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Getting noticed: even with strict regulations and a lack of variety in products, insurers must find ways to differentiate themselves from competitors.

Selling is all about customer value--or at least the customer's perception of value. Unfortunately for insurers, most customers perceive insurance products as commodities with little or no differentiation among the sellers.

To compete with other insurers, a company must find a way to communicate to its customers the unique value they will receive as a result of their purchase of the particular product and their dealings with the carrier. This requires insurers to pay close attention to the information they collect about customers' circumstances, needs and perceptions, as well as how these vary from one buyer or segment to another.

Even when armed with such information, opportunities for insurers to differentiate themselves from competitors are limited. The strict regulation of the insurance industry combined with the realities of today's economy does not allow for a great deal of creativity and variety in the insurance marketplace. One place where variety does exist for insurers to capitalize upon is within the customer base. The needs and values of customers, or groups of customers, vary greatly. As a result, insurers need to provide unique customer-oriented value if they wish to outdo their rivals, and they must be sure to communicate that value to the customers.

An insurer that correctly understands the varying needs and values of customers in relation to its products and capabilities can identify why its offerings should be attractive to each group of customers. To understand the unique value, if any, of their products, insurers also must understand the value of the competitors' products to their customers. Too often, insurers fail to examine the value proposition competitors present to customers.

Many account executives and salespeople assume that they know and understand competitor offerings based on anecdotal and other casually obtained information. Most insurance company marketing and research and development traits don't have the resources or expertise to perform a detailed assessment of competitor value propositions and so rely on the insights of their sales force. Those that do have such resources gain a significant advantage in crafting a unique offering that will attract customers. Even those companies that cannot conduct detailed competitor analysis must consider whatever information is available about competitors' products in order to understand the context within which they must offer a unique value.

Those companies that have developed a unique value proposition for purchasers still face the challenge of making their target customers aware of that value. A well-thought-out communication plan based on customer values is therefore essential. The communication plan must be tailored to the needs and preferences of the target customer segments in considering issues such as the mode of communication: e-mail/e-commerce, direct marketing, mass marketing, specialist/consultative sales, agent/broker. Also, companies must consider what message they are sending: product focused, such as cost/financial performance; customer focused, such as protection security; or conditions focused, such as convenience and features.

The communication plan should not merely address advertising or marketing materials, but establish the core theme for all communication with customers. To be effective, the theme or value proposition must be incorporated into all interaction with customers. This requires a high degree of coordination and consensus among traits within the insurer.

With such consistent presentation of the theme message to customers, there is a greater likelihood that the value proposition will be received, understood and appreciated by customers. Carriers that do not have a consistent value proposition evident in all their dealings with customers run the risk of confusing and alienating them, or at the very least, making them wonder what they are paying for that they can't get elsewhere.

Most carriers have access to sufficient buyer information to develop a clear understanding of the needs and values sought by various customer segments. Unfortunately, most insurers do not use it for this purpose. Worse yet, most do not present a clear value proposition for customers, thus missing an opportunity to differentiate themselves in a crowded marketplace and gain a competitive advantage.

A focused effort to document customer needs and communicate a company's ability to satisfy those needs is possible and necessary for any carrier wishing to establish a competitive advantage for itself. All that is required is the recognition of the need to differentiate itself and dedicate sufficient effort to define its unique value to customers and to strive to deliver that value.

Gregory J. Hoeg, a Best's Review columnist, is vice president, corporate strategic planning, American Reinsurance Co. He can be reached at
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Title Annotation:Life/Health
Author:Hoeg, Gregory J.
Publication:Best's Review
Geographic Code:1USA
Date:Dec 1, 2003
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