The expansion of the life insurance industry in the latter half of the nineteenth century was a phenomenon experienced in many countries around the globe. The trend was a reflection of the growth of insurance markets more generally at this time. Industrialization and the associated extension of international trade were two key drivers of the expansion of global insurance markets.Footnote 1 Economic growth in industrializing countries was associated with the expansion of the middle classes. It was from this section of the population that the demand for the protection afforded by life insurance products emerged and grew. Pearson argues that by 1890, life insurance in the United Kingdom had become a mass market and that similar developments were evident in other industrializing economies.Footnote 2 Murphy points to the major boom in life insurance sales in the United States after the Civil War.Footnote 3
Settler colonies, such as those in Australia, were also noted for the takeup of life insurance in this period.Footnote 4 The growth of the industry in Australia by the 1880s was so rapid that it was remarked on in the international press.Footnote 5 One life office (the Australian Mutual Provident), in 1885, sold almost double the number of new policies of any British firm and only a little less than all the life offices in Canada in that year.Footnote 6
The success of nineteenth-century life insurers indicates a capacity to promote a product and capitalize on consumer sentiments to expand their market. McFall and Dodsworth state that markets are not given, but “made.” They contend that life insurance is a product for which demand has to be created in the face of major obstacles.Footnote 7 Supple makes a similar point when he argues that even not-for-profit (mutual) firms were driven by the imperatives of salesmanship and active marketing.Footnote 8 Such comments suggest that the manner in which product marketing evolved to support the growth of the industry has been an important ingredient in the historical development of insurance organizations.
Previous studies have thrown light on the way in which marketing strategies evolved to reflect societal expectations. Early works, such as that of Stalson, detail the emergence of U.S. insurance companies and the pioneer entrepreneurs who developed sales promotions strategies.Footnote 9 Later studies, such as that of Zelizer, examine the legitimization of life insurance from a sociological perspective. In this respect, moral persuasion became a critical tool in the marketing of life insurance.Footnote 10 More recently, Murphy’s study of the American life market between 1810 and 1860 interprets the growth of the industry from both an economic and social perspective. Approaches to marketing insurance products in this context shifted in line with changing middle class expectations.Footnote 11 Similarly, Alborn, in his exposition of British life insurance, uses a multidisciplinary approach to demonstrate how life insurance and life insurers influenced Victorian society.Footnote 12
Although our knowledge of the strategic developments in life insurance offices in nineteenth-century Britain and the United States has been informed by these studies, little analysis has been undertaken into the way in which the marketing message has evolved in other regions. Parallel to the experiences in both Britain and the United States, countries like Australia developed very successful life insurance markets.Footnote 13 The purpose of this article is to examine the emergence of marketing strategies and the way in which the marketing message evolved to support the changing focus of life insurance organizations. In exploring the manner in which life insurance products were marketed in settler colonies like Australia, this article extends our knowledge of the growth of life offices in the nineteenth century. Whereas prior research has informed the development of life insurance companies as financial service providers, little research has been undertaken into way in which the approaches to marketing evolved.Footnote 14 This article makes a further contribution to the academic debate by providing insights into the way in which the marketing of life insurance evolved in the early twentieth century. The next section of this article proceeds with an explanation of the approach taken to analyzing the development of marketing strategy.
Framework of Analysis
There is broad debate among business historians and marketing researchers on the methodology that best explains the development of marketing from its emergence in the nineteenth century. The categorization of developments into stages has been a commonly applied approach. Such a methodology assumes that attitudes to marketing change over time and that each stage can be distinguished by particular characteristics that mark the approach during that phase. Adopting such a “stages” approach is different from the periodization of events. Periodization provides a basic framework for summarizing trends, whereas a stages approach assumes that the characteristics identified can be comparable in other situations and may be applied to other industries.Footnote 15
In terms of the history of marketing, conventional textbook approaches distinguish among production, selling, and marketing stages; however, this model has been criticized for being overly simplistic.Footnote 16 Such an approach focuses on the orientation of the enterprise rather than on institutional structures and strategies.
Church presents a useful table that summarizes the literature on the stages of marketing history in the United States.Footnote 17 The majority of studies listed in that table are able to identify stages in development of marketing, although their timelines do not necessarily coincide. The criteria applied in determining these stages varies and includes organizational and institutional influences, the characteristics of advertising and marketing, and the development of corporate strategy.
One of the better known methodologies is that of Richard Tedlow.Footnote 18 Tedlow identifies three stages of marketing (fragmentation, unification, and segmentation) and argues that changes have often been associated with developments outside particular industries. In the first stage (prior to the 1880s in the United States), markets were populated by a large number of small producers selling within localized areas. Geographical constraints determined the ability of firms to extend their reach. Stage two emerged as improved transport and communication systems allowed firms greater access to other parts of the country. It encouraged a more unified approach whereby economies of scale would accrue to firms able to sell larger volumes of mass-produced products. These products sought to appeal to all consumers. As markets became more sophisticated and communications technology advanced (post–World War II) the potential to differentiate among consumer groups occurred. Stage three was marked by the segmentation of markets, allowing firms to target specific cohorts in marketing campaigns. In this context, the link between changes in marketing strategies and the development of industrial structures along the lines proposed by Chandler is evident.Footnote 19 Although Tedlow applies it to the emergence of mass marketing in the United States, such an approach is a useful way of linking the evolution of marketing techniques to the parameters influencing the broader development of the industry.
This article also uses a stages model to analyze the way in which the market for life insurance was “made,” to use McFall and Dodsworth’s terminology.Footnote 20 The period under investigation commences in the 1850s, when the antecedents of modern life insurers emerged, and finishes on the eve of World War II. After the hiatus of the war, the postwar years of the 1950s witnessed a period of modernization in the industry, which was associated with organizational change marked by shifts from unitary to multidivisional structures among major life insurance providers.Footnote 21 Allied with this shift, the approach to marketing—while building on the experience of the past—changed in focus as sales and advertising departments professionalized. In this respect, the year 1940 is a convenient point from which to observe the way in which strategies had developed before dedicated marketing divisions within these organizations emerged.
During the period from the 1850s to 1940, three stages in the development of the marketing of life insurance in Australia are apparent. The first stage, establishment (from the 1850s to the 1870s) was a period during which the market for life insurance was built from scratch. The colonies of Australia were sparsely settled; population numbers were initially low, but had begun to expand in the 1860s. Urban centers were relatively small but growing. Industrialization in the wake of the gold rushes was transforming the structure of the economy, but a middle class was only just beginning to emerge. During this period, the primary function of marketing was to establish the message. As with Tedlow’s fragmentation stage, markets were restricted by geographical and logistical limits. An additional complication, though, was that life insurers had to convince consumers that their products were necessary items.
The second phase, adaptation (from 1870 to 1900), was marked by the growing sophistication of the Australian financial sector together with the commercialization of mutual life insurers as they expanded and the demand for insurance grew. Though not totally analogous to Tedlow’s unification stage, there were some similarities. Advertising and other marketing strategies were targeted at a general audience rather than specific market segments. During this period, the role of marketing was primarily to adapt the message in line with changing economic and social forces as the economies of Australian colonies matured.
During the third stage, refinement (from 1900 to 1940), the marketing message was developed in a number of ways. Life offices began to differentiate the marketing message and use it to appeal to different consumer cohorts. Tedlow explains how U.S. companies were able to capitalize on technological and cultural changes to segment markets in postwar America. Though not on the same scale or level of sophistication, insurance companies adopted similar strategies in their approach to the marketing of their products. This was a process that evolved slowly over time. Evidence of differentiation is apparent in the decade before World War I. It increased and became progressively more erudite in the 1920s and 1930s. By the end of that decade, advertising campaigns were aimed at a wide grouping of consumers, including workingmen, professionals, single women, families, pensioners, young people, and public servants.
In tracing the evolution of the marketing message, this article uses the archival collection of promotional material held by Australia’s oldest and largest life insurer, Australian Mutual Provident (AMP).Footnote 22 This collection comprises promotional and advertising material not only for this organization but also for competing companies over a prolonged period of time. The richness of this material enables not just an analysis of the advertising message, but also the marketing strategies that informed this message. The next section of this article outlines the development of the life insurance markets in Australia, before presenting an investigation of the evolution of marketing techniques through the three stages identified.
The Growth of the Life Insurance Market in Australia
The growth of a life insurance market in Australia has parallels with the experience in the United States, but not to the same extent with the United Kingdom. As was the case in America, mutual insurers emerged in the mid-nineteenth century and grew rapidly to have a significant presence in the market. In the United States, regulation encouraged specialization and the separation of life insurers from those selling other types of insurance (the so-called American system).Footnote 23 In the Australian colonies, this separation occurred mainly as a consequence of the success of mutual providers in capturing the market. In both countries, the approach to selling insurance was heavily influenced by the British model of developing agencies, and then branches, as new markets expanded.
However, unlike the British experience, there was a distinct demarcation between the life insurance and fire insurance markets. In Britain, insurance markets evolved from the activities of fire insurers. These organizations were inspired by the growth of commercial and industrial development, originating initially from networks of merchants and factory owners formed to protect their property interests.Footnote 24 These establishments grew to become large multinational firms operating in an oligopolistic market structure. As part of this process, they developed a composite structure with fire, accident, and life insurance being provided under the same umbrella. This heritage fostered the cartelization of the industry and was characterized by price-fixing arrangements under the oversight of a tariff organization known as the Fire Offices Committee.Footnote 25 Oliver Westall has argued that marketing was a vital component of non-price competition in an industry in which collusive activities fostered price-fixing arrangements.Footnote 26 Although such types of behavior were evident in the Australian fire and general insurance industry, there is no evidence to suggest that price fixing was a feature of the life insurance industry;Footnote 27 instead, premium rates for life insurance policies were largely a function of mortality tables. In this respect, the work of the actuarial profession in developing these tables was of critical importance.Footnote 28
A stable life insurance market did not appear in the Australian colonies until the 1850s. Before that date, market conditions were not conducive to the spread of insurance offices. In the early 1800s, settlement was still in its infancy, population was sparse, urban centers small and geographically dispersed. Life insurance was sold first through agencies of British insurance companies and then through branches of local insurance companies. The market was very unstable; many of these companies ceased trading within a few years of establishment.Footnote 29 The proprietary company structure failed to provide a sustainable solution to the problem of providing long-term insurance within the parameters of the colonial economies of Australia. Hansmann has written on similar characteristics evident in the early American insurance markets.Footnote 30 At the heart of the problem were informational issues that impeded the ability of players to make informed decisions. Buyers were unable to distinguish reliable providers. Sellers had similar problems in identifying the risk associated with the sale of particular policies. Market failure in this context inspired the emergence of different organizational structures. Mutual life insurance associations, in which policyholders had ownership rights, emerged in response. The first mutual office, Australian Mutual Provident (AMP), was founded in 1849 with a view to establishing a mutual self-help mechanism to protect against old age and infirmity. It was another twenty years before the industry’s major takeoff occurred.
Economic expansion from the 1850s created the preconditions for the growth of the industry. The number of firms selling life insurance increased in the late 1860s and early 1870s. By 1880 there were seven mutual and two stock companies, along with several British agencies, in the market.Footnote 31 However, the amount of life insurance business undertaken by overseas offices and agencies was reportedly very small. In fact, by the 1890s these companies had all but exited the market.Footnote 32 Richard Teece, AMP’s general manage, was able to boast at this time that no British companies were selling life insurance in the Australian colonies.Footnote 33
By the 1880s, the life insurance industry had developed into a highly concentrated structure, with the mutual companies dominating the market. In 1885, seven mutual associations accounted for 70 percent of assets and 86 percent of new policies sold.Footnote 34 No new mutual firms were established after 1881; instead, mergers and consolidation of existing mutuals resulted in the growth of five influential associations, which remained market leaders for the next one hundred years. During the 1920s there was an influx of proprietary companies, but these did not challenge the status quo. The growing popularity of industrial insurance was a driver of this trend.Footnote 35 In 1900 there were eleven life offices; this figure grew to twenty by 1905 and remained at that level until the 1920s. Between 1920 and 1925, the number of firms rose to thirty-five. Although the number of insurance providers increased, new entrants were unable capture any significant slice of the market. The 1930s were characterized by a period of consolidation, as many of these new companies exited the market. Twenty-two of the thirty-five companies in existence in 1925 were no longer trading in the 1930s. Gray has estimated that the average life of new entrants in the 1920s was five years.Footnote 36 High costs and undercapitalization were argued to be key factors in the demise of many of these companies.Footnote 37
The market structure that had emerged in the 1870s remained intact until the late 1950s, with the major mutual offices as industry leaders. The five largest mutuals accounted for 83 percent of industry assets, whereas 13 non-mutuals accounted for 17 percent.Footnote 38
Marketing of Life Insurance Products
Establishing the Message, 1850–1870
Australian actuary David Carment, reflecting on the progress of the life insurance industry in 1905, made the point that prior to 1849 (when AMP was established), it did not appear that any life insurance business was transacted in the colonies.Footnote 39 In the space of three decades, the Australian colonies came to have one of the highest per capita coverages of life insurance.Footnote 40 The way in which this was achieved reveals much about the development of marketing strategies and their ability to tap into the psyche of the population.
It is no coincidence that mutual life insurers in both Australia and Britain were founded at height of the self-help movement in the nineteenth century. In this respect, the social value rather than the economic value of insurance becomes an important consideration in understanding the rise of mutual insurers. Combined with contemporary moral and religious doctrines, these values found expression in a number of mutual aid movements, of which life insurance was one.Footnote 41
The progress of the first mutual life insurer, AMP, epitomizes the way in which the marketing of life insurance encouraged the evolution from a philanthropic pursuit to a commercial enterprise. AMP was formed in 1849 by three prominent philanthropists, concerned to make available a mutual self-help mechanism to provide protection against the costs of old age, illness, and death. It remained the only mutual and dedicated life insurer for twenty years. The words of the society’s prospectus sum up the intent of these gentlemen. It was established for the “express purpose of rendering Widows and Orphans free from all risk of suffering and penury” and for a “means of providing for old age … by all who wish to avoid the humiliation of dependence on the bounty of strangers.”Footnote 42
The aims of the society were elucidated by its chairman, Thomas Holt, at the 1857 annual general meeting, when he stated that “this Society was established for the sole purpose of doing good.”Footnote 43 The founders did not view their actions as having a commercial basis. This point was made by patron and Chief Justice of New South Wales (NSW), Sir Alfred Stephen, when he stated that the AMP society was “not formed for the sake of procuring profits, but from a feeling both benevolent and patriotic.”Footnote 44 The attitudes of the early directors reflected the role they saw for such institutions, which were viewed as vehicles for improving society and encouraging a particular moral code indicative of the aspirations of thrift and temperance that had come to characterize the middle classes, both in Britain and its colonies. Zelizer points to similar sentiments in the motivations of early American life insurers in the 1840s and 1850s.Footnote 45
The marketing and sale of insurance policies was first undertaken on a very rudimentary scale. The aim was to sell insurance policies to white-collar breadwinners. The clergy and public servants were two groups originally targeted. This was expanded fairly quickly to include the self-employed and skilled tradesmen. Initially, office hours were restricted—from 8 p.m. to 9 p.m. three nights a week.Footnote 46 These hours were later extended. However, it was not a very successful process, as it relied on the customer approaching the office, and not the other way around. Understandably, not a lot of business was transacted. An agent system was also employed, in which clerks of the county court were recruited to sell policies for a return of 5 percent of premiums paid. Again, this did not prove successful in generating much business.Footnote 47
To establish its credentials and build its brand, AMP co-opted influential members of the community to support the principle of mutual life insurance and to spread the word. The governor of NSW became a patron, as did the chief justice, colonial secretary, and attorney general. Members of parliament, the clergy, and the army were also enlisted. The marketing of life insurance centered around the advocacy of the directors of the organization and its patrons. This was supported by literature such as prospectuses, which explained the principles of mutual insurance.
Advertising was limited and uninspiring. The use of local agents continued to be problematic and did not yield the volume of sales expected. The Australasian Insurance and Banking Record described local agents as “people with little acquaintance with the subject, apathetic in promulgating a knowledge of it [and] fully occupied with their own business.”Footnote 48 For most agents, their insurance business was secondary to their other employment; as a result, they did not have a total commitment to it. Life insurance was “bought,” not “sold.” As Geoffrey Blainey states, “Selling insurance was a casual, almost amateurish activity.”Footnote 49 In the first five years of operation, only 243 policies were sold. After a decade, 1,147 policies were on the books.Footnote 50
Table 1, which is based on an assessment of promotional material at that time, summarizes the main marketing strategies and message.
Marketing during the establishment phase, 1850–1870
Source: Promotional Literature, AMP Archives.
The focus of advertising reflected the intent of the moral codes underpinning the establishment of the mutual institution. The AMP prospectuses summed this up in their opening statements, stating: “The Society is chiefly designed for those who recognize the obligation of providing for their families in the event of death.” Footnote 51 Initially, the presentation of advertising material had no visual appeal. Plain printed prospectuses and pamphlets relied on the information contained within to persuade potential policyholders.
A shift in the approach to the marketing and sale of life insurance occurred from 1860 on. After that point, a more sophisticated style began to emerge. The catalyst for this was AMP’s decision to employ its first full-time agent, Benjamin Short. Short, who had recently arrived from Britain, was an evangelical preacher who adapted the same skills he brought to the pulpit to his new career. His approach to selling was to travel the country, lecturing not only on the benefits of life insurance but also on a host of other topics. He pioneered the application of entertainment as a sales tool. Short was so successful that for a time in the 1860s he was selling four out of every ten policies sold by AMP.Footnote 52
The Society was quick to perceive the benefits of this approach to selling and extended it to develop the traveling agent (or canvassing agent) system. Canvassing agents were employed by AMP solely to travel the countryside with the expressed purpose of signing up life insurance proposals.Footnote 53 The strategy marked a turning point in the growth of life insurance markets in Australia. In the decade that followed, the number of policies sold increased by more than 500 percent and new business income nearly tripled. The organization evolved to facilitate the growth of business. AMP, which was still the only dedicated life insurer in the market, progressively opened branches throughout the Australian colonies. The first branch, Victoria, was opened in 1863. This was followed a decade later with branches in the other Australasian colonies and New Zealand. As business continued to grow, regional offices were created under the auspices of the branches. Branches and small local offices were used to manage canvassing agents in localized areas, enabling the sales machine to advance farther into more remote areas of settlement. Departmental office structures evolved to cater to the various activities associated with the management of life policies and funds. Simple administrative structures were replaced with management hierarchies. Internal labor markets were constructed to ensure a pool of trained clerks responsible for processing the large volume of data generated.Footnote 54 The professionalization of life insurance offices was the first step in the move toward a more commercially focused approach. As this occurred, the emphasis in the way in which life insurance was marketed also shifted.
Adapting the Message, 1870–1900
The decade and a half between 1870 and 1885 was a period of considerable expansion in the life insurance industry. The position of AMP as practically the sole provider of life insurance was challenged after 1869. In that year, two new mutual insurers commenced selling; in the following decade, an additional six entered the market. Growth in the industry was associated with a refocusing of the imperative behind the provision of life insurance. Supply and demand side influences were at work in this respect. On the demand side, the growth of colonial economies was associated with the urbanization of the population and the expansion of the middle class. Inspired by the gold rushes of the 1850s and then fed by the industrialization and urban growth, the Australian colonies experienced a sustained boom. Real GDP grew at an average of 4.8 percent per annum between 1861 and 1889, and per capita real GDP at a rate of 1.3 percent per annum.Footnote 55 The Australian colonies had one of the highest per capita levels of income at this time.Footnote 56 This supported a growing middle class and, with that, an increasing demand for insurance products. Three conditions existed that supported the expansion of life insurance business. The population of the colonies was increasing, income was growing, and there was an expansion in the number of people with the funds and incentive to purchase life insurance. The number of policies held increased from 6,127 in 1869 to 31,443 in 1878 and 102,424 in 1888. Premiums received grew from £179,762 per annum in 1869 to £1,707,801 per annum in 1888.Footnote 57
On the supply side, there was a subtle change in the approach to the selling of life insurance. As the industry expanded, life offices moved further away from their roots. Significantly, five of the eight new mutuals established were done so by men already working in the insurance business. Commercial perspectives were a much greater consideration in the establishment of these offices than previously. Within AMP, a similar shift in sentiment was evident, as new directors replaced the founders.
Changes to the by-laws, which determined the operational standards of the organization, began to occur from the 1870s. The 1873 alteration to the society’s by-laws was significant in two ways. First, it extended the investment powers of the organization, allowing it to develop a more diversified portfolio. Second, it established the facility to issue non-participating policies and, in doing so, distinguish between members who had a right to receive a share of any bonuses generated and those who did not.Footnote 58 This allowed the office to introduce new products specifically tailored for this group of the market. These products usually had more of a savings focus and were attractive to young unmarried men typically not interested in whole life policies but wanting a projected income stream at some point in the future.
The growth in premium income, in turn, led to the development of more sophisticated approaches to the management of funds generated. The need to invest these funds in a safe and secure manner was a key concern of the mutual organization. The increase in premium income during the 1870s and 1880s meant that life offices had large sums of money to invest. As mutuals developed expertise in funds management, a more commercial approach to business was introduced.
Investment income became an important component of revenue generated and this then fed into bonuses payable to policyholders. Bonuses were initially paid only every five years, calculated on the results of the quinquennial review. In the early 1880s, the larger mutuals, such as AMP, moved to pay bonuses annually. This was made possible not only because of the success of the organization in attracting and retaining business, but also because of its developing expertise in the investment of funds.
Increased competition provided a strong incentive for a shift in marketing focus. This took several forms, including changes to policy conditions, the creation of new products, and the introduction of new services. Policies were liberalized and restrictions on travel, place of abode, and occupation relaxed. New products included the variations to endowment and annuity policies designed to cater to specific cohorts (for example, children). New services included the provision of loans to policyholders based on the value of their policies.
New entrants into the market from 1869 were quick to take advantage of the opportunity for policy reform and to use this as a marketing tool. In 1869, the Mutual Life Association was established with the expressed purpose of providing policies that were indefeasible or unrestricted. Prior to this point, life insurance policies had been loaded with restrictions, which, if breached, voided the policy. Restrictions on particular types of activities, such as mining, were common, as were limits to travel. Premiums were also loaded for particular types of risks associated with place of residence or occupation. With the introduction of indefeasible policies by Mutual Life, other life offices followed suit so that in the 1870s, life insurers in the Australian colonies could boast that there was only one condition associated with a policy: the payment of a premium on a regular basis. Not to be outdone, the next mutual office to open its doors, National Mutual, advised the public that it would introduce a nonforfeiture principle for all policies sold. Previously, if premium payments lapsed, the policy was canceled. The nonforfeiture system allowed for the continuance of the policy in the absence of payment until its available surrender value was reduced to zero.Footnote 59 This condition was to become a feature of all policies in time and eventually was mandated by law. Other companies followed the introduction policy adjustments very quickly. In 1875, AMP proclaimed new regulations, which listed eight areas of reform to policy restrictions.Footnote 60
Many of these changes had parallels in British and American markets; however, there is evidence to suggest that Australian life offices were ahead of their time in this respect. For example, John Templeton of National Mutual was credited as the first to introduce the nonforfeiture principle.Footnote 61 The policies of American companies continued to be comparatively full of restrictions during the 1870s and 1880s. British life insurance policies were less restrictive, but not to the extent of Australian offices.Footnote 62
Competition-induced policy development was accompanied by the introduction of new types of policies, as well as enhancement of existing policy contracts. Associated with this was a shift in the tone and language of advertising. Zelizer argues of the American life insurance market that after 1870, an “unemotional rational” approach to product advertising was adopted.Footnote 63 There is evidence that this is also the case in the Australian colonies. Table 2 summarizes the key marketing messages based on advertising material released between 1870 and 1900.
Adapting the message, 1870–1900
Source: Promotional literature, AMP Archives.
The shift in advertising emphasis is clearly evident from the 1870s. The focus on the moral virtue of providing protection for widows and children was subtly replaced with a less altruistic message. The idea that life insurance provided a means for personal savings and investment gained currency. A greater emphasis on individual gain was the outcome. Advertising themes had two overall points of focus: In the first instance, life insurers were concerned about building a trustworthy reputation. There was a plethora of pamphlets focusing on performance, in terms of both policy outcomes and funds management. Figure 1 provides some examples of this advertising.
Early Advertising Pamphlets, 1880s to 1910. Courtesy of The Archives of the AMP, AMP Ltd., Sydney, Australia.
Prospectuses evolved from unremarkable publications of tables of rates to colorful works of art. The covers were adorned with images of the architectural style of life insurance offices, stressing the prestige and importance of these organizations. Emphasizing status was a common subject in both the written and visual imagery used. Such an approach was not unique—McFall and Dodsworth point to similar trends within the British insurance industry in which the “language” of architecture” was a key promotional device.Footnote 64
The second theme highlighted the benefit to the individual. The redistribution of surplus to members of mutuals under the bonus system was an increasingly attractive benefit, which life offices marketed quite aggressively. The widening of products to include endowments and annuities provided a greater focus on the investment side of the product as opposed to the risk management facility. Other innovations, such as the introduction of loans on policies, further shifted the emphasis to personal gain. The emotive language of previous advertising material was replaced in this period with a much more pragmatic tone, as is illustrated in Figure 1. Rates of return, bonus payments, and examples of policy outcomes were targeted in promotional material. However, advertising continued to be directed primarily at middle-class and professional men; there was no attempt to segment or distinguish different types of consumers beyond these groups.
The pattern of marketing development in Australia reflected that occurring in both Britain and the United States. In Britain, Supple points out that the investment element came to dominate both policyholder and life office decision making.Footnote 65 Regarding the United States, both Zelizer and Murphy remark on the shift in focus.Footnote 66 For Zelizer, this created a dilemma for life insurers that were torn between the need to operate profitably while at the same time maintaining the altruistic goals that formed the rationale for their establishment.Footnote 67 Murphy, on the other hand, argues that the growth of life insurance paralleled that of middle-class America. The shift in marketing focus to financial gain and saving for the future reflected the sentiments of the emerging middle class.Footnote 68 Both arguments highlight the social and cultural aspects of the society in which the industry was developing.
The Australian experience suggests that the maturing of the life insurance organization is also a consideration. Mutual life offices had been founded on mutual aid principles that emphasized social obligations. The business model initially employed was relatively simplistic. Over time it became more sophisticated as the success of mutual life offices grew. By the 1870s, the growth of the branch office system and the need to develop skills in managing large amounts of funds had led to a much greater emphasis on business functions. By the 1880s, Richard Teece, general manager of the largest mutual, AMP, summed up the state of the industry when he claimed that life insurance has “come to be fully recognized as an ordinary commercial enterprise.”Footnote 69 The concept of mutuality, as it applied to life insurance, changed as the functions of the life office evolved and became more complex. This is evidenced by the changes in by-laws governing offices such as those of AMP. From the 1870s changes in the by-laws of this office resulted in an increase in investment powers emphasizing the shift toward bettering financial outcomes of policyholder funds.Footnote 70 The commercialization of mutual insurance offices translated into marketing messages that emphasized the growth and strength of these organizations and the benefits that accrued to the public taking out policies with them.
Refining the Message, 1900–1940
Between 1870 and 1900, the approach to selling insurance took a different track. Products were enhanced in a number of ways, the emphasis in advertising shifted, and advertising media began to be more sophisticated. Printed media, such as prospectuses and pamphlets, developed to create an image of strength and security of the office, reinforcing the status of the life insurer. After 1900, further shifts are evident in the approaches to advertising and marketing. Between 1900 and 1940, the major themes evident in the previous periods were gradually amalgamated to highlight a more contemporary message, relevant to the life insurance market in the 1920s and 1930s.
The period between 1900 and 1940 was one in which the industry matured within the confines of its existing market and organizational structures. The branch system of organization and the way in which life offices were managed built on established processes. It was not until after World War II that a concerted push to modernization became evident and new competitive structures emerged.Footnote 71
Growth in the industry was assisted by the introduction and spread of industrial insurance, a product targeted specifically at low-income earners. Although this type of insurance had been in existence for a number of years, sales did not begin to grow significantly until after 1910. A factor driving this trend was the increased commitment of the larger, more established offices that had previously been slow to develop a share in this market. The industrial insurance product allowed a broadening of the market base and introduced the concept of life insurance to new groups of people. Geoffrey Blainey, writing of AMP, argues that it “was really the Society’s far reaching advertisement.”Footnote 72 The benefit to the organization was not so much in terms of the revenue generated but in the reception of the life insurance message. Its popularity was associated with a greater appreciation of the need for insurance and saving for old age. It was spread across wider strata of society, thus broadening the pool of potential customers.
The increasing popularity of industrial insurance encouraged the growth of competition. The number of suppliers expanded as new firms entered the market. This had implications for the marketing and advertising of insurance products. Existing life offices continued to differentiate themselves from new rivals by focusing on their status and reliability. However, they also constructed new messages designed to appeal to a wider audience. Table 3 considers the main advertising messages that were current between 1900 and 1940.
Refining the message, 1900–1940
Source: Promotional literature, AMP Archives.
Table 3 indicates a growing sophistication in the approach to marketing and advertising. Generic products were supplemented with more targeted products. Apart from the conventional whole life, term, and endowment policies, there were now facilities to ensure high-risk clients. Accident and disability insurance could be added to life policies. Housing loans could be taken out against existing policies. Group insurance and superannuation plans were targeted at specific businesses and government organizations. Advertising themes broadened, in part reflecting the extension of policy options but also in an attempt to appeal to different cohorts of the population. In addition to themes listed in Table 3, life offices made use of special events to advertise their wares. For example, an advertising program highlighting the event, as well as the number of newly elected federal politicians holding policies with particular companies, accompanied federation in 1901. Advertising material was also directed at more specific cohorts.
In what was the beginning of market segmentation, life insurers identified particular groups and developed advertising campaigns specifically to appeal to them. Family men were targeted, both in terms of the need to protect their families and to provide for the future of their children. Young adults, both men and women, were shown how the benefits of a life insurance product would guarantee an independent future. Professional men, working men, and men on the land were the focus of similar campaigns, which highlighted the specific benefits to them.
The production of pamphlets was the key type of advertising. Pamphlets were supplied to agents to distribute, mailed to existing policyholders, and used as the basis for newspaper advertisements and poster campaigns. They became visually attractive, conveying the message in images as well as words. Extracts of pamphlets were used in newspaper campaigns. These promotions became more regular during the depression years of the 1930s, as life insurers struggled to control both declining sales and increasing cancellations. Between 1931 and 1934, AMP issued fifty-five different advertisements that were published in metropolitan and regional newspapers around the country. In 1931 alone, nine different advertising campaigns were published in 108 newspapers.Footnote 73 The messages in these advertisements mirrored those of the pamphlets. Titles such as “Can you look the world in the eye and feel safe?,” “They are in comfort because their dad was insured,” and “Happy, carefree now, yet he may desert this lovely bride of his” were emotive, pitched at groups within the market receptive to idea of insuring for the future. In a rare show of unity, the major life offices banded together to launch a joint advertising campaign, emphasizing this emotive message. As a result, from the 1930s on, newspaper advertising became a more visual and important component of marketing campaigns, reinforcing the message on a number of fronts.
The onset of the depression and the associated decline in demand for life insurance products was a catalyst for a shift in attitudes to advertising among the management of life offices. For the first time, an external advertising consultant was employed by AMP to develop print and radio advertising campaigns.Footnote 74 Although this led to an expansion of advertising in the print media, radio did not prove an effective mode of communication at this time.Footnote 75
From the turn of the century, a new pattern in the development of life insurance marketing emerged. The shift in approach is evident in Table 4, which presents a review of the major advertising themes in pamphlets produced by AMP between 1900 and 1940.Footnote 76
Advertising Themes, 1900–1940
Source: Promotional literature, AMP Archives.
The identification of particular themes in this table is based on both the language and pictorial depiction in the advertisement. The topics identified in the previous tables provided the basis for categorization. The visual images displayed were then used to further classify the content of the advertisement.
Prior to World War I, the key emphasis on advertising was to reinforce the message surrounding the status and prestige of the organization. This message was also important in the previous period. Pamphlets with titles such as “Best in the World,” “Greatest of All British Life Assurance Institutions,” and “Confidence Exemplified” created the impression of stability, reliability, and security. This was reinforced by more general pamphlets that highlighted the benefits of insurance and of the mutual model. Individual gain was the next most common subject of advertising literature. The idea that life insurance was a form of personal investment and a source of financial benefit became a popular advertising theme from the 1870s on. A common way in which this message was conveyed was with the publication of examples of policy results. Over time this became more focused, with examples drawn from politicians or prominent members of local communities. At this point, the first examples of a concerted approach to market differentiation began to emerge. In 1905, advertisements selling policies for “under-average” lives first appeared. From 1911, pamphlets aimed at professional men, farmers, mariners, and public servants began to be published
By the 1920s, a clear shift in the style of advertising was evident. The targeting of specific groups was extended and became more sophisticated. For the first time women, were a focus of attention. The pamphlet “For Women, the Way of Independence” was aimed at single working women, as was “Self Supporting Women.” Other groups that were targeted included wheat farmers, wool farmers, and businessmen. The number of different advertisements emphasizing individual gains more than doubled in this period. The central theme remained similar—namely, the use of examples to demonstrate the benefits of life insurance. However, the message was presented in an increasing variety of ways. Titles such as “Legal opinion,” “An Insurance Epic,” and “Progressive Realization” all alluded to the financial gains that could accrue with the purchase of an insurance policy. Table 4 also points to an increase in emotive advertising. Moral obligation was a theme of early advertising in the establishment phase of the industry. It was superseded by a shift in focus to personal gain in the adaptation phase. A more modern variation of the emotive message gained currency in the 1920s. Titles such as “Happiness and Security,” “Soliloquy of a Breadwinner,” “Can We Betray the Trust,” and “Is Your Wife Only Half Protected” were aimed at fostering an emotional response to the advertising campaign. Figure 2 illustrates some of these advertisements.
Examples of Emotive Advertising Pamphlets, 1920s–1930s . Courtesy of The Archives of the AMP, AMP Ltd., Sydney, Australia.
The refinements to marketing after 1900 allowed the synthesis of the two key messages in earlier periods to occur. As insurers developed the capacity to separate markets and target particular cohorts of the population, they were able to create more specific messages aimed at capitalizing on the distinctions identified between differing groups of customers.
Conclusion
An investigation of the marketing of life insurance by Australian mutuals in the nineteenth and early twentieth centuries provides insights not only into the progress of marketing strategies but also into the evolution of the market and the changing nature of the mutual organization within that market. Adapting Tedlow’s approach and identifying specific stages in the development of marketing strategy allows the links among the development of the market, the organizational dynamics of the firm and broader socioeconomic forces to be identified.
Initially, the advent of mutual life insurance occurred in reaction to the failure of the market to supply a reliable risk management product. In the early years of the first mutual (AMP), the motivation for business was driven by philanthropic more than commercial imperatives. Marketing strategies were very basic, reflecting the embryonic status of the organization. The essential role of these strategies was to establish the message, which was done with reference to prevailing social constructs and moral codes that underpinned the mutual philosophy. The messages of self-help and moral responsibility were mixed with the broader social ambition of protecting women and children. At first, the approach to sales was simplistic; little consideration was given to strategy. It was assumed that life insurance was “bought, not sold.” Early directors of AMP railed at the unwillingness of the population to take heed of their moral responsibilitiesFootnote 77 but did not conceive of taking a more proactive approach to marketing their product.
The 1860s marked a turning point in the approach to selling insurance. The appointment of AMP’s first dedicated agent proved so successful that a new model of sales was implemented. The employment of canvassing agents was the catalyst for change. The resulting increase in business created pressure for organizational adjustment. The branch structure was created to support the agency system, which formed the foundation of marketing and sales for the next ninety years. Salesmanship also evolved as the canvassing agent system spread. As agents toured the countryside in search of business, they developed more sophisticated sales techniques, many of which used entertainment as a sales tool. The life insurance message began to be spread in a number of differing ways.
In the second stage of development, marketing strategy responded to the changing economic parameters driving broader growth patterns. Fueled initially by the impact of the gold rushes, and later by the industrialization and urbanization of colonial economies, an expansion in real GDP supported the growth of a middle class. As in other countries that had experienced a similar growth in the middle class (such as the United Kingdom and the United States), the demand for life insurance increased. The corresponding expansion of insurance revenues and growth of industry assets encouraged a reorientation of the focus of mutual insurers. The requirement to invest these funds was associated with an increasing orientation to a commercial rather than a philanthropic outlook.
The marketing message was adapted in a number of ways. Life insurance products were enhanced and savings attributes emphasized. The language used to sell insurance altered, reflecting middle-class sentiments in respect to improving economic status. The gain to the individual became a common message portrayed in an increasingly elaborate manner. The marketing of the brand was increasingly oriented toward establishing the status of the insurer—reliability, stability, and place in the market.
From 1900, the marketing message was further refined in response to both the changing structure of the industry and the competitive environment. The popularity of the industrial insurance product exposed a broader cross section of the population to the concept of life insurance. It also encouraged increased competition and a growth in the number of suppliers, especially during the 1920s. Product differentiation became an important source of competition and marketing strategies were evolved to cater to this. Conventional life insurance policies were complemented with the introduction of a range of targeted products designed to appeal to specific segments of the market. Advertising was directed at a wider audience and the number of different types advertisements increased.
Until the end of World War I, the themes of the previous period—namely, individual gain and institutional status—remained the major thrust. However, after 1920 there was a clear shift in approach. In what appeared to be a synthesis of the messages of the previous two periods, a much more emotive type of advertising was increasingly evident in the printed media. From this, it would appear that marketing strategy was evolving the capacity to segment markets and develop specific campaigns, which enabled life insurers to capitalize on the aspirations of different cohorts of the population. This was a technique that was further developed from the 1950s, contributing to the rise of sales and marketing departments as life insurers adopted more advanced organizational structures after that time.
The experience of Australian mutual insurers suggests that marketing strategy, as with other types of organizational skills, evolve in response to both the prevailing business environment and the ability of the firm to acquire and implement new knowledge and ways of conducting business. Early marketing tactics were simplistic and not very successful. The adoption of new approaches to selling in the 1860s was associated with an expansion in organizational capabilities, which enabled the firm to capitalize on opportunities presented in the emerging market. The skills acquired in this process provided the necessary knowledge for further advancement and refinement of the marketing message. The application of a stages approach to the analysis of this message has enabled the nuances of the progress of organizational learning in respect to the sale of life insurance products to be identified.
