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Sandeep chaudhary Assistant Professor Lyallpur Khalsa college Jalandhar Contact No.- 9878302307 Email: Csandeep090990@gmail.com |
Insurance companies play an important role in the welfare of human well-being by providing protection to millions of people against life risks such as uncertain death or accident. Even the life insurance is fastest growing service sector in India after privatisation and increase in FDI. Thus it has become essential to study the buying pattern of the life insurance policies. The current study examines the various factors that affect the consumer perception towards life insurance policy. Data was collected with the help of structured questionnaire. The sample constituted of 100 respondents from Amritsar , Ludhiana and Chandigarh. The statistical technique used for the analysis are descriptive and factor analysis. The main finding of the study reflected that there are six factors i.e. customised and timely services, better company reputation, effective service quality , customer convenience , tangible benefits and healthy customer client relationship that influence the consumer perception towards life insurance policy
Human life is a most precious asset and life insurance is one of the ways which provides financial protection to a person and his family at the time of any disaster. Life insurance provides both safety as well as protection to individuals and also boosts savings among people. Insurance companies play an important role in the welfare of human well-being by providing protection to millions of people against life risks such as uncertain death or accident.
LIC is the most trusted and popular brand in life insurance, the market share of private insurers are gradually increasing with people trust. The new private players offer many new innovative products and services. They are increasing the awareness level among consumers by using innovative and new techniques of advertisement, introducing new products, increasing penetration of life insurance of consumers in uninsured markets. The competition among public and private players has helped to increase in variety of products being offered from pure risk based to ULIP plans.
Customers are the back bone of life insurance business. Every company tries to attract new customers and retain existing customers in order to keep their profits high. This helps insurance companies to maintain a good competitive edge on its competitors. The proper understanding of consumers, their needs and expectations help insurance providers to bring betterment in product as well as services offered. In comparison with the developed foreign countries, the Indian life insurance industry has achieved only a little due of low customer awareness, high premiums, delayed and poor customer services, lack of suitable products.
In today’s competitive world, it becomes necessary for life insurers to provide customer satisfaction, spread more awareness, stress on need based innovative products and affordable price. This would help every individual to avail the benefits of insurance and protect their lives against future risks and uncertainties. Earlier life insurance was used as a tool to protect the income of families, particularly young families in income saving phase, in the event of the head of household's death. But now, life insurance is used for many other reasons, including wealth preservation and tax saving. Whether an individual needs to have life insurance or not, merely depends on his need.
Francisco J. Colayco is the author of the book “wealth within your reach” and “making your money work”
“Your family depends on your ability to generate income. They will suffer a serious financial loss if you are no longer able to generate income for them. Therefore, it is important to cover yourself with insurance. Insurance is needed only when there is a possibility of unbearable financial loss.”
David King is the author of “you can be rich”.
“A fund generally ranges from lifetime security for you and your beneficiaries to immediate needs such as the education expenses of your children. A life insurance plan gives benefits to your family or another beneficiary in case of untimely death.”
In India, insurance has a deep-rooted history. It is mentioned in the writings of Manu (Manusmrithi ), Yagnavalkya ( Dharmasastra) and Kautilya (Arthasastra). The writings talk about the pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a starting point to modern day insurance. The earlier times have preserved the traces of insurance in the form of marine trade loans and carriers’ contracts. The concept of Insurance in India has evolved from other countries, England in particular.
The life insurance business started in India in1818 with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834 with passage of time. In 1829, the Madras Equitable began transacting life insurance business in the Madras Presidency. There was enactment of the British Insurance Act in 1870 and last three decades of the nineteenth century saw the starting of the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) in the Bombay Residency. This era, however, was ruled by foreign insurance offices that did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices had to face hard competition from the foreign companies.
In 1912 the first Indian insurance act was passed which was re-enacted in 1938.In 1914,the major step taken was that the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the pioneer statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to initiate the Government to collect statistical information about both life and non-life insurance business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, in order to protect the interest of the Insuring public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurance companies. The insurance amendment act of 1950 abolished the concept of Principal Agencies. However, there was increase in number of insurance companies and the level of competition was quite high. There were also allegations of unfair trade practices undertaken during that time period. As a result the Government of India decided to nationalize insurance business.
In 1956; 245 Indian and foreign insurers and provident fund societies were taken over by the central government and were nationalised. Life Insurance Company was formed by the Act of Parliament called Life Corporation of India act 1956, with a capital contribution of Rs 5 crores from government of India.
Insurance companies play an important role in the welfare of human well-being by providing protection to millions of people against life risks such as uncertain death or accident. Even the life insurance is fastest growing service sector in India after privatisation and increase in FDI. Thus it has become essential to study the buying pattern of the life insurance policies.
Objectives
Objectives provide the guide lines for which the research work is done. A study without an objective is of no use. Research work is done in order to get answers to certain questions named as objectives of the study. The objectives for which this particular study is carried out are as following:
Database and Research methodology
Research methodology help us to know the research methods along the logic behind the methods we use in the context of our research study and explain why we are using a particular method or technique.
Research design
It is the comprehensive plan of the sequence of operations that a researcher intends to carry out to achieve the desired research objective. It is a plan of action to be carried out in connection with a proposed research work. The present study needs to chalk out the consumer perception regarding life insurance policies.
Sampling method
Convenience sampling is used while selecting the sample for the study. As the name suggests itself when population elements are selected for inclusion in the sample based on the ease of access, it can be called convenience sampling.
Data design
Data design involves different aspects like the nature of data used, data collection methods used, data sources and tools used for analysis of data.
Nature of data
Primary data is used to find the answers to the objectives.
Data collection
The task of data collection begins after a research problem has been defined and research design/plan chalked out. In this particular study primary data has been collected from 100 respondents while keeping in mind the objectives of the study. The primary data was collected through a self administered questionnaire that contained questions relating to the objectives of the study. The questionnaire contains certain question regarding awareness level and the attributes that consumers consider while buying a life insurance policy.
Sample size
In this particular study a sample of 100 respondents is taken to apply the various statistical tools.
Statistical tools used
The role of statistics in research is to function as a tool in designing research, analysing its data and drawing conclusions there from and most research studies result in a large volume of raw data which must be suitably reduced so that the same can be understood. Thus it is clear that the science of statistics cannot be ignored by any research worker. The statistical tools used in this study are Percentage Method and Factor Analysis are used.
Factor analysis
Factor analysis is a general name denoting a class of procedures primarily used for data reduction. It is by far the most often used multivariate technique of research studies, specially pertaining to social and behavioural sciences. It is a technique applicable when there is a systematic interdependence among a set of variables and the researcher is interested in finding out some common factors out of those variables.
But three variables has been dropped due to low factor loadings namely amount of premium being charged, it provides effective and satisfactory services to its customers and the personal information of customer must not be leaked.
Exploratory Factor analysis
The factor analysis technique has been used in order to find out those attributes that affect the consumer perception regarding life insurance policies. A questionnaire has been prepared for this purpose containing 20 variables that could affect the decision of a policy holder. Likert scale has been used that shows a series of attitudes toward each variable, which are given numerical values ranging from Strongly Agree to Strongly Disagree. Ratings are on 5-point scale (5 = strongly agree , 4 = agree , 3 = neutral , 2 = disagree , 1 = strongly disagree ).
Factor analysis is a general name denoting a class of procedures primarily used for data reduction and summarization. The basic objective of Factor Analysis is data reduction or simplification. It summarizes the information contained in a large number of variables into a smaller number of summary measures. A technique that analyses data on a relatively large set of variables and produces a smaller set of factors which are used to represent the original variables as a smaller set of factors; so that the set of factor captures as much information as possible from the original set of data.
Reliability Test
Reliability comes to the forefront when variables developed from summated scales are used as predictor components in objective models. Since summated scales are an assembly of interrelated items designed to measure underlying constructs, it is very important to know whether the same set of items would depict the same responses if the same questions are recast and re-administered to the same respondent. Variables derived from test instruments are declared to be reliable only when they provide stable and reliable responses over a repeated administration of the test.
Cronbach's alpha is the most common measure of internal consistency ("reliability"). It is most commonly used when you have multiple Likert questions in a survey/questionnaire that form a scale and you wish to determine if the scale is reliable.
Cronbach's alpha internal consistency:
α ≥ 0.9Excellent
0.9 > α ≥ 0.8Good
0.8 > α ≥ 0.7Acceptable
0.7 > α ≥ 0.6Questionable
0.6 > α ≥ 0.5Poor
0.5 > α Unacceptable
Table no.11
| Reliability Statistics | |
| Cronbach's Alpha | N of Items |
| .816 | 17 |
Since the value of cronbach alpha is .816 which is greater than .5 hence the data is reliable for research purpose.
KMO and Bartlett’s Test
Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy: The Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy is an index used to examine the appropriateness of factor analysis. High values (between 0.6 and 1.0) indicate factor analysis is appropriate. Values below 0.6 imply that factor analysis may not be appropriate. Small values of the KMO statistic indicate that the correlations between pairs of variables cannot be explained by other variables and that factor analysis may not be appropriate.
Bartlett's test of sphericity. Bartlett's test of sphericity is a test statistic used to examine the hypothesis that the variables are uncorrelated in the population. In other words, the population correlation matrix is an identity matrix; each variable correlates perfectly with itself (r = 1) but has no correlation with the other variables (r = 0). If this hypothesis cannot be rejected, then the appropriateness of factor analysis should be questioned.
From the above given table we can conclude that the sample is adequate as the KMO value of the sample is .723 which is between the prescribed limit i.e..6 to 1.0 and Bartlett’s Test of Sphericity value is .000 it means null hypothesis is rejected as a result the data is significant. It implies that there is relation between the populations.
Rotated factors
In rotating the factors, we would like each factor to have nonzero, or significant, loadings or coefficients for only some of the variables. Likewise, we would like each variable to have nonzero or significant loadings with only a few factors, if possible with only one. The rotation is called orthogonal rotation if the axes are maintained at right angles. The most commonly used method for rotation is the varimax procedure. This is an orthogonal method of rotation that minimizes the number of variables with high loadings on a factor, thereby enhancing the interpretability of the factors. Orthogonal rotation results in factors that are uncorrelated.
Table No: 13
| Rotated component matrix | ||||||
| Component | ||||||
| 1 | 2 | 3 | 4 | 5 | 6 | |
| The company must provide appropriate feedback to its customers | .703 | |||||
| It must keep its customers updated with the latest information | .697 | |||||
| Agents/company must show honesty in its services | .619 | |||||
| Documentation work must be easy | .600 | |||||
| Timely alerts must be given in case of policy being lapsed | .566 | |||||
| The goodwill of company is important | .831 | |||||
| Products being offered must be cost effective | .621 | |||||
| Procedure of settlement of claim must be speedy | .521 | |||||
| Grievance handling process must be effective | .859 | |||||
| The behaviour of agents must be generous | .579 | |||||
| The company must use updated technology | .545 | |||||
| The service charges must be low | .794 | |||||
| It must provide convenient working hours for customers | .729 | |||||
| It provides tax benefit to its customers | .838 | |||||
| Customer must find payment of premiums very easy | .606 | |||||
| It provides risk coverage to customers | .808 | |||||
| It must focus in building healthy customer relationship | .599 | |||||
The above table shows the factor loadings of all the attributes which indicate the consumers’ perception about life insurance policies. Factor loadings are simple correlations between the variables and the factors. It ranges from -1 to 1. A factor can then be interpreted in terms of the variables that load high on it. High loadings provide better interpretation of factor in which it lies.
Table no. 14
| Rank | Factor Name (Variance Explained %) | Eigen Value | Loading | Statements Included in the Factor |
| 1 | CUSTOMISED AND TIMELY SERVICES | 4.772 | .703 | The company must provide appropriate feedback to its customers |
| .619 | Agents/company must show honesty in its services | |||
| .697 | It must keep its customers updated with the latest information | |||
| .566 | Timely alerts must be given in case of policy being lapsed | |||
| .600 | Documentation work must be easy | |||
| 2 | BETTER COMPANY REPUTATION | 1.727 | 0.831 | The goodwill of company is important |
| 0.621 | Products being offered must be cost effective | |||
| 0.521 | Procedure of settlement of claim must be speedy | |||
| 3 | EFFECTIVE SERVICE QUALITY | 1.490 | .859 | Grievance handling process must be effective |
| .545 | The company must use updated technology | |||
| .579 | The behaviour of agents must be generous | |||
| 4 | CUSTOMER CONVENIENCE | 1.320 | .729 | It must provide convenient working hours for customers |
| .794 | The service charges must be low | |||
| 5 | TANGIBLE BENEFITS | 1.074 | .838 | It provides tax benefit to its customers |
| .606 | Customer must find payment of premiums very easy | |||
| 6 | HEALTHY CUSTOMER -CLIENT RELATION | 1.054 | .808 | It provides risk coverage to customers |
| .599 | It must focus in building healthy customer relationship |
Factor 1-Customised and Timely services
In the above table all loadings of items in factor 1 are significantly high. Five variables with positive loadings are extracted on factor 1. The positive loadings indicate that these five variables co-vary with each other. The eigen value of this factor is 4.772. This factor exhibits that the customers consider providing appropriate feedback to its customers(.703), Agents/company must show honesty in its services(.619), Customers updated with the latest information(.697), Timely alerts must be given in case of policy being lapsed(.566), and Documentation work must be easy(.600)as important attributes which are important while choosing life insurance policy. Keeping in view the nature of the variables on this factor, it can be named as Customised and Timely Services.
Factor 2- Better Company Reputation
In the above table all loadings of items in factor 2 are significantly high. Three variables with positive loadings are extracted on factor 2. The positive loadings indicate that these three variables co-vary with each other. The eigen value of this factor is 1.727. This factor exhibits that the customers consider the goodwill of company is important (.831), Products being offered must be cost effective (.621) and Procedure of settlement of claim must be speedy (.521) as important attributes which are important while choosing life insurance policy. Keeping in view the nature of the variables on this factor, it can be named as Better Company Reputation.
Factor 3- Effective Service Quality
In the above table all loadings of items in factor 3 are significantly high. Three variables with positive loadings are extracted on factor 3. The positive loadings indicate that these three variables co-vary with each other. The eigen value of this factor is 1.490. This factor exhibits that the customers consider Grievance handling process must be effective(.859),The company must use updated technology (.545)and The behaviour of agents must be generous(.579)as important attributes which are important while choosing life insurance policy. Keeping in view the nature of the variables on this factor, it can be named as Effective Service Quality.
Factor 4- Customer Convenience
In the above table all loadings of items in factor 4 are significantly high. Two variables with positive loadings are extracted on factor 4. The positive loadings indicate that these two variables co-vary with each other. The eigen value of this factor is 1.320. This factor exhibits that the customers consider It must provide convenient working hours for customers(.729) and The service charges must be low(.794) as important attributes which are important while choosing life insurance policy. Keeping in view the nature of the variables on this factor, it can be named as customer convenience.
Factor 5- Tangible Benefits
In the above table all loadings of items in factor 5 are significantly high. Two variables with positive loadings are extracted on factor 5. The positive loadings indicate that these two variables co-vary with each other. The eigen value of this factor is 1.074. This factor exhibits that the customers consider customer must find payment of premiums very easy (.606) and it provides tax benefit to its customers (.838) as important attributes which are important while choosing life insurance policy. Keeping in view the nature of the variables on this factor, it can be named as Tangible Benefits.
Factor 6- Healthy Customer Client Relationship
In the above table all loadings of items in factor 6 are significantly high. Two variables with positive loadings are extracted on factor 6. The positive loadings indicate that these two variables co-vary with each other. The eigen value of this factor is1.054. This factor exhibits that the customers consider it provides risk coverage to customers (.808) and It must focus in building healthy customer relationship (.599) as important attributes which are important while choosing life insurance policy. Keeping in view the nature of the variables on this factor, it can be named as healthy customer client relationship.
From past two decades it has been seen that service sector is the fastest growing sector in India and is projected to have high growth in future. A major contributor in this emerging service sector is the insurance sector which plays an important role in improving financial intermediation, creating liquidity and mobilizing savings in the country. LIC has maintained its monopoly in insurance sector from past many years but after the liberalisation many new insurance companies have entered this business. Majority of policy holders purchase the insurance policy for savings purpose. After conducting the whole study it has been concluded that 100%respondents are aware about life insurance policies and majority of respondents are satisfied with the services of their respective life insurers. Of those who are not satisfied with the services the major reason being the large amount of premiums paid.
The study has extracted six factors that affect the buying decision of a consumer are Customised and Timely Services, Better Company Reputation, Effective Service Quality, Customer convenience, Tangible Benefits and Healthy Customer Client Relationship. In nutshell we could say that human life is a most precious asset and life insurance is one of the ways which provides financial protection to a person and his family at the time of any uncertainty. After conducting the whole study certain loop holes have been found that need to be corrected to increase the life insurance business. ULIP plans are not very popular among the respondents. People must invest more in these plans to get the benefit of investment along with insurance. Even after the privatisation the share of private sector is very low thus private sector should try to win the trust of investors. They must offer new and innovative products to build better customer relationships. The amount of premium being charged for insured must be kept low in order to reduce the dissatisfaction of policy holders. More female members must have life insurance policies. There must be certain policies exclusively for business man to tend to take more risk.
The above study has been conducted on the basis of primary data which has been collected through questionnaire. It is subject to certain limitations that are as follows:
