A Study on Customers Preference towards Insurance Services and Bancassurance

Rajkumari M * Bancassurance is a channel of distribution of insurance products through banks. A number of insurers have already tied up with banks and some banks have already flagged off bancassurance through soft launches of select risk products. Bancassurance has been gaining momentum in the Indian market. This study is carried out to understand the position of private players when compared to public, and also to find the most preferred policies with these leading companies. It also aims to analyze the segment wise preference among different age groups. The study has been undertaken in order to identify the customers attitude towards purchase of insurance products and also their knowledge on the bancassurance formats available through banks. The study concludes that there is a low level of awareness about bancassurance among bank customers and thereby gives suggestions to improve insurance penetration levels. Introduction
The business of insurance started with the beginning marine business. Traders, who used to gather in the Lloyds coffee house in London, agreed to share the losses to their goods while being carried by ships. The losses used to occur because of pirates who robbed on the high seas or because of bad weather spoiling the goods or sinking the ship. The first insurance policy was issued in 1583 in England. In India, insurance began in 1870 with life insurance being transacted by an English company, the European and the Albert. The first Indian insurance company was the Bombay Mutual Assurance Society Ltd., formed in 1870. This was followed by the Oriental Life Assurance Co. in 1874, the Bharat in 1896 and the Empire of India in 1897. Later, the Hindustan Cooperative was formed in Calcutta, the United India in Madras, the Bombay Life in Bombay, the National in Calcutta, the New India in Bombay, and the Jupiter in Bombay and the Lakshmi in New Delhi. These were all Indian companies, started as a result of the swadeshi movement in the early 1900s. By the year 1956, when the life insurance business was nationalized and the Life Insurance Corporation of India (LIC) was formed on September 1, 1956, there were 170 companies and 75 provident fund societies transacting life insurance business in India. After the amendments to the relevant laws in 1999, the LIC did not
* Faculty Trainee, Department of E-mail: rajkumari.mano@yahoo.co.in MBA, St. Peters Engineering College, Chennai, India.

2007 The Icfai University Press. All Rights Reserved. A Study on Customers Preference towards Insurance Services and Bancassurance

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have the exclusive privilege of doing life insurance business in India. By March 31, 2002, 11 new insurers had been registered and had begun to transact life insurance business in India.

Insurance Format
In India, insurance business is classified primarily as life and non-life or general. Life insurance includes all risks related to the lives of human beings and general insurance covers the rest. General insurance has three classifications viz., Fire (dealing with all fire related risks), Marine (dealing with all transport related risks and ships) and Miscellaneous (dealing with all others like liability, fidelity, motor, crop, personal accident, etc). Personal accident and sickness insurance, which are related to human beings, is classified as non-life in India, but is classified as life, in many other countries. What is non-life in India is termed Property and Casualty in some other countries.

Bancassurance
Bancassurance, the much talked about channel of insurance distribution through banks that originated in France and which has been a success story in Europe is yet to take off here. A number of insurers have already tied up with banks and some banks have already flagged off bancassurance through soft launches of select risk products. While reams have been written about the numerous benefits of bancassurance considering the wide scale availability of risk products it will enable, rules and regulations regarding the same are yet to fall in place. For banks, bancassurance is a new concept for building better and secured relationship, to sustain themselves in this present competitive world. Enter bancassurance and fee-based income for a risk free product that would be guaranteed. While, on the one hand it is an economical proposition to sell risk products through the numerous bank branches spread across the country the fact that claim settlement disputes take some time in our country is one of the causes for worry. In such a situation will banks be in a position to fight for the cause of their clients is a major concern. Besides all these controversies, bancassurance is gaining momentum in the Indian market. Insurance companies are increasingly using the banking network to improve their distribution system.

Objectives of the Study

To find the customers preference towards Insurance services and bancassurance. To understand the awareness level on insurance among various segments and also to find the major policies preferred by people both in life and non-life. To find the awareness level on bancassurance provided through Centurion Bank of Punjab. To find the benefits that customers get through Insurance savings. To find the client satisfaction among the clients of Centurion Banks bancassurance. To understand the various policies sold under non-life in Centurion Bank and the future trends towards bancassurance.

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Statement of the Problem

The key attributes for any business to succeed depends on the customers satisfaction towards the company. The aim of marketing is through understanding the changing customer attitude and their varying preferences for buying an Insurance plan. The company should be cost effective to give the best solution to the client to suit his/her position. In Insurance field private players need to do lot of work in order to attract the people, whereas public sector companies in insurance do not face these problems mainly as public sectors are directly controlled by the government rather than a foreign company which tie-up with an Indian company for selling life guards. When it comes to the question of security it takes hard to convince our people as still private sectors are considered only as a work place which is not assured like a government job. This study is carried to understand the position of private players when compared to public, and also to find the most preferred policies with these leading companies. It also is to define the problem based on the future of bancassurance which shows a growth rate of 64% according to this study which powers a good welcome entry in India. This study is also to analyze the segment wise preference among different age groups.

Scope of the Study

The study has been undertaken by the researcher in order to identify the customers attitude towards purchase of insurance products and also their knowledge on the bancassurance formats available through banks. The study is also based on the awareness of the various policies available through insurance, both life and non-life (general insurance). This study is also focused on understanding the bancassurance awareness in one view, i.e., with respect to Centurion Bank of Punjab in Chennai.

Methodology
The present study is a descriptive work based on a survey method. Based on the segment wise concentration, a structured questionnaire has been framed for interviewing as a tool for research. A separate questionnaire was framed to concentrate the clients of Centurion Banks bancassurance. The collected data has been analyzed using a statistical test for final interpretations. Sampling Design The report is confined to understand the Insurance benefits to customers through different insurance companies for both life and non-life. It also helps to focus, based on different segments namely: Professionals Government Employees Business People Others Segment 1 Segment 2 Segment 3 Segment 4 (Retail shop owners, students, etc.)

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The secondary objective was based on targeting the bancassurance clients of Centurion Bank through random sampling method. Measurement of Variables and Frame Work of Analysis The key objective is to study the customers preference towards Insurance services in life and non-life and also to find the awareness on the bancassurance among people. For doing this study, percentage analysis has been used to understand the various preferences and cross analysis is done to analyze the factors influencing the other factors. Bar diagrams and Pie charts has been done to give a pictorial representation of the overall analysis.

Research
Basic Awareness on Policies The common life policy that was known by the majority of the people, among the other policies specially the money back and pension plan is much familiar with the government employess and business people (Figure 1). The awareness of the child benefit policy is very low; people need more awareness in this area. Figure 1: Life Insurance Awareness
90 80 70

86%

Percentage

60 50 40 30 20 10 0

56% 45%

52%

Life

Child

Pension

Money Back

Policy In the general Insurance, the most commonly known policies are the motor insurance as it is mandatory that every vehicle owner should have taken the motor insurance (Figure 2). Apart from this, the other policies better known are the house plans, health insurance, and other insurance policies (travel insurance, oversees insurance, etc., Table 1). In non-life, the analysis shows that majority of them are aware on motor insurance and on an average, level of knowledge on other plans like house insurance and health insurance is also better with government employees, IT professionals and few business people.
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Figure 2: Non-life Insurance Awareness

80 70 76

Table 1: Preference of Non-life Insurance Products

Policies Preferred Percentage 52 56 by Customers Motor Health Insurance House Insurance 10 Others Analyzed 40 14 8 4

Percentage

60 50 40 30 20 10 0 Motor Health House

Policy

Others

Percentage of Insured People

The analysis says that the percentage of people, who have taken either Life policy or General policy, is low when compared to the percentage of people who are aware about Insurance plans. Though most people are aware on insurance, many are still hesitant to take insurance for various reasons including social beliefs and myths (Figure 3). The analysis as an overall basis from all the 4 segments has showed that still some people have not taken insurance for both life and non life. In the IT segment, most professionals concentrated in this survey were between the age group of 18-25 who have still not taken insurance due to less interest in taking policies and also less awareness on the right policy to suit their career. But in the business segment, almost all the people have taken insurance specially money back is famous among them and in non-life, health insurance is much taken by them as these people were mainly between the age group of 25-35 and 35-45. Figure 3: Percentage of Insurance Coverage in Study Group
0% 50% 100%

A Study on Customers Preference towards Insurance Services and Bancassurance

16% 84%

Yes No Level of Variation

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Preferred Policies by Customers

The key benefits that customers get through availing Insurance plans were rated on a five point scale and the top reason was found to be Income tax reduction that they get for paying premium towards these policies under section 10(A), 10(D) and 80C (Table 2). The next rating was for the protection especially family protection and Table 2: Benefits Available for Insurance Schemes
Factors Income Tax Deduction Returns Protection Savings Others Percentage Rating 68 34 56 52 6

for self protection. In this protection category, health insurance, child benefit, money back plan, etc... are some of the policies that topped for family protection (Figure 4). Savings were rated with a lesser percentage as insurance is not much considered for savings when Bank options are there for savings. Only in case of few plans like pension plan which comes under this category for retirement benefits. Some other factors also were rated with a less percentage for certain rider benefits that people get through availing insurance plans like accident benefits, house protection, etc. Figure 4: Commonly Preferred Policies in Life Insurance

80 60

62

Percentage

40 24 20 6 0 Life Child Benefit Pension Money Back Others 10 6

Policy

Awareness on Bancassurance
Bancassurance still being in nascent stage, has low awareness in our country. The data of awareness on bancassurance and Centurion bancassurance is given in Figure 5 and Table 3

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Figure 5: Data on Awareness of Bancassurance Awareness on Bancassurance Percentage Awareness of Centurion Bancassurance
10 0 90 80 70 60 50 40 30 20 10 0

78

No 36%

Yes 64%

22 Yes No

Sources of Awareness on Centurion Banks Bancassurance

Table 3: Data on Awareness on Centurion Banks Bancassurance
Factors Media Friends Banks Others Media 14% Friends 26% Tele Callers 50% Marketing Executives 4% Others 6%

Top Preferred Policies in Centurion Bancassurance

The analysis taken from the client data base shows that most of the policies taken through ICICI Lombard is mainly health insurance and house insurance and motor insurance has a very low purchase in ICICI as the vehicle dealer itself mostly arranges for motor insurance with tie-ups with insurance companies specially as Bajaj Alliance which is one of the leading motor insurers for most of the vehicles during the sale of a new vehicle. Health insurance has gained a lot of exposure through the various mediclaim policies available through ICICI due to the massive change in modern life style and food habits (Figure 6). Figure 6: Top Preferred in Non-life Insurance Policies
60

Percentage

40 20 0

Motor Insurance

Health Insurance

House Insurance

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 House insurance is still to reach the top mainly as people are not much aware on the house insurance plans and also due to certain social beliefs.

Cross Analysis: Description

This cross analysis is done for a comparison with the different segments of professions, i.e., IT professionals, government employees, etc compared with the age group were the policies are much in demand. The insurance preferences among the various age group people are understood through this cross analysis (Table 4). In case of the IT sector most of the insured are between 18-25 and 25-35. And even among business group this is the apt age for insurance as most people venture into business mostly in age group of 25-35. For professionals this age is best suited as they come to a settlement in their career and hence at this point they start investing in insurance policies. While considering the government employees, they invest mostly from the age group of 35-55 and above 55 especially as at this stage they decide on their retirement benefits and apart from this the other savings are also concentrated. Table 4: Segment Wise Cross Analysis
Profession IT Professionals Government Employees Business People Others Age Group 18-25 (%) 65 2 4 25-35 (%) 30 28 75 20 35-55 (%) 5 68 21 50 Above 55 (%) 2 30

Future Plans towards Life Insurance: Description

This interpretation is done to find out the percentage of clients willing to insure with Aviva Life Insurance Company through Centurions bancassurance tie-up with Aviva (Figure 7). Figure 7: Future Preference towards Life Insurance

No 34% Yes 66%

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Statistical Test
The statistical test is applied to prove the bancassurance clients mostly do not have any previous relation with the bank through any savings or loans. This test also shows that most of the clients have come to know about bancassurance through the main source of tele callers. The test is done through a combination of 3 different variables, namely: (1) Clients of bancassurance having previous accounts with the bank; (2) Fresh Clients of bancassurance having no previous relation with the bank; and (3) Clients Source of awareness for availing bancassurance through Centurion bank. Statistical Test Chi-square Test. Hypothesis Setting H0: There is a low relation of the bancassurance clients with centurions bank accounts. H1: There is a relation between the bancassurance clients with centurion bank. Table 5: Observed Values of Clients
Savings in Bank with Bancassurance/Only Bancassurance Observed Value Yes No Total Expected Value Yes No Total Final Analysis S.No. 1. 2. 3. 4. 5. 6. Total Note: The table value of for 2 degree of freedom at 5% level is 5.991.

Media/Friends and Relatives

Marketing Executives

Tele Callers

Total

5 11 16 (T1) 5.12 10.88 16

5 8 13 (T2) 4.16 8.84 13

6 15 21 (T3) 6.72 14.28 21

16 (C1) 34 (C2) 50 16 34 50

O 5 5 6 11 8 15

E 5.12 4.16 6.72 10.88 8.84 14.28

O-E 0.12 0.84 0.72 0.12 0.84 0.72

(O-E)^2 0.0144 0.7056 0.5184 0.0144 0.7056 0.5184

(O-E)^2/E 0.0028 0.1696 0.0771 0.0013 0.0798 0.0360 0.3660

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Result
Calculated value 0.366 is less than table value. Thus, H0 is accepted. The analysis shows that there is a very less relation of the bancassurance clients with centurion bank accounts like any savings, loans, etc.

Findings
Insurance awareness is growing rapidly among the people though few are hesitant to insure due to certain barriers. The interest level of the people in terms of getting insured is very important and this importance must be made to realize through the upcoming insurance companies. The life plan is the basic policy that any individual takes when reminded of insurance. The other policies like child benefit plans, pension plans and other rider benefits have still not reached the awareness. The future of a child in case of any mishap to the parents or guardian forms a big question to the childs future and hence every parent should avail this policy to protect their child. The retirement benefits are mostly considered by the government employees only. Other professionals should also have their savings towards pension plans. In Non-life Insurance, motor is the main insurance that is still in effect as it is mandatory that vehicles should be insured. Apart from this mediclaim insurance and house insurance is gaining their position. Mediclaim policy has not been welcomed yet as most of the employees in public sectors, central government employees and few private company staff get medical reimbursement for any hospitalization and out patient treatment. As they get the money back through reimbursements they do not go separately for health plans. House Insurance has recently got its attraction through the easy loan availability for constructing a house. But still house loans under repayment availed through banks are exempted under income tax, and people do not opt house insurance. But still it attracts people for any claim regarding house burglary, fire or any safety factor. Nowadays tax saver house plans for constructions and remodeling have been brought by ICICI. The major reason for people availing insurance is to avoid income tax and towards future savings. The government also has taken measure to provide tax exemption for various life policies:

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 Under Section 10(10D), any sum received under a Life Insurance policy is also exempted from taxation. But it is wise to remember that Pensions received from Annuity plans are not exempted from Income Tax. Section 80 CCC provides a deduction of up to Rs.10,000/- to an individual assessee for any amount paid or deposited to effect or keeping in force any annuity plan of LIC for receiving pension from the fund referred in sections 10 (23AAB). Presently LICs Jeevan Suraksha plan is one such plan using such benefit. Bancassurance, the new term in insurance distribution has not been penetrated as most people are not aware on this concept. The people who knew on bancassurance did not have an idea on Centurion bank providing this facility. The bank officials do not have any relation with the customer after the policy is issued and the cheque is drawn. After this procedure it is the insurer who is responsible for all the claim settlement and enquires.

Conclusion
Insurance is a term related to assurance as the insured is repaid for the loss incurred in terms of economical returns for both life and non-life. People avail insurance mainly due to the following reasons: Insurance creates financial provisions for the deceaseds dependents. Insurance provides for the policyholders old age benefits after his earning power diminishes. After all, interest rates may fall and Invested holdings may lose value and stop gaining dividends, but the value of an insurance policy once set, never reduces. Insurance also provides a legally authorized way to reduce the incidence of Income Tax. Thus, all the above reasons state that insurance is for future returns and towards protection of family and self. Hence, safety is the key factor which should be assured to public to penetrate the private insurers. Bancassurance, regarding centurions bancassurance, more exposure has to be brought through media and other sources. Online ads on bancassurance can bring a wide coverage in cost effective way. Banks should try to have contacts with the bancassurance clients at regular basis to build a good long standing relation. This will also be helpful to attract the clients towards opening of credit accounts with the bank. As long it is not mandatory to seek insurance with few exceptions, it is in the hands of the insurers to bring confidence and commitment towards Insurance services for a better tomorrow.

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Bibliography
Books 1. Beri G C (2000), Marketing Research, Tata McGraw-Hill Publishing Co. Ltd. 2. Practice of General Insurance -IC -11 - Insurance Institute of India. Magazine 1. Escolife Newsletter. Websites 1. www.centurionbop.co.in 2. www.licindia.com 3. www.insuremagic.com 4. www.icicilombard.com Reference # 45J-2007-10-04-01

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