Nib Insurance Company S.Co.

(NIC) is a private insurance company which was

established in May2, 2002 as a sister company to Nib International Bank.
Registering its Memorandum and Article of Association with the document
Authentication and Registration Office and getting its legal personality on the
15th of March, 2002. NIC commenced its operation in May 2, 2002 as a
General Insurance Company after getting its license No. 010/10 from the
National Bank of Ethiopia, the controlling authority for insurance operation in
Ethiopia having its head office at Dembel City Center. The company expanded
its service to include Life Assurance Business and become a composite insurer
since September, 2007. The company which started its general insurance
business operation by 658 Shareholders, a paid up capital of birr 14 million
and with only 4 branches has managed to increase its efficiency and expand its
services over the past fourteen years. As the company was able to increase its
paid up capital to 195 million, has 947 shareholders and its branches number
has reached 30. The company which from the outset emerged as a strong
competitive private insurance company is developing a sound portfolio which is
demonstrated by a prudent underwriting. Besides, NIC is known for its efficient
claim services. Furthermore, it is also a market pioneer in introducing "Travel
Health Insurance'' as a new product for travelers going to Schengen and
European states
 Motor Insurance
 Marine Cargo Insurance
 Burglary and Housebreaking Insurance
 Goods in Transit
 Pecuniary Insurance
 Engineering Insurance
 Fire , Lightning & Allied Perils Insurance
 Group/Personal Accident Insurance
 Plate Glass Insurance
 "All Risk" Insurance
 Life Insurance
Market segmentation
The use of market segmentation strategies means an organization targets its
product, service, or idea only to specific groups of consumers rather than to
everybody even if it means that other consumers who don’t belong to this target
market aren’t attracted to it.

While consumers can be described in many ways, the segmentation process is

valid only when the following criteria are met:
 Consumers within the segment are similar to one another in terms of
product needs, and these needs are different from consumers in other
segments.
 Important differences among segments can be identified.
 The segment is large enough to be profitable.
 Consumers in the segment can be reached by an appropriate marketing
mix.
 The consumers in the segment will respond in the desired way to the
marketing mix designed for them.
Marketing of Insurance Service to achieve increased customer orientation and
generation of profit is called Insurance Marketing. Formulation of an ideal mix
for insurance business is the main focus of Insurance marketing. The core and
peripheral services can be improved by following an appropriate service. The
marketing concept enables the insurance business to expand business in the
best interest of society as well as the insurance organization. Markets are
segmented into different customer groups. Each product or services is tailored
to match the needs of the customer group. The segmentation helps the
insurance organization in dividing the market into small segments where the
customer needs are identical.

SIGNIFICANCE OF SEGMENTATION TO THE INSURANCE BUSINESS

1. Market Segmentation is very important to an insurance organization. In

insurance business, the prime focus is on the policyholder. Insurance
marketing aims at transforming the prospects into policyholders. Market
segmentation enables the insurance marketer to identify the level of
expectations of the policyholders.

2. Insurance organizations capitalize on the available opportunities in market.

They need to increase their market share constantly. Market segmentation in
insurance business helps in informing, sensing and persuading the different
segments where the potential users are available.
3. The insurance professionals can do business in all segments, such as rural
and urban, men and women, agricultural or industrial and so on.
Segmentation makes it possible to spread the insurance business even to the
agricultural sector of the economy which is predominantly rural-based.

4. With market segmentation, the insurance organizations become aware the

changing needs and requirements of the rural sector and shape their services
accordingly.

5. Knowing and understanding the market is considered significant to the

insurance professionals since the segmentation process helps them in
scanning the changing needs and requirements of the rural sector.

6. A study of segmentation would help insurance professionals in formulating a

sound marketing strategy. The product mix based on market segmentation
would be competitive. All the prospects would have additional attraction in
using the services.

7. The segmentation would help insurance professionals in making the

promotional measures creative. It would be instrumental in sensitizing the
prospects. The advertisement professionals would make advertisement appeals,
messages and campaigns proactive to the receiving capacity of the target
audience.

8. The pricing decision can also be rationalized and the weaker sections of the
society would get substantial benefits. In view of the above, it is appropriate to
say that segmentation is very important to insurance professionals. It
transforms the prospects into users.

Nib insurance company segments its market based on mainly geographic

element. The company is trying to present its service outlets all over the
country to reach the untapped parts of the insurance market. Nib insurance
company serves all types of customers that come to its market based on their
special needs. For the segmented, the company gives incentives such as
discounts on premium and other benefits such as separately handling claims
and special policy offers.
The Nib insurance is divided into different segments and sub-segments.

Segments include

 Household sector
 Industrial sector
 Institutional sector
 Region-wise sector

The industrial sector is subdivided into

 Public sector and

 Private sector

Target Market
Targeting comes after segmentation where the market has been broken into
several segments. Targeting is the process of choosing and concentrating
companies’ efforts on one or a few key segments. The idea of targeting is to
make companies focus on target segmentations in order to ensure the target
group to be highly satisfied. However, on the other hand, ignoring other
customers who are not in the chosen segmentations may lead to a loss of
companies’ market shares. The targeting strategy involves segmenting the
market, choosing which segments of the market are appropriate, and
determining the service/products that will be offered in each segment. A
business offering multiple products can determine if the various segments
should receive one generic product/service (such as in mass marketing), or if
each segment should receive a customized product/service (multi-segment),
based upon the market's diversity, maturity, the level of competition and the
volume of sales expected.

Sometimes the most difficult question to answer is who will use your services.
Ideally, everyone will flock to your practice and refer friends. A more realistic
approach is to target your message to a specific group that will be most
interested in your practice.

Identifying your target market should take into account your mission
statement and your situation analysis. Both can help you realistically target
specific groups or individuals.

This doesn’t mean you’ll only provide care to these customers, but it will help
you craft a message geared toward individuals you consider being your target
market.
Insurance is an intangible service to consumers, where they essentially are
buying security and peace of mind. Insurance protects them against
unexpected damage of their motor vehicle and financial loss. It is not a product
that consumers actively seek out they just know that they should have it, and
in some jurisdictions certain types of car insurance are mandatory.

Insurance is one of those products where the majority of consumers are less
involved in the purchase decision primarily due to lack of interest and, as a
result, consumer typically sees very little differentiation between competitive
offers. This will mean that price and brand and distribution channel will play a
more important role in the successful sale of insurance products, as opposed to
the quality and design of the product itself.

Types of Targeting Strategy

A) Single segment concentration:- It is a type of targeting strategy where total

marketing effort is concentrated on only one market segment. A financial
institution mostly prefers this strategy when it has limited resources or when
that is the only segment which need can be currently met given the capability
of the financial institution.

B) Multi segment coverage (selective specialization): This is a multiple-

segment strategy, also known as a differentiated strategy. Different marketing
mixes offered to different segments. The product itself may not be different in
many cases only the promotional message or distribution channels vary.

C) Product specialization: The firm specializes in a particular product and

tailors it to different market segments.

D) Market Specialization: The firm specializes in serving a particular market

segment and offers that segment an array of different products.

E) Full Market coverage: The firm attempts to serve the entire market. This
coverage can be achieved by means of either a mass market strategy. Large
firms can cover a whole market in two broad ways: through undifferentiated
marketing or differentiated marketing

Ethiopian insurance sector is highly supervised by National Bank of Ethiopia,

where it is difficult to get approval for any new idea provided by the insurance
companies. On the other hand, as insurance business in giving service, it is
very easy to copy by other similar insurance companies.
But Nib insurance is mostly following differentiated targeting strategy.
Nib insurance company closely communicates with its customers to give
service based on the special need better than other the industry players.
Let’s see the motor insurance segmentation based on the customer need and
want
Example-

 Third party insurance(Mandatory)

 Comprehensive motor insurance

What is third party insurance?

As the name and title explains third party insurance mainly covers risks that
occurs to third parties by an insured individual. The Preamble also states that
the insurance sector plays an important role in economic development through
providing insurance coverage against risks, the provision for alternative means
for savings and mobilization of financial resources from within and outside the
country. The Proclamation to insure the reliability and stability of the financial
sector it has become necessary to put in place a comprehensive legal
framework in the country.

Third party is defined to mean “any person other than the insured person,
member of the insured person’s family, the driver or employee of the insured
person to whom an insurance policy applies at the time when vehicle accident
occur giving rise to liability under such insurance policy”.
Insurance policy for purposes of the third party insurance means a contract
whereby an insurer undertakes to pay compensation and cost of emergency
medical treatment to any third party for death, bodily injury (i.e. any bodily
injury or functional disorder on any part of the body’s natural order sustained
by a victim of vehicle accident and includes temporary, partially permanent or
fully permanent bodily injury) or damage to property caused by the vehicle of
an insured person. Emergency medical treatment is in turn defined as a
medical service provided to any person who have sustained injury as a result of
vehicle accident at the site of the incident, while on the route to a medical
institution and in the emergency ward of the medical institution.
The premium tariff applicable to vehicle insurance policy against third party
risks is determined by the Council of Ministers based on the study carried out
and submitted by the Insurance Fund Administration Agency. Under the law,
the Ministry of Transport is mandated to issue directive applicable to insured
persons and drivers with repetitive vehicle accidents.

The amount of compensation to be covered by vehicle insurance policy against

third party risks must a) not be less than 5,000 birr and a maximum of
40,000 birr in respect of the death of one person (although in some developed
countries it reaches 1 million Euros); b) an amount not exceeding 40,000 birr
in respect of bodily injury of one person which also includes medical expenses
incurred for the injured person and costs related to other compensations etc);
or c) an amount not exceeding 100,000 birr in respect of damage to property
although the law is not clear what kind of property is worth what? It is also
important to stress that the person who is entitled to compensation above the
limit stated above also have the right to claim same from the insured person or
from other having legal liability in accordance with the relevant law

What is Comprehensive motor insurance?

Comprehensive insurance is a coverage that helps pay to replace or repair your

vehicle if it's stolen or damaged in an incident that's not a collision.
Comprehensive, sometimes called "other than collision" coverage, typically
covers damage from fire, vandalism or falling objects (like a tree or hail). If
you're financing or leasing your car, your lender likely requires comprehensive
coverage. If you own your vehicle outright, it's an optional coverage on your car
insurance policy.

It provides covers against loss of or damage to the insured vehicles as a result

of accidental collision and/or overturning or fire or theft plus against Third
Party Legal Liabilities in accordance with the Ethiopian proclamation No.
559/2008 (Vehicle Insurance Against Third Party Risks).

The policy can be extended to cover risks to Passenger Accident Benefit; act of
Bandits, Shifta and Guerrilla/ BSG/; Territorial Limit to Djibouti, etc.

Positioning

Nib insurance is one of the top five leading insurance companies in the country
and the study results are more relatively leading to conclusion of good
perception among consumers on the company’s service giving.

Product

Nib insurance is providing a lot of insurance service, which is almost given by

other similar insurance companies. However, some products like online travel
and third party insurance as well as funeral insurance has not been given by
any other insurance company except Ethiopian insurance company thus can
be considered as special product.

Pricing

Pricing in the insurance business is a careful task. One, various risk factors
need to be assessed to arrive at the “right price” or a price that considers
underwriting premium, withstands competition, generates operating surplus
and performs in the highly volatile economic market. The pricing strategy of
Nib insurance is pricing on the foundation of the risk. Therefore the premiums
charged against the policies are based on the risk attached to the type of
insurance given.
Place/Distribution

Insurance agents, brokers and direct channel or service outlets are the way Nib
insurance reaches its customers. Non-life insurance individual agents are the
biggest channel.

Promotion

Promotion practice in Nib insurance is satisfactory; a lot of money has been

deployed for printing advertising such as, diary, table and wall calendar, flayer,
poster, advertising newsletter and newspapers, and giveaway materials like key
holder, pen, car sunshade, and desk clock and other. In sales promotion, the
company is trying to encourage by incentives to the end users, for taking the
policy, playing an important role in promoting Nib insurance service.

However, in publicity or public relations, the practice is very good. Event and
experience along with direct marketing are in very good

While considering the issue of Television advertisement strategies undertaken

by the company it not satisfied advertising practice of the company. It is not as
such in a well performing position according to addressing customers
particular need with the advertisement and also the advertising time
convenience is not suitable for more customers of the company.

And regard to advertising of the company using various methods the company
advertising method using various advertising media is low. To the contrary the
compotators company using various advertising media. Most of the customers
of Nib Insurance Company were motor policy holders this implies that there is
no awareness creation was made by the company on other services and this yet
implies that there is no good advertising strategies are undertaken by the
company as long as the one and main motive of advertising is to create
awareness and to inform customers about all the services or products which a
given company provides to the market.