CHAPTER I

INTRODUCTION AND DESIGN OF THE STUDY

1.1 INTRODUCTION

Indias economic development had been awesome in recent years both in

terms of Gross Domestic Product and in terms of Per Capita Income.
Globalization and Liberalization were said to be the triggering forces for this
scenario. Today, despite global economic recession, Indias expected growth rate,
though estimated to be slightly lower than that was previously anticipated, still due
to strong domestic fundamentals, was likely to be reasonable and convincing at the
rate of 7.6 during July-September 2008.

Owing to this thriving economic scenario, there were satisfactory levels of

growth in employment opportunities in the economy, leading many people to
enjoy improved standard of living. Disposable income of households was more
and this provided them leverage to think about financial planning. Financial
planning includes not only distribution of savings amongst different avenues of
investment, but also includes the methods of facing contingencies e.g. opting for
Life Insurance cover.

The dominance of the state-owned Life Insurance Corporation of India in

insurance sector was put into test when its gates were opened for the entry of
private players. This step, in line with globalization and liberalization, provided an
opportunity for the global private insurance players to offer a variety of insurance
products to people.

The entry of Private players changed the erstwhile scenario which prevailed
in the insurance sector. Today, there are 23 Life Insurance Companies operating in

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India against the stand alone LIC of India in the past. 1 As per the general rule,
customers are the beneficiaries in a healthy market competition. This is applicable
to the insurance sector also. Due to competition, different Private players offered
policies at competitive prices. This forces the Life Insurance Corporation of India
to draw new strategies to deliver goods. Besides traditional policies, the new bred
Unit Linked Insurance Policies (ULIPs) and closed ended fixed term maturity
single premium policies are also being offered to people.

Despite an expected premium growth rate of 17 per cent, life insurance

cover of Indian people is considered to be low. This is mainly due to lack of
awareness regarding the need for insurance and availability of different kinds of
policies. In this context, awareness and satisfaction of the policy holders will give
us an idea for charting strategies to bring more and more people under insurance
cover, as insurance is the backbone of a countrys risk management system.

It is rightly observed that the success of the insurance industry depends

upon meeting the rising expectations of the policy holders who are the real kings
in the liberalized insurance market.

1.2. IMPORTANCE OF THE STUDY

In human life, wherever there is uncertainty there is an involvement of risk.

Uncertainty is the truth of life. The instinct and need for security against such a
risk is a motivating force for human behaviour and action. Insurance is universally
acknowledged as it eliminates risk and provides timely aid to the family after the
unfortunate occasion. The needs for life insurance differ, according to age, family
size, etc. Each plan of life insurance provides a kind of need. Thus, the success of
a life insurance company depends on the efficiency of the company fulfilling the
expectations of the policyholders.

1
http://www.irda.gov.in/ accessed on 27.12.2013.

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 Many policyholders take up life insurance policies for the purpose of giving
economic protection to their children when they attain adulthood. The lump sum
available on maturity of the policy can be utilized for education, marriage, self-
employment and other useful purposes. Even though policyholders take up life
insurance for the purpose of covering the risk, many policyholders have a strong
feeling that life policies act as long term investments. In these competitive days,
the life insurance companies offer a variety of life insurance policies and
introduced new life insurance plans to meet the demands of the changing social
and economic environment.

LIC of India enjoys monopolistic status and large funds could be raised for
nation-building activities and millions could enjoy the benefits of life insurance.
However, when a vast majority of the population of insurable lives in India
remained uncovered and untapped. Government of India has decided to open up
the markets and the economy of our country for private and foreign insurance
players. In 1999, the Insurance Regulatory and Development Authority of India
(IRDA) Act was passed in the Parliament and the IRDA was set up to monitor,
regulate and control the affairs of various life insurance companies in India.

The Indian insurance industry has moved into a more competitive arena
with the arrival of private players in the market. Even though, the Life Insurance
Corporation of India (LIC) reigns supreme in terms of market share, private
companies are gearing up to woo the consumer. Any new player entering the
insurance business would try to differentiate its product offering, but it is the
service delivery system which would become the key differentiator. One of the
most curious aspects of insurance services is that customers simultaneously expect
quality and customization. These two aspects must be tailor made by LIC of India
and Private life insurance companies to retain the customers in the long run.

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 The LIC of India and other Private life insurers are posing healthy
competition among themselves in offering variety of products and services in life
insurance arena. But these insurance companies miserably fail in reaching out all
the segments of the people towards the life insurance products and services offered
by life insurance industry. Thus, it is essential to provide financial support to the
people to a reasonable extent to maintain their security by life insurance. In India,
people have less insurance cover because the awareness towards life insurance is
very low. Most people have understood that the term insurance is a forced activity
of insurance agency. They never bother about risk in life and consequent suffering
of the family in case of death. At the same time, the agents fail to provide clients
with full information and services about the products both before and after a loss.

Further, the consumers do not shop efficiently for insurance because

making right choices is difficult and time consuming. Normally, the informed
purchasers do not pay more for goods of inferior quality than for goods of superior
quality. Unfortunately, both situations occur today in the insurance market place
despite regulation. The cost of getting information needed to make effective
purchase decisions may be examined in terms of the problems encountered in
obtaining this knowledge. Perhaps the main problem in making an informed
decision is the life insurance contract itself. The typical life insurance contract is a
complex legal document and is difficult for most of the consumers to understand
and to grasp. Besides, the legal knowledge needed to understand the contract,
knowledge of finance is also needed to evaluate the policys cost.

An additional problem of uninformed consumers is that they rarely know

the right questions to ask. Even if they asked a good question, the answer might be
so technical that the consumer would find it difficult to understand. The problems
created by an inferior insurance policy ordinarily are not readily apparent to the
consumer. Usually, the insured face problem when made a claim for payment.

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Moreover, the problems relating to very poor maintenance of records by the life
insurance companies, tedious and lengthy formalities in some services, defective
loan sanctioning procedures, discourteous behaviour of employees, delay in claim
settlements and heavy confusion in policy transfer, alterations, etc. make the
customers feel worse.

On the whole, both private and public sector companies attracting people
and their policy holders by using different marketing strategies. These marketing
strategies are highly baffled people and policy holders that make them not able to
trace out the fruitful services offered by the public and private sector life insurers.
So, this research has been conducted to examine the services in various
dimensions offered by the public and private life insurers.

1.3 STATEMENT OF THE PROBLEM

There has been a need to evaluate the life insurance policyholders

satisfaction and get their problems enlightened. It is required to understand the
awareness level of the policies offered by the public and private sector life
insurance companies and the satisfaction of services and facilities provided by
them. Based on this a descriptive study has been undertaken in Dharmapuri
District.

The study has been focused with sampling frame and quantitative analysis
to bring out the Life Insurance Policy holders preference and satisfaction level in
Dharmapuri District.

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1.4 OBJECTIVES OF THE STUDY

The study is undertaken with the broad objective of evaluating the

policyholders level of satisfaction towards the services of Public and Private Life
Insurance Companies in Dharmapuri District. The following are the specific
objectives:

1. To identify the level of awareness on services of life insurance among

policyholders.
2. To study the existing practices of policyholders towards Public and Private
Life Insurance Companies.
3. To identify the factors that influence the level of satisfaction of policyholders
towards the services provided by Public and Private Life Insurance
Companies in the study area.
4. To examine the problems faced by the life insurance policyholders in terms
of services and claims.
5. To offer suggestions to Public and Private Life Insurance Companies to
provide better services to the policyholders and the general public.

1.5 HYPOTHESES OF THE STUDY

The following workable hypotheses have been framed and tested in

connection with the objectives of the study.

1. There is no significant difference between selected independent variables

and the level of satisfaction towards services offered by the Public and
Private Life Insurance Companies.
2. There is no significant relationship between selected independent variables
and the after sales service offered by the Public and Private Life Insurance
Companies.

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1.6 RESEARCH METHODOLOGY

The validity of any research depends upon the systematic method of

collecting data and analyzing the same in a logical and sequential order. In the
present study, an extensive use of both primary and secondary data has been made,
making use of descriptive research.

The details of the life insurance policyholders in Dharmapuri district had

been collected from the Life Insurance Corporation of India and from various
private sector life insurance companies viz., ICICI, SBI, TATA AIA, etc. in
Dharmapuri district. The total life insurance policyholders in public sector was
11,00,000 and 14,00,000 policy holders were having private life insurance policies
in Dharmapuri district.

Sampling Design and Technique

Both the primary and the secondary data were used in the study for the
purpose of analysis. For collecting primary data, a field survey technique was
employed in Dharmapuri district. A well framed questionnaire was used to collect
the primary data. First hand information pertaining to the policy holders
satisfaction accrued by different policy holders who had utilized the services
offered by the Public and Private Life Insurance companies collected from 700
sample respondents. Stratified random sampling technique was employed to
select the sample respondents in the study area. The distribution of the sample
respondents was given in the following table.

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 TABLE NO. 1.1
SAMPLE DISTRIBUTION
S.No. Taluk Public Private
1 Dharmapuri 70 70
2 Harur 70 70
3 Palakcode 70 70
4 Pappireddipatti 70 70
5 Pennagaram 70 70
Total 350 350

COLLECTION OF DATA
Framework of Analysis

By virtue of a mass data obtained from the research survey as well as the
data from the secondary sources Descriptive and analytical research were
considered as the most appropriate for the study. The researcher administered both
close-ended and open-ended questions in the questionnaire to collect the primary
data.

The core of study being Satisfaction of Life Insurance Policy Holders, the
study is centered around the dependent variable viz., the level of satisfaction
towards services offered by the Public and Private Life Insurance companies
perceived by the policy holders and their relationship with the related independent
variables.

Construction of Questionnaire

The key aspect of the present research was identified through preliminary
interviews (Pilot study) with some selected life insurance policy holders. The

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questionnaire so drafted was circulated among some of the research experts, life
insurance policy holders, insurance managers, insurance agents and research
scholars for a critical review with regard to wording, format, sequence and the
like. The questionnaire was redrafted in the light of their comments.

Primary Data

In order to fulfill the defined objectives, a sample study was undertaken by

using a well framed questionnaire which was duly filled in by the respondents.
The respondents were selected with varying background based on the important
aspects of their age, education, occupation, area and so forth, in Dharmapuri
district. A noteworthy feature was that all the 700 respondents filled the
questionnaire with much zeal. This was due to the high level of literacy among the
respondents that the questionnaire was prepared both in English and Tamil and the
researchers established rapport with them.

Secondary Data

The primary data were supplemented by secondary data. The secondary

data pertaining to the study was gathered from the records published by IRDA.
The latest information was gathered from well equipped libraries in Bangalore,
Trichirapallai, Chennai, Madurai, Salem and Coimbatore and from various other
web resources. Further, the secondary data were also collected from different
leading life insurance journals and magazines. A number of standard text books
were studied to obtain pertinent literature on the life insurance services. Web
resources related to insurance were also used to collect the latest information about
the policy holders opinion about technological services in the study area.

Discussion and Informal Interviews

In order to understand the satisfaction towards services offered by the

Public and Private Life Insurance companies to the respondents, several rounds of

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discussion were held with knowledgeable persons in the field of life insurance
services, namely life insurance officials, business people and other professionals
who were utilizing the services offered by the public and privates Life Insurance
companies and also the research supervisor offered valuable suggestions.

Statistical Tools Used for Analysis

The difference in the extent of using the Life Insurance services among the
different types of respondents based on their age, sex, marital status, community,
educational status, occupation, annual income, wealth position, family size, level
of awareness, number of policies purchased, period of utilizing the services, type
of insurance policy purchased and mode of purchase was studied by means of
Percentages, Mean, Standard Deviation, Cross tabulation, Chi-Square test, Anova,
Correlation analysis and Multiple Regression analysis. Further, Henry Garrett
Ranking Technique, Factor Analysis and Structural Equation Modelling have been
used in appropriate places.

1.7. SCOPE OF THE STUDY

The present study aims to find the level of awareness and the existing
practices of life insurance policyholders based on the policies taken by them. An
attempt has been made to identify the factors influencing the level of satisfaction
of Public and Private sector Life Insurance Companies policyholders. The study
also highlights the problems faced by the policyholders and to offer suggestions to
improve the services rendered by Public and Private Life Insurance Companies.
The study is useful for the life insurance companies to feel the pulse of the
policyholders in the study area.

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1.8 LIMITATIONS OF THE STUDY

It is but natural that any research investigation suffers from certain

limitations, which warrant an attitude of caution and healthy skepticism about its
findings. Such limitations are:

The investor awareness about the life insurance products is very less or may
be they are not aware about the products in both public and private sector
life insurance. Even though, the researcher has taken due care for collecting
the details.

It is difficult to find out the determinants of the brand loyalty among the
sample respondents and so there is a possibility of personal bias while
answering the questionnaire.

The survey is conducted only in the Dhrmapuri District of Tamil Nadu

state. Hence, the results arrived at from the study may not be applicable to
other geographical location.

The study is confined to individual life insurance policies not for group
policies.

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1.9. CHAPTER SCHEME

The study has been divided into five chapters.

The first chapter consists of the introduction and design of the study
comprising statement of the problem, scope of the study, objectives, hypotheses,
methodology, framework of analysis, limitations of the study and chapter scheme.

The second chapter makes a review of earlier studies conducted by the

researchers in the area of life insurance.

The third chapter gives an overview of Public and Private Life Insurance
Companies and their functioning.

The fourth chapter analyses the policyholders satisfaction, the

determinants of policyholders satisfaction towards life insurance services, their
preferences of life insurance companies and problems faced by them.

The fifth chapter recapitulates the key findings of the study and offers
suggestions to improve the services of life insurance companies.

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