A Study on Customers’ Preference

towards Insurance Services

and Bancassurance
Rajkumari M *

Bancassurance is a channel of distribution of insurance products through banks.

A number of insurers have already tied up with banks and some banks have already
flagged off bancassurance through soft launches of select risk products. Bancassurance
has been gaining momentum in the Indian market. This study is carried out to
understand the position of private players when compared to public, and also to find
the most preferred policies with these leading companies. It also aims to analyze the
segment wise preference among different age groups. The study has been undertaken
in order to identify the customers’ attitude towards purchase of insurance products
and also their knowledge on the bancassurance formats available through banks.
The study concludes that there is a low level of awareness about bancassurance
among bank customers and thereby gives suggestions to improve insurance penetration
levels.

Introduction
The business of insurance started with the beginning marine business. Traders, who used to
gather in the Lloyd’s coffee house in London, agreed to share the losses to their goods while
being carried by ships. The losses used to occur because of pirates who robbed on the high
seas or because of bad weather spoiling the goods or sinking the ship. The first insurance policy
was issued in 1583 in England. In India, insurance began in 1870 with life insurance being
transacted by an English company, the European and the Albert. The first Indian insurance
company was the Bombay Mutual Assurance Society Ltd., formed in 1870. This was followed
by the Oriental Life Assurance Co. in 1874, the Bharat in 1896 and the Empire of India in 1897.
Later, the Hindustan Cooperative was formed in Calcutta, the United India in Madras, the
Bombay Life in Bombay, the National in Calcutta, the New India in Bombay, and the Jupiter in
Bombay and the Lakshmi in New Delhi. These were all Indian companies, started as a result of
the swadeshi movement in the early 1900s. By the year 1956, when the life insurance business
was nationalized and the Life Insurance Corporation of India (LIC) was formed on
September 1, 1956, there were 170 companies and 75 provident fund societies transacting life
insurance business in India. After the amendments to the relevant laws in 1999, the LIC did not

* Faculty Trainee, Department of MBA, St. Peters Engineering College, Chennai, India.
E-mail: rajkumari.mano@yahoo.co.in

© 2007 The Icfai University Press. All Rights Reserved.

A Study on Customers’ Preference towards Insurance Services and Bancassurance 49
have the exclusive privilege of doing life insurance business in India. By March 31, 2002, 11
new insurers had been registered and had begun to transact life insurance business in India.

Insurance Format
In India, insurance business is classified primarily as life and non-life or general. Life insurance
includes all risks related to the lives of human beings and general insurance covers the rest.
General insurance has three classifications viz., Fire (dealing with all fire related risks), Marine
(dealing with all transport related risks and ships) and Miscellaneous (dealing with all others like
liability, fidelity, motor, crop, personal accident, etc). Personal accident and sickness insurance,
which are related to human beings, is classified as ‘non-life’ in India, but is classified as ‘life’,
in many other countries. What is ‘non-life’ in India is termed ‘Property and Casualty’ in some
other countries.

Bancassurance
Bancassurance, the much talked about channel of insurance distribution through banks that
originated in France and which has been a success story in Europe is yet to take off here. A
number of insurers have already tied up with banks and some banks have already flagged off
bancassurance through soft launches of select risk products. While reams have been written
about the numerous benefits of bancassurance considering the wide scale availability of risk
products it will enable, rules and regulations regarding the same are yet to fall in place.
For banks, bancassurance is a new concept for building better and secured relationship, to
sustain themselves in this present competitive world. Enter bancassurance and fee-based
income for a risk free product that would be guaranteed.
While, on the one hand it is an economical proposition to sell risk products through the
numerous bank branches spread across the country the fact that claim settlement disputes take
some time in our country is one of the causes for worry. In such a situation will banks be in
a position to fight for the cause of their clients is a major concern.
Besides all these controversies, bancassurance is gaining momentum in the Indian
market. Insurance companies are increasingly using the banking network to improve their
distribution system.

Objectives of the Study

• To find the customer’s preference towards Insurance services and bancassurance.
• To understand the awareness level on insurance among various segments and also
to find the major policies preferred by people both in life and non-life.
• To find the awareness level on bancassurance provided through Centurion Bank of
Punjab.
• To find the benefits that customers get through Insurance savings.
• To find the client satisfaction among the clients of Centurion Bank’s bancassurance.
• To understand the various policies sold under non-life in Centurion Bank and the
future trends towards bancassurance.

50 The Icfai Journal of Risk & Insurance, Vol. IV, No. 4, 2007
Statement of the Problem
The key attributes for any business to succeed depends on the customers satisfaction towards
the company. The aim of marketing is through understanding the changing customer attitude
and their varying preferences for buying an Insurance plan. The company should be cost
effective to give the best solution to the client to suit his/her position.
In Insurance field private players need to do lot of work in order to attract the people,
whereas public sector companies in insurance do not face these problems mainly as public
sectors are directly controlled by the government rather than a foreign company which tie-up
with an Indian company for selling life guards. When it comes to the question of security it
takes hard to convince our people as still private sectors are considered only as a work place
which is not assured like a government job.
This study is carried to understand the position of private players when compared to public,
and also to find the most preferred policies with these leading companies. It also is to define
the problem based on the future of bancassurance which shows a growth rate of 64% according
to this study which powers a good welcome entry in India. This study is also to analyze the
segment wise preference among different age groups.

Scope of the Study

The study has been undertaken by the researcher in order to identify the customer’s attitude
towards purchase of insurance products and also their knowledge on the bancassurance
formats available through banks. The study is also based on the awareness of the various
policies available through insurance, both life and non-life (general insurance).
This study is also focused on understanding the bancassurance awareness in one view, i.e.,
with respect to Centurion Bank of Punjab in Chennai.

Methodology
The present study is a descriptive work based on a survey method. Based on the segment wise
concentration, a structured questionnaire has been framed for interviewing as a tool for
research.
A separate questionnaire was framed to concentrate the clients of Centurion Bank’s
bancassurance. The collected data has been analyzed using a statistical test for final
interpretations.
Sampling Design
The report is confined to understand the Insurance benefits to customers through different
insurance companies for both life and non-life. It also helps to focus, based on different
segments namely:
• Professionals – Segment 1
• Government Employees – Segment 2
• Business People – Segment 3
• Others – Segment 4 (Retail shop owners, students, etc.)

A Study on Customers’ Preference towards Insurance Services and Bancassurance 51

 The secondary objective was based on targeting the bancassurance clients of Centurion
Bank through random sampling method.
Measurement of Variables and Frame Work of Analysis
• The key objective is to study the customers’ preference towards Insurance services in life
and non-life and also to find the awareness on the bancassurance among people.
• For doing this study, percentage analysis has been used to understand the various
preferences and cross analysis is done to analyze the factors influencing the other factors.
• Bar diagrams and Pie charts has been done to give a pictorial representation of the overall
analysis.

Research
Basic Awareness on Policies
• The common life policy that was known by the majority of the people, among the other
policies specially the money back and pension plan is much familiar with the government
employess and business people (Figure 1).

• The awareness of the child benefit policy is very low; people need more awareness in this
area.

Figure 1: Life Insurance Awareness

90
80 86%
70
60
Percentage

56%
50 52%
45%
40
30
20
10
0
Life Child Pension Money Back
Policy

In the general Insurance, the most commonly known policies are the motor insurance as
it is mandatory that every vehicle owner should have taken the motor insurance (Figure 2).
• Apart from this, the other policies better known are the house plans, health insurance, and
other insurance policies (travel insurance, oversees insurance, etc., Table 1).
• In non-life, the analysis shows that majority of them are aware on motor insurance and on
an average, level of knowledge on other plans like house insurance and health insurance
is also better with government employees, IT professionals and few business people.

52 The Icfai Journal of Risk & Insurance, Vol. IV, No. 4, 2007
 Figure 2: Non-life Insurance Awareness

80
Table 1: Preference of
70 76 Non-life Insurance Products
60
Policies Preferred Percentage
Percentage

50
52 56 by Customer’s Analyzed
40
Motor 40
30
Health Insurance 14
20
House Insurance 8
10
10
Others 4
0
Motor Health House Others
Policy

Percentage of Insured People

• The analysis says that the percentage of people, who have taken either Life policy or
General policy, is low when compared to the percentage of people who are aware about
Insurance plans.
• Though most people are aware on insurance, many are still hesitant to take insurance
for various reasons including social beliefs and myths (Figure 3).
• The analysis as an overall basis from all the 4 segments has showed that still some people
have not taken insurance for both life and non life.
• In the IT segment, most professionals concentrated in this survey were between the age
group of 18-25 who have still not taken insurance due to less interest in taking policies
and also less awareness on the right policy to suit their career.
• But in the business segment, almost all the people have taken insurance specially money
back is famous among them and in non-life, health insurance is much taken by them as
these people were mainly between the age group of 25-35 and 35-45.

Figure 3: Percentage of Insurance Coverage in Study Group

0% 50% 100%
16%

Yes

No

Level of
Variation
84%

A Study on Customers’ Preference towards Insurance Services and Bancassurance 53

Preferred Policies by Customers
Table 2: Benefits Available
• The key benefits that customer’s get through for Insurance Schemes
availing Insurance plans were rated on a
Factors Percentage Rating
five point scale and the top reason was
Income Tax Deduction 68
found to be Income tax reduction that they
Returns 34
get for paying premium towards these
Protection 56
policies under section 10(A), 10(D) and 80C
Savings 52
(Table 2). The next rating was for the
Others 6
protection especially family protection and
for self protection. In this protection category, health insurance, child benefit, money back
plan, etc... are some of the policies that topped for family protection (Figure 4). Savings were
rated with a lesser percentage as insurance is not much considered for savings when Bank
options are there for savings. Only in case of few plans like pension plan which comes under
this category for retirement benefits. Some other factors also were rated with a less
percentage for certain rider benefits that people get through availing insurance plans like
accident benefits, house protection, etc.

Figure 4: Commonly Preferred Policies in Life Insurance

80
62

60
Percentage

40
24

20
10
6 6

0
Life Child Benefit Pension Money Back Others

Policy

Awareness on Bancassurance
Bancassurance still being in nascent stage, has low awareness in our country. The data of
awareness on bancassurance and Centurion bancassurance is given in Figure 5 and Table 3

54 The Icfai Journal of Risk & Insurance, Vol. IV, No. 4, 2007
 Figure 5: Data on Awareness of Bancassurance

Awareness on Bancassurance Awareness of Centurion Bancassurance

10 0
90
80
78

Percentage
70
No 36% 60
Yes 64% 50
40
30 22
20
10
0
Yes No

Sources of Awareness on Centurion Bank’s Bancassurance

Table 3: Data on Awareness on Centurion Bank’s Bancassurance

Factors Media Friends Tele Callers Marketing Executives Others

Media 14% – – – –
Friends – 26% – – –
Banks – – 50% – –
Others – – – 4% 6%

Top Preferred Policies in Centurion Bancassurance

• The analysis taken from the client data base shows that most of the policies taken through
ICICI Lombard is mainly health insurance and house insurance and motor insurance has a
very low purchase in ICICI as the vehicle dealer itself mostly arranges for motor insurance
with tie-ups with insurance companies specially as Bajaj Alliance which is one of the leading
motor insurers for most of the vehicles during the sale of a new vehicle. Health insurance
has gained a lot of exposure through the various mediclaim policies available through ICICI
due to the massive change in modern life style and food habits (Figure 6).

Figure 6: Top Preferred in Non-life Insurance Policies

60

40
Percentage

20

0
Motor Health House
Insurance Insurance Insurance

A Study on Customers’ Preference towards Insurance Services and Bancassurance 55

• House insurance is still to reach the top mainly as people are not much aware on the house
insurance plans and also due to certain social beliefs.

Cross Analysis: Description

This cross analysis is done for a comparison with the different segments of professions, i.e., IT
professionals, government employees, etc… compared with the age group were the policies are
much in demand. The insurance preferences among the various age group people are
understood through this cross analysis (Table 4).

• In case of the IT sector most of the insured are between 18-25 and 25-35. And even among
business group this is the apt age for insurance as most people venture into business mostly
in age group of 25-35. For professionals this age is best suited as they come to a settlement
in their career and hence at this point they start investing in insurance policies. While
considering the government employees, they invest mostly from the age group of 35-55 and
above 55 especially as at this stage they decide on their retirement benefits and apart from
this the other savings are also concentrated.

Table 4: Segment Wise Cross Analysis

Age Group
Profession
18-25 (%) 25-35 (%) 35-55 (%) Above 55 (%)
IT Professionals 65 30 5 –
Government Employees 2 28 68 2
Business People 4 75 21 –
Others – 20 50 30

Future Plans towards Life Insurance: Description

This interpretation is done to find out the percentage of clients willing to insure with Aviva Life
Insurance Company through Centurion’s bancassurance tie-up with Aviva (Figure 7).

Figure 7: Future Preference towards Life Insurance

No 34%
Yes 66%

56 The Icfai Journal of Risk & Insurance, Vol. IV, No. 4, 2007
Statistical Test
The statistical test is applied to prove the bancassurance clients mostly do not have any previous
relation with the bank through any savings or loans. This test also shows that most of the clients
have come to know about bancassurance through the main source of tele callers. The test is
done through a combination of 3 different variables, namely: (1) Clients of bancassurance
having previous accounts with the bank; (2) Fresh Clients of bancassurance having no previous
relation with the bank; and (3) Clients Source of awareness for availing bancassurance through
Centurion bank.
Statistical Test – Chi-square Test.
Hypothesis Setting
H0: There is a low relation of the bancassurance clients with centurion’s bank accounts.
H1: There is a relation between the bancassurance clients with centurion bank.

Table 5: Observed Values of Clients

Savings in Bank with

Media/Friends Marketing
Bancassurance/Only Tele Callers Total
and Relatives Executives
Bancassurance
Observed Value
Yes 5 5 6 16 (C1)
No 11 8 15 34 (C2)
Total 16 (T1) 13 (T2) 21 (T3) 50
Expected Value
Yes 5.12 4.16 6.72 16
No 10.88 8.84 14.28 34
Total 16 13 21 50

Final Analysis
S.No. O E O-E (O-E)^2 (O-E)^2/E
1. 5 5.12 –0.12 0.0144 0.0028
2. 5 4.16 0.84 0.7056 0.1696
3. 6 6.72 –0.72 0.5184 0.0771
4. 11 10.88 0.12 0.0144 0.0013
5. 8 8.84 0.84 0.7056 0.0798
6. 15 14.28 0.72 0.5184 0.0360
Total 0.3660

Note: The table value of  for 2 degree of freedom at 5% level is 5.991.



A Study on Customers’ Preference towards Insurance Services and Bancassurance 57

Result
• “Calculated value 0.366 is less than table value”.

• Thus, H0 is accepted.

• The analysis shows that there is a very less relation of the bancassurance clients with
centurion bank accounts like any savings, loans, etc.

Findings
• Insurance awareness is growing rapidly among the people though few are hesitant to insure
due to certain barriers. The interest level of the people in terms of getting insured is very
important and this importance must be made to realize through the upcoming insurance
companies.

• The life plan is the basic policy that any individual takes when reminded of insurance. The
other policies like child benefit plans, pension plans and other rider benefits have still not
reached the awareness. The future of a child in case of any mishap to the parents or
guardian forms a big question to the child’s future and hence every parent should avail this
policy to protect their child.

• The retirement benefits are mostly considered by the government employees only. Other
professionals should also have their savings towards pension plans.

• In Non-life Insurance, motor is the main insurance that is still in effect as it is mandatory
that vehicles should be insured. Apart from this mediclaim insurance and house insurance
is gaining their position.

• Mediclaim policy has not been welcomed yet as most of the employees in public sectors,
central government employees and few private company staff get medical reimbursement
for any hospitalization and out patient treatment. As they get the money back through
reimbursement’s they do not go separately for health plans.

• House Insurance has recently got its attraction through the easy loan availability for
constructing a house. But still house loans under repayment availed through banks are
exempted under income tax, and people do not opt house insurance. But still it attracts
people for any claim regarding house burglary, fire or any safety factor. Nowadays tax saver
house plans for constructions and remodeling have been brought by ICICI.

• The major reason for people availing insurance is to avoid income tax and towards future
savings. The government also has taken measure to provide tax exemption for various life
policies:

58 The Icfai Journal of Risk & Insurance, Vol. IV, No. 4, 2007
• Under Section 10(10D), any sum received under a Life Insurance policy is also exempted
from taxation. But it is wise to remember that Pensions received from Annuity plans are not
exempted from Income Tax.

• Section 80 CCC provides a deduction of up to Rs.10,000/- to an individual assessee for any

amount paid or deposited to effect or keeping in force any annuity plan of LIC for receiving
pension from the fund referred in sections 10 (23AAB). Presently LIC’s Jeevan Suraksha plan
is one such plan using such benefit.

• Bancassurance, the new term in insurance distribution has not been penetrated as most
people are not aware on this concept. The people who knew on bancassurance did not have
an idea on Centurion bank providing this facility.

• The bank officials do not have any relation with the customer after the policy is issued and
the cheque is drawn. After this procedure it is the insurer who is responsible for all the claim
settlement and enquires.

Conclusion
Insurance is a term related to assurance as the insured is repaid for the loss incurred in terms
of economical returns for both life and non-life. People avail insurance mainly due to the
following reasons:

• Insurance creates financial provisions for the deceased’s dependents.

• Insurance provides for the policyholder’s old age benefits after his earning power
diminishes. After all, interest rates may fall and Invested holdings may lose value and stop
gaining dividends, but the value of an insurance policy once set, never reduces.

• Insurance also provides a legally authorized way to reduce the incidence of Income Tax.

Thus, all the above reasons state that insurance is for future returns and towards protection
of family and self. Hence, safety is the key factor which should be assured to public to penetrate
the private insurers.

Bancassurance, regarding centurion’s bancassurance, more exposure has to be brought

through media and other sources.

• Online ads on bancassurance can bring a wide coverage in cost effective way.

• Banks should try to have contacts with the bancassurance clients at regular basis to build
a good long standing relation. This will also be helpful to attract the clients towards opening
of credit accounts with the bank.

As long it is not mandatory to seek insurance with few exceptions, it is in the hands of the
insurers to bring confidence and commitment towards Insurance services for a better
tomorrow. 

A Study on Customers’ Preference towards Insurance Services and Bancassurance 59

Bibliography
Books
1. Beri G C (2000), Marketing Research, Tata McGraw-Hill Publishing Co. Ltd.
2. Practice of General Insurance -IC -11 - Insurance Institute of India.
Magazine
1. Escolife Newsletter.
Websites
1. www.centurionbop.co.in
2. www.licindia.com
3. www.insuremagic.com
4. www.icicilombard.com

Reference # 45J-2007-10-04-01

60 The Icfai Journal of Risk & Insurance, Vol. IV, No. 4, 2007