CHAPTER:1 - INTRODUCTION

According to Mr J. Hari Narayan, Chairman of insurance watchdog IRDA, Indian insurance

industry in set for some serious changes. Speaking to students of Institute of Insurance and
Risk Management at their graduation ceremony on Tuesday, Mr Narayan said the Indian
insurance industry had matured from its state of childhood to early adulthood. He said that in
countries like UK, the agents have adopted themselves to latest form of marketing and very
soon such changes will also be introduced in India.

With an annual growth rate of 15-20% and the largest number of life insurance policies in
force, the potential of the Indian insurance industry is huge. Total value of the Indian
insurance market (2004- 05) is estimated at Rs. 450 billion (US $10 billion). According to
government sources, the insurance and banking services’ contribution to the country's gross
domestic product (GDP) is 7% out of which the gross premium collection forms a significant
part. The funds available with the state-owned Life Insurance Corporation (LIC) for
investments are 8% of GDP.

During April 2015 to March 2016 period, the life insurance industry recorded a new premium
income of Rs 1.38 trillion (US$ 20.54 billion), indicating a growth rate of 22.5 per cent. The
general insurance industry recorded a 12 per cent growth in Gross Direct Premium
underwritten in April 2016 at Rs 105.25 billion (US$ 1.55 billion).

India’s life insurance sector is the biggest in the world with about 360 million policies which
are expected to increase at a Compound Annual Growth Rate (CAGR) of 12-15 per cent over
the next five years. The insurance industry plans to hike penetration levels to five per cent by
2020.

The country’s insurance market is expected to quadruple in size over the next 10 years from
its current size of US$ 60 billion. During this period, the life insurance market is slated to
cross US$ 160 billion.

The general insurance business in India is currently at Rs 78,000 crore (US$ 11.44 billion)
premium per annum industry and is growing at a healthy rate of 17 per cent.

The Indian insurance market is a huge business opportunity waiting to be harnessed. India
currently accounts for less than 1.5 per cent of the world’s total insurance premiums and

1
about 2 per cent of the world’s life insurance premiums despite being the second most
populous nation. The country is the fifteenth largest insurance market in the world in terms of
premium volume, and has the potential to grow exponentially in the coming years.

The story of insurance is probably as old as the story of mankind.

 The same instinct that prompts modern businessmen today to secure themselves
against loss and disaster existed in primitive men also. They too sought to avert the
evil consequences of fire and flood and loss of life and were willing to make some
sort of sacrifice in order to achieve security. Though the concept of insurance is
largely a development of the recent past, particularly after the industrial era – past few
centuries – yet its beginnings date back almost 6000 years.
 Life Insurance in its modern form came to India from England in the year 1818.
Oriental Life Insurance Company started by Europeans in Calcutta was the first life
insurance company on Indian Soil. All the insurance companies established during
that period were brought up with the purpose of looking after the needs of European
community and Indian natives were not being insured by these companies. However,
later with the efforts of eminent people like Babu Muttylal Seal, the foreign life
insurance companies started insuring Indian lives. But Indian lives were being treated
as sub-standard lives and heavy extra premiums were being charged on them. Bombay
Mutual Life Assurance Society heralded the birth of first Indian life insurance
company in the year 1870, and covered Indian lives at normal rates. Starting as Indian
Senterprise with highly patriotic motives, insurance companies came into existence to
carry the message of insurance and social security through insurance to various
sectors of society. Bharat Insurance Company (1896) was also one of such companies
inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more
insurance companies. The United India in Madras, National Indian and National
Insurance in Calcutta and the Co-operative Assurance at Lahore were established in
1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the
rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The
Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were
some of the companies established during the same period. Prior to 1912 India had no
legislation to regulate insurance business. In the year 1912, the Life Insurance
Companies Act, and the Provident Fund Act were passed. The Life Insurance
Companies Act 1912 made it necessary that the premium rate tables and periodical

2
 valuations of companies should be certified by an actuary. But the Act discriminated
between foreign and Indian companies on many accounts, putting the Indian
companies at a disadvantage.
 The first two decades of the twentieth century saw lot of growth in insurance
business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose to
176 companies with total business-in-force as Rs.298 crore in 1938. During the
mushrooming of insurance companies many financially unsound concerns were also
floated which failed miserably. The Insurance Act 1938 was the first legislation
governing not only life insurance but also non-life insurance to provide strict state
control over insurance business. The demand for nationalization of life insurance
industry was made repeatedly in the past but it gathered momentum in 1944 when a
bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly.
However, it was much later on the 19th of January 1956 that life insurance in India
was nationalized. About 154 Indian insurance companies, 16 non-Indian companies
and 75 provident were operating in India at the time of nationalization.
Nationalization was accomplished in two stages; initially the management of the
companies was taken over by means of an Ordinance, and later, the ownership too by
means of a comprehensive bill. The Parliament of India passed the Life Insurance
Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India
was created on 1st September, 1956, with the objective of spreading life insurance
much more widely and in particular to the rural areas with a view to reach all
insurable persons in the country, providing them adequate financial cover at a
reasonable cost.

A HISTORICAL REVIEW OF INDIAN INSURANCE INDUSTRY

 In 1818, a British company called Oriental Life Insurance setup the first insurance
firm in India followed by the Bombay Assurance Company in 1823 and the Madras
Equitable Life Insurance Society in 1829. Though all this companies were operating
in India but insuring the life of European living in India only. Later some of the
companies started providing insurance to Indians with approximately 20% higher
premium than Europeans as Indians were treated as “substandard”. Substandard in
insurance parlance refers to lives with physical disability. Bombay Mutual Life
Assurance Society was the first company established in 1871 which started selling

3
 policies to Indians with “fair value”.
 Insurance business was subjected to Indian company act1866, without any specific
regulation. In 1905, the slogan “Be Indian-Buy Indian” declared by Swadwshi
Movement gave birth to dozens of indigenous life insurance and provident fund
companies.
 In 1937, the Government of India setup a consultative committee and finally first
comprehensive ‘insurance act’ was passed in 1938.

 In Oct.2000, IRDA (Insurance Regulatory and Development Authority) issued license

paper to three companies, which are HDFC Life Standard, Sundaram Royal Alliance
Insurance Company and Reliance General Insurance. At the same time “Principal
approval” was given to Max New York Life, ICICI Prudential Life Insurance
Company and IFFCO Tokio General Insurance Company. Today total 22 life
insurance companies including one public sector are successfully operating in India.
The growth of the sector can easily be judged through figure-1. According to a study
by McKinsey total life insurance market premiums in India is likely to more than
double from the current US$ 40 billion to US$ 80-US$100 billion by 2012.

 In India, insurance has a deep-rooted history. Insurance in various forms has been
mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra)
and Kautilya (Arthashastra). The fundamental basis of the historical reference to
insurance in these ancient Indian texts is the same i.e. pooling of resources that could
be re-distributed in times of calamities such as fire, floods, epidemics and famine. The
early references to Insurance in these texts have reference to marine trade loans and
carriers' contracts.

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 Insurance in its current form has its history dating back until 1818, when Oriental Life
Insurance Company was started by Anita Bhavsar in Kolkata to cater to the needs of
European community. The pre-independence era in India saw discrimination between
the lives of foreigners (English) and Indians with higher premiums being charged for
the latter. In 1870, Bombay Mutual Life Assurance Society became the first Indian
insurer.

 At the dawn of the twentieth century, many insurance companies were founded. 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. However, the disparity still existed as discrimination
between Indian and foreign companies. The oldest existing insurance company in
India is the National Insurance Company , which was founded in 1906, and is still 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 1 January 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.

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INDUSTRY STRUCTURE

 By 2012 Indian Insurance is a US$72 billion industry. However, only two million
people (0.2% of the total population of 1 billion) are covered under Mediclaim. With
more and more private companies in the sector, this situation is expected to change.
ECGC, ESIC and AIC provide insurance services for niche markets. So, their scope is
limited by legislation but enjoy some special powers. The majority of Western
Countries have state run medical systems so have less need for medical insurance. In
the UK, for example, the corporate cover of employees, when added to the individual
purchase of coverage gives approximately 11–12% of the population on cover - due
largely to usage of the state financed National Health Service (NHS), whereas in
developed nations with a more limited state system, like USA, about 75% of the total
population are covered under some insurance scheme.

INSURANCE REPOSITORY

 On 16 September 2013, IRDA launched "insurance repository" services in India. It is

a unique concept and first to be introduced in India. This system enables policy
holders to buy and keep insurance policies in dematerialised or electronic form.
Policy holders can hold all their insurance policies in an electronic format in a single
account called electronic insurance account (eIA). Insurance Regulatory and
Development Authority of India has issued licences to five entities to act as Insurance
Repository: CDSL Insurance Repository Limited (CDSL IR), SHCIL Projects Limited
Karvy Insurance repository Limited NSDL Database Management Limited CAMS
Repository Services Limited.

LEGAL STRUCTURE

 The insurance sector went through a full circle of phases from being unregulated to
completely regulated and then currently being partly deregulated. It is governed by a
number of 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 nationalised on 19 January 1956, through the Life Insurance Corporation

6
 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 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. 4 billion) is required by legislation to set up an insurance
business.

Authorities

 The primary regulator for insurance in India is the Insurance Regulatory and
Development Authority of India (IRDAI) which was established in 1999 under the
government legislation called the Insurance Regulatory and Development Authority
Act, 1999.

 The industry recognises examinations conducted by the IAI (for 280 actuaries), III
(for 2.2 million retail agents, 361 brokers, 175 bancassurers, 125 corporate agents and
29 third-party administrators) and IIISLA (for 8,200 surveyors and loss assessors).
There are 9 licensed web aggregators. TAC is the sole data repository for the non-life
industry. IBAI gives voice to brokers while GI Council and LI Council are platforms
for insurers. AIGIEA, AIIEA, AIIEF, AILICEF, AILIEA, FLICOA, GIEAIA, GIEU
and NFIFWI cater to the employees of the insurers. In addition, there are a dozen
Ombudsman offices to address client grievances.

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GROWTH OF INSURANCE INDUSTRY IN THE RECENT
YEARS
 The insurance industry recorded a booming growth of 35% in premium income during
2005-06 with the 13 private sector players walking away with an impressive 129%
while the Life Insurance Corporation of India recorded a 21% growth. Thus the
market share of state behemoth’s dropped to 78% in 2004-05 from 87% a year ago.
 According to ASSOCHAM Eco Pulse (AEP) Study, the industry premium increased
to Rs253.42bn in 2005-06 from Rs187.1bn in 2004-05. The LIC total premium for the
year 2005-06 amounted to Rs197.85bn as against the Rs162.84bn during previous
year.
 The figures for the first two months of the fiscal 2007-08 also speak of the growing
share of the private insurers. The share of LIC for this period has further come down
to 75%, while the private players have grabbed over 24% share.
 “With the huge potential the market has, the Government should, more seriously look
into increasing the FDI cap in the sector” said Mahendra K. Sanghi, ASSOCHAM
President.
 During April-June 2005, the largest private company ICICI Prudential has increased
its share from 6.25% in 2004-05 to 7.68% in current fiscal.
 The opening up of the sector has given some of the most innovative products like the
customized insurance policies and now the unit linked policies that have gained much
of customer attention. The sector has huge potential and certain other new and
innovative areas can also be looked into for enhancing market share and premium
income, said Sanghi.
 HDFC is next in the row with 2.91% market share which has increased from 1.92%
last fiscal followed by TATA AIG which now shares 2% of the market from 1.18%
last fiscal. Birla Sun life’s share has dropped from 2.45% during FY’05 to 1.76% in
first two months of FY’06. SBI life comes next with 1.72% share and has infact
dropped a few percent points from last year.Max New York life and Aviva Life
Insurance have captured more than 1% share each from less than 1% share during
FY’05. Others like ING, AMP Sanmar, Met Life and Sahara India have less than 1%
share.

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  The details of the market share of life insurance companies are attached. The market
share of the private players has doubled every year from 5.6% in 2002-03 to 12% in
2003-04 and close to 22% in 2004-05.
 The state run insurance company has the biggest advantage of its huge network,
which the company can use to penetrate into rural market that is still lying untapped.
Another option with the life insurance companies to capture more and more market
share could be product innovation and constantly developing an insurance product in
order to meet the ever-changing requirements of the customer. Quality customer
service and education can be another area where a company can differentiate itself
from other companies.

COMPETITORS INFORMATION IN INSURANCE INDUSTRY:

a) LIC -Fully owned by Government.
b) Postal Life Insurance.
Private Players -
a) Baja Allianz Life Insurance Co. Ltd.
b) Birla Sun Life Insurance Co. Ltd.
c) HDFC Standard Life Insurance Co. Ltd.
d) ICICI Prudential Life Insurance Co. Ltd.
e) ING Vysya Life Insurance Co. Ltd.
f) Max New York Life Insurance Co. Ltd.
g) MetLife India Insurance Co. Pvt. Ltd.
h) Kotak Mahindra Old Mutual Life Insurance Co. Ltd.
i) SBI Life Insurance Co. Ltd.
j) TATA AIG Life Insurance Co. Ltd
k) AMP Sanmar Assurance Co. Ltd.
l) Aviva Life Insurance Co. Ltd.
m) Sahara India Life Insurance Co. Ltd.
n) Shriram Sunlam.

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Other Likely Players – PNB Life Insurance, Reliance Life Insurance, Axa Bharti
Enterprises.
INSURER INDIAN PROMOTER FOREIGN PROMOTER
Allianz Bajaj life insurance Bajaj Auto Allianz AG
Assurance Sanmar Group AMP, Australia
Birla Sun Life Insurance Aditya Birla Group Sun Life Financial, Canada
Aviva Life Insurance Dabur India Aviva Plc
HDFC Standard Life HDFC Standard Life
insurance
ICICI Prudential Life ICICI Prudential Plc
Insurance
ING Vysya Life Insurance Vysya Bank ING Group
Life Insurance Corporation Govt of India None
Max New York Max India New York Life
MetLife India Insurance J&K Bank, Pallonji & Co Metropolitan Life Insurance
OM Kotak Mahindra Life Kotak mahindra finance Old Mutual Plc
SBI life insurance State Bank of India Cardiff (arm of BNP Paribas)

Tata-AIG life insurance Tata Group American International

Group

LIFE INSURANCE
Life insurance is a contract that pledges payment of an amount to the
person assured (or his nominee) on the happening of the event insured
against.
The contract is valid for payment of the insured amount during:
 The date of maturity, or Specified dates at periodic intervals, or Unfortunate death, if
it occurs earlier.
 Among other things, the contract also provides for the payment of premium
periodically to the Corporation by the policyholder. Life insurance is universally
acknowledged to be an institution, which eliminates 'risk', substituting certainty for
uncertainty and comes to the timely aid of the family in the unfortunate event of death
of the breadwinner.

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  By and large, life insurance is civilization’s partial solution to the problems caused by
death. Life insurance, in short, is concerned with two hazards that stand across the
life-path of every person:
 That of dying prematurely leaving a dependent family to fend for itself. That of living
till old age without visible means of support.

LIFE INSURANCE V/S OTHER SAVING PLANS

Contract of Insurance:
i) A contract of insurance is a contract of utmost good faith technically known as
UBERRIMA FIDES. The doctrine of disclosing all material facts is embodied in
this important principle, which applies to all forms of insurance.
ii) At the time of taking a policy, policyholder should ensure that all questions in the
proposal form are correctly answered. Any misrepresentation, non-disclosure or
fraud in any document leading to the acceptance of the risk would render the
insurance contract null and void.
Aid to Thrift:
I. Life insurance encourages 'thrift'. It allows long-term savings since payments can be
made effortlessly because of the 'easy installment' facility built into the scheme.
(Premium payment for insurance is either monthly, quarterly, half yearly or yearly).
II. For example: The Salary Saving Scheme popularly known as SSS, provides a
convenient method of paying premium each month by deduction from one's salary.
III. In this case the employer directly pays the deducted premium to LIC. The Salary
Saving Scheme is ideal for any institution or establishment subject to specified terms
and conditions.

Tax Relief:
i) Life Insurance is the best way to enjoy tax deductions on income tax and wealth
tax. This is available for amounts paid by way of premium for life insurance
subject to income tax rates in force.

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 ii) Assesses can also avail of provisions in the law for tax relief. In such cases the
assured in effect pays a lower premium for insurance than otherwise.

Money When You Need It:

i) A policy that has a suitable insurance plan or a combination of different plans can
be effectively used to meet certain monetary needs that may arise from time-to-
time.
ii) Children's education, start-in-life or marriage provision or even periodical needs
for cash over a stretch of time can be less stressful with the help of these policies.

iii) Alternatively, policy money can be made available at the time of one's retirement
from service and used for any specific purpose, such as, purchase of a house or for
other investments. Also, loans are granted to policyholders for house building or
for purchase of flats (subject to certain conditions).

Who Can Buy A Policy?

i) Any person who has attained majority and is eligible to enter into a valid contract
can insure himself/herself and those in whom he/she has insurable interest.
ii) Policies can also be taken, subject to certain conditions, on the life of one's spouse
or children. While underwriting proposals, certain factors such as the
policyholder’s state of health, the proponent's income and other relevant factors
are considered by the Corporation.

PRINCIPLES OF LIFE INSURANCE

BASIC PRINCIPLES

 Principle of Co-Operation: The insurance company collects premium from insured

persons and puts the premium in pool. The insured are cooperating by paying
premium in advance to strengthen the pool.
 Principle of probability: The occurrence of risk in each type of insurance can be
estimated with the help of theory of probability, which can be use as a basis for fixing
premium.

LEGAL PRINCIPLES

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  Principle of utmost good faith : Contracts of insurance are based on mutual trust and
faith.
 Principle of Low Penetration : Per Capita insurance premium in India, in 2000 was
$8 only against $4,800 in Japan. The life insurance premium was only 1.4% 0f GDP.
The penetration of non-life business is still lower at 0.56 percent of GDP. LIC and
GIC have able to tap only 10% of the market 90% is still untapped.
 Principle of Indemnity : (Applicable in non-life insurance only): It is a promise to
compensate the loss. However, insured is not entitled to make a profit on his loss.

CHANGING TRENDS IN LIFE INSURANCE POLICY:

Along with the other objectives of insurance like financial security, tax benefits etc. one of
the major objectives is saving and investment. Traditional life insurance policies like
endowment were becoming unattractive and not meeting the aspirations of the policyholders
as the policyholder found that the sum assured guaranteed on maturity had really depreciated
in real value because of the depreciation in the value of money. The investor was no longer
content with the so called security of capital provided under a policy of life insurance and
started showing a preference for higher rate of return on his investments as also for capital
appreciation. It was, therefore found necessary for the insurance companies to think of a
method whereby the expectation of the policyholders could be satisfied. The objective of
providing a hedge against the inflation through a contract of insurance pushed insurer to link
the insurance policy with market and thus the industry observed the beginning of Unit linked
insurance policy (ULIP).

HOW INSURANCE WORKS

Suppose there are 1000 person all aged 35 years and healthy lives. They are insured for one
year against the risk of death. Each person is insured for Rs. 50,000. if the past experience
indicates the 4 out of 1000 people die during the year, expected amount claimed to be paid to

13
the family of 4 persons would come to Rs. 2,00,000. the contribution to be paid by the each
of the 1000 will come to Rs.200 per year. Thus, all the 1000 persons share loss caused to the
4 unfortunate families. 996 persons who survived till 1 year have not lost any thing as they
have secured peace of mind and a feeling of security for their family. While insurance cannot
prevent accident or premature death, it can help, protect the family of the deceased against
the loss of income caused by the of the main breadwinner. In return for specified payments,
insurance will provide protection against the insurance of an uncertain event such as
premature death.
The business of insurance company called insurer is to bring together persons who are
exposed to similar risk, collect contribution (premium) from them on sum equitable basis and
pay the losses (claim) to the unfortunate few who suffer.

NEED FOR THE INSURANCE:

Unlike other avenues of savings where the amount saved with interest is payable only on
maturity, insurance plans provide for payment of the total sum assured along with a bonus, if
any, on any eventuality even before the maturity of the policy. And another advantage of
insurance is that an insurer can avail loans against the security of the policy from the
insurance company. Even banks and other financial institutions advances loans with
insurance policies as a collateral security.To provide for one’s family and perhaps; others in
the event of death, especially premature death. Originally, policies were to provide for short
period of time, covering temporary risky situations, such as sea voyages. As lie insurance
became more established, it was realized what a useful tool it was for a number of situation,
including:
 Temporary needs/threats:-
The original purpose of life insurance remains an important element, namely providing for
replacement of income on death etc.
 Regular savings:-
Providing for one’s family and oneself, as a medium o long term exercise (through a series
of regular payment of premiums). This has become more relevant in recent times as people
seek financial independence from their family.
 Investment:-

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It is the insurance that builds up the savings of the society and thus safeguard the economy
from the ravages of inflation.Unlike regular saving products, investment Products are
traditionally lump sum investments, where the individual makes one time payment.
 Retirement:-
Provisions for one’s own later years become increasingly necessary, especially in a changing
cultural and social environment. One can buy a suitable insurance policy, which will provide
periodical payments in one’s old age.

WHY SHOULD YOU TAKE INSURANCE

Insurance is desired to safeguard oneself and ones family against possible losses on account
of risk and perils. It provides financial compensation for the losses suffered due to the
happening of unforeseen events. By taking life insurance a person can have peace of mind
and need not worry about the financial consequences in case of any untimely death.
Along with the growth of overall population in the country, crossing the benchmark of
hundred crore, there gas been a significant awareness for the need for insurance in the other
as well as rural segments and even among the lower middle class and illiterate class of the
population. We in India have around 30 crore middle class educated and enlightened people
who have not realized that insurance is as necessary as the other basic necessities of life such
as food, shelter, clothing.

INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N.
Malhotra, was formed to evaluate the Indian insurance industry and recommend its future
direction.

The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector. The reforms were aimed at “creating a more efficient and
competitive financial system suitable for the requirements of the economy keeping in mind
the structural changes currently underway and recognizing that insurance is an important part
of the overall financial system where it was necessary to address the need for similar
reforms…”.

1997:- Insurance regulator IRDA set up.

2000:- IRDA starts giving licenses to private insurers: Kotak Life Insurance ICICI
prudential and HDFC Standard Life insurance first private insurers to sell a policy.

15
2001:- Royal Sundaram Alliance first non life insurer to sell a policy 2002 Banks allowed
selling insurance plans.

In 1994, the committee submitted the report and some of the key
recommendations included:-

1. STRUCTURE:-
 Government stake in the insurance companies to be brought down to
50%.
 Government should take over the holdings of GIC and its subsidiaries so
that these subsidiaries so that these subsidiaries can act as independent
corporations.
 All the insurance companies should be given greater freedom to operate.

2. COMPETITION:-
 Private companies with a minimum paid up capital of Rs.1 billion should
be allowed to enter the industry.
 No company should deal in both life and general insurance through a
single entity.
 Foreign companies may be allowed to enter the industry in
collaboration with domestic companies.
 Postal life insurance should be allowed to operate in the rural market.
 Only one state level life insurance company should be allowed to
operate in each state.

3. REGULATORY BODY:-
 The insurance act should be changed.
 An insurance regulatory body should be set up.
 Controller of insurance should be made independent.

4. INVESTMENTS:-
 Mandatory investments of LIC life fund in government securities
to be reduced from 75% to 50%.
 GIC and its subsidiaries are not to hold more than 5% in any
company.

5. CUSTOMER SERVICE:-
 LIC should pay interest on delays in payments beyond 30 days
 Insurance companies must be encouraged to set up unit linked
pension plans.
 Computerization of operations and updating of technology to be
carried out in the insurance industry. The committee emphasized
that in order to improve the customer services and increase the

16
 coverage of the insurance, industry should be opened up to
competition.

But at the same time, the committee felt the need to exercise caution as any failure on the
part of new players could ruin the public confidence in the industry. Hence, it was decided to
allow competition in a limited way by stipulating the minimum capital requirement of Rs.
100 crores. The committee felt the need to provide greater autonomy to insurance companies
in order to improve their performance and enable them to act as independent companies with
economic motives. For this purpose, it had proposed setting up independent regulatory body.

PLAYERS OF INDIAN INSURANCE INDUSTRY

Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:
Life Insurers:
 Life Insurance Corporation of India (LIC)
 HDFC Standard Life Insurance Company Ltd.
 Max New York Life Insurance Co. Ltd.
 ICICI Prudential Life Insurance Company Ltd.
 Kotak Mahindra Old Mutual Life Insurance Limited
 Birla Sun Life Insurance Company Ltd.
 Tata AIG Life Insurance Company Ltd.
 SBI Life Insurance Company Limited
 ING Vysya Life Insurance Company Private Limited
 Bajaj Allianz Life Insurance Company Limited
 Metlife India Insurance Company Pvt. Ltd.

General Insurers:
 General Insurance Corporation of India (GIC) (with effect from Dec'2000, a National
Reinsurer). GIC had four subsidary companies, namely (with effect from Dec'2000,
these subsidaries have been de-linked from the parent company and made as
independent insurance companies.
 The Oriental Insurance Company Limited

17
  The New India Assurance Company Limited,
 National Insurance Company Limited
 United India Insurance Company Limited.

INVESTMENTS
The following are some of the major investments and developments in the Indian insurance
sector.
 Max Life Insurance Co Ltd and HDFC Life Insurance Co Ltd have signed a merger
agreement, which is expected to create India's largest private sector life insurance
company once the transaction is completed.
 Lloyd’s, a UK-based reinsurer, plans to make its entry in Indian markets by early
2017, after receiving the approval from Insurance Regulatory and Development
Authority (IRDA) to operate in India through its market model wherein a set of
members collectively come together to underwrite and provide reinsurance.
 The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue
redesigned initial public offering (IPO) guidelines for insurance companies in India,
which are to looking to divest equity through the IPO route.
 Aviva Plc, the UK-based Insurance company, has acquired an additional 23 per cent
stake in Aviva Life Insurance Company India from the joint venture (JV) partner
Dabur Invest Corporation for Rs 940 crore (US$ 141.3 million), thereby increasing
their stake to 49 per cent in the company.
 The Insurance sector in India is expected to attract over Rs 12,000 crore (US$ 1.76
billion) in 2016# as many foreign companies are expected to raise their stake in
private sector insurance joint ventures.
 QuEST Global, a pure-play engineering and Research and Development (R&D)
services provider, has raised investment of around Rs 2,396 crore (US$ 351.54
million) from leading global investors Bain Capital, GIC and Advent International for
a minority stake in the company.
 Insurance firm AIA Group Ltd has decided to increase its stake in Tata AIA Life
Insurance Co Ltd, a joint venture owned by Tata Sons Ltd and AIA Group from 26 per
cent to 49 per cent.

18
  Canada-based Sun Life Financial Inc plans to increase its stake from 26 per cent to 49
per cent in Birla Sun Life Insurance Co Ltd, a joint venture with Aditya Birla Nuvo
Ltd, through buying of shares worth Rs 1,664 crore (US$ 244.14 million).
 Nippon Life Insurance, Japan’s second largest life insurance company, has signed
definitive agreements to invest Rs 2,265 crore (US$ 332.32 million) in order to
increase its stake in Reliance Life Insurance from 26 per cent to 49 per cent.
 Bennett Coleman and Co. Ltd (BCCL), the media conglomerate with multiple
publications in several languages across India, is set to buy Religare Enterprises Ltd’s
entire 44 per cent stake in life insurance joint venture Aegon Religare Life Insurance
Co. Ltd. The foreign partner Aegon is set to increase its stake in the joint venture from
26 per cent to 49 per cent, following government’s reform measure allowing the
increase in stake holding by foreign companies in the insurance sector.
 GIC Re and 11 other non-life insurers have jointly formed the India Nuclear Insurance
Pool with a capacity of Rs 1,500 crore (US$ 220.08 million) and will provide the risk
transfer mechanism to the operators and suppliers under the CLND Act.
 State Bank of India has announced that BNP Paribas Cardif is keen to increase its
stake in SBI Life Insurance from 26 per cent to 36 per cent. Once the foreign joint
venture partner increases its stake to 36 per cent, SBI’s stake in SBI Life will get
diluted to 64 per cent.

GOVERNMENT INITIATIVES
The Government of India has taken a number of initiatives to boost the insurance industry.
Some of them are as follows:
 The Union Budget of 2016-17 has made the following provisions for the Insurance
Sector:
 Foreign investment will be allowed through automatic route for up to 49 per cent
subject to the guidelines on Indian management and control, to be verified by the
regulators.
 Service tax on single premium annuity policies has been reduced from 3.5 per cent to
1.4 per cent of the premium paid in certain cases.
 Government insurance companies to be listed on the exchanges
 Service tax on service of life insurance business provided by way of annuity under the
National Pension System regulated by Pension Fund Regulatory and Development
Authority (PFRDA) being exempted, with effect from April 01, 2016.

19
  The Insurance Regulatory and Development Authority (IRDA) of India has formed
two committees to explore and suggest ways to promote e-commerce in the sector in
order to increase insurance penetration and bring financial inclusion.
 IRDA has formulated a draft regulation, IRDAI (Obligations of Insures to Rural and
Social Sectors) Regulations, 2015, in pursuance of the amendments brought about
under section 32 B of the Insurance Laws (Amendment) Act, 2015. These regulations
impose obligations on insurers towards providing insurance cover to the rural and
economically weaker sections of the population.
 The Government of India has launched two insurance schemes as announced in Union
Budget 2015-16. The first is Pradhan Mantri Suraksha Bima Yojana (PMSBY), which
is a Personal Accident Insurance Scheme. The second is Pradhan Mantri Jeevan Jyoti
Bima Yojana (PMJJBY), which is the government’s Life Insurance Scheme. Both the
schemes offer basic insurance at minimal rates and can be easily availed of through
various government agencies and private sector outlets.
 The Uttar Pradesh government has launched a first of its kind banking and insurance
services helpline for farmers where individuals can lodge their complaints on a toll
free number.
 The select committee of the Rajya Sabha gave its approval to increase stake of foreign
investors to 49 per cent equity investment in insurance companies.
 Government of India has launched an insurance pool to the tune of Rs 1,500 crore
(US$ 220.08 million) which is mandatory under the Civil Liability for Nuclear
Damage Act (CLND) in a bid to offset financial burden of foreign nuclear suppliers.
 Foreign Investment Promotion Board (FIPB) has cleared 15 Foreign Direct
Investment (FDI) proposals including large investments in the insurance sector by
Nippon Life Insurance, AIA International, Sun Life and Aviva Life leading to a
cumulative investment of Rs 7,262 crore (US$ 1.09 billion).
 The Insurance Regulatory and Development Authority of India (IRDAI) has given
initial approval to open branches in India to Switzerland-based Swiss Re, French-
based Scor SE, and two Germany-based reinsurers namely, Hannover Re and Munich
Re.

REGULATORY BODY OF INSURANCE

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA)
The Insurance Regulatory and Development Authority (IRDA) was constituted as an

20
autonomous body to regulate and develop the insurance industry. The IRDA was incorporated
as a statutory body in April, 2000. The key objectives of the IRDA include promotion of
competition so as to enhance customer satisfaction through increased consumer choice and
lower premiums, while ensuring the financial security of the insurance market. The IRDA
opened up the market in August 2000 with the invitation for application for registrations.
Foreign companies were allowed ownership of up to 26%. The Authority has the power to
frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards
framed various regulations ranging from registration of companies for carrying on insurance
business to protection of policyholders’ interests.In December, 2000, the subsidiaries of the
General Insurance Corporation of India were restructured as independent companies and at
the same time GIC was converted into a national re-insurer. Parliament passed a bill de-
linking the four subsidiaries from GIC in July,2002. Today there are 14 general insurance
companies including the ECGC and Agriculture Insurance Corporation of India and 14 life
insurance companies operating in the country. The insurance sector is a colossal one and is
growing at a speedy rate of 15-20%.Together with banking services, insurance services add
about 7% to the country’s GDP.A well-developed and evolved insurance sector is a boon for
economic development as it provides long- term funds for infrastructure development at the
same time strengthening the risk taking ability of the country.

CHAPTER:2 - RESEARCH METHODOLOGY

A systematic process and methodology is needed to conduct a research in a successful

manner. This section highlights the methodology and process used to conduct the present
research. This section highlights the objectives and procedure of the study. Further, this
section discusses the research methodology adopted for attaining the objectives of the study.
Properly conducted research reduces the uncertainty level for the top management in making
critical decisions. Hence it is extremely important to describe the research methodology here.

JUSTIFICATION OF THE PRESENT STUDY

The present study “Challenges and Opportunities in Life Insurance Sector of India
(A comparative study of public and private sector)”, includes impact of privatisation on
public sector. Many attempts have been made to explore this area, but no systematic research
has been specifically conducted on “Challenges and Opportunities in Life Insurance Sector of
India (A comparative study of public and private sector)” due to non availability of sufficient

21
data, this field has remain untouched by the researchers.Hence, there is need and justification
for comprehensive study to evaluate it. The present study aims to bridge such a gap and hence
the present study has been taken up.

OBJECTIVES OF LIFE INSURANCE

The objectives of life insurance are as follows:-

 Spread Life Insurance widely and particular to the rural areas and to the socially and
backward classes with a view to reaching all insurable persons in the county and
providing them adequate financial cover against death at a reasonable cost.
 Maximize mobilization of people’s savings by making insurance-linked savings
adequately attractive.
 Bear in mind, in the investment of funds, the primary obligation to its poliy holders,
whose money it holds in trust, without losing sight of the interest of the community as
a whole, the funds to be developed to the best advantage of the investors as well as a
whole, keeping in view national priorities and obligations of attractive return.
 Conduct business with utmost economy and with the full realization that money
belong to the policyholders.
 Act as trustees of the insured public in their individual and collective capacities.
 Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.
 Involve all people working in the corporation to the best of their capability in
furthering their interests of the insured public by providing efficient service with
courtesy.
 Promote amongst all agents and employees of the corporation a sense of participation,
pride and job satisfaction through discharge of their duties with dedication towards to
achievement of corporate objective.
 Proper understanding and analysis of life insurance industry.
 To know about brand awareness of Kotak Life Insurance and customer’s preference
about Kotak Life Insurance.
 Conduct market survey on a sample selected from the entire population and derived
opinion on that research.

22
  According the market survey come know about how much potential of insurance
market in our city.
 And base on analysis of the result thus obtained make a report on that research.
 Training aims at recruiting maximum number of Life Advisors and to Sell the
maximum policies for the company and bring the business for the company whichever
is going at the particular point of time.
 Along with it I will be gaining the thorough knowledge of insurance sector. This will
give me in more confidence in marketing products given to me.

The overall objective is to evaluate the “Challenges and Opportunities in Life Insurance
Sector of India (A comparative study of public and private sector)”. To achieve overall
objective various sub-objectives have been established, these are:
 To compare the business earned by the LIC of India and the private life insurance
companies.
 To compare & study the trend after introduction of private life Insurance companies
on LIC of India.
 To compare the business earned amongst the private insurers.
 To investigate the consumer behavior towards life insurance in the state of Haryana
 To investigate and compare the satisfaction of intermediaries of public and private
insurance sector in the state of Haryana
 To determine and investigate which of private insurance companies has gained more
popularity among the rural and urban respondent in the state of Haryana
 To offer suggestions and recommendations for improvement in private and public life
insurance sector. In modern times, management research has reached a stage of
development where the traditional methods and techniques require synthesis and
extension. Now, research has become a more complex, cost incurring and time
consuming activity. Therefore, a systematic process and methodology was needed to
conduct the research in a successful manner. Research methodology is the systematic
method/process dealing with enunciation of identifying a problem, collection of facts
or data, analyzing these data and reaching a certain conclusion either in the form of
solutions towards the problem concerned or certain generalizations for some
theoretical formulation

23
ADVANTAGES OF LIFE INSURANCE
 Life insurance is brought not because someone is going to die, but because someone
is going to live.
 Life insurance means peace of mind.
 Life insurance promises payment of the full sum assured from the moment the first
premium is paid.
 Life insurance encourages regular savings and guards against extravagances.
 In most cases life insurance possesses a cash value after the first three years.
 Life insurance removes the worry of looking after your savings. Experts safely and
profitably invest your money on your behalf by experts.
 Life insurance guarantees payment in cash and is backed by the Government of India.
 Life insurance is a tax saving product.
 Life insurance is free from loss, from theft, fire, misplacement etc.
 A life insurance contract is one sided, i.e., always in favor of the insured and his
family. One can withdraw from the contract anytime, but the company’s cannot.
 Life insurance replaces uncertainty with certainty. It provide a complete, balanced and
perfect hedge against economic threats, which confront all person, the danger of
living too long or the danger of dying soon.

(HASOUNEH, 2003)
It also comprises of a number of alternative approaches and interrelated and frequently
overlapping procedures and practices. Since there were many aspect of research
methodology, the line of action had to be chosen from a variety of alternatives. The decision
of a suitable method can be arrived at through the assessment of objectives and comparison
of various alternatives. Research methodology used in the present study is as under:

SAMPLE DESIGN
In most if the cases of research studies, it becomes almost impossible to examine the entire
universe; the only alternative thus, was to resort to sampling. The present study is also of the
same nature. According to Manheim (1977), “a sample is a part of the population which is

24
studies in order to make inferences about the whole population”. Thus, a good sample would
be a miniature version of the population, which would involve the following:
 Sample Unit (Unit of Analysis)
 Sample Techniques and
 Sample Size

SAMPLE UNIT: The sample unit is the individual, group, or other entity that is selected
for the survey. This is also known as the unit of analysis when the survey data are examined
statistically (Fink, 1995). Since the major objectives of the present study was to make
comparative study of private and public sector life insurance companies in India, to compare
the business earned by the LIC of India and the private life insurance companies, eight life
insurance companies of India (Life Insurance Corporation of India, ICICI Prudential Life
Insurance Company, HDFC Life Insurance Company, Bajaj Allianz Life Insurance Company,
SBI Life Insurance Company, Reliance Life Insurance Company, Birla SunLife Life
Insurance Company and Kotak Life Insurance Company) had been considered as sample unit.
The life insurance companies of India selected above as sample units for this study on the
basis of their respective market shares, to compare and study the trend after introduction of
private life Insurance companies on LIC of India, the premium underwritten by the two
segment i.e. public sector and private sector is taken, to compare the business earned amongst
the private insurers, all twenty two life insurance companies of private sector ( ICICI Life
Insurance Company, Bajaj Allianz Life Insurance Company, SBI Life Insurance Company,
HDFC Standard Life Insurance Company, Birla Sunlife Life Insurance Company, Reliance
Life Insurance Company, Max New York Life Insurance Company, Tata AIG Life Insurance
Company, Aviva Life Insurance Company, Kotak Life Insurance Company, Metlife Insurance
Company, ING Vysya Life Insurance Company, Canara HSBC Life Insurance Company,
Shriram Life Insurance Company, IDBI Federal Life Insurance Company, Star Union Dai-
ichi Life Insurance Company, Bharti AXA Life Insurance Company, Future Generali Life
Insurance Company, India First Life Insurance Company, Sahara Life Insurance Company,
DLF Pramerica Life Insurance Company and Aegon Religare Life Insurance Company) had
been considered as sample unit.
One of the major purposes of the present study was to find out the policyholders behaviour
and preference towards different life insurance companies in India in the state of Haryana;
therefore, policyholders of selected life insurance companies was also considered as sample

25
unit. The Haryana state is divided into four commissioned viz. Ambala, Hisar, Rohtak and
Gurgaon. Respondents belongs to these districts and nearby villages were contacted for the
study of behavior and preference towards life insurance sector in India, to examine which of
private insurance companies has gained more popularity among the rural and urban
respondent, ten private life insurance companies of India (ICICI Prudential Life Insurance
Company, HDFC Life Insurance Company, Bajaj Allianz Life Insurance Company, SBI Life
Insurance Company, Reliance Life Insurance Company, Birla SunLife Life Insurance
Company, Kotak Life Insurance Company, Tata AIG Life Insurance Company, Max New Life
Insurance Company and Future Generali Life Insurance Company) had been considered as
sample unit, to analyse the satisfaction among intermediaries (advisors, assistant sales
manager, sales managers etc.), related to the factors that motivates the employees to excel,
eight life insurance companies of India (Life Insurance Corporation of India, ICICI
Prudential Life Insurance Company, HDFC Life Insurance Company, Bajaj Allianz Life
Insurance Company, SBI Life Insurance Company, Reliance Life Insurance Company, Birla
SunLife Life Insurance Company and Kotak Life Insurance Company) had been considered
as sample unit. The life insurance companies of India selected above as sample units for this
study again on the basis of their respective market shares and their popularity among the
people in the state of Haryana.

SAMPLING TECHNIQUES:
The procedure that a researcher adopts in selecting the unit for the sample is known as
sampling technique. There are mainly two types of sampling, the first type of sampling is
known as Probability Sampling and the second type of sampling is known as Non Probability
Sampling. In Probability Sampling each sample has a known probability of being included in
the sample, but Non-Probability Sampling does not allow the researcher to determine this
probability.Such samples are chosen based on judgment regarding the characteristics of the
target population and the needs of the survey.
In the present study, Non-Probability sampling technique was used. The selection of the units
was made on the basis of non-probability sampling technique, viz, ‘QUOTA’ sampling. The
data was obtained from the various respondents within the organizations (Customer Support
Executives, advisors, assistant sales manager, sales managers etc). Officials of the selected
life insurance companies of India) and from outside the organizations (Policy holders of the
selected life insurance companies of India) also, through appropriate questionnaires and

26
schedules. In the present study the researcher approached only those prospective respondents
(policyholders) who have to previous experience related to services offered by selected Life
Insurance Companies. The researcher approached prospective respondents (policyholders) in
branches and divisional offices of selected life insurance companies in selected cities. This
method proved very beneficial, as it was really difficult and in fact impractical to compile an
exhaustive list of the respondents (policyholders) from the entire population.

SAMPLE SIZE:
Sample size means the number of sampling units selected from the population for the purpose
of investigation. No doubt, sample size must be sufficiently large so that wecan have a
representative sample. But, money and time constraints tend to limit thesize of sample. The
population addressed under the present study consists of life insurance sector of India. The
sample unit included Eleven leading Life insurance companies (based upon market share)
viz, Life Insurance Corporation of India, (ICICI Prudential Life Insurance Company, HDFC
Life Insurance Company, Bajaj Allianz Life Insurance Company, SBI Life Insurance
Company, Reliance Life Insurance Company, Birla SunLife Life Insurance Company, Kotak
Life Insurance Company, Tata AIG Life Insurance Company, Max New Life Insurance
Company and Future Generali Life Insurance Company, which a large number of
policyholders and offices located in Haryana and Delhi were chosen. To achieve research
objectives of present study, information was collected from two types of respondents. One,
the internal respondents targeted was from the middle management and lower management.
Total 500 persons (customer care executives, advisors, assistant sales manager, sales
managers etc.) were contacted for the purpose. Second, the external respondents targeted
were those policyholders of selected life insurance companies, who had taken life insurance
policies offered by different Life Insurance companies. 300 external respondents were
selected from the state of Haryana. Exhibit No. 3.1 and Exhibit No. 3.2 indicates the details
of both types of samples of respondents.

TABLE2.1:SAMPLE FROM INTERNAL RESPONDENTS

(EMPLOYEES)
SR.NO. NAME OF INSURANCE COMPANY SAMPLE PER CENT OF
QUOTA SAMPLE QUOTA
1 Life Insurance Corporation of India 185 37
2 ICICI Prudential Life Insurance Company 45 9

27
3 Bajaj Allianz Life Insurance Company 45 9
4 Birla SunLife Life Insurance Company 45 9
5 Tata AIG Life Insurance Company 45 9
6 HDFC Life Insurance Company 45 9
7 SBI Life Insurance Company 45 9
8 Kotak Life Insurance Company 45 9

TABLE 3.2 SAMPLE FROM EXTERNAL RESPONDENTS

(POLICYHOLDERS)
SR.NO. NAME OF INSURANCE COMPANY SAMPLE PERCENT OF
QUOTA
SAMPLEQUOTA
1 PUBLIC SECTOR Life Insurance 200 67
Corporation of India
2 PRIVATE SECTOR Private Life Insurance 100 33
Companies

Five conditions were established to permit collection of the most representative samples:
1) Customers should be allowed to rate and review about the various services of life
insurance companies based on their own service experience;
2) Customers should not be financially, socially, and emotionally motivated to express their
opinions favoring the reviewed insurance companies;
3) Customers should be encouraged to post both dissatisfied and satisfied reviews.
4) The results of market survey are accurate. The validity of the model is based around the
results of empirical studies.
5) Policyholders responses can be documented and captured and they remain stable during
the whole process.
DATA COLLECTION
In research process, the result will be good if the data put in is good. If poor and unrelated
data are collected, naturally poor and misleading conclusion will be drawn. Therefore, due
consideration should be given to the type and method of data collection (Wilkinson and
Bhandarkar, 2000). There are two types of data: primary data and secondary data. Since the
scope of the study was really very vast, both types of data have been collected.
Primary data was collected through the well- structured comprehensive questionnaire. Sets of
two questionnaires were prepared which have been given in Annexure 1 and 2

28
Annexure 1: Questionnaire for customer care executives, advisors, assistant sales manager,
sales managers etc., of the selected life insurance companies of India.
Annexure 2: Questionnaire for the Policyholders of selected life insurance companies of
India.
Well-structured questionnaires were prepared for the purpose of collecting the necessary
information. The questionnaires were prepared in the two phases. In the first phase,
unstructured in-depth interviews were conducted to create initial questionnaire. Further,
expert opinions on the questionnaires were collected supported by extensive literature review
of similar studies carried out in various countries of the world and improvements were made
to the questionnaires. This necessitated some changes in the final version of the
questionnaire. In the second phase, a pilot survey was also conducted with 4 life insurance
companies (Life Insurance Corporation of India, SBI Life Insurance Company, ICICI
Prudential Life Insurance Company and Bajaj Allianz Life Insurance company) and 50
customers to evaluate how well the questionnaire was understood, and also to test alternative
wordings of questions, alternative response options and determining whether some other
response should be provided. During the interview process, some weaknesses in the design
were also found. Some of the respondents had reservations about some questions in the initial
questionnaire, due to the sensitive nature of topic addressed. In various questions, internal
respondents were asked to rate (highly satisfied to highly dissatisfied) the various reasons
behind the factors affecting customer retention process and also factors that motivates
intermediaries to provide excellent services for customer satisfaction, rather than asking only
one reason. The survey also helped the researcher in rewording and restructuring the
questionnaire. The validation of the questionnaires was done by the feedback from the
academicians, practitioners and by the issues identified by relevant literature. Finally, the
structured questionnaires were prepared and the survey was conducted by explaining the
purpose of the research to the respondents. The content of the first questionnaire (for
intermediaries) included the company profile; some strategic questions like
commission/salary, working environment, promotional avenues in the organisation etc. were
asked to rate (highly satisfied to highly dissatisfied)in the questionnaire The second part of
the first questionnaire (for intermediaries) included statements related to factors affecting the
satisfaction level of the intermediaries. These statements were included after extensive
literature review of the similar studies. According to Jillian Dawes Farquhar (1994), study
findings financial service retailers were aiming to retain customers through building
relationships but lack of management appreciation for staff expertise and the burden for

29
service quality and retention appears to fall upon staff. The study also finds that the staff
appeared to view themselves as key players in retaining customers and, since information
systems and structure appear not to provide the required support, there are grounds for this
view. Dennis J. Adsit Rath & strong Inc., and Steven Crom and Dana Jones Rath & Strong,
Inc., (1996) study found positive relationships between employee attitudes, departmental
performance and customer satisfaction with service quality. Krosnick and Petty (1995) found
strong evidence for effect of attitude strength on behaviour and the fact that behavioural
intentions leads towards satisfaction. Krosnick and Petty also referred to the strong impact of
attitude strength on behaviour and the processing of information.
Reichheld and Sasser (1990), found that Customer Retention requires a positive climate in
which everyone in the organization works towards keeping customers. According to Bowen
and Lawler (1995), study if staffs were given more power, greater access to information and
adequate knowledge, they would be in a better position to recover situations or delight
customers. Internal marketing supports the creation of a positive climate of cooperation
where everyone in the organization was working towards keeping customers (Reichheld and
Sasser, 1990). Segments focused HRM policies, practices and procedures activated
employee’s energies and provided direction and, activation and direction were the keys to the
motivation of employee’s (Locke and Latham, 1990). This focusing of employees was
recognized as “culture” and others have called it “climate” (Schneider, 1990). Steve
Macaulary and Sarah Cook (1995) concluded that teamwork is a term most people pay more
lip-service to than practice. Deanne N. Den Hartog and Robert M. Verburg (2002) study
provided more insight into the relationship between perceived leader behaviour and
employees’ willingness to provide excellent service as well as their perceptions of service
quality. Supervisors’ supportive behaviours, providing useful information, giving feedback,
fair evaluations of performance and their direct stimulation of service related behaviours were
all found to be positively related to service outcomes. Neeru Malhotra and Avinandan
Mukherjee (2004) study indicated that job satisfaction and organizational commitment of
employees had a significant impact on service quality delivered. Avinandan Mukherjee and
Neeru Malhotra (2006) research revealed that role clarity plays a critical role in explaining
employee perceptions of service quality. Yong-Ki Lee, Jung- Heon Nam, Dae-Hwan, and
Kyung Ah Lee (2006) analysed the structural relationship between empowerment, service
training, service reward, job attitudes such as job satisfaction and organizational commitment,
and customer-oriented prosocial behavior of employees. Respondents of the first
questionnaire (for employees) and asked to rate (highly satisfied to highly dissatisfied) these

30
statements. Based on above discussion the researcher had used these key dimensions and
their respective service features to develop survey questionnaire for policyholders to assess
the perceived level of consumer services provided by selected life insurance companies of
India.
The policyholder’s questionnaire included expectations regarding different dimensions
(Reliability, Responsiveness, Competence, Easy to use, Product Portfolio, Security and
Convenience) of customer services offered to policyholders by the concerned life insurance
company. This questionnaire also included perceptions regarding different dimensions
(Reliability, Responsiveness, Competence, Easy to use, Product Portfolio, Security and
Convenience) of consumer services provided to policyholders by the concerned life insurance
company. The same questionnaire included questions regarding importance weight related to
different dimensions (Reliability, Responsiveness, Competence, Easy to use, Product
Portfolio, Security and Convenience) of consumer services offered by the selected life
insurance company of India.
The questionnaires mentioned above, contain several type of questions keeping in view the
objectives of the present study. Easily understandable and answerable questions were
prepared and were carried to the respondents to be filled up by the. In all the cases, personal
interviews are conducted by the researcher to secure correct and collect necessary
information.
The present study analysis was also based on the secondary data, which were collected from
various international and national journals of repute, annual reports of various Government
institutions of India like IRDA, RBI etc., text books, magazines of repute, annual reports of
selected life insurance companies, annual reports of various financial institutions and
commercial and social associations like CII, FICCI, Gartner, Oxford’s Economic survey etc.
For this purpose researcher explored many libraries (CII, ICSAR, FICCI, American Cultural
and British Library, and also of various universities). Online libraries, Internet and online
database were highly used for the purpose of data collection. Some important information
was also complied from the different international and national newspapers.

FREQUENCY DISTRIBUTION TABLES OF QUESTIONNAIRE-1

(EMPLOYEES)
TABLE: 2.3 SURVEY RESPONSE RATE
Total Sample Size Response Usable Response

31
 Received Response Rate (%)
Received
500 350 314 62.8

TABLE: 2.4 INSURANCE COMPANY WISE RESPONSE RATE

Name of Insurance Company Frequency Percent Cumulative
Percent
Life Insurance Company of 104 33.13 33.13
India
ICICI Prudential Life 30 9.554 42.684
Insurance
Company
HDFC Standard Life Insurance 30 9.554 52.238
Company
Bajaj Allianz Life Insurance 30 9.554 61.792
Company
RELIANCE Life Insurance 30 9.554 71.346
Company
Birla Sunlife Life Insurance 30 9.554 80.9
Company
SBI Life Insurance Company 30 9.554 90.454
KOTAK LIFE Insurance 30 9.554 100
Company
Total 314

However 350 respondents gave the information as per our requirement. Later on the
information given by 36 (10.29%) respondents was not found satisfactory. Hence finally
information given by 314 (89.71%) respondents was taken into study according to the
requirement of the objective. Out of 314 persons in total 104 (33.13%) belongs to LIC and 30
(9.554%) each belongs to ICICI, HDFC, Bajaj Allianz, Reliance, Birla Sunlife, SBI and
Kotak Life Insurance Company

FREQUENCY DISTRIBUTION TABLES OF QUESTIONNAIRE-2

(POLICYHOLDERS)
TABLE: 2.5 SURVEY RESPONSE RATE
Total Sample Size Response Usable Response
Received Response Rate (%)
Received
300 154 121 40.33

32
 TABLE: 2.6 INSURANCE COMPANIES WISE RESPONSE RATE
Name of Insurance Company Frequency Percent Cumulative
Percent
Public Sector 96 79.34 79.34
Life Insurance Corporation of
India
Private Sector 25 20.66 100
Private Life Insurance
Companies
Total 121 100

TABLE: 2.7 GENDER OF THE POLICYHOLDERS

Gender Frequency Percent Cumulative
Percent
Male 81 66.94 66.94
Female 40 33.06 100
Total 121 100
TABLE: 2.8 AGE GROUP OF POLICYHOLDERS
Age Group Frequency Percent Cumulative
Percent
<25 yrs 16 24.5 24.5
25-45 yrs 74 46.5 71
>45 yrs 31 29 100
Total 121 100

TABLE: 2.9 PROFESSION OF POLICYHOLDERS

Nature of Profession Frequency Percent Cumulative
Percent
Business 15 12.4 12.4
Service 56 46.3 58.7
Professional 11 9.1 67.8
Farmers/Others 39 32.2 100
Total 121 100

TABLE: 2.10 MONTHLY INCOME OF POLICYHOLDERS

Income Group Frequency Percent Cumulative
Percent
<15000 p.m. 24 19.8 19.8

33
15000-25000 p.m. 70 57.9 77.7
25001-50000 p.m. 20 16.5 94.2
>50000 p.m. 7 5.8 100
Total 121 100

34
 TABLE: 2.11 RESIDENTIAL STATUS OF POLICYHOLDERS
Residential Status Frequency Percent Cumulative
Percent
Urban 60 49.6 49.6
Rural 61 50.4 100
Total 121 100

TABLE: 2.12 QUALIFICATION OF POLICYHOLDERS

Qualification Frequency Percent Cumulative
Percent
Under Graduate 40 33.1 33.1
Graduate 46 38 71.1
Post Graduate 35 28.9 100
Total 100 100

Out of 154 responses received, 121 (78.36%) were usable responses and of which (66.94%)
were males and 40 (33.06%) were females; 96 (79.34%) were policy holders of LIC, 25
(20.66%) were policy holders of ; 74(46.5%) surveyed policy holders belong to 25-45 yrs, 31
(29.0%) belong to >45 yrs, and 16 (24.5%) belong to <25 yrs age group; 56(46.3%) of the
surveyed policy holders belong to service class, 15(12.4%) were businessman’s, 11(9.1%)
were professionals and 39(32.2%) were farmers/others; 70 (57.9%) surveyed policy holders
24(19.8%) belong to <15000 household income, belong to 15000-25000 household income,
20 (16.5%) belong to 25001-50000 household income, and 7(5.8%) belong to >50001
household income group; 60(49.6%) of surveyed policy holder were residents of urban area,
61(50.4%) were residents of rural area; 40 (33.1%) surveyed policy holders were under
graduates, 46 (38%) were graduates and 35 (28.9%) were post graduates.

CHAPTER:3 - REVIEW OF LITERATURE

3.1 INTRODUCTION

35
In today’s competitive world, customer satisfaction is the most important aspect to every
company which retain customer to grow and to survive as satisfied customer is the greatest
brand ambassador to attract the prospective customers to the company. The above saying is
true, especially in the service sector like insurance. In life insurance sector, after privatization,
many new private companies have entered the industry by merging with foreign companies.
In order to capture the market, they have offered new innovative products for different
segments of the population with a wide variety of benefits like premium rates, rider options,
maturity periods, etc. This has resulted in a huge competition among public and private
players. Due to this, private players are adopting every possible strategy to enhance service
quality and to retain their customer for a longer period. Offering variety of policies with low
premium, better communication, consistent post-sale services, human approach, immediate
attention, less formalities, timely reminder of premium dues and claim settlement procedure
are the factors which influence the customers’ satisfaction on private life insurance
companies (Dinesh et al. 2011; Push Deep Dagar and Sunil Phougat, 2011; Nageswara Rao,
2006; Sudarsana Reddy, 2005). Apart from these, there exist other factors which also lead to
customer satisfaction in life insurance. In this background, an attempt has been made in this
chapter to summarise the results of the study which are carried out in India as well as abroad
with regard to the policyholders’ satisfaction on the services of life insurers. Foreign studies
are presented first, followed by Indian studies.

3.2 RESEARCH ABROAD

J.D. Power (2011) in their article titled, “Policyholders Satisfaction with the Agency-Based
Sales Surpasses Satisfaction with Direct Sales in Japan”, reveals that customers are more
satisfied with timely services, procedure and documentation followed, low premium and
innovative products offered by the Prudential Life Insurance Company.
Hui-Boon Tan et al. (2009) in their study captioned, “The effect of consumer factors and
firm efficiency on Malaysian Life Insurance Expenditure”, observe that the demand for the
life insurance in Malaysia and the policyholders’ satisfaction is closely linked to the
efficiency of the insurance companies. It means the insurance companies with higher
efficiency have higher customer satisfaction and it leads to increased demand from
customers.
Affiaine Ahmad and Zalina Sungip (2008) in their study headed, “An Assessment on
Service Quality in Malaysian Insurance Industry”, to evaluate the customers general

36
expectation and perception of insurers in terms of services offered at the insurance service
counter. They reveal that among the five service quality dimensions namely, tangibility,
reliability, responsiveness, assurance and empathy, customer are highly satisfied with
tangibility and assurance dimension and they need the insurance providers to make
improvement on customer service and quality towards the components of reliability,
responsiveness and empathy.
J.D. Power and Associates (2008) in their study on “Customer Satisfaction” reveal that
frequent interaction between the customer and insurer about the services rendered by the
insurance company influences the customer satisfaction.
Capgemini (2007) in his World Insurance report titled, “Empowered Customers”, observes
that right policy specification is the prominent factor which influences customer satisfaction
in U.K. and Spain. Simplicity of information and constant availability of services are the
most significant factors that influence the customer satisfaction in Italy.
Evangelos Tsoukatos and Rand (2006) in their study titled, “Path Analysis of Perceived
Service Quality, Satisfaction and Loyalty in Greek Insurance”, find that tangibility is the
leading factor that influences customer satisfaction along with reliability, assurance,
responsiveness and empathy.
Song Hongmei (2006) in his survey entitled, “Insurers Score Low in Client Satisfaction”,
observes that the policyholders are dissatisfied with the insurer’s services with regard to
customer complaint lodged and claim settlement.
Prakash Vel et al. (2005) in their research article entitled, “An Exploratory Study on the
Role Played by Product, Service and Behavioural Factors in the Purchase of Life Insurance
Policies in the Klang Valley, Malaysia”, observe that timely service, good response by the
agents and employees to the customers and insurers concentration on the policyholders
grievance improves the level of customer satisfaction.
Ravipa Larpsiri and Mark Speece (2004) carried out a study on “Determinants of
Customer Satisfaction: A Model of Technology Integration in Thailand’s Insurance Industry”
depicts that magnitude of technology integration directly influences customer satisfaction
whereas technology readiness of salespeople and customer indirectly influences the customer
satisfaction towards insurance provider.
Srinivasa Durvasula et al. (2004) carried out a study entitled, “Forging Relationship with
Services: The Antecedents that have an Impact on Behavioral Outcomes in the Life Insurance
Industry”, with a view to investigate the linkages between service quality, satisfaction,
perceived value, repurchase intention and willingness to recommend to others. They find that

37
customers are very much satisfied with the factors such as price, reliability, product
knowledge and helping tendency of the service provider’s representative which lead their
intention to re-purchase.
Hellier et al. (2003) in their study, “Customer Repurchase Intention: A General Structural
Equation Model”, reveal that insurance providers responsiveness to the customers and
treating the customers impartially are the mean factor that influences the customer
satisfaction.
Tam and Wong (2001) in their study captioned, “Interactive Selling: A Dynamic Framework
for Services”, finds that salespersons – agents, brokers, development officers etc., enhanced
relationship with the insurance customer improves the customer satisfaction and it in turn
leads to the intention of repurchase.
Clare Chow-Chua and Geraldine Lim (2000) in their research article titled, “A Demand
Audit of the Insurance Market in Singapore”, observe that effective service rendered by both
the insurer and agents leads to customer satisfaction.
Ashley et al. (1999) in their article entitled, “The Focus of Business is Customer
Satisfaction”, reveal that agents thorough knowledge of the product, capability to understand
the customer needs and recommend suitable policy to the customer, prompt delivery of
product and responsiveness increases the policyholders satisfaction.
Brenda P.Wells and Marla Royne Stafford (1995) carried out a study entitled, “Service
Quality in the Insurance Industry – Consumer Perception versus Regulatory Perceptions”,
observe that consumers who are aware of their right to complain to the regulator are highly
satisfied with the service quality of the insurer.
Lawrence and Nancy Stephens (1987) in their study titled, “Effects of Relationship
Marketing on Satisfaction, Retention and Prices in the Life Insurance Industry”, reveal that
well-organized marketing enrich the service quality which in turn improves the policyholders
level of satisfaction.

3.3 RESEARCH IN INDIA

Policyholders’ expectation varies depending on every individual’s mentality and his
environment according to the services and facilities provided by the life insurance company.

38
The policyholders’ are satisfied only when the insurance company fulfills their expectations.
To ascertain the variables which influence the policyholders’ satisfaction on the services of
private life insurers in India, the following studies have been appraised.
Anshuja Tiwari and Babita Yadav (2012) in their article “Analytical Study on Indian Life
Insurance Industry in Post Liberalisation” reveal that prompt customer service, after-sales
services, innovative products with flexibility and better communication influences the
customer satisfaction towards private life insurers than public sector insurer, LIC.
Deepika Upadhyaya and Manish Badlani (2011) carried out a study entitled, “Service
Quality Perception and Customer Satisfaction in Life Insurance Companies in India”, with a
view to identify customer satisfaction in retail life insurance in India. They identify that the
customers are more satisfied with the pricing factor followed by employee competence,
product and service, technology, physical appearances, trust, service delivery, advertising and
service management.
Dharmendra Singh (2011) in his study titled, “Factors affecting customers preferences for
life insurers: An Empirical Study”, reveal that quick claim settlement, convenient payment
system and better complaint redressal are the important factors which influences the
policyholders satisfaction.
Dinesh et al. (2011) in their study entitled, “Assessment of perceived service quality in
Reliance Life Insurance Company Ltd. in South Tamilnadu”, to assess the policyholders level
of perception and satisfaction on the services offered in the operating offices of Reliance life
insurance. They find that policyholders’ perception level is high with regard to financial
credential of the company and the servicing aspect of timely reminder of dues. Further, they
state that policyholders are highly satisfied with the claim settlement procedure followed by
the Reliance Life Insurance Company.
Pushp Deep Dagar and Sunil Phougat (2011) in their article on “Impact of Privatization of
Life Insurance Sector on Consumer” reveal that the policyholders are more satisfied with the
services of private insurers than LIC with regard to the attractive policy offerings with low
premium and long period and their consistent services.
Uma et al. (2011) in their article titled, “A Survey of Life Insurance Customers Awareness,
Perception and Preferences”, observes that a majority of customers are satisfied the policy
features whereas few customers are dissatisfied with the incomplete information provided to
them and suppression of information about the policy terms and conditions.
Vikas Gautam (2011) in his study captioned, “Service Quality perceptions of customers
about insurance companies: An Empirical Study”, to analyze and to compare the service

39
quality perceptions of the customers in public and private insurance companies. He finds that
among the five service quality dimensions namely, reliability, responsiveness, tangibility,
assurance and empathy, the public sector insurance company – LIC - has high quality
perception in reliability, responsiveness, assurance and empathy dimensions compared to
private sector whereas in tangibility dimension, the private players has high level of
perception compared to LIC.
Karthikeyan et al. (2010) in their study captioned, “An Empirical Study on Customers
Attitude Towards the Services of Insurance Companies in India”, to examine the factors that
influences the customers attitude towards services offered by insurance companies in
Nagapatinam District. They identify that low interest rate on policy revival, additional
benefits like accidental death, loan etc., with the policy, sending reminders at the time of
lapsation of policy, easy loan repayment system, additional benefit at the time of settlement,
convenience in receiving the maturity amount and the document pledged for loan after
settlement are the main factors that highly influences the customers satisfaction towards the
services of insurers.
Kaur et al. (2010) carried out a study entitled, “A Study on Customer Satisfaction with Life
Insurance in Chandigarh, Tricity”, observe that policyholders are more satisfied with the
policy features, price, maturity benefits and tax saving contents.
Masood H. Siddiqui et al. (2010) carried out a study captioned, “Measuring the Customer
Perceived Service Quality for Life Insurance Services: An Empirical Investigation”, with a
view to identify the various attributes of service quality construct with respect to life
insurance industry and to determine hierarchical framework of these attributes as perceived
by customers. They find that among the selected six service quality dimensions namely,
assurance, personalize financial planning, competence, corporate image, tangibles and
technology, assurance is the most important determinant of service quality followed by
personalized financial planning, competence, corporate image, tangibles and technology.
Gupta (2009) in his study captioned, “Exploring Rural markets for Private Life Insurance
Players in India”, to explore the reason for poor performance of the private players in the
rural area. He finds that the channel of distribution adopted by the private players does not
suit the rural market and the products offered are not up to the rural consumers’ expectation.
Further, the frequency of premium payment is also not suitable for the rural consumers. As a
result, the rural customers are dissatisfied with the services of private life insurers.
Chadha and Deepa Kapoor (2008) in their study headed, “An Attribute base perceptual
mapping of the selected private life insurance companies: An Empirical study in Ludhiana”,

40
portray that transparency in contracts, CRM practices, product quality, services of
intermediaries, good advertisement and promotional campaigns of insurance companies
influences the policyholder’s satisfaction.
Gopalakrishnan (2008) in his article entitled, “The Insurance Customer – The Consumer
Protection Act, 1986”, observes that policyholders are more satisfied with the post sales
services of insurance companies such as sending premium reminder notice in time, furnishing
of required data and showing response to customer needs and claim servicing especially the
amount of claim settled.
Gireesh Kumar and Eldhose (2008) carried out a study captioned, “Customer Perceptions
on Life Insurance Services - A Comparative Study on Public and Private Sectors”, with a
view to assess the awareness and perceptions of policyholders about public and private
insurance companies. They observe that customers of public sector have high level of
awareness than private sector with regard to various aspects of insurance products. Further,
they reveal that customers are more satisfied with quick services, keeping up of promises,
transparency in dealings, personal attention and redressal of grievances of the public sector
insurer than private insurer.
Kalpana and Sadhana (2008) carried out a study on “Insurance a Ray of Hope: A Study on
the Level of Awareness of Private Players in the Insurance Industry” disclose that customers
are satisfied with the services of agents namely, motivation, giving personal attention,
promptness in collecting premium amount, informing about new policies and his patience.
Panchanatham et al. (2008) carried out a study entitled, “A Study on Policy Holders
Expectation and Preference towards Selected Private Life Insurance Companies in Karur
District”, identify that the policyholders are highly satisfied with the premium amount fixed
by the company and the maturity amount received after the maturity period.
Raju Indukoori (2008) in his article entitled, “Expectation Management: A Tool for
Enhancing Customer Satisfaction”, states that effective implementation of the tools of
expectation management – assessment of customer’s needs and requirements, educating the
customers, training intermediaries, periodic customer meets, flexible product features and re-
engineering of the process – improves the policyholders level of satisfaction in insurance
business.
Sonia Chawla and Fulbag Singh (2008) in their study entitled, “Service Quality Perceptions
of Life Insurance Policyholders in Northern India: Pre-Privatization vs. Post- Privatization”,
to identify the service quality dimension affecting customer satisfaction. They disclose that
among the five service quality dimensions namely, tangibility, reliability, responsiveness,

41
assurance and empathy, policyholders are highly satisfied with tangibility dimension
compared to reliability, responsiveness, assurance and empathy.
Subhasis Ray and Shahid Ali (2008) in their article titled, “Gap Analysis Between
Customer’s Expectations and Current Provisions of Indian Life Insurance Industry”, discloses
that the policyholders level of satisfaction increases with the level of offering of after sales
services such as reminder of premium due date, supply of fund statements and information on
switching of funds as well as on new products – through sms, phone call and e-mail.
Paromita Goswami (2007) carried out a study captioned, “Customer Satisfaction with the
Service Quality in the Life Insurance Industry in India”, to identify the dimensions of service
quality that ensures maximum satisfaction for the customers in the life insurance industry. He
finds that customers are more satisfied with responsiveness dimension of service quality
namely, promptness and timeliness in service as well as willingness to help the customers.
Pooja Bhalla and Gangandeep Kaur (2007) in their article on “Private Players and Life
Insurance Industry” observes that innovative products, smart marketing, more number of
branches and better customer service provided by the private life insurance companies
increases the satisfaction level of the policyholders.
Vannirajan and Jeyakumar (2007) in their study on “Discriminate Service Quality among
Public and Private Players in Life Insurance Market” to examine the service quality offered
by the insurers. They reveal that among the nine service quality factors namely, Distribution
Network, Product, Responsiveness, Reliability, Customer Relationship Management,
Empathy, Brand Building, Promotion and Tangibles, the customers of private life insurance
companies are highly satisfied with the tangibility and promotion followed by responsiveness
factor and they are dissatisfied with customer relationship management and empathy factor.
Alok Mittal and Akash Kumar (2006) in their study titled, “An exploratory study of factors
affecting selection of life insurance product”, reveal that effective methods used for handling
customer grievances and less procedural formalities followed by the insurance companies
influences the customer satisfaction.
Bejon Misra (2006) in the article entitled, “Insurance PSUs Losing Out on Consumer
Rating”, portrays that services relating to claim settlement influences the policyholder’s
satisfaction.
Jagannath and Santhosh Singh Bais (2006) in their study entitled, “Customer Satisfaction
in Insurance Sector”, identify that policyholders are more satisfied with the insurance
company’s timely response to customer needs and efficiency to offer the services at the
lowest price with best quality.

42
Nageswara Rao and Madhavi (2006) carried out a study captioned, “An Overview of the
Private Insurance Companies”, with a view to identify the level of satisfaction relating to the
different aspects of the private companies. They find that communication, services extended,
human approach, immediate attention and product availability under less formalities leads to
customer satisfaction.
Nalini Prava Tripathy (2006) in her study captioned, “Brand Positioning of Insurance
Industries – A study on Private Players”, to examine the satisfaction level of customers and
agents regarding the customer service offered by the company. She finds that majority of the
customers are dissatisfied with the services of insurance company due to the non - availability
of flexible mode of premium payment, policies offered are not up to their need and lack of
multiple channels like brokers, bancassurance, corporate agents for professional approach
towards customers.
Nani Javeri (2006) in an article entitled, “Claims on Customer Satisfaction”, observes that
the high return policies and post - sale advisory interactions such as frequent contact,
expertise and guidance in financial planning and friendliness increases the policyholders
satisfaction.
Vijayan (2006) in his keynote address on Oscars of the Internet – award honoring excellent
in web design, creativity, usability and functionality – depicts that easy access of information
via internet leads to customer satisfaction.
Voice Survey (2006) on “Customer Satisfaction in Insurance sector” reveals that courteous
behavior of employees, concentration to consumer’s interest, effective redressal system and
efficient claim settlement leads to customer satisfaction.
Darling Selvi (2005) in her article on “Insurance Industry – A Source for Investment and
Employment” ascertain that the benefits derived out of the schemes and enhanced customer-
centric service facilities influence the customer satisfaction.
Gayathri et al. (2005) in their study captioned, “A Pilot Study on the Service Quality of Life
Insurance Companies”, to analyze the relationship of customer satisfaction with the score on
the service quality dimensions reveals that assurance is one of the most important
determinant that highly influences the customer satisfaction.
Kumar and Jogendra (2005) in their article captioned, “Insurance Industry on Growth
Path”, disclose that adopting new strategies like brand promotion, offering wide range of
insurance products with flexibility and added benefits influences the customer satisfaction
over public sector player.

43
Malhotra (2005) in his MARG Survey portrays that plans with low premium and high
returns, effective and speedy claim settlement and enriched timely services of agents
influence the satisfaction level of policyholders.
Mony (2005) in his article entitled, “New Initiatives in the Insurance Sector: Opportunities
and Challenges”, reveals that friendly approach and transparency in claims handling are the
key drivers for customer satisfaction.
National Insurance Academy (2005) carried out a study entitled, “Customer Survey on
Service Quality” reveal that policyholder’s satisfaction increases with better policy servicing
as well as effective claim servicing by the insurance provider.
Ravi Kumar Sharma (2005) in his study entitled, “Insurance Perspective in Eastern UP –
An Empirical Study”, discloses that policyholders’ faith on their insurers and the active
servicing of agents influence the satisfaction level of customers in life insurance.
Sudarsana Reddy (2005) carried out a study on “Customer Perception towards Private Life
Insurance Companies Policies with Reference to Bangalore City” reveals that majority of the
respondents are satisfied with the variety of policies offered by the private life insurance
companies which is up to their expectation and they feel that the private insurance policies
are better alternative for public sector companies policies.
Anil Chandhok and Mittal (2004) in their study entitled, “Critical Study of First Year
Lapsation Ratio of Life Insurance Business”, reveal that agent’s recommendation of apt
policies to the clients by understanding their basic needs influence the level of satisfaction
and enable them to keep the policy in force.
Pillai (2004) in his study entitled, “A Study on Life Insurance awareness and Customer
Perception”, portrays that customers’ awareness on policies and facilities, effective claim
settlement and agent’s response to the customer needs influence their level of satisfaction.
Shobit and Sanjay Shukla (2004) have carried out a research titled, “An Empirical Study
and analysis of failure of Private Insurance Players in Rural Areas”, to find out the reason for
the failure of private insurance players in attaining a significant share in the rural market.
They observe that a luxurious policy with high premium amount is the major reason for the
failure of private insurance players in rural sector.
Chandra Mohan (2002) in his doctoral dissertation on “A Study on Marketing of Life
Insurance Services in Erode District of Tamil Nadu” finds that policyholders level of
satisfaction increases with the offering of innovative facilities and customer-centric services
rendered by the insurance company.

44
Rudra Sibaba et al. (2002) in their study entitled, “Perception and Attitude of Women
Towards Life Insurance Policies”, discover that intensive advertisement on new product
features, enhanced customer relationship, convenience in payment of premium and timely
response of agents to customer need increases the policyholder satisfaction.
Steward Doss and Kaveri (2000) in their study captioned, “Total Quality assessment in
Insurance”, observe that pre-sales services like advice rendered in selection of policy, product
knowledge and capacity of explaining the policy benefits and after sales services like
reminding of premium due date, assistance in premium remittance and other intermediary
services of the agents increases the level of satisfaction of urban and rural customers.

CHAPTER:4 - DATA ANLAYSIS,INTERPRETATION AND

PRESENTATION

45
 DATA ANALYSIS
1. HOW WOULD YOU RATE LIFE INSURANCE AS A MEANS OF INVESTMENT
VIS-À VIS OTHER FORMS OF INVESTMENTS?
Frequency Percent Valid Percent Cumulative Percent

Poor 2 2.0 2.0 2.0

Fair 16 16.0 16.0 18.0
Good 50 50.0 50.0 68.0
Excellent 32 32.0 32.0 100.0
Total 100 100.0 100.0

50

40
cy
Fr

q
u

n
e

30

20

10

0
Poor Fair Good Excellent

nalysis of above Diagram - Approximately 50% of the people surveyed believe that
Insurance is a good source of Investment.32% believes that it is an excellent source of
Investment and Remaining 22% believe that it ranges from fair to poor, where only 2%
believed that it is a poor source of investment. Hence it can be concluded that majority
believe that investment in Life Insurance is a good option.

46
 2. RETURN ON INVESTMENT AS FACTOR FOR SELECTING LIFE INSURANCE
POLICY.

Frequency Percent Valid Percent Cumulative Percent

Not important 5 5.0 5.0 5.0

Moderately important 7 7.0 7.0 12.0
Important 45 45.0 45.0 57.0
Very important 43 43.0 43.0 100.0
Total 100 100.0 100.0

50

40
uenc
Freq

30
y

20

10

0
Not Important Moderately important Important Very Important

Analysis of the above Diagram-From the above diagram, we can conclude that 45%
respondents believe that Return on Investment is important, while 43% of the respondents
believe that is very important. So 88% of the respondents recognized the importance of Life
insurance as an investment. Whereas only 17% believe it ranges from moderately important
to not important.

47
3. GOODWILL AS FACTOR FOR SELECTING LIFE INSURANCE POLICY.

Frequency Percent Valid Percent Cumulative Percent

Not important 1 1.0 1.0 1.0

Moderately important 16 16.0 16.0 17.0
Important 51 51.0 51.0 68.0
Very important 32 32.0 32.0 100.0
Total 100 100.0 100.0

not important
moderately important
important
very important

Analysis of the above Diagram-The majority of the respondents i.e. 51%,believed that
goodwill of a company is Important while selecting an Insurance Policy.32% believed it is
very important, only 1% of the respondents believed that it is not important and the remaining
32% considered it to be moderately important.

4. SECURITY AS FACTOR FOR SELECTING LIFE INSURANCE POLICY.

48
 Frequency Percent Valid Percent Cumulative Percent

Not important 1 1.0 1.0 1.0

Moderately important 4 4.0 4.0 5.0
Important 48 48.0 48.0 53.0
Very important 47 47.0 47.0 100.0
Total 100 100.0 100.0

50

40
cy
Fr

q
u

n
e

30

20

10

Mean =3.41
Std. Dev. =0.621
N =100
0
0.00 1.00 2.00 3.00 4.00 5.00

Analysis of the Above Diagram-In the above Dig. The rank 1 stands for Not Important,
whereas the rank 4 stands for Very Important. The Mean Result generated is 3.41 which
implies the central tendency or the average for selecting Life Insurance is slightly more than
Important and less than very important.

5. TAX REBATE AS FACTOR FOR SELECTING INSURANCE POLICY

49
 Frequency Percent Valid Percent Cumulative Percent

Not important 4 4.0 4.0 4.0

Moderately important 8 8.0 8.0 12.0
Important 40 40.0 40.0 52.0
Very important 48 48.0 48.0 100.0
Total 100 100.0 100.0

50

40
cy
Fr

q
u

n
e

30

20

10

0
Not important Moderately Important Important Very Important

Analysis of the above Diagram-From the above histogram it can be concluded that for 48%
of the respondents Tax Benefit involved with buying a Life Insurance Policy is Very
Imporatnt,40% of the respondents consider it to be Important whereas only 4% believe it is
not at all important while the reaming 8% believe it is Moderately Important.

6. WHAT MOTIVATES YOU TO PURCHASE INSURANCE PLANS

Frequency Percent Valid Percent Cumulative Percent

Assurance 17 17.0 17.0 17.0

Savings 10 10.0 10.0 27.0

50
High return 16 16.0 16.0 43.0
Tax benefit 42 42.0 42.0 85.0
Old age benefit 15 15.0 15.0 100.0
Total 100 100.0 100.0

50

40
cy
Fr

q
u

n
e

30

20

10

0
Assurance Savings High Return Tax Benefit Old Age Benefit

Analysis of the above Diagram-Tax benefit was cited as the most important reason by 42 %
of the respondents. The other factors stand very close to each other, Assurance as a reason
stands at 17%, High Return at 16%, Old Age Benefit at 15% and Savings at 10%

7. AMOUNT OF PREMIUM PAID EVERY YEAR

Frequency Percent Valid Percent Cumulative Percent

Rs. 5000 - Rs. 25000 23 23.0 23.0 23.0

Rs. 25001 - Rs. 45000 31 31.0 31.0 54.0
Rs.45001 - Rs.75000 22 22.0 22.0 76.0
Rs.75000 and Above 24 24.0 24.0 100.0
Total 100 100.0 100.0

51
 40

30
cy
Fr

q
u

n
e

20

10

0
Rs.5000-Rs.25000 Rs.25000-Rs.45000 Rs.45000-Rs.75000 Rs.75000 and above

Analysis of the above Diagram-As far as paying of Annual premium is concerned 31% of
the respondents pay a premium ranging from Rs 25000 to Rs 45000.24% paid premium
ranging more than Rs.75000.23% of the respondents pay an annual premium ranging from Rs
5000- Rs 25000, and nearly 22% of the respondents pay an annual premium of Rs 45000- Rs
75000.

8. DOES ADVERTISEMENT PLAY IMPORTANT ROLE WHILE BUYING LIFE

INSURANCE.
Frequency Percent Valid Percent Cumulative Percent

Not important 4 4.0 4.0 4.0

Moderately important 24 24.0 24.0 28.0
Important 47 47.0 47.0 75.0
Very important 25 25.0 25.0 100.0
Total 100 100.0 100.0

52
 50

40
cy
Fr

q
u

n
e

30

20

10

0
Not Important Moderately Important Important Very Important

Analysis of the above Diagram-For 47% of the respondents surveyed Advertisement plays
an Important Role while buying Life Insurance. Whereas 25% believe that it is very
important and 24% respondent believe it is Moderately Important. The Remaining 4%
believes that advertisement is Not Important at all and does not influence their buying
decision.

9. WHOM DO YOU KEEP IN MIND WHILE TAKING A LIFE INSURANCE

POLICY?
Frequency Percent Valid Percent Cumulative Percent

Spouse 11 11.0 11.0 11.0

Children 9 9.0 9.0 20.0
Yourself 29 29.0 29.0 49.0
Whole Family 51 51.0 51.0 100.0
Total 100 100.0 100.0

53
 60

50

40
cy
Fr

q
u

n
e

30

20

10

0
Spouse Children Yourself Whole Family

Analysis of the above Diagram-When the respondents were asked whom they kept in mind
while buying a Life Insurance Policy a majority i.e. 51% of them replied that they kept in
mind the Whole Family.29% said they buy Life Insurance considering Self.11% replied that
they consider their Spouse while buying Life Insurane and 9% said that they consider their
Children.

CHAPTER:5 – CONCLUSION AND SUGGESTIONS

54
FINDINGS
 The procedure of becoming RELIANCE LIFE INSURANCE Insurance Advisor Is
very long so efforts to reduce number of training hours should be made.
 Various companies are paying OR sharing the cost of getting a license, (which
attracts majority of people who wants to become advisors) therefore should give a
consideration to the same.
 Various companies are paying fixed salary when an advisor reaches its targets,
which attracts the potential advisors to opt for those companies, Therefore
RELIANCE LIFE INSURANCE should consider paying some amount as fixed
salary which will considerably increase the response.
 Behavior towards trainees should improve in terms of amount of time spent with
them as well as clearing various aspects of project in the very beginning.

RECOMMENDATIONS
The following are the critical points of consideration for the under writing processors at
Reliance Life-
 The underwriters at Reliance Life must satisfy himself / herself whether the
information and the information called for fit together “Does it make sense?”.
 The underwriter must assess whether there any reason to believe that the life insured
might take his life.
 Are there any financial incentives, which may incite someone to murder the life
assured?
 Does the life insured have the financial ability to continue to pay premiums not only
now, but also into future?
 Whether all the documents are completed or not?
 Whether all the documents are genuine or fake?
 What is his purpose at taking insurance?

Considering the challenges in the Indian market the need of developing robust underwriting
process for collecting information is must. at Reliance Life should always establish the
insurable interest and the need of cover before taking any decision. The facts should be
considered altogether in totality before reaching any final decision and underwriter should not

55
do any guesswork at all. Remember “A good company will always call for required
information at application stage rather than claim stage”.

56
 BIBLIOGRAPHY

 Chhabra T.N. – Business Organization And Managemnet, 2008.

 Pahuja D. Advisor-The Search For ICICI Prudential, Project Year, 2007.

WEBLIOGRAPHY

 www.ingvysyalife.com
 www.reliancelifeinsurance.com
 Article, ‘An Analysis of the Evolution of Insurance in India’ by Tapen Sinha, ING
Chair Professor, Institute of Tecnological Autonomous de Mexico and Special
Professor, University of Nottingham.
 Bimaquest- Vol VIII, Issue I, pages 51-55
 Insurance bill-2000, Govt. of India, October 2000.p.26
 N JANARDHAN RAO, “INDIA An emerging superpower house,” published by
ICFAI Press.
 www.irdaindia.org
 www.bimadeals.com/life-insurance-india
 www.insuringindia.com
 www.nasscom.in
 www.economictimes.com
 www.irdaindia.org
 www.indiatoday.com

57
 ANNEXURE
QUESTIONNAIRE
1. How would you rate Life Insurance as a means of investment vis-à vis other forms
of Investments?
 Poor
 Fair
 Good
 Excellent

2. Return on Investment as factor for selecting Life Insurance policy

 not important
 moderately important
 important
 very important

3. Goodwill as factor for selecting Life Insurance policy

 not important
 moderately important
 important
 very important

4. Security as factor for selecting Life Insurance policy

 not important
 moderately important
 important
 very important

5. Tax rebate as factor for selecting insurance policy

 Not important
 Moderately Important
 Important
 Very Important

58
6. What motivates you to purchase insurance plans
 Assurance
 Savings
 High return
 Tax benefit
 Old age benefit

7. Amount of Premium paid every year

 Rs.5000 - Rs.25000
 Rs.25001 - Rs.45000
 Rs.45001 - Rs.75000
 Rs.75000 and above

8. Does Advertisement play important role while buying Life Insurance?

 not important
 moderately important
 important
 very important

9. Whom do you keep in mind while taking a Life Insurance policy?

 Spouse
 Children
 Yourself
 Whole Family

59