Development Of New Product In Nigeria Insurance Industry
The topic of this research work is the development of new products in Nigeria Insurance Industry, the work include the background of the study, statement of the problems, the objective of the study and research questions, other areas treated include significant of the study, scope and limitations, definition of terms. Chapter two cover review of related literature, historical development and son on. Chapter three deals with research methodology, sources of data, instrument use and so on. Chapter four covers major findings and chapter five cover conclusions and recommendations.
1.1 Background of the Study
Insurance business is comparatively new in Nigeria, even though it has been in existence for a long time in Europe. In this regard, not much has been written about new product development in insurance.
According to medium, new product development in the insurance industry are not subject to copy right they still represent an important method of stimulating growth of the industry. Insurance products determine the competitive behaviour of the insurance companies and the structure of insurance market. The main focus of marketing activities of most insurance of customer needs.
Insurance policies or products have been categorized into two broad groups.
- Those products/policies which provide protection;
- Policies which provide protections and investment.
These two types of major conventional product are fund in life assurance policy.
In products/policies which provide protection the policy holder is given protection for a limited period of 10 – 15 years. Convertible term is a variation where the policy holder is given the option to convert to another type of policy at any time during the policy terms even if his death deteriorates.
Policies which provide a mixture of protection and investment include profit participating endowment and whole life policies. To remain competitive, insurance companies have developed a large number of products. Product development means modifying the existing products or developing new ones to suit the need of the insuring public.
1.2 Statement of the Problem
The problems which are intended to be solved in this research work include the followings:
- Development of new products has taken sometimes in the insurance industry without much results;
- To determine the reason fro the slowness of the modification of existing products and innovation;
- To know the reason for the aggressive competitiveness the insurance industry.
1.3 Objectives of the Study
Based on the identical problems as eh insurance industry increase, new products insurance the study to designed to:
- To ascertain whether new products differ from old products;
- To ascertain the level of efficiency of new insurance products;
- To find out the major problems in the marketing of new products in the insurance industry;
- To find out the effects of new products on the insurance industry.
1.4 Research Questions
The research questions which are pertinent to this project research include:
- Are there any need for the development of new product in insurance?
- Do the existing products satisfy the buying needs of the people?
- Are there products which need modification or outright rejection?
- Who are responsible for the modification or development of new products in the insurance company?
- Does the re-packing of new insurance products affect the existing ones?
1.5 Significance of the Study
The research work will of immense benefits to the following persons:-
The research work will provide a source of reference for current and future insurance. Statistician or historians who would wish to use volume of published data in insurance industry.
The insurance public will find this research work useful as it highlights the effect of introducing new insurance products into the insurance market.
Furthermore, this study will widen the knowledge of students who may embark on future research on product development.
Finally, this research work will create awareness to the general public (country) and educate them on the use of new insurance products.
1.6 The Scope and Limitation of the Study
The study focused attention on the new product development in three insurance companies based in Enugu selected randomly.
In het course of this study the researcher encountered many obstacles among which are time, lack of fund and so on. The time allows to write this report was too short and it cut in time for other academic activities. Lack of fund prevent the author from traveling to many places to source for materials. Research materials were other problems. Poor response from the respondents is another problem. Many of the staff met feared that if hey give full information their employer might victimize them.
1.7 Definition of Operational Terms
This is the demand made by the insured for payment of benefits following a loss.
An unlawful means of acquiring financial advantage of the expense of others.
A person or persons named under an existing policy as being covered by an insurance.
4. Under Writing:
This is assessment of a risk to know whether it will be acceptable or not.
5. Moral Hazard:
The bad moral behaviour of an individual.
An evidence of insurance contract.
The consideration which the policy holder pays from being covered under an insurance contract.
8. Double Insurance:
Where two or more policies are affected by or on behalf of the insured on some adventure.
A situation under which a person is made to pay for certain thing whether voluntarily or by the force of low.
A condition in a policy that states expressly or impliedly the circumstances under which an insured can be compensated under a policy.
Summary, Conclusions and Recommendations
This chapter consists of summary of findings, conclusions, study recommendations and areas that can be considered for further research.
The aim of the study was to identify New product development strategies used by insurance companies in Nigeria and the challenges that they face when developing products. Results show that 85% of the study participants had worked in the sector for a period of over 6 years which indicates that insurance sector provides a good working environment as evidenced from the number of years people have worked in the companies. Further, the results on the New product development decision are very critical in decision making. These results mean that the management of insurance companies’ value the way New product development strategies are structured as the same may affect future operations of the company.
Franchising results indicate that insurance companies rarely use franchising to enter new markets. This is evidenced by the agreement level of respondents on that franchising is not suitable mode of entry in new markets due to fear of losing control of the product standards and some rights over the company. Results indicate that joint ventures are expensive means of New product development and are only best fit for short lived objectives of the firm, thus joint ventures are not suitable for insurance companies and the least adopted means of New product development by insurance firms in Nigeria.
Results on pricing shows that, it is a less adopted New product development strategy used by insurance firms in Nigeria. This is because from the responses, the prices of products of insurance companies are regulated by the IRA. Pricing is not a good choice of New product development mode as its negative correlation indicates that a unit change in pricing will cause a negative change in New product development of insurance companies.
Management contracts is used as an entry strategy by insurance firms as the results indicate .It is the most used strategy especially to those companies whose expansion is within the country. Results further indicate that product development as a method of entry is time consuming, however, product innovation in insurance companies is immense thus a high use in it as an entry method.
Results show that as much as New product development decisions are good ventures for the firms’ expansion it also goes through some challenges when having the same implemented. Challenges identified from the results that tend to affect entry decisions of insurance firms were; cultural misunderstanding, government instability and political upheavals, limited ownership and differences in a countries’ currency.
From the results management contracting is among the used strategy in insurance firms in Nigeria. Management contracting offers independence to the contracted firm. The contracted company makes its own decisions on organizational issues such staffing and sourcing of clients for the insurance products. Management contractors act as agents of the insurance companies. However the firm under management contract may not have any equity share in the enterprise it manages; they only receive pay according to the revenues received. From the results conclusions can be made that management contracting is also used by insurance companies to enter foreign markets. This can be done where the company does international marketing contracts with firms in foreign countries to manufacturing or assemble the products while retaining the responsibility of marketing the product. This is a common practice in international business.
Product differentiation as indicated from the results is a used entry strategy by insurance firms. Innovation strategy is an essential tool for product development which is a good entry strategy for companies because great new products attract new market. However, product innovation and development is a good entry strategy if the same is allocated to a specific department whose objective will be to come up with innovations on products and their development.
A number of factors were identified in the study as to pose a great challenge during implementation. For instance in foreign New product development challenges such as cultural misunderstandings, country’s currencies, which affect profits and limited ownership control are adverse. Results further indicate that the choice of entry may be affected by unstable economic conditions and political instability which hinder insurance firms in establishing its desired position in the market.
The study provides recommendations to insurance companies and other institutions that will benefit from the study. New product development strategies are decisions made mostly by corporate level managers either business development managers or marketing managers. The decisions on mode of entry should be carefully analyzed and planned to ensure companies do not end up making losses from the choice of New product development . Challenges that affect the mode of entry as identified in the study should also put into consideration and managers ought to source for ways to mitigate the same.
Companies considering franchising and joint ventures as an entry mode are recommended to have enough resources for greater financial investment so as to attract prospects for support and management. Franchising is not a highly recommended strategy especially if the companies do not have a strong brand that is brand recognition in the product or service it sales. Joint ventures strategies on the other hand are more advisable for companies in the same industry and are most appropriate for companies who desire to establish their presence in a foreign market.
The recommendation of pricing as an entry strategy is mainly to other companies in a different industry, whose products prices are not strictly regulated by the governing body. For instance, penetration pricing is the best strategy for companies to establish their presence and dominate a new market. Penetration pricing is the pricing technique of setting low prices than the intended prices during entry price, with the objective of attracting new customers. This strategy works on the expectation that customers will switch to the products of the new company because of the lower price. It is important to note that penetration pricing is most commonly associated with a marketing objective of increasing expansion through increase in market share or sales volume, rather than making profits to make profit in the short term
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