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Research Paper for publication

ACCEPTABILITY OF LIFE INSURANCE BY INDIAN CUSTOMERS

Submitted by-

MS. RUSHINA SINGHI

Lecturer

Amity Business School,

I floor , F-I Block, Amity University

Sector-125, Noida, Uttar Pradesh.

M. 09999665534

e-mail rushina.singhi@

MS. MEENAKSHI JAIN

Student

Amity Business School,

I floor , F-I Block, Amity University

Sector-125, Noida, Uttar Pradesh

ACCEPTABILITY OF LIFE INSURANCE BY INDIAN CUSTOMERS

ABSTRACT

Insurance constitutes one of the major segments of the financial market. Insurance services play predominant role in the process of financial intermediary. Today insurance industry is one of the most growing sectors in India. There is lot of potential in the Indian Insurance Industry. There are many issues, which require study. The scope of the study of insurance industry of India would be very great as there are ongoing developments in the industry after the opening of the sector. The present study has been undertaken to identify the association between demographics of individual investors and their investment behavior and also analyzing the acceptance of insurance by them. The study was conducted using the survey method (Personal interviews and Telephonic interviews). Data was collected through a structured questionnaire from a sample of 150 respondents from Delhi. Factor and regression analysis and Cross Tabs was used to analyze the data and identify the effect of customers’ perception about the quality of performance of various factors on customer satisfaction.

INTRODUCTION

In India insurance is a flourishing industry, with several national and international players competing to excel. With several reforms and policy regulations, the Indian insurance sector has witnessed tremendous growth in the recent past. Insurance can be defined as a “legal contract between two parties whereby one party called insurer undertakes to pay a fixed amount of money on the happening of a particular event, which may be certain or uncertain.” The other party called insured pays in exchange a fixed sum known as premium. Insurance is desired to safeguard oneself and one’s family against possible losses on account of risks and perils. It provides financial compensation for the losses suffered due to the happening of any unforeseen events.

Life insurance provides financial security to the family of a policyholder in the event of his/her death. This is the most popular insurance policy, as most people want to ensure that their family members remain financially secure in the event of their death. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the of immense growth potential of the insurance sector. At present there are 22 life insurance companies at present offering different products to suit to the needs of the customers. Life Insurance contracts not only allows an individual to have a risk cover against any unfortunate event of the future but also provides for educational needs, retirement needs, loans, tax planning, investment option and savings. The customers prefer to invest their money in a number of alternatives such as post office savings, fixed deposits, mutual funds, share market, insurance, bonds etc. Also, the returns they expect and their frequency of investment varies. The individuals may be equal in all aspects, may even be living next door, but their financial planning needs are very different. The investment preference is influenced by various demographic factors such as family size, age, gender, occupation, educational qualification, income size etc.

Given the dynamism in new offerings it becomes very important to analyze the association between demographics of individual investors and their investment behavior and also analyzing the acceptance of insurance by them. Furthermore it is equally necessary to evaluate the importance accorded to various factors before going for insurance.

LITERATURE REVIEW

It  has  been  observed  that  insurance  agents  should  constantly  monitor  the  level   of satisfaction  among  his/her  customers  to  keep  themselves  close  to  the  customers  for fulfilling their needs (Joseph et al., 2003). Ennew et al. (1993) indicated that a comparison of mean scores on the importance of service attributes provides a very effective method of measuring the ability of services to meet the needs of the customers. Perceived service quality has a significant effect on the attitude towards obtaining insurance  (Arora and Stoner,  1996).  Moreover,  the  degree  of  success  in  the  implementation  of  enterprise mobilization  in  the  life  insurance  industry  is  positively  correlated  to  the management performance of external aspects like providing increased customer satisfaction (Luarn et al., 2003). Customer satisfaction and  the salesperson’s relation orientation significantly influences the future business opportunities and as the salespersons are able to enhance their relationships with the clients, clients are more satisfied and are more willing to trust, and thus secures the  long-term demand for the services (Tam and Wong, 2001). Hellier et al. (2003)  found  that  in  insurance purchase brand preference  is an  intervening factor between customer satisfaction and repurchase  intention and  the main  factor  influencing the brand preference is the perceived value and customer satisfaction. Both the company and  agent’s  service  quality  as  well  as  recommendations  of  friends  are  factors that significantly affect decisions of purchasing  life insurance policies (Chow-Chua and Lim, 2000). Stafford et  al.  (1998)  in a study on auto-casualty  industry proved  that  reliability is  consistently  the most  important  determinant  of  both  perceived  service  quality  and feelings of satisfaction among customers engaged in auto-insurance claims. No such study has been carried out in the area of life insurance. Given the importance of the life insurance industry  in  India  in  terms of  increasing market size, growing competition and  the share of the total insurance premium market, this paper attempts to identify the service quality dimensions which contribute  to  the maximum customer satisfaction  in  the  life  insurance industry in India.

OBJECTIVES

  • To know customer’s preference and attitude for life insurance policies according to their demographic factors.

  • Find out purpose for buying insurance

  • Find out the frequency of investment and the kind of returns they expect according to their demographic factors.

  • To study the existing investment pattern among different age groups, different income categories and different occupations

RESEARCH METHODOLOGY

Scope and sample of the study

In order to analyze the association between demographics of individual investors and their investment behavior and also the acceptance of insurance by them the study was conducted using the survey method on a sample of 150 respondents. The study is confined to respondents from Delhi only. The sample was chosen on the basis of convenient sampling.

Method of Data Collection

In the present study, data was collected through a structured questionnaire. Pretesting of the questionnaire was done on 20 people. To get a sample representative of the whole population, it has been kept in mind to have respondents from all groups, depending upon the parameters such as Age, Income, Occupation, Gender and Marital Status.

Scale and scoring of items

Nominal Scale - It has been used to select responses for age, gender, occupation etc.

Likert Scaling- Respondents were presented with five response categories ranging from highly important to highly unimportant and asked to respond according to their need.

Some variables relating to portfolio of respondents have been studied such as Frequency of Investment, Return Expected, Investments Preferred and Purpose of taking Insurance

MEASUREMENT TECHNIQUES

The following measurement techniques have been used in the study:

  • Chi- square test

  • Factor analysis

RESEARCH FINDINGS AND ANALYSIS

Here we have analyzed how the investment options, frequency of investment, return expected by people are affected by various parameters like age, gender, marital status, qualification, occupation.

The sample was taken cautiously so as to include respondents from all age groups. The respondents are segmented into following classes according to their age- (a) less than 25 years (b) 25-35 years (c) 35-45 years (d) 45-55 years (e) 55 years & above. The table reveals that while the highest percentage (34.7 %) of the respondents belong to the lowest age group of less than 25 years; 25.3% and 21.3% fall in the category of 35- 45 years and 25-35 years respectively. Those between the age group of 45-55 years constitute only 12.7% and the lowest percentage of respondents (6%) belong to the age of 55 & above.

According to gender, the sample consists of 69.3% males and 30.7% females. Thus, the sample is dominated by male respondents.

On the basis of marital status, the sample consists of 52% respondents who are married, while 48% are single.

On the basis of qualification, the table reveals that while the highest percentage (42 %) of the respondents are graduate; 22.7% fall under the category of undergraduate and 20.7 % fall under post graduate. The lowest percentage (14.7%) of the sample collected includes respondents having professional qualification.

Occupation is also one of the variables influencing the preference for investment and the frequency of investment. Occupation has been classified into six categories-(a) Student (b) Business man (c) Service man (d) Professional (e) Retired (f) Housewife

The table above which presents the distribution of sample investors amongst different occupations shows that the highest proportion (27.3%) of the respondents are students followed by business man (24.7%).The sample includes the lowest percentage of retired people (6%).

On the basis of income, the respondents have been classified into the following categories: (a) Not Earning (b) less than 1,50,000 (c) 1,50,000- 3,00,000 (d) 3,00,000- 5,00,000 (e) 5,00,000 & above. The highest percentages of respondents (36.7%) include those who are not earning themselves. The second highest group includes the respondents in the highest income group which is 20%. The sample includes very less percentage of those having income less than Rs.1,50,000.

Table 1 AGE WISE DISTRIBUTION

Age (in years)

Frequency

Percent

Cumulative Percent

less than 25 years

52

34.7

34.7

25-35 years

32

21.3

56.0

35-45 years

38

25.3

81.3

45-55 years

19

12.7

94.0

55 & above

9

6.0

100.0

Total

150

100.0

Table 2 GENDER WISE DISTRIBUTION

Gender

Frequency

Percent

Cumulative Percent

male

104

69.3

69.3

female

46

30.7

100.0

Total

150

100.0

Table 3 MARITAL STATUS WISE DISTRIBUTION

Marital Status

Frequency

Percent

Cumulative Percent

Married

78

52.0

52.0

Single

72

48.0

100.0

Total

150

100.0

Table 4 QUALIFICATION WISE DISTRIBUTION

Qualification

Frequency

Percent

Cumulative Percent

undergraduate

34

22.7

22.7

Graduate

63

42.0

64.7

post graduate

31

20.7

85.3

professional course

22

14.7

100.0

Total

150

100.0

Table 5 OCCUPATION WISE DISTRIBUTION

Occupation

Frequency

Percent

Cumulative Percent

Student

41

27.3

27.3

business man

37

24.7

52.0

service man

27

18.0

70.0

Professional

17

11.3

81.3

Retired

9

6.0

87.3

Housewife

19

12.7

100.0

Total

150

100.0

Table 6 INCOME WISE DISTRIBUTION

Annual Income (Rs.)

Frequency

Percent

Cumulative Percent

not earning

55

36.7

36.7

less than 150000

12

8.0

44.7

150000 -300000

26

17.3

62.0

300000- 500000

27

18.0

80.0

500000 & above

30

20.0

100.0

Total

150

100.0

PREFERENCE FOR INVESTING MONEY



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