellers of insurance, other players are directly or indirectly involved in the insurance market such as garages, agents, brokers, consultants, advisors, surveyors, loss adjusters, loss assessors, actuaries, regulators, educational institutions, risk managers, banks, reinsurers, etc. 

In car insurance, we focus on the insurance companies, insured, re-insurers, brokers, agents, consultants, advisors, and risk managers. They all play an important role in the process of the sale of an insurance policy. Whereas the reinsurers do not directly participate in the marketing process, but, as a supplier, they help and protect the insurance company by providing them with the necessary reinsurance coverage. Large customers will give importance to the backing of a good reinsurer. 

Insurance Lines

The buyers are also known as insurance customers and are usually categorized into two main segments: personal lines, and commercial lines. 

  • Personal Lines are composed of individuals who buy insurance for their self-consumption. There may be further categorization of personal lines by identifying different segments like High-Net-worth Individuals (HNI) and Ultra High Net-worth Individuals (UHNI). These segments target the top rich people in the market. 
  • Commercial Lines are composed of individuals, who run businesses and corporate bodies. In commercial insurance also there may be further classification of the customer based on the Ownership (private and public bodies etc.), size of the organization, region, etc. 

Categories of Insurance Companies

The sellers of insurance are the insurance companies. The insurance companies may be categorized into life insurance companies and general insurance companies: 

  • Life insurance companies deal with life insurance, also known as protection and savings insurance. 
  • General insurance companies deal with non-life products, and some general insurance companies deal with life products. 

The general insurance companies can also be further divided into the line of business they are doing like health, auto, or home insurance providers. These are also known as specialist insurance companies as they deal only in one business class. Companies that deal with more than one class of business are also termed composite insurance companies.

The insurance companies are also categorized into direct-selling insurance companies and indirect-selling insurance companies. 

  • The direct selling insurance companies sell their policies directly to the customer. They can do it directly through their sales staff, having an arrangement with franchisees, and opening many points of sale offices. They also use information technology and internet to increase their sales. Nationwide Mutual Insurance Company or  Direct Auto are only examples of these companies where you get a direct auto insurance policy.
  • The indirect companies sell through intermediaries; the intermediaries can be the agent, broker, consultant, bank, or any other individual or juristic entity that will get the business for the insurance company for a fee or commission. The commission is part of the premium that is paid to the agent, broker, or any other service provider for their services. 

Some companies may be a mix of direct and indirect companies as they do business directly and also through intermediaries. Nowadays it is very common to use online platforms like Rodney D Young’s to provide insurance quotes and facilitate comparison shopping.

How does insurance work?

Insured needs protection against financial loss and this need is being satisfied by the insurance company in the form of an insurance policy. The policy guarantees the insured against financial loss against the insured perils, which is subject to the terms and conditions of the policy. 

Insurance is a promise to make good a financial loss in exchange for a consideration which is termed as a premium. The insurance company offers only a document (policy), which promises to compensate the insured in case of admit-able loss under the policy. The policy may be worth a few dollars and the premium received by the insurance company may be in millions, whereas the claim may be astronomical high. 

What is the significance of insurance marketing?

Marketing is an important function of the insurance company. Philip Kotler, a well-known authority on marketing has defined marketing as “Satisfying needs and wants through an exchange process”. 

Insurance is not a tangible product, it is considered as a service product. Hence the marketing of insurance on the spot schaumberg is like marketing of services: a major portion of marketing insurance products is selling. Selling is an integral part of the marketing process. 

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