CHAPTER- 3

RESEARCH METHODOLOGY
3.1 Introduction
Research is defined as a systematic, self-critical enquiry aimed at understanding
a thing or phenomenon or solving a problem. Clifford Woody has defined research as
“defining and redefining problems, formulating hypothesis or suggested solutions;
collecting, organising and evaluating data; making deductions and reaching conclusions;
and at last carefully testing the conclusion to determine whether they fit the formulated
hypothesis (Kothari, 2009).
This chapter deals with the methodology adopted for the research study. It
describes the research design, sample size taken for study, procedure of data collection
and sources and statistical techniques for data analysis.
3.2 Design of the Study
The purpose of this research was to study the contribution of bancassurance
towards no. of policies sold, premium generation, and insurance penetration (no. of lives
covered) for the life and non-life insurance companies operating in the Indian insurance
scene. The study also aimed at examining the customer satisfaction in purchasing
insurance policies through banks by evaluating their perception about banks selling
insurance, their inhibitions in not purchasing through banks, factors motivating them to
make further policy purchase from banks and their future buying patterns. Another
parameter of the study was to examine the significance of various motivating or
inhibiting factors among the different cities to evaluate the difference in performance, if
any.
Hence, the study moved from exploratory research to descriptive research to
draw conclusions. In exploratory research, existing literature and other available
information was studied to draw inferences for the questionnaire. This questionnaire
was administered to the respondents through survey method and data collected.

3.3 Objectives of the Study

The study has been conducted with the following objectives:
1. To study the impact on policy mobilization and premium generation through
Bancassurance channel

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2. To study the trends in the Bancassurance channel

3. To analyse and evaluate the various models used by insurance companies in

aligning with banks to get the dual advantage

4. To study consumer perception and acceptability of Bancassurance as a medium

of selling insurance and their resultant levels of satisfaction.

5. To evaluate the challenges and expectations of Indian Bancassurance businesses

3.4 Hypothesis of the Study

The objectives have been achieved with the following hypothesis:
H01: There is no significant difference in respondents’ duration of dealing with
different insurance intermediaries in different cities.
H02: There is no significant difference of factors affecting purchase from present
insurance intermediary in different cities.
H03: There is no significant difference in rating of insurance intermediaries by
respondents in different cities.
H04: There is no significant difference in pattern of purchasing insurance through
banks in different cities.
H05: There is no significant difference in reasons for not purchasing insurance
through banks in different cities.
H06: There is no significant difference in factors affecting purchase of insurance
through banks in different cities.
H07: There is no significant difference in customer satisfaction while purchasing
insurance through banks in different cities.
H08: There is no significant difference in extent of difficulty faced while buying
insurance through banks in different cities.
H09: There is no significant difference in future buying behaviour of respondents in
different cities.
H010: There is no significant difference in factors for choosing an insurance company
in different cities.
3.5 Development of Research Tool - Scale Designing
One of the objectives of this research was to develop a reliable and valid scale to
measure customer satisfaction in purchasing life and non-life insurance policies through

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the bancassurance mode i.e. why did they purchase from the banks, how the policy was
sold to them and their response for various policy related services and their future
buying plans. Inorder to gain deeper insight into the topic, before actually developing
the scales, interviews and discussions were carried out with various experts from
industry (both banks and insurance companies) and academia and informal discussions
with customers approaching the banks.
The questionnaire was designed to fill the gap provided by previous studies.
Also extra caution was taken to develop a complete and consistent instrument for future
use as bancassurance is a relatively developing phenomenon and studies in this field are
limited.
3.5.1 Scales Used For Data Collection
The data has been collected through the scale prepared by the researcher which
has been filled by the respondents in a survey carried out. The following scales have
been used gather information from the customers:

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Table 3.1: Various scales used to study customer satisfaction from bancassurance
Scales Used Score
 Frequency of dealing with a particular intermediary
Not used till date 1
Less than 1 year 2
1-3 years 3
3-5 years 4
More Than 5 years 5
 Likert Scale for reason for purchasing from present intermediary
Strongly Disagree 1
Somewhat Disagree 2
Neutral 3
Somewhat Agree 4
Strongly Agree 5
 Rating of insurance intermediaries
Very Good 5
Good 4
Average 3
Poor 2
Very Poor 1
 Likert scale on reasons for not purchasing insurance through banks
Strongly Disagree 1
Somewhat Disagree 2
Neutral 3
Somewhat Agree 4
Strongly Agree 5
 Likert scale on importance of factors affecting purchase from banks
Not at all important 1
Not so important 2
Neutral 3
Fairly important 4
Extremely important 5

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  Likert scale on satisfaction level in availing insurance services from banks
Highly dissatisfied 1
Dissatisfied 2
Neutral 3
Satisfied 4
Highly satisfied 5
 Likert scale on difficulties faced in availing insurance services from banks
Too easy 5
Easy to some extent 4
Can’t say 3
Somewhat difficult 2
Too difficult 1
 Likert scale on future policy purchase from bank
Definitely will not 1
Probably will not 2
Can’t say 3
Probably will 4
Definitely will 5
 Likert scale on reasons for making future purchase from bank
Strongly Disagree 1
Somewhat Disagree 2
Neutral 3
Somewhat Agree 4
Strongly Agree 5
 Likert scale on importance of factors in choosing an insurance company.
Not at all important 1
Not so important 2
Neutral 3
Fairly important 4
Extremely important 5
 Likert scale on future insurance purchase
Definitely will not 1

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Probably will not 2
Can’t say 3
Probably will 4
Definitely will 5

3.6 Reliability and Validity

For a social science researcher, the estimation of reliability and validity is an
important task. Reliability is the degree to which a test consistently measures whatever
it measures. Four procedures are commonly used for computing the reliability
coefficient of a test. These are:
 Test-retest method
 Alternate or parallel form
 Split-half technique
 Rational equivalence
 Internal consistency

Two dimensions underlie the concept of reliability: one is repeatability and the
other is internal consistency. The rationale for internal consistency is that the individual
items or indicators of the scale should all be measuring the same construct and thus be
highly intercorrelated. In this study, internal consistency was estimated using a
reliability coefficient called Cronbach’s alpha.

Kr
standardized =
(1+(K - 1) r)

The values of Cronbach alpha were estimated for all the factors in the questionnaire
construct. Usually a value of less than 0.6 is considered unsatisfactory for the Cronbach
alpha. Hence, as some of the questions gave a value of 0.4 and 0.54, they were
redesigned by omitting the overlapping factors and changing the language of the
statements to make it easier for the respondents to understand.

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Validity
Very simply, validity is the extent to which a test measures what it is supposed to
measure. The question of validity is raised in the context of three points- form of the
test, the purpose of the test and the population for whom it is intended. In this study,
efforts were made to improve upon the scales by carrying out interviews with the
banking and insurance experts and also the users of bancassurance. The various items of
the scale were redefined and edited. Also, help of experts was taken to probe the
ambiguity of the wordings and incompatibility between an item and the dimension it is
supposed to measure. Keeping in mind the comments of the experts, some items were
deleted and some new parameters were added to the questionnaire.
3.7 Sample Size
Sampling was resorted to at three stages. At first stage, a list of life and non-life
insurance companies using bancassurance as a channel of insurance distribution was
obtained from the IRDA website. From this list, 12 insurance companies- 6 in the life
insurance and 6 in non- life insurance segment were shortlisted with the restriction that
public sector insurance companies i.e. LIC in life insurance and any subsidiary of GIC
in the non-life insurance segment had to be included as they were long time players in
the market. Further, from these 12 companies, 8 companies – 4 in the life insurance and
4 in the non-life insurance segment were finalized keeping in mind the nature of the
bancassurance models used. Hence, the final selected list included:
Table 3.2: List of selected insurance companies

Life Insurance Companies Non-Life Insurance Companies

Life Insurance Corporation of India Oriental Insurance

AVIVA India New India Insurance

ICICI Prudential Bajaj Allianz

SBI Life ICICI Lombard

At the second stage, 4 cities- Ludhiana, Patiala, Amritsar and Chandigarh were
selected based on the bancassurance business generated by them. In the third stage, a
convenient sample of 400 respondents – 50 each of life and non-life insurance in the 4
selected cities and the questionnaire was administered to them. The consumers have

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been stratified on the basis of income, age, policy type and point of purchase etc. to
draw generalizations.
3.8 Data Collection
The study is based on both primary and secondary data. The secondary data
relating to policies sold, premium generated, lives covered etc. was gathered from the
Annual reports of the selected companies and the IRDA for the years 2005-2012.
The primary data was collected by the researcher through survey. To study the
consumer perception and satisfaction regarding Bancassurance as a medium of
insurance distribution, a non – disguised questionnaire has been made comprising all
relevant questions from all aspects of the study to extract the maximum and the best
possible information from all the consumers. The purpose and premises of the
questionnaire was explained to the selected bank and insurance company customers and
they were assured of total confidentiality of the data.
3.9 Statistical Techniques
The data collected was analysed using appropriate statistical techniques.
Alongwith simple techniques like mean, percentage and coefficient of variation, used to
study the premium generation, policies sold and lives covered by the insurance
companies and comparing the contribution of different insurance intermediaries in
business generation for the companies, t-values were computed to chart the significance
of the annual compounded growth rate of the business generated by the different
intermediaries.
Compounded Growth Rate:
The compound growth rates of different performance indicators were worked

out by applying the regression model in its exponential form as under:

Y = abt u

Where, Y = a performance indicator

a= a constant term

t = time variable (No. of years under study)

b= regression coefficient of time

u = a random error term

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Log transformation of the above function is:

In Yt = In a + t (In b) + e

Where, In b = In (1 + r) and

r = [antilog (In b) – 1] x 100

CGR (%) = [antilog (In b) – 1] x 100

The compound growth rates were tested to determine their statistical

significance with the help of t-test.

Advanced statistical techniques like Chi-square, ANOVA with Tukey’s test of

significance were used to analyse the primary data collected.
Chi-square
In order to see the association between two way classification of respondents,
Chi-square test was applied by using the following formula:

2 (O - E)2
= O
Where
2
= Chi-Square Value
O = Observed Frequency
E = Expected Frequency
= Summation
Chi-square was used to evaluate the knowledge of customers about insurance
companies’ selling policies through banks and the extent of policy purchased through
the banking intermediary.
Analysis of Variance
To compare more than two means at a time, Analysis of Variance (ANOVA)
was carried out. This was done to compare a parameter between four cities.
The process of the analysis is given hereunder:
Source of variation d.f. T.S.S. M.S.S. F-ratio
Cities n-1=a S1 S1/a=x x|y
Error b-a=c S2 S2/b=y

Total N-1=b

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where n= No. of cities to be compared
N= Total number of respondents
T.S.S.= Total Sum of Squares
M.S.S. = Mean Sum of Squares (TSS/d.f.)
d.f. = Degree of Freedom
One way Anova was used to test the customers’ duration of dealing with a
particular intermediary; reasons for purchasing policy from the present intermediary;
rating of different insurance intermediaries, reasons for not purchasing from the banks;
factors motivating them to purchase from the banks; satisfaction level of customers in
purchasing different insurance policies through banks and getting different policy
related services; their future policy purchase patterns and factors in selecting a particular
insurance company.
To make inter-city comparison and test the significance of the difference in
response for various factors in the chosen cities, Tukey’s test of significance was used
to compare the inter-city significance levels of - duration of dealing with a particular
intermediary; reasons for purchasing policy from the present intermediary; rating of
different insurance intermediaries, reasons for not purchasing from the banks; factors
motivating them to purchase from the banks; satisfaction level of customers in
purchasing different insurance policies through banks and getting different policy
related services; their future policy purchase patterns and factors in selecting a particular
insurance company.
Tukey’s Test of Significance

A single-step multiple comparison procedure and statistical test generally used in

conjunction with an ANOVA to find which means are significantly different from one
another. It compares all possible pairs of means and helps the researcher to analyse
which groups differ among themselves.
3.10 Limitations of the Study
The study possesses the following limitations:-

 The study has been restricted to 4 cities only. So, the findings of the study may
not be generalized to other parts of the country where banking facilities are not
that developed.

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 The study has been restricted only to 4 companies in the life insurance sector
and 4 in the non-life insurance segment.

 The public sector insurance companies have been working with the individual
agents for long and developed the new intermediaries shortly while the private
insurance companies have developed all the channels afresh. Hence, the
comparison of performance would have been affected.

 For the non-life insurance segment, the various types of insurance policies sold
by them have been clubbed together to restrict the scope of the study.

 The study is based on primary data collected through a well-structured

questionnaire. There may be a possibility that respondents have not truly
reported their behaviour regarding certain aspects or may have misinterpreted
the points mentioned in the questions.

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