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IAI Actuarial Core Principles · Business Management · Strategy, competitive advantage, strategic decision process and PEST analysis

Suryodaya Life, a mid-sized insurer, sells term plans only to rural self-employed workers in Bihar, offering simple products, vernacular documents and doorstep premium collection that larger insurers do not provide. It charges a modest premium over the market average for this service. Which generic strategy best describes this?

This is differentiation focus. Suryodaya Life targets a narrow customer segment and competes through distinctive features such as vernacular documents and doorstep collection, which justify a premium price, rather than competing on lowest cost or across the entire market.

  1. ACost leadership
  2. BBroad differentiation
  3. CCost focus
  4. DDifferentiation focusCorrect
  5. Diversification

Explanation

The insurer serves a narrow segment (rural self-employed workers) and wins by offering distinctive features valued by that segment, at a premium price. That is differentiation focus. Broad differentiation would target the whole market, and cost focus would rely on a low cost position in the niche.

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