CHAPTER-3

The research methodology

3.0 Introduction:
The present research is an empirical study of the impact of liberalisation on the
marketing of life insurance in India. The study involves both secondary and primary
data collection and analysis. Secondary sources of data have been used to understand
the existing market scenario. The primary objective of the study was to measure the
impact of liberalisation on the life insurance market from the perspectives of customer,
executive and intermediary. For this purpose, an exclusive survey of the customer,
executive and agent was carried out separately. As an outcome of the study, an
operational framework for tracking the performance in marketing of life insurance
services in the changed scenario/environment has been developed.

Secondary data, as available, is classified under the system of 7 Ps of services

marketing. The secondary data on 7 Ps analyzed in the present research is the data of
actual performance of life insurance companies in terms of these elements of
marketing mix; whereas the primary data is in terms of:

(a). The perceptions of the participants at operational level about the impact of
liberalisation on the elements of services marketing mix; and

(b). The relative significance given by the participants at operational level to different
individual elements of the marketing mix.

This approach to data at the primary level is based on the new theoretical perspective
being proposed in the present research, as delineated in the course of review of past
theory of services marketing in Chapter 2. To recapitulate, the theoretical point is that
the success of any operational level strategy in marketing depends on the level of
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agreement between the perception or understanding with regard to the relative

significance of the seven elements of services marketing mix, between the customers
and the marketing organizations.

3.1 A special opportunity: Reviewed literature

Incidentally, in the case of the present research, most of the respondents on the
research topic were senior level officers in different life insurance companies and the
insurance regulation authority IRDA established as part of liberalisation. This created
a rare and special situation of the reviewed literature also turning out to be part of the
data for research, since the reviewed literature reflect the ideas and perceptions at the
level of senior and middle level participants from marketing, finance, human resource
management, information technology, etc. in the life insurance market that can be
viewed and studied vis-a-vis the perceptions at the operational level being collected as
the primary data in the present study.

This research employed a multi-source empirical methodology consisting of:

a. Analysis of secondary sources

b. Primary Survey using questionnaires for customer, intermediaries like agent and
executive working in this industry

c. Developed an operational framework for quarterly /yearly usage by the branch

manager in life insurance business.

3.2 Secondary data:

Secondary data has contributed in a significant way to understand the scope as well as,
it helped in developing the framework for the primary data. Chapter 4 has been
devoted to secondary data analysis in this thesis.

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3.2.1 Sources of secondary data:

a) IRDA Annual Reports and IRDA Journal: IRDA Annual Reports are the most
important sources of secondary data utilized in the present work. These reports contain
consolidations of the data furnished by various insurers through their annual returns
submitted to IRDA under the stipulations of IRDA Act, 1999. Insurers submit the
annual financial statements to IRDA which stipulates companies to submit such
statements as per its powers provided in the Section 14 of IRDA Act, 1999. All the
IRDA Journal and IRDA Annual Report published in the period of study were
referred. The IRDA Journal as the medium was expected to serve as one more step in
the transparency being adopted by the regulatory authority as the information
interchange; availability and an open-door policy were the basis adopted by the IRDA
in regulating the industry. The premium statistics helped to track strategies followed
by insurers. It enabled to have data which is meaningful and authentic. Though,
providing data about the life insurance market is not the primary purpose of these
reports, data of the life insurance market forms a significant part of each of these
reports. The required data has been extracted from these sources in the form required
for the present research from the relevant tabulations to build a longitudinal data for
analysis.

b) Sigma Publication Series of Swiss Reinsurance Company Limited: The Sigma

Publication series is one of the best information sources as it provides comprehensive
information on the international insurance markets including India. It gives in-depth
analysis of economic trends and strategic issues in insurance, reinsurance and financial
services, covering life and non-life business.

c) Books, magazines, periodicals and newspapers like The Insurance Times,

Insurance Watch, Risk in Insurance, BimaQuest, Asia Insurance Post, Insurance
Chronicle, International Insurance and Financial Institutions, Strategic Marketing,

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Economic Times, Times of India, India Insurance Report, Services Marketing : The
Indian Experience and Chartered Insurance Institute.

d) Journals like Journal of Insurance and Risk Management, Harvard Business Review
and Journal of Marketing.

e) Reports of research like monograph and thesis.

f) Reports and publications of various associations, institutions and organizations

connected with life insurance like LIC, FICCI and CII.

g) Numerous websites - Refer Appendix IX.

All the inputs used from different sources have been duly acknowledged in the
endnotes as references and are also a part of bibliography.

Care has been taken to ensure the reliability, suitability and adequacy of data and then
only used these in this study. The data has been subsequently classified.

3.2.2 ClassiHcation of Secondary data:

This has been classified into eleven categories which are related or connected to
facilitate the study. This has been useful in drawing up and aligning the objectives and
hypotheses of the study. These categories identified were:

1. Consumer: Changes and their expectations

2. Environmental Factors: Impact of changes like interest rate, inflation etc.
3. Competition: Private players, intensity of competition, its effect on the
market size and share on Life Insurance Corporation of India (LIC).
4. Product: Range, additions/deletions, innovations.
5. Premium (Price): Impact due to changed scenario and riders.
6. Promotion: Changes and mix used.
7. Place: New intermediaries like bancassurance, direct marketing, internet and
telemarketing, corporate agents and brokers and their impact.

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8. People: Changes pertaining to employees and customers.

9. Process: It covers all aspects where customer interfaces or which affects
service quality which is a key deliverable.
10. Physical evidence: Changes if any and there impact
11. Customer service and satisfaction: Comparison before and after
liberalisation to understand the improvement if any.

3.3 Development of Hypothesis

Since the liberalisation of life insurance, markets have registered healthy growth. The
factors which have contributed to growth were: innovative products like unit-linked,
annuity products with riders and pension products. This was fuelled by multi-channel
growth from agent as the only intermediary before liberalisation. Alternate channels
like corporate agent banks, other corporate agents, brokers, referral and direct business
have taken roots more so in case of private players. The awareness levels of customers
have increased as well as the Indian economy has registered a healthy growth rate. All
these factors have led to growth of life insurance market which needs to be empirically
tested. Hence, the following hypothesis was drawn up to study:

Hypothesis 1. Liberalisation of Insurance sector in India has affected (positively)

marketing of life insurance.

Competition intensifying with each passing year and more players joining in the fray,
a marketing organization needs to track the changes as soon as they get identified at
the operating level. It is also important to identify the components and a tool is
necessary to compile the data and analyze it so that inputs can be internalized at the
operating as well as strategic level. This has led to the formulation of the following
hypothesis:
Hypothesis 2. The effects of liberalisation necessitates a new operational framework
for marketing of life insurance.

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3.4 Research design for Primary data collection:

The method for sampHng, data collection instrument and sample size have been
discussed below:

3.4.1 Sampling:

A 3-stage primary survey was undertaken.

i. Customer: A survey was conducted in 2004-05 covering 247 customers,' who

were selected using stratified convenience sampling. This was done taking into
account the time frame as well as the cost and considering the fact that the
researcher was the lone field investigator for administering the questionnaires.
The sample chosen was reasonably representative of the heterogeneous
population in the strata. The six segments considered and classified by the
researcher on basis of occupation were:

a) Worker included individuals with professions such as watchman, maid, peon,

mechanic, construction site worker, industrial worker.
b) Professional included lawyer, doctor, chartered accountant, architect, artist,
financial advisor.
c) Salaried class included individuals like clerk, officer, manager and director.
d) Housewife is women who managed their home and had no other occupation.
e) Entrepreneur includes businessman, trader, and industrialist from small,
medium and large units.
f) RetiredAVidow is a category of people which included retired people, people
who had taken voluntary retirement or have lost their spouse.
ii. Agent: Another stratum who were intermediary namely, the agent.

iii. Executive: A strata belonging to life insurance industry namely the executives of
Lie or other private players

' Customers include 202 customers and 45 potential customers.

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Executives and agents were interviewed. Their views about liberalisation and
perceptions about the impact of UberaHsation were obtained through separate
questionnaires.

3.4.2 Questionnaire preparation with the help of Focus Group Discussion

A number of aspects pertaining to the 7 Ps of service marketing were incorporated in
relevance to life insurance. Moreover, the outcomes in terms of customer satisfaction
as well as some aspects of service quality were also factored in. A focus group
discussion on issues pertaining to liberalisation with researcher as a moderator was
conducted. Participants consisting of eight consumers, two agents and two executives
working in life insurance organization, out of which one agent and executive were
from a private player. Inputs from research studies available and proposal form of the
insurers were used to improve the content validity while preparing the first draft of the
questionnaire.

The questionnaire was given to five respondents, who observed that it was time
consuming and took nearly an hour and that some of the questions could be integrated.
The questionnaire was iterated and the second draft of a semi-structured questionnaire
was administered in the pilot study to 30 respondents. Based on this trial, relevant
questions common to agents and executives were incorporated into their respective
questionnaires. The questionnaire catered to 'parentage' which is the reason why a
policy holder opts for an insurer considering factors like sovereign guarantee, national
feeling, joint venture partner etc. Personal details like gender, age group, educational
qualifications, occupation and total family income have been considered. Additional
relevant questions pertaining to each of these groups were included. Thus, three
questionnaires, one for customer, other for agent and third for executive were
finalized. A copy of these is attached in Appendix lA, IB and IC respectively.

3.4.3 Sample size

The strata-wise responses obtained by administering the questionnaire were as
follows:

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Table: 3.01 Strata-wise response

Customer Sample size
Worker/labourer 35
Salaried class 79
Trader/Entrepreneur 45
Professional 51
Housewives 20
Retired/widow 17
Customer total 247
Agent 59
Executive 63
Grand total 369

Four subject experts from life insurance industry, who have been associated with the
industry before and after liberalisation, were interviewed using the focused interview
technique.' These experts were placed at senior levels in the industry and their
interview was planned based on a presumption that they would give some insights
which might not have been documented yet. Some insights have been attached in
Appendix V.

3.5 Processing of data

Each response of the questionnaire was numbered. Editing of raw data of the field
survey was done to detach omission and errors and corrections were done where
possible and arranged to facilitate coding and tabulation. Central editing was done and
wrong replies were discarded. Coding of data was done for enabling efficient analysis.
Classification was done with respect to occupation. Data from the questionnaires was
compiled in dummy tables. Two-way and three-way tabulation was done where it was
appropriate.

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3.6 Statistical techniques used

Suitable statistical techniques such as frequency analysis, descriptive analysis along

with weighted average rating where used as and where necessary. Z test was used.
One-tailed test was used to validate the hypotheses of the study.

3.7 Interpretation of the analysis

The data has been interpreted and analysed with the help of statistical techniques.
Then, inferences and findings were drawn keeping in mind the objectives and
hypothesis of the research. This was to ensure that the study was complete in all
respects as it was planned. It has also taken into account the analysis available from
secondary data wherever relevant.

3.8 Development of Operational Framework

Competition emerged through liberalisation and greater stress on marketing

orientation led to the development of an operational framework to evaluate the
marketing mix at this juncture. Branch managers are the beneficiary of this liberalised
market. A focus group consisting of middle level and senior level executives including
branch managers was organized for developing this framework. The components
which emerged were market intelligence which could detail social and economic
changes taking place, product expectations as well as Competition Analysis on 7 Ps -
each element being rated on a 100 point scale for the public sector company as well as
three major private insurance companies. It also includes customer satisfaction rating
on a 7- point rating scale, market share as a percentage and first year lapsation ratio.

3.8.1 Pretesting the Operational Framework

The newly developed operational framework was tested with the help of branch
managers in Pune city: eight of the seventeen branch managers of LIC as well as with
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one branch manager each of ICICI Prudential, HDFC Standard Life, Bajaj AUiance
and Max New York Life from private players. Market intelligence emerged from the
analysis could identify the social and economic changes. The competition analysis part
of the framework was useful at the tactical level. As for all the 7 Ps of the marketing
mix, assessment can be made for their relative position versus the competitor's. The
score for each P was averaged for the respondents and the player who was the best or
otherwise was determined. The overall score could also be determined by using the
element weightage deduced in this study for each of the 7 Ps and multiplying it with
the average score of the element for insurer as well as the competitor. The customer
satisfaction score was averaged for the respondents and the score arrived at provides
the barometer to know where they stand. The market share gave them an index of
business performance while the first year lapsation ratio of policy gave an indicator of
the quality of business generated.

3.9 Conclusion

On the whole, this chapter summarizes the empirical methodology adopted for this
study. The methodology also ensured that a cross-sectional group of customers,
executives and intermediaries were interviewed and the key aspects of marketing mix
were conducted during the survey. The chapter explains the methodology adopted for
developing the operational framework which is an important aspect of the study. The
next chapter discusses the analysis of secondary data and their findings.

Reference

C.R. Kothari, Research Methodology: Methods and Techniques, New Age

International (P) Ltd., New Delhi, 2005, p. 98.

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