Discount Pricing in Insurance sector:
In insurance sector, discount is offered if group insurance is opted for. Group Insurance Scheme is meant to provide life insurance protection to groups of people. Administration of the scheme is on group basis and cost is very low.
Discount is given on group insurance scheme because the insurance company gets a large number of customers at a time and hence it saves expenses on promotion and advertisement, which are to be incurred to attract new customers.
Thus, discount is given in order to attract more customers at a time by this group insurance scheme. The cost incurred on giving discount is much less as compared to the cost spend and advertising and promotion. Hence discounting is much more profitable for the company
However, 65 per cent of the pricing is still determined by the government that is the Tariff Advisory Committee. So the rates of premium are more or less the same. It is going to change over the next few years. In non-tariff products like personal accident etc there is a lot of pressure on pricing. Companies will have to be reasonable while determining a pricing structure because, across the globe, there are instances of companies going bust while playing the game of undercutting state-run companies.
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