A SUMMER TRAINING REPORT

ON

( The Indian Life Insurance Market)

Submitted to:
Satyug Darshan Institute of Engineering and
Technology
By:
(VARSHA DISODIYA)
Roll No.(It should be your MDU
exam roll no)
Batch 2014 2017
In Partial Fulfillment of
Bachelor of Business Administration
MAHARSHI DAYANAND UNIVERSITY
ROHTAK (HARYANA)
(November, 2016)

Satyug Darshan Institute of Engineering and

Technology
Bhupani Lalpur Road, Village Bhupani
Faridabad - 121002, NCR, Haryana, India

DECLARATION
I, Ms.Varsha Disodiya hereby declare that this summer
training report is the record of authentic work carried out by
me during the period from ---------- to --------and has not
been submitted to any other University or Institute for the
award of any degree / diploma etc.

(Signature)
Varsha
Date:

BONAFIDE CERTIFICATE

This is to certify that Ms.Varsha of Satyug Darshan Institute of

Engineering and Technology has successfully completed the project
work titled (THE INDIAN LIFE INSURANCE MARKET) in
partial fulfillment of requirement for the completion of Bachelor in
Business Administration (BBA) course as prescribed by the
Maharshi Dayanand University, Rohtak, (HARYANA).
This project report is the record of authentic work carried out by
him/her during the period from ------- to -------. He / She has worked
under my guidance.

(Signature)
Ms Vineeta Agrawal
Assistant Professor, BBA Department
Project Guide (Internal)

Date:

Counter signed by

(Signature)
Mr. Ravi Bakshi
Department Coordinator (BBA Department)
Date:
ACKNOWLEDGEMENT
It has been a matter of great privilege and pleasure for me to be associated with
MAPPING MINDS VENTURE (consultancy firm), FARIDABAD for my
summer training. I hereby acknowledge with due courtesy the sources consulted
in the completion of my project.
First of all I would like to thanks Mr. AMIT VIRMANI who allowed me to
undergo training program at MAPPING MINDS VENTURE., (consultancy firm)
FARIDABAD.
Further I pay my sincere regards to Ms. NISHA DHILON and Mr. J.P. Sharma
for their valuable guidance, continuous encouragement and enthusiasm in
inspiring me throughout the project.
Last but not the least, I would like to thank to my project guide Ms. VINEETA
AGARWAL and faculty members of SATYUG DARSHAN TECGNICAL
CAMPUS and whole hearted co-operation in drafting this report.

VARSHA

PREFACE
The study of expectations and perceptions of consumers towards a
professional service like life insurance in the post liberalization period is
considered to be one of the most challenging problems in the insurance sector.
Expectations and perceptions form the basis for the determination of customer
satisfaction. The main problem of the study is to examine the consumers
opinion and attitude towards the characteristic features exhibited, the reasons for
loyalty, persistency and withdrawal from existing life insurance company. The
entry of private players has made the entire scenario complicated and satisfying
the customers is the major problem faced by insurers in the light of the severe
competition. To solve this problem, it is imperative for the insurance companies
to keep a track of the customers through continuous feed back mechanism to
understand customers changing expectations to develop strategies for the future.
Hence, this study is undertaken to examine expectations, perceptions and
customer satisfaction, to provide useful information to the industry and the
policyholders for their useful and fruitful relationship.

TABLE OF CONTENT

S.NO

PARTICULARS

Introduction to the study

The indian life insurance market :An overview

Review of Literature

Research Methodology
Objectives of the Study
Scope of the Study
Research Design
Method of Data Collection
Limitations of the Study

Data Analysis and Interpretation

Conclusion and Suggestions

Annexure

CHAPTER I
INTRODUCTION

CHAPTER I
INTRODUCTION
Indian economy is in transition over the last ten years owing to the major
economic reforms affecting almost all sectors. Insurance business is the most
significant in the financial services sector. Life insurance Corporation (LIC) of
India is a financial intermediary which mobilizes peoples savings and invests
large amounts of premiums. Life insurance meets the contingencies of physical
death and economic loss.
In India the insurance business is going on for more than 150 years. Life
Insurance was brought in for the first time by the British. The business of life
insurance in India in its existing form started in the year 1818 with the
establishment of the Oriental Life Insurance Company in Calcutta. The Indian
Life Assurance Companies were the first to regulate the Life Insurance business
in 1912. The Insurance Act of 1938 was passed and the Department of Insurance
under the authority of Superintendent of Insurance was established for the
administration of the Act. The study of insurance companies between 1939-55
reveal the lack of trust which is the corner stone of life business and thus

nationalization of insurance business became necessary.

In 1956 LIC was formed by an Act of Parliament, viz. LIC Act, 1956. The
Life Insurance Business in India was characterized by the presence of only one
player i.e., the Life Insurance Corporation of India. The Life Insurance
Corporation of India is the largest life insurance company in India and it is fully
owned by the Government of India.
Policy Holders Expectations and Perceptions
Customer expectations are beliefs about service delivery that function as
standards or reference points against which performance is judged. Because
customers compare their perceptions of performance with these reference
points when evaluating service quality, thorough knowledge about customer
expectations is crucial to services marketers. Knowing what the customer
expects is the first and possibly most crucial step in delivering quality service.
The level of expectation can vary widely depending on the reference
point the customer holds. Everyone has an intuitive sense of what
expectations are. Customers hold different types of expectations about
service. Two types of expectation can be focused on.
The highest can be termed as desired service: the level of service the
customer
hopes to receive and the wished for level of performance. Desired service is a
blend
of what the customer believes can be and should be
The lower level of customer expectation is the level of acceptable service
or
adequate service: the level of service the customer will accept.
These two types of expectation standards, act as the upper and lower
boundaries for customer expectations. Customers typically hold similar desired
expectations across categories of service, but these categories are not as broad as

whole industries. The adequate service expectation level, on the other hand, may
vary
for different firms within a category or subcategory.1
Six major areas of customers expectations from the life insurance companies are:
1.

Resolution of customer anxiety In a service industry, one of the factors

that motivates a customer to opt for a service provider is whether the
service provider is able to reduce his or her anxieties, articulated or not, in
relation to the same. In case of insurance service, many customers are not
fully aware of the benefits being offered as well as the terms and
conditions underlying the same. There is always an apprehension in the
minds of the customers that insurance companies are only interested in
collecting the premium without explaining the conditions for seeking
future claims. Because of this fear, the general tendency is to avoid taking
insurance covers.

2.

Simplification of the documents. Complex documentation acts as a

deterrent to seeking services because most customers are not
knowledgeable about the insurance products. When faced with long and
complicated paperwork, an immediate reaction of the customers is to
assume that the cover is not in their favour.

3.

Enhanced responsiveness. Though the customers expect superior

services all the time, customers do realize that once in a while, there can
be specific problems when service providers, such as the insurance

companies, are not able to honour the predefined service standards in the
normal course. However, if a service provider is responsive to customer
needs, and goes out of its way to make up for the failure in services
offered, the customers enjoy the special treatment meted out by the
service provider during the post-complaint stage and this builds loyalty.

4.

Improve post-sale service. In a service industry, a significant amount of

customer value is created during the post-sale phase. For example, in the
insurance industry, the past experience of customers in settling claims
influences their future decision on renewals as well as in taking additional
policies. Research shows that unhappy customers tend to share a bad
experience with potential customers more than they share a good one.

5.

Courtesy shown. The customers perception of quality of services is also

influenced by the courtesy extended to a customer when he comes faceto-face with the employees of the service provider.

6.

Effective cost of service. This includes not only direct cost e.g.,
premium, but also the hidden costs such as cost of follow-up, delay in
settlement of claims, long waiting time etc.,

Perceptions
Perception can be described as how we see the world around us.
Perception is the process by which an individual selects, organizes and interprets
information to create a meaningful picture of the world. Individuals act and react

on the basis of their perceptions and not on the basis of objective reality.
Perception is the process by which an individual selects, organizes and
interprets stimuli into a meaningful and coherent picture of the world. Leon G.
Schiffman(2000).2
Philip Kotler 3 is of the view that people can form different perceptions of
the same stimulus because of three perceptional processes selective exposure,
selective distortion and selective retention.
Customer Preferences
There are four unique elements to services. Intangibility, Inconsistency,
Inseparability and Inventory. These four elements are referred to as the 4 Is of
services. When customers decide to purchase a service to meet an unfilled
need, they go through what is often a complex purchase process. This process
has three identifiable stages: the pre-purchase stage, the service encounter
stage, and the post-purchase stage.
The primary objective of service producers and marketers is identical to
that of all marketers: to develop and provide offers that satisfy consumer needs
and expectations, thereby ensuring their own economic survival. In other words
service marketers need to be able to close the customer gap between expectations
and perceptions. To achieve this objective, service providers need to understand
how consumers choose and evaluate their service offerings. Unfortunately, most
of what is known about consumer evaluation processes pertains specifically to
goods. The assumption appears to be that of services, if not identical to goods,
are at least similar enough in the consumers mind thereby chosen and evaluated

in the same manner.

The assumption has been challenged and it is clearly shown that the
unique characteristics of services require different consumer evaluation
processes from those used in assessing goods. Recognizing these differences and
thoroughly understanding consumer evaluation processes are critical for the
customer focus, on which effective services marketing is based. As the customer
is the heart of effective services marketing, the focus should be on the customer.
Consumers have a more difficult time evaluating and choosing services than
goods, partly because services are intangible and non standardized and partly
because consumption is so closely intertwined with production. These
characteristics lead to differences in consumer evaluation processes for goods
and services in all the stages of the buying process. Customer behavior is
roughly divided into 5 categories or stages of the buying process: (1) Need
recognition, (2) information search, (3) evaluation of alternatives, (4) purchase
and consumption, and (5) post-purchase evaluation. Lack of understanding of the
way customers assess and choose services in these five fundamental stages leads
to a customer gap that must be closed by service marketers.

Consumer Evaluation of Services

For consumer evaluation of services the concept of goods was considered
and it is only in the two decades it was realized that service characteristics have
definite implications on the consumer evaluation process. For service industries,
therefore, service providers must understand how consumers choose and

evaluate their offering.

Service performances, especially those that contain few tangible clues,
can be difficult for consumers to evaluate, both in advance of purchase and even
afterward. As a result, there is greater risk of making a purchase that proves to be
disappointing. A customer who buys a physical commodity that proves
unsatisfactory can usually return or replace it. These options are not as readily
available with services.
Product Attributes affecting Service Evaluation.
Product attributes can be divided into search, experience, and credence
properties. All products can be placed on a continuum ranging from easy to
evaluate to difficult to evaluate, depending on whether they are high in search
attributes, experience attributes, or credence attributes.
Search attributes are those that a consumer can determine before
purchasing a product, experience attributes are that, which can be discerned only
after purchase or during consumption and credence attributes includes
characteristics that the consumer may find impossible to evaluate even after
purchase and consumption.
Goods high in search attributes are the easiest to evaluate. Goods and
services high in experience attributes are more difficult to evaluate because they
must be purchased and consumed before assessment is possible. Goods and
services high in credence attributes are most difficult to evaluate because the
consumer may be unaware of or may lack sufficient knowledge to appraise
whether the offerings satisfy given wants or needs even after consumption.

These four important characteristics of services make it difficult for

customers to evaluate. Difficulty in evaluation, in turn, forces consumers to rely
on different cues and processes when evaluating services. Experience and
credence qualities dominate in services and consumers employ different
evaluation processes than those they use with goods, where search qualities
dominate. Specific areas, where characteristics of services may lead to divergent
evaluation processes and altered consumer behavior are information search,
evaluative criteria, size and composition of
the evoked set of values, and attribution of dissatisfaction.
Need for the Study
In the current scenario with the liberalization of the life insurance industry
the customer will be the single most important factor driving changes in the life
insurance business. Fuelled by competition, increased awareness will bring the
customers on to center stage. For insurers, therefore, the critical success factor
would be managing the customer. In the Indian context, with the onset of
financial deregulation, monoliths of the insurance industry are changing. It is
witnessing a redefining of its role by exhibiting a paradigm shift from brickmortar strategy to click-and-mortar strategy.

Thus increase in number of insurance companies has led to a wider choice for
Indian consumers.
The rising customer awareness and aspiration of quality service and
availability of alternative service providers in the Indian market has made
customers more demanding. Thus, an insurance companys ability to attract and
retain the customers is a function of not only what it offers but also how it serves
its existing customers.
A large number of studies have been carried out in US and other Western
countries to identify the important factors that guide the consumers while
selecting life insurance products. Insurance products are a dime a dozen.
Choosing an insurer over another is not easy with little track record of
performance to compare. Moreover, while choosing an insurance product, it is
important for an individual to identify the core need. While most seek a
combination of financial protection as well as investment needs to achieve longterm goals like childs education, buying a house etc., there are customers who
require only financial protection. Such individuals have already taken care of
their investment needs and have identified a need to protect his/her family
financially from undesirable eventualities like mortgage liability or degradation
of lifestyle, in the unfortunate event of his death. The need for buying an
insurance not only differs among individuals, but also varies with the persons
age. The insurance needs of an unmarried working executive when he is in his
early days of employment is different from his needs when he is middle aged and
married with children. It is thus important that the individual evaluates his

insurance need, considering his age, following which he can arrive at a suitable
protection and investment mix and tenure.

Life insurance companies have to understand the requirements of the

customers. For this purpose lots of surveys and studies have to be conducted
periodically to explore and identify their expectations in the existing
environment.
Statement of the Problem
The Life Insurance Industry has become increasingly competitive in
recent years. Consumer behavior and satisfaction from life insurance products
depends upon various attributes like search, experience and credence factors. The
pre-purchase and post-purchase services perception and expectations from the
services determines the quality and customer satisfaction from services. There
are other important factors like emotional factors, loyalty, persistency, switching
over costs, complaining behavior and repurchase decisions which are of
immense importance in determining the service quality, customer satisfaction,
switching over behavior and repurchase intention.
Poor persistency may be due to churning, where the salesperson
persuades the policyholder to withdraw from an existing contract in order to
switch insurers. In such cases, persistency problems could not necessarily be
attributed to the poor sales quality of the original insurer or due to
dissatisfaction. Furthermore policyholders may decide to withdraw and switch
between different insurers in order to secure better terms.
The foundation for true loyalty lies in customer satisfaction. Highly
satisfied or even delighted customers are more likely to become loyal apostles of
a firm, consolidate their buying with one firm and spread positive word of

mouth. In contrast, dissatisfaction drives customers away and is a key factor in

switching behavior.

CHAPTER II
THE INDIAN LIFE INSURANCE MARKET
AN OVERVIEW
Marketing in India, with its economic and social contrasts, with a
population of more than 1 billion differing enormously with 15 different
languages, social customs and living under varying states of economic
development from the vastly affluent to the destitute, necessitates the need to
deal with several markets at the same time. The life insurance market, hitherto
dominated by a governmental monopolistic monolith LIC, had to make way
for a slew of private players who paired with local financial institutions to
revolutionize the insurance market in India. At the time of entry of the private
players, several demographic and psychographic mega trends augured well for
the growth of financial services in general and insurance in particular.
The essence of insurance is to share losses and substitute certainty by uncertainty.
Human life is also an income generating asset, albeit, intangible. This asset can be lost
through an unexpectedly premature death due to some accident or disease or the asset can
also become non-functional through some disability. In case of such unforeseen mishaps,
life insurance becomes essential to help the dependents to maintain their life in a normal and
regular manner. In this context, it becomes essential to mention that living too long can be
equally or sometimes more problematic than dying too young. Hence, very old age can be
considered a risk, and insurance takes care of all such risks which need to be safe guarded
against. Insurance can minimize the impact of the risk on the owner of the asset and those
who

depend upon the asset, but only in terms of economy or finance, not in terms of

emotions.
Insurance and Economic Development
Investments form the base for the economic development of the country. Investments are the result of mobilization
of the savings. An insurance company is a major instrument for the mobilization of the savings of the people. Most of the
money collected from public are invested in Government through the IRDA Act, which has made it compulsory that a life
insurance company has to invest at least 15% of its controlled fund in the infrastructure and social sector of the country.

Insurance and Social Security

In India, under Article 41, of our Constitution, the State within the limits of its economic capacity and development,
has to make effective provision for securing the right to work, to education and to provide assistance in case of
unemployment, old-age and illness or disability. During the last 50 years, life insurance has become the main vehicle for
carrying social security to the public in general and the weaker sections in particular. The institution of insurance has thus
proved to be a reliable as well as a viable means of carrying the benefits of social security to the people and it can be said in
particular that life insurance ultimately provides social security when it meets the needs of the people.

Insurance and Financial Security

Life insurance is seen as an instrument for Risk Coverage as well as a long term investment. With the
bank interest rates coming down, insurance is more of a financial saving rather than a normal risk covering
instrument. With every passing year, life insurance will become an intelligent investment. Now a days, life insurance
companies are offering products with life coverage combined with investment appreciation. The life insurance
companies have realised that such a Unique Selling Proposition (USP) is a must.
Life insurance in India was nationalized by incorporating Life Insurance Corporation (LIC) in 1956. All private life
insurance companies at that time were taken over by LIC. In 1993 the Government of Republic of India appointed RN
Malhotra Committee to lay down a road map for privatization of the life insurance sector. While the committee submitted its
report in 1994, it took another six years before the enabling legislation was passed in the year 2000, the legislation
amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000. In the
same year, the newly appointed insurance regulator IRDA started issuing licenses to private life insurers.

The main objectives21 of liberalization are

To meet the obligation of WTO to open up the finance sector for international
players and competition as a part of liberalization of trade and services.

To induce competition among providers, to give customer a sense of greater

choice of products and services.
To promote FDI flow to help build better infrastructure.

To reorganize insurance market through a regulatory authority for giving a

better deal to customers.
To promote professionalism in insurance and insurance related trade and occupations.

To make Indian insurance market globally competitive.

Liberalisation and its Implementation
The main purpose behind the liberalisation of the insurance industry was to
call for a large dose of social infrastructure, propped up by the private insurance
companies. Supporters of the IRDA Bill bickered that opening up of the insurance
sector to private companies would ensure better conditions for consumers as more
products would be introduced with reduced premium rates. It would be mandatory
for insurance companies to deal with the veracity of competition.

But there were also some manifestation against the opening up of

insurance sector to private players. People thought that liberalization could
influence the industry in the following ways.
The real competition would be on profits and not on prices.
2
.People may find it tough to take policies which they actually require,
since it is expensive.
The claim settlement rate would show a sliding indication as companies
tie with each other to ensure higher profit margins.

There was always a probability of deception or failure among private

companies, as the core drive is not of service nature.

The private insurance companies in their zeal to cut cost and to improve
profitability, can ignore the basic interest of people.

The influx of foreign insurance company is observed by the AIIEA

(All India Insurance employees Association) as parallel to pre 1956
situation where the Indian insurance sector was nationalized after a sequence
of scandals that rocked the Indian parliament. Mr. Sundaram (General
Secretary of the AIIEA) thought that the Government was violating the oath of
strengthening the LIC & GIC by coercing the public companies to unviable
operation. As a protest to the liberalisation the AIIEA has campaigned across
the country, conducting Jathas, street corner meetings and street plays.

However the monopoly was purged by The Malhotra committee,

which gave birth to the liberalization in insurance sector. This was the need
of the hour, as there was strong proposal from the side of the Government,
which focused on creating an efficient and competitive financial system
appropriate for the requirements of the company
Liberalized Insurance Market 2000 AD
The year 2000 was a defining moment in the history of the Indian insurance
industry. For the first time, the sector was opened up to the private sector. The three
primary reasons behind the move to privatize the insurance sector were

Need for funds for financing the infrastructure development

initiatives in the country.
Increasing the insurance penetration in the country to march with
the global standards.
Increasing the reach of
insurance to cater to the
needs of rural India.
In 2000 the Government passed a resolution that
enabled private participation in the financial services sector in
India. At the time of entry of private players, the Life Insurance
Corporation was the major force to reckon with. With a large
force of nearly 2000 branches and 5,00,000 sales agents LIC

seemed formidable with almost 190 million policies

outstanding. Despite the impressive statistics, insurance
premia paid accounted for only 2.3% of the total GDP.

ICICI Prudential was the first private insurer to

open shop. After its debut, there has been no looking
back. Over a dozen private players in the life insurance
market had made their entry.

List of Life Insurers. ( September

29
2007)
Life Insurer in the Public Sector
1.

Life Insurance Corporation of

India.

Life Insurers in the Private Sector

1. Bajaj Allianz Life.
2. Tata AIG Life.
3. ICICI Prudential Life Insurance.
4. HDFC Standard Life.
5. Birla Sunlife.
6. SBI Life Insurance.
7. Kotak Mahindra Old Mutual Life
Insurance.
8. Aviva Life Insurance.
9. Reliance Life Insurance
Company
Limited

Formerly known as AMP

Sanmar LIC.

10. Metlife India Life Insurance.

11. ING Vysya Life Insurance.
12. Max Newyork Life Insurance.
13. Sahara Life Insurance Now
not in business

14. Shriram Life Insurance.

15. Bharti AXA Life Insurance Co.
Ltd.,

The success of the first lot has

lured a new set of players in the
market. The second wave of entrants
include

Bharati,

Shriram,

Future

Group (already licensed) and Bank of

Baroda-Andhra Bank, Bank of IndiaUnion Bank, IDBI Bank-Federal Bank,
Religare and DLF. A host of foreign
companies,

including

Ergo

of

Germany and Travelers of the US, are

also expected to finalise their joint
ventures (2007, November)

30

One of the greatest takeaways of the

liberalization in the insurance sector has been the
discernible shift from the sellers to the buyers
market. Competition has been the key, and has
resulted in innovation, new delivery channels and
new product offered.
Although the leader, the LIC, continues to

lead, one thing is certain, the increased competition

and the ongoing liberalization in the insurance sector
have made one beneficiary THE CONSUMER very
happy. The consumer has won the race and emerged
as the clear winner. The consumers is the King and
long live the King.

Insurance penetration in India is one of the lowest (2007)

32

Contribution by way of insurance premia has shot up from 1.2% to 4.1% of

the GDP during the same period. Interestingly, insurance penetration in the
US stands at 4% of the GDP, but some of the participants pointed out that
India still has some distance to cover in improving penetration. The US
which ranks poorly in GDP terms, has a stronger social security system with
the Government spending much more on the average American.

India is, however, ahead of China where insurance accounts for just
1.7% of the GDP. In other developed markets such as the UK and Japan,
insurance penetration stands much higher at 13.1% and 8.3% of the GDP
respectively. India constitutes 16% of the world population, but accounts for
only 1.68% of the world insurance market. But favourable demographic
profile, rising incomes and growing investments in insurance and pensions
should see this number go up. According to the data collected by the Life
Insurance Council, the life insurance industry has made a huge leap across
several other parameters in the liberalized era.

PREMIUM AS PRECENTAGE OF GDP

Insurance Penetration

14
12
10
8
6
4
2
0
K

APAN
J

KOREA

INDIA

IL

ASI

HINA
C

AZ
BR

MALA

COUNTRIES

Source: Life Insurance Council

(UK 13.1%, Japan 8.3%, Korea 7.9%, India 4.1%, US 4.06%,

Malaysia 3.2%, China 1.7 and Brazil 1.3%)

The Socio, Demographic and Psychographic trends in the Post Liberalized era.

At the time of entry of the private players, several demographic and

psychographic mega trends augured well for the growth of financial services in
general and insurance in particular. There was a favorable demographic profile,
rising incomes and huge investments in the insurance sector at the time of the
entry of the private players. One important factor that was very positive for
potential growth was that a substantial segment of the middle class population
that remained unbanked (40%) and the penetration of insurance was only 13%
of the total insurable population. Besides this, economic growth at 6.5% and the
demographic dividend at 55% of the population in the productive age group of
15-60years were clear indications for exponential growth. Liberalization of the
insurance sector has facilitated the entry of more players of diverse complexion including
those from the private sector with a foreign pedigree

for selling insurance products. The injection of additional distributor channels

has added to the flavor of more competition. Customers now have a wider
choice of selection of insurance providers giving thema voice and a unique
identity long denied to them.
Kannan, Manivannan and Sathishkumar (2005)

34

revealed that the market

potential for private companies is greater as the Indians are of the opinion that private
companies would be able to perform well. The insurance company should concentrate
on the areas like loss prevention, assured returns, long term investment etc.

Life Insurance Corporation of India

Objectives , Vision and Mission of LIC
* Spread Life Insurance widely and in particular to the rural areas and to
the socially and economically backward classes with a view to reaching all
insurable persons in the country and providing them adequate financial
cover against death at a reasonable cost.
Maximize mobilization of people's savings by making insurance-linked
savings adequately attractive.
Bear in mind, in the investment of funds, the primary obligation to its
policyholders, whose money it holds in trust, without losing sight of the
interest of the community as a whole; the funds to be deployed to the
best advantage of the investors as well as the community as a whole,
keeping in view national priorities and obligations of attractive return.

Conduct business with utmost economy and with the full realization
that the moneys belong to the policyholders.
Act as trustees of the insured public in their individual and collective
capacities.
Meet the various life insurance needs of the community that would
arise in the changing social and economic environment.

Involve all people working in the Corporation to the best of their

capability in furthering the interests of the insured public by providing
efficient service with courtesy.
LIC continues to be the dominant insurer even in the liberalized
scenario of the Indian insurance market and is moving fast on a new growth
trajectory surpassing its own past records. LIC has issued over 1 crore
policies during the year 2005. It has crossed the milestone by issuing
1,01,32,955 new policies by October 15

th

2005, showing a healthy growth

rate of 16.67% over the corresponding period of the previous year.

Over the last five decades, Life Insurance Corporation of India has
become a household name, when it comes to providing insurance cover to
millions of people in India.
ICICI Prudential Life Insurance Company.

ICICI Prudential Life Insurance Company is a joint venture between

ICICI Bank and Prudential Plc a leading international financial services
group headquartered in the United Kingdom. Total capital infusion stands at
Rs. 29.32 billion, with ICICI Bank holding a stake of 74% and Prudential plc
holding 26%.
ICICI Prudential was the first life insurer in India to receive a National
Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three
years in a row, ICICI Prudential has been voted as Indias Most Trusted
Brands. For the past six years, ICICI Prudential has retained its leadership
position in the life insurance industry with a wide range of flexible products that
meet the needs of the Indian customer at every step in life.

HDFC Standard Life Insurance

HDFC Standard Life Insurance Company Ltd. is one of the leading

private life insurance companies in India. HDFC Standard Life Insurance

Company Ltd. is one of Indias leading private life insurance companies, which
offers a range of individual and group insurance solutions. It is a joint venture
between Housing Development Finance Corporation Limited (HDFC Ltd.),
Indias leading housing finance institution and The Standard Life Assurance
Company, a leading provider of financial services from the United Kingdom.
Rated by 'Business world' as 'India's Most Respected Private Life Insurance

Company' in 2004. Rated as the "Best New Insurer - 2003" by Outlook

Money magazine, Indias number 1 personal finance magazine.
SBI Life Insurance Company Limited
SBI Life Insurance Company Limited, is a joint venture company
between State Bank of India and Cardif SA of France. SBI holds 74%, while
the joint venture partner Cardif SA has 26%. SBI life has become the first life
insurer in India to receive the highest financial strength rating of AAA from
CRISIL.
The other key milestones of SBI Life are First private life insurance company to
make profits. Ranked third amongst its private peers in terms of new business
premium income during FY 06-07.
It has been rated as the most trusted private sector life insurance company,
according to a survey conducted by Brand Equity in association with AC
Nelson ORG-MARG and The Economic Times Intelligence Bureau.
Bajaj Allianz Life Insurance Company Limited
Bajaj Allianz Life Insurance Company Limited, is a joint venture leading
global insurance company Allianz and motor cycle maker Baja Auto. The
company provides life insurance services to customers throughout India. Its
product caters to a wide spectrum of customers and needs, including companies,
individuals, children, risk care, and lifetime care. The company has crossed 50
lac policies and Rs. 10000 crore premium this FY 2006-2007.
Reliance Life Insurance.
Reliance Life Insurance Company Limited is a part of the Reliance
Capital Ltd. Reliance Capital is one of Indias leading private sector companies,
and ranks among the top 3 private sector financial services and banking in terms
of net worth. Reliance Life Insurance is an associate of Relaince Capital

Limited, which along with its associates has acquired 100% shares in AMP
Sanmar Life Insurance Company Limited. RLI has a pan presence and a range
of products catering to individuals as well as corporate needs. A total of 16
products covering savings, protection and investment requirements.
Life Insurance Statistics
(Source India Insurance Research and Consultants)
Premiums collected by LIC, for the period April to October, 2007 has
gone down by 10.4% as compared to the corresponding period during the
previous year. Premiums collected by the private insurers, on the other hand
increased by 67.7%. The share of private players has consequently increased
from 17.4% to 28.3%.

Figure 3.2
Premium Collections and Number of Policies

Source : India Insurance Research and Consultants

Figure 3.3
Premium Share Private Players

Source : India Insurance Research and Consultants

In terms of number of policies, LIC showed a growth of 50.4%,
whereas private insurers outperformed by growing at 69.3%. The share of
private players has consequently increased from 16.5% to 18.2%.

Premiums collected up to October 07 by private life

insurers - Rs 10,248 Cr, up 67.7% from the same period in 2006
Premiums collected by LIC, for the period April to September, 2007 has
gone down by 2.9% as compared to the corresponding period during the
previous year. Premiums collected by the private insurers, on the other hand
increased by 66.9%. The share of private players has consequently increased
from 21% to 31.4%.

Figure 3.4
Premium Collections and Number of Policies

Source : India Insurance Research and Consultants

In terms of number of policies, LIC showed a growth of 61.6%,
whereas private insurers outperformed by growing at 99.2%. The share of
private players has consequently increased from 19.9% to 23.4%.

Premiums collected up to September 07 by private life insurers

Total amount Rs 10,398 Cr, up 66.9% from the same period in 2006

Figure 3.5
Premium Collections Private Players

Source India Insurance Research and Consultants

ICICI Prudential and Bajaj Allianz have emerged as clear leaders, their
shares individually being at least twice the nearest competitor

CHAPTER III
Review of Literature

(T S Ramakrishna Rao )

27

The insurance market has really come to life.

Prior to the entry of the private sector players, the insurance market in India grew at
the average rate of 10-15%. In the last five years, (2005) the growth has been of the
order of 20%. There has been a quantum jump in the first year of the life insurance
premium in the post 2000 period. The growth has been of the order of 260% in the
last five years. Most of the new growth in the last five years has been coming from
private sector companies. The private players in the last five years were able to
make a significant dent in the kitty that has been exclusively enjoyed by the LIC. As
in December 2005, their market share in the life insurance segment was over 20%.
The insurance penetration level, which has always stuck near an average of 1.5%,
has in the post liberalization period crossed the 2% mark and stands perched at
2.6%. The insurance industry has become another success story of the positive
benefits of the competition and allowing entry of private and foreign players.
The Indian life insurance market has been a mixed bag of rapid growth in some areas and lagging
behind in several other areas. Rectification of the imbalance has been attempted by liberalizing the industry and
opening it up to private participation.
The Post-Liberalization Scenario

T S Ramakrishna Rao (2006)

31

in terms of the premium income, India is

considered as the sixth largest market in the globe. Being the worlds seventh
largest country and the second most populous one, the type of opportunity, the
countrys hold of insurance business can be envisioned. Besides this, the country
has one of the youngest population segments in the entire world and a burgeoning
middle class population of around 30%. The global penetration levels are around
4.7% as against our Indias 2.6%, there is tremendous potential to be tapped.
The private players, have contributed significantly to the fast spread of insurance business in the country, and they
have silenced the critics who were very pessimistic about their making any dent in the industry which was totally dominated
by the state owned player like LIC. In terms of incremental business private players and foreign joint ventures continued to
grab a larger piece of the pie. Although premiums and the asset pools have soared, there is still scope for growth. The
opening up of the insurance sector to the private insurers has definitely been a positive development. Impressed by their
performance, there is a serious thought that the regulators should have allowed their entry much earlier.

28

(U Jawaharlal ) The growth of the life insurance business during the post-

liberalization period in India presents some very interesting features. When one looks at
it on a progressive basis, it can be observed that the year-on-year growth has been
steady. Similarly, private players have steadily consolidated their strengths and

consistently increased their overall market share. In a market which has a monolithic player
like the Life Insurance Corporation of India operating for more than four decades and thereby
making its position rock-solid, the realignment of forces has been very gratifying. It not only
indicates that competition keeps the new players on their feet, but also that the incumbent is
being made to be inventive and open to new ideas

The National Council of Applied Economic Research, New Delhi conducted two
surveys in 1988 and 198913 on Appraisal of Quality Service in Service
Organizations and Quality Services in Life Insurance Company respectively.
These two studies were sponsored by the Life Insurance Company. The
policyholders general feeling is that the demand notice must be sent in time.
Some policyholders rated the quality of services was excellent. Hence, by
providing prompt services, the customer relationship is maintained for a long
period of time. Patki, V.V. (1989)14 in his article Rural Marketing discussed
the problems of selling the life insurance in the rural areas and gave many
suggestions to penetrate into the rural market. The suggestions are participation
in village fairs, using audiovisual methods and explaining the merits of the life
insurance to the villagers etc. Shejwalker, P.C. (1989)15 in his article Training
in life Insurance discussed the importance of trained agent force to develop the
life insurance business. He stressed that present selection pattern of the agent
should be changed. He expressed his opinion that private or independent institute
should be invited to impart training to the agents. Krirubashni, B. (1991)16 in her
study attempts to know the level of awareness, preference and influencing factor
pertaining to policy holdings and to test the relationship between the influencing
factors and policy holdings. The study reveals that the majority of the
respondents aware of the endowment assurance policy and considered to rank it
as number one. The study also revealed that there was a significant relationship
between personal factors and policy holdings.

CHAPTER III
RESEARCH METHODOLOGY

Objectives of the Study

1.

To observe the current scenario of the Life insurance Industry in India.

2.

To identify and compare the attributes relating to customer preference

and their influence on the purchase of Life insurance products from LIC
and PLIC.

3.

To compare LIC and PLIC on the basis of the role of service quality
relating to customer satisfaction.

4.

To study the impact of customer satisfaction on loyalty, corporate image,

complaining behaviour and switching over of the customers.

5.

To compare the customers of LIC and PLIC based on their

behavioural aspects towards life insurance products.

6.

To suggest measures for improvement of quality of service of life

insurance companies and customer satisfaction.

Research Design
This study is based on both primary data as well as secondary data.
The primary data is collected from the policyholders of life insurance through
a well framed questionnaire consisting of 10 prominent questions. The
questions are constructed in Likerts Five Point Scale. The optional type is
aimed at ascertaining Life Insurance Companies corporate image,
information search and other policy details of the customers. It is also used
to obtain Demographic details of the customers.

Data Collection
The primary data is collected from the policy holders of the selected
companies. The secondary data is collected from reports, journals,
newspapers, magazines and websites.
The primary data is collected through the questionnaire with suitable scales
as mentioned above from the customers of life insurance policies in Gurgaon.

Area of Study.
Gurgaon is selected for conducting the survey as it is one among the
four Metros in India, where people from all walks of life are located. The LIC
of India has been the leader for the past 51 years and has been the only
Public Sector Undertaking and thus is chosen. From the private sector, five
companies viz., Bajaj Allianz Life, ICICI Prudential Life Insurance, HDFC
Standard Life, SBI Life and Reliance Insurance are chosen because their
volume of the business occupies the first five places.
Sample Size.
In order to obtain different perceptions of customers of LIC and PLIC, totally
80 well framed questionnaires are circulated in different parts of Gurgaon city on a
random basis. Out of 80, only 75 are returned. Among 75 questionnaires it is found
that 70 as suitable for primary data analysis. Out of 700, it is found that 45 are
customers of LIC and 25 are from selected PLICs. The top five private life insurance
companies were chosen on the basis of the number of policies and premium
collected. Since LIC is in life insurance business for the past 51 years and is
considered as a big giant, top 5 PLICs are chosen for comparison.

Data Analysis.

This study is both descriptive and empirical in nature. Certain

concepts of insurance policies and elaborative expressions of secondary
data are described in detail for clear understanding. The primary data
collected in the form of responses from the customers are systematically
analyzed by identifying the independent as well as dependent variables.
All the responses of the customers obtained through Likerts Five
Point Scale forms the domain of dependent variables and the questions
about life insurance policies, information search and demographic
background are taken up as independent variables. Based on these two
categories of variables , the following statistical tools are systematically
applied to obtain the results desired in the objectives of the study.
Scope of the Study
The study focuses on the consumer behavior relating to the areas of
customer preference, customer satisfaction, loyalty, repurchase decision and
complaining behavior of customers in the purchase of life insurance products.
In the current scenario the life insurance business has become liberalized
and competitive. It is found that exploring the behavior of the customers will give an
insight to life insurance companies to maximize their customers.

Limitations of the Study

The study suffers from certain limitations
1. The data for the purpose of the study is collected from respondents in
Gurgaon only.

2. The study concentrates only on certain factors relating to customer

purchase behavior. There may be other influencing factors too, which
have not been considered due to time and data constraints.

3. The primary data for the study is collected through questionnaires

and the results of the study may suffer from the inherent drawbacks
of such instrument.

4. The study compares the perceptions and expectations of the customers

of the life insurance service. Perceptions are subjective in nature and are
likely to change with the changing times and market conditions.

5. This study is restricted to the sample size of 70. Out of these 70

respondents, 45 expressed their views on LIC and 25 on for Private
Insurance Companies. So, any result obtained out of this sampling
technique may not be generalized for other greater or less sample size.

6. This study is restricted to the comparison of services offered by LIC

and Private insurance companies and no comparison of range of
insurance products is compared.

This study cannot be generalized for the customers of life insurance

products in the whole of India. The results obtained in this study or
suggestions offered are based on the study conducted on the consumers in
a small geographical base viz., the City of Gurgaon.

CHAPTER IV
DATA ANALYSIS &
INTERPRETATION

DATA ANALYSIS
Keeping in mind the objectives of the study, the survey was being done and
following interpretation were being drawn.
1.

Have you heard about Privatization in Life Insurance Sector ?

Objective :- To know the awareness of Privatization in insurance sector,

this question is asked. As there are a number of private insurance
companies, which provide a variety of products and services as compared
to, nationalized insurance companies.
Awareness of Privatization in Insurance sector

Interpretation
The evident from above finding showed that out of 100 respondents, 78
respondents are aware of private companies present in the insurance sector
and rest of the respondents i.e., 22 is not aware of private insurance
companies.

2. Have you heard about Private Insurance Company Bajaj Allianz

Life, Tata AIG Life, ICICI Prudential Life Insurance, HDFC
Standard Life, Birla Sunlife.
Objective :- To know the awareness of customer regarding. Reliance life
insurance.
Awareness of Customer Regarding. Reliance life insurance.

Interpretation
The above figure depicts that out of 70 respondents, 65 respondents are
aware Reliance life insurance and rests of the respondents i.e., 5 are not
aware of Reliance life insurance.

3. From where did you come to know about Life Insurance ?

Objective :- To know the media, which helps in promotion of Reliance
Life Insurance. As we know in the present era media plays an important
role in the promotion of companies.
Role of Media in the Promotion of Reliance Life Insurance

Interpretation
According to above data Electronic Media plays a vital role in the
promotion of Reliance Life Insurance. As 56 of the respondents are
aware through Electronic Media, 20 through Agents, 10 through Print
Media and 14 through other like friends and relatives.

4. Do you think services provided by Private Sector will be better

than Public Sector companies ?
Objective :- To know the priority given by customer to the private
sector over public sector. As we know that more and more customers are
moving towards private sector because of better facilities and services
provided by private sector.
Priority of Private sector over the public sector.

Interpretation
The above figure depicts that 68 of the total respondents agree that private
sector was providing better services as compared to the public sector.

5. Do you have Insurance Policy ?

Objective :- To know the number of persons who presently have life
insurance policy. As most of the persons are very muh concerned about
their family and life so cover the risk by an insurance policy.
No. of persons having insurance policy

Interpretation
The above evident shows that as most of 62 of the total respondents have
insurance policy to cover the risk of the life and tax. This shows that most
peoples are interested in buying insurance policy.

6. With which company do you have Insurance Policy ?

Objective :- To known the number of customers dealing with different
insurance companies. As the there are a number of companies providing
different products.
No. of customers dealing with different insurance companies.

Interpretation
The above evident shows that out of the total respondents 62 dealing with
LIC, which is a public sector insurance company, 18 respondents were
dealing with ICICI Pru and HDFC Std. Life respectively, 03 respondents
are dealing with Reliance Insurance company.

7. What according to you are the motives of buying Life Insurance

Policy?
Objective :- To know the motive of buying insurance policy. There is
always a reason to buy life insurance policy as it protects the insurer
from different aspects even after death.

Interpretation
As the above figure showed that most of the respondents buy insurance
policy for the purpose of saving tax, 42 respondents are in favour of this,
22 respondents gave preference to secure investment, 30 and 06 are with
life cover and liquidity respectively.

8. Do you have any plan to buy Insurance Policy in near future ?

Objective :- To know the customer preference to buy insurance policy
in near future.
Preference to buy insurance policy in future

Interpretation
As the above figure depicts that mostly respondents are interested to buy
insurance policy in the future. 40 of the total respondents are in favour
of this and rest 42 respondents want any insurance.

9. If you have any plan to buy an Insurance Policy,

Which policy would you prefect?
Objective: - To knows the customer preference regarding various
insurance plans provided by the insurance companies.
Preference regarding various insurance plans

Interpretation
As the above evident shows that as most as 32 of the total respondents
prefer to invest in endowment plan, 26 prefer to have child plan, 24
prefer to Spl. Endowment Plan and rest 18 cash flow plan.

10.

If you are not taking any insurance policy, please tell us the
reasons why?

Objective: - To know the reasons not to buy any insurance plan by the
respondents.
Reasons not to buy any insurance plan

Interpretation

As the evident shows that as most as 35 of the total respondents dont

understand the working of the insurance system and nearly 24 of the
respondents dont see any benefit with the system, 15 and 26 of the
respondents dont want insurance and could not afford respectively.

CONCLUSION AND SUGGESTION

The transition of the insurance industry from a public monopoly to a competitive environment now
presents very interesting challenges, both to the new players and to the customer. This transition has given
the new players an opportunity to test out their various hypothesis and apply what they have learnt from
overseas markets. From the customers point of view they will have greater choice when it comes to
choosing a provider or a solution to their need. Thus the biggest beneficiary of the incoming competition in
insurance will be the Indian customers. Thus through privatization, customers will have more choice of
insurance schemes and their claims and settlement will be hassle free and customer friendly.

In view of the review of literature on the various elements of customer satisfaction, this
study aims at determining the expectations and perceptions of the consumers and the measure of
satisfaction as the degree of discrepancy between customers service perceptions and
expectations. This study also examines loyalty, persistency, withdrawal of policies, repurchase
decision, best practices and conduct of business and emotional factors leading to purchase of life
insurance policies as elements of customer satisfaction. It also identifies the nature of complaining
behaviour of the life insurance customers. Finally, a comparison is made between the consumers
of LIC and PLIC on the above mentioned elements of customer satisfaction.

SUGGESTION

a)

Life insurance has becomes generic now. People believe in Life

Insurance Company only and therefore, everybody wants to go in
for a policy with LIC. It will take a lot of time, to private
companies to win the confidence of the people.

b)

As far as future decision making about the policy is concerned

most of the policy would go in for saving plan.

c)

It is a service class, which has maximum number of LIC and

private sector policies. As far as future decision-making is
concerned most of the service class prefers to protection plan

d)

LIC is the oldest player in the Insurance market, so people are

more aware of i.e., as compared to new players.

e)

This clearly comes out of the survey conducted that most of the
people comes to know about Reliance life Insurance company
through print media.

f)

It has clearly comes out that most of the people like to go in for a
policy, which gives them tax.

CHAPTER 7
BIBLIOGRAPHY

BIBLIOGRAPGHY
Website of the bank: www.citibank.com

Various articles of :
BUSINESS TIMES
ECONOMIC TIMES

AUTHORS

PRASANNA CHANDRA
PUNITHARVATHY PANDIAN
FISCHER JORDAN

Magazines/Newspaper

The Business World

The Business Today
The Financial Express

QUESTIONNAIRE
1.

Have you heard about privatization in Life Insurance sector ?

a) Yes

2.

b) No

Have you heard about Private Insurance Company Reliance Life

Insurance ?
a) Yes
3.

4.

b) No

From where did you come to know about Reliance Life Insurance ?
a) Electronic Media

b) Print Media

c) Agents

d) Others

Do you think services provided by Private sector will be better than

Public
Sector companies ?
a) Yes

b) No

If yes, Remarks___________________________________________

If no, Why_______________________________________________
5.

Do you have Insurance Policy ?

a) Yes

6.

b) No

With which company do you have Insurance Policy ?

7. What according to you are motives of buying Life Insurance Policy ?

a) Tax Saving

b) Life cover

c) Liquidity

d) Secure Investment

8. Do you have any plan to buy Insurance Policy in near future ?

a) Yes

b) No

9. If you have any plan to buy an Insurance Policy, which Policy would
you prefer ?
a) Saving Plan

b) Protection Plan

c) Pension Plan

d) Childrens Plan

10. If you are not taking any Insurance Policy, please tell us the reasons
why ?
a) We could not afford
b) We dont see any benefit with the system
c) We dont want insurance
d) We dont understand how system works
BACKGROUND DATA
1. Name__________________________
2. Sex :
3. Age :

a) Male
a) Below 18

b) Female
b) 18-35

c) 35-50

d) Above 50

4. Education :
4. Education :
a) Under Graduate

b) Profession

c) Business

d) Others

5. Occupation:
a) Service

b) Profession

c) Business

d) Others

6. Income:
a) Less than Rs. 50,000
b) Rs. 50,000 to Rs. 1,50,000
c) Rs. 1,50,000 to 3,00,000
d) Rs. 3,00,000 & above
7. Address________________________ __________________
_________________________________________
8. Phone No. ____________________________________