Professional Documents
Culture Documents
Rhiddhi Khartadkar
Rhiddhi Khartadkar
By
Rhiddhi Khartadkar
Roll No.D2-M21
At
2019-2021
Acknowledgement
I Rhiddhi Khartadkar of Indira School of Business studies hereby present my Summer Internship
Project Report.
First and foremost, I would like to express my heartfelt gratitude towards Shriram Life
Insurance for providing me with the opportunity to be a part of their prestigious organization.
I would also take this opportunity to thank Mr Manmohan Vyas, Dean MBA, and my faculty
mentor Dr Tausif Mistry for their continuous support, assistance and cooperation throughout
the internship tenure.
I extend my gratitude to Indira School of Business Studies for giving me this opportunity
which helped me strengthen my corporate skills and knowledge. It was indeed a great learning
experience.
Rhiddhi Khartadkar
D2M-21/ 2019-2021
Indira School of Business Studies, Pune
Summer Internship Project Certificate
This is to certify that Ms. Rhiddhi Khartadkar is a bonafide student of this Institute and has
successfully completed her project entitled “A study consumer behavior awareness and perception
in working professionals towards term life insurance” at Shriram Life Insurance for partial
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Executive Summary
This research report is mainly a study on consumer behavior regarding term insurance policies
which encompasses various determinants like awareness, perception and attitude. The targeted
sample of this study is working professionals. Through this study, we aim to comprehensively
understand term insurance as a financial product; its history, evolution in our country and
significance in the current scenario. Another very important area of this research includes the
various factors which encourage and discourage working professionals from buying life
insurance.
This study was conducted for Shriram Life insurance in Pune using an extensive questionnaire.
The insurance industry in our country has seen a gradual increase in penetration over the years.
There are 24 insurance providers in India of which 23 are private companies and LIC is the only
public insurance provider. The private sector insurance companies in India have witnessed a
visible boom in sales and market capitalization over the last few years. LIC’s share has decreased
from its previous holding of 72.61 % in 2015-16, the private insurers have made a gain of 0.8%.
Gross premium collected by life insurance companies in India increased from Rs 2.56 trillion in
FY 11-12 to Rs 7.31 trillion in FY19-20. This data strongly asserts the fact that insurance is one
biggest business opportunities in the country.
Shriram life insurance being one of the key players in the private sector of the insurance industry
it is important to understand the mindset of the working class as they the form majority chunk
of the target market. Consumer behavior is one of the key insights for any company to make
informed and fact based data driven decisions. This research aims to precisely do this.
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At the end of the research the major contributions would be :
1. To conclude what exactly do the working class expect from private insurance providers
by means of studying their perception, attitude and awareness.
2. The major factors which include socio-cultural and socio-economic factors and behavior
driven factors, that support or deter buying decisions.
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Index / Table of Contents
1 Introduction 11-17
company)
Background
6 Objectives 67-68
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9 Conclusions / Learnings from the 88-90
Project
11 Recommendations 93-94
12 -Bibliography 96-101
-Appendices
7
List of Tables
8
List of Figuers
9
Abbreviations
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Chapter 1: Introduction
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Introduction
My summer internship was at Shriram Life Insurance and I undertook the project title ‘A study
on consumer behavior, awareness and perception in working Professionals towards term life
insurance’. I interned at SLIC for a period of 45 days; from 15th May 2020 to 30th June 2020.
The internship was a work from home virtual internship which was the need of the hour due to
the ongoing pandemic. The internship was a training cum internship program involving training
on core financial concepts like financial markets, investments, securities, mutual funds and
ofcourse insurance.
As part of the internship we were required to strengthen our understanding of SLIC’s product
offerings and had to pitch SLIC’s flagship endowment plan ‘Assured Income plus’ to our
friends, family and relatives. Assured Income plus plan is also called as the triple five plan. In
this plan the policy holder has to pay premiums only for five years, wait for another five years
and reap the benefits of the plan from the 11th year to the 15th year. In this plan the premium
paying term is just five years and life cover is for ten years. After the policy term is over the
policy holder can enjoy the returns or benefits of the plan after ten years from the date of taking
the plan, for the next 5 years. The policy holder can avail benefits in the form of instalments
which equal twenty percent of the sum assured for each year over the next five years.
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As an intern I made daily phone calls to my family, friends and relatives to pitch and sell this
product. I was also given a special link to the SLIC website for generating a quote id for an
interested customer. I was also taught about deciding on the appropriate term policy for a
salaried person using the ‘human life value’ concept. Through this I was taught about calculating
the sum assured for a client by considering factors like their current age, the age they wish to
retire, current savings, annual income and monthly expenses.
These activities made me observe the behavior of different prospective clients and in due course
of time I learned about customer behavior towards life insurance policies. Hence I chose to study
the buying behavior, awareness level, perception and attitude of working professionals for my
research.
Defination of Concept
Life Insurance is a contract with an insurance company where fixed payments called ‘premiums’,
are made over a period of time called the ‘term’, in exchange the company promises to pay a
lump sum amount which is termed ‘Death Benefit’ or 'Sum Assured’ in the unfortunate event of
death of the person (Life Assured) to his family (Nominees).
Sum Assured is the sum of money that the life insurance company agrees to pay on the death of
the life assured.
Premium- It is the amount of money a customer pays to a life insurance company for getting the
life cover.
Life insurance is a legally binding contract. For the contract to be enforceable, the life insurance
application must accurately disclose the insured’s past and current health conditions and high-
risk activities. For a life insurance policy to remain in force, the policyholder must pay a single
premium up front or pay regular premiums over time.
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measures the value of human life based on an individual’s expected net future earnings. HLV
helps to determine how much insurance one should have for full protection. Human Life Value
(HLV) helps in determining your life insurance needs on the basis of your income, expenses,
savings and liabilities. Several factors need to be taken into account while arriving at the value.
They include:
• Your monthly expenses (housing, travel, medical, food, education, lifestyle, etc.)
• Possible future expenses (child’s higher education, child’s marriage, buying a house, etc.)
In general, we can say that amount of insurance should be around 10 to 15 times one’s annual
income.
2. Risk- life insurance provides protection against those risk events that can destroy or diminish
the value of human life as an asset. Since mortality is related to age it means lower premiums are
charged for those who are young and higher premiums for older people.
Insurers evaluate each life insurance applicant on a case-by-case basis. In general, the younger
and healthier you are, the easier it will be to qualify for life insurance, and the older and less
healthy you are, the harder it will be. Certain lifestyle choices, such as using tobacco or engaging
in risky hobbies such as skydiving, also make it harder to qualify or lead to higher rates. There is
no one-size fits all life insurance plan. The needs and goals of different customers are different
and this must reflects in their individual insurance plans.The earlier you start the better it is, since
life insurance premiums are lower at an earlier age and begin to increase as you age.
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Broadly, there are five basic types of life insurance plans:
1. Term insurance
Term plans are the most basic form of life insurance. They provide life cover with no savings /
profits component. They are the most affordable form of life insurance as premiums are cheaper
compared to other life insurance plans.
2. Endowment plans
Endowment plans differ from term plans in one important aspect i.e. maturity benefit. Unlike
term plans which pay out the sum assured, along with profits, only in case of an eventuality over
the policy term, endowment plans pay out the sum assured under both scenarios – death and
survival.
The overall benefits of life insurance can be summarise under three main aspects-
Protection
Savings
Investment
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Protection- Life is unpredictable and full of uncertainties. The risk of an untoward incident such
as death cannot be eliminated. In such a situation, families are subjected to extreme financial
crisis in the absence of a regular income, however the expenses continue to hit the accounts.
Therefore life insurance plans provides the requisite safety during such times.
Savings- Life Insurance products help you to systematically save and build a corpus for your
future. The accumulated amount may be used for a variety of events such child education,
marriage, buying a house and so on. They also offer regular pay-outs in the form of annuities,
and is therefore, an excellent method to meet your retirement goals.
Investment- ULIP offered by various LI companies are primarily investment instruments. These
plans linked to the market offer significant returns thereby making it an attractive investment
tool.
Besides the aforementioned benefits, life insurance also offers tax deductions under section 10 &
80 C of Income Tax Act, 1961. You may also borrow a loan against your insurance plan in case
of a financial crunch. Therefore buying a life insurance plan is a necessity as it helps your family
tide over difficult times and provides financial support during uncertain events. It also inculcates
the habit of disciplined savings, thereby enabling an individual to build a good corpus.
Insurance is a basic form of risk management which provides protection against the loss of the
economic benefits that can be enjoyed from assets. These assets may be physical assets, such as
buildings and machinery, or they may be human assets. Assets are subject to the risk that their
ability to generate benefits could be lost or reduced due to unforeseen or unexpected events.
There is a financial or economic consequence to the risk, and insurance indemnifies or protects
against these consequences.
For example, the ability of human beings to generate income from occupation may be affected
by illness, disabilities and death; factory buildings & machinery may break down or may be
destroyed leading to loss of output. The events themselves cannot be avoided. Insurance enables
risk transfer from the beneficiary (insured) to the insurance company (insurer), which undertakes
to indemnify the insured for the financial loss suffered. In return, the insured pays a periodic fee,
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called premium, to the insurer to receive this protection. To be insurable, the event being insured
against, such as death, accident or fire must result in a financial loss which can be quantified and
insured against. The premium payable will depend upon this expected loss and the probability of
the event occurring during the period of contract.
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Chapter 2: Sector Analysis
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Sector Analysis
Sector analysis is an evaluation of the economic and financial positions and prospects of a
given sector of the economy. It is the process of investigating and observing the environment in
which different organizations operate their businesses. This includes both micro as well as macro
environment. In Sector analysis we assess the competitive dynamics of a given market. Industry
assessment helps to understand the demand in the market and the state of competition. In this
research report the sector analysis of the insurance industry is done.
Some types of insurance (such as product liability insurance) are an essential component of risk
management, and are mandatory in several countries. Insurance, however, provides protection
only against tangible losses. It cannot ensure continuity of business, market share, or customer
confidence, and cannot provide knowledge, skills, or resources to resume the operations after a
disaster.
The insurance sector in India has completed all the facets of competition - from being an open
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competitive market to being nationalized and then getting back to the form of a liberalized
market once again. The history of the insurance sector in India reveals that it has witnessed
complete dynamism for the past two centuries approximately. With the establishment of the
Oriental Life Insurance Company in Kolkata, the business of Indian life insurance started in the
year 1818.
• 1912: The Indian Life Assurance Companies Act came into force for regulating the life
insurance business.
• 1928: The Indian Insurance Companies Act was enacted for enabling the government to
collectstatistical information on both life and non-life insurance businesses.
• 1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding
theinterests of the insuring public.
• 1956: 245 Indian and foreign insurers and provident societies were taken over by the central
government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act,
1956. It started off with a capital of Rs. 5 crore and that too from the Government of India. All
life insurance companies were nationalised to form LIC in 1956 to increase penetration and
protect policy holders from mismanagement.
• 1907: The Indian Mercantile Insurance Ltd. was set up which was the first company of its type
to transact all general insurance business.
• 1957: General Insurance Council, an arm of the Insurance Association of India, framed a code
of conduct for guaranteeing fair conduct and sound business patterns.
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• 1968: The Insurance Act improved for regulating investments and set minimal solvency levels
and the Tariff Advisory Committee was set up.
• 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general
insurance business in India. It was with effect from 1st January 1973.
107 insurers integrated and grouped into four companies viz. the National Insurance Company
Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the
United India Insurance Company Ltd. GIC was incorporated as a company.
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Market Size
Government's policy of insuring the uninsured has gradually pushed insurance penetration in the
country and proliferation of insurance schemes.Gross premium collected by life insurance
companies in India increased from Rs 2.56 trillion (US$ 39.7 billion) in FY12 to Rs 7.31 trillion
(US$ 94.7 billion) in FY20. During FY12–FY20, premium from new business of life insurance
companies in India increased at a CAGR of 15 per cent to reach Rs 2.13 trillion (US$ 37 billion)
in FY20. Overall insurance penetration (premiums as per cent of GDP) in India reached 3.69 per
cent in 2017 from 2.71 per cent in 2001. The market share of private sector companies in the
non-life insurance market rose from 15 per cent in FY04 to 56 per cent in FY21 (till April 2020).
In life insurance segment, private players had a market share of 31.3 per cent in new business in
FY20.
As of FY20,life insurance sector had 24 private players in comparison to only four in FY02.
With nearly 53 percent of the new business market share in FY20, Life Insurance Corporation of
India,the only public sector life insurer in the country,continued to be the market leader.
Among private sector lenders, HDFC Standard Life Insurance was leading in new business
premium with a market share of over 14 percent, followed by SBI Life Insurance(9 percent) and
ICICI Prudential Life Insurance (6percent) inFY20.
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Fig. 2.2: Market share of Life Insurance providers in India
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7 Edelweiss Tokio Life Insurance 95.82%
Company
8 Exide Life Insurance Company 97.03%
9 Future Generali Life Insurance 95.16%
Company
10 HDFC Life Insurance Company 99.04%
11 ICICI Prudential Life Insurance 98.58%
Company
12 IDBI Federal Life Insurance 95.79%
Company
13 IndiaFirst Life Insurance Company 92.82%
14 Kotak Life Insurance Company 97.40%
15 Max Life Insurance Company 99.2%
16 PNB MetLife Insurance Company 96.21%
17 Pramerica Life Insurance 96.80%
Company
18 Reliance Life Insurance Company 97.71%
19 Sahara Life Insurance Company 90.16%
20 SBI Life Insurance Company 95.03%
21 Shriram Life Insurance Company 85.30%
22 Star Union Dai-ichi Life Insurance 96.74%
Company
23 Tata AIA Life Insurance Company 99.07%
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Porter’S Five Forces Model
Porter’s Five Forces Model Porter’s five forces model is an analysis tool that uses five forces to
determine the profitability of an industry and outline a firm’s competitive strategy. It is a
framework that classifies and analyzes the most important forces affecting the intensity of
competition in an industry and its profitability level. Five forces model was created by M. Porter
in 1979 to understand how five key competitive forces are affecting an industry. These forces
determine an industry structure and the level of competition in that industry.
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and economies of scale can be easily achieved. The threat for new entrants lies within the
industry itself. Some companies are operating in the niche area of underwriting insurance. They
are running the threat of being squeezed out by big players. Another threat is other financial
services companies entering the market.
Strong bargaining power allows suppliers to sell higher price or low quality raw materials to
their buyers. This directly affects the buying firms’ profits because it has to pay more for
materials. Suppliers have strong bargaining power when; There are few suppliers but many
buyers, suppliers are large and threaten to forward integrate, few substitute raw materials exist,
suppliers hold scarce resources, and cost of switching raw materials is especially high.
For the insurance industry, the source of funds is the premium paid by its customers.The
suppliers of funds here, hence have the option of choosing from various insurance agencies.
However, the insurance agencies cannot reduce the premiums below a minimum support level.
Thereby, the bargaining power of suppliers is medium.
Buyers have the power to demand lower price or higher product quality from industry producers
when their bargaining power is strong. Lower price means lower revenues for the producer,
while higher quality products usually raise production costs. Both scenarios result in lower
profits for producers. Buyers exercise strong bargaining power when: Buying in large quantities
or control many access points to the final customer, only few buyers exist, switching costs to
other supplier are low, they threaten to backward integrate, there are many substitutes, and
buyers are price sensitive.
There are 2 types of buyers/consumers- individual and corporate. Large corporate clients who
pay millions of dollars in premium have a lot more bargaining power than individual clients. As
a whole, the buyers have moderate to high bargaining power.
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This force is the major determinant on how competitive and profitable an industry is. In
competitive industry, firms have to compete aggressively for a market share, which results in low
profits. Rivalry among competitors is intense when: There are many competitors, exit barriers
are high, growth of industry is slow or negative, products are not differentiated and can be easily
substituted, competitors are of equal size, and low customer loyalty. Insurance has become more
of a commodity. The Insurance companies with low cost structure, better customer service and
greater efficiency will be able to beat out its competitors. Considering that more than 50
companies exist in this sector, the intensity of competition would definitely be high.
5. Threat of substitutes:
This force is especially threatening when buyers can easily find substitute products with
attractive prices or better quality and when buyers can switch from one product or service to
another with little cost. There is no real threat of substitutes for the insurance industry. However,
PPF and PF can act as low level substitutes.
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PESTLE Analysis
PESTLE is one of the strategic tools used by the management for business analysis on a broader
aspect. This is applied when the organization intends to expand the business. PESTLE is an
acronym coined by Francis Aguilar, a Harvard Professor, in 1967. The study evolved initially as
PEST analysis, in which P stands for Political, E for Economic, S for Social and T for
Technological. Later on the Legal and Environmental (L&E) factors were added to make it a
sixfactor analysis. It is a framework which helps to identify the different external factors in the
macro environment.
1. Political:
The Political factor is one of the important parameters in planning the marketing strategy.
It has more uncontrollable elements and contributes to a great extent in understanding the
market environment. The ruling governments' (both at the center and the states)
regulations and appropriate policies are the key constituents in making the political
system strong and robust.
2. Economical:
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The economic environment of the country strongly influences the insurance business. The
health of economy and business opportunities are some of the basic factors that accelerate
the business growth. India liberalized and globalized her economy in 2000 so that many
private players could enter the insurance arena on a level playing field. During the period
from 2000 to 08, the economic growth of the insurance business also blossomed. By and
large, if the economic condition of the country is in good shape, insurance companies
also will reap good returns from their investments. This will in turn trigger faster claims
settlement and business expansion.
3. Social:
Social factors have impacting influence and telling significance in insurance business. It
helps to understand the marketing environment with respect to society and its parameters
like demographics, culture, etc. All these indicate a trend to availing of all products and
services. Few marketers also refer to it as socio-cultural factors which involve culture of
the people. Social factors are mostly not in the control of marketers and trend setters but
are directly or indirectly responsible for driving the market in the long run. Demography
deals with the characteristics of human population. It is a major opportunity factor in life
insurance purchase decision. All researchers have confirmed that it plays a vital role in
the expansion of the life insurance industry.
4. Tecnhological:
Technology has impacted the entire business world including insurance industry in a big
way. In fact it is a key element in the life insurance business. Almost all the functional
operations are carried out based on digital technological advancement. Issuance of on-
line policies to customers claims settlement, customer profiling, etc., are the key tasks
where the role of technology has proved to be indispensable to the insurers.
5. Legal:
Like in all other businesses, legal factors are quite indispensable with many unruly
elements. All policy innovations are to be understood properly and examined from time
to time. Insurance in general is a contract between the insured and the insurer. Also the
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gestation period for this business is high. So the legal obligations with respect to
regulator, government and other supporting institutions are critical.
6. Environmental:
And the last item in the PESTLE analysis of insurance is the environmental factor.
Global economy has fundamentally changed the environment of life insurance business.
A complete positive business atmosphere is essential for the Indian insurance industry to
grow. Every insurance business, with respect to its SWOT analysis, must focus on the
key area of operation. The thrust area may be the mode of operation, employee retention
and the scrutiny of business practices of various players in the industry. The style of
management or leadership is essential as it plays a vital role in managing the insurance
business.
● Growth of Economy
● Unemployment
ECONOMICAL
● Other factors affecting Economy
● Demographic variables
● Cultural & ethical aspects
SOCIAL
● Impact of Media
● Use of Internet
TECHNOLOGICAL ● Analytics and other tools
● Regulatory Bodies
LEGAL ● Supporting Institutions
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Regulatory Body and its role
The Indian Insurance Sector is basically divided into two categories – Life Insurance and Non-
life Insurance. The Non-life Insurance sector is also termed as General Insurance. Both the Life
Insurance and the Non-life Insurance is governed by the IRDAI (Insurance Regulatory and
Development Authority of India). It was constituted by the Insurance Regulatory and
Development Authority Act, 1999, an Act of Parliament passed by the Government of India. The
agency's headquarters are in Hyderabad, Telangana, where it moved from Delhi in 2001.
The role of IRDA is to thoroughly monitor the entire insurance sector in India and also act like a
custodian of all the insurance consumer rights. This is the reason all the insurers have to abide by
the rules and regulations of the IRDAI. The functions of the IRDAI are defined in Section 14 of
the IRDAI Act, 1999, and include:
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Specifying the percentage of premium income to finance schemes for promoting and
regulating professional organisations
Specifying the percentage of life- and general-insurance business undertaken in the rural or
social sector
Specifying the form and the manner in which books of accounts shall be maintained, and
statement of accounts shall be rendered by insurers and other insurer intermediaries.
Government Initiatives
The Government of India has taken number of initiatives to boost the insurance industry. Some
of them are as follows:
● As per Union Budget 2019-20, 100 per cent foreign direct investment (FDI) was permitted for
insurance intermediaries.
● In September 2018, National Health Protection Scheme was launched under Ayushman Bharat
to provide coverage of up to Rs 500,000 (US$ 7,723) to more than 100 million vulnerable
families. The scheme is expected to increase penetration of health insurance in India from 34 per
cent to 50 per cent.
● The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue
redesigned initial public offering (IPO) guidelines for insurance companies in India, which are to
looking to divest equity through the IPO route.
● IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1) bonds that are
issued by banks to augment their tier 1 capital, in order to expand the pool of eligible investors
for the banks.
Flagship schemes
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This initiative provides life insurance for people employed in the unorganised sector
Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for
payment. It is a form of risk management primarily used to hedge against the risk of a
contingent, uncertain loss. We can note that, insurance is an important element of modern
economic relations. It includes financial relations which perform specific functions in economy .
In addition to playing great role in society insurance effects to macroeconomic indicators
positively. So we can show effects of insurance to macroeconomic indicators like that.
One of the main problems in economy is unemployment. Many countries suffer from this
problem nowadays. The number of unemployed people is increasing in developing countries
usually. But insurance system helps to solve this problem in economy. So, insurance companies
provides increasing employment with hiring new workers. Many people from work in these
insurance companies. This process provides employment in economy.
One of the main macroeconomic indicators of each country is GDP. A lot of macroeconomic
indicators are usually considered as determinants of profitability. The development level of each
country is measured with volume of GDP. In modern period insurance companies offer different
insurance products to people. When people use these insurance products they pay insurance
premiums to insurance companies. Insurance companies use these premiums in financial and
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investment activities of economy. So, this process increases GDP in economy.
The insurance sector plays an important role in the financial services industry, contributing to
economic growth, efficient resource allocation, reduction of transaction costs, creation of
liquidity, facilitation of economics of scale in investment, and spread of financial. Insurance also
helps to develop service, agriculture and industry sector of economy. It is known that, insurance
provides employment in economy and it provides increasing GDP. With these advantages
insurance also effects economic growth positively.
Insurance is one of the main fields of service sector. Insurance companies are primary part of
financial system. Besides that, insurance companies play great role in forming state budget.
Because they are big tax payers of the state. As we know the big part of the state budget is formed by
taxes. For this reason, insurance sector plays great role in providing stability of tax and financial system.
Availability insurance in the world is the best advantage. Nowadays people from different
countries can use different types of insurance. For example in modern period people use such as
motor insurance, property insurance, life insurance, medical insurance, travel insurance. All
these insurance types provides people’s safety and security. Availability insurance in the world
also provides people’s guarantee. It effects their life style positively. It is known that, insurance
increases savings of people. Especially we can say that life insurance effects positively to
people’s savings. When people use insurance their property, also their life is under guarantee.
These good advantages provide prosperity of people.
These factors, which we have mentioned is the main effects of insurance to macroeconomic
indicators. As we know, insurance is advantageous, as it facilitates economic growth by
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investing the premium funds, by protecting individuals, industry and commerce, community and
nation from economic impact of losses, removing anxiety of losses and promotes investment .
The year 2020 began on an uncertain note, with the corona virus resulting in a pandemic. To
ensure coverage for policyholders, more and more insurers have begun offering protection
against such diseases caused by viruses which may result in an epidemic or a pandemic. Insurers
all over the world have now taken steps to ensure they are not caught off-guard again by a
pandemic resulting in a high number of deaths.
● Customer-Focused Solutions:
In its nascent stage, the insurance industry used to provide policies that were more geared
towards a one-size-fits-all approach, but that is no longer the case. Customers today are more
aware than ever and expect customized solutions for their requirements. As a result, insurers are
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steadily moving towards tailoring their solutions and policies exactly in line with customer 26
requirements. This is set to emerge as one of the largest trends in 2020, with customers having
the flexibility to choose between different sections of their policy.
● Digital Access:
Technology has long proved a game-changer for most industries, but life insurance plans are yet
to embrace the full benefits of it. However, the year 2020 looks set to change that with
technology quickly being embraced to provide customers with more flexible solutions which are
also easier for them to interact with. Also, policyholders can upload documents and start making
their premium payments as well, all at their leisure through online mechanisms. This ensures that
customers are more comfortable and have greater say in how they’d like the policy to be
designed according to their needs. Newer technologies such as Augmented Reality (AR) and
block-chain are also set to be used by insurers to give customers a more realistic approach even
without leaving their homes.
In line with digitalization as well as increasing focus on customer-centered solutions, 2020 will
see insurers enhancing their claim settlement mechanisms as well. For instance, claims can now
be raised more quickly with the policyholder having access to online portals. Insurers can use
this increased access efficiently and also leverage it for settling claims more efficiently and in a
shorter timeline.
As the pool of potential policyholders increase, insurers are also going to become more
competitive in terms of servicing these customers. This will result in different kinds of policies
diversifying and accounting for additional factors. While riders have always been an additional
component to every life insurance plan, 2020 will see an increasing number of riders being added
with regular life insurance policies. This will allow insurers to beat out the competition by
offering solutions to policyholders to retain their business.
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Challenges
● Distribution Challenge:
India is a diverse country with various languages, food, culture, spending and saving patterns.
Historically, the majority of life insurance players have followed a national strategy of similar
distribution and operating models across geographies. With increasing economic pressures,
players will need to make very conscious choices about ‘where’ and ‘how’ to compete. Access to
customers and quality of customer relationship should be the primary focus of the channels. It
needs to develop in terms of grievance redressal and knowledge pool.
● Perceptions of Influencers:
Another major challenge is that the life insurance industry is portrayed in a negative manner and
hence the consumers become skeptical of the life insurance industry. The result is that, they may
not purchase life insurance, even though a legitimate need exists. The fact the life insurance
promotes a regular routine of small savings for long term savings and protection is not circulated.
People must understand that life insurance products should not be compared to any other
financial products on calculated returns alone.
● Insurance Awareness:
Though the number of insurers increased, financial literacy and awareness in terms of
understanding of products and services by customers is huge challenge. Early years of private
life insurers resulted great expectations and lot of disappointments from the customer
perspective. The customer anticipation has to be meeting by innovative means.
● Right Selling:
Inadequate knowledge and unethical practices by some insurance advisors, the same portrayed in
negative manner in public, plays a greatest mishap to overcome skeptical consumers. However,
insurance regulator, and industry taking various measures to contain the mis selling, insurance
selling is a great challenge compared to other financial service sales.
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The basic purpose of insurance is for protection but most insurance sales happen with perception
of tax planning and investment instrument. Indian insurance professionals do not start the
customer relationship with providing pure risk cover coverage i.e term cover. This leads to
negative perception of consumers towards the products.
Advanced technology has already become an integral part of the insurance industry. Nowadays,
one can easily compare the life insurance quotes by clicking a button. Not only this, managing
coverage or checking the policy status can be easily done via mobile app. These days, paper
insurance has mostly become a thing of the past. Insurance companies looking for a competitive
advantage can consider following one or more of these insurance technology trends.
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Machine Learning: To improve the accuracy of the insurance companies many
insurance technology trends are interlinked with one another. As per Forbes, Machine
learning is technically a subdivision of Artificial Intelligence, however, it is more
specific. Machine learning is built on the concept that we can develop machines to learn
and process data on their own, without the constant supervision of a human.
In FY20, the insurance sector witnessed robust growth of 13% for non-life and 18% for
life insurance till Feb Y-o-Y basis. Whereas awareness of health products has increased,
renewals might get delayed because of the paucity of funds in hands of the policyholders. Fresh
savings business and P&C Business issuance is also expected to be muted. Growth of the SME
group health segment is likely to be absent in the short term. An expectation of near term
increase in claims also signifies chances of loss ratios. With the material drop in interest
rates credit spread increases and hence the credit discount rate used for calculating Mathematical
Reserves will reduce putting pressure on premiums. The opportunity to reinvest maturing assets
also becomes difficult because of the prolonged low-interest-rate environment outlook.
There will be additional pressure on capital as growth levels will affect absorption of overhead
expenses. Furthermore, asset value will get depressed as the credit spread widens and credit
quality deteriorates. Prospective loss faced by reinsurers increases the credit risk on the
recoverable which further gives a blow to asset value. All of this will negatively impact solvency
of all insurance companies.
Since the pandemic offtake of digital health products has seen a rise and with it insurers will
need to develop paperless app/web based seamless journeys. Processes will have to be cost
efficient and should ensure greater productivity which can be capitalized post recovery. It will
also lead to a greater degree of centralization of claims and policy administration related
functions. An expected demand creates the need for development of products focusing on “Loss
of Business or Revenue”. Using COVID-19 as a fitting exhibition of testing grounds the CROs
can check sufficiency of their current capital framework.
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Some key policy recommendations that can be followed are:
1. To ensure policies stay in force, regulators can devise automatic renewal with a grace duration
period for premium payment.
2. Accelerated payments of premium for government policies to ensure a steady cash flow for the
companies
3. For the capital stress , increasing the FDI limit can be explored
4. Post lockdown the situation can be challenging and would require economical products for
which an accelerated approval process will be beneficial.
Since India currently follows a factor based regime for solvency capital calculation the current
events fortify discussions in favor of a risk-based capital framework to fully calibrate and
mitigate risk posed by such events for the future.
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Chapter 3: Company Analysis
41
Company Analysis
The Shriram group is a leading brand in the banking and financial services sector of our country
and each product or service by SLIC is tailor-made to specifically suit the needs of the customer.
The Sanlam Group and the Piramal Group hold an effective beneficial interest of 26% and
20% in Shriram Capital Limited , respectively. Shriram Network is one of its kind in India
having a pan-India presence.
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Vision, mission, values
The Shriram Life Insurance Company was founded with the objective of reaching out to the
“common man” with products and services that would be helpful to him as he sets out on the
path to “prosperity”.
Operational efficiency, integrity and a strong focus on catering to the needs of the average Indian
, by offering him high quality and cost-effective products and services, are the core values that
drive the organisation. These values have been strongly adhered to over the decades and are now
an integral part of the organisation’s DNA.
The company prides itself on its deep understanding of the customer. Each product or service is
tailor-made to specifically suit the needs of the customer. It is this guiding philosophy of putting
people first that has brought the group company closer to the grassroots and has made it the
preferred choice for all truck financing requirements amongst the customers.
Key People
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Product Portfolio
Protection Plans
These are term insurance plans which aim to protect your family financially if you die
prematurely. In the event of premature death of the bread-winner, the family might face a
financial crisis if no financial provision is made for them. Life insurance protection plans make a
financial provision for the bereaved family in case of death of the bread-winner.
Savings Plans
Savings Plans are traditional life insurance plans which allow you to create a corpus for your
financial goals while at the same time enjoying life insurance coverage. These plans promise a
guaranteed corpus which is further enhanced through bonus additions or guaranteed additions.
Savings plans can be offered as endowment plans which pay a lump sum on maturity or death or
as money back plans which pay benefits at regular intervals during the policy tenure.
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Savings plans offered by Shriram Life Insurance are:
1. Shriram Life Golden Premier Saver Plan
Investment Plans
Investment plans are nothing but unit-linked insurance plans which invest your premiums in the
capital market for good returns. These plans are flexible and help in maximising your wealth.
Insurance coverage is also available under the plan which makes the plan a dual benefit plan.
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1. Shriram Life Growth Plus Plan
Retirement plans
Retirement plans are insurance plans which are designed to provide you with incomes after you
retire. There are two types of retirement plans offered by life insurance companies. The first one
is a plan which lets you create a retirement corpus through regular investments when you are
working. The other is a plan which lets you avail lifetime incomes as soon as you buy it. Shriram
Life Insurance offers both types of retirement plans to its customers. Let’s see these plans and
understand their benefits –
Microinsurance plans are rural insurance plans which offer life insurance solutions to people
living in rural areas. These plans offer lower coverage levels suitable to the economically
backward classes of the society and the premiums are also very low. Shriram Life offers one
micro-insurance plan which is:
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SWOT analysis is a tool for analyzing the strengths, weaknesses, opportunities and threats for a
company. The strengths and weaknesses are the internal factors whereas opportunities and
threats are the external factors. The SWOT analysis of SLIC is as follows:
5. More than 75,000 loyal and dedicated agents and has a customer base of 30 lacs chit
subscribers and investors due to the goodwill of the Shriram group.
The Company’s paid up equity share capital during the year stands at ₹ 179,37,50,000. The
domestic life insurance industry registered 11% growth for new business premium in financial
year 2018-19, largely driven by growth in Individual premium policy. While private insurers saw
their growth at 22 %, state - run Life Insurance Corporation of India (LIC) registered growth at 6
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% in last financial year. On Individual New Business, SLIC saw a growth of around 9% as
compared to 16% growth for private industry and 1% de-growth for LIC. On Individual APE, the
Company grew from ₹425 Crores to ₹452 Crores, a growth of 6%, as compared to 12% growth
for Private Industry & 5% growth for LIC. The total premium income of the company was `
1699 Crores (Previous Year - ₹ 1497 Crores). SLIC has incurred operating expenses of ₹413.34
Crore.
The insurance arm of the Shriram group is not listed a listed subsidiary however Shriram
Transport Finance Co. Ltd. is a listed entity and the flagship company of the Group.
Best Customer Experience in Financial Sector – Non Banking, 2020 by Kamikaze B2B
Media.
Recognition for Active Customer Engagement 2019 from Confederation of Indian
Industry.
Shriram Life Insurance Company Limited MD Mr. Manoj Kumar Jain ranked amongst
the ‘Topmost Influential BFSI Leaders’ – World BFSI Congress & Awards, 13th
February 2018, Mumbai.
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Mrs. Akhila Srinivasan (Managing Director- Shriram Life Insurance Co Ltd) conferred
with the Business Woman of the Year(2018), by The Hindu (newspaper) Group of
publications.
Shriram Life MD, Mr. Manoj Jain receiving the ‘Order of Merit’ for the company’s
contribution to“Life Insurance distribution to Aam Aadmi” – SKOCH Awards, New
Delhi, 19th September 2018.
CSR Policy
Governance structure
The Corporate Social Responsibility Committee (CSR Committee) is the governing body that
will articulate the scope of CSR activities for the Company and ensure compliance with the CSR
Policy. The CSR Committee would comprise of three or more Directors including at least one
independent Director. The CSR Committee shall:
I. Formulate and recommend to the Board the CSR Policy and any amendments thereto.
II. Indicate the activities to be undertaken by the Company as specified in the Act.
III. Review and recommend the annual CSR plan to the Board.
IV. Monitor the CSR activities and compliance with the CSR Policy from time to time;
and
V. Review and implement, if required, any other matter related to CSR initiatives.
The Committee shall meet at least twice in every financial year.
The Board of Directors shall:
1. Approve the CSR Policy based on the recommendation of the CSR Committee.
2. Approve the CSR activities and annual CSR plan based on the recommendation of the CSR
Committee; and
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Initiative towards social inclusion and environmental conservation:
The growing concept of Corporate Social Responsibility (CSR) goes beyond charity and requires
the company to act beyond its legal obligations and to integrated social, environmental and
ethical concerns into company’s business process. With the rapidly changing corporate
environment and more functional autonomy, many organizations have set up separate CSR
wings as a strategic tool for sustainable growth. In the current scenario, CSR goes way beyond
the old philanthropy of the past — donating money to good causes at the end of the financial
year. Instead, it is an all year-round responsibility. Indeed, the brand names depend not only on
quality, price and uniqueness but on how, cumulatively, they interact with companies’
workforce, community and environment. Business has today, emerged as one of the most
powerful institutions on the earth.
The globalization and liberalization of the Indian economy has helped in stepping up growth
rates. Companies are expanding their operations and crossing geographical boundaries. Indian
Life insurance companies too have made their way into the business boom and are today
acknowledged as major player and fastest growing sector in India. This sector has also made
momentous contribution towards corporate social responsibility. CSR has gained unprecedented
importance and has become imperative to any company’s strategic decision making the aim of
present paper is to study the conceptual framework of corporate social responsibility. The paper
as well highlights the CSR initiatives undertaken by the selected life insurance companies
operating in India. The paper is based on secondary data collected from different sources and
websites. The paper concludes that life insurance sector of India has taken a number of initiatives
for corporate social responsibility, LIC, being the prominent initiator.
The insurance industry brings numerous positive contributions to society, and that a number of
pioneering companies in the sector are striving hard to operate in a socially responsible way. The
CSR policy of insurance companies in India mainly focuses on environment, education,
community, workforce, human rights, health, senior citizens, marginalized groups, safety and
standard of business conduct. Insurance companies favor the wellbeing of society as a whole
through a variety of initiatives. They contribute to improve and enhance the quality of life of
society in which they operate by helping to create an equitable society. In addition to it, they are
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strongly involved in promoting public health and their interventions have led to the adoption of
higher security standards in several important areas such as car safety.
Insurance companies also strive to integrate the environmental concern, both internally and
externally. In recent decades’ economic losses due to natural disasters have risen sharply and are
doubling every ten years, this directly affects the industry as the claims related to natural
disasters are massive. Therefore, insurance industry is confronted with the responsibility to
devise innovative responses to the environmental challenges. Apart from this insurance
companies are also showing great interest in socially responsible investment. A group of leading
insurance companies have adopted clear policies of socially responsible investment and have
undertaken to implement them in their asset management practices. From the above discussion it
is clear that CSR is now an effective part of organizational objectives of insurance companies
and has become an effective tool by which a company can differentiate itself from their
competitors and can hold strong position in market.
Response to Covid-19
Shriram life insurance has always been very agile in its responses to the rapidly growing changes
in the industry. SLIC has an efficient digital arm which handles all the important business
operations and client service requests digitally. During the Nation wide lockdown SLIC worked
immensely on their digital architecture and achieved a good percentage of policy renewal and
client retainment.
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Chapter 4: News Analysis (w.r.t selected
sector & company)
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News Analysis
IRDAI allows insurers to offer short-term health policies for coronavirus treatment
24th June 2020
In the light of the Covid-19 Pandemic the IRDAI has has now allowed life, general and
health insurers to offer corona virus specific short term health insurance policies. These
short term policies will offer insurance for a period between 3 to 11 months. These
policies are permitted to be offered both as individual and group products. A circular
stating the same was issued by the regulatory authority on the 23rd of June with the
intention enabling all citizens to protect them selves and mitigate any health risk cause by
the lethal disease.
A short term health insurance policy health insurance policy is a contract which has
been issued for a policy term of less than 12 months. Short term policies may be issued
for a minimum term of three months to a maximum term of eleven months. In between
three months and eleven months, the policy term shall be in multiples of completed
months. A policy term less than three months is not permitted. Also, where the term of
policy is fixed as 12 months, the same will not be considered as short-term health policy.
Tata AIA Life Insurance launches express claims service that promises payouts in 4
hours
31st July 2020
Private sector insurer Tata AIA Life Insurance has declared a new facility that promises
to process life insurance claim pay-outs within four hours of registering them. “Tata AIA
Life’s Express Claims within four hours is the fastest claims pay-out by any life insurer
in the country,” said the insurance company spokesperson on 27th july 2020.
Additionally, the insurer’s representatives offer customers services at their doorstep and
assist with the necessary documentation so that the nominees do not need to visit the Tata
AIA Life branch to register their claim.“The Express Claims payout and claims services
from home will be a huge support to families in their hour of need. Our tech-enabled
initiative coupled with our beneficiary outreach is part of our commitment to customer
convenience,” said Yusuf Pachmariwala, Executive Vice President and Head of
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Operations.
SBI to dilute 2.1% stake in SBI Life Insurance via offer for sale
12th June 2020
The country’s largest lender State Bank of India (SBI) will pare 2.1 per cent of its stake
in the subsidiary SBI Life Insurance via an offer for sale. The offer for sale will open on
June 12 with a floor price of Rs 725 apiece, which is at 2.1 per cent discount from the last
close. SBI is expected to mop up almost $202 million via the share sale.In a statement to
the exchanges, SBI said, its board has given a nod to divest 2.1 per cent stake in SBI
Life to achieve minimum public shareholding of 25 per cent (remaining part of the bank’s
share for minimum public shareholding), through offer for sale. SBI Life is a joint
venture between SBI and BNP Paribas Cardiff. At the end of March, 2020, SBI held a
57.60 per cent stake in the life insurer and BNP Paribas Cardiff 5.20 per cent, thereby
taking the promoter stake to 62.80 per cent. Public shareholding in SBI Life as of March,
2020, is 37.20 per cent.
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Government may have to infuse capital into LIC before IPO
10th May 2020
Besides amending the Life Insurance Corporation (LIC) Act, the government will need to
infuse capital into the PSU giant ahead of its initial public offering (IPO). This is because
the corporation’s paid-up capital is only Rs 100 crore, which is not enough for a public
flotation. The most conservative estimate values LIC at around Rs 10 lakh crore. If the
valuation is close to that of another public sector life insurer SBI Life, it would be around
Rs 18 lakh crore. Even if the shares were split to be worth Re 1 each, it would be valued
at Rs 10,000 in the market. To create the required liquidity in the corporation’s stock, the
government will have to expand the capital base to around Rs 10,000 crore, insurers say.
LIC chairman M R Kumar had said that the LIC Act would need to be amended before an
IPO. The changes to the act would include increasing paid-up capital of the corporation
and removal of the requirement that the government owns 100% stake. The corporation,
on its part, would have to undertake a valuation exercise including finding its embedded
value, which reflects the future profits likely to be earned from policies that have been
issued.
Sachin Bansal's Navi Technologies eyes stake at private life insurance firms
19th August 2020
The Sachin Bansal-promoted Navi Technologies is in talks with promoters of private life
insurance companies to acquire a stake. This follows its acquisition of DHFL General
Insurance. The group is understood to have held talks with promoters of Future Generali
Life Insurance for a possible acquisition. It is also looking at DHFL Pramarica Life
Insurance, which is on the block as part of the group's debt resolution. It is not clear
whether Navi is looking at buying a stake on its own or as part of a consortium. Sector
regulator Irdai's norms now allow private equity companies to come in as promoters. The
Kishore Biyani-promoted Future Group has been in talks to sell its stake in both its life
and non-life ventures in a bid to reduce debt. Among potential investors, State Bank of
India and Premji Invest are those who have shown interest. Housing finance company
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DHFL is currently facing insolvency proceedings in the National Companies Law
Tribunal
Bharti AXA Life partners with SBM Bank India for insurance distribution
18th August 2020
Bharti AXA Life Insuranceon Tuesday announced its bancassurance partnership with
SBM Bank India. Under this agreement, the insurer will offer its life insurance products,
including protection, health, savings and investment plans, to customers of SBM Private
Wealth, the retail banking arm of SBM Bank India, a release said.
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Chapter 5: Review of Literature/
Theoretical Background
57
Review of Literature/ Theoretical Background
The research literature on Life Insurance is vast and covers a number of factors.
The following section provides a brief summary of research in different areas of life
Insurance research.
3. Sinha and Tapen (2005), in their research article “The Indian Insurance Industry:
Challenges and Prospects” have stated that India is among the most promising
Emerging insurance markets in the world. But out of total insurance premium market in
India particularly life insurance currently makes up for 80% of premiums.
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4. Manohar Giri in his Ph.D. thesis titled “A Behavioral Study of Life Insurance
Purchase Decisions” aims is to understand the behavioural aspects of insurance purchase
decisions. The thesis primarily deals understanding the consumer behaviour associated
with life insurance purchase decisions in the Indian context. However important variables
related to financial behaviour such as financial literacy and financial inclusion weren’t
taken into consideration. This can be a critical factor of inspection in this study.
5. Subir Sen (2008),in his article “An Analysis of Life Insurance Demand Determinants
For Selected Asian Economies and India” has tried to understand economic and other
socio-political variables, which may play a significant role in explaining the life
insurance consumption pattern in Greater China Region and six ASEAN countries for
the11-year period 1994-2004 and also tried to re-assess whether or not the variables best
explaining life insurance consumption pattern for twelve selected Asian economies in the
panel are significant for India for the period1965 to 2004.
A term insurance policy is the most basic and simple form of life insurance. This is a pure
insurance product without any profit component. Term insurance is a type of life
insurance policy that provides coverage or life cover for a certain period or a defined "term" of
years. Life cover is the sum assured that an insurance company provides to the insured person's
family members in case of unfortunate incidents like death or illness, accident etc. This sum
assured is paid in return of the premium of the policyholder pays at regular intervals of time. If
the life insured dies during the term of the plan, the sum assured selected is paid by the insurance
company to the deceased’s family. This lump sum benefit helps the family deal with their
financial loss. A term life insurance policy promises financial security and helps the family deal
with the financial in case of untimely death of the bread-winner.
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How does Term Insurance work?
Once a customer decides the policy term and the coverage amount, the premium for Term
Insurance plan is calculated based on multiple factors like age, health, coverage amount, term
etc. This premium remains constant throughout the policy term.
The premium can be paid at regular intervals or just once. The policyholder can also decide how
he wants to receive the coverage amount.
Once a policy is purchased, in case of the demise of the policyholder during the term, the
insurance company pays the coverage amount to the beneficiary named in the policy.
If the policyholder is alive at the end of the term, the coverage ends, usually without any
financial payment from the company. However, if the policy includes survival benefits, then
once the policy matures, the policyholder will get a lump sum.
After the policy term is over, if the policy allows renewal and the policyholder wants to renew
the policy, then the policy can be renewed. Generally, renewals are allowed till the policyholder
reaches the maximum age defined by the insurer. However, in case of renewals, the premium is
recalculated for the new term.
Term insurance plans have the following key benefits which you should know to understand the
plan better –
1. Term plans demand very low premiums because the policy covers only the risk of death.
2. There is usually no limit on the coverage that you can avail. You can, therefore, opt for higher
coverage levels, as per your requirement, for better financial security.
3. The coverage period of the plan can go up to 30 or 35 years allowing you to enjoy coverage up to
very old ages.
4. There is no paid-up value or surrender value under term insurance plans. If you stop paying the
premiums the policy would lapse and you would get no benefits.
5. Bonus is not declared under term insurance plans. In case of death, only the guaranteed sum
assured is paid.
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6. A range of riders is available under term insurance plans. These riders help you in enhancing the
scope of coverage of the policy.
1. Minimal Cost: There are no savings or investment component in term insurance, which
makes it significantly cheaper than other life insurance products.
2. Financial Security: The sum assured is a significant factor in determining the amount of
premium you will have to pay for the policy. Term insurance has made financial security
affordable as you are assured of a substantial cover at minimal costs. With term
insurance, you can live a secure life without worrying about the financial security of your
family in your absence.
4. Fixed Premium: Term insurance is a basic product with the sole function of securing
the financial future of the insured. The sum assured, or the premium is not indexed to the
market, which makes it a very stable insurance product. Once an insurance company
accepts your request, the premiums remain the same throughout the policy term.
5. Increased Life Cover: The needs of a family increase with an improvement in lifestyle.
It is pertinent to hike the insurance cover in consonance with the increase in financial
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needs. Some term insurance policies offer insurance cover linked to life stages. The sum
assured automatically increases at a certain rate as per the age of the insured.
6. Flexibility: The needs of every family is different. Some need regular income while
some seek a lump-sum amount. Term insurance plans have flexible payout options. You
can opt for a lump-sum payment or choose to receive a part of the sum assured as lump-
sum and the balance in equal instalments. The premiums can also be paid on a monthly or
annual basis.
7. Takes Care of Liabilities: Buying a house or a car through bank finance is common
practice. But in the race to improve their material condition, many people inadvertently
increase their liabilities. In the event of an unfortunate incident, liabilities can become an
albatross around your family’s neck. Term insurance plans with short tenures like 10
years can be taken to secure your family against liabilities.
8. Income Tax Benefits: Buying a term insurance plan comes with a host of income tax
benefits. You can claim a tax deduction of up to Rs 1.5 lakhs per year under Section 80C
of the Income Tax Act, 1961 for the premiums paid for term insurance. The sum assured
paid to the nominee is tax-exempt under Section 10 (10D) of the income-tax law.
9. Spouse Cover: The financial security of your spouse is as important as yours. Having an
additional cover can be critical in times of need. Some insurance companies provide an
option to cover both husband and wife under a single policy with an additional premium
under its term insurance plan.
10. Easy to Buy: The rising internet penetration has nudged insurance companies to launch a
number of financial products that can be bought online. Being a simple product, almost
all companies offer the option to purchase term insurance online. Buying it online is
cheaper and saves a lot of time.
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Consumer Behaviour
Consumer behavior is the study of consumers and the processes they use to choose, use
(consume), and dispose of products and services, including consumers’ emotional, mental, and
behavioral responses.Consumer behavior incorporates ideas from several sciences including
psychology, biology, chemistry, and economics. Studying consumer behavior is important
because this way marketers can understand what influences consumers’ buying decisions. By
understanding how consumers decide on a product they can fill in the gap in the market and
identify the products that are needed and the products that are obsolete. Studying consumer
behaviour also helps marketers decide how to present their products in a way that generates
maximum impact on consumers. Understanding consumer buying behaviour is the key secret to
reaching and engaging your clients, and convert them to purchase from you.
What consumers think and how they feel about various alternatives (brands, products, etc.);
How consumers’ environment (friends, family, media, etc.) influences their behavior.
Consumer behavior is often influenced by different factors. Marketers should study consumer
purchase patterns and figure out buyer trends. There are three categories of factors that influence
consumer behavior:
1. Personal factors: an individual’s interests and opinions that can be influenced by
demographics (age, gender, culture, etc.).
3. Social factors: family, friends, education level, social media, income, they all influence
consumers’ behavior.
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Consumer Awareness
Consumer Awareness is an act of making sure the buyer or consumer is aware of the information
about products, goods, services, and consumers rights. Consumer awareness is important so that
buyer can take the right decision and make the right choice. Consumers have the right to information,
right to choose, right to safety. Consumer awareness means being conscious of having knowledge
about the various consumer production laws, redress mechanism and the consumer rights which
include right to protection of health and safety from goods and services that the consumer buy,
right to be informed about the quality, price, potency, purity and standard of good, right to
choose the best from a variety of others, right to get representation if there is any grievance or
suggestion, and right to seek redress against unfair trade practice or unscrupulous exploitation.
Consumer Perception
Perception is the sequence of consumer exposure and attention (Evans et al., 2009) which is
stimulated and interpreted individually in marketing process (Hawkins, & Mothersbaugh, 2010).
Meanwhile, perception is “the process by which people select, organize and interpret information
to form a meaningful picture of the world” as defined in Adnan and Khan (2010, p.5) by Kotler
and Armstrong (2001). As a result, perception is the first and the most practical step in consumer
buying decision processes to select stimuli from their atmosphere. Stimuli are any units of inputs
from objects that are perceived by any one of the five senses-vision, sound, touch, taste and
smell (Wells & Prensky, 1996). These five senses of human will be unique to each individual
depending on the quality of human‟s sensory receptors (e.g. eyesight or hearing) and the
intensity of the stimuli to which ones are exposed (Schiffman & Kanuk, 2000). The process of
perception consists of three elements which are exposure, attention and interpretation within four
steps: begin with receiving information from outside, selecting information, organizing
information and end with interpreting (Kotler, 2005 in Alcheva et al. 2009).
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marketers often use tremendous attention-getting devices to accomplish maximum contrast and
thus attract consumer‟s attention.
3.) Organizing information: This process is how the ones organize information in physical
configuration; therefore, they can interpret into a coherent picture.
4.) Interpreting information (Interpretation): The consumer will interpret the chosen stimuli
once the selection and organization processes have been completed. This process is also uniquely
individual because it serves as a basis of consumer‟s expectation and previous experiences.
(Schiffman & Kanuk, 2000).
It is essential for marketers to understand the nature of perception in order to communicate their
messages efficiently to consumers. Because the way people perceive and interpret may vary
depending on their perspective.
Consumer Attitude
In simple term, an attitude is the way one thinks, feels and acts toward some aspect of the
environment (Evans et al., 2009) as well as a complex mental concept of motivational,
emotional, perceptual and cognitive processes to evaluate an object of thought and response in
certain ways (Hawkins, & Mothersbaugh, 2010). The attitude can be anything that people
discriminate and hold in mind and thereby express in either positive or negative way (Bohner &
Wanke, 2002 cited in Alcheva et al., 2009). Thus, Hawkins and Mothersbaugh (2010) and Evans
et al. (2009) noted that an individual‟s lifestyle is dramatically influenced by attitudes which are
consisted of three elements: cognitive (beliefs), affective (feelings) and behavioral (response
tendencies) which are discussed below:
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. A cognitive component: consists of an individual‟s beliefs or knowledges about an object or
a particular situation which is defined as consumers are learning the object that they think might
interest in a simple term. This component is acquired by a combination of direct experience with
related information and the attitude object from various sources that lead to specific behavior
(Schiffman & Kanuk, 2000).
In fact, these three stages have been developing an attitude about a product as well as have
influenced each others. In the process of formulating attitude, these elements do not need to be in
respect that might start with any of these three and afterwards will play together as Blythe (2008)
referred in Alcheva et al. (2009).
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Chapter 6: Objectives
67
Objectives
The Primary objectives of this research study are:
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Chapter 7: Research Methodology
69
Research Methodology
The main objectives of this research include understanding
I. Consumer behaviour
II. Awareness levels
III. Attitude and perception in working professionals towards term life insurance.
IV. Factors encouraging and discouraging working professionals from buying term life
insurance policies.
Exploratory Research
In this research we will try determining the factors that encourage and discourage working
professionals from buying term insurance plans. Exploratory research design is being conducted
for this research problem as there isn’t much past data or studies for reference. This research will
serve as a tool for initial research and will provide a hypothetical or theoretical idea of the
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research problem. An exploratory research mostly doesn’t offer concrete solutions for the
research problem. Exploratory research is flexible and provides the initial groundwork for future
research.
Descriptive Research
A Descriptive Research design helps in answering the ‘What’ question regarding the subject of
study. It is an observational study which involves studying individual behaviour or the
phenomenon revolving the topic of study without influencing or affecting the natural behaviour.
In this study the following topics are going to be studied as descriptive components:
Sampling Method
The Sampling method that would be used in this research would be a non-probability sampling
method called convenience sampling. In convenience sampling the research data is obtained
from a group of conveniently available respondents. This kind of sampling technique would be
easy to implement due to the current pandemic situation because of which people are stuck at
home. This type of sampling would be quick, easy and time saving.
Data Collection
Data in this study would be collected via a questionnaire of relevant questions which would be
suitable and pertinent to working professionals. Data collection will be done through primary
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sources which will be the respondents i.e. working professionals. The questionnaire involves the
questions related to awareness and perception of customers while purchasing a insurance policy.
It yields broad information than direct observation on buying behaviour of a customer. It is faster
and more economical in nature than observation method.
Primary Data
Primary data is that data, which is collected for the first time and is utilized to analyse the
problem. In this study the primary data would be collected by floating a questionnaire among
working professionals in Pune.
Secondary Data
Secondary data is the data that is readily available in different sources and can be used to study
to analyse the research problem efficiently. Secondary data used in this research would be from
different magazines, scholarly articles and other research reports. The secondary data would be
used for defining and understanding concepts like consumer behavior, perception and attitude.
Secondary data would also be used for understanding the concept of term life plans their
importance and evolution.
Sample Size
Pune is a large metropolitan city with a large number of working professionals. The last time the
population of the city was checked (2015-statista) it was 66,56,509. The labour force
participation rate mentioned in the census report of 2011 is 35.07%. This makes the total
working population of Pune 23,34,437. Using the sample size formula considering margin of
error and confidence the optimum sample size is 250. However to due to time constraints and
other limitations owing to the Pandemic the decided sample size is 100.
DataCollection
Primary Questionnaire
Statistical Tools Pie chart, Percentage method
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Chapter 8: Data Analysis/ Data
visualization, Results and Interpretation
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Data Analysis/ Data visualization, Results and Interpretation
The collected data is from primary sources. For primary data a survey was conducted and
feedback was acquired from the working professionals. Questionnaire method was used to
collect data from working professioanls . This feedback was used to understand the perception
and the awareness of the working professionals towards term life insurance and its. I have
collected responses from 100 working professioanls as sample for the research project.
1. Age :
Interpretation:
From the above bar chart we can infer that majority of the working professionals in and around
the city of Pune are in mid twenties. 29 percent of the respondents are 25 years of age where as
20 percent of the respondents are between 30-55 years of age.
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2. Gender :
Interpretation:
From the above pie chart we can infer that majority of the respondents i.e 59% of respondents
are males while the remaining 41% are females.
3. Yearly Salary :
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Interpretation:
From the above pie chart we can infer that 34% of the respondents lie in the salary bracket of 3-5
lakh ₹ per annum. While 20% lie in the 5-7 lakh ₹ per annum bracket, 22% respondents have a
yearly salary of more than 7 lakh ₹ and 24% of the repsondents have a salary less than 3 lakh ₹
per annum.
4. Occupation:
Interpretation:
From the above pie chart we can infer that 92% of the repsondents who are working
professionals work in private companies whereas the remaining 8% work in government
companies.
5. Education
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Fig. 8.5: Educational diversity
Interpretation:
From the above pie chart we can infer that 51% of the respondents have graduation as their
highest qualification, while 46% have post graduation (Masters degree) as their highest
qualification. The remaining 3 percent are high school pass outs.
6. Marital status
From the above pie chart we can infer that 80% of the working professionals are single while
20% are married.
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Survey questionnaire analysis:
From the above pie chart we can infer that 95 percent of the respondents who are working
professionals are aware of the concept of life insurance. Which indicates that majority of the
working population knows about life insurance its concept and benefits. Thus awareness in
working professionals regarding life insurance is high. This also indicates that the average
working professional is inclined towards protecting their loved ones from any financial loss
and instability.
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From the above pie chart we can infer that 74% of working professionals are insured while
26 percent of the working professionals are not insured. This indicates that although
inclination towards risk protection is high the ability to actually act on it and buy a life
insurance policy is a lower than that.
3. If yes then from which source did you come to know about life insurance?
From the above bar graph we can infer that awareness in working professionals is driven
mostly by family friends and relatives which is around 68.4% . Another significant channel
through which working professionals gain awareness (41.8%)regarding insurance is the
internet and social media platforms. Thus we can conclude that awareness regarding life
insurance policies is majorly driven by the close circle consisting of family, friends and
relatives along with social media.
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Fig. 8.10: Term Plan Awareness
From the above pie chart we can infer that 80% of the respondents have a sound idea of
what a term plan is, while 14% of the respondents do not know what a term plan is and the
other 6% are not sure about what a term plan is. Thus we can conclude that majority of the
working professionals (80%) are aware of term insurance policies. Hence, it can be
concluded that awareness levels in working professionals are high.
From the above pie chart we can infer that 42.9% of the working professionals buy term
plans for a variety of reasons or multiple benefits like tax benefits, family protection and a
large policy cover for a small amount of premium. 14.3% of the working professionals
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buy term plans only because it provides a large life cover for a smaller premium, while
32.5% of the working professionals buy term plans for protecting their family from any
unforeseen circumstances and 7.8% buy it solely for the tax benefits. Through this we can
conclude that the attitude of working professionals towards term plans is more
pragmatic and rational rather than emotional.
6. Would you rather invest in the stock market than a life insurance policy ?
From the above pie chart we can infer that 36% of the woring professionals would
definitely buy an insurance policy because for them it is imperative to buy one while 31 %
would use the same money to invest in the stock market instead of getting themselves
insured. 33% of the working professionals are not sure and would contemplate between
buying an insurance policy and insvesting in the stock market. Attitude and beliefs are
closely linked in consumer behavior and from this pie chart we can conclude that working
professionals do not have a very strong or positive belief in life insurance policies as
31% of them would surely invest in the stock market and not buy life insurance. While
33% percent of the working professionals are unsure of their investment choices which
exhibits low financial knowledge in them.
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Fig. 8.13: Preference of Premium Paying Modes
From the above pie chart we can infer that 51% of the working professionals i.e more than half
of the working professionals prefer the yearly premium paying mode, while 18% prefer half-
yearly, 16% prefer quarterly and the remaining 15% prefer monthly. The yearly payment mode is
relatively cheaper as a whole when compared to other premium paying modes due to the addition
of tax and GST. From this we can conclude that working professionals look for premiums which
cost low, thus saving on premium and opting for premiums which on an aggregate cost low
can be pointed out as an important characteristic of their buying behavior.
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From the above pie chart we can conclude that the buying decision of 90% of the working
professionals is not influenced because of religious factors, while 10% of the working
professionals do not choose to buy life insurance owing to religious constraints. Hence we can
conclude that religion as a demographic factor doesn’t have much influence on the buying
behavior of working professionals.
9. What could be a possible reason for you to not buy life insurance?
From the above pie chart we can infer that there are a number of reasons because of which
working professionals may choose to not buy life insurance policies. 23% of the working
professionals would not buy life insurance because of lack of awareness, 30% would not buy
life insurance because of lack of personal or salary savings, 28% would not buy life
insurance because they do not find the returns and the life insurance policies lucrative
enough and 10% wouldn’t buy life insurance because of poor after sales service. Thus we
can conclude that one of the vital reasons because of which working professionals are
not able to buy insurance policies is lack of savings.
10. Which Company would you preferably buy a life insurance policy from?
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Fig. 8.16: Private Insurance Vs LIC
From the above pie chart we can infer that 75% of the working porfessionals would prefer to buy
life insurance policies form LIC while only 25% would prefer to buy them from private
insurance providers. Thus we can conclude that majority of the working professioanls would
prefer to buy insurance policies from LIC.
From the above pie chart we can infer that among the private life insurance providers ICICI
Prudential Life Insurance enjoys the highest share of preference in working professionals
(22.5%) followed by Max Life insurance (15%), HDFC Standard life insurance(15%),
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SBI Life Insurance(12.5%) and Bajaj Allianz Life Insurance (10%). Thus we can conclude
that ICICI Prudential Life Insurance is the most preferred life insurance service
provider by working professionals.
12. Please mention in brief what you actually understand (your perception) by ‘Term life
Insurance’
After reading, assessing and analyzing the subjective responses of the working professionals
the following inferences could be drawn:
Around 20% of working professioanls have absolutely no idea of what a term plan
is.
80% of the working professionals have a faint idea of what a term plans is.
Only about 40% of the working professionals have a clear idea what a term plans is.
Majority of the repsonses included the keywords coverage at fixed rate for a certain
period, family security, protection, death benefit, low premium, pure insurance.
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Fig. 8.19: No. of insurance policies owned by working professioanls
From the above pie chart we can infer that 50% of the working professionals hold atleast 1
insurance policy while 10% hold two insurance policies, 11% hold more than two insurance
policies and 29% of the working professionals do not hold any life insurance policies. Thus we
can conclude that majority of the working professionals i.e 71% of the working
professionals hold atleast one life insurance policy.
14. Which of the following factors would encourage you to buy an insurance policy from a
company?
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From the above pie chart we can infer that some of the important factors that encourage working
professionals to buy life insurance policies are brand image and company reputation (50%
respondents chose this), good claim settlement ratio(51% of the respondents chose this),
tangible benefits with good profit component(49% of the respondents chose this), a good
product range with customizable benefits (45% of the respondents chose this), a good
complain/redressal system (39% of the respondents chose this) and good after sales service.
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Chapter 9: Conclusions / Learnings from
the Project
88
Conclusion and learning From the Project
The aforementioned research has helped in arriving at the following conclusions and resulted in
the following learnings:
1. Term plan as a financial tool, holds an important position in the financial planning goals
of an individual. Risk management is also the very second level in the financial planning
pyramid after cash flow management. Thus protecting our family from any unforeseeable
risks exhibits the importance of term plan as a financial tool.
2. Awareness in the working professionals is relatively higher with 95% of the working
professionals knowing the concept of life insurance while 80% had knowledge about
term plans.
3. Awareness in working professioanls is driven majorly by family, realtives, close
friends and social media channels.
4. However, working professioanals have not been very actively inclined towards
converting their awareness into a disposable benefit with awareness levels being as high
as 95% but roughly only 73% working professionals being insured.
5. Perception in working professionals with respect to term life insurance mainly
encompasses family security, death benefit, protection from risk and life cover till a
particular age. The value that working professioanls associate with term plans is
relatively low because of lack of accurate financial knowledge. Around 20% have
absolutely no idea of what a term plan is, while out of the remaining 80% roughly only
40% have a sound idea of term plans.
6. The attitude of working professionals towards term plans is more pragmatic and
rational rather than emotional, as their decision to buy a term plan is associated with a
variety of benefits like family protection, large sum assured for reasonable premium
and tax savings. There is little sentimental value attached to buying insurance when it
comes to working professionals.
7. Working professionals are more likely to invest in the stock market than in an
insurance policy because of the lucrative benefits of the stock market and because of lack
of positive belief in insurance.
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8. Socio-cultural factors like religion have little effect on the buying behavior of working
professionals with respect to life insurance policies.
9. Lack of awareness, lack of personal or salary savings, unprofitable returns and poor
after sales service are some of the main factors which deter working professionals
from buying life insurance policies.
10. Brand image and company reputation, a good claim settlement ratio, tangible
benefits with good profit component, a good product range with customizable
benefits, a good complain/redressal system, and good after sales service are some of
the main factors that encourage working professionals to buy life insurance policies.
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Chapter 10: Limitations of the project
91
Limitations of the Project
1. Face to face interaction with prospective clients and field experience due the pandemic
may have hampered the accuracy of the research.
2. The sample size has been restricted to 100.
3. The reluctance of respondents to answer the questions even after requesting persistently.
4. Certain respondents may have biased opinions which may have hampered the accuracy of
the research.
5. The area considered for research is a largely metropolitan area and hence results may
vary with change in sampling universe.
6. The number of respondents considered for research is small hence results may vary with
change in sample size.
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Chapter 11: Recommendations
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Recommendations
1. Since awareness in working professionals is driven a lot by social media and the internet
SLIC should lay more focus on its online digital marketing efforts.
2. SLIC should try to improve its claim settlement ratio as it is one of the crucial factors
which encourage working professionals to buy life insurance policies.
3. As working professionals are keen on saving when it comes to paying the premiums of
insurance policies SLIC should try to make the premiums more affordable so as to attract
more customers.
4. SLIC has a strong presence in the southern part of the country, it should try to propagate
the same in the remaining parts of the country by spreading more and more awareness as
LIC still holds majority share in the life insurance market.
Contribution
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Chapter 12 - Bibliography - Appendices
95
Bibliography
Websites
https://www.omniconvert.com/
https://www.turtlemint.com/life-insurance/term-insurance-plans/
https://economictimes.indiatimes.com/
https://www.thehindubusinessline.com/
https://shriramlife.com/
https://www.business-standard.com/
https://timesofindia.indiatimes.com/
https://bfsi.economictimes.indiatimes.com/news/insurance/kpmg
Books:
Kotler, P., & Keller, K. (2006). Marketing Management. India: Pearson Education, Inc.
Hawkins, D.I., & Mothersbaugh, D.L. (2010). Consumer behavior: building marketing strategy.
NY, USA: McGraw-Hill/Irwin.
Consumer Behaviour, The Indian Context (Concepts and Cases), Second Edition, S. Ramesh
Kumar, Professor of Marketing, IIMB Chair of Excellence, Indian Institute of Management
Bangalore
Wells, W.D., & Prensky, D. (1996). Consumer behavior. Canada: John Wiley & Sons, Inc
Papers:
Adnan, M., & Khan, Z.S. (2010). Perception of swedish consumers towards tapal tea.
Unpublished manuscript, School of Sustainable Development of Society and Technology,
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Mälardalen University, Västerås, Sweden. Retrieved from
http://mdh.divaportal.org/smash/record.jsf?searchId=1&pid=diva2:324103
Alcheva, V., Cai, Y., & Zhao, L. (2009). Cause related marketing: how does a cause-related
marketing strategy shape consumer perception, attitude and behaviour?. Manuscript submitted
for publication, School of Health and Society, Kristianstad University College, Sweden.
Retrieved from http://urn.kb.se/resolve?urn=urn:nbn:se:hkr:diva-5739
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Appendices
Appendix 1
Questionnaire:
i Name:
ii Age:
iii Gender:
(ii) 3, 00,000-7,00,000
vi Married:
vii City:
Research Questionnaire:
1.Yes
2.No
1.Yes
2.No
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Q3. If yes From which source did you come to know about life insurance?
2. Radio/ Television
6. Telemarketing
7. Internet/social media
8. Direct Mail
1. Yes
2. No
1. Tax benefits
2. Family Protection
5. other
Q6. Would you rather invest in the stock market than buy an insurance policy?
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1. Strongly agree
2. Agree
3. Neutral
4. Disagree
5. strongly disagree
1. Yearly
2. Half-yearly
3. Quarterly
4. Monthly
1. Yes
2. No
Q10. What could be a possible reason for you to not buy insurance?
1. Lack of awareness
2. Lack of savings
6. Other
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Q11. Which Company would you preferably buy a life insurance policy from?
1. LIC
3. both
Q12. Please mention in brief what you actually understand (your perception) by ‘Term life
Insurance’
1. 0
2. 1
3. 2
4. more than 2
Q14. Which of the following factors would encourage you to buy an insurance policy from a
company?
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