Customer Preferences in Life Insurance Industry in India

Ms Sunayna Khurana, Lecturer, ICFAI National College, SCO-105-107, Sec-14,

Hissar, Haryana-125001, e-mail Id: [email protected],
[email protected] , Cell No.09354325838
Abstract
In today’s tough competition, every company in service sector tries hard to satisfy
their customer. In Insurance sector, various new private companies have entered in
industry by doing the merger with foreign companies. Day by day they are offering
new services with the basic plan to attract the new customers & for retaining the
present customers. In this research paper, I tried to understand the consumer
behavior in Insurance sector. The main objective of this paper to identify customer
preference regarding plans & company , their purpose of buying the insurance
policies, satisfaction level & their future plans for new insurance policy. Data was
collected with help of structured questionnaire from 200 customers of Hissar city
only. Sample was taken on the basis of convenience sampling, but only 192
questionnaires were used for analysis as the remaining 8 were not filled properly by
the respondents. Percentage, frequency & Cross tabulation methods have been used
for analysis.

KEYWORDS: Customer Preferences, Insurance, Competition, Satisfaction

Note: This paper is presented at 5th INTERNATIONAL CONFERENCE

ON BUSINESS CHALLENGES & STRATEGIES (ICBCS’08) 30 MAY
2008, FRIDAY at PUNJAB COLLEGE OF TECHNICAL
EDUCATION, Ludhiana
Introduction:
Insurance sector plays a very important role in the development of any economy. A well
developed and evolved insurance sector is needed for economic development as it
provides long term funds for infrastructure development and at the same time strengthens
the risk taking ability. It is estimated that over the next ten years India would require
investments to the tune of one trillion US dollar. The insurance sector to some extent can
enable investments in infrastructure development to sustain economic growth of the
country.
Life insurance players in India:
Public Sector
1. Life Insurance Corporation of India
Private Sector
1. Bajaj Allianz Life Insurance Company Limited
2. Birla Sun- Life Insurance Company Limited
3. HDFC Standard Life Insurance Co. Limited
4. ICICI Prudential Life Insurance Co. Limited
5. ING Vysya Life Insurance Company Limited
6. Max New York Life Insurance Co. Limited
7. MetLife Insurance Company Limited
8. Om Kotak Mahindra Life Insurance Co. Limited
9. TATA AIG Life Insurance Company Limited
Product profile:
Life insurance products are mainly assigned to provide to a survivor, family or business
in the event of the death of the insured. It is used to help replace income, pay off
mortgages, debts or estate taxes, and provide cash to buy out a partnership or acquire
stock owned by the deceased.
There are two basic types of life insurance policies: term insurance, which provides
coverage for a specified period of time (term), and endowment insurance, which
combines a death benefit with a cash value component. The endowment insurance offers
lifetime protection, while term insurance may be most affordable option for buying life
insurance mainly for the financial protection it offers, and when the need for life
insurance is temporary.
Based on the Demographic Profile various products have been created and continuous
product innovations are done to meet the growing needs of different segments of the
society. Some of the products categories to different segments are:

Age groups Policy

0-20 years Children Plan
Educational Needs, Marriage Plans
20-49 years Money Back, Endowment Plan, Loan Cover, Term Plans,
Unit Linked Insurance Plans.
Investments, Tax Planning
50 and above Pension Plans
Security and Regular Flows
Literature review
The basic necessity of review of any study is to find out the issues that had been taken by
the past researches. The present literature serves many varied interesting features, which
forms the vital background for the study and conducted a consideration.

N. Namasivayam, S. Ganesan and S. Rajendran (2006) study titled “Socioeconornic

factors influencing the decision in Taking Life Insurance Policies “The objective of the
study was to analyze the socioeconomic factors that are responsible for taking life
insurance policies and to examine the preference of the policyholders towards various
types of policies of LIC. From the analysis it was found that factors such as age,
educational level and sex of the policy holders are insignificant But (Income Level,
Occupation & Family size are significant) while deciding on taking an insurance policy.
From the analysis, it is inferred that respondents belonging to the age group between 31
to 40 years are very much interested in taking a life insurance policy.

Dr. N. Raman & Miss. C. Gayatri (2004) had observed the customers Awareness
towards new insurance companies. It was found that 53% of the respondents belong to
the age group “up to 30”, 24% to the age group 31-40 , 20% belong to the age group of
41-50, and the remaining belong to the group of above 50. They also observed that a
large percentage of the insured respondents (32%) are professionals and 56% of the
respondents are married. It is also found that most of the respondents (52%) have taken a
policy to cover the risk and 44% to avoid tax and the remaining to invest the surplus
amount. The study suggests of the understanding the customer better will enable
insurance companies to design appropriate products, determine price correctly and
increase profitability.

Jagendra Kumar (2005) by his study, revealed that The Life Insurance penetration, in
India is Just about 2% of GDP. The life insurance premium per capita is just Rs. 550/-
The LIC is the largest player with over 2000 officers. After liberalization, it has improved
efficiency and customer services, among the private life insurance companies ICICI
Prudential life Insurance and Birla Sunlife are the first and second largest players. Other
prominent companies in competition are – Bajaj -Allianz, HDFC Standard Life, Kotak
Mahindra, ING Vysya Aviva Life, and Metlife etc.

A study conducted by Patil Kallinath S (2003) aimed at –“critically evaluation of the

performance of existing insurance products.” It revealed that the insurance coverage of
agricultural groups and agricultural labor is very low. The performance of children related
policies like Jeevan Kishore, Jeevan Balya etc. is very poor except the children money
back policy, which has also not been contributing significantly. The demonstration of
product features, by the agents, is not satisfactory.

Scope of the study:-

 The universe of the research was ‘Buyers of Life Insurance Policy’. The sample
Respondents have been selected from Hissar City only.

Research Objectives
The main objectives of this paper to identify customer preference regarding plans &
company , their purpose of buying the insurance policies, satisfaction level & their future
plans for new insurance policy.

Research design
It has been further classified into four subsections.
A. Sample selection & size
B. Sampling Procedure
C. Data Collection
D. Analytical Tools
A. Sample selection & size
First step of research is sample selection, for which respondents were consumers in
Hissar city. Total consumers covered were 200.
200 questionnaires were distributed but only 192 fully completed questionnaires were
received and results are based on the responses of 192 respondents.
Sample Size – 192
B. Sampling procedure
The Consumers are selected by the following method:-
Convenience Sampling: The researcher selects the most accessible population members
from which to obtain information. Exploratory Research was used.

C. Data collection
Primary Data:-
For the present study, the researcher used the survey method for collecting Primary data.
A structured questionnaire was used for the purpose. The questionnaire included multiple
choice questions.
Secondary Data:-
The main source of secondary data for this research has been Insurance Chronicle , The
ICFAI journal of Service marketing , The ICFAI journal of Consumer Behavior and
Indian Journal of Marketing.

D. Analytical tools
The data thus collected was collected was tabulated, interpreted & analyzed with a view
to make the study meaningful. In the present study, percentage, a frequency & cross
tabulation method has been used for analysis.

Analysis of Data
Data collected through structured questionnaire were coded & tabulated according to
need of study.

Demographic profile
71.9 % respondents were male while 28.1% were female. Responded were mostly belong
to age group 25-30 (34.4 %), followed by the age group 41-45 (28.1%) & 21.9%
respondent belong to age group 36-40.Mostly the respondents (71.9%) are married. 37.5
% respondents have annual income in the range of 1 lakh- 2 lakhs. Most of respondents
(31.3%, 60 out of 192) are civil servants. The detailed respondent’s demographic profile
in terms of frequency & percentage is presented in Table 1.

Table 1 : Demographic profile

Frequency Percentage
Gender
Male 138 71.9
Female 54 28.1
Total 192 100.0
Age
25-30 66 34.4
31-35 12 6.3
36-40 42 21.9
41-45 54 28.1
46-50 12 6.3
More than 50 6 3.1
Total 192 100.0
Family Status

Married 138 71.9

single 48 25.0
Total 192 100.0
Annual Income

upto 1 lakh 66 34.4

1 lakh-2 lakh 72 37.5
2-3 lakh 24 12.5
3-4 lakh 18 9.4
4- 5 lakh 6 3.1
6 6 3.1
Total 192 100.0
Occupation
 Civil servant 60 31.3
Private employee 54 28.1
Self employed 18 9.4
Businessman /women 12 6.3
Farmer 12 6.3
Other 36 18.8
Total 192 100.0

Company name * Insurance Policy

As shown in Table 2, 68.8% respondents have policies of LIC Company & 31.2%
respondents have policies of private companies like HDFC Std Life, ICICI Pru, KOTAK
Life, TATA AIG, Max New York, Birla Sun Life, & Bajaj Allianz.
34.4% respondents have Simple Term plan out of which 63.6% plans are of LIC
Company. 28.1 % respondents have Money Back policy out of which 77.8% money
back policies of LIC company only, that means customer still prefer public sector
companies as compared to private sector companies. In ULIP plan category, 55.6 % of
total policies (28.1%) belong to again LIC. Only 6.3% & 3.1% of total (192) respondents
have Pension Plans & Child Benefits Plans respectively & all of LIC Company only.

Table 2: Company name * Insurance Policy Cross tabulation

Insurance Policy Total

Term Money ULIP Pension Child
policy back plan plan benefit
policy plan
Company Name

% within 31.8% 31.8% 22.7% 9.1% 4.5% 100.0%

company
name
LIC % within 63.6% 77.8% 55.6% 100.0% 100.0% 68.8%
Ins.Policy
% of Total 21.9% 21.9% 15.6% 6.3% 3.1% 68.8%
% within 100.0% 100.0%
company
HDFC Std name
Life % within 9.1% 3.1%
Ins.Policy
% of Total 3.1% 3.1%
% within 100.0% 100.0%
company
name
ICICI Pru. % within 11.1% 3.1%
Ins.Policy
% of Total 3.1% 3.1%
KOTAK % within 100.0% 100.0%
Life company
name
 % within 9.1% 3.1%
Ins.Policy
% of Total 3.1% 3.1%
% within 50.0% 50.0% 100.0%
company
name
TATA AIG % within 9.1% 11.1% 6.3%
Ins.Policy
% of Total 3.1% 3.1% 6.3%
% within 100.0% 100.0%
company
Max New name
York % within 11.1% 3.1%
Ins.Policy
% of Total 3.1% 3.1%
% within 100.0% 100.0%
company
Birla Sun name
Life % within 22.2% 6.3%
Ins.Policy
% of Total 6.3% 6.3%
% within 50.0% 50.0% 100.0%
company
Bajaj name
Allianz % within 9.1% 11.1% 6.3%
Ins.Policy
% of Total 3.1% 3.1% 6.3%
% within 34.4% 28.1% 28.1% 6.3% 3.1% 100.0%
company
Total name
% within 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Ins.Policy
% of Total 34.4% 28.1% 28.1% 6.3% 3.1% 100.0%

Purpose of buying a policy

The result of survey (Table 3) shows that protection is the main purpose of buying a
Insurance policy.

Table :3 Purpose of Buying a Policy

S.No Purpose Frequency Percentage

1 Income tax rebate 40 20.8%

2 Protection 75 39.0%

3 Return 40 20.8%

4 Saving 35 18.2%

5 Other 02 1.2 %
 Total 192 100%

Problem Faced while dealing with Insurance Company

According to survey, only 6.3% (12) respondents faced problems & all have policies of
LIC Company (Table: 4).

Table :4 Company name * Problem Cross tabulation

(% within company name )
Problem Faced Total

Yes No
Company name

LIC 9.1% 90.9% 100.0%

HDFC Std Life 100.0% 100.0%

ICICI Pru 100.0% 100.0%
KOTAK Life 100.0% 100.0%
TATA AIG 100.0% 100.0%
Max New York 100.0% 100.0%
Birla Sun Life 100.0% 100.0%
Bajaj Allianz 100.0% 100.0%

Total 6.3% 93.8% 100.0%

Acc. to Table: 5, 6 & 7, 50% of respondents faced the Claim Settlement problem & 50%
while collecting the relevant information from Insurance company. All the respondents
told that the problem was resolved to their satisfaction.

Table :5 Company name * problem type Cross tabulation

(% within company name)
Problem type Total
Claim Information
settlement

Company LIC 50.0% 50.0% 100.0%

name
Total 50.0% 50.0% 100.0%
 Table:6 Problem type * satisfaction with solution Cross
tabulation
(% within problem type)
Satisfaction with solution Total
Yes

Problem Claim settlement 100.0% 100.0%

Information 100.0% 100.0%

type

Total 100.0% 100.0%

Table :7 Company name * satisfaction with solution Cross

tabulation
(% within company name)
Satisfaction with Total
solution
Yes

Company name LIC 100.0% 100.0%

Total 100.0% 100.0%

It is observed from data that 62.5% respondents will suggest to a friend or relative about
their Insurance Company & its services.100 % customers of HDFC Std life, ICICI Pru,
Kotak Life Max New York & Birla sun life will definitely suggest to friends that means
they are totally satisfy with company policies & services. But the 45%, 50% &50%
customers of LIC, TATA AIG & Bajaj Allianz resp. will not suggest to friends that means
they are not satisfy.

Table:8 Company name * Suggest to friend Cross tabulation

(% within company name)
Suggest to friend Total
Yes No
LIC 54.5% 45.5% 100.0%
Company name

HDFC Std Life 100.0% 100.0%

ICICI Pru 100.0% 100.0%
KOTAK Life 100.0% 100.0%
TATA AIG 50.0% 50.0% 100.0%
Max New York 100.0% 100.0%
Birla Sun Life 100.0% 100.0%
Bajaj Allianz 50.0% 50.0% 100.0%
Total 62.5% 37.5% 100.0%
When the question asked to the respondent regarding how they cover an additional
insurance need in near future, whether would acquire a policy from some other company
or from the same insurance company, 56.3 % told that they buy from same company &
43.8 % told that they will buy from other different company. By doing a cross tabulation
of Company Name vs New Insurance, it is found that 50% customers of LIC, TATA AIG
& Bajaj Allianz will not buy the new insurance in near future from same company while
the 100 % customers of ICICI Pru. , Kotak Life, Max New York & Birla Sun Life will
buy new insurance from same company that means they are totally satisfy with
company’s Insurance Plans & its services. But all the customers of HDFC Std life are not
happy with company & they will buy the new insurance plan in near future from some
other company.

Table :9 Company name * new insurance Cross tabulation

(% within company name)
New insurance Total
Other company Same company
LIC 50.0% 50.0% 100.0%
HDFC Std Life 100.0% 100.0%
Company name

ICICI Pru 100.0% 100.0%

KOTAK Life 100.0% 100.0%
TATA AIG 50.0% 50.0% 100.0%
Max New York 100.0% 100.0%
Birla Sun Life 100.0% 100.0%
Bajaj Allianz 50.0% 50.0% 100.0%
Total 43.8% 56.3% 100.0%

Conclusions
1. 71.9 % respondents were male while 28.1% were female.
2. Responded were mostly belong to age group 25-30 (34.4 %),
3. Most of respondents (31.3%, 60 out of 192) are civil servants
4. 68.8% respondents have policies of LIC Company & 31.2% respondents have
policies of private companies like HDFC Std Life, ICICI Pru, KOTAK Life,
TATA AIG, Max New York, Birla Sun Life, & Bajaj Allianz
5. 34.4% respondents have Simple Term plan out of which 63.6% plans are of LIC
Company.
6. 28.1 % respondents have Money Back policy out of which 77.8% money back
policies of LIC company only, that means customer still prefer public sector
companies as compared to private sector companies.
7. In ULIP plan category, 55.6 % of total policies (28.1%) belong to again LIC.
8. Only 6.3% & 3.1% of total (192) respondents have Pension Plans & Child
Benefits Plans respectively & all of LIC Company only.
9. Protection is the main purpose of buying a Insurance policy.
 10. Only 6.3% (12) respondents faced problems & all have policies of LIC
Company..
11. 100 % customers of HDFC Std life, ICICI Pru, Kotak Life Max New York &
Birla sun life will definitely suggest to friends that means they are totally satisfy
with company policies & services. But the 45%, 50% &50% customers of LIC,
TATA AIG & Bajaj Allianz resp. will not suggest to friends that means they are
not satisfy.
12. Only 56.3 % respondents are ready to buy new insurance plans from same
company.

References:
1. Raman, N. and Miss C. Gayatri (January, 2004), “A study on Customers
Awareness towards New Insurance Companies”, Indian Journal of Marketing
(Volume- XXXIV), page 6-8
2. Rao, Bn. Vankateswara (June, 2006), “LIC- New Business Lacks Vigor”,
Insurance chronicle (The ICFAI University Press) , page33-40
3. Sharma, Ravi Kumar (August,2005), “Insurance Perspective in Eastern Up- an
Empirical Study”, Indian Journal of Marketing, page 14-20
4. Namasivayam, N., S. Ganesan and S. Rajendran (August, 2006), “ Socio
economic Factors Influencing the Decision in Taking Life Insurance Policies”,
Insurance chronicle (The ICFAI University Press) , page 65-70
5. Rajesham, Dr. Ch. and K. Rajender (July, 2006), “Changing Scenario of Indian
Insurance Sector”, Indian Journal of Marketing, (Volume XXXVI) No. 7, page 9-
15.