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LIFE INSURANCE PRODUCT PRICING IN RURAL ODISHA: AN

EMPIRICAL STUDY
GANESH DASH
Research Scholar, D.M.S. - S.O.M., Pondicherry University
ganeshdash@hotmail.com
Dr. M. BASHEER AHMED KHAN
Senior Prof., D.M.S. - S.O.M., Pondicherry University
Abstract
This study tries to investigate the differences in the perception of the executives (of the policy pricing variables)
with respect to their age, gender, education, experience and organization. The various elements involved in the
policy pricing are outlined as: affordability of the price level, flexibility of terms and conditions, worth of its
value (as anticipated by the customer), uniqueness and better than alternate policies, simple and clear price
structure and discountsincentives. This study relies on assumption that age, gender, education, experience and
organization have no effect on the perception (of the policy pricing elements) of the executives. The study was
conducted in south !disha spreading over three districts with more than "## life insurance executives put
through the data collection process. $arious elementary statistical tools such as mean and variance were
applied to find any variation among the different classes of respondents with regard to the various policy
variables. %urther, to find out significant variation among these different classes, one&way '(!$' and t&Test
were applied. )n the long run, this study will help the life insurance companies in understanding its frontline
sales force with respect to creating a flawless pricing policy.
Key words: )ndia, *ife )nsurance, +rice.
Intro!ct"on
In a developing contry li!e India "here the
disposa#le income in the hands of prospective
cstomers is lo", the pricing decision al"ays
governs the transformation of potential policyholders
into actal ones. $he strategies may #e high or lo"
pricing !eeping in vie" the level or standard of
cstomers or the policyholders. $he pricing in
insrance is in the form of premim rates. $he
varios elements involved in the policy pricing and
their perception #y the front line e%ectives are the
focal theme of this stdy. $his component addresses
management of the otlays incrred #y cstomers in
o#taining #enefits from the service prodct. In the
insrance #siness the pricing decisions are
concerned "ith& I' the premim charged against the
policies, II' interest charged for defalting in the
payment of premim and credit facility and III'
commission charged for nder"riting and
consltancy activities. (ith a vie" of inflencing the
target mar!et or prospects the formlation of pricing
strategy #ecomes significant. In a developing contry
li!e India "here the disposa#le income in the hands
of prospect is lo", the pricing decision also governs
the transformation of potential policyholders into
actal policyholders. $he strategies may #e high or
lo" pricing !eeping in vie" the level or standard of
cstomers or the policyholders. $he pricing in
insrance is in the form of premim rates. $he three
main factors sed for determining the premim rates
nder a life insrance plan are #orta$"t% )deaths in a
particlar area', &'(&ns& )cost of processing,
commission to agents, reinsrance companies as "ell
as registration' and "nt&r&st )people "old not #e
"illing to invest in insrance #siness if the interest
rates provided #y other financial instittions are
mch greater than the perceived retrns from the
insrance premims'. $he premim rates are revised
if there are any significant changes in any of these
factors.
*ny life insrance prodct shold have a clearly laid
price strctre "hich can #e nderstood #y the
consmer. $here shold not #e any hidden cost
"hich is most rampant in India. +o", almost all the
companies are moving to"ards a lo"-premim era
ma!ing the poorer sections eligi#le to #y a policy.
$hey are providing the costs and #enefits of the
policies and ,stification for the pricing. $hey are
ma!ing the prodcts "orthy of their #ying price.
$hey are also adding lot of add-on #enefits to the
prodcts to attract the recession-hit cash-strapped
cstomers.
R&)"&* o+ L"t&rat!r&
$he stdy #y Saif Siddi-i ).//0' named as 1Indian
2ife Insrance Sector 3 *n overvie"4 prodces an
overvie" of present position of 2ife Insrance Sector
in India and stdy varios economic indicators
related to policy pricing of all 2ife Insrance
5ompanies operating in India.
$he stdy condcted #y $apen Sinha ).//6' named
as& 1$he Indian insrance indstry& challenges and
prospects4 also discsses a#ot the present stats of
Indian insrance indstry. 7oy 5ha!ra#orty ).//8' in
his stdy 1Private 2ife Insrance 5ompanies in India&
9ro"ing Prospects and 5hallenges4 traces the
challenges faced #y the private players "hile
mar!eting and pricing their prodcts and the
measres they have ta!en for overcoming them.
$he stdy condcted #y M 5 9arg and *n, :erma
)./;/' named as&4 *n <mpirical *nalysis of
Mar!eting Mi% in the 2ife Insrance Indstry in
India4 discsses the pro#lems of mar!eting mi% and
policy pricing strategies in the life insrance indstry
in India.
R&s&arc, Ob-&ct")&s
$he sole o#,ective of this stdy is to investigate the
differences in the perception of the e%ectives )of the
policy pricing varia#les' "ith respect to their age,
gender, edcation, e%perience and organi=ation. $he
varios elements involved in the policy pricing are
otlined as& afforda#ility of the price level, fle%i#ility
of terms and conditions, "orth of its vale )as
anticipated #y the cstomer', ni-eness and #etter
than alternate policies, simple and clear price
strctre and disconts>incentives.
R&s&arc, M&t,oo$o.%
?ased on the a#ove mentioned o#,ectives, the
follo"ing ma,or hypotheses are set&
H/& *ge does not affect the e%ective@s perception of
the varios varia#les involved in policy pricing.
H0& ?oth male and female e%ectives@ perceptions of
the policy pricing varia#les are same.
H1& 2evel of edcation has no effect on the
perception of the e%ectives regarding the policy
pricing attri#tes.
H2& <%perience has no impact on the perception of
the e%ectives regarding the policy pricing attri#tes.
H3& $here is no significant difference #et"een p#lic
and private companies@ e%ectives@ perception of the
policy pricing varia#les.
Regarding the data collection methods, this stdy has
adopted primary data collection approach to gather
data.
$he sample has #een collected from soth Odisha
spreading over three districts in the $ast t*o
4!art&rs o+ 05/5. ./8 life insrance e%ectives "ere
pt throgh the data collection process. * "ell
strctred -estionnaire "as framed "ith -estions
on their demographic varia#les as "ell as the varios
attri#tes involved in pricing of the policy. $he
e%ectives "ere classified into different classes on
the #asis of their age, gender, edcation, e%perience
and organisation. Aor this prpose, a five-point scale
)from ; to 6' has #een adopted "ith ; #eing
1,trongly disagree- and 6 #eing .,trongly 'gree-.
$he #asic o#,ective of this stdy is to investigate the
relationship #et"een the demographic varia#les and
the varios varia#les involved in pricing. $he policy
pricing varia#les "ere pt throgh some statements
as per the perception of the e%ectives )adapted from
price component of services mar!eting mi% model #y
?ooms B ?itner, /01/).
$he seller@s )e%ective' perception of the policy
pricing attri#tes is pt throgh the follo"ing
statements&
P/& $he price level of the policy is afforda#le to the
cstomer
P0& $he terms of payment is fle%i#le and convenient
for the cstomer
P1& $he price of the policy does not e%ceed the
anticipation of the cstomer regarding its "orth
P2& $he pricing is ni-e and #etter compared to
other alternate policies
P3& $he price strctre is simple and clearly laid
P6& $his price level provides good amont of
disconts >and incentives to the cstomer
*fter getting the desired data, varios elementary
statistical tools sch as mean and variance "ere
applied to find any variation among the different
classes of respondents "ith regard to the varios
pricing varia#les. 5orrelation analysis are nderta!en
to verify the relationship among the varia#les. Aactor
analysis "as sed to categorise the si% varia#les in to
grops #ased on the loadings. Arther, to find ot
significant variation among these different classes,
one-"ay *+O:* and t-$est "ere applied. Aor
gender-"ise and organisation-"ise analysis, t-$est
"as follo"ed "here as for age-"ise analysis,
edcation-"ise analysis and e%perience-"ise
analysis, one-"ay *+O:* method "as sed to test
the significance.
R&s!$ts an D"sc!ss"on
Airstly, let s ta!e a loo! on the demographic
varia#les of the sample collected. $he age grop "as
divided into three parts. Ot of the ./8 e%ectives,
;.. people #elonged to 1less than C6 years4 grop
"hereas 88 respondents #elonged to 1C6-6/ years4
grop and D respondents #elonged to 1a#ove 6/
years4 grop. ;6D e%ectives "ere male and EF
e%ectives "ere female. ?ased on the edcational
-alifications, the e%ectives "ere categorised in to
three categories& 1G.S.5. > H.4 )0F', 19radate4
);/6' and 1Post-gradate and a#ove4 )CC'. ?ased on
their "or! e%periences, they "ere categorised into
three categories& I#elo" 6 years@ )DC', I6-;6 years@
);/6' and Ia#ove ;6 years@ );F'. *gain, ;/;
e%ectives #elonged to the 2.I.5.I. and ;/0
e%ectives #elonged to the private companies.
5orrelation analysis "as applied to verify the
relationship among the varios pricing attri#tes. It
"as fond that P;, P., PC and P0 have a high
positive correlation among themselves "hile PE and
P6 have a high positive correlation among
themselves. *gain to verify the linear relationship
among some factors,
factor analysis "as applied. $a!ing principal
component analysis and varima% rotation method,
rotated factor matri% "as esta#lished. $"o factors
"ere fond to #e having <igen vales more than one.
?oth these factors possess more than 8DJ of the total
variance.
Arom tab$&7/8 it can #e seen that P;, P., PC and P0
have a high loading on the factor ; "hich is named
as PA; )pricing factor ;' "hereas PE and P6 have a
high loading on the factor . named as PA. )pricing
factor.'. $herefore, PA; is a com#ination of P;, P.,
PC and P0 "hereas PA. is a com#ination of PE and
P6. Relia#ility statistics )cron#ach@s K' "ere carried
ot for the E items of PA; and . items of PA. "hich
"ere fond to #e /.860 and /.8;. respectively.
Means and standard deviations of PA; and PA. "ere
fond to #e )C.08/, ;./FF' and )C.0F6, ;./F/'
respectively "hich sggests that #oth the factors are
sggesting agreea#ility regarding the impact of
pricing attri#tes mentioned earlier on the
e%ectives@ perception.
Tab$& /7 Factor Ana$%s"s R&s!$ts *"t, R&$"ab"$"t% Co&++"c"&nts o+ Instr!#&nts
Tab$& 0
Impact of Age - Arom tab$&70, it can #e seen that
mean vales of PA; are C.0FD, C.0FE and C./// "ith
standard deviation vales of ;./FF, ;./D8 and ;.;E;
respectively "ith respect to the three age categories.
*gain, mean vales of PA. are C.8F;, C.6.0 and
C.D86 "ith standard deviation vales of ;./8;, ;.;.F
and /.D80 respectively "ith respect to the three age
categories. $o verify the significance of the
difference, one-"ay *+O:* "as carried ot
!eeping the significance level at ;/J. A-vale for
PA; "as fond to #e ;.660 at /..;E significance level
and A-vale for PA. "as fond to #e ;.6;6 at /....
level of significance. Gence, it can #e said that there
is no significant difference #et"een the perceptions
of the e%ectives of the three age categories
regarding #oth the pricing factors.
Impact of Gender - Arom tab$&71, it can #e seen that
mean values of PF1 are 3.742 and 3.438
with standard deviation values of 1.036 and
1.266 respectively with respect to males
and females respectively. !ain" mean
values of PF2 are 3.721 and 3.612 with
standard deviation values of 1.062 and
1.182 respectively with respect to males
and females respectively. #o verify the
si!nificance of the difference" t$#est was
carried out %eepin! the si!nificance level at
10&. #he t$value for PF1 was found to 'e
1.6() at 0.0(2* si!nificance level and t$
value for PF2 was found to 'e 0.612 at
Factors
Pr"c"n.
9ar"ab$&s
Loa"n. No. O+ It&#s Cronbac,:s ; M&an Stanar D&)"at"on
PF/
; P; .88.
E .860 C.08/
;./FF
. P. .D00
C PC .8E6
E P0 .086
PF0 ; PE .D;6 . .8;. C.0F6 ;./F/
. P6 .0;F
+ote- <%traction Method& Principal 5omponent *nalysis.
Rotation Method& :arima% "ith Laiser +ormali=ation. Rotation converged in C iterations.
Factors
On&7<a% ANO9A Ana$%s"s +or A.&7<"s& Ana$%s"s o+ t,& E'&c!t")&s
A.& =Y&ars>
F79a$!&
S".n"+"canc& L&)&$
L&ss T,an 13 13735 Abo)& 35
N?/00 N?@@ N?A
M&an S.D. M&an S.D. M&an S.D.
PA; C.0FD ;./FF C.0FE ;./D8 C./// ;.;E; ;.660 /..;E
PA. C.8F; ;./8; C.6.0 ;.;.F C.D86 /.D80 ;.6;6 /....
0.)41 level of si!nificance. +ence" it can 'e
said that there is si!nificant difference
'etween the perceptions of male and
female e,ecutives re!ardin! PF1 -%eepin!
the si!nificance level at 10&. whereas
there is no si!nificant difference 'etween
the perceptions of male and female
e,ecutives re!ardin! PF2.
Tab$& 1
t7T&st +or G&n&r7<"s& Ana$%s"s o+ t,& E'&c!t")&s
G&n&r
t79a$!&
S".n. L&)&$
=07ta"$&> Ma$& F&#a$&
N?/3A N?2B
M&an S.D. M&an M&an
PF/ C.8E. ;./C0 C.ECD ;..00 ;.0F6 /./F.M
PF0 C.8.; ;./0. C.0;. ;.;D. /.0;. /.6E;
MSignificant at ;/J level
Tab$& 2
Impact of Education - Arom tab$&72, it can #e seen
that mean vales of PA; are C.8;/, C.06F and C.0.;
"ith standard deviation vales of ;./CF, ;.;;8 and
;.;F. respectively "ith respect to the three
categories of edcational -alifications. *gain, mean
vales of PA. are C.F60, C.6;F and C.8;. "ith
standard deviation vales of /.FC/, ;.;;8 and ;...E
respectively "ith respect to the three categories of
edcational -alifications. $o verify the significance
of the difference, one-"ay *+O:* "as carried ot
!eeping the significance level at ;/J. A-vale for
PA; "as fond to #e /./DC at /.F.; significance level
and A-vale for PA. "as fond to #e C.EC0 at /./CEM
level of significance. Gence, it can #e said that there
is no significant difference #et"een the perceptions
of the e%ectives of the three categories of
edcational -alifications regarding PA; "hereas
there is significant difference #et"een the
perceptions of the e%ectives of the three categories
of edcational -alifications regarding PA. )!eeping
the significance level at 6J'.
Impact of Experience - Arom tab$&73, it can #e seen
that mean vales of PA; are C.0.F, C.8.; and C.606
"ith standard deviation vales of ;.;0C, ;./EE and
;.;6; respectively "ith respect to the three
e%perience categories. *gain, mean vales of PA. are
C.0EE, C.8/F and C.DE. "ith standard deviation
vales of ;..;0, ;./.8 and /.D6/ respectively "ith
respect to the three e%perience categories. $o verify
the significance of the difference, one-"ay *+O:*
"as carried ot !eeping the significance level at
;/J. A-vale for PA; "as fond to #e /..66 at /.886
significance level and A-vale for PA. "as fond to
#e /..0F at /.80E level of significance. Gence, it can
#e said that there is no significant difference #et"een
the perceptions of the e%ectives of the three
categories of "or! e%periences regarding #oth the
pricing factors.
C
Tab$& 3
Factors
On&7<a% ANO9A Ana$%s"s +or E!cat"on7<"s& Ana$%s"s o+ t,& E'&c!t")&s
E!cat"ona$ D!a$"+"cat"on
F79a$!&
S".n.
$&)&$
H.S.C. E F0 Gra!at& P.G. an abo)&
N?6B N?/53 N?11
M&an S.D. M&an S.D. M&an S.D.
PA; C.8;/ ;./CF C.06F ;.;;8 C.0.; ;.;F. /./DC /.F.;
PA. C.F60 /.FC/ C.6;F ;.;;8 C.8;. ;...E C.EC0 /./CEM
MSignificant at 6J level
Impact Of Organisation - Arom tab$&76, it can #e
seen that mean vales of PA; are C.0F6 and C.0E0
"ith standard deviation vales of /.FD/ and ;../6
respectively "ith respect to the e%ectives of 2.I.5.I.
and private companies respectively. *gain, mean
vales of PA. are C.08C and C.8;8 "ith standard
deviation vales of /.FFC and ;.;8F respectively "ith
respect to e%ectives of 2.I.5.I. and private
companies respectively. $o verify the significance of
the difference, t-$est "as carried ot !eeping the
significance level at ;/J. $he t-vale for PA; "as
fond to #e /.C.. at /.8ED significance level and t-
vale for PA. "as fond to #e -/..DD at /.88E level
of significance. Gence, it can #e said that there is no
significant difference #et"een the perceptions of
e%ectives of 2.I.5.I. and private companies
regarding #oth the pricing factors.
Tab$& 6
Conc$!s"on
$his stdy has analysed the seller@s perception of
varios pricing attri#tes involved in life insrance
pricing policy "ith respect to their age, gender,
edcation, e%perience and organisation. $he
e%ectives have a positive perception )agree'
regarding all the pricing varia#les e%cept PC for
"hich they have a netral opinion. *mong the other
five varia#les, they have the highest positive
perception regarding P0 and lo"est positive
perception regarding P; and P6. Arther, it has #een
proved that age, e%perience and organisation have no
significant impact on the e%ectives@ perception of
the pricing attri#tes. Gence, it can #e said that nll
hypotheses G;, GE and G6 are accepted. ?t, the
stdy has sho"n that gender and edcation have an
impact on the seller@s perception of the pricing
varia#les. $herefore, nll hypotheses G. and GC are
not flly accepted. $his research paper also gives
some sggestions for the life insrance indstry in
India regarding their policy pricing strategies. $he
price level shold #e "ell "ithin the afforda#ility
level of the cstomer. Ale%i#ility and convenience of
terms of payment mst #e follo"ed as per the
re-irements of the potential cstomer. $he life
insrance companies mst ensre that the price of the
policy shold not e%ceed its "orth as anticipated #y
the #yer. *gain, a transparent comparison "ith the
price levels of similar policies provided #y the rival
companies shold #e made #efore the prospective
#yers. * clear and simple price strctre shold #e
provided #y the selling companies to the cstomer
that can #e nderstood easily #y a lay man. Arther,
disconts and incentives shold #e inclded in the
pricing strctre in order to attract #yers. 2ife
insrance may #e the most difficlt prodct to sell,
#t "ith a perfect price strctre it can #e sold easily.
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Factors
On&7<a% ANO9A Ana$%s"s +or E'(&r"&nc&7<"s& Ana$%s"s o+ t,& E'&c!t")&s
E'(&r"&nc& =Y&ars>
F79a$!&
S".n.
$&)&$
B&$o* 3 37/3 Abo)& /3
N?A1 N?/53 N?/B
M&an S.D. M&an S.D. M&an S.D.
PA; C.0.F ;.;0C C.8.; ;./EE C.606 ;.;6; /..66 /.886
PA. C.0EE ;..;0 C.8/F ;./.8 C.DE. /.D6/ /..0F /.80E
Factors
t7T&st +or Co#(an%EOr.an"sat"on7<"s& Ana$%s"s o+ t,& E'&c!t")&s
Co#(an%
t79a$!&
S".n. L&)&$
=07ta"$&>
L.I.C.I. Pr")at&
N?/5/ N?/56
M&an S.D. M&an S.D.
PA; C.0F6 /.FD/ C.0E0 ;../6 /.C.. /.8ED
PA. C.08C /.FFC C.8;8 ;.;8F -/..DD /.88E
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