Uppsala universitet

5. The Insurance Relationship
5.1 Particularities of the Exchange and Distribution of Insurance Services
Not only are financial services complicated in nature, but the relationship between the financial
institution and the customer may also become very complex. This is due to the fact that
financial service customers seldom buy just one product, but rather purchase a range of
products, often in the form of a ‘package’. The service provider has to establish priorities
concerning how much involvement should be invested in a relationship, taking into
consideration both the type of service and the type of customer concerned. The more complex
the financial service provided, the higher the long-term commitment, the larger the resources,
and the increased risk required (Harrison, 1994).
In order to understand the corporate customer’s behaviour when discussing an offer
with the company representative it is, among other things, valuable to consider tax legislation
and its effects on insurance decisions. Loss and damage of a company’s inventories and/or
stock are considered as operational losses and thus tax deductible. The question is whether to
choose a high retention in favour of a lower premium or vice versa. The opposite conditions
exist, however, concerning real estate. A loss of a building is considered a loss of capital and
thus is not tax deductible. In this case it is a tax related advantage to sign on insurance with as
low retention as possible, since paid premiums are looked upon as operating costs and thus
deductible variable costs (Bergendahl, Hartman & Lindblom, 1990).

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The relationship manager in an insurance firm must be equipped with enough
experience and knowledge to be able to manage the complexity and intangibility of the
insurance services provided, so that there is no doubt of the customer’s level of
comprehension. All in all it is a matter of the insurance agent’s ability to inform the customer
of the elements of the particular insurance. This is also the fact in the chosen marketing
strategy, which has to aim at increasing the comprehensibility in the relationship in order to
make the service more palpable. There are no shortcuts in making the insurance service more
tangible to the customer, and this concerns all kinds of insurance (See Figure 4). Not everyone
understands guarantee insurance on a new pair of glasses at first sight, the message has to be
transferred in a competent manner. The figure below is intended to convey the theory outlined
above, showing the perceived difference between a bank loan and an insurance contract, and
the importance of a high level of customer-perceived comprehension of the service product
provided. The intention is not to make a product with low complexity more complex, but
rather to show that even an uncomplicated product may be difficult to comprehend. The more
complex the product, the higher the need for a marketing strategy capable of increasing
customer comprehensibility.