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Consumer behavior towards

online Insurance services in India

Marketing Financial Services

Travel Insurance

House Insurance

Health Insurance

Car Insurance

Saurabh Pant( PRN No: 13020847017)
MBA EE(2013-16)

Table of Contents

Literature Review
Conceptual Model to Explain On-line Buying of Financial
Purchasing behavior towards online Insurance services


Deregulation and the emergence of new forms of technology have created highly competitive market
conditions which have had a critical impact upon consumer behavior. Bank providers must, therefore,
attempt to better understand their customers in an attempt not only to anticipate but also to influence
and determine consumer buying behavior. Consumers are now more disposed to change their buying
behavior when purchasing financial products. As a consequence, bank providers are less certain that
their customers will continue to reservoir with them or that they will be able to rely upon the traditional
banker customer relationship to cross-sell high value, so-called ancillary products.
In an era where customer retention and the ability to cross-sell products to existing customers are
critical in determining profitability, it is important that banks respond strategically to these changes. The
present research paper provides understanding the changing online buying behavior of consumers.
In India, online shopping in general and online insurance services in particular, are yet to gain
momentum. A large population still remains skeptical about its relative advantage over the traditional
delivery channels. Limited Internet accessibility coupled with low technology literacy makes customers
suspicious about online insurance services.

India is a country where the average selling of life insurance policies is still lower than many western and
Asian countries; with the second largest population in world the Indian insurance market is looking very
prospective to many multinational and Indian insurance companies for expanding their business and
market share. Before the opening of Indian market for Multinational Insurance Companies, Life
Insurance Corporation (LIC) was the only company which dealt in Life Insurance and after opening of this
sector to other private companies, all the world leaders of life insurance have started their operation in
India. With their world market experience and network, these companies have offered many good
schemes to lure all type of Indian consumers but unfortunately failed to get the major share of market.
Still the LIC is the biggest player in the life insurance market with approx 65% market share.
Technology is said to have revolutionized the service sector and widened the reach across different
customer segments. Customers have the flexibility to take advantage of the service according to their
convenience and without interacting with service staff. In India, financial sector has invested in
developing technological infrastructure for providing efficient services to customers and competing with
the multinational insurance companies.
Technological innovations and advancements would continue to be a critical component of customerfirm interface. Internet as a service delivery channel has revolutionized the traditional marketplace
interaction by providing greater accessibility to customers. The virtual marketplaces have changed the
nature of customercompany interaction and their relationships. The online business models can be
improved by comprehending customers needs. Assessment of customers attitude can be of immense
help in planning self-service technologies (SSTs) and improving service. The SST is an independent
service delivery system, which permits customers to avail the service at their convenience without the
interference of the service staff.
The use of web-based technologies as a service delivery medium has added new elements to service
dissemination. Escalation in self-service technologies has provided customers with multiple choices for
using services offered by an organization. The online service attributes of convenience and ease of
use are being given priority by companies for designing web-based services. In India, online shopping in
general and online insurance services in particular, are yet to gain momentum.
A large population still remains skeptical about its relative advantage over the traditional delivery
channels. Limited Internet accessibility coupled with low technology literacy makes customers
suspicious about online insurance services. The research directed toward understanding Indian
customers behavior toward using online insurance services, suggest that improvement in technological
attributes of online insurance Web sites can enhance customers service usage.

Literature Review
Research states that online shoppers differ in their perceptions and attributes they assign to evaluate
the service. Service providers encounter tremendous pressure in designing service attributes that
address needs of the customers. Understanding customer's behavior toward service features and
technological innovations becomes pertinent. Service quality strategies have to be customer-centric that
focus on behavioral intentions of the customer. Internet decreases transaction and operating costs and
facilitates efficient transactions. Services are heterogeneous in nature as they are produced and
consumed during service encounters. It is important that online service experience should prompt
customer satisfaction. Evanschitzky et al posit that online environment provides convenience to
shoppers, increases interactivity, customer support and fosters relationships. Various Web sites
attributes affect customer satisfaction and motivate them to use online services.
Szymanski and Hise suggest the importance of four Web dimensions; namely, convenience,
merchandizing, site design and financial security as qualifications to customer satisfaction.
Taylor and Brown state that humans select, interpret and process stimuli or information based on their
existing attitudes. The interpretation of information is based on how well it fits into their lifestyle.
Zeithaml posit that customers assess the service based on what they believe they should receive in
return for the resources they are expending. The outcome is dependent on the value customers derive
from the interaction and exchange. Online Web sites are evaluated according to accessibility,
interactivity, information availability and their ability to deliver the service.
Mehr and Cammack (1976) agrees that Insurance is usually thought of as a product that spreads the risk
of serious, but low-probability, losses among a group of individuals, thus providing some financial
protection to each individual.
Davis in his Technology Acceptance Model states that the individuals acceptance of technology depends
on their attitude toward using the technology. The ease of use and usefulness play a pivotal role in
adoption of the technology. Further research added a new attribute to the above-mentioned attributes.
Davis et al state that use of technology is amplified if the customers feel a sense of enjoyment in using it.
The online service experience is enhanced with the interactivity and enjoyment features of the Web site.
Lin and Wu postulate that customer satisfaction and adoption of technology is related to attributes such
as information content, customization and reliability. The customers responses have a significant effect
on their perceived ease of use and usefulness of the Web sites. The implications of any innovation can
be measured by the volume of use and how far it fits into the customers requirement.
Technology use in services has made it possible for service providers to offer personalized services to
customers. The acceptability of technology in insurance sector is of interest to the Insurance companies.
It is inevitable that receptivity of the customers has to be grasped for making the necessary
customizations in the Web sites.
Balasubramanian et al posit that trust plays a significant role in driving customer satisfaction in financial
services, especially in online insurance services. Technology can tackle trust related expectation of
customers as it is closely linked with security and system integrity.

Online Shopping
The Internet has proven a fertile ground for marketing and advertising and, by extension, has significant
implications for privacy. It readily offers all of the tools needed by an organization attempting to fully
embrace relationship marketing and possesses unique customer data-gathering capabilities. The
Internet serves as a platform for online companies to create favorable relations with consumers.
Although similar in some respects, the Internet is different from traditional direct marketing channels in
three main ways:
 increased data creation and collection,
 Globalization of information and communications, and
 Lack of centralized control mechanisms.

These differences can be used advantageously but at the same time they have the capacity to create
problems both for online companies and consumers. The Internet has made enormous amounts of
information available to consumers. Search engines have become an essential way and the first choice
to seek pre-purchase information for many people. In the electronics market, consumers are able to
seek information in many different ways (search agents). They are able to seek more information faster
(larger extent of search), for more alternatives (width of search), and attributes of value (depth of
Consumers online pre-purchase information search is an essential part of consumer decision making
process. Consumer search is the main method, besides advertising, for acquiring information necessary
to purchase decisions. Consumers look for products and competitive prices in an attempt to make a
right choice and decide what, when, and from whom to purchase. Consumers make everyday
decisions regarding choice, purchase and use of products and services. These decisions are often
important to consumers and thus difficult to make.

Financial products
Financial products is one of the fastest growing fields the world over. The opening up of global
economies has only increased the scope for financial products. Banks and financial institutions are
rapidly introducing innovative online financial products to capture competitive space. Companies in this
field are seeking to become financial super centers by offering a variety of online financial products and
services under one roof. However, dealing in financial products comes with risk, as small mistakes can
result in major damages to the company. Therefore, the marketing for online financial products needs to
be planned meticulously to avoid errors and consequent damages and should be user friendly.
Considering the intense competition in the field, companies also need to create a source of
differentiation to improve customer recall. Financial products act as an investment avenue and provide
the required financial security to the investors based on the risk-return profile of the financial products.
In the past, traditional financial products were offered in India through government initiatives by Public
Sector Banks (PSBs) (deposit account, credit account), Life Insurance Corporation (LIC), and postal

department (recurring deposit, National Saving Certificate, Kisan Vikas Patra). However, in recent years
with the advent of liberalization of financial services industry, diverse financial products have been
introduced through participation of private and foreign entities in addition to the public sector
enterprises. These include products such as debit and credit cards by banks, open-end and closed-end
mutual fund schemes (Exchange Traded Funds (ETFs), Index Funds, Systematic Investment Plans (SIP),
sector funds, etc.), life and non-life insurance schemes (Unit Linked Investment Plans (ULIPs), pension
plans, children education plans, etc.).
It further includes shares and debt securities offered by various entities, investments in which are mainly
facilitated by the brokerage houses. This has led to rising competition through introduction of innovative
and attractive products, regulatory initiatives and growth in the investor base along with increased
marketing activities in the financial sector. The increased activities in the financial sector could be
reflected in the growth in the aggregate deposits with banks.

Conceptual Model to Explain On-line Buying of Financial Products

The MAO (Motivation, Ability, and Online) framework has enabled researchers to explain how
consumers process information obtained through exposure to advertising. Since the frameworks
motivational component arises from the need confronting consumers and directs their behavior, it can
be used to explain any behavioral tendency that is based on an underlying need.
The basic constructs in the model include on-line purchase, on-line information search, and antecedent
levels of motivation, ability, and opportunity. Prior to the development of the on-line channel, most
consumers relied upon a financial adviser or agent (e.g., financial planner, stockbroker, insurance agent)
to manage their financial transactions. The present research work suggests that consumers are more
motivated to use the electronic channel when they are not satisfied with their agent, and especially with
the agents plan for them (end goal) and methods. Conversely, dissatisfaction and conflict are lower
when consumers view the agents role performance favorably.
Beyond this, consumers who exhibit readiness to use the on-line channel are more likely to do so when
presented with the opportunity. Their ability to use the electronic channel will probably be influenced
by how much they know about financial products and markets, and how much confidence they have in
their own decision-making capacity. The greater their ability, and the probability of online use. Finally,
beyond motivation and ability, potential on-line consumers tend to face lower opportunity constraints in
making decisions themselves. Opportunity is constrained when consumers feel that they do not have
the time to personally manage their financial transactions.

Conceptual Model to Explain On-line Buying of Financial / Insurance Products

Internet Banking in India

The financial products and services have become available over the Internet, which has thus become an
important distribution channel for a number of banks. Banks boost technology investment spending
strongly to address revenue, cost and competitiveness concerns. The purpose of present study is to
analyze such effects of IB & online Insurance in India, where no rigorous attempts have been undertaken
to understand this aspect of the banking business. A study on the Internet users, conducted by Internet
and Mobile Association of India (IAMAI), found that about 23% of the online users prefer IB as the
banking channel in India, second to ATM which is preferred by 53%. Out of the 6,365 Internet users
sampled, 35% use online banking channels in India. This shows that a significant number of online users
do not use IB, and hence there is a need to understand the reasons for not using it. Until the advent of
ATMs, people were unaware and/or not directly affected by the technological revolutions happening in
the banking sector. ATMs became the major revelation for customers, since it offered the facility to
avoid long queues in front of the cashiers in banks. It also provided them the flexibility of withdrawing

money anytime, anywhere. In the study by IAMAI, it was found that the people are not doing financial
transactions on the banks Internet sites in India because of reasons such as: security concerns (43%),
preference for face-to-face transactions (39%), lack of knowledge about transferring online (22%), lack
of user friendliness (10%), or lack of the facility in the current bank (2%).

Purchasing behaviour towards online Insurance services in India

 Online insurance services are new in India, and customers are not accustomed with its technical
features and transactional intricacies. They are accustomed to the traditional interpersonal
channels like insurance agents.
 Online insurance Web sites create uncertainty in customers minds. Customers prefer direct
channels for seeking information about the insurance products. Many customers prefer to speak
to an insurance agent for purchasing a policy and are not comfortable shopping for insurance
 The application of Internet in commercial and marketing activities reduces operating costs and
allows the producer to contact customers directly.
 Technology facilitates easier customer interaction with improved service. Online environment
provides convenience to shoppers, increases interactivity, customer support and fosters
 Various Web sites attributes affect customer satisfaction and motivate them to use online
services. Online Web sites are evaluated according to accessibility, interactivity, information
availability and their ability to deliver the service.
 The acceptability of technology in insurance sector is of interest to the Insurance companies. It
is inevitable that receptivity of the customers has to be grasped for making the necessary
customizations in the Web sites.
 Trust plays a significant role in driving customer satisfaction in financial services, especially in
online insurance services. Technology can tackle trust related expectation of customers as it is
closely linked with security and system integrity.
 Customers place high priority to security attributes, and technical safety of the network against
fraud or hackers is a high concern. Customers concerns can be categorized as financial and nonfinancial, which affect their evaluations. The customer satisfaction in online financial service
depends on easy navigation, availability of information, graphics and security in transaction.
 Easy Web accessibility is one of the factors affecting customers interaction and perception
toward online service Web sites. Online users expect access to online service even from remote
places, and accessibility can improve their attitude toward online systems.

 The time spent in waiting for the service to be delivered can be exponentially reduced in online
systems. Web site's accessibility relates to easy contact possible through the Web site at
customers convenience. Convenience and time-saving features are important factors
influencing consumer online shopping behaviour.
 Online service models enable access to information and facilitate comparisons between
products of different service providers. Customers can seek appropriate information on the Web
site, which fulfils their needs and knowledge about the products. While using e-commerce
services, customers give importance to transaction costs, and service quality.
 During the past decade, the ubiquity of Internet has made it possible for customers to access
insurance services online for gathering information about products, financial consultancy and
indemnity planning.
 In India, Internet penetration is on the increase but it is hindered by connectivity problems. This
restricts customers from accessing company Web sites due to broken links and server problems.
Being accustomed to insurance agents for paying their annual premiums and renewing a policy,
Internet is considered unsuitable for regular transactions.
 Government or semi-government insurance companies are preferred over private companies.
Insurance companies find it difficult to comprehend the expectations of customers regarding
service quality attributes.
 Online shopping behaviour of youth differs from that of the older customer age group. The
youth seeks more variety and explores Web Sites. The older customers do not feel comfortable
with online insurance services and may have to be motivated to try out online services.

The customers involvements in online Buying have become an important trend. Advancement in the
Internet technology has facilitated the growth of in-home shopping as consumers are increasingly using
the Internet as a shopping approach in performing their Buying activities, companies can take this
opportunity to use the Internet as a medium to attract and maintain current and potential customers. In
this vein, online companies must understand consumers perceptions of website characteristics and
their online shopping behavior.
The advancement of the World Wide Web has resulted in the creation of a new form of retail
transactions- electronic retailing (e-tailing) or web-shopping. The rapid growth of the Internet
technology has enabled Indian consumers to purchase products or services from the web-retailers and
search product information from the Internet. However, web-retailers can only offer certain ranges of
products and services to web-shoppers, including e-banking services, technology gadgets, cosmetics,
clothing and the booking of airlines ticket.
Effectiveness of the e-marketplaces for financial products is not linear function of existence of such
marketplaces. It will rather depend upon efficiency of the web site in achieving the business objectives
such as promotion of products and services, provision of data and information and processing of
business transactions. These may be achieved with the help of four basic factors of value creation,
namely, timely, custom, logistic and sensational. Hardly any attempt seems to have been made to look
at e-marketplaces with focus on ownership, range and competition issues, particularly in the Indian
financial sector.
The buyers of financial products and services are concerned with the effectiveness of their eprocurement process. The effectiveness of their e-procurement will depend upon selection of
appropriate type of e-marketplace that has the supplier set, amount and quality of product information
and accompanying services. The effectiveness of e-procurement of financial instrument is usually
measured in terms of factors such as competitiveness in cost of funds or investment instrument,
transaction costs, bargaining power, trust, uncertainty, payment as well as delivery efficiency and the
variety and quality of instrument in terms of suitability for the purpose for which it is procured. Many of
these factors are market situational ones and they must be taken into consideration while selecting the
appropriate type of e-marketplace.
Similarly, the nature and functioning of e-marketplaces for financial instruments should be a matter of
interest and concern to the regulators of financial markets. Central banks and securities regulatory
bodies must be as interested in bringing some order to the chaotic space of e-marketplaces for financial
products, as they are in the brick and mortar marketplaces. These institutions have always shown
interest in the online trading in shares of companies that are being traded online.

The markets for financial products and services are highly scattered and sellers seek to provide their
financial products and services all over the global. In fact, in case of most of the financial services such as
banking and financial broking, one can leverage on global presence. E- Marketplaces have global
presence and they offer access to widely scattered customers at no additional cost. The markets for
financial products and services are deep. These markets offer a wide variety of financial instruments to
suit desired risk/reward balance. Most of these instruments are highly liquid, allowing for cross-selling
multi- products. Each customer is likely to seek a number of financial products and ser- vices. Thus,
customer relationship management (CRM) plays critical role in financial services business. The
interactivity and convenience offered by the e-marketplaces make these marketplaces apt for selling
financial products.
The financial products and services are information intensive by nature. Promptness in delivery of
complete information regarding financial product plays an important role in success in this sector. With
the large volumes and high value of transactions, quickness with which an enterprise can respond to an
opportunity is crucial. E-marketplaces are reservoirs of product related information that can easily be
delivered to the potential customer at a very low cost. E-marketplaces can store digitized financial
products deliver them to any remote location. To the extent, the financial products can be digitized;
they can be delivered electronically to the customer at a very low cost. Thus, buying/selling process can
be fully automated. This can offer substantial saving in the cost.
Financial services have high intensity of transactions and thus minor saving in transaction processing and
execution costs can result in substantial savings in overall cost of a financial services company. Emarketplaces are highly scalable in terms their capacity to handle large volume of transactions and have
facilities for automating the transaction processing. This can help in reducing transaction-processing
costs leading to substantial savings.