TOPIC: - A STUDY ON FACTORS AFFECTING CHOICE OF

INSURANCE POLICY BY INDIVIDUALS

Chapter no 1:-

Introduction to study (Insurance)

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

The transaction involves the insured assuming a guaranteed and known relatively
small loss in the form of payment to the insurer in exchange for the insurer's promise
to compensate (indemnify) the insured in the case of a financial (personal) loss. The
insured receives a contract, called the insurance policy, which details the conditions
and circumstances under which the insured will be financially compensated.

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1.1 Objective of the study

1. To explore the various factors influencing customer investment

decision in life insurance.

2. To explore the various factors influencing Individual investment

decision in life insurance.

3. To evaluate preferences of the customers while taking life insurance

investment decision

4. To offer suggestions for popularizing life insurance among the pubic .

5. To know about the total sum assured of life insurance.

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1.2 Limitations :

1. The sample size is small i.e. 100 respondents from Mumbai region.
2. The analysis is based on the perception and opinions of a limited number of
respondents.
3. Generalization of the study-the study cannot be universally applied.
4. Although different factors influencing the customer’s choice were taken, it may be
needed that other aspects and factors not taken into account needed to be explored and
studied.
5. There were financial and time constraints during the study.

Regulators

 Insurance Regulatory &Development Authority

 The laws which regulate the business

 Insurance Act 1938

 The Insurance Regulatory & Development Authority Act 1999

 Life Insurance Corporation Act 1956

 General Business (Nationalization) Act 1972

 The limit of the foreign Direct Investment (FDI)

 In life insurance Joint venture is maximum 26%

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1.3 Scope:
In this study both primary and secondary sources of data have been used. The primary
data was collected through a self- administered questionnaire that contained questions
relating to the objectives of the study. The questionnaire contains certain question
regarding awareness level and the attributes that investors consider while buying a life
insurance policy.

The Scope of the study Include;

1) The demographic profiles of respondents,
2) Monthly investments in insurance;
3) Factors consider while choosing an insurance policy*;
4) Awareness on Insure companies and policy details;
5) Duration of the policy and the target;
6) Sources of buying Insurance policy and premium payment methods; and choice of
Insurance Company. This study is confined only to the insurance customers’
perceptions in the city of Hyderabad. A sample of 75 insurance investors was
considered for the study from a huge population of various policy holders of life
Insurance, the sample covers both LIC and Private insurance companies but not
covered extensively.

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1.4 Methodolody & Sources of the study:
Data was collected through the structured questionnaire circulated through Google
form. The link for the questionnaire was sent to all the target audience using social
media platforms like whatsapp.

Primary Data through – Questionnaire & Survey

Secondary Data – Journals, Articles, Website

Sample size:
The sample sizes for the survey were 100 individuals
Will be employees, between 27-35 years, men and
Women both were considered for data collection . Some homemakers were also
considered for data collection.

Sampling technique:
A structured questionnaire was used to get responses from the sample questions that
were related to demographics and most of the questions were multiple choice
questions.

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CHAPTER 2 :-
Review of Literature:-

Jayakar (2003) in his study emphasized that new products innovation; distribution
and better use of technology are helping the new private life insurers to take market
share away from lic, a only company before liberalization of insurance industry. With
the privatization of insurance sector and with the entrance and cut throat competition
with the private sectors gaining an ever increasing edge over the public sector.

S Krishnamurthy, S V Mony, Nani Jhaveri, Sandeep Bakhshi, Ramesh Bhat and M

R Dixit (2005), in the paper titled, “Insurance Industry in India: Structure,
Performance and Future Challenges”, clearly explained the status and growth of
Indian Insurance Industry after liberalization and also presents future challenges and
opportunities linked with the Insurance. Insurance is the backbone of country‟s risk
management system and influence growth of an economy in several ways. Penetration
of Insurance largely depends on availability of Insurance products, insurance
awareness and quality of services. The future growth of this sector will depend on
how effectively the insurers are meeting the expectations of their customers and able
to change the perceptions of the Indian consumers and make them aware of the
insurable risks. The paper has also drawn attention on emerging structure, role of banc
assurance, agents and customer services in the success of life insurance business
.

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Devasenathipathi, et.al. (2007) analyzed and rated all the life insurance companies
by examining certain variables. The study also examined the effect of privatization,
measured the customer perceptions, analyzed purchase behaviour, and consumer
awareness regarding the life insurance policies. The study also reported that
awareness and growth prospects ofLIC were considerably better than the private
players. Nevertheless, with the increasing use of Information Technology tools, like
Internet and ecommerce, LIC has to face tough competition from private insurers, as
its use ofthe technology happened to be lower than the private players. On the other
hand, private players felt that convenience, time savings and money saving schemes
were the key factors to the success of a business, and now, they had clearly tapped
consumers' expectations. From the study it became clear thatconsumers expect
multiple benefits than the single benefit from the policy. The reasons LBS Journal of
Management & Research behind the preference for a particular company included:
more returns from policy, less premium, more awareness created by companies,
variety in policies and advertisement.

Bodla and Verma (2007) conducted a study to understand the consumer's insurance
buying behaviour in rural areas of Haryana. The study was conducted to understand
the consumer demographics, to examine the preference of the policyholders towards
various types ofpolicies ofinsurance and to probe into the reasons or the causal factors
behind the insurance product purchases in rural area. The study found that the
respondents in the age-group of 31-40 years dominated the rural insurance market;
agents were the most important source ofinformation and motivation as the people
took a policy that was suggested by the agent; Money-back policy was the most
preferred policy in the rural areas; and the rural
people exhibited less faith in private players.

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M. Rajkumari (2007) in the paper titled “A Study on Customers' Preference towards
Insurance Services ” examined the awareness, satisfaction and preferences of
customers towards various Insurance services . The study has been undertaken by the
researcher in order to identify the customer's attitude towards purchase of insurance
products and services formats available through banks. He also gave suggestions to
improve customer awareness on performance of banks in selling insurance policies
Hyderabad ICFAI publication has clearly mentioned in his book that how banc
assurance will be beneficial for banks, insurers and customers and also present
challenges and opportunities of banc assurance in India. He identified cultural
differences between banks and insurance companies could pose a major challenge to
the growth of banc assurance. Large customer base and people trust on bank is the
main opportunity for the banks as a distribution channel for insurance companies

According to J. Campbell Alexandra, 2003,” While increasingly demanding

customers have prompted many firms & corporation to implement better sales
programme , little is known about the internal processes that assist corporation-wide
learning about individual customer services.”
According to Ranjan, Jayanthi, Bhatnagar, Vishal, 2009,”The efficient and
automated management of customer interactions is the need of today. The customer
services have helped organizations to increase the interaction with customers.
Organization also needs to analyze the customer data to uncover trends in customer
behavior and understand the true value of their customers. Analyzing customer
relationships from a lifetime perspective is critical for success.”

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Athma. P and kumar. R (2007) in the research paper titled “an explorative study of
life insurance purchase decision making: influence of product and non-product
factors". The empirical based study conducted on 200 sample size comprising of both
rural and urban market. The various product and non-product related factors have
been identified and their impact on life insurance purchase decision-making has been
analyzed. Based on the survey analysis; urban market is more influenced with product
based factors like risk coverage, tax benefits, return etc. Whereas rural population is
influenced with non-product related factors such as: credibility of agent, company’s
reputation, trust, customer services. Company goodwill and money back guarantee
attracts many people for life insurance.

Ray and Ali (2008) have studied the gap between available and desired features in
existing products and services in life insurance. This study has also examined general
awareness about life insurance, reasons for buying life insurance policy, preferred
tenure and age cut offfor entering into a life insurance contract. The relative
importance offactors in the purchase decision of a life insurance product and people's
preference relating to after-sales services was also observed. The study revealed that
Life insurance has become an attractive investment channel along with providing risk
coverage against death/accident, tax savings and
meeting post-retirement needs, etc. People like to receive quarterly statement,
companies should also inform people about premium payment, its new products and
also about switching of funds. The preferred media of communication is SMS, phone
call and e-mail at least for the urban population.

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Khurana (2008) attempted to identify customer preferences regarding plans and
company, their purpose ofbuying insurance policies, their satisfaction
level and future plans for the new insurance policy. The results ofthis study show that
protection was the main purpose ofbuying an insurance policy. Half of the
respondents (50%) faced the claim settlement problem and the remaining halffaced
problems while collecting the relevant information from the insurance company. Out
of the total sample 28.1 % of the respondents had obtained the Money-Back Policy,
out of which 77.8% were policyholders ofLIC only, which meant that the customers
preferred public sectorcompanies to private sector companies.

Girish kumar and eldhose (2008), published in insurance chronicle icfai monthly
magazine august 2008 in their paper titled "customer perception on life insurance
services: a comparative study of public and private sectors", well explained the
importance of quality services and its significance in raising customer satisfaction
level. A comparative study of public and private sectors help in understanding the
customer perception, satisfaction and awareness on various life insurance services.

Narayan. H. Jai (2009), in an article has made an emphasis on importance of

customer in the business of insurance. He explained in phase of growing market
competition, there is an intense need to go beyond mere efficiency in designing
products. To understand the customer’s needs and to convey what they have to offer
would perhaps bring in higher efficiencies in customer service. Insurance business
revolves around the customer and fair treatment to customers is need of an hour to
win their loyalty and trust. In a service based organizations, customer service is the
most dominating feature that differentiate and gives good return to the insurers.
Proper dealing
with customer complaints, effective customer grievances handling mechanism and
fast claim settlement procedure are some of the ways through which satisfaction level
of customers can be increased. Hence to serve the customers promptly and effectively
is the key success of a life insurance business.

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Dr. P.K. Gupta (2000), in the article named “Exploring Rural markets for Private
Life Insurance Players in India” has tried to examine the present state of affairs of
rural life insurance in India and attempts to explore the causes, which led to poor
penetration of rural life insurance markets for which a survey of 2000 sample of rural
customers was been conducted to examine their perception and attitude towards
buying life insurance products. The study bought outinteresting facts to lights like
rural households with head of the family more educated but with less family income
are more likely to purchase a life insurance policy than those with better social
security but lesser education & rural customers consider safety of invested funds as
the most important factor in buying a life insurance followed by claims settlement and
assistance in policy purchases. On the distribution side the research stated that a firm
belief among the insurance companies is that agents are best suited for tapping the
rural segments. But the research concluded that the keys to success in insurance
penetration in rural areas for private players are accessibility, reasonably priced
products, effective communication and after-sales service.

Alok Mittal and Akash Kumar (2003), in their study “An Exploratory Study of
Factors Affecting Selection of Life Insurance Products” have attempted to identify the
factors which are affecting the consumers in taking into consideration before selecting
a life insurance product and determining the extent to which these factors are taken
into consideration for choosing life insurance products. The study highlighted that
consumers take into consideration factors like product attributes, customer delight,
payment mode, product flexibility, risk coverage, grace period, professional advisor,
and maturity period as important before making a decision on selection of a life
insurance product but most important factors which are of vital importance was
product attributes, and the least important was maturity period.

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William H.Greene, and Dan Segal (2004), in their research “Profitability and
Efficiency in the U.S. Life Insurance Industry” have discussed the relationship
between cost inefficiency and profitability in the U.S. life insurance industry. The life
insurance industry is mature and highly competitive, and cost efficiency may be the
main driver of profitability. The authors derive cost efficiency using the stochastic
frontier (SF) method allowing the mean inefficiency to vary with organizational form
and the outputs. In addition, the estimation of the cost efficiency measure takes into
account the underlying accounting concepts. This study suggests that cost inefficiency
in the life insurance industry is substantial relative to earnings, and that inefficiency is
negatively associated with profitability measures such as the return on equity.

T.Venkateswara Rao (2004), presented a paper titled “Alternative Distribution

Channels in India” in Global Conference of Actuaries. This research points out that a
distribution channel means a set of interdependent organizations involved in the
process of making a product or service available for use or consumption by the
consumer by creating place utility & the value of having the products where the
customer wants them, when they want them. The research said that in Distribution in
Life Insurance requires the intermediaries. The current insurance market depends
heavily on Individual Agency channel but it concluded that Alternative distribution
channels can give competitive edge for the Insurers, a statistics of Alternative
Distribution channels of LIC suggest that corporate agencies including banks are
garnering 82% and the rest 18% is coming from Brokers & Over time bancassurance
may get at least 20% distribution share in life insurance.

Sinha and Tapen (2005), in their research article “The Indian Insurance Industry:
Challenges and Prospects” have stated that India is among the most promising
emerging insurance markets in the world. But out of total insurance premium market
in India particularly life insurance currently makes up 80% of premiums. The research
also highlighted that when India undertook to open the domestic insurance market to
private-sector and foreign companies since then, 13 private life insurers and eight
general insurers have joined the Indian market. But speaking about major
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hurdles this research spoke on the obsolete regulations on insurance prices which have
to be replaced by risk-differentiated pricing structures. . Furthermore it said that both
the life and non-life insurance sectors would benefit from less invasive regulations.
The author also suggested that Price liberalisation will be needed to improve
underwriting efficiency and risk management and the Private insurers will have a key
role to play in serving the large number of informal sector workers. A Cross-Country
Study for Industrialized and Developing Countries” has stated that during the last
decade, there has been faster growth in insurance market activity, particularly in
emerging markets given the process of liberalization and financial integration, which
raises questions about its impact on economic growth. So this research tried to
systematic ally assess the impact of insurance market activity (life and non-life
insurance) on economic growth. To accomplish this task this research used measures
of insurance premiums as a proxy of insurance activity for a set of 56 countries over
the 1976- 2004 period. Based on research the paper has concluded that there is a
causal relationship of insurance market activity on economic growth& both life and
non-life insurance premiums have a positive and significant effect on economic
growth. But in the case of life insurance, its impact on economic growth is driven by
high-income countries only ,On the other hand, in the case of non-life insurance, its
impact is driven by both high-income and developing (middle and low income)
countries.

Rajni M. Shah (2007), Paper Presented at the C.D.Deshmukh Seminar on “Creating

Consumer Awareness in Life Insurance” has analysed as how to harness huge
untapped market potential for life insurance to the benefit of vast rural and semi urban
populace. The paper has quoted the famous line - “customer is business, business is
people, people are customers” in context of consumer awareness. The paper
emphasises that Consumer awareness will provide a new frame of reference for value
creation as also an opportunity for innovation and also have emphasised on campaigns
to educate rural and semi urban masses on the need for security that protects their
livelihood, security for produce and belongings and create feel-good feeling. In
summary it states that a new phenomenon will emerge where Market dynamics will
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rule and unfold a stage through a process of evolution by co-creating unique value
with customers will merge as expounded by Prof. C.K. Prahalad in his later path-
breaking Title “ The Future of Competition : Co-creating Unique Value with
Customers”.

Tamzid Ahmed Chowdhury and Masud Ibn Rahman (2007), in the article,
“Problems and Strategies in Service Marketing: Bangladesh Perspective”, present a
conceptual framework of the problems and strategies in services marketing that derive
from five unique characteristics of services. The framework is based on a review of
the growing body of literature in services marketing. The article also reports the
findings from a survey of service firms concerning problems they face and strategies
they use. A combination of theoretical aspects and survey results in one article affords
the opportunity to make a bridge between the empirical practices and theoretical
aspects.

Subir Sen (2008), in his article “An Analysis of Life Insurance Demand
Determinants for Selected Asian Economies and India” has tried to understand
economic and other socio-political variables, which may play a significant role in
explaining the life insurance consumption pattern in Greater China Region and six
ASEAN countries for the 11- year period 1994-2004 and also tried to re-assess
whether or not the variables best explaining life insurance consumption pattern for
twelve selected Asian economies in the panel are significant for India for the period
1965 to 2004. This research has highlighted that in India the economic variables such
as income, savings, prices of insurance product, inflation and interest rates &
demographic variables like dependency ratio, life expectancy at birth, crude death rate
and urbanization are few significant determinants which effect the insurance
consumption.

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Lavanya Vedagiri Rao (2008) in article, “Innovation and New Service Development
in Select Private Life Insurance Companies in India” try to examine how service firms
actually innovate by interviewing Zonal managers of select 10 private life insurance
companies in India. The research stated that Private Life Insurance organizations use
systematic procedures in the areas of New Service Development (NSD) Strategies and
deploy that for new services & the study also reports on how the organizations
involve their customers in the service innovation process. Another observation from
the study was that the top executives of all the ten companies participate in the idea
generation stage. Finally the research positively states that there is an effective system
of innovation in these service organizations in India.

Manjit Singh and Rohit Kumar (2008), in the paper, “Indian Insurance Industry
Outlook in the Post Reform period”, highlight that insurance penetration and density
has witnessed an increasing trend in the post- reform period, but has a long way to go
to even come close to the developed nations. The study also indicates huge
unexplored and untapped market in India and shows huge opportunities for insurance
companies to capture the business from competitive market; the survival of
companies will depend on their strategies and efforts to increase their penetration
levels and tap the new business positions especially in rural India

Nagaraja Rao, K. (2010), in his article “Challenges in Designing Need Based

Products in Life Insurance for Inclusive Growth in India”, analyses the challenges
faced by the insurers in designing need-based products in insurance for inclusive
growth, and concludes that the policies of life insurance companies are still not rural-
centric, catering to the specific needs of the people. With a view to popularizing life
insurance, he recommends that the consumers need to study the rural market, analyse
the specific needs of each segment and design innovative products, to suit the requests
of the people to the objective of inclusive growth.

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Sonika Chaudhary, Priti Kiran (2011), in their paper “Life Insurance Industry in
India - Current Scenario” discussed that life insurance in India’s trend from the year
2005-06 to 2010- 2011. During the study period this sector moved upwards from the
factors like number of offices, number of agents, new business policies, premium
income etc. Further, many new products like ULIPs, pension plans etc. and riders
were provided by the life insurers to suit the requirements of various customers.
However, the new business of such companies was more skewed in favour of selected
states and union territories. This paper concludes that Private life insurers used the
new business channels of marketing to a great extent when compared with LIC

Upadhyaya and Badlani (2011), in their research, attempt to identify the key success
factors in the life insurance industry, in terms of customer satisfaction so as to survive
intense competition and to increase the market share. The objectives of the study are
to identify the factors of customer satisfaction in retail life Insurance in India and to
study the importance of technology in fulfilling Customer Satisfaction. Data was
collected from 206 insurance customers of the ten public and private sector life
insurance companies from the major cities of Rajasthan and Maharashtra state in
India. The study concludes that despite high satisfaction levels, there remains a lot to
be done by the management of the retail life Insurance companies to maximise their
customer satisfaction and improve the quality of service. The satisfaction of the
customer with the services of the Life Insurance Companies was found to be linked
with the performance of the service

Harpreet Singh & Preeti Singh(2011), in their research “An Empirical Analysis Of
Insurance Industry In India” have analysed the overall performance of Life Insurance
Industry of India between pre- and post economic reform era and also measure the
current status, volume of competitions , challenges faced by the Life Insurance
Corporation of India and lastly to measure the effectiveness of investment strategy of
LIC over the period 1980 to 2009.They have highlighted the role of LIC as a primary
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player in life insurance and how there is growth in performance of Indian Life
Insurance industry and LIC due to the policy of LPG. They have summarised that
Total investment of LIC rose from Rs 4587.7 crores in 1979 to Rs. 762891.7 crores in
2009. Proportion of premium collected by LIC out of total premium collected by life
insurance industry is declined from 97% in 2001-02 to 74% in 2007-08. It indicates
the increasing competition from private sector. ICICI prudential is becoming a
stronger and stronger player by taking over a lot of business of LIC due to aggressive
and flexible product range. But still there is a lot of scope of development in the life
insurance industry where private sector will be a challenge in the front of LIC.

Syed Ibrahim (2012), in his research “Consumers’ Grievance Redressal System in

the Indian Life Insurance Industry - An Analysis” attempts to review on consumer
protection and the awareness with reference to the grievances settlement operations of
the Life Insurance Industry in India. The study was based on relevant secondary data
which was been collected mainly through the data bases of Insurance Regulatory
Development Authority of India (IRDA), Reserve Bank of India (RBI), various
reports and other studies for a period of 5 years. The research based on various
statistical analyses revealed that LIC has succeeded in resolving consumer’s
grievances when compared to the private insurers but even private players were active
in resolving the grievances only in performance year ends .The paper also highlight
that IRDA has recently established the Consumer Affairs Department to give a special
focus to and oversee the compliance by insurers of the IRDA Regulations for
Protection of Policyholders’ Interests and also to empower consumers by educating
them regarding details of the procedures and mechanisms that are available for
grievance redressal.

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Chapter 3:
Introduction to Topic:
 In today’s hectic world, there is a lot of uncertainty, risk and stress in
everybody’s life. Generally, human beings are risk averse.
 People have an urge to minimize the risks and take protection against possible
uncertainty of life.
 Life insurance provides a mean by which people can collectively seek
protection against various types of risks related to their life that may arise in
future.
 Not only risk coverage, life insurance also provides certain other
benefits, namely investment, tax saving, loan facility, etc. The extent of
attention given to customer needs has increased a lot in India with the
transition of life insurance sector from a state monopoly to a market driven
one.
 Customers have tremendous choice from large variety of products from pure
term (risk) insurance to unit linked investment products.
 Competition in insurance industry spurred product innovation, reduced
premium, active sales and distribution coupled with targeted advertising and
marketing campaigns by the insurers.
 The response and turnaround times are signalling improvement in specific
areas, such as delivery of first policy receipt, policy document, premium
notice, final maturity payment, settlement of claims, etc.
 As a result of customer orientation, the new private insurers have acquired 36
per cent share of new business of the life insurance market by the end of 2008.
The one time monopoly of the LIC is now going through a revision.
 Life Insurance plans or protection plans are the simplest form of life insurance
providing coverage for a defined period of time, at a fixed rate of payment.
 If the insured expires during the relevant term, the death benefit is payable to
the nominee, who is typically a family member. However, in
case of survival, the coverage at the earlier rate of premiums is not guaranteed
after the expiry of the policy.
 Insured can often choose to have the policy pay its own way in the case of
disability or other hardship. .
 By adding a “waiver of premium” rider when selling the policy, you can
provide a huge benefit called “piece of mind” for your clients.
 For clients what may be even better than getting an unexpected value from
their life insurance, is the peace of mind of knowing their agent can provide
alternatives and maximize value in a life insurance policy.
 Showing clients other means by which the policy can be helpful provides
tremendous upside and value for your clients. The customer has to either
obtain extended coverage with different payment conditions or for go
coverage entirely.

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 Term insurance plans are the least expensive ways of buying substantial life
cover over a particular period of time.
 Unlike other life insurance plans, term insurance does not have any investment
component or cash built up value. It only extends guaranteed level of
premiums and a specific amount of coverage for a specific period of time.
 The present study is an endeavour to bring out the factors influencing choice
of a life insurance company. It is expected that this study will help the insurers
to frame marketing strategies needed to attract potential and present customers
towards them. Besides the above, it will help understanding whether customer
demographics have any bearing on their choice.

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3.1 Introduction to factors affecting choice of life insurance products
of India.
In today' s hectic world, there is a lot of uncertainty, risk and stress in everybody's
life. Generally, human beings are risk averse. People have an urge to minimize the
risks and take protection against possible uncertainty oflife. Life insurance provides a
mean by which people can collectively seek protection against various types of risks
related to their life that may arise in future. Not only risk coverage, life insurance also
provides certain other benefits, namely investment, tax saving, loan facility, etc.
Keeping in view the varied requirements ofinsurance customers, insurance companies
endeavour to offer a large varietyof insurance products/policies to prospective
customers. Since the relationship with the insurance customer continues over a
sufficiently long period of time, the insurance companies are required to provide a lot
of services to a policyholder till the maturity of the insurance policy. The extent of
attention given to customer needs has increased a lot in India with the transition of life
insurance sector from a state monopoly to a market driven one. Till 2007, 17 private
players have entered the Indian life insurance industry. The entry of such a large
number ofprivate companies has changed the market from a seller's market to a
buyer's market. The private companies are making strides in raising Factors
Influencing Choice ofALife Insurance Company awareness levels through extensive
advertisement campaigns, introducing innovative products and increasing the
penetration oflife insurance in the vastly underinsured Indian market. The new players
offer a plethora ofnew and innovative products, mainly from the stables oftheir
international partners. Customers have tremendous choice from large variety
ofproducts from pure term (risk) insurance to unit linked investmentproducts.
Competition in insurance industry spurred product innovation, reduced premium,
active sales and distribution channels coupled with targeted advertising and marketing
campaigns by the insurers. Consumers have become the most important centre of the
insurance sector. Because of this, insurance companies have begun to provide better
customer services. Advice and need-based selling practice is emerging through a
much better trained sales force and advisors. The response and turnaround times are
signaling improvement in specific areas, such as delivery of first policy receipt, policy
document, premium notice, final maturity payment, settlementof claims, etc. As a
result of customer orientation, the new private insurers have acquired 36 percent share

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of new business of the life insurance market by the end of 2008. The one time
monopoly ofthe LIC is now goingthrough a revision. However, the mushrooming
growth of life insurance business and service-based competition has posed some
problems for the customers. One of the problematic outcomes of the enhanced
competition has been the difficulty in choosing an appropriate company by the
prospective customers. They pay attention to various aspects of life insurance services
while choosing an insurance company. These aspects include the mature insurance
products, premium, promotional activities, distribution and service employees. The
factors considered for choosing the company differ in their importance assigned to
them by the customers. The present study is an endeavour to bring out the factors
influencing choice ofa life insurance company. It is expected that this study will help
the insurers to frame marketing strategies needed to attract potential and present
customers towards them. Besides the above, it will help understanding whether
customer demographics have any bearing on their choice.

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3.2 Types of insurance:

Any risk that can be quantified can potentially be insured. Specific kinds of risk that
may give rise to claims are known as perils. An insurance policy will set out in detail
which perils are covered by the policy and which are not. Below are non-exhaustive
lists of the many different types of insurance that exist. A single policy may cover
risks in one or more of the categories set out below. For example, vehicle
insurance would typically cover both the property risk (theft or damage to the vehicle)
and the liability risk (legal claims arising from an accident). A home insurance policy
in the United States typically includes coverage for damage to the home and the
owner's belongings, certain legal claims against the owner, and even a small amount
of coverage for medical expenses of guests who are injured on the owner's property.

Business insurance can take a number of different forms, such as the various kinds of
professional liability insurance, also called professional indemnity (PI), which are
discussed below under that name; and the business owner's policy (BOP), which
packages into one policy many of the kinds of coverage that a business owner needs,
in a way analogous to how homeowners' insurance packages the coverages that a
homeowner needs.

Auto insurance

A wrecked vehicle in Copenhagen

Auto insurance protects the policyholder against financial loss in the event of an
incident involving a vehicle they own, such as in a traffic collision.

Coverage typically includes:

 Property coverage, for damage to or theft of the car

 Liability coverage, for the legal responsibility to others for bodily injury or
property damage

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 Medical coverage, for the cost of treating injuries, rehabilitation and sometimes
lost wages and funeral expenses

Gap insurance

Gap insurance covers the excess amount on your auto loan in an instance where your
insurance company does not cover the entire loan. Depending on the companies
specific policies it might or might not cover the deductible as well. This coverage is
marketed for those who put low down payments, have high interest rates on their
loans, and those with 60 month or longer terms. Gap insurance is typically offered by
your finance company when you first purchase your vehicle. Most auto insurance
companies offer this coverage to consumers as well. If you are unsure if GAP
coverage had been purchased, you should check your vehicle lease or purchase
documentation.We are living in the era of uncertainty in every spear of life. Yet the
average In-dian does not consider it as a serious decision which he cannot afford to
neglect. A meagre 10 percent of the Indian population purchase insurance products in
India. Though there is enough disposable income to subscribe for the insurance
policies, this is a least priority for majority of the individuals. Hence, there is a long-
time argument that insurance habits are to be imposed upon rather than making it
optional. This not only secures the life of the insured, but imparts fi-nancial discipline
and aving habits resulting in corpus. Funds mobilised through insurance policies may
be channelled to the capital needed for the pro-ductive needs of the economy. Saving
helps in propelling the growth of the in-dustry and domestic production. Today,
across the world and in India in par-ticular, the insurance companies have been called
as the institutional investors who move the stock market indices. The health of the
economy is demonstrated through the performance of the capital markets. That is why
the stock exchanges are referred to as the barometers of the economy. There are some
misconcep-tions about the insurance products. These myths have to be cleared to
accelerate the growth of the insurance business in India. According to the needs for
life insurance are to:

1) meet family’s financial requirements in future;

2) clear outstanding loans and expenses;
3) diversify investment options;
4) avail tax benefits;
5) avail loans against Insurance

23
Health insurance

Great Western Hospital, Swindon

Health insurance policies cover the cost of medical treatments. Dental insurance, like
medical insurance, protects policyholders for dental costs. In most developed
countries, all citizens receive some health coverage from their governments, paid for
by taxation. In most countries, health insurance is often part of an employer's benefits.

Accident, sickness, and unemployment insurance

Workers' compensation, or employers' liability insurance, is compulsory in some

countries

 Disability insurance policies provide financial support in the event of the

policyholder becoming unable to work because of disabling illness or injury. It
provides monthly support to help pay such obligations as mortgage
loans and credit cards. Short-term and long-term disability policies are available
to individuals, but considering the expense, long-term policies are generally
obtained only by those with at least six-figure incomes, such as doctors, lawyers,
etc. Short-term disability insurance covers a person for a period typically up to six
months, paying a stipend each month to cover medical bills and other necessities.
 Long-term disability insurance covers an individual's expenses for the long term,
up until such time as they are considered permanently disabled and thereafter.
Insurance companies will often try to encourage the person back into employment
in preference to and before declaring them unable to work at all and therefore
totally disabled.
 Disability overhead insurance allows business owners to cover the overhead
expenses of their business while they are unable to work.
 Total permanent disability insurance provides benefits when a person is
permanently disabled and can no longer work in their profession, often taken as an

24
 adjunct to life insurance.
 Workers' compensation insurance replaces all or part of a worker's wages lost and
accompanying medical expenses incurred because of a job-related injury.

Causality insurance:

Casualty insurance insures against accidents, not necessarily tied to any specific
property. It is a broad spectrum of insurance that a number of other types of insurance
could be classified, such as auto, workers compensation, and some liability
insurances.

 Crime insurance is a form of casualty insurance that covers the policyholder

against losses arising from the criminal acts of third parties. For example, a
company can obtain crime insurance to cover losses arising
from theft or embezzlement.
 Political risk insurance is a form of casualty insurance that can be taken out by
businesses with operations in countries in which there is a risk that revolution or
other politicalconditions could result in a loss.

Life insurance

Life insurance provides a monetary benefit to a decedent's family or other designated

beneficiary, and may specifically provide for income to an insured person's family,
burial, funeral and other final expenses. Life insurance policies often allow the option
of having the proceeds paid to the beneficiary either in a lump sum cash payment or
an annuity. In most states, a person cannot purchase a policy on another person
without their knowledge.

Burial insurance.

Burial insurance is a very old type of life insurance which is paid out upon death to
cover final expenses, such as the cost of a funeral.
The Greeks and Romans introduced burial insurance c. 600 CE when they
organized guilds called "benevolent societies" which cared for the surviving families
and paid funeral expenses of members upon death. Guilds in the Middle Ages served
a similar purpose, as did friendly societies during Victorian times

25
Property insurance

This tornado damage to an Illinois home would be considered an "Act of God" for
insurance purposes

Property insurance provides protection against risks to property, such

as fire, theft or weather damage. This may include specialized forms of insurance
such as fire insurance, flood insurance, earthquake insurance, home insurance, inland
marine insurance or boiler insurance

26
3.3 COSTS AND BENEFITS OF INSURANCE:-
The purpose of insurance mode of risk transfer is to provide economic protection
against the losses that may be incurred but to chance events such as (a) disability ,
(b) death, (c) economic losses. One party (the insurer )for a set of amount of money ,
(premium) agrees to pay the other party (insured or beneficiary) ,a sum of money
benefit upon the occurrence of an event which may or may not occur during the
effective time of the contract called a ‘POLICY’
The insurance of business organisation is essential in the sense that adverse events, if
not guarded, may affect_ the business itself , the owner or owner’s personal property
and may also threaten the continued operation of the business and threaten the
owner’s financial well-being.

INSURANCE DEVICE:-
The fundamental characteristics insurance are:-

(a) It involves transfer of risk from the individual to the group , and

(b) There is sharing (pooling) of losses on some equitable basis such that fortuitous
losses will be indemnified (paid)

BENEFITS:-
1. Reimbursement of losses
2. Reduction in tension and fear
3. Avenue for investment _ life insurance investment officer attractive return
4. Prevention for losses
5. Credit multiplication
6. costs of insurance to society
7. Cost of business operations_ social wastage of resources
8. Fraudulent and exaggerated claims _ Malacious and Undesirable transfer

27
3.4 ELEMENTS OF INSURABLE RISK:-
For pure risk to be insurable, it should be posses the following characteristics:
Large number of exposure units:-
The theory of insurance is based on law of large number. Therefore the prime
necessity for a rise to be insurable is that there must be sufficiently large number of
homogenous exposure in order that losses are reasonable predictable. Also, the
probabilistic estimates used by the insurance company, by logic, assume large number
of units in a distribution and insurance products are priced accordingly.

Define and measurable loss:-

The losses are fairly predictable and can be measured in money terms. Loss of peace
of mind, Tension etc. Or loss of life cannot be indemnified

Determinable Probability Distribution:-

The probability distribution of the happening of adverse event is determinable. This
condition is necessary to establish the free premium according to the theory of
equivalence . If there is not determinable distribution , there is no question of issuing
a cover by an insurance company.

Random (Fortuitous) Loss:-

The adverse event may or may not occur in future and once which the insurance
company has not control . Naturally, if the event is non-random or the loss has
incurred in the past, there is no question of insurance. Also, it is important to note that
randomness is ensured by underwriters who guard against adverse selection the
tendency of the poorer than average insured to seek or continue insurance coverage.

Non-catastrophic Loss:The losses should be non-catastrophic. Not all the units

in a homogenous group will be subject to an adverse event. Recall that if all the units
meet losses, the company will be ruined only few out of a large group will be
exposed.

28
Premium should be Economically Feasible:-
Since, the insurance pool is structured to be sufficiently large, the price charged by the
insurer for buying the risk is generally low. It should be sufficient to cause the rich for
the insurer as well as viable for the insured.

Insurance Versus Gambling:-

If gambling events were insurable, the gambler would be put in the enviable position
of being unable to lose because if it is head, he wins else if fails, he collects the
money from insurance company. Since, the insurance premium must include the
charge for the losses and the expenses of operating the insurance pool, the resulting
premium must be more than the mathematically fair value of the potential loss.
Moreover, the gambler presumably enjoys the risk of gambling and therefore would
be unlikely to pay the premium needed for transferring the risk being enjoyed. Law
prohibits the use of insurance for gambling purposes because fraud and murder would
increase thus making a social device prohibitively expensive and therefore making the
system fail. In summary, the gambling can be distinguished from an insurance
contract in the following ways:
(a) Gambling creates risk while insurance transfers an existing risk.
(b) Gambling deals with speculative risk – there might be gains or losses, while
Insurance deals with pure risk.

29
3.5 INSURANCE AS A MACRO- ECONOMICS ISSUE:-
1. Mobilisation of Scattered Resources:-
The money collected from the scattered and distant policy holders by the way of
premium is pooled and invested in projects which would otherwise have not been
possible. This reduces the transaction cost of financing and eases the pressure on other
financial intermediaries.

2. Creation of Liquidity:-
Instead of policy holders directly landing their money to entrepreneurs and projects,
the money is lent on their behalf by the insurance company. This creates liquidity in
system and in case the adverse event occurs , money is immediately paid to the
insured without time lags.

3. Economies of Scale:-
The bulk fund invested in large and infrastructure projects promote economies of
scale, promoter economic development and growth and other technological
innovation.

4. Inflation, Business Cycle, and Insurance:-

Inflation and business recessions directly reduces the real purchasing power and
network of the people respectively. Insurance can provide a cover to these , yet the
negative side is the adverse impact on the financial performance of the companies,
5. Fiscal policy:-
Fiscal Policy affects in Insurance sector in thefollowing form:-
a. Government spending
b. Taxation
c. Direct control on the business system

30
3.6 Origin and History of insurance:
ESSENCE OF INSURANCE
• The Egyptian ruler or Pharoah dreams of seven fat and glossy cows, coming
out of the river Nile, followed by seven lean and hungry cows, with the latter
devouring the former.
• The seven fat cows represented seven years of good crops and the seven lean
and hungry cows forebode seven years of famine.
• He was advised by Prophet Joseph or Yusuf to collect one fifth of the crop of
each prosperous year as a levy or tax to be used in the years of famine.

LOMBARDS
• Around the 13th Century, the earliest practice of insurance of ships called
marine insurance is associated with the merchants of the cities of Lombardy,
Italy.
• The Lombards also established themselves in London and other cities.
• Lombards brought with them the practices of marine insurance, banking and
money lending.
• The earliest known policy issued in London was written in Italian and was
dated 20th Sept. 1547
LLOYD’S
• In 1688, Edward Lloyd, proprieter of Lloyd’s Coffee House in London,
encouraged a clientele of ships’ captains, merchants, ship owners and the like.
• He gained an enviable reputation for trustworthy shipping news. He even
published Lloyd’s News, one of the very first newspapers which contained
shipping news.
• Lloyds Coffee House, became the recognised place for obtaining marine
insurance.
• Lloyd himself did no insurance business. He merely provided congenial
surroundings for his patrons till his death in 1713.

31
3.7 HISTORY OF INSURANCE IN INDIA:
In India, insurance has a deep-rooted history.
DURING VEDIC PERIOD YOGAKSHEMA, A SANSKRIT TERM MENTIONED
IN THE RIGVEDA, A FORM OF INSURANCE WAS PRACTISED BY THE
ARYANS,3000 YEARS AGO.
The Codes of Manu refer to one another practice, i.e. if the cargo (good and
merchandise carried in the ship) was Lost due to the negligence of the crew, the loss
was to be
Shared by all its members but when the loss was caused by an act of God, the
members of the crew were not held responsible. IN MOGHUL DAYS THE
PRACTICE OF INSURANCE TOOK FIRM ROOTS.THERE ARE EVEN
REFERENCES TO
INSURANCE AGAINST THE RISKS OF WAR.
Insurance in India has evolved over time heavily drawing
from other countries, England in particular.
 IN 1810 PERMISSION WAS GIVEN TO ANY RESIDENT OF GREAT
BRITAIN TO INSURE ANY PROPERTY IN ANY TERRITORY OF
GREAT BRITAIN,WITH THE ENGLISH INSURANCE COMPANIES.
 LOCAL OFFICES OF 7 INSURANCE COMPANIES STARTED IN
CALCUTTA.
 THE BUSINESS OF LIFE INSURANCE IN INDIA IN IT’S EXISTING
FORM STARTED IN THE YEAR 1818 WITH THE ESTABLISHMENT OF
THE ORIENTAL LIFE INSURANCE COMPANY IN CALCUTTA.

32
3. 8 THE IMPORTANCE OF INSURANCE :
Insurance benefits society by allowing individuals to share the risks faced by
many people. But it also serves many other important economic and societal
functions. Because insurance is available and affordable, banks can make loans with
the assurance that the loan’s collateral (property that can be taken as payment if a loan
goes unpaid) is covered against damage. This increased availability of credit helps
people buy homes and cars. Insurance also provides the capital that communities need
to quickly rebuild and recover economically from natural disasters, such as tornadoes
or hurricanes .Insurance itself has become a significant economic force in most
industrialized countries. Employers buy insurance to cover their employees against
work-related injuries and health problems. Businesses also insure their property,
including technology used in production, against damage and theft. Because it makes
business operations safer, insurance encourages businesses to make economic
transactions, which benefits the economies of countries. In addition, millions of
people work for insurance companies and related businesses. In 1996 more than 2.4
million people worked in the insurance industry in the United States and Canada.

Insurance as an investment that offers a lot more in terms of returns, risk cover & as
also that tax concessions & added bonuses Not all effects of insurance are positive
ones. The possibility of earning insurance payments motivates some people to attempt
to cause damage or losses. Without the possibility of collecting insurance benefits, for
instance, no one would think of arson, the willful destruction of property by fire, as a
potential source of money

33
3.9 Features of Life Insurance
1. Like other contracts of insurance, the life insurance contract is also the outcome of
an offer made by the insured and its acceptance by the insurer. Usually, contract of
life insurance is made in writing.
2. The insurance company agrees to pay a certain sum of money either on the death of
the insured or on the maturity of the policy, whichever is earlier.
3. The insured is under obligation to pay periodically the amount of payment till the
death of insured or expiry of the period of policy, whichever is earlier
4. The contract of life insurance is not a contract of indemnity because the loss
caused by the death cannot be calculated in money terms, nor is money compensation
for loss of one’s life.
5. Insurable interest must be present in the person insured at the time when the policy
is taken in case of life insurance, which may or may not be present at the time of
insured’s death.
6. Life insurance extends the hand of protection to those who are left support less and
helps financially in case of death of the insured . It is also considered to be the best
alternative for making savings.
7. Life insurance covers under scope certain other risks which are connected with the
human life in addition to the risk of death. For example , in case of total and
permanent disability or the living death, temporary disability and medical expenses,
compulsory retirement or the economic death risks, etc., have also been covered
under the purview of life insurance these days.
8. It relieves the insured from the sword of Damocles i.e. various risks and
uncertainties which may occur before and after the death of the insured.

34
3.10 Nature of Life Insurance:-
On the basis of present day economic environment, there are few basic needs for
which life insurance is needed. The Life insurance is concerned with the hazards that
stand across the life of every person that is dying prematurely leaving dependent and
that of living to old age without visible means of support.

(a) Family Protection :

To protect the families from the economic hardships after the death of the bread-
winner member of the family.

(b) Investment of Savings :

Savings provide the new source of income when permanent earning stops and Life
Assurance provide an immediate source of income for one’s family on the death of an
insured person prematurely.

(c) Additional Way of Earnings :

It provides an insured additional earning by way of bonus and interest credited by
the Life Insurance Corporation.

(d) Helpful at the Time of Cessation of Earnings :

Life Assurance is needed because when one ceases to earn money, insurer provides
certain sum of money to the insured as per various terms of policies.

35
3.11 Types of life insurance product

Pure Insurance Products

Term Plans

Unfortunately, in the pure insurance category, there is only one product available
which is called term insurance. Term insurance policy covers only the risk of your
dying. You pay premium year on year to the insurance company and if you die, the
insurance amount, called the Sum Assured, is paid out to the nominees. If you
survive, you don’t get anything and lose the yearly premiums you paid.
Since everything that you pay goes towards covering the risk on your life, term
insurance is the cheapest. There is no investments clubbed with a pure term insurance
plan.
There is a variant of term insurance called term-insurance-with-return-of-premium
wherein the premiums you pay are returned to you at the end of the policy term. The
premium for such policies will obviously be more as compared to pure term plans.

Insurance-cum-Investment Products

As the name goes, these are plans that provide insurance and along with it return on
investments.

Endowment Plans

Take a term plan and add an offer of some returns on the premiums you pay – that is
an endowment policy for you. If you survive the policy term, you get the sum assured
plus the returns and if you die during the policy tenure, you still get the sum assured
plus some returns. To get these returns along with the life cover, you end up paying
more premium.
It is from these yearly premiums that the insurance company covers you for
protection, invests to give you some returns and deducts administrative expenses.
That makes the overall yield of an endowment plan somewhere between 4-7%. There
are two types.

36
Without-profit endowment plans : These plans do not participate in the profits the
insurance company makes each year. Apart from the sum assured, you could possibly
get a loyalty bonus, which is a one time payout made in appreciation of your sticking
to the insurance company.

With-profit endowment plans :

These plans share the profits the insurance company makes each year with the
policyholder. So they offer more returns than without-profit endowment plans and
are more expensive as well – that it, for all parameters considered same, the premiums
will be higher than without-profit endowment plans.
If you know at the beginning what the profit is, then you have picked up a assured
returns insurance plan and this in insurance parlance is called guaranteed additions. In
case the assurance is shaky or non guaranteed, it is called bonuses. Bonuses are to
insurance policies what dividends are to shares. Non guaranteed. Watch out for these
terminologies.

Money-back plans

Money-back plans are variants of endowment plans with one difference – the payout
can be staggered through the policy term. Some part of the sum assured is returned to
the policy holder at periodic intervals through the policy tenure. In case of death, the
full sum assured is paid out irrespective of the payouts already made.
Bonus is also calculated on the full sum assured and not the balance money left.
Because of these two reasons, premiums on money-back plans are higher than
endowment plans.

Whole-life plans

Term plans, endowment plans and money back plans offer insurance cover till a
specified age, generally 70 years. Whole-life plans provide cover throughout your life.

37
Usually, the policyholder is given an option to pay premiums till a certain age or a
specified period (called maturity age).
On reaching the maturity age, the policyholder has the option to continue the cover till
death without paying any premium or encashing the sum assured and bonuses.
Unit-linked insurance plans (ULIP)

In all the above mentioned insurance-cum-investment products, you have no say on

where your money is invested. To keep your money safe, most of these products will
invest in debt. Unit-linked insurance plans give you greater control on where your
premium can be invested.
Think of them like mutual funds. The annual premium you pay can be invested in
various types of funds that invest in debt and equity in a proportion that suits all types
of investors. You can switch from one fund plan to another freely and you can also
monitor the performance of your plan easily.
There are various charges to be aware of in a ULIP and is suitable for those who
understand the stock market well.

Investment Products

Pension Plans

Pension plans are investment options that let you set up an income stream in your post
retirement years by giving away your savings to an insurance company who invests it
on your behalf for a fee. The returns you get depends on a host of factors like how
much you contributed and when is it that you started, the number of years when you
want the money to come to you and at what age that starts.
When you buy the pension plan contract, if the payment to you (called annuity) starts
immediately it is called an immediate annuity contract. However, if the payout start
after some years of deferment, it is called a deferred annuity.
Most agents and insurance professionals would agree that life insurance is rather
straightforward: if an insured pays the premium, their beneficiaries get the benefit

38
when the insured passes away. However, the keys to making more life insurance sales
may be in the unexpected coverage that life insurance can provide. Highlighting these
in meeting with clients could make a huge difference in your closing percentage.

Converting Term or Group Life Policies to a Permanent Life Insurance Policy

Most term life and group life policies come with the bulit-in means to convert the
policy into an individual permanent life insurance policy. And this can usually be
done without undergoing an additional medical exam or underwriting. But of course
insured need to understand that the extra value inherent in premanent insurance
requires the payment of higher premiums. This conversion can be invaluable if the
insured is diagnosed with a severe medical condition and they want to ensure
continued life insurance coverage when the term life policy runs out.

Life Insurance Policies May Pay for Long-term Care

As another means to provide clients with more value for their life insurance
premiums, many life insurers are developing policies that can be used in a number of
meaningful ways. One means is the long-term care rider, which may be added at the
time the insured buys the policy. Long-term care riders allow insured.

What if the Insured becomes terminally ill?

If a client is diagnosed with a terminal illness, they may be able to tap into the policy
benefits as a way to pay for medical bills or other immediate expenses. These are
often termed "accelerated death benefits," or "living benefits," and may be
automatically included many policies or as an attached rider.

Life Insurance Can Pay its Own Premium, if the Client Cannot

When an insured cannot pay their own insurance premiums, it may be valuable for
them to know that the life insurance itself can take care of that. Insureds can often
choose to have the policy pay its own way in the case of disability or other hardship..
By adding a "waiver of premium" rider when selling the policy, you can provide a
huge benefit called “piece of mind” for your clients.

Use Permanent Policy Cash in a Financial Crisis

Having just survived a deep economic recession many clients may find it useful to
know that their life insurance may provide valuable cash if needed. Instead of running

39
up credit card debt in financially hard times, insureds can tap the available cash value
that has built up within a permanent life insurance policy.

History Of Life Insurance Companies Till Life Insurance Corporation

Established

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu
(Manusmrithi ), Yagnavalkya ( Dharmasastra) and Kautilya (Arthasastra). The
writings talk in terms of pooling of resources that could be re-distributed in times of
calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor
to modern day insurance. Ancient Indian history has preserved the earliest traces of
insurance in the form of marine trade loans and carriers’ contracts. Insurance in India
has evolved over time heavily drawing from other countries, England in particular.
1818 saw the advent of life insurance business in India with the establishment of the
Oriental Life Insurance Company in Calcutta. This Company however failed in 1834.
In 1829, the Madras Equitable had begun transacting life insurance business in the
Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the
last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental
(1874) and Empire of India (1897) were started in the Bombay Residency. This era,

40
however, was dominated by foreign insurance offices which did good business in
India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe
Insurance and the Indian offices were up for hard competition from the foreign
companies.
In 1914, the Government of India started publishing returns of Insurance Companies
in India. The Indian Life Assurance Companies Act, 1912 was the first statutory
measure to regulate life business.

In 1928, the Indian Insurance Companies Act was enacted to enable the Government
to collect statistical information about both life and non-life business transacted in
India by Indian and foreign insurers including provident insurance societies. In 1938,
with a view to protecting the interest of the Insurance public, the earlier legislation
was consolidated and amended by the Insurance Act, 1938 with comprehensive
provisions for effective control over the activities of insurers.
The insurance amendment act of 1950 abolish principal agencies . however ,there
were a large Number of insurance companies and the level of competition was high.
There were also allegations of unfair trade practices. The government of india
,therefore , decided to nationalize insurance business.

Life insurance corporation of india birth

An ordinance was issued on 19th January 1956 nationalizing the life insurance sector
and life insurance corporation came into exixtence in the same year.the lic absorbed
154 indian 16 non Indian insurers as also 75 provident societies 245 indian and
foreign insurers in all.

41
ROLE OF LIFE INSURANCE:-

Insurance is an attractive option for investment. While most people recognize the risk
hedging and tax saving potential of insurance, many are not aware of its advantages as
an investment option as well. Insurance products yield more compared to regular
investment options, and this is besides the added incentives(read bonuses) offered by
insurers .You cannot compare an insurance product with other investment schemes for
the simple reason that it offers financial protection from risks, something that is
missing in non-insurance products. In fact, the premium you pay for an insurance
policy is an investment against risk. Thus, before comparing with other schemes, you
must accept that a part of the total amount invested in life insurance goes towards
providing for the risk cover, while the rest is used for savings.
In life insurance, unlike non-life products, you get maturity benefits on survival at the
end of the term. In other words, if you take a life insurance policy for 20years and
survive the term, the amount invested as premium in the policy will come back to you
with added returns. In the unfortunate event of death with in the tenure of the policy,
the family of the deceased will receive the sum assured. Now, let us compare
insurance as an investment options. If you invest Rs 10,000in PPF, your money grows
to Rs 10,950 at 9.5 per cent interest over a year. But in this case, the access to your
funds will be limited. One can withdraw 50 per cent of the initial deposit only after 4

42
years. The same amount of Rs 10,000 can give you an insurance cover of up to
approximately Rs 5-12 lakh (depending upon the plan, age and medical condition of
the life insured, etc) and this amount can become immediately available to the
nominee of the policyholder on death. Thus insurance is a unique investment avenue
that delivers sound returns in addition to protection Insurance is an attractive option
for investment. While most people recognize the risk hedging and tax saving potential
of insurance, many are not aware of its advantages as an investment option as well.
Insurance products yield more compared to regular investment options, and this is
besides the added incentives (read bonuses) offered by insurers.

You cannot compare an insurance product with other investment schemes for the
simple reason that it offers financial protection from risks, something that is missing
in non-insurance products. In fact, the premium you pay for an insurance policy is an
investment against risk. Thus, before comparing with other schemes, you must accept
that a part of the total amount invested in life insurance goes towards providing for
the risk cover, while the rest is used for savings. In life insurance, unlike non-life
products, you get maturity benefits on survival at the end of the term. In other words,
if you take a life insurance policy for 20years and survive the term, the amount
invested as premium in the policy will come back to you with added returns. In the
unfortunate event of death with in the tenure of the policy, the family of the deceased
will receive the sum assured. Now, let us compare insurance as an investment options.
If you invest Rs 10,000in PPF, your money grows to Rs 10,950 at 9.5 per cent interest
over a year. But in this case, the access to your funds will be limited. One can
withdraw 50 per cent of the initial deposit only after 4 years. The same amount of Rs
10,000 can give you an insurance cover of up to approximately Rs 5-12 lakh
(depending upon the plan, age and medical condition of the life insured, etc) and this
amount can become immediately available to the nominee of the policyholder on
death. Thus insurance is a unique investment avenue that delivers sound returns in
addition to protection.

43
 WORLD INSURANCE MARKET OVERVIEW

LIFE

NON LIFE

Life US$ 2393 Bln

Non-life US$ 1668 Bln

Total US$ 4061Bln

44
COUNTRIES MARKET SHARE

U.S.A.

Canada

1.53% U.K.
2.88% 1.34% 2.28%

Germany
10.46% 30.28%

6.62% France
11.42%
Japan

5.49%
2.47% S.Korea

India

Australia

China

45
 LIFE INSURANCE SHARE IN WORLD MARKET 2007

U.S.

Canada

2.45% U.K.

3.40% 1.97%
France
13.82%
24.17% Germany

14.61% Italy
3.69%
1.91% Japan
4.28%
7.81% S.Korea

China

India

46
 PREMIUM INCOME SHARE IN INDIA
(2011-2012)
OF LIFE INSURANSE COMPANIES

BAJAJ ALLIANZ
1.58% 5.71% RELIANCE
2.384% 3.36% SBI LIFE
4.45%
HDFC STD 34.61%
1.69%
ICICI PRU
1.672%
71.35% BIRLA SUN
MAX NEY YORK
LIC

04/04/2015 HISTORY OF INSURANCE:MW

47
Factors Determining Company Choice
The questionnaire was developed in a way to find out the important factors which
influences the customers in selecting a particular company. The variables which were
included consisted of the 7 Ps of Services Marketing, which services providing
companies like insurance companies are assumed to have given due importance. The
7 Ps of services marketing are Product, Price, Place, Promotion, People, Physical
Evidence and Process. The respondents were queried about which factors strongly
influences their choice of a particular company. The findings were analyzed using
ANOVA tests for each of the 7Ps.

A. Product:
The variables which were included in Product are Product variety, User friendliness
of product and features like tax rebate, savings, investment and life cover. The single
factor ANOVA suggested that all these variables' mean are not similar and therefore it
can be inferred that they are significantly different as far as customer perception is
concerned.

B. Price:
Two variables were included in the Price factor, low premium and value for money.
The mean of low premium is very near to the value which referred to 'Strongly Agree'
in the questionnaire. This implies that the respondents strongly feel that low premium
determines their choice of a company. The mean for 'value for money' implies that the
respondents feel that it also has some influence on the buying decision.

C. Place:
The Place factor included the accessibility and robust distribution channels of the
company. The mean of the variable 'accessibility' suggests that the respondents
strongly agree that this variable influences their purchase decision in selecting a
particular company. 'Robust distribution channel’ also influences the respondents'
decision in selecting a particular company but to a lesser extent.

48
D. Promotion:
The Promotion factor included the variables advertising, sales promotion, direct
marketing and word of mouth the respondents strongly feel that the variable affects
their choice of a company. The respondents also agree to a lesser extent that 'sales
promotion' and 'word of mouth' determines their choice of a company.

E. People:
The variables include in 'people' were agents' behavior, agents' knowledge and agents'
appearance As can be seen from the means of variable 'agents' knowledge' and 'agents'
behavior', these two variables are strongly considered as factors which influences the
choice of a company. In this aspect, agents' knowledge is a more influencing factor
than agent's behavior. Agents' appearance is regarded as an influencing factor but to a
lesser extent. The value of the mean suggested that the respondents agree to the
statement that the appearance of the agents determines the purchase decision of the
customer as far as insurance policies are concerned.

F. Physical Evidence:
The variables included in the factor Physical Evidence are company's website, office
ambience, billing statements and product brochure it can be inferred that office
ambience is considered as a most determining factor, which influences the choice of
the respondents. It is followed by the product brochure and the company's website.
Billing statements are regarded as less influencing as far as purchase decision is
concerned.

G. Process:
The variables included in process were better claim settlement, convenient payment
system.

49
THE PURCHASE DECISION OF CONSUMERS

Consumers are faced with purchase decisions nearly every day. Some decisions are
more complex and some are fairly easy. In general, consumers face four types of
purchase decisions:

• MINOR NEW PURCHASE: These purchases represent something new to a

consumer but in the consumers mind is not a very important purchase in terms of
need, money or other reason (e.g., status within a group).

•MINOR RE-PURCHASE: These are the most routine of all purchases and often the
consumer returns to purchase the same product without giving much thought to other
product options (i.e., consumer is brand loyalty).

• MAJOR NEW PURCHASE: These purchases are the most difficult of all
purchases because the product being purchased is important to the consumer but the
consumer has little or no previous experience making these decisions. The consumer’s
lack of confidence in making this type of decision often (but not always) requires the
consumer to engage in an extensive decision-making process.

50
• MAJOR RE-PURCHASE: These purchase decisions are also important to the
consumer but the consumer feels confident in making these decisions since they have
previous experience purchasing the product.
In this purchase decision process, demographic factor is the factor which has got the
maximum of its effect in the purchase decision of the product and especially if that
product is life insurance product. It is so because these factors incorporate other
factors like Economical, Social, Political and legal. These factors can influence the
buying decision of the buyers to maximum extent viz. occupational factor
(service/business), age factor, gender, marital status factor and income level etc.
It cannot be denied that buying decision of an individual who is unmarried and is into
business, having the income level of the range Rs. 2.4 lakh PA, is into the age group
of say 25 years will have the entirely different approach towards purchase of the life
insurance policy with the individual who is into service and is married, is into the age
group of, say 35, and is earning Rs. 30000/- per month.
Considering the above phenomena, it is very clear that demographical factor has got
its influence in purchase decision of the life insurance products.

51
FACTORS INFLUENCING CONSUMER BEHAVIOUR
Consumer behavior refers to the selection, purchase and consumption of goods and
services for the satisfaction of their wants. There are lots of factors influencing
consumer by decision-making process, such as social, cultural, personal and
psychological. The explanations of these factors are as follows:

SOCIAL FACTOR: Social factor divides the society into a hierarchy of distinct
classes. The members of each class have relatively the same status and members of
other classes have either more or less status. It includes family, group etc.

CULTURAL FACTOR: It has potent influences that are brought up to follow the
beliefs, values and customs of their society and to avoid behavior that is judged
acceptable. Beliefs, values and customs set subculture apart from other members of
the same society. Thus sub-culture is a distinct cultural group that exists as an
identifiable segment, within a larger, more complex society.

PERSONAL FACTOR: It is a very important factor. Personal factors also influence

buyer's behavior. They include age, income, occupation, life style. They simply direct
our outer personality. PSYCHOLOGY FACTOR: The buying behavior of consumer
is influenced by a number of psychological factors which includes motivation,
perception, learning, beliefs and attitude and personality.

52
REASON FOR BUYING LIFE INSURANCE PRODUCTS

Insurance is designed to protect a person and the family from disasters and financial
burdens. There are some important reasons which plays a very vital role in purchase
decisions and buying of life insurance products, are as follows:

• Life insurance provide funds to the family, leaves behind a one’s and serves as a
cash resource, on premature death.

• It can have a savings or pension component that provides during the retirement.

• Some policies have riders like coverage of critical illness or term insurance for the
children or spouse.

• Having a valid insurance policy is considered as financial assets which improves the
credit rating when one’s need health insurance or a home or business loan.

• Term life insurance has double benefits, it protects and one can get their money back
during strategic points in their life.

• It can contribute towards maintaining a family's life style when one contributing
partner suddenly dies.

DEMOGRAPHIC FACTORS FOR LIFE INSURANCE INDUSTRY

53
Demographics are the statistical characteristics of human populations, such as age,
income, sex, occupation, education, family size, etc that are used by businesses to
identify markets for their goods and services. The explanations of the demographic
factors on the customers for life insurance industry are as follows:

 EDUCATION: It is expected that education has a positive relationship with

the demand for insurance. Educated people understand the necessity of
protecting dependents from premature death of wage earners and the various
types of life insurance products.

 INCOME: Income is one of the most important factors that can affect the
demand for life insurance. All previous studies have revealed that family
income is positively related to life insurance ownership.

 SIZE OF FAMILY: It is usually expected that formation of household

increase in life insurance purchases, because intensity for bequests tends to
increase as people get married or have children. Size of family is expected to
have a positive relationship with purchase for life insurance products.

 EMPLOYMENT: Employment is expected to be positively related to the life

insurance purchase, because life insurance is usually purchased to prevent
from uncertainty about wage earners’ pre-retirement.

 OTHER FACTORS: Other demographic factors such as sex, race and

religious preference were suggested to be meaningful factors that can affect
demand for insurance. In addition, psychographic variables also affects on the
demand for insurance.

Benefits of Life Insurance:-

The following are the advantages of Life Insurance
1. Superior Saving Plan :
Unlike any other savings plan, a life insurance policy affords full protection against
risk of death. In the event of death of a policyholder, the insurance company makes

54
available the full sum assured to the policyholders near and dear ones In comparison ,
any other savings plan would amount to the total savings accumulated till date. If the
death occurs prematurely, such savings can be much lesser than the sum assured.
Evidently, the potential financial loss to the family of the policyholder is sizable.
2. Encourage saving plan :
Life insurance encourage saving habbit. Long term savings can be made in a painless
manner because of the easy instalment facility built into the scheme. The insured
person can pay premiums through monthly, half- yearly or yearly instalments. The
salary saving scheme, popularly known as SSS ; Provides a convenient method of
paying premium each month through deduction from one’s salary. The employer is
authorized by the employee to deduct the insurance premium monthly and remit to the
life insurance corporation. The salary saving scheme (SSS) can be introduced in any
institution or organisation subject to specified terms and condition laid down by
insurer.
3. Suitable for raising Loans :
Life insurance policy can be given as security to raise a loan even for commercial
purposes also. The loan can be raised without any delay on safe security of the policy.
Even after an initial period payments if the policy holder finds it difficult to continue
with the payments of premium , he can surrender the policy for a surrender amount
with the Life Insurance Corporation.
4. Easy Settlement Protection Against Creditors :
The maturity value of life insurance policy can be protected against the claims of the
creditors of the life assured by valid assignment of the policy. The policy holder can
nominate a person to whom the policy money would be payable in event of his health.

5. Estate Duty:
Life insurance ensures the definite sum of money after the death of the insured
without resorting to sale of assets at a loss on realization. So it is the bread- earner of
the family. So it is the best way of making provision for payment of Estate Duty.
6. Life Insurance is not an Investment :,
Life Insurance is an Expense and not an Asset.It is an expense just like your health
insurance to make sure in case of serious illness you are covered and not in a position
55
to pay the costs of your illness leading to your life ending in a bad manner.Life
Insurance makes sure that your dependents can lead a decent life economically despite
your death.This is the main purpose and advantage of life insurance
7.Tax Advantage :
A number of countries allow you to offset the premiums that you pay for you life
insurance in your taxable income.Also the maturity amount that you get is also not
taxable in a number of places.Insurance is widely used by financial advisors to reduce
your tax burden.
8.Advantage of Term Insurance :
While Insurance Companies sell a wide variety of insurance products like
term,variable,universal insurance most are complex and intended to fleece customers.
Term Insurance is the best life insurance product for its simplicity and cheapness. It
gives you a lump sum amount in case of death and has no clauses and conditions. Its
very simple to understand and the cheapest insurance product as well.
9. Government Regulation provides Safety :
The government heavily regulates the insurance sector making sure that your
insurance company has enough assets to cover your liability.This means that you have
the peace of mind that in case of your death the money will be given out by the life
insurance company and it does not go bankrupt.Governments make sure that
insurance companies don’t fail like banks.Even if they do their liabilities are taken
over by the governemtn
.
Disadvantages of Life Insurance

1) The Cons of a Life Insurance chosen carefully is almost negligible.However the

disadvantage of Life Insurance arises when it is used as an investment
product.Insurance companies also promote these as people are uncomfortable in
paying premiums on which returns are uncertain.They think that if you are paying for
insurance you msut get back something.This is because of the psychological make up
of humans where we underestimate the chances of our demise.

2) Buying Life Insurance when you have no Need – People buy insurance when they
have no need for example an old woman buying life insurance.Also the example of

56
buying life insurance for a very long time period till you are 80 years old.At that age
you have no need since you would have no dependents and earning power as well.

3) Buying Complex Life Insurance Products like ULIPs,Endowment,Child Plans etc

which give sub optimal returns – Millions of people every year buy insurance
products without understanding it.Most of the complex products give suboptimal
returns and have no suitability for the buyers.Agents frequently give bad advice to get
more commissions.Copmanies also make more money by selling complex producst
which people don’t understand.

4) Buying Expensive Policies – People have little clue and don’t compare life
insurance products even from the same provider.Sometimes they buy insurance
policies which are far too expensive leading to heavy burden which is unnecessary.
Buying Life Insurance is not Rocket Science however this trillion dollar industry has
made it complicated.There are hundreds of types of insurance and products which
makes choosing a difficult thing for a person.But keeping it simple like buying term
insurance for your insurance needs and other financial assets for your investment will
keep it simple.

INSURANCE POLICY:-
The insurance policy is a contract (generally a standard form contract) between the
insurer and the policyholder, which determines the claims which the insurer is legally
required to pay. In exchange for an initial payment, known as the premium, the
insurer promises to pay for loss caused by perils covered under the policy language.

Insurance contracts are designed to meet specific needs and thus have many features
not found in many other types of contracts. Since insurance policies are standard
forms, they feature boilerplate language which is similar across a wide variety of
different types of insurance policies.

The insurance policy is generally an integrated contract, meaning that it includes all
forms associated with the agreement between the insured and insurer.[2]: 10  In some
cases, however, supplementary writings such as letters sent after the final agreement
can make the insurance policy a non-integrated contract.One insurance textbook states
57
that generally "courts consider all prior negotiations or agreements ... every
contractual term in the policy at the time of delivery, as well as those written
afterward as policy riders and endorsements ... with both parties' consent, are part of
the written policy". The textbook also states that the policy must refer to all papers
which are part of the policy.Oral agreements are subject to the parol evidence rule,
and may not be considered part of the policy if the contract appears to be whole.
Advertising materials and circulars are typically not part of a policy. Oral contracts
pending the issuance of a written policy can occur.

GENERAL FEATURES:-
The insurance contract or agreement is a contract whereby the insurer promises to pay
benefits to the insured or on their behalf to a third party if certain defined events
occur. Subject to the "fortuity principle", the event must be uncertain. The uncertainty
can be either as to when the event will happen (e.g. in a life insurance policy, the time
of the insured's death is uncertain) or as to if it will happen at all (e.g. in a fire
insurance policy, whether or not a fire will occur at all).

Insurance contracts are generally considered contracts of adhesion because the insurer
draws up the contract and the insured has little or no ability to make material changes
to it. This is interpreted to mean that the insurer bears the burden if there is any
ambiguity in any terms of the contract. Insurance policies are sold without the
policyholder even seeing a copy of the contract. 27  In 1970 Robert Keeton suggested
that many courts were actually applying 'reasonable expectations' rather than
interpreting ambiguities, which he called the 'reasonable expectations doctrine'. This
doctrine has been controversial, with some courts adopting it and others explicitly
rejecting it.In several jurisdictions, including California, Wyoming, and Pennsylvania,
the insured is bound by clear and conspicuous terms in the contract even if the
evidence suggests that the insured did not read or understand them.

58
Insurance contracts are aleatory in that the amounts exchanged by the insured and
insurer are unequal and depend upon uncertain future events. In contrast, ordinary
non-insurance contracts are commutative in that the amounts (or values) exchanged
are usually intended by the parties to be roughly equal. This distinction is particularly
important in the context of exotic products such as finite risk insurance that contain
"commutation" provisions.
Insurance contracts are unilateral, meaning that only the insurer makes legally
enforceable promises in the contract. The insured is not required to pay the premiums,
but the insurer is required to pay the benefits under the contract if the insured has paid
the premiums and met certain other basic provisions.

Insurance contracts are governed by the principle of utmost good faith (uberrima
fides), which requires both parties of the insurance contract to deal in good faith and
in particular, imparts on the insured a duty to disclose all material facts that relate to
the risk to be covered. This contrasts with the legal doctrine that covers most other
types of contracts, caveat emptor (let the buyer beware). In the United States, the
insured can sue an insurer in tort for acting in bad faith.

Insurance contracts were traditionally written on the basis of every single type of risk
(where risks were defined extremely narrowly), and a separate premium was
calculated and charged for each. Only those individual risks expressly described or
"scheduled" in the policy were covered; hence, those policies are now described as
"individual" or "schedule" policies.

This system of "named perils" or "specific perils"coverage proved to be unsustainable

in the context of the Second Industrial Revolution, in that a typical large conglomerate
might have dozens of types of risks to insure against. For example, in 1926, an
insurance industry spokesman noted that a bakery would have to buy a separate policy
for each of the following risks: manufacturing operations, elevators, teamsters,
product liability, contractual liability (for a spur track connecting the bakery to a
nearby railroad), premises liability (for a retail store), and owners' protective liability
(for negligence of contractors hired to make any building modifications).

59
In 1941, the insurance industry began to shift to the current system where covered
risks are initially defined broadly in an "all risk"[18] or "all sums"[19] insuring
agreement on a general policy form (e.g., "We will pay all sums that the insured
becomes legally obligated to pay as damages..."), then narrowed down by subsequent
exclusion clauses (e.g., "This insurance does not apply to...").

How Insurance Works:-

A multitude of different types of insurance policies is available, and virtually any
individual or business can find an insurance company willing to insure them—for a
price. The most common types of personal insurance policies are auto, health,
homeowners, and life. Most individuals in the United States have at least one of these
types of insurance, and car insurance is required by law.

Businesses require special types of insurance policies that insure against specific
types of risks faced by a particular business. For example, a fast-food restaurant needs
a policy that covers damage or injury that occurs as a result of cooking with a deep
fryer. An auto dealer is not subject to this type of risk but does require coverage for
damage or injury that could occur during test drives.

There are also insurance policies available for very specific needs, such as kidnap and
ransom (K&R), medical malpractice, and professional liability insurance, also known
as errors and omissions insurance.

Insurance Policy Components

When choosing a policy, it is important to understand how insurance works.

A firm understanding of these concepts goes a long way in helping you choose the
policy that best suits your needs. For instance, whole life insurance may or may not be
the right type of life insurance for you. Three components of any type of insurance are
crucial: premium, policy limit, and deductible.

60
Premium
A policy’s premium is its price, typically expressed as a monthly cost. The premium
is determined by the insurer based on your or your business’s risk profile, which may
include creditworthiness.

For example, if you own several expensive automobiles and have a history of reckless
driving, you will likely pay more for an auto policy than someone with a single
midrange sedan and a perfect driving record. However, different insurers may charge
different premiums for similar policies. So finding the price that is right for you
requires some legwork.

Policy Limit
The policy limit is the maximum amount that an insurer will pay under a policy for a
covered loss. Maximums may be set per period (e.g., annual or policy term), per loss
or injury, or over the life of the policy, also known as the lifetime maximum.

Typically, higher limits carry higher premiums. For a general life insurance policy,
the maximum amount that the insurer will pay is referred to as the face value, which
is the amount paid to a beneficiary upon the death of the insured.

Deductible
The deductible is a specific amount that the policyholder must pay out of pocket
before the insurer pays a claim. Deductibles serve as deterrents to large volumes of
small and insignificant claims.

Deductibles can apply per policy or per claim, depending on the insurer and the type
of policy. Policies with very high deductibles are typically less expensive because the
high out-of-pocket expense generally results in fewer small claims.

What is insurance?
Insurance is a way to manage your risk. When you buy insurance, you purchase
protection against unexpected financial losses. The insurance company pays you or
61
someone you choose if something bad happens to you. If you have no insurance and
an accident happens, you may be responsible for all related costs.
What are the four major types of insurance?
There are four types of insurance that most financial experts recommend everybody
have: life, health, auto, and long-term disability.

Is insurance an asset?
Depending on the type of life insurance policy and how it is used, permanent life
insurance can be considered a financial asset because of its ability to build cash value
or be converted into cash. Simply put, most permanent life insurance policies have the
ability to build cash value over time.

The Bottom Line

Insurance is a contract in which an insurer indemnifies another against losses from
specific contingencies or perils. It helps to protect the insured person or their family
against financial loss. There are many types of insurance policies. Life, health,
homeowners, and auto are the most common forms of insurance.

An insurance policy is a legal contract between the insurance company (the insurer)
and the person(s), business, or entity being insured (the insured). Reading your policy
helps you verify that the policy meets your needs and that you understand your and
the insurance company’s responsibilities if a loss occurs. Many insureds purchase a
policy without understanding what is covered, the exclusions that take away coverage,
and the conditions that must be met in order for coverage to apply when a loss occurs.
The SCDOI would like to remind consumers that reading and understanding your
entire policy can help you avoid problems and disagreements with your insurance
company in the event of a loss.

It is important to understand that multi-peril policies may have specific exclusions and
conditions for each type of coverage, such as collision coverage, medical payment
coverage, liability coverage, and so on. You will need to make sure that you read the
language for the specific coverage that applies to your loss.
62
The Insuring Agreement
This is a summary of the major promises of the insurance company and states what is
covered. In the Insuring Agreement, the insurer agrees to do certain things such as
paying losses for covered perils, providing certain services, or agreeing to defend the
insured in a liability lawsuit. There are two basic forms of an insuring agreement:

Named–perils coverage, under which only those perils specifically listed in the policy
are covered. If the peril is not listed, it is not covered.
All–risk coverage, under which all losses are covered except those losses specifically
excluded. If the loss is not excluded, then it is covered. Life insurance policies are
typically all-risk policies.
The Exclusions
Exclusions take coverage away from the Insuring Agreement. The three major types
of Exclusions are:

Excluded perils or causes of loss

Excluded losses
Excluded property
Typical examples of excluded perils under a homeowners policy are flood,
earthquake, and nuclear radiation. A typical example of an excluded loss under an
automobile policy is damage due to wear and tear. Examples of excluded property
under a homeowners policy are personal property such as an automobile, a pet, or an
airplane.

The Conditions
Conditions are provisions inserted in the policy that qualify or place limitations on the
insurer’s promise to pay or perform. If the policy conditions are not met, the insurer
can deny the claim. Common conditions in a policy include the requirement to file a
proof of loss with the company, to protect property after a loss, and to cooperate
during the company’s investigation or defense of a liability lawsuit.

63
Expected Outcome:
1. To evaluate the expected welfare gain from insurance products on offer to
individuals.
2. If we know the risk preferences of the individual, and subjective beliefs about loss
contingencies and likelihood of pay out, there is a certainty equivalent of the risky
insurance policy that can be compared to the certain insurance premium.

3. This simple logic extends to nonstandard models of risk preferences, such as those
in which individuals exhibit “optimism” or “pessimism” about loss contingencies in
their evaluation of the risky insurance policy.
4. We illustrate the application of these basic ideas about the welfare evaluation of
insurance policies in a controlled laboratory experiment.
5. We estimate the risk preferences of individuals from one task, and separately
present the individual with a number of insurance policies in which loss contingencies
are objective. We then estimate the expected consumer surplus gained or foregone
from observed take-up decisions.
6. There is striking evidence of foregone expected consumer surplus from incorrect
take-up decisions. Indeed, the metric of take-up itself, widely used in welfare
evaluations of insurance products, provides a qualitatively incorrect guide to the
expected welfare effects of insurance.

64
Findings:-

 The consumer decision to purchase insurance product from different insurance

companies can be affected by several factors like age, gender and income
level. From the analysis, it is inferred that respondents belonging to the age
group between 30 to 40 years (which contribute 52% to the total respondents)
found to be more interested in buying a life insurance policy as compare to
other age group.

 Out of 150 samples drawn, a majority (54.6%) of policyholders have shown

preference towards lic followed by sbi life insurance with (14.6%) among the
private players. Therefore lic has the maximum no. Of policyholders and rank
as 1st among other insurance companies, followed by sbi life (14.6%), icici
prudential (10.6%), Bajaj Allianz (8.0%) and hdfc standard life with 6.6%.

 The features of policy that attracted policyholders can be ranked as follows:

company reputation, money back guarantee, risk coverage, low premium and
easy access to agents as 1st, 2nd, 3rd, 4th and 5th respectively. Thus it can be
inferred that goodwill of the company is the most influencing factor while
policy buying decision.

 It is found from the analysis that out of 150 respondents, majority (37.3%)
respondents preferred money-back policy of lic. This is followed by the unit
linked plan of private insurers (31.3%) and endowment plans (15.3%). Only
10% of the respondents have shown interest towards term plan. Hence in
present days people are more interested in such policy which gives higher
return along with the risk coverage benefit.

 A large no. Of the respondents (48%) said that they look for trusted name in a
company for insurance, followed by good plans, friendly service and
accessibility with 30%, 18% and 4% respectively.

65
 It is evident from the above study that most (54.6%) of the respondent's have
opted for lic policies because of safety and rest of the respondent's opted for
private players for higher returns. Among private insurers, sbi life insurance
holds 14.6% market share, followed by the icic prudential and bajaj allianz
with 14.6% and 8.0% respectively. The study reveals the fact that lic still holds
the major share of the life insurance market.
 On the basis of a careful review of the scientific literature since 2002, the
committee reported findings in three key areas: trends in health insurance
coverage, the health consequences of uninsurance for children and adults, and
the implications of high community-level rates of uninsurance on people who
have health insurance in affected communities.
 Health care costs and insurance premiums are growing at rates greater than the
U.S. economy and family incomes. The situation is dire as it affects not only
employer-sponsored coverage, the cornerstone of private health coverage in
the United States, but also recent expansions in public coverage.
 Overall, fewer workers, particularly those with lower wages, are offered
employer-sponsored insurance, and fewer among the workers that are offered
such insurance can afford the premiums.
 And, early retirees are less likely to be offered retiree health insurance benefits
than in the past. Employment has shifted away from industries with
traditionally high rates of coverage (e.g., manufacturing) to service jobs (e.g.,
in wholesale and retail trades) with historically lower rates of coverage. In
some industries, employers have relied more heavily on jobs without health
benefits, including part-time and shorter term employment, and contract and
temporary jobs.
 Only a small percentage of Americans has nongroup private health insurance
purchased in the individual insurance market. For many individuals and
families without employer-sponsored group coverage, nongroup coverage is
unaffordable.
 States and the federal government have substantially increased health
coverage among low-income children and, to a lesser degree, among adults in
the last decade by expanding eligibility, conducting outreach to people already
eligible, and expediting enrollment in Medicaid and State Children’s Health
Insurance Program (SCHIP) programs. As this report was being finalized,
66
 Congress reauthorized the SCHIP program (P.L. No. 111-3).2 However, some
states remain under extreme economic pressures to cut their recent expansions
of public programs for low-income children and adults.
 Sharp increases in unemployment will further fuel the decline in the number of
people with employer-sponsored coverage and add even greater stress on state
health insurance programs.
 Children with health insurance are more likely to gain access to a usual source
of care or medical home, well-child care and immunizations to prevent future
illness and monitor developmental milestones, prescription medications,
appropriate care for asthma, and basic dental services. Serious childhood
health problems are more likely to be identified early in children with health
insurance, and insured children with special health care needs are more likely
to have access to specialists. Children with health insurance have fewer
avoidable hospitalizations, improved asthma outcomes, and fewer missed days
of school.
 Uninsured adults are much less likely to receive clinical preventive services
that have the potential to reduce unnecessary morbidity and premature death.
Chronically ill adults delay or forgo visits with physicians and clinically
effective therapies, including prescription medications. Adults are more likely
to be diagnosed with later stage cancers that are detectable by preventive
screening or by contact with a clinician who can assess worrisome symptoms.
Uninsured adults are more likely to die when hospitalized for trauma or other
serious acute conditions, such as heart attack or stroke. Uninsured adults with
cancer, cardiovascular disease (including hypertension, coronary heart disease,
and congestive heart failure), serious injury, stroke, respiratory failure, chronic
obstructive pulmonary disease or asthma exacerbation, hip fracture, seizures,
and serious injury are more likely to suffer poorer health outcomes, greater
limitations in quality of life, and premature death. New evidence demonstrates
that gaining health insurance ameliorates many of these deleterious effects,
particularly for adults who are acutely or chronically ill.
 There are also growing economic disparities between communities with
respect to geographic distribution of physician services and other health care
resources such as new diagnostic and therapeutic techniques and technology.
Well-documented fault lines in local health care delivery—not necessarily
67
 attributable to uninsurance—are particularly vulnerable to the financial
pressures associated with higher uninsurance and may be intensified by higher
uninsurance rates. These include hospital-based emergency care problems,
such as limits on inpatient bed capacity, outpatient emergency services, and
timeliness of trauma care, that have potentially serious implications for the
quality and timeliness of care for insured as well as uninsured patients.
 There are stark differences in the percentage of people without health
insurance in different communities across the country. Many local health care
providers in communities with high uninsurance rates bear a disproportionate
and substantial financial burden due to America’s uninsured crisis. Recent
empirical evidence indicates that higher community-level uninsurance rates
are negatively associated with several well-validated indicators of access to
and satisfaction with health care among privately insured adults. Research
commissioned by the committee suggests that when local rates of uninsurance
are relatively high, insured adults are more likely to have difficulties obtaining
needed health care and to be dissatisfied with their care. The precise
contribution of uninsurance to this dynamic is not well understood.

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Chapter 4:-
Data Analysis :

A STUDY ON FACTORS WHICH AFFECTING CHOICE OF INSURANCE

POLICY BY INDIVIDUALS
QUESTIONAIRE

1.] Age
A. 18-25
B. 26-35
C. 36-45
D. 46-55
E. Above
Options No. of respondents Responses %
18-25 27 40.3%
26-35 19 28.4%
36-45 12 17.9%
46-55 9 13.4%
Above 18 24.8%
Total 67 100

As per the research 18-25 age of group has the maximum insured and the
46-55 age group people has the minimum insured.

69
2.] Gender
A. Female
B. Male
Options No. of respondents Responses %
Female 41 61.2%
Male 26 38.8%
Total 67 100

By analyzing the survey the data shows that the female are more insured rather
than the male.

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3.] Annual Income
A. less than Rs. 3,00,000
B. Between Rs. 5,00,000 to 8,00,000
C. Between Rs. 8,00,000 to 10,00,000
D. Above Rs. 10,00,000
Options No. of respondents Responses %
Less than Rs. 3,00,000 33 54.1%
Between Rs. 5,00,000 to 17 27.9%
8,00,000
Between Rs. 8,00,000 to 10 16.4%
10,00,000
Above Rs. 10,00,000 1 1.6%
Total 67 100

As per the survey 54.1% people has less than 3,00,000 annual income, 27.9%
is between Rs. 5,00,000 to 8,00,000 annual income, 16.4% people is between
Rs. 8,00,000 to 10,00,000 annual income and the minimum annual income of
people is above 10,00,000.

71
4.] Do you have insurance policy?
A. Yes b. Not
Options No. of respondents Responses %
Yes 55 82.1%
No 12 17.9%
Total 67 100

An arrangement by which a company or the state undertakes to provide a

gurantee of compensation for specified loss, damage, illness or death in return
of payment of a specified premium.
About 81.8% people are insured, where as 18.2% people are non insured.

72
5.] Under which sector does your insurance policy fall?
A. Public b. Private
Options No. of respondents Responses %
Public 45 69.2%
Private 20 30.8%
Total 67 100

By analysing the survey the data shows that the people are more insured from
public sector rather than private sector. Hence, it shows people are more
realible and trust worthy on public sector.

73
6.] If yours is a private insurance company could you provide name?
A. ICICI Prudential b. Bajaj Allianz c. HDFC standard
D. Any other_____________
Options No. of respondents Responses %
ICICI Prudential 3 7.3%
Bajaj Allianz 2 5.3%
HDFC Standard 12 31.6%
Any other 8 45.9%
Total 67 100

About 10% people are insured by icici prudential insurance company, 10% by
bajaj allianze and 20% by hdfc standard and mostly of them .are insured by
any other insurance company

74
 7.] Who influence you to get Insured? ? (if ques no 1 answer is YES)
A. Insurance Agent b. Electronic Media
C. Print Media d. Friends/ relative

Options No. of respondents Responses %

Insurance Agent 26 41.9%
Electronic Media 11 17.7%
Print Media 7 11.3%
Friends/relative 18 29%
Total 67 100

According to the survey, insurance agent influenced most of the people i.e
about 95% people approximately to get insured, where as 25% people are
influenced by friends and relatives.though this shows that most of the people
keep trust on insurance agent to avoid fraud. No one get influenced by
electronic or print media to invest in insurance policy.

75
8.] How many Insurance policies you have?
A. Up to 3 b. More than 6 c. 4 to 6
Options No. of respondents Responses %
Up to 3 51 80.6%
More than 6 1 1.5%
4 to 6 12 17.9%
Total 67 100

As per the survey, every investor takes into consideration basically two
important aspects i.e their investing capacity and basic needs. So due to this
factors mainly 80% people invest in up to 3 insurance policy, 10% people
invest in more than 6 policies, where as, 18.2% people invest in 4 to 6
policies.

76
9.] For what you have Insured Yourself?

A. For saving b. For covering risk to life

C. For tax benefit d. For security to family
E. All of above f. None of the above
Options No. of respondents Responses %
For saving 20 29.9%
For covering risk to life 11 16.4%
For tax benefit 8 1.9%
For security to family 9 13.4%
All of above 14 20.9%
None of the above 5 7.5%
Total 67 100

As per the research, every investor gives top most priority to their first basic
need I.e to save their money.secondly most of the people take policy for
covering risk of their life and to secured their family members.

77
 10. ] Which of the following policies you have?
A. Endowment policy b. Single premium policy
C. Term life policy d. Money back policy
E. Pension plan policy f. Any other___________________
Options No. of respondents Responses
Endowment policy 8 11.9%
Single premium policy 19 28.4%
Term life policy 8 11.9%
Money back policy 11 16.4%
Pension plan policy 11 16.4%
Any other 10 14.9%
Total 67 100

60
50
40
30
20
10
0

People invest as per their requirements and basic needs through their future plans. As
per the survey, endowment policy is most suitable to every individual investor.
Insurance policy Investment(in %)
Endowment policy 60
Single premium policy 5
Term life policy 5
Money back policy 15
Pension plan policy 15
Any other 0

78
11.] Mention your satisfaction level with insurance policy.
A. Very dissatisfied
B. Moderately satisfied
C. Satisfied
D. Highly satisfied
Options No. of respondents Responses %
Very dissatisfied 7 10.4%
Moderately satisfied 19 28.4%
Satisfied 33 49.3%
Highly satisfied 8 11.9%
Total 67 100

As per the data, 80% people are satisfied and 20% are moderately satisfied
with the insurance policy which indicate better performance on the side of
insurance company.

79
12.] What are the reasons that may have held you back from investing in life
insurance products?( if ques no 1 answer is NO)
A. Lack of awareness
B. Returns not lucrative enough
C. Not approved by the intermediaries
D. Promotional measures not attractive
E. Not affordable
F. Any other ___________________
Options No. of respondents Responses %
Lack of awareness 11 31.4%
Returns not lucrative 4 11.4%
enough
Not approved by the 2 5.7%
intermediaries
Promotional measures 2 5.7%
not attractive
Not affordable 2 5.7%
Any other 14 40
Total 67 100

As per the research, there are many insurance policies, people are not able to
understand in which policy to invest so this shows their lack of awareness
about the insurance policies and thus due to low knowledge people feel
reluctant to invest in life insurance product.

80
 13.] What prompted you to buy the life insurance policy from the
company named by you?
A. Brand image of the company ____
B. Excellent past record of performance____
C. My friend / acquaintances have bought from this company____
D. Marketing people insisted me to buy _____
E. Impressed the company ads& promotion____
F. Any other _________________
Options No. of respondents Responses %
Brand image of the 15 22.4%
company
Excellent past record of 17 25.4%
performance
My friend / acquaintances 7 10.4%
have bought from this
company
Marketing people insisted 9 13.4%
me to buy
Impressed the company 8 11.9%
ads& promotion
Any other 11 16.4%
Total 67 100

According to the analysing data, majorly the excellent past record of

performance of the insurance company in the eyes of the investor
promoted investor to buy the life insurance policy from that particular
company.

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14.] How important would it be to you to make a right choice of the brand?
A. Not at all important B. Very much important
Options No. of respondents Responses %
Not at all important 23 34.4%
Very much important 44 65.7%
Total 67 100

As per survey, every investor should be firmed on his decision to invest in

right insurance policy so it is very much important to make a right choice of
insurance brand.

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15.] How important is the financial strength of the company?
A. Very important b. Important
C. Some what important d. Not important
Options No. of respondents Responses %
Very important 29 43.3%
Important 23 34.3%
Some what important 10 14.9%
Not important 5 7.5%
Total 67 100

As per the survey, basically every investor wants regular and stable return so
that it is very much important that the insurance company should be
financially stable.

83
16.] Are you happy with the services provided by your agent?
A. Yes b. No
Options No. of respondents Responses %
Yes 37 74
No 13 26
Total 67 100

As per the survey, out of 88% people around 73.5% people are satisfied with
the services provided by insurance agent.

84
 17.] Does your agent collects the renewal premium from you?
A. Yes
B. No
Options No. of respondents Responses
Yes 29 63%
No 17 37%
Total 67 100

As per the survey, answer of 62.2% people is yes and 37.8% people says no

85
18.] Do you tend to stick to the same brand and remain loyal to a particular
Insurance company and its product?
A. Yes b. No
Options No. of respondents Responses
Yes 55 82.1%
No 12 17.9%
Total 67 100

The answer of this question is depends up on the performance of the company,

but still 81.8% people says yes and 18.2% people says no.

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CHAPTER 5:
Suggestions:
After the analysis of the data collected and review of the findings, it was found that
the study served its purpose by achieving the objectives. The findings provided
insight into discovering the factors which affects the customers' preferences of life
insurance product . The following suggestion can be made based upon the findings
and conclusion:

1) Training of Agents: The agents/ financial consultants are the person who comes in
direct contact with the customers most frequently. Therefore, it becomes imperative to
provide them the best of the training. The training should not be confined only to
providing product knowledge. Behavioural aspects, especially the soft skills are also
very important. The agents should also be given training in a way which will compel
them to serve their duty ethically. By making the agents ethically right, their tainted
image can be wiped out.
2) Providing excellent moments of truth: Moments of truth are the instances when a
customer comes in contact with the organization. The company should consider all
the necessary steps which can provide the best moments of truth so that every time a
person encounters something related with the company, he should derive a favourable
impression about it.
3) Product features: Product features are considered to be very influencing in the
selection of company. It should be considered with utmost importance while
formulating any communication strategy.
4) Communication Strategy: Advertising came out to be the most effective mode of
communication. Sales promotion and word of mouth are determining factors and
influences the customers' preferences. Therefore, proper weightage should be given to
advertising and sales promotion. As far as favourable word of mouth is concerned,
this can be achieved only in the long run with dedicated service to the customers.
Direct marketing approaches like telemarketing, junk mails are considered to be
discomforting and this mode of communication should be used very cautiously.

87
5) Premium of the policies: Low premium are considered preferable by most of the
people. People considers premium in HDFC Standard as a bit on the higher end. So, a
little reduction is the premium amount can help to cater for a larger customer base and
even the rural areas can also be entertained.
6) Accessibility: LIC enjoys huge popularity because of its easy accessibility. The
number of agents of LIC is far more than what HDFCSLIC has. So, more emphasis
should be given to acquire efficient financial consultants. Nevertheless, the quality of
the financial consultants should not be compromised for quantity.
7)Private insurers should emphasis more on advertising and building brand awareness
through different modes of communication. This will help in spreading insurance
awareness among the common man.
8)Life insurance companies should come up with innovative tailor-made products
with high risk cover, more return and low insurance premium to attract more number
of customer.

88
Chapter 6:-
Conclusion:
1)It was found that people who have bought their policy because some agent coaxed
him, is not satisfied with their existing policy and some even remarks that life
insurance is not necessary at all in today's scenario.

2) Life Insurance Corporation of India still enjoys massive popularity among the
Indian crowd. People still prefers LIC over other private players. In fact, people have
made the name LIC synonymous with insurance.
3) It was found that the most important reason, why a customer to buy an insurance
product is Tax Rebate. This pattern is very prominent among the younger individuals,
who have recently become financially independent. Older people consider life
coverage as the most important reason.
4) Internet proved to be the most prominent information source among the people.
Again, this pattern is more prevalent among the youth. Friends and peer groups were
also considered as an important information source by the people.
5) When a person evaluates the alternatives available to him while buying an
insurance policy, his most important criterion is whether a company is public or
private. Product features and amount of premium are also considered as important
criteria to select a particular company.
6) Most of the people admitted that their purchase decision was affected by the
agents/ brokers. This also signifies the importance of an agent in helping the customer
to make the purchase decision. Friends' suggestions and advices also influence the
purchase decision.
7) Product features of an insurance policy like tax rebate, savings, investment and life
cover are strongly considered as the determining factor for selecting a company.
8) People regard advertising and word of mouth as very relevant factors for selecting
a company. The advertising can be any form like print media, television commercials
or other electronic media. Word of mouth account for the goodwill of the company,
which it has earned through its years of devoted and dedicated service to its
customers.

89
9) Agent's knowledge influences greatly the purchase decision of a customer. The
way he behaves and presents himself also affect the buying decision of the customer.
Therefore, it can be concluded that only product knowledge is not sufficient to
convince people. The agents should be properly trained about the behavioral aspects
as well. Proper emphasis should be given to improve the soft skills of the agents.

90
Chapter 7:-
ANNEXURE:-
A STUDY ON FACTORS WHICH AFFECTS CHOICE OF
LIFE INSURANCE PRODUCTS IN INDIA.
QUESTIONAIRE

BASIC INFORMATION:-
1. NAME:- ____________________________________________
2. GENDER :- a. Male b. Female
3. AGE:- a. 18-25 b. 26-35 c. 36-45 d. 46-55 e. Above 55
4. ANNUAL INCOME:-
a. less than Rs. 3,00,000
b. Between Rs. 5,00,000 to 8,00,000
c. Between Rs. 8,00,000 to 10,00,000
d. Above Rs. 10,00,000

Please tick on the alternative in the given below the question.

1.] Do you have the insurance policy?
a. Yes b. No
2.] Under which sector does your insurance policy fall?
a. Public b. Private
3.] From which private insurance company you are insured?
a. ICICI Prudential b. Bajaj Allianz c. HDFC standard
d. Any other_____________
4.] Who influence you to get Insured? ? (if ques no 1 answer is YES)
a. Insurance Agent b. Electronic Media
c. Print Media d. Friends/ relative
5.] How many Insurance policies you have?
a. Up to 3 b. More than 6 c. 4 to 6
6.] For what you have Insured Yourself?
a. for saving b. For covering risk to life
c. for tax benefit d. For security to family

91
e. All of above f. None of the above
7. ] Which of the following policies you have?
a. Endowment policy b. Single premium policy
c. Term life policy d. Money back policy
e. Pension plan policy f. Any other___________________
8.] Mention your satisfaction level with insurance policy.
a. Very dissatisfied
b. Moderately satisfied
c. Satisfied
d. Highly satisfied
9.] What are the reasons that may have held you back from investing in life
insurance products?( if ques no 1 answer is NO)
a. Lack of awareness
b. Returns not lucrative enough
c. Not approved by the intermediaries
d. Promotional measures not attractive
e. Not affordable
f. Any other ___________________
10.] What prompted you to buy the life insurance policy from the company
named by you?( Please rate them on scale of Importance)
Very low Very high
1 4
2 5
3

a. Brand image of the company ____

b. Excellent past record of performance____
c. My friend / acquaintances have bought from this company____
d. marketing people insisted me to buy _____
e. impressed the company ads& promotion____
f. Any other _________________
11.] How important would it be to you to make a right choice of the brand?
a. Not at all important b. Very much important
12.] How important is the financial strength of the company?
a. Very important b. Important

92
c. Some what important d. Not important
13.] Are you happy with the services provided by your agent?
a. Yes b. No .
14.] Does your agent collects the renewal premium from you?
a. Yes b. No
15.] Do you tend to stick to the same brand and remain loyal to a particular
Insurance company and its product?
a. Yes b. No

93
Chapter 8:-
Bibliography:
BOOKS.

CR KOTHARI

WEBLIOGRAPHY.
Websites
 International Journal of Marketing, Financial Services & Management
Research Vol.1 Issue 7, July 2012, ISSN 2277 3622.
 LBS Journal of Management & Research.
 www.iosrjournals.org
 www.lic.com

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