CASE-2

New Market Entry

Insurance Company

HOME INSURANCE SECTOR

Entry of a Life and Health Insurance company who wishes to enter the Home Insurance Sector.

CASE QUESTION:

This is an insurance company which is currently in Life and

Health insurance departments and wishes to expand further in

the Home insurance sector. The client believes a real-estate boom is happening

across India, and hence a potential market that is expected to

grow substantially in the coming years. Their home insurance

products would not only be limited to new houses but would also

be relevant for renovating existing houses.

There is low penetration; not many companies have ventured into

this segment.

ANALYSIS

The objective is to capitalize on the growing real estate market in India and tap into the potential growth of the home insurance sector. The company aims to provide comprehensive home insurance products not only for new houses but also for the renovation of existing houses.

CURRENT SCENARIO:

India's affordable housing market is projected to be worth approximately INR 9.7 trillion (equivalent to US$150 billion). The Indian government has initiated an ambitious plan to build 20 million homes in urban areas and 40 million homes in rural areas by 2022, aiming to ensure housing for all. This extensive project requires a massive investment.

However, the scenario for insuring this substantial asset base in India is disappointing. Home insurance penetration in the country stands at a mere 1%. Merely 3% of homes in India are currently insured. In contrast, countries like the US, UK, France, Australia, and China boast home insurance penetration rates ranging between 90% to 97%.

VULNERABILITIES:

The only semblance of home insurance in India is home loan insurance, where the loan taken to buy the property is insured. This covers only the outstanding loan liability from the time the property is bought. In case of an event where the applicant is unable to repay the loan, home loan insurance coverage helps the family repay the outstanding amount. It does not provide any special protection in case the home or the contents of the home suffer a loss either by a natural or man-made disaster.

Around 60% of the Indian subcontinent landmass is vulnerable to earthquakes and other natural catastrophes, and at least 38 Indian cities lie in high-risk seismic zones. Further, most Indian cities are densely populated and do not adhere to the best architectural layout standards.

Also, a majority of both residential and commercial premises, do not comply with earthquake and flood resistance safety guidelines. These aspects make them highly vulnerable to natural and man-made perils.

TARGET COSTUMERS:

New Homeowners: Individuals or families purchasing new homes.

Home Renovators: People investing in renovating their existing houses.

The insurance company can further segment its target market based on the following factors:

• Age: New homeowners are typically younger adults, while homeowners who are renovating their existing homes may be older adults.
• Income: The insurance company can target homeowners with different income levels by offering a variety of products and price points.
• Location: The insurance company can target homeowners in specific geographic areas, such as urban areas, rural areas, or coastal areas.

ROLLOUT-STRATEGY

Product Offering

Develop comprehensive home insurance packages tailored for both new homeowners and home renovators. The packages should cover structural damage, content insurance, liability coverage, and potentially offer add-ons such as coverage for smart home technologies or eco-friendly upgrades.

• Basic home insurance: This would cover the structure of the home and its contents against damage from fire, theft, and other hazards.
• Renovation insurance: This would cover the cost of repairs to the home if it is damaged during a renovation project.
• Disaster insurance: This would cover the cost of repairs to the home if it is damaged by a natural disaster, such as a flood or earthquake.

The insurance company should also consider offering additional features and benefits with its home insurance products, such as:

• 24/7 customer service: This would allow homeowners to get help with their claims and other questions at any time of day or night.
• Home maintenance tips and advice: This would help homeowners keep their homes in good condition and reduce the risk of claims.
• Discounts for safety features: This would encourage homeowners to install safety features in their homes, such as smoke alarms and security systems.

Promotion

Utilize targeted marketing strategies through digital platforms, partnering with real estate agencies, and advertising in home renovation shows or expos. Leverage social media, influencers, and content marketing to create awareness.

• Direct mail: The insurance company can send direct mail to new homeowners and homeowners who are planning to renovate their existing homes.
• Online advertising: The insurance company can use online advertising to target its desired demographic.
• Social media: The insurance company can use social media to connect with potential customers and provide them with information about its products and services.
• Partnerships: The insurance company can partner with real estate agents and other businesses to reach its target market.

Place

Establish a user-friendly online platform for easy policy purchase and management. Additionally, consider tie-ups with real estate companies for direct selling at the point of property purchase.

• Direct sales: The insurance company can sell its products directly to consumers through its own website or sales force.
• Independent agents: The insurance company can sell its products through independent agents who represent multiple insurance companies.
• Partnerships: The insurance company can partner with other businesses, such as banks and financial institutions, to offer its products to their customer

Leveraging Current Strengths/Resources

• Industry Presence: Leverage the reputation and trust established in the Life and Health insurance departments to introduce cross-selling or bundle offers for existing clients.
• Salespeople: Train the existing sales force in the specifics of home insurance. Equip them to communicate the unique selling points of the home insurance products.
• Customer base: The insurance company can cross-sell home insurance products to its existing customers. Potential Problems and BarriersThe insurance company may face the following problems and barriers while entering the home insurance market:

• Competition: The home insurance market is competitive, with several established players.
• Low awareness: Many consumers are not aware of the importance of home insurance.
• Pricing: The insurance company will need to price its products competitively to attract customers.

The insurance company can overcome these problems and barriers by:

• Differentiation: The insurance company can differentiate its products and services from those of its competitors by offering unique features and benefits.
• Education: The insurance company can educate consumers about the importance of home insurance through marketing campaigns and public relations efforts.
• Competitive pricing: The insurance company can price its products competitively by using data analytics to accurately assess risk

POTENTIAL PROBLEMS AND BARRIERS:

a. Regulatory Compliance: Ensure compliance with the regulatory framework governing the insurance industry in India. Familiarize the company with the specific regulations and requirements related to home insurance products.

b. Competitive Landscape: Understand the existing competition in the home insurance sector and identify ways to differentiate the client's offerings. Develop unique selling propositions that address customer pain points and offer superior coverage, pricing, or customer service.

c. Customer Awareness and Trust: Educate potential customers about the importance of home insurance and build trust in the client's brand. Overcome the perception that home insurance is unnecessary or expensive by highlighting the financial protection and peace of mind it offers.

d. Risk Assessment and Underwriting: Develop robust risk assessment and underwriting processes to accurately evaluate the risks associated with insuring different types of properties. This will enable the client to price policies appropriately and mitigate potential losses.

e. Distribution Channels: Establish efficient distribution channels to ensure reach and accessibility to customers across India. Overcome logistical challenges and ensure seamless policy issuance, renewal, and claims processes.

CONCLUSION:

Entering the home insurance sector requires a strategic approach encompassing the 4 P's of marketing, leveraging current resources, understanding potential barriers, and implementing a phased rollout strategy. Adapting to market feedback and being flexible in the approach will be key to establishing a strong foothold in this growing sector.