Interim Report: A Study of Consumer Behavior in relation to insurance products in IDBI Federal Life

Insurance Co. Ltd.

Executive Summary for Interim Report:

My Internship in IDBI Federal Insurance Co Ltd started on 4th April 2011. As per the program
we had a training for Incomesurance and the different sales techniques to pitch for our
prospective clients.
The target assigned to me was to achieve a sales target of minimum of 1 lac in terms of
premium amount collected per month. Though I have not been able to convert any pitches into
sales till now , while making these sales I got a chance to meet many different people from
diverse backgrounds and occupations to discuss on insurance related topics.
Along with the sales part we have been assigned a project for which I have chosen the topic
Behavior of consumers while purchasing Life Insurance. Buying behavior is a vast and important
marketing subject. The primary objective of my project is to identify the key factors which
influence a prospective consumer of life insurance the most when considering the purchase of an
insurance product. A questionnaire is been prepared with the help of my company guide and I
intend to survey 200 respondents for my research.

Background:

Insurance is a subject listed in the Union list in the Seventh Schedule to the Constitution of
India where only centre can legislate. The insurance sector has gone through a number of phases
by allowing private companies to solicit insurance and also allowing foreign direct investment of
up to 26% earlier and 49% from 2012, the insurance sector has been a booming market.
However, the largest life-insurance company in India is still owned by the government.

Insurance History :
 It dates back until 1818, when Oriental Life Insurance Company was started by Anita
Bhavsar in Kolkata to cater to the needs of European community.
 In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer.
In the year 1912, the Life Insurance Companies Act and the Provident Fund Act were
passed to regulate the insurance business.
 The Life Insurance Companies Act, 1912 made it necessary that the premium-rate tables
and periodical valuations of companies should be certified by an actuary. The oldest
existing insurance company in India is the National Insurance Company Ltd., which was
founded in 1906. It is in business.
 The Government of India issued an Ordinance on 19 January 1956 nationalising the Life
Insurance sector and Life Insurance Corporation came into existence in the same year.
The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as
also 75 provident societies—245 Indian and foreign insurers in all. In 1972 with the
 General Insurance Business (Nationalisation) Act was passed by the Indian Parliament,
and consequently, General Insurance business was nationalized with effect from 1
January 1973.
 107 insurers were amalgamated and grouped into four companies, namely National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd and the United India Insurance Company Ltd. The General Insurance
Corporation of India was incorporated as a company in 1971 and it commence business
on January 1, 1973.
 The LIC had monopoly till the late 90s when the Insurance sector was reopened to the
private sector. Before that, the industry consisted of only two state insurers: Life Insurers
(Life Insurance Corporation of India, LIC) and General Insurers (General Insurance
Corporation of India, GIC). GIC had four subsidiary companies.
 With effect from December 2000, these subsidiaries have been de-linked from the parent
company and were set up as independent insurance companies: Oriental Insurance
Company Limited, New India Assurance Company Limited, National Insurance
Company Limited and United India Insurance Company Limited.

Insurance Acts
 The Insurance Act of 1938 was the first legislation governing all forms of insurance to
provide strict state control over insurance business.
 Life insurance in India was completely nationalized on January 19, 1956, through the
Life Insurance Corporation Act. All 245 insurance companies operating then in the
country were merged into one entity, the Life Insurance Corporation of India.
 The General Insurance Business Act of 1972 was enacted to nationalise the about 100
general insurance companies then and subsequently merging them into four companies.
All the companies were amalgamated into National Insurance, New India Assurance,
Oriental Insurance and United India Insurance, which were headquartered in each of the
four metropolitan cities.
 Until 1999, there were no private insurance companies in India. The government then
introduced the Insurance Regulatory and Development Authority Act in 1999, thereby
de-regulating the insurance sector and allowing private companies. Furthermore, foreign
investment was also allowed and capped at 26% holding in the Indian insurance
companies.
 In 2006, the Actuaries Act was passed by parliament to give the profession statutory
status on par with Chartered Accountants, Notaries, Cost & Works Accountants,
Advocates, Architects and Company Secretaries.
 A minimum capital of US$80 million(Rs.400 Crore) is required by legislation to set up an
insurance business.
About IDBI Federal Life Insurance

IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, India’s premier
development and commercial bank, Federal Bank, one of India’s leading private sector banks
and Ageas, a multinational insurance giant based out of Europe. In this venture, IDBI Bank owns
48% equity while Federal Bank and Ageas own 26% equity each.
Having started in March 2008, in just five months of inception, IDBI Federal became one of the
fastest growing new insurance companies to garner Rs 100 Cr in premiums.
The company offers its services through a vast nationwide network of 2137 partner bank
branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and
partners. As on 28th February 2013, the company has issued over 8.65 lakh policies with sum
assured of over Rs. 26,591 Cr.
IDBI Federal today is recognized as a customer-centric brand, with an array of awards to their
credit. They have been awarded the PMAA Awards (2009) for best Dealer/Sales force Activity,
EFFIE Award (2011) for effective advertising, and conferred with the status of ‘Master Brand
2012-13’ by the CMO Council USA and CMO Asia.

Sponsors of IDBI Federal Life Insurance Co Ltd

IDBI Bank Ltd. continues to be, since its inception, India’s premier industrial development
bank. It came into being as on July 01, 1964 (under the Companies Act, 1956) to support India’s
industrial backbone. Today, with a wide range of innovative products and services, serving retail
and corporate customers in all corners of the country from 1077 branches and 1702 ATMs , the
Bank offers its customers an extensive range of diversified services including project financing,
term lending, working capital facilities, lease finance, venture capital, loan syndication, corporate
advisory services and legal and technical advisory services to its corporate clients as well as
mortgages and personal loans to its retail clients.
As part of its development activities, IDBI Bank has been instrumental in sponsoring the
development of key institutions involved in India’s financial sector –National Stock Exchange of
India Limited (NSE) and National Securities Depository Ltd, SHCIL (Stock Holding
Corporation of India Ltd), CARE (Credit Analysis and Research Ltd).

Federal Bank is one of India’s leading private sector banks, with a dominant presence in the
state of Kerala. It has a strong network of over 1060 branches and 1158 ATMs spread across
India. The bank provides over four million retail customers with a wide variety of financial
products.
Federal Bank is one of the first large Indian banks to have an entirely automated and
interconnected branch network. In addition to interconnected branches and ATMs, the Bank has
a wide range of services like Internet Banking, Mobile Banking, Tele Banking, Any Where
Banking, debit cards, online bill payment and call centre facilities to offer round the clock
banking convenience to its customers.

Ageas is an international insurance group with a heritage spanning more than 180 years. Ranked
among the top 20 insurance companies in Europe, Ageas has chosen to concentrate its business
activities in Europe and Asia, which together make up the largest share of the global insurance
market. These are grouped around four segments: Belgium, United Kingdom, Continental
Europe and Asia and served through a combination of wholly owned subsidiaries and
partnerships .
Ageas operates successful partnerships in Belgium, UK, Luxembourg, Italy, Portugal, Turkey,
China, Malaysia, India and Thailand and has subsidiaries in France, Hong Kong and UK. Ageas
is the market leader in Belgium for individual life and employee benefits, as well as a leading
non-life player through AG Insurance. In the UK, Ageas has a strong presence as the fourth
largest player in private car insurance and the over 50’s market. Ageas employs more than
13,000 people and has annual inflows of more than EUR21billion.

Literature Review:
A sound insurance segment ensures better economic development as indicated by a study which
states that 1 per cent increase in insurance penetration leads to 13 per cent reduction in uninsured
losses and 22 per cent reduction in taxpayers' contribution to recovery following a natural
catastrophe.
Keeping pace with international happenings, Indian insurance industry has remained in a good
health and maintained absolute transparency and highest standards of corporate governance.
Assets under management (AUM) of the Indian insurers are slated to touch Rs 20 trillion (US$
376.51 billion) while the general insurance sector is anticipated to grow 18 per cent in 2012-13
as stated by the Chairman of IRDA. He further reported that the insurance sector has grown
substantially over the last few years, with its AUM from Rs 8 trillion (US$ 150.57 billion) in
2008 to Rs 18 trillion (US$ 338.82 billion) in 2011-12.

Key Statistics
 Life insurance companies have registered a growth of 4 per cent in the first three quarters
of financial year 2012-13. The total premium collection from the individual segment by
24 life insurers stood at Rs 40,688 crore (US$ 7.66 billion) in April-December 2012 as
against Rs 39,131 crore (US$ 7.36 billion) in the corresponding period last year.
 Public sector insurer Life Insurance Corporation of India (LIC) recorded 11.3 per cent
growth in the retail segment, with collection of Rs 28,017 crore (US$ 5.27 billion) during
April-December 2012 while private sector insurers' collection from individual segment
stood at Rs 12,671 crore (US$ 2.38 billion).
  IRDA reported that insurance density came out be US$ 49 while insurance penetration
stood at 4.1 per cent in 2011.
 The measure of insurance penetration and density reflects the level of development of
insurance sector in a country.
 While insurance penetration is measured as the percentage of insurance premium to the
gross domestic product (GDP), insurance density is calculated as the ratio of premium to
population (per capita premium).

New Developments/ Product Launches

 Allstate Corp, the second largest insurer in the US has inaugurated its first technology
and operations centre in Bangalore, India. The centre, an integral part of Allstate's global
value chain, is majorly a technology services centre serving in the areas of business
intelligence, analytics, testing and mobility.
 Metlife India is now PNB Metlife India after Punjab National Bank (PNB) picked up 30
per cent stake in the life insurance company. Apart from PNB, MetLife India has two
other banks, Karnataka Bank and Jammu and Kashmir Bank as its distribution partners.
At present, around 60 per cent of the business is coming from bank channels and the
company expects it to increase further over next few years.
 Two of the insurance companies are planning to launch a specialised health cover for
diabetic patients in India. While Apollo Munich has already filed a diabetic cover policy
document with IRDA, Religare Health Insurance will soon submit documents for a
similar cover with the regulator. Diabetes is an epidemic in India (with around 61 million
people having it) and insurance companies look at this as a good business proposition.
Unlike the existing health covers, which do not cover hospitals admissions relating to
complications of diabetes for up to four years, the proposed policies will cover diabetics
from day one.
 With a view to cover more and more Indians under the umbrella of insurance, public
sector general insurers are mulling expanding their operations to other countries in 2013-
14. With a large number of Indians and Indian businesses in South-east Asia, West Asia
and Africa, these regions are emerging as preferred destinations.
 The four general insurers - New India Assurance, United India Insurance, Oriental
Insurance and National Insurance - are considering setting up more international centres.
While Oriental Insurance might hold stake in proposed reinsurance firm in Nepal, New
India is looking to expand in Canada, Qatar and Myanmar. United India Assurance is also
looking at South East Asia and Middle East for expansion. Moreover, LIC, GIC Re, four
PSU general insurers are already holding stakes in Kenyan Insurance joint venture (JV).
Government Initiatives
IRDA has recently formed four working groups to standardise products offered by life insurance
companies, wherein the groups would consider unit-liked investment plans, linked variable
insurance plans, non-linked variable insurance plans and other non-linked plans. It would focus
on bringing uniformity in the designs of the products, determining relevant parameters for each
product and ensuring that these parameters are aligned with IRDA stipulations. They would also
mention the numerical range within which the parameters could be allowed.

Buying Behavior
Consumer behavior is the study of how individuals, groups, and organizations select, buy, use and
dispose of goods, services, ideas, or experiences to satisfy their needs and wants.
It blends elements from psychology, sociology, social anthropology and economics. It attempts to
understand the decision-making processes of buyers, both individually and in groups. It studies
characteristics of individual consumers such as demographics and behavioral variables in an attempt
to understand people's wants. It also tries to assess influences on the consumer from groups such as
family, friends, reference groups, and society in general.
Five Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is
only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions
do not always include all 6 stages, determined by the degree of complexity.

The 5 stages are:

1. Problem Recognition
2. Information Search
3. Evaluation of alternatives
4. Purchase Decision
5. Post purchase Behavior.

Taking into consideration these 5 stages, the questionnaire has been designed to understand the need
for insurances , what perceptions and factors influences buying decisions , what alternatives are
available and how to create awareness for the product. Along with the questionnaire I have also
circulated a pamphlet containing the brief explanation of Incomesurance , as a way of indirect
advertizing while filling up questionnaires
Research Objectives

• Primary Research Objective (PRO):

• To identify the key factors which influence consumers the most when they purchase a
life insurance product.
•
• Secondary Research Objectives (SROs):
• To understand the most common purpose behind taking a life insurance policy.

• To find out the best option of people when it comes to making an investment.
• To know about the consumer perceptions to insurances
• To understand the market of Gujarat majorly from Ahmedabad , evaluating
prospects based on needs, obtaining leads

• To try to create awareness about the insurance products of IDBI Federal life
Insurance

Research Approach

Research Design : Causal Approach

Research Instrument : Questionnaire

Data Collection Method:

Primary Data Source: Questionnaire for survey

 Questionnaire
These questions ( open + close ended) are being used to know what are the different
attributes which consumer looks for while buying Insurance products

Secondary Data source

 Articles
 Internet
 Product Brochures
Measurement Technique:
To record the data the following measurement techniques would be used:
 Single Question Multi Choice
 Likert Scale
Sampling Plan:
The sample for survey would be taken on the following basis.
 Sample Frame
People residing or working in India majority being from Gujarat
 Sample Unit
People in the age group of 21 and above
 Sample Size
Targeting a sample size of 200
 Time Frame
20 days for survey
 Sampling Method
Simple random sampling (SRS)

Data Analysis Technique

The data collected from the research would provide us with the different factors that a
consumer looks for while buying Insurances .Analysis would be carried out the help of software
like MS-Excel, SPSS etc.

References :

1. www.wikipedia.org
2. www.idbifederal.com
3. www.ibef.org
 Questionnaire
Dear Sir/Madam,
I am ANUJ MATHEW pursuing my MBA from IMT-Nagpur . This research, titled “BUYING
BEHAVIOUR OF CONSUMERS WHILE PURCHASING INSURANCE PRODUCTS” is part of my
Summer Internship Program for IDBI Federal Life Insuarance.Your feedback will be strictly confidential.
It will be used only for academic purpose and will be very important and valuable for my project.

1. Name: ___________________________________________________

2. In what age group do you fall under? Tick Mark the right option.
21- 25 Yrs 26-35 Yrs 36-50 Yrs 51-65 Yrs Above 65 Yrs

3. Gender: Male Female

4. City: ________________ State :________________

Telephone No. : ______________ Email Id: ______________________________________

5. Occupation -
Service Business Professional Self employed Student Others

6. What is your annual income?

Up to Rs 1 lac Rs 1lac – 5 lacs Rs 5lacs – 10lacs Above 10 Lacs

7. Which one according to you is the best investment option?

Shares and debentures Bank deposits Mutual funds Insurance products
Post office savings Real estate Gold Others
Others. Please Specify ___________________

8. Do you own an Insurance Policy?

Yes No

9. Why would you take up an insurance policy?

Risk Coverage Investment purpose Pension schemes Tax Benefit
Future security Childs marriage Childs education Savings tool

10. Which insurance companys’ policy do you own?

LIC ICICI Prudential Bajaj Allianz IDBI Federal SBI Life
Others. Please Specify: _________________________________

11. What is your preferred mode of payment?

Yearly Half yearly Quarterly Monthly
12. Rate each Factor given below according to how much it influences you when considering the purchase
of a life insurance product. Tick Mark the right option:
STRONGLY STRONGLY
QUES. STATEMENT AGREE NEUTRAL DISAGREE
AGREE DISAGREE
Investment in insurance products is better than the
1 Bank Deposits 5 4 3 2 1
2 Mutual funds 5 4 3 2 1
3 Post office savings 5 4 3 2 1
4 shares and debentures 5 4 3 2 1
 Features you consider before taking the insurance policy
1 Insurance Coverage 5 4 3 2 1
2 Rate of Returns 5 4 3 2 1
Flexible premium
3 5 4 3 2 1
payment options
4 Flexible withdrawals 5 4 3 2 1
5 Risk Involved 5 4 3 2 1
6 Safety 5 4 3 2 1
7 Brand Image 5 4 3 2 1
8 Tax benefit 5 4 3 2 1
Customization of
9 products, services and 5 4 3 2 1
communication
Approach and
10 conviction of the 5 4 3 2 1
insurance agent
Friends/relative
11 5 4 3 2 1
referrals
Government stake in
12 5 4 3 2 1
the company
Advertising /
13 5 4 3 2 1
Visibility

13. Which Insurance company comes to your mind other than (LIC) when asked about Insurance? Why?
___________________________________________________________________

14. What is the level of Customer service you get from your current insurance company?
Highly Satisfied Satisfied Neutral Dissatisfactory Highly Dissatisfied

15. Are you aware about IDBI Federal or any of the insurance products offered by it?
Yes No
16. How are you aware of IDBI Federal Life Insurance?
Television Print Media Hoardings/Bill Boards Friend/Family referrals Others.
If others please specify __________________

17. Do you know about the Insurance product, “Incomesurance” offered by IDBI Federal Life Insurance?
Can I explain it to you if you have not?
I do I don’t and I am not Interested to know I don’t and I am Interested to Know

18. Have you invested in any of the plans offered by IDBI Federal Life Insurance?
Yes No.
If yes, please mention the plan: ___________________________

19. Any feedback /Enquiry related to IDBI FEDERAL LIFE INSURANCE?

20. Any referrals you would like to provide who may be interested in knowing about Insurance?
_____________________________________________

I appreciate & would like to thank you for taking out your time in providing with the details.