A PROJECT REPORT ON

“CONSUMER PERCEPTION ABOUT LIFE

INSURANCE POLICIES”

SUBMITTED BY
RACHANA UDAY MANORE

T.Y.B.B.I. [Semester VI]

SHETH T.J. EDUCATION SOCIETY’S

SHETH N.K.T.T. COLLEGE OF COMMERCE

& SHETH J.T.T. COLLEGE OF ARTS

KHARKAR ALI, THANE (W) 400 607

SUBMITTED TO

UNIVERSITY OF MUMBAI

ACADEMIC YEAR

2017 - 2018

PROJECT GUIDE

ASST. PROF. MS. FARHEEN SHAIKH

 Sheth T.J. Education Society’s

SHETH N.K.T.T. COLLEGE OF COMMERCE &

SHETH J.T.T. COLLEGE OF ARTS, THANE (W)

CERTIFICATE

This is to certify that, Rachana Uday Manore Seat No. ___________ has
undertaken & completed the project titled “Consumer Perception About
Life Insurance Policies” during the academic year 2017-18 under the
guidance of Asst. Prof. Ms. Farheen shaikh submitted on ____________ to
this college in fulfillment of the curriculum of BACHELOR OF BANKING &
INSURANCE, UNIVERSITY OF MUMBAI.

This is a bonafide project work & the information presented is true &
original to the best of our knowledge & belief.

_______________ _____________________

PROJECT GUIDE EXTERNAL EXAMINER

______________ ___________

COORDINATOR PRINCIPAL

2
 DECLARATION

I, Rachana Uday Manore Seat No. ___________ studying in Third

Year Semester TYBBI (BACHELOR OF BANKING & INSURANCE)
course in the academic year 2017-2018 at Sheth N.K.T.T. College of
Commerce and Sheth J.T.T. College of Arts hereby declare that I have
completed the “Consumer Perception About Life Insurance Policies” as a
part of course requirements of Bachelor of Banking & Insurance of University
of Mumbai.

I further declare that the information presented in this project is true and
original to the best of my knowledge.

Date:

Place: Thane (RACHANA UDAY

MANORE)

ACKNOWLEDGEMENT
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It gives me great pleasure to declare that my project on “CONSUMER
PERCEPTION ABOUT LIFE INSURANCE POLICIES” have been
prepared purely from the point of view of students requirements.

This project covers all the information pertaining to “CONSUMER

PERCEPTION ABOUT LIFE INSURANCE POLICIES”. I had tried my
best to write project in simple and lucid manner. I have tried to avoid
unnecessary discussions and details. At the same time it provides all the
necessary information. I feel that it would be of immense help to the students
as well as all others referring in updating their knowledge.

I am indebted to our principal DR. MR.  P.M.KARKHELE for giving us

such an awesome opportunity. I am also thankful to our coordinator MRS.
NIVEDITA MUKHARJEE MADAM and my colleagues for their valuable
support, co-operation and encouragement in completing my project.

Special thanks to Prof. MS. Farheen Shaikh my internal guide for this
project for giving me expert guidance, full support and encouragement in
completing my project successfully.

I take this opportunity to thanks my parents for giving guidance and for their
patience and understanding me while I am busy with my project work.

Lastly I am thankful to GOD for giving me strength, spirit and also his
blessings for completing my project successfully.

EXECUTIVE SUMMARY
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The Project “The Study on customer perception about insurance company” is
undertaken as it looks deep into effectiveness. It also provides a comparative
study of life insurance company ltd. With some national companies with
similar profiles to discuss their working structure and suggest to organization.
On the basis of feedback through questionnaire, interview and observation
method, we find out the perception view about the insurance company’s
working style and a service offered is quite effective. Management of
company is constantly making efforts to make the company the best place to
work for level. As they are measures of individuals psychologically makeup
and personality and as such are extremely powerful instruments as find out
from our comparative analysis results.

“In order to make them proactive, it is required to provide them with such kind
of environment, and equally have people orientation too in order to make a
company best place to work for high performance and creating a congenial
environment.”

OBJECTIVES OF STUDY

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1) Ascertain the profile and characteristics of potential buyers.

2) To gain a thorough understanding of the attributes that prospective

buyers Ascribe to life insurance policies.

3) To have an insight into the attitudes and behaviors of customers.

4) To find out the differences among perceived service and expected

service.

5) To produce an executive service report to upgrade service

characteristics of life insurance companies.

6) To understand consumer’s preferences.

7) To access the degree of satisfaction of the consumers with their current

Brand of Insurance products.

8) To know about the various investment alternatives that is mostly

preferred by the people

NEED & SCOPE OF STUDY

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1) The deeper the company understands of consumer’s needs and perception,
the earlier the product is introduced ahead of competition, the greater the
expected contribution margin. Hence the study is very important.

2) Consumer markets and consumer buying behavior can be understood before

sound product and marketing plans are developed

3) This study will help companies to customize the service and product,
according to the consumer’s need.

4) This study will also help the companies to understand the experience and
Expectations of the existing customers.

5) Apart from creating, manufacturing and distribution capabilities for life

insurance products, an in depth study of the consumers, their preferences and
demand for their product is very necessary for setting up an efficient
marketing network.

SCOPE OF THE STUDY

 The study will be able to reveal the preferences, needs, perception of the
Customers regarding the life insurance products, It also help the insurance
Companies to know whether the existing products are really satisfying the
Customers needs.
 The result of this research would help the company to have a better
understanding about the consumer’s perception towards life insurance.

 The study helps the company by creating awareness about the consumers

of different ages and income levels.

 The study also enables the company to focus the consumer’s preferences
and expectations on the product which they offer.

RESEARCH METHODOLOGY:-

 RESEARCH DESIGN:

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A research design is a basic plan which guides the researcher in the collection
and analysis of data required for practicing the research. Infant the research
design is the conceptual structure which the research is conducted. It
constitutes the ‘Blue Print’ for the collection, measurement and analysis of the
data. The study is carried out to understand the Consumer Perception about
life insurance policies .For this study the researcher used exploratory research
design. This research covers 50 consumers, belonging to various age groups.

 SAMPLE DESIGN:
The process of drawing a sample from a large population is called sampling.
Population refers to the total of items about which information is defined.
Well selected samples may reflect fairly and accurately the characteristics of
the population.

 Sampling Unit:
The sample unit of this survey was the customers having life insurance
policies

 Sample Size :
The sample size was 50 customers of different life insurance companies

 Sampling Technique Adopted : Convenient sampling

 SOURCE OF DATA
After identifying and defining the research problem and determining specific
Information required to solve the problem the researcher will look for the type
and sources of data which may yield the desired results, while deciding about
the method of data collection to be used for the study, there are two types of
data.

They are as follows

 PRIMARY DATA :

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Primary data are those which are collected for the first time. Primary data is
collected by framing questionnaires. The questionnaire contained questions
which are both open-ended and closed-ended. Open-ended questions are
questions requiring answers in the responders own words. Closed-ended
questions are those wherein the respondent has to merely check the
appropriate answer from a list of options available. Any doubts raised by the
Respondents were clarified to get the perfect answers from the distributors.
Open-ended questions yielded more insightful information, whereas closed-
Ended questions were relatively simple to tabulate and analyze.

 SECONDARY DATA :
Secondary data means data that are already available i.e. they refer to the data
which have been collected and analyzed by someone and can save both money
and time of the researcher. Secondary data may be available in the form of
company records, trade publications, libraries etc .Secondary data sources are
as follows:
♦ Company Reports
♦ Daily Newspaper
♦ Standard Textbook
♦ Various Websites

LITERATURE REVIEW

This chapter presents the review of literature to identify and understand the

9
implications of different issues related to consumer behavior and life
insurances in India. A comprehensive review of related past studies helps the
researcher to adopt, modify and improve the conceptualization of framework
and provide a link with past approaches. The findings and recommendation of
the past literature relating to consumer behavior towards life insurance
services are not many. Only few comprehensive studies exclusively towards
consumer behavior on endowment policy are carried out in India. Based on the
review of literature the researcher has enable to identify her source for the
present study. The available studies are collected from research articles,
committee reports, projects and surveys conducted.

Khan, M.K. (1978)1 attempts to know the opportunities and prospects in the
career of a life insurance sector. He explains about what a good career is and
how a good career should be for selling of life insurance products. There is no
age barrier and it requires no previous occupational experience but one must
be a professional and capable of creating opportunities in building personality.
The relationship of life Insurance agent with clients is not temporary and the
service rendered has no substitutes. He also observes that life insurance agent
remains, in a sense, permanent server to the clients.

Rajkumar (1985)3 views that advertising is to influence a customer, who has

a limited spending power and it seems to operate through familiarizing
spreading news over cog inertia and image building improving market share,
educating, informative and to have staff support. As far as insurance industry
is concerned, misconception is a common problem and the pre-testing
revealed that most of the rich people are associated with insurance and he
viewed that the treatment of Life Insurance Company to the public is always
unfair.

Shesha Ayyar, V. (1986)4 in his article entitled “Product Development” has

discussed various issues connected with developing new polices such as the
importance of developing new schemes and various problems involved in the

10
development of new schemes in Company. He suggested the need for
including ancillary benefits such as accident benefits, disablement and
hospitalization benefits.

Namasivayam, Ganesan, S. and Rajendran, S. (2006)83 examined the

socioeconomic factors that are responsible for purchase of life insurance
policies and the preference of the policyholders towards various types of
policies of Company. From the analysis, it was found that factors such as age,
educational level and sex of the policyholders are insignificant, but income
level, occupation and family size are significant factors for the purchase of
LIC products.

A study conducted by Rajesham, Ch. and Rajender, K. (2006)84 article

“Changing Scenario of Insurance Sector” Indian Journal of marketing revealed
that insurance companies of India are required to come up with multi-benefit
policies including tax benefits with quality based timely customer services and
need to focus on health insurance which is one of the untapped areas of
insurance including services through innovative products, smart marketing and
aggressive distribution with internet facility with much individual attention
transparency and flexibility to increase the quality and volume of insurance
business. Today, the focus is on selling more products to existing customers to
improve profitability, therefore customer – focused strategies require an
effective CRM ensuring insurance firms monitor the ebb and flow of customer
behavior, giving them a holistic 360-degree view for their customers.

Praveen Sanu, Gaurav Jaiswal and Vijay Kumar Panday (2009)95 in their
article, “A Study of Buying Behavior of Consumers towards Life Insurance
Company”, Prestige institute of Management and Research, Gwalior, revealed
that in present Indian market, the investment habits of Indian consumers are
changing very frequently. The individuals have their own perception towards
various types of investment plans.
INDEX

Sr. UNITS Page

No. no.
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 Title Page
Declaration
Acknowledgment
Executive Summary
Objective of the study
Need & Scope of study
Research Methodology
Literature of review
UNIT – I
1.1 Introduction of Insurance
1.2 Importance of Insurance
1.3 Types of Insurance
1.4 Limitation & challenges
1.5 Principal of insurance
UNIT - II
2.1 Introduction to life insurance policies
2.2 History of life insurance policies
2.3 Profile of The Industry
2.4 Benefit of Life Insurance Policies
2.5 Types of Life Insurance Policies
UNIT - III
3.1 Consumer perception on life insurance

 Business of life insurance company.

 Consumer Redressal Sales
 Claim Settlement procedures.
 Complaint handling system.
 Initiatives to make claim settlement
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 procedures smooth.

UNIT – IV
4.1 Data analysis
Recommendation & suggestion
Conclusion
Bibliography /Webilography
Annexure

13
 UNIT 1

_____________________________________________

1.1 INTRODUCTION OF INSURANCE.

1.2 IMPORTANCE OF INSURANCE.

1.3 TYPES OF INSURANCE.

1.4 LIMITATION & CHALLENGE.

1.5. PRINCIPAL OF INSURANCE.

1.1 INTRODUCTION OF INSURANCE

 Meaning of Insurance
In law and Economics, Insurance is a form of risk management
primarily used to hedge against risk of a contingent, uncertain loss. Insurance
is an equitable transfer of the risk of loss, from one party to another, in
exchange for payment. An insurer is a company selling the insurance; an
insured or policyholder is a person or entity buying the insurance policy. The
14
insurance rate is a factor used to determine the amount to be charged for a
certain amount of insurance coverage, called as premium. Risk management,
the practice of appraising and controlling risk, has evolved as a discrete field
of study and practice.

Insurance is a mechanism that ensures an individual to thrive on

adverse consequences by compensating the individual his/her loss financially.
Every individual in this world is subject to unforeseen and uncalled hazards or
dangers, which may make him and his family vulnerable. At this place, only
insurance helps him not only to survive but also to recover his loss and
continue his life in a normal manner, which would otherwise be unthinkable.

The term insurance can be defined in financial as well as in legal terms.

The financial definition deals with the funding or financial arrangement of the
losses whereas the legal definition deals with provisions relating to legally
enforceable contract.

Insurance is financial arrangement, which redistributes the costs of

unexpected losses among the members of the pool. The pool is a collection of
people facing common risks. All members contribute a fixed amount towards
a pool called Premium. In the exchange for the premium payment the person
gets an assurance that a certain sum of money has to be paid to him on the
happening of the event insured against.
The assurance is that his loss will be made good. Thus, insurance involves the
transfer of loss exposures to an insurance pool and the redistribution of losses
among the members of the pool. Insurance can be defined as a contract
between two parties by which one party undertakes to make good or
indemnify any financial loss suffered by other party, in consideration of a sum
of money, on happening of a specified event e.g. fire, accident or death.
Thus, in the end we can sum up that insurance is a transfer of risk
from the individual to the group and there is a sharing (pooling) of losses on
some equitable basis such that fortuitous losses can be indemnified (paid).

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Definitions of Insurance

Insurance in its basic form is defined as “A contract between two

parties whereby one party called insurer undertakes in exchange for a fixed
sum called premiums, to pay the other party called insured a fixed amount of
money on the happening of a certain event."

“A contract (policy) in which an individual or entity receives financial

protection or reimbursement against losses from an insurance company. The
company pools clients' risks to make payments more affordable for the
insured.”

A financial risk management tool in which the insured transfers a risk

of potential financial loss to the insurance company that mitigates it in
exchange for monetary compensation known as the premium.

1.2 IMPORTANCE OF INSURANCE

1) Provide safety and security:

Insurance provide financial support and reduce uncertainties in
business and human life. It provides safety and security against particular
event. There is always a fear of sudden loss. Insurance provides a cover
against any sudden loss. For example, in case of life insurance financial
assistance is provided to the family of the insured on his death. In case of other
insurance security is provided against the loss due to fire, marine, accidents
etc.

2) Generates financial resources:

Insurance generate funds by collecting premium. These funds are
invested in government securities and stock. These funds are gainfully
employed in industrial development of a country for generating more funds
and utilized for the economic development of the country. Employment
opportunities are increased by big investments leading to capital formation.

3) Life insurance encourages savings:

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 Insurance does not only protect against risks and uncertainties, but
also provides an investment channel too. Life insurance enables systematic
savings due to payment of regular premium. Life insurance provides a mode
of investment. It develops a habit of saving money by paying premium. The
insured get the lump sum amount at the maturity of the contract. Thus life
insurance encourages savings.

4) Promotes economic growth:

Insurance generates significant impact on the economy by
mobilizing domestic savings. Insurance turn accumulated capital into
productive investments. Insurance enables to mitigate loss, financial stability
and promotes trade and commerce activities those results into economic
growth and development. Thus, insurance plays a crucial role in sustainable
growth of an economy.

5) Medical support:
A medical insurance considered essential in managing risk in health.
Anyone can be a victim of critical illness unexpectedly. And rising medical
expense is of great concern. Medical Insurance is one of the insurance policies
that cater for different type of health risks. The insured gets a medical support
in case of medical insurance policy.

6) Spreading of risk:
Insurance facilitates spreading of risk from the insured to the insurer.
The basic principle of insurance is to spread risk among a large number of
people. A large number of persons get insurance policies and pay premium to
the insurer. Whenever a loss occurs, it is compensated out of funds of the
insurer.

7) Source of collecting funds:

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 Large funds are collected by the way of premium. These funds are
utilized in the industrial development of a country, which accelerates the
economic growth. Employment opportunities are increased by such big
investments. Thus, insurance has become an important source of capital
formation.

1.3 TYPES OF INSURANCE

 Life Insurance

Insurance that pays out a sum of money either on the death of the insured
person or after a set period

 Health Insurance

A health insurance policy will provide a cover to you and your family against
sudden medical contingency or bodily injury.

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 Every human being is exposed to various health hazards. Medical
emergency can strike anyone without pre-warning. The reasons why health
insurance is a must: 

 Medicines have become quite expensive

 Private hospitals are too expensive

 Diagnostic charges are beyond common man’s reach

 Specialists come at a price

 People opt for Travel Insurance which covers them against medical
expenses they may incur while travelling abroad (outside country of
residence)

 Disability Insurance

Disability Insurance, often called DI or disability income insurance, or income

protection, is a form of insurance that insures the beneficiary's earned income
against the risk that a disability creates a barrier for a worker to complete the
core functions of their work.

 Motor & Auto Insurance

Motor insurance protects you against damage caused to your vehicle or third
party if you have an accident. It is a contract between you and the insurance
company. You agree to pay the premium and the insurance company agrees to
pay your losses as defined in your policy. Motor insurance provides property,
liability and medical coverage:

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 1. Property coverage pays for damage to or theft of your car.
2. Liability coverage pays for your legal responsibility to others for
bodily injury or property damage.

 Home insurance 

Home insurance is a form of property insurance designed to protect an

individual's home against damages to the house  itself, or to possessions in
the home. Home insurance also provides liability coverage against accidents in
the home or on the property.

 Travel insurance 

Travel insurance is insurance that is intended to cover medical expenses, trip

cancellation, lost luggage, flight accident and other losses incurred
while traveling, either internationally or within one's own country.

1.4 LIMITATION & CHALLENGES

Although the study was carried out with extreme enthusiasm and careful
planning there are several limitations which handicapped the research viz.

1. Time Constraints:
The time stipulated for the project to be completed is less and thus
there are chances that some information might have been left out, however due
care is taken to include all the relevant information needed.

2. Sample size:
Due to time constraints the sample size was relatively small and
would definitely have been more representative if I had collected information
from more respondents.

3. Accuracy:

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 It is difficult to know if all the respondents gave accurate
information; some respondents tend to give misleading information

CHALLENGES IN LIFE INSURANCE INDUSTRY

The year 2011 brought in the beginning of a new decade for Indian
Life Insurance  industry. The preceding years were significant for the life
insurance industry in India after the opening of the sector by the
government. During the period 2000-2008, combined with India’s rapid rate
of economic growth the Indian Life Insurance Industry gained its foothold
in the country. Private sector insurers ventured into the country and the
industry got a taste of market-driven competition, compared to the time
when insurance business was dominated by only public sector insurers. The
beginning of this new era in the development of insurance industry saw
proliferation of new products and distribution channels which promoted
rapid growth of the industry. 

The phase also witnessed continued regulatory action which is shaping the
insurance industry currently. The regulatory changes introduced in
September 2010 signaled the intent to shift the orientation of the industry
for unbridled growth towards longer-term savings and protection and
deliver more efficient propositions to consumers. There is also no doubt that
the regulatory shifts had material impact on all life insurers in India. 
Given the above scenario, the current challenges in the life insurance
industry have various factors guiding the market.

ENVIRONMENTAL FACTORS
Domestic economic conditions – No matter how well-managed or
financially sound a given insurer might be, none are immune to the effects
of a contracting or slow growing economy. The double-digit inflation rate is
an uncomfortable factor for the Indian economy. And the central bank of
India, RBI, has the huge task of balancing the two – controlling inflation
without dampening growth too much.
The interest rate and inflation trade off is the central bank’s core business

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and the last one year has been a very difficult for the central bank. While the
Reserve Bank of India (RBI) has been raising repo and reverse-repo rates
consecutively every quarter in an attempt to manage inflation, it has not
succeeded in moderating inflation. This probably implies that inflation is
more of a real sector supply side issue than a monetary implication.
Implications of this relatively high interest rate and high inflation regime
are unlikely to be positive for the Insurance industry in general.  On one
hand it would be difficult for the life insurance industry to manage return
expectations as they are likely to be high. In the high interest scenario,
higher assured returns are required for increasing penetration while
competing with fixed income products. While there may be some reduction
in actual growth rates but  India's long term fundamentals remain intact and
Life Insurance being  an industry with very long term horizon, it would be
able to tide over the economic cycle.

On the other hand inflation means lower disposal income in the hands of
consumer leading to lower household savings which currently stands at a
healthy 34.7%, though significantly lower than China’s 50%.
 
Global Economic conditions – The other concerning factor is the
rising crude oil prices and rupee depreciation. Domestic oil companies have
upwardly revised prices very often. Secondly, the Euro crisis and the
instability of the US economic conditions too will bring in a ripple effect on
India, mainly on financial markets and import oriented industries.

Connecting the two syndromes – the exchange rate (rupee devaluation)

impacts India through oil imports and increased prices of fuel and transport
(which gets factored in inflation). It is almost a double whammy kind of
situation – inflation, whichever way it happens reduces disposable income
and discretionary spend does get affected. 

On the other hand, exchange rate devaluation has some positive effects also
such as higher exports (goods and services) and increased employment
which would hold good for the insurance industry in the long run.
 
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Consumer related challenges
Low financial literacy and poor access to financial services in India pose a
problem in penetration of the right kinds of life insurance products - more in
terms of the right mix of savings and protection. This is combined with the
fact that consumers and distributors both lack understanding of the true
purpose of life insurance. Consumers are not clued in about their life stage
needs, and the product solutions suitable for such needs. The distributor,
armed with an array of products is also unable to give proper insurance
guidance to the consumer due to limited knowledge of the true purpose of
each financial instrument. This leads to mis-selling, which is a huge
negative factor for the life insurance industry. 

The MNYL-NCAER India Financial Protection Survey done in

collaboration with Max New York Life Insurance had yielded some
worrisome results. The research had revealed the problem of uninsured and
underinsured Indian households. At an all-India level, for all insured
households, while the average sum-assured of a life insurance policy is Rs
1,14,450, the average premium paid is Rs 5,007 only. The awareness level
about life insurance is higher for people in the older age group. It is
important for consumers across demography to understand the true value of
life insurance. 
 

In India, there is hardly any state supported social security system. The
number of Indians over the age of 60 will grow to more than 21.8 crore in
2030. Today, at the age of 60, an Indian has an expected life up to 75 years
– by 2020 an individual of 60 will have an expected life up to 80 years of
age. According to studies, only about 11% of India’s working population
has any form of social security at all.
The reason for citing the above data is to talk about the next challenge –
longevity. As the average longevity of people has increased, the number of
years people spend working are less than their non-working years. This
requires people to plan their future in such a way so that their savings help
in the autumn years. Unfortunately, consumers are not savvy enough to

23
understand or plan their needs for this time. 
Life Insurance is best suited to help consumers overcome this problem.
While the industry will have to develop suitable products, it also has to
overcome the challenge of lack of awareness of this issue. The key is to start
as early as possible and sticking to the plan.

Distribution Challenge
India is a diverse country with various languages, food, culture, spending
and saving patterns. Historically, the majority of life insurance players have
followed a national strategy, with largely similar distribution and operating
models across geographies. Going forward, with increasing economic
pressures, players will need to make very conscious choices about ‘where’
and ‘how’ to compete. While advice based sales through agency distribution
remains the most suitable distribution channel, to expand the reach there is a
need to utilize the existing retail distribution networks available in the
country. This may require simplified product designs to promote OTC life
insurance solutions.  
For banc assurance, even though an open architecture will provide better
choice for the consumer, in the Indian context it also needs to be viewed
from societal perspective. Access to customers and quality of customer
relationship should be the primary focus of the channels.

It needs to develop in terms of grievance redressed and knowledge

pool. The banks are not yet equipped to handle complex customer
requirements with increasingly sophisticated products being launched by the
life insurance companies. 
Notably, increasing the number of partners may not lead to increase in
insurance penetration and/or financial inclusion. The number of bank
branches across the country will anyway remain the same even with two
insurers.
 
Impact of regulatory changes and the new challenges it poses
The regulatory changes that have been implemented in the past two years

24
included ULIPs regulation that brought in a price control taking flexibility
away from life insurers. This influenced distributors’ commission. In fact,
India has now the lowest commission rates for agent advisors. It is
imperative for agents to be motivated as they are the faces of life insurance
companies. In order to build a career-agency model, adequate compensation
is critical. 
 The regulator IRDA has also tightened the performance criteria for agents
in its effort to improve the persistency ratio in the industry. The agents have
to ensure that the average annual persistency ratio should be 50 per cent.
Though good for the industry in the long run, this poses a challenge for
many agents in the interim. 
Another big challenge is attracting committed and quality talent to the
industry. It is important to have good quality sales managers and agent
advisors to ensure need-based selling and right-selling. This will require
behavioral change in agent advisors so that products are not mis-sold. Life
Insurers need to impart training to advisors to address this challenge. Max
New York Life Insurance invests significantly into the training of agent
advisors through pre-licensing training for around 100 hours instead of the
stipulated 50 hours by IRDA and a continued course curriculum of 250
hours in the first 2 years.

The latest draft of the DTC has suggested removing or reducing certain tax
incentives from Indian life insurance products. It is these tax breaks alone
that explain why the life penetration rate of 4.4% in India is higher than in
China (2.5%) and even the US (3.5%). Implementation of DTC in its current
form, especially with the no-grandfathering provision, does not bode too
well for the industry’s long-term growth outlook.
While it is important that the life insurance industry is well regulated in
terms of providing value for money or benefit to the insured/consumer, the
regulator also needs to ensure that the business of insurance is profitable
and earns adequate return on investment.

25
It is extremely important, as it plays an important role in deepening the
financial sector of the country.  Life insurance industry also provides long-
term infrastructure funds by routing small savings to long-term investments.
In addition, the government also needs to make suitable interventions and
facilitate business models for increasing financial inclusion through micro
finance, micro insurance and social security /safety net mechanisms. 

Perceptions of influencers
Another major challenge is posed by the media and influencers. Often, the
life insurance industry is portrayed in a negative manner and hence the
consumers become skeptical of the life insurance industry. The result is that,
they may not purchase life insurance, even though a legitimate need exists.
The fact the life insurance promotes a regular routine of small savings for
long term savings and protection is not propagated. 
It is important for media and third-party influencers to look at the bigger
picture on life insurance. They must understand that life insurance products
should not be compared to any other financial products on calculated returns
alone. They should also take into consideration, the discipline life insurance
instill in the financial planning. 
 

The Way forward

As mentioned earlier, Life Insurance is critical for the development of
Indian economy. Apart from a brief dip in FY 2009 due to downturn, the
industry has grown around 20 per cent per annum. In the first decade of
privatization the insurance penetration has doubled, which has all going for
it to only rise significantly in a country of 1.2 billion people.
Post the global financial crisis financial capital infusion by foreign partners
has considerably slowed down; from Rs 8,170 core in 2008-9 to less than Rs
2,300 crore in 2010-11. For a capital intensive business like life insurance,
the trickling down of capital severely impacts growth and also changes the
strategy that the company adopts with its business. The fabled increase in
26
the insurance FDI limit from 26% to 49% (consistent with banks sector) is
on hold currently till the next parliamentary session.

The much debated issue on allowing insurers to tap the capital markets has
also not resulted into anything significant with regulatory roadblocks
delaying clarity on companies floating an IPO. However, all is not lost. The
Indian life insurance industry’s biggest advantage is the country’s favorable
demographics.

Market penetration will be guided by the rise in income levels. From 80 per
cent policy renewals in early 2000s, today only about 65 per cent policies
come up for renewal after the first year.

The working population (25–60 years) is expected to increase from 675.8

million to 795.5 million by 2025 with the projected per capita GDP
expected to increase to Rs 100,680 in 2025, which is indicative of rising
disposable incomes.  Indian’s are inclined towards savings and research has
shown that life insurance is the first financial product majority turn to. And
it is high time that the regulator, consumer bodies and the insurance
companies collaborate together to yield effective and measurable results.
With increasing levels of income, higher cost of living and longer life
expectancy, the Indian consumer will require innovative products that will
cater to wealth management, protection and retirement solutions.

For insurance companies, profit from innovation will be integral to driving

success, and technology will help insurers to develop and customize
products to befit individual needs. Consumers are increasingly becoming
multi-channel in terms if their interaction with financial institutions. To buy
insurance products, insurers will have to gear up wi th robust IT solutions to
cater to that need.
There will be need of proper financial planning for the Indian consumer.
And hence, need for quality of advice in managing their financial need will
be critical. Insurance agent advisors need to be trained and be their primary
source of financial advisor. The customer-agent relation needs to be
deepened by suggesting life-stage related selling.

27
It is time for various stakeholders – life insurers, regulators, distributors and
consumer groups – to come together to build a robust life insurance sector
in India which will help create a secured society.

1.5 PRINCIPLE OF INSURANCE

 Principle of Insurable Interest

 The principle of insurable interest states that the person getting

insured must have insurable interest in the object of insurance. A person has
an insurable interest when the physical existence of the insured object gives
him some gain but its non-existence will give him a loss. In simple words, the
insured person must suffer some financial loss by the damage of the insured
object.

For example: - The owner of a taxicab has insurable interest in the taxicab
because he is getting income from it. But, if he sells it, he will not have an
insurable interest left in that taxicab.

From above example, we can conclude that, ownership plays a very crucial
role in evaluating insurable interest. Every person has an insurable interest in
his own life. A merchant has insurable interest in his business of trading.
Similarly, a creditor has insurable interest in his debtor.

 Principle of Indemnity

  Indemnity means security, protection and compensation given against

damage, loss or injury. According to the principle of indemnity, an insurance
contract is signed only for getting protection against unpredicted financial
losses arising due to future uncertainties. Insurance contract is not made for
making profit else its sole purpose is to give compensation in case of any
damage or loss.

In an insurance contract, the amount of compensations paid is in proportion to

the incurred losses. The amount of compensations is limited to the amount
assured or the actual losses, whichever is less. The compensation must not be
28
less or more than the actual damage. Compensation is not paid if the specified
loss does not happen due to a particular reason during a specific time period.
Thus, insurance is only for giving protection against losses and not for making
profit. However, in case of life insurance, the principle of indemnity does not
apply because the value of human life cannot be measured in terms of money.

 Principle of Contribution

  Principle of Contribution is a corollary of the principle of

indemnity. It applies to all contracts of indemnity, if the insured has taken out
more than one policy on the same subject matter. According to this principle,
the insured can claim the compensation only to the extent of actual loss either
from all insurers or from any one insurer. If one insurer pays full
compensation then that insurer can claim proportionate claim from the other
insurers.

For example: - Mr. John insures his property worth $ 100,000 with two
insurers "AIG Ltd." for $ 90,000 and "MetLife Ltd." for $ 60,000. John's
actual property destroyed is worth $ 60,000, then Mr. John can claim the full
loss of $ 60,000 either from AIG Ltd. or MetLife Ltd., or he can claim $
36,000 from AIG Ltd. and $ 24,000 from Metlife Ltd.

 Principle of Subrogation

 Subrogation means substituting one creditor for another.

Principle of Subrogation is an extension and another corollary of the principle
of indemnity. It also applies to all contracts of indemnity.

According to the principle of subrogation, when the insured is compensated

for the losses due to damage to his insured property, then the ownership right
of such property shifts to the insurer.

This principle is applicable only when the damaged property has any value
after the event causing the damage. The insurer can benefit out of subrogation

29
rights only to the extent of the amount he has paid to the insured as
compensation.

For example: - Mr. John insures his house for $ 1 million. The house is totally
destroyed by the negligence of his neighbor Mr. Tom. The insurance company
shall settle the claim of Mr. John for $ 1 million. At the same time, it can file a
law suit against Mr. Tom for $ 1.2 million, the market value of the house. If
insurance company wins the case and collects $ 1.2 million from Mr. Tom,
then the insurance company will retain $ 1 million (which it has already paid
to Mr. John) plus other expenses such as court fees. The balance amount, if
any will be given to Mr. John, the insured.

 Principle of Loss Minimization

 According to the Principle of Loss Minimization, insured must

always try his level best to minimize the loss of his insured property, in case of
uncertain events like a fire outbreak or blast, etc. The insured must take all
possible measures and necessary steps to control and reduce the losses in such
a scenario. The insured must not neglect and behave irresponsibly during such
events just because the property is insured. Hence it is a responsibility of the
insured to protect his insured property and avoid further losses.

For example: - Assume, Mr. John's house is set on fire due to an electric
short-circuit. In this tragic scenario, Mr. John must try his level best to stop
fire by all possible means, like first calling nearest fire department office,
asking neighbors for emergency fire extinguishers, etc. He must not remain
inactive and watch his house burning hoping, "Why should I worry? I've
insured my house."

 Principle of Causa Proxima (Nearest Cause)

 Principle of Causa Proxima (a Latin phrase), or in simple

English words, the Principle of Proximate (i.e. Nearest) Cause, means when a
loss is caused by more than one causes, the proximate or the nearest or the

30
closest cause should be taken into consideration to decide the liability of the
insurer.

The principle states that to find out whether the insurer is liable for the loss or
not, the proximate (closest) and not the remote (farest) must be looked into.

For example: - A cargo ship's base was punctured due to rats and so sea water
entered and cargo was damaged. Here there are two causes for the damage of
the cargo ship - (i) The cargo ship getting punctured because of rats, and (ii)
The sea water entering ship through puncture. The risk of sea water is insured
but the first cause is not. The nearest cause of damage is sea water which is
insured and therefore the insurer must pay the compensation.

UNIT 2
_______________________________________________

2.1 INTRODUCTION TO LIFE INSURANCE

POLICIES
31
2.2 HISTORY OF LIFE INSURANCE POLICIES

2.3 PROFILE OF THE INDUSTRY

2.4 BENEFITS OF LIFE INSURANCE POLICIES

2.5 TYPES OF LIFE INSURANCE POLICIES

_______________________________________________

2.1 INTRODUCTION OF LIFE INSURANCE

POLICIES.

Life insurance (or life assurance, especially in the Commonwealth of

Nations) is a contract between an insurance policy holder and an insurer or
assurer, where the insurer promises to pay a designated beneficiary a sum of
money (the benefit) in exchange for a premium, upon the death of an insured
person (often the policy holder). Depending on the contract, other events such
as terminal illness or critical illness can also trigger payment. The policy
holder typically pays a premium, either regularly or as one lump sum. Other
expenses, such as funeral expenses, can also be included in the benefits.

32
Life policies are legal contracts and the terms of the contract describe the
limitations of the insured events. Specific exclusions are often written into the
contract to limit the liability of the insurer; common examples are claims
relating to suicide, fraud, war, riot, and civil commotion.

Life-based contracts tend to fall into two major categories:

 Protection policies designed to provide a benefit, typically a lump sum

payment, in the event of a specified occurrence. A common form more
common in years past of a protection policy design is term insurance.
 Investment policies the main objective of these policies is to facilitate
the growth of capital by regular or single premiums. Common forms
(in the U.S.) are whole life, universal life, and variable life policies.

2.2 HISTORY OF LIFE INSURANCE POLICIES

An early form of life insurance dates to Ancient Rome; "burial clubs" covered
the cost of members' funeral expenses and assisted survivors financially. The
first company to offer life insurance in modern times was the Amicable Society
for a Perpetual Assurance Office, founded in London in 1706 by William
Talbot and Sir Thomas Allen.

Each member made an annual payment per share on one to three shares with
consideration to age of the members being twelve to fifty-five.

At the end of the year a portion of the "amicable contribution" was divided
among the wives and children of deceased members, in proportion to the
number of shares the heirs owned. The Amicable Society started with 2000
members.

The first life table was written by Edmund Halley in 1693, but it was only in
the 1750s that the necessary mathematical and statistical tools were in place
for the development of modern life insurance. James Dodson,
a mathematician, and actuary, tried to establish a new company aimed at
correctly offsetting the risks of long term life assurance policies, after being
refused admission to the Amicable Life Assurance Society because of his
33
advanced age. He was unsuccessful in his attempts at procuring a charter from
the government.

His disciple, Edward Rowe Mores, was able to establish the Society for

Equitable Assurances on Lives and Survivorship in 1762. It was the world's
first mutual insurer and it pioneered age based premiums based on mortality
rate laying "the framework for scientific insurance practice and
development" and "the basis of modern life assurance upon which all life
assurance schemes were subsequently based".

Mores also gave the name actuary to the chief official—the earliest known
reference to the position as a business concern. The first modern actuary
was William Morgan, who served from 1775 to 1830. In 1776 the Society
carried out the first actuarial valuation of liabilities and subsequently
distributed the first reversionary bonus (1781) and interim bonus (1809)
among its members. It also used regular valuations to balance competing
interests. The Society sought to treat its members equitably and the Directors
tried to ensure that policyholders received a fair return on their investments.
Premiums were regulated according to age, and anybody could be admitted
regardless of their state of health and other circumstances.

The sale of life insurance in the U.S. began in the 1760s.

The Presbyterian Synods in Philadelphia and New York City created the
Corporation for Relief of Poor and Distressed Widows and Children of
Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund
in 1769. Between 1787 and 1837 more than two dozen life insurance
companies were started, but fewer than half a dozen survived. In the 1870s,
military officers banded together to found both the Army (AAFMAA) and
the Navy Mutual Aid Association (Navy Mutual), inspired by the plight of
widows and orphans left stranded in the West after the Battle of the Little Big
Horn, and of the families of U.S. sailors who died at sea.

34
2.3 PROFILE OF THE INDUSTRY:

History and Development of Life Insurance

1. Life Insurance, in its present form, came to India from the United Kingdom
With establishment of a British firm, Oriental Life Insurance Company in
Calcutta in 1818, followed by Bombay Life Assurance Company in 1823, the
Madras Equitable Life Insurance society in 1829 and Oriental Government
Security Assurance company in 1874. Prior to 1871, Indian Lives were treated
as sub-standard and charged an extra premium of 15% to 20% . Bombay
Mutual Life Assurance Society, a Indian insurer which came into existence in
1871 was the first to cover Indian lives at normal rates.

2. The Indian life Assurance Companies Act, 1912 was the first statutory
measure to regulate life insurance business. Later, in 1928, the Indian
Insurance Companies Act was enacted, to enable the government to collect
statistical Information about both life and non-life insurance business
transacted in India by Indian and foreign insurers, including the provident
insurance societies. Comprehensive arrangement was, however, brought into
effect with the enactment of the Insurance Act, 1938. Efforts in this direction
continued progressively and the act was amended in 1950, making far-
reaching changes, such as requirement of equity capital for companies
carrying on life insurance business,
ceiling on share holdings in such companies, submission of periodical return
relating to investments and such other information to the controller of
insurance as he many call for, appointment of administrator for mismanaged
companies, ceiling on expenses of management and agency commission,
incorporation of the Insurance association of India and formation of councils
and committees thereof.

3. By 1956, 154 Indian insurers, 16 non-Indian insurers and 15 provident

societies were carrying online insurance business in India. On 19th January
1956, the management of the entire life insurance business of 229 Indian
insurers and provident insurance societies and the Indian life insurance
business of 16 non Indian Life insurance companies then operating in India,
35
was taken over by the central Government and then nationalized on 1st
September 1956 when the Life Insurance Corporation came into exist.

 PROFILE OF THE ORGANISATIONS:

LIFE INSURANCE CORPORATION OF INDIA

Life Insurance corporation of India was formed in September 1956 by passing
LIC Act, 1956 in Indian parliament. On the nationalization of the life
insurance in 1956, the premium rating of Oriental Government security life
Assurance company were adopted by LIC with a reduction of 5% of the
tabular premium or Re. 1 per thousand sum assured, whichever was less. This
reduction was made in anticipation of economies of scale that would emerge
on the merger of different insurers in a single entity. Life Insurance
Corporation Of India - there are many things to consider as Life Insurance
Corporation Of India offers various insurance products which are very
complex, but underlying this complexity is a simple fact. The building blocks
for all Life Insurance Corporation of India are (1) investment return; (2)
mortality experience; and (3) expense management; for your Life Insurance
Corporation Of India. LIC is the biggest insurance player in the country.
Out of the total premium of Rs 3766 crore generated by the insurance industry
through group business in the year 2005-06, LIC alone accounted for Rs 3051
crore.
In the financial year 2005-06, LIC has grown at 30.68%. In respect of
number of lives insured, LIC has shown a growth of over 152%. In respect of
number of schemes, LIC has a growth of 2%. LIC's market share in number of
individuals covered and number of policies stands at 77% and 81%,
respectively.

2.4 BENEFITS OF LIFE INSURANCE POLICIES:

1) Superior to any other savings plan:

36
 Unlike any other savings plan, a life insurance policy affords full
protection against risk of death. In the event of death of a policy holder, the
insurance company makes available the full sum assured to policy holder’s
near and dear ones. In comparison, any other savings plan would amount to
only the total savings plan accumulated till date. If the death occurs
prematurely, such savings can be much less than the sum assured which means
that the potential financial loss to the family is sizable.

2) Encourages and Forces Thrifts:

A saving deposit can easily be withdrawn. The payment of life insurance

premium, however, is considered sacrosanct and is viewed with the same
seriousness as the payment of interest on a mortgage. Thus, a life insurance
policy in effect brings about compulsory savings.

3) Easy settlement and protection against creditors:

A life insurance policy is the only financial instrument the proceeds of

which can be protected against the claims of a creditor of the assured by
effecting a valid assignment of the policy.

4) Administering the Legacy for Beneficiaries:

Speculative or unwise expenses can quickly cause the proceeds to be

squandered. Several policies have foreseen this possibility and provide for
payment over a period of years or in a combination of installments and lump
sum amounts.

5) Ready Marketability and suitability for quick borrowing:

A life insurance policy can, after a certain time period (generally three years)
be surrendered for a cash value. The policy is also acceptable as a security for
a commercial loan, for example, a student loan.

6) Disability Benefits:

37
 Death is not the only hazard that is insured; many policies also include
disability benefits. Typically, these provide for waiver of future premiums and
payment of monthly installments spread over a certain time period.

7) Accidental death Benefits:

Many policies can also provide for an extra sum to be paid (typically equal
to the sum assured) if death occurs as a result of accident

2.5 TYPES OF LIFE INSURANCE POLICIES

1. Whole life insurance

Whole life is a form of permanent insurance, with guaranteed rates and
guaranteed cash values. It is the least flexible form of permanent insurance.

2. Universal life insurance

Universal life is similar to whole life, except that you can change the death
benefit (the money paid to the beneficiary when the insured person dies), the
amount of premiums and how often you pay the premiums.

3. Variable life insurance

Variable life insurance is the riskiest form of permanent insurance, but it can
also give you the best return for your money. Essentially, the life insurance
company will invest your insurance premiums for you. If the investments do
well, the death benefit and cash value of the policy go up. If they do poorly,
they go down. It's a little like putting your savings into the stock market.

4. Group life insurance

Many companies allow their employees to buy group life insurance through
the company. Usually, you can get very good rates for this insurance but you
have to give the insurance up when you stop working there. For that reason,
group insurance can be a good way to buy a little extra life insurance, but it
does not make sense to make it your main policy.

38
There are a number of policies for specific insurance needs.
Some of these include:

1. Family income life insurance.

This is a decreasing term policy that provides a stated income for a fixed
period of time, if the insured person dies during the term of coverage. These
payments Continue until the end of a time period specified when the policy is
purchased.

2. Family insurance.
A whole life policy that insures all the members of an immediate family --
husband, wife and children. Usually the coverage is sold in units per person,
with the primary wage-earner insured for the greatest amount.

3. Senior life insurance.

Also known as graded death benefit plans, they provide for a graded amount to
be paid to the beneficiary. For example, in each of the first three to five years
after the insured dies, the death benefit slowly increases. After that period, the
entire death benefit is paid to the beneficiary.
4. Juvenile insurance.
This is life insurance on a child. Coverage is paid for by an adult, usually the
parents or guardians. Such policies are not considered traditional life insurance
because the child is not producing an income that needs to be protected.
However, by buying the policy when the child is young, the parents are able to
lock in an extremely low premium rate and allow many more years of tax-
deferred cash value buildup.

5. Credit life insurance.

This insurance is designed to pay off the balance of a loan if you die before
you have repaid it. Credit life insurance is available for many kinds of loans
including student loans, auto loans, farm equipment loans, furniture and other
personal loans including credit cards. Credit life insurance can be purchased
by an individual. Usually it is sold by financial institutions making loans, like

39
banks, to borrowers at the time they take out the loan. If a borrower dies, the
proceeds of the policy repays the loan directly to the lender or creditor.

6. Mortgage insurance
This decreasing term coverage is designed to pay off the unpaid balance of a
Mortgage if you die before the mortgage is paid off. Premiums are generally
level throughout the term of the policy. The policy is usually independent of
the Mortgage, meaning that the financial institution granting the mortgage is
separate from the insurance company issuing the policy. The proceeds of the
policy are paid to the beneficiaries of the policy, not the mortgage company.
The beneficiary is not required to use the proceeds to pay off the mortgage

7. Annuity
An annuity is a form of insurance that enables you to save for your retirement.
Basically, you give the insurance company money for a certain period of time,
and then after you retire they will pay you a certain amount of money every
year until you die. There are many different forms of annuities. Most people
who buy annuities are 55 or older

UNIT 3
_______________________________________________

3. CONSUMER PERCEPTION ON LIFE

INSURANCE.
40
 BUSINESS OF LIFE INSURANCE COMPANY.
 CONSUMER REDRESSAL SALES.

 CLAIM SETTLEMENT PROCEDURES.

 COMPLAINT HANDLING SYSTEM.

 INITIATIVES TO MAKE CLAIM SETTLEMENT

PROCEDURES SMOOTH.

3.1 BUSINESS OF LIFE INSURANCE COMPANIES

Insurance companies base their business models around assuming and

diversifying risk. The essential insurance model involves pooling risk from
individual payers and redistributing it across a larger portfolio. Most insurance
companies generate revenue in two ways: charging premiums in exchange for
insurance policy coverage, then reinvesting those premiums into other interest-
generating assets. Like all private business models, insurance companies
should try to market effectively and minimize administrative costs.

Pricing and Assuming Risk

Revenue model specifics vary among health insurance companies, property
insurance companies and financial guarantors. The first task of any insurer,
however, is to price risk and charge a premium for assuming it.
41
Suppose the insurance company is offering a $100,000 conditional payout. It
needs to assess how likely a prospective buyer is to trigger the conditional
payment and extend that risk based on the length of the policy. This is where
insurance underwriting is critical. Without good underwriting, the insurance
company would charge some customers too much and others too little for
assuming risk. This could price out the least risky customers, eventually
causing rates to increase even further. If a company prices its risk effectively,
it should bring in more revenue in premiums than it spends on conditional
payouts.

Interest Earnings And Revenue

Suppose the insurance company receives $1 million in premiums for its
policies. It could hold onto the money in cash or place it into a savings
account, but that is not as efficient. At the very least, those savings are going
to be exposed to inflation risk. The company can find safe, short-term assets to
invest its funds. This generates additional interest revenue for the company
while it waits for possible payouts. Common instruments include Treasury
bonds, high-grade corporate bonds and interest-bearing cash equivalents.

Claims and Loss Handling

The real product of the insurer is insurance claims. When a customer files a
claim, the company must process it, check it for accuracy and submit payment.
This adjusting process is necessary to filter out fraudulent claims and
minimize risk of loss to the company.

3.2 CONSUMER REDRESSAL SALES

PROCESS
Workflow for Grievance Redressal as handled by sites such as ActPlease.com
Organizations define their own process flows for grievance redressal. These
are rarely made known to the public in case of private businesses;
governments and non-profits usually share voluntarily or by mandate the
hierarchy of officers responsible for taking corrective action. Some

42
organizations maintain a custom-developed ticketing software, while others
count onSaaSPortals such as ActPlease.com. Feedback Portals such as
TripAdvisor and Yelp are driven by consumers, and organizations / businesses
have the option to join and participate. Depending on the desire to correct as
well as level of transparency of the organization, grievance redressal flow can
include the following steps:

INPUT ACCEPTANCE
Customers convey their grievance to the organization through feedback forms,
letters, registered communications, emails, etc. These inputs may be submitted
by mail, over the Internet, or in person.

ANONYMITY
Customers are often reluctant to report grievances that target individual
executives of the organization, especially those who may influence their future
interactions or have the potential to take vengeance. Under such conditions,
the organization needs to assure the customer that her identity will be hidden
from executives, and preferably from everyone.
This, however, opens the potential problem of deceitful negative inputs
purposefully targeted against specific executives, as the people reporting are
kept anonymous.

SPAM PREVENTION
Feedback forms on website are prone to spam submissions. There are cases
when employees themselves submit feedback - positive for their professional
gain, and negative if targeting colleagues. Some service centers make
employees sign blank feedback forms to create positive statistics. Such
situations can be prevented by seeking verification of identity of customers.
This is especially possible on online setups, such as ActPlease.com, which
uses SMS to verify the authenticity of the mobile number of reporter. Basic
tools such as Captcha can prevent automatic spammers. Mass submission of
false feedback becomes less likely and easy to detect in case of paper-based
submission.

43
ACKNOWLEDGEMENT & STATUS TRACKING
Customers tend to develop much greater confidence in the grievance and
feedback mechanism if they are given a formal acknowledgement. The
acknowledgement could be by SMS and Email, as used by ActPlease.com, or
simply by publicly posting their message on the appropriate forum, such
as TripAdvisor. Ticketing Systems such as osTicket and Fresh Desk, as well as
SaaS systems such as ActPlease respond with acknowledgements with unique
tracking numbers. These may be used by customers to check status of action
taken on their complaint.

FORWARDING
Paper-based feedback as well as standard feedback forms on websites usually
forward inputs to a single officer or email address. This naturally causes scope
for delay or failure to reach the right persons. However, smarter ticketing
systems sort grievances based on their classification, and then redirect each to
their relevant executive(s) instantly.

ESCALATION
Smart Grievance Portals such as ActPlease expect organizations to configure
typical action time for each type of complaint, as well as set up the hierarchy
for escalation. When an executive fails to take corrective action in time, the
matter is promoted to the officer next in line in seniority.

ACTION
Computerized and web-based systems have an advantage over paper-based
systems as they can alert the reporter immediately upon completion of action,
as marked by the executive in charge.

VERIFICATION
Customer may certify, if applicable and asked, whether the corrective action
taken on their grievance satisfies them or is not substantial enough. Should it

44
not be, the complaint may be marked as pending again, or be forwarded to a
more senior officer in escalated form.
Measurements
The effectiveness of implementation of a grievance redressal mechanism can
be calculated with the following parameters:
 Count of cases received
 Nature of cases received

 Acceptance of anonymous feedback

 Ratio of false inputs

 Time taken for corrective action

 Escalations required

 Confirmations & rejections after completion

 Repeat nature of grievances

3.3 PROCEDURE OF CLAIM SETTLEMENT

MATURITY BENEFIT

If the policyholder lives through the duration of the policy and becomes
eligible to get the maturity value it is called the settlement of a maturity claim.
As the policyholder is alive, the nomination is of no significance. Age is
normally admitted at the stage of the proposal. If it has not been admitted for
some reason, it is necessary to submit the age proof before the payment of the
maturity value. Much before the date of maturity the insurer sends the claim
discharge voucher which has to be returned duly signed and witnessed along
with the policy document for payment of the maturity value.

45
DEATH CLAIM

In case of the death of the policyholder at anytime during the duration of the
policy, the claim amount becomes payable to the nominee mentioned in the
policy document. The nominee or the nearest relative shall send an intimation
of death of the policyholder to the insurer stating therein the fact of death, the
date of death, cause of death and the place of death along with the policy
number. Insurer deals with the death claim differently on the basis of the
duration or the policy. If the policyholder has died within two years of the
commencement of the policy, i.e., acceptance of risk which may be different
from the date of commencement if the policy has been dated back it is treated
as “early or premature claim” and if the death has occurred after 2 yrs of the
commencement, it is treated as normal death claim. In a normal death claim,
that is if the life assured has died after two years of the commencement of risk,
the insurer, on being intimated about the death of the policyholder, calls for
the age proof, if not earlier admitted, the original policy document and proof
of death. The proof of death can be a certificate from the municipal authorities
under which cremation has taken place, or other local body like death registry.
The claimant generally is required to fill in a form giving certain routine
information about his title to the policy money and the information relating to
death, which is normally called a claimant’s statement.

PREMATURE CLAIM
It is a premature claim if the death has occurred within two years from the
commencement of the policy or the date of last revival, or medical
examination. The insurer takes certain precautions before making payment
under such a premature claim. It wants to satisfy itself that it is a genuine case
i.e., the correct policyholder has died and that the cause of death does not go
back to a date prior to the commencement of the policy. The duration of last
illness is of vital importance to eliminate any fraudulent intention. Last
medical attendants’ certificate, hospital report, burial certificate, employees’
leave record, if he was an employee in a reputed firm etc,

46
are the different records examined and normally a senior officer is deputed by
the insurer to make on the spot investigation, through neighbors, colleagues or
doctor of the locality.

As the revival of the policy is a de novo contract of insurance, the insurer

would like to verify whether the statement contained in the declaration of good
health given at the time of revival is correct. If such a statement is proved
fraudulent relating to a material fact, the claim, may be rejected. Life
insurance is a contract of utmost good faith and good faith has to be observed,
not only at the time of the proposal, but also at the time of the revival of the
policy whenever it is done. In case there is a rival claimant to the insurance
money, the insurer can get a valid discharge by paying to the nominee. The
rival claimant can approach a court of law which may order to stop the
payment till the case is finally disposed of.
However if there is no nomination under the policy, the insurer shall await a
valid title through either a will or a probate as a letter of administration or a
succession certificate. It may take quite sometime to get such certificate from
the court and in the meantime the family may suffer. A good agent therefore
shall ensure that there is a valid nomination or assignment.
If there is an assignment, the policy money is paid to the assignee. If there is a
reassignment of the policy, it is necessary that a fresh nomination is done, as
assignment invalidates the existing nomination. However, if there is a
nomination in favor of the insurer for taking any loan, the nomination is said
to be unaffected subject to the claim of the insurer. If the premature death has
been due to an accident, it is necessary to get a police inquiry report in lieu of
the attending physician certificate. Suicide, if it has taken place within one
year of the beginning of the risk, exempts the insurer from the liability of the
payment of the claim. The propensity to commit suicide is a moral hazard and
is not expected to continue beyond one year. If the policyholder disappears
and he has not been heard of for 7 years by those who would naturally have
heard of him, if he had been alive, he is presumed dead as per Sec 108 of the
Indian–Evidence Act, 1872. However, it is necessary to keep the policy in
force during this period by payment of the due premiums on the due dates.

47
CLAIM CONCESSION
Normally, a death claim becomes payable so long as the policy is kept in force
by payment of due premium. In other words if say the payment of premium is
stopped and the grace period expires and if the death occurs thereafter the
policy is treated as lapsed or paid up depending upon whether the premium
has been paid for less than 3 yrs or 3yrs & more. Under a lapsed policy no
claim is payable. In case of a paid up policy, only the paid up value is payable.
However, some companies provide certain concessions with regard to the
claim payment, if the policy has run for 3 yrs or more:

1. If the premiums under a policy have been paid for a minimum period of
three full years, and the life assured has died within 6 months from the date of
the first unpaid premium insurer pays the full sum assured instead of the paid
up value and only the unpaid premiums for the policy year are deducted from
the claim amount.

2. This concession is extended to a period of twelve months and the full sum
assured is paid if the life assured dies within one year from the due date of the
first unpaid premium, provided the premiums have been paid for a minimum
period of 5 years subject to deduction of the unpaid premiums for the policy
year.

EX GRATIA CLAIM
When a policy has not acquired paid up value and claim concession rules are
not applicable, nothing is payable in case of death. However some insurers
relax the rules in favor of the claimant. If the premiums have been paid for
more than 2 years and (a) the death occurs within three months from the first
unpaid premium, full sum assured with bonus, if any, is payable (b) if the
death occurs after 3 months, but within 6 months, half the sum assured is paid
(c) if the death occurs within one year from first unpaid premium, notional
paid up value is paid. Under the first condition, the unpaid premium with

48
interest for the policy year of death will be deducted from the claim and no
deduction is made in the other two conditions.

3.3 COMPLAINT HANDLING SYSTEM

PREFACE:
IRDA has enacted the Protection of Policyholders’ Interests (PPI) Regulations,
2002 for safeguarding the interests of policy holders. Accordingly, Insurance
companies are required to have in place, a speedy and effective Grievance
Redressal Mechanism. On July 27, 2010, IRDA has subsequently issued
guidelines to all insurance companies under ‘Guidelines for redressal of
grievances’ regarding time frames for complaint resolution and
definition/classifications with respect to grievance redressal to be followed by
insurance companies.
Accordingly, Life Insurance company had defined a grievance redressal policy
for resolving complaints, which is reviewed periodically to ensure adherence
to IRDA guidelines and approved its policy in 2010.
As a practice, the policy must be reviewed regularly. Accordingly, the policy
has been reviewed and some changes have been made

1) COMPLAINT MANAGEMENT PHILOSOPHY:

In FY 2014-15, LIC embarked on a mission of creating Customer trust
surplus. Our Endeavour is to provide Customers with a superior Customer
experience, which is achieved by being:

 Insightful: Engage with our Customers, build loyalty and deepen

relationships
 Innovative: Create differentiation in market through technological
innovations and providing convenience for Customers
 Integrating: Processes/functions integration and usage of effective
communication
At LIC, we believe that our unhappy Customers are a very important source of
learning.

49
Our Philosophy:
 Accessibility: Be easily accessible to ours Customer. All interactions
to be dealt with high sensitivity, accuracy and resolved in time
 Transparency: Be fair and consistent in all decisions
 Solution oriented & open to appeal: Present all solutions/options for
escalation to the Customer
 Feedback oriented: Learn and improve from each complaint/feedback

2) DEFINITION OF A CUSTOMER:

Based on our experience, Customer is defined as the following:

 Prospective Customer
 Applicant
 Policyholder
 Representative of Customer (relative or Authorized person by
Customer)
 Customer’s Agent (Distributor)
 Claimant
Please note: All interactions would need to satisfy the security procedures
defined by the Company for any information

3) CATEGORISATION OF CUSTOMER INTERACTIONS:

50
 Query: Customer contacts the Company primarily for information
about the policy and/or its services and/or follows up on a status of a particular
request within the stipulated regulatory time frame.
e.g. Information related to policy features, premium due, fund value, claim
procedure, follow up on status of policy within regulatory timeframe as
prescribed in the IRDA servicing TATs.
 Request: Communication received from a Customer soliciting a
service such as a change or modification in the policy/requests for statement.
e.g. change in nomination, increase / decrease in sum assured, placing of a
surrender request, request for a duplicate renewal premium receipt, request for
unit statement (Policy account statement), etc
 Grievance: Customer communicates and expresses dissatisfaction
as there has been a lapse / deficiency in service
Company has defined its ‘service delivery standards’ for its core service
delivery processes in line with the regulatory guidelines. This would be a
base to ascertain deficiency of service.

 Critical Request: Request /Query received from Customer has been

processed by the Company as per regulatory guidelines and in line with the
Company’s policy/process; however, the Customer does not acknowledge the
same. These cases would be categorized as “Critical Requests” for re-
execution / re-investigation of the request/query.
e.g. Customer perceives that there has been an error in data entry. However, it
is found that the data entry is as per ‘application form’. Depending on the
categorization of the complaint, the TATs and work groups assisting in
resolution of the case defers.

4) MULTI-CHANNEL SERVICE ARCHITECTURE:

In line with our philosophy, customers have several options to interact with
the Company and register a grievance. It is our endeavor to be easily
accessible and Customers may opt for any channel based on customer
convenience.

51
 Contact centre: Customer may call the contact centre between 9 am –
9 pm, Monday through Saturday. A grievance is registered after authenticating
the customer by asking the relevant security questions. All the calls are
recorded and stored in line with the Company policy
 E-mail: Customer may send an e-mail to from registered e-mail id
with complete details of the concern faced by the Customer.
 Company website: Customer may register a grievance on the
Company website -www.lifeinsurance company.com by clicking on the
‘Grievance Redressal’ link
 Branch office/Other Service Partner office: Customer may visit any
LIC/other service partner branch office and submit complaint letter duly
signed by the policy holder
 Letter: Complaint letter duly signed by the policy holder may be
dispatched to any LIC corporate office
 Social media: If a customer raises concerns on any LIC social media
platform, the complaint is addressed and resolution is provided to the customer
after due verification of the Customer.
In case of any escalated grievances, the authentication is obtained from the
policy holders by Complaints Management Team through an outbound call by
asking the relevant security questions.
5) CUSTOMER RELATIONSHIP MANAGEMENT (CRM):
The Company has an automated CRM in place. All the customer contact
points use this system to register every interaction with the customer. The
CRM enables the customer service teams to get a single view of the customer.
For complaints, this system is integrated with IRDA’s IGMS portal and
provides history of all interactions.

6) GRIEVANCE HANDLING AND RESOLUTION PROCESS:

The grievance redressal mechanism ensures that policy holders are provided
with a quick and fair resolution by establishing a robust resolution process as
elaborated below:
 All touch points are equipped to understand and address customer
concerns. Based on the categorization norms, a grievance is registered by the

52
respective touch point. The customer is provided with a unique reference
number on registering the grievance, which can be quoted for ascertaining the
resolution status. This reference number is an auto generated number by the
CRM system.
 Complaint resolution is handled by a dedicated team designated as
Complaints Management Team who specialize in grievance redressal role and
are empowered to take decisions
 Written acknowledgment is sent to policy holders within 3 working
days containing a timeline for resolution, name & designation of the officer
addressing the grievance, details of LIC’s grievance redressal procedure
 The complaint decisions are taken according to the authority matrix in
place where monetary limits for various types of approvals have been
prescribed for each approver
 After resolving the complaint, Complaints Management Team
communicates the response (i.e. acceptance/ rejection) to the complainant as
early as possible and within 15 days from the date of the receipt of the
complaint. The response sent contains the following:
a) The process by which the complainant may pursue the complaint, if
dissatisfied with the resolution communicated b) LIC will consider the
complaint as closed if the complainant does not revert to LIC within 8 weeks
from the date of LIC’s response communicated
 The complaints are disposed fairly and swiftly within a maximum of
15 days maximum turnaround as per IRDA guidelines. The Company has also
defined internal TATs for resolution based on the complaint category.
Accordingly, the TAT communicated to the customer is based on the TAT
defined by the Company for the relevant complaint category

7) ESCALATION MECHANISM:
To ensure that Customers are provided with fair resolution for their grievances
and have access to an appropriate appeal mechanism if not satisfied, a 4-tier
escalation mechanism has been set up. Accordingly, the escalation mechanism
comprises of the following 4 levels:

53
 Basic Redressal:
First time complaints are received at the Basic Redressal level, which is the 1st
tier of the Grievance Redressal mechanism.

 Grievance Redressal Officer:

Policy holders can pursue the complaint with the Grievance Redressal Officer,
which is the 2nd tier of the Grievance Redressal mechanism. All offices of
Birla Sun Life Insurance have a designated Grievance Redressal Officer
appointed. At the branch level, the senior most official viz. Branch
Manager/Branch head etc. has been appointed as Grievance Redressal Officer.
At central level, Head – Service Assurance is designated as the GRO.

 Chief Grievance Redressal Officer:

Policy holders can pursue the complaint with the Chief Grievance Redressal
Officer, which is the 3rd tier of the Grievance Redressal mechanism.

 Grievance Redressal Committee (GRC):

Policy holders can pursue the complaint with the Grievance Redressal
Committee, which is the 4th tier and final level of the Grievance Redressal
mechanism in the Company. Claimants can also submit any claims
representations/claim repudiation representations before the Grievance
Redressal Committee. The Grievance Redressal Committee is a cross
functional committee. It is presided over by an external member with
experience in the Insurance Industry. Besides, the Committee also comprised
of the Chief Compliance Officer, Chief Operating Officer, Head-Legal, Head-
Customer Service & Claims, functional teams. It is the apex decision making
body for grievance redressal.
If the policy holder is still not satisfied after having approached all 4 tiers
mentioned in the Grievance Redressal mechanism, they are directed to
approach the Insurance Ombudsman for redressal of their grievances.

8) REPEAT COMPLAINTS MANAGEMENT:

54
If the customer wishes to represent / pursue the complaint, he may approach the
levels mentioned in the Escalation Mechanism. On the basis of the escalation level,
the complaint is referred to the appropriate decision making authority.

Grievance Redressal Decision making

Level 1 Service Assurance hierarchy based on
approval limits
Level 2 Service Assurance hierarchy based on
approval limits
Level 3 Compliance team
Level 4 Grievance Redressal Committee (GRC)
If after approaching all the levels mentioned in the Escalation Mechanism, the
customer still wishes to pursue the complaint, he may approach the Insurance
Ombudsman. For the same type of complaint, Company would register one
complaint

9) QUALITY EVALUATION:
There is a complaint evaluation process where complaints resolved by all the
Service Assurance team members are evaluated on sample basis. The
evaluation is done by neutral team based on various parameters impacting
accuracy and quality of resolution provided. Parameters where wrong
information is given are marked as fatal errors, which impact the quality
scores of the team members. This is a bi-monthly process.

10) TRAINING:
All customer service touch points are provided with training at regular
intervals. The training sessions cover the following aspects:

 Complaint handling sensitivity & decision making process

 Soft skills enhancement
 Product knowledge

11) CUSTOMER FEEDBACK:

As a practice, we believe a capturing representative customer feedback across
all the service transactions. This helps in understanding customer expectations
and gaps in service delivery. Different modes such as SMS, IVR and calls are
55
used to capture feedback. In case of complaints, at the end of the resolution
call, Customer feedback is sought and tracked for improvement and to gather
learning’s.

12) REVIEW MECHANISM:

 Root Cause Analysis (RCA):

Grievances provide the Company with an opportunity to review processes for

identifying gaps and initiating corrective action. Accordingly, Root Cause
Analysis (RCA) for all complaints received is done where gaps are identified
and highlighted to the respective stakeholders for initiating corrective action.
Regular MIS reports are circulated and all action plans are tracked till closure.

3.4 INITIATIVES TO MAKE CLAIM SETTLEMENT

PROCEDURES SMOOTH.

The death of a near one can leave the family facing a tough situation. While
nothing can assuage the feeling of bereavement, financial security can help the
family, to a small extent, cope with the situation. So, don’t stop at buying a
life policy. Be informed about the policy fine print and tell your family how to
claim the insurance money. Here is a step-by-step guide to filling a life
insurance claim.

Step 1 : Inform the insurer this can be done by calling up its call centre or
walking into the nearest branch. One can also get in touch with the agent the
policy was bought from. Keep the policy details handy.

Step 2 : The nominee will be required to give a claimant’s statement (a form

provided by the insurer for giving details about the deceased and the
claimant), original policy papers, death certificate and police first information
report (FIR) & postmortem report if the death is due to an accident. For
medical-related claims, you will have to arrange for medical reports such as
discharge summary and hospital records. The insurer can ask for additional
documents based on the cause of death, policy duration and risk cover (see
documents to be submitted).

56
Step 3 : The insurer starts the evaluation process. If it feels the need for a
further examination, it conducts an external investigation to check the veracity
of the claim.

Step 4 : The claim is settled after all documents are received.

Step 5 : Norms require that insurers settle all claims within 30 days of
completion of all requirements. If there is need for a further investigation,
according to norms, the insurer should complete the procedure within six
months of the written intimation of the claim. If it fails to do so, it has to pay
interest on the claim amount for the period the payment is delayed.

This steps now can be done online and we can also courier the documents to
the related company.

UNIT 4
____________________________________________

4.1 DATA ANALYSIS.

_______________________________________________

57
4.1 DATA ANALYSIS

DATA INTERPRETATION :- According to above

diagram, we can say that 82.20% have life insurance policy. Where
as, 17.80% do not have life insurance policy.

58
DATA INTERPRETATION :- From the above diagram, we can
say that the family influence people more to by life insurance as it
has highest 49.5% votes, then stands personal interest at 39.2%,
then friends at 20.6%, agents at 16.5%, advertisement 14.4% and
least tax benefit and security at 1% .

59
DATA INTERPRETATION :- From the above diagram, we can
say that 35% of people have policy cover of more than 1,00,000.
21% have coverage of 10,000 to 25,000. 20% of people have
coverage of 25,000 to 50,000. 14 % have coverage of 50,000 to
1,00,000 And 10% have coverage of less than 10,000.

60
DATA INTERPRETATION :- According to above diagram, we
can say that 59.4% people preferred to invest their money in a
Insurance company. Where as, 40.6% preferred to invest in Bank.

61
DATA INTERPRETATION :- From the following figure we can
say that, 84.2% people are satisfied with their current life insurance
company. Where as, 15.8% people are not satisfied with it.

62
DATA INTERPRETATION :- As per the following figure 13%
people think that services offered by their company is excellent,
where as 41% say it’s good, 34% say it’s very Good, 10% say it’s
average and rest of people say it’s poor.

DATA INTERPRETATION :- According to above diagram, we

can say that 85% of people would like to continue with their
existing company. Where as 15% would like to switch their current
life insurance company.

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DATA INTERPRETATION :- From the following figure, we
can say that 55% people have gone through claim settlement
process. Where as 45% have not gone through it.

64
DATA INTERPRETATION :- According to above figure, we
can say that 9.8% people think the claim settlement process was
excellent, where as 23.9% say it’s very good, 48.9% say it’s good,
15.2% people say it was average rest say it was poor.

DATA INTERPRETATION :- From the following diagram, we

can say that 77% people would like to recommend their company
to others, while 23% would not recommend it to other’s.

65
_______________________________________________

RECOMMENDATIONS & SUGGESTIONS

CONCLUSION

BIBLIOGRAPHY
66
 WEBILOGRAPHY

ANNEXURE

_______________________________________________

RECOMMENDATIONS & SUGGESTIONS

With regard to insurance products, consumers respond at different rates,

depending on the consumers characteristics. Hence Insurance companies
should try to bring their new product to the attention of potential early
adopters.

a) Due to the intense competition in the life insurance market, the life
insurance Companies have to adopt better strategies to attract more customers.

b) Keeping the cost, quality and return on investment in tact is necessary in

order to tackle the competition.

c) Life insurance products are taken mainly by middle and higher income
group. Hence they should be regarded as maim targeted income groups. Life
insurance products which are suitable for lower income group should also be
released so that the market share increases.

d) Return on investment company reputation and premium outflow are most

preferred attributes that are expected by the respondents. Hence greater focus
should be given to these attributes.

67
e) Private life insurance companies should adopt effective promotional
strategies to increase the awareness level among the consumers.

f) Life insurance companies should ask for their consumer feedback to know
whether the consumers are really satisfied or dissatisfied with the service and
product of the companies. If they are dissatisfied, then the reasons for
dissatisfaction should be found out and should be corrected in future.

g) The LIC brand name has earned a lot of goodwill and enjoys high brand
equity. As there is intense competition in life insurance market, LIC should
work hard to maintain its top position and offer better service and product.

CONCLUSION

This study titled “Study of Consumers Perception about Life Insurance

Policies” enables the Life Insurance Companies to understand how
consumer’s perception differs from person to person. How a consumer
selects, organizes and interprets the service quality and the product quality of
different Life Insurance Policies, offered by various Life Insurance Companies
The response of the insurance companies has been very positive and within a
short span on time, the Indian insurance market scenario has seen a perceptible
change in terms of improved customer service benchmarks and introduction of
innovative and tailors made products. Most of the insurance majors have
represented in the form of joint venture in Indian market.
The new products that have been introduced by the companies have certain
innovative features in terms of better customer services and also wider covers.
This has given customer ample choice to select products.

BIBLIOGRAPHY

TEXT BOOKS:-

1) Services Marketing : Ravi Shankar.

68
2) Marketing Management : Philip Kotler.
3) Consumer Behavior : Leon G Schiffman
Lestie Lazar Kanwk.
4) Principles of insurance Law : Dr. Avtar Singh.

WEBLIOGRAPHY:-

WWW.GOOGLE.COM
WWW.LIC.COM

ANNEXURE
QUESTIONNAIRE
A STUDY CONDUCTED TO UNDERSTAND THE CONSUMER’S
PERCEPTION ABOUT LIFE INSURANCE POLICIES
Name:
Age:
Address:
Occupation:

1. Do you have a Life Insurance Policy with any Life Insurance

Company?
Yes No
a) If yes, name the Company_____________________________
b) Name the policy which you own________________________

2. What factors influenced to buy Life Insurance Policy?

Personal interest
Friends
Family
Agents
Advertisements
Others

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3. What is the value of your life insurance?
Less Than 10,000
10,000-25,000
25,000-50,000
50,000-1, 00,000
More Than 1, 00,000

4. Do you prefer to invest your money in a Insurance company or in

a Bank?
Insurance Company
Bank
5. Are you satisfied with your current Life Insurance Company?

Yes No

If Yes Why? __________________________________________________

If No Why? ____________________________________________________

6. How do you rate the service offered by your Life Insurance

Company?
Excellent
Very Good
Good
Average
Poor

7. Would you like to continue with the same Life Insurance

Company?
Yes No 8.

8. Have you ever gone though the claim process?

Yes No

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9. How was the claim settlement on your company?

Excellent
Very Good
Good
Average
Poor

10. Would you like to recommend your insurance company to others?

Yes No

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