PROJET REPORT ON

STUDY OF CUSTOMER RELATION MANAGEMENT IN INSURANCE

COMPANY

SUBMITTED TO
UNIVERSITY OF MUMBAI
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD
OF DEGREE OF BACHELOR OF COMMERCE
ACCOUNTING AND FINANCE
PREPARED BY
PRASAD DILIP HARAD
ROLL NO :- 218514
TY BAF SEM VI

UNDER THE GUIDENCE OF

PROF. NILESH S. SARKTE

J.S.S.P COLLEGE OF ARTS, COMMERCE AND SCIENCE

GOVELI
AFFILIATED TO UNIVERSITY OF MUMBAI
(2021-2022)

J.S.S.P COLLEGE OF ARTS, COMMERCE AND SCIENCE GOVELI

(AFFILIATED BY UNIVERSITY OF MUMBAI)

1 
 CERTIFICATE

THIS IS TO CERTIFY THAT MR. STUDENT NAME PRASAD DILIP HARAD

STUDYING IN J.J.S.P COLLEGE OF ARTS, COMMERCE AND SCIENCE,
KHARDI. STUDENT OF BACHELOR OF COMMERCE (SEMESTER- VI)
(ACCOUNTANCY AND FIANANCE) HAS SUCCESSFULLY COMPLETED THE
PROJECT ON “STUDY OF CUSTOMER RELATION MANAGEMENT IN
INSURANCE COMPANY” UNDER THE GUIDANCE OF PROF. NILESH S.
SARKTE.
THE INFORMATION SUBMITTED BY ME IS TRUE AND ORIGNAL TO THE
BEST OF MY KNOWLEDGE

PROJECT GUIDE
(PROF. NILESH SARKTE)

EXTERNAL EXAMINER

2 
 DECLARATION

I, PRASAD DILIP HARAD student of Bachelor of commerce semester VI

(Accountingand finance) hereby declare that I have completed the project on “STUDY
OF CUSTOMER RELATION MANAGEMENT IN INSURANCE COMPANY” I
further declare that the information imparted is true and fair to the best of my knowledge.

SIGNATURE

PRASAD DILIP HARAD

Roll No: 218514

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 ACKNOWLEDGEMENT

I hereby express my heartiest thank to all sources who have contributed to

the making of this project. I oblige thanks to all who supported provided their
valuable guidance and helped for the accomplishment of this project
I am thankful to Mumbai University for giving me such a challenging
task to explore the urbanization which includes not only thinking and analyzing
various facts and updates about real work our principal and the coordinator of
the project Prof. Nilesh Sarkte for having such wonderful course. I am very
much grateful to my project guide Prof. Nilesh Sarkte who in spite of busy
schedule spent valuable time to guide me and helped in completion of this
project

4 
 CONTENTS
S.NO. CONTENTS PAGE NO.

1. Executive Summary 5

2. CHAPTER 1.INTRODUCTION 6-14

1.1 A GENERAL INTRODUCTION ON THE TOPIC 7

1.2 IMPORTANCE OF THE PROBLEM 11

1.3 OBJECTIVES,HYPOTHESES,METHODOLOGY AND LIMITATIONS 12-13

3. CHAPTER 2.REVIEW OF LITERATURE

2.1 A BRIEF REVIEW 15-44

2.2 REVIEW ON LIC 21

2.3 REVIEW INSUREDINSURED WOMEN 25

4. CHAPTER 3. PROFILE OF THE STUDY AREA 38

3.1 AREA PROFILE 44-47

3.2 INDUSTRIAL PROFILE 45

3.3PRODUCT PROFILE-SUMMARY OF PRODUCT OF LIC 47

3.4 PROCESS PROFILE 59-63

64
6. Chapter 6. Bibliography

5 
CHAPTER:-1.
INTRODUCTION
In India, Insurance Sector has not only been playing a leading role within
the financial system but also performs a significant socio-economic function, making
inroads into the interiors of the economy. It has also been facilitating economic
development with an objective to build an efficient, effective and a stable insurance
business in India as well as a strong base to cater to the needs of both the real
economy and socio - economic objectives of the country.

The insurance industry also provides crucial financial intermediation services,

transferring funds from the insured to capital investment, which is crucial for
continued economic expansion and growth, simultaneously generating long-term
funds for infrastructure development. Development of the insurance sector is, thus,
necessary to support the structural changes in the economy.

Historical Background of Insurance:

The story of insurance is probably as old as the story of mankind. The

same instinct that prompts modern businessmen today to secure themselves against
loss and disaster existed in primitive men also. They too sought to avert the evil
consequences of fire and flood and loss of life and were willing to make some sort of
sacrifice in order to achieve security. Though the concept of insurance is largely a
development of the recent past, particularly after the industrial era its beginning date
back almost 6000 years.
In Babylonia, traders were encouraged to assume the risks of the caravan trade
through loans that were repaid with interest only after the goods had arrived safely. In
Europe, with the growth of towns and trade, the medieval guilds undertook to protect
their members from loss by fire and shipwreck, and to provide decent burial and
support in sickness and poverty. By the middle of the 14th century, as evidenced by
the earliest known insurance contract, marine insurance was practically universal
among the maritime nations of Europe.

In London, Lloyd’s Coffee House (1688) was a place where merchants, ship
owners and underwriters met to transact business. By the end of the 18th century,
Lloyd’s had progressed into one of the first modern insurance companies. In 1693,
the astronomer Edmond Halley constructed the first mortality table, based on the
statistical laws of mortality and compound interest. The table which was corrected in

6 
the year 1756 by Joseph Dodson, made it possible to scale the premium rate to age;
previously the rate had been same for all ages.

Insurance business was developed rapidly with the growth of British

Commerce in the 17th and 18th Century. Prior to the formation of corporations which
devoted solely to the business of writing insurance, policies were signed by a number
of individuals. Each of these individuals wrote his name and the amount of risk he was
assuming underneath the insurance proposal, and thus the term underwriter become
popular. The first joint stock company to engage in insurance was chartered in
England in 1720. After 1840, with the decline of religious prejudice against the
practice, life insurance entered a boom period. In the 1830s the practice of classifying
risks began. In 1835 New York called attention to the need for adequate reserves to
meet unexpected large losses; Massachusetts was the first state to require companies
by law (1837) to maintain such reserves. The Great Chicago Fire (1871) emphasized
the costly nature of fires in structurally dense modern cities. Reinsurance, whereby
losses are distributed among many companies, was devised to meet such situations
and is now common in other lines of insurance.

The Workmen’ Compensation Act of 1897 in Britain required employers to

insure their employees against industrial accidents. Public liability insurance fostered
by legislation, made its appearance in the 1880s, which attained major importance
with the advent of automobiles. Thus, based upon the nature of risk coverage,
insurance business can be classified into long-term i.e., Life and General or non-life
insurance. While the General insurance firms in India are main providers of risk
financing for man made disasters and natural catastrophes, the life insurers support
economic growth and also facilitate economic development, by mobilizing long-term
savings and offering insurance cover to a large segment of people.
History of Life Insurance in India:

Life Insurance in its modern form came to India from England in the
year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the
first life insurance company on Indian Soil. All the insurance companies established
during that period were brought up with the purpose of looking after the needs of
European community and Indian natives were not being insured by these companies.
However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign
life insurance companies started insuring Indian lives. But Indian lives were being
treated as sub-standard lives and heavy extra premiums were being charged on them.
Bombay Mutual Life Assurance Society heralded the birth of first Indian life
insurance company in the year 1870, and covered Indian lives at normal rates. Starting
as Indian enterprise with highly patriotic motives, insurance companies came into
existence to carry the message of insurance and social security through insurance to
various sectors of society. Bharat Insurance Company (1896) was also one of such
companies inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise
to more insurance companies. The United India in Madras, National Indian and
National Insurance in Calcutta and the Co-operative Assurance at Lahore were
established in 1906. In 1907, Hindustan Co-operative Insurance Company took its
birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath

7 
Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life
(later Bombay Life) were some of the companies established during the same period.

Prior to 1912 India had no legislation to regulate insurance business. In

the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were
passed. The Life Insurance Companies Act, 1912 made it necessary that the premium
rate tables and periodical valuations of companies should be certified by an actuary.
But this Act discriminated between foreign and Indian companies on many accounts,
putting the Indian companies at a disadvantage.

The first two decades of the twentieth century saw lot of growth in
insurance business. From 44 companies with total business-in-force as Rs.22.44 crore,
it rose to 176 companies with total business-in-force as Rs.298 crore in 1938. During
the mushrooming of insurance companies many financially unsound concerns were
also floated which failed miserably. The Insurance Act
1938 was the first legislation governing not only life insurance but also non-life
insurance to provide strict state control over insurance business. The demand for
nationalization of life insurance industry was made repeatedly in the past but it
gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was
introduced in the Legislative Assembly. However, it was much later on the 19th of
January, 1956, that life insurance in India was nationalized and the Life Insurance
Corporation (LIC) has been established by an Act of parliament.

Later, after four decades the insurance sector was liberalized in the year 2000.
The private insurers commenced their business in Indian soil again as it was in the
pre-nationalisation period. Started with 4 private life insurers namely HDFC -
Standard Life, Birla Sun Life Insurance, ICICI - Prudential, Max New York .In 2000-
01, the number of private insurers increased to 17 in the year
2007-08.

There were 18 life insurers and 19 privatenon life and health insurers in
India as on 31.03.2008. The life insurers include Bajaj Allianz Life Insurance
Company Limited, Birla Sun Life Insurance Co. Ltd , HDFC Standard Life Insurance
Co. Ltd, ICICI Prudential Life Insurance Co. Ltd, ING Vysya Life Insurance
Company Ltd, Life Insurance Corporation of India, Max New York Life Insurance
Co. Ltd, Met Life India Insurance Company Ltd, Kotak Mahindra Old Mutual Life
Insurance Limited ,SBI Life Insurance Co. Ltd, Tata AIG Life Insurance Company
Limited, Reliance Life Insurance Company Limited, Aviva Life Insurance Co. India
Pvt. Ltd. Sahara India Life Insurance Co, Ltd, Shriram Life Insurance Co, Ltd, Bharti
AXA Life Insurance Company Ltd, Future Generali Life Insurance Company Ltd,
IDBI Fortis Life Insurance Company Ltd. Apart from the above insurers there are four
more insurers who obtained registration and came into existence after 31.03.2008,
namely, Canara HSBC
Oriental Bank of Commerce Life Insurance Co. Ltd, AEGON Religare Life Insurance
Company Limited, DLF Pramerica Life Insurance Co. Ltd,and Star Union Dai-ichi
Life Insurance Company Ltd.

8 
 1.1A INTRODUCTION ON THE TOPIC

India’s macro-economic performance in the year 2007-08 in terms of GDP growth was
high at 9 percent. While GDP growth originating from agriculture sector was 4.5 percent
and from industry sector was 8.1 percent the services sector continues to grow at double
digit level i.e.10.7 percent in 200708. Of all the services, the share of Financing,
Insurance, Real estate and Business services sector, in real GDP remained a high 14.7
percent in the year 2007-08.
Latest estimates on GDP in this sector shows that the banking and insurance
sub sector alone recorded a growth of 19.71 percent in 2006-07.In this sub sector,
while banking showed a growth of 17 percent, insurance recorded a growth of 34.5
per cent 2006-07 over 2005-06.

Preliminary estimates of household financial savings released by RBI also

revealed a change in the pattern of the household savings in 2007-08 from that of
2006-07.The share of insurance funds in households savings increased from 14.9
percent in 2006-07 to 17.5 percent in 2007-08 reflecting household’s desire for
insurance and availability of innovative and customized products. Thus, though
insurance primarily is a risk cover instrument, it gains the status of the second best
savings mode following bank savings in India.(Source: Annual report of IRDA 2007-
08 pg5)

The postal insurance and state insurance have only marginal share and growth
in the insurance funds. But the main contributor to the insurance funds is the life
insurance sector. This savings in the form of life insurance funds increased to 16.9 per
cent in 2007-08 from 14.4 percent in 2006-07.Thus the life insurance sector remains
one of the important accelerator of the growth of our economy.

Changing needs of Insured:

Life Insurance penetration is the ratio between life insurance premiums to the
GDP. This ratio is 4 % in India while the world average is 4.40 percent and the Asian
average is 4.60 for the year 2007. But countries like South Korea, Japan, Taiwan, Hong
Kong, Israel, Singapore, South Africa, and Trinidad and Tobago outshine India in this
aspect with better penetration ratios. Similarly, even in the insurance density counts i.e.,
premium to the total population, India has a meager score of 40.4, while the world’s
average score is 358.1 and the Asian average is 156. Even the Latin African countries like
Trinidad, Chile, Jamaica, Panama, Argentina, Brazil, and Mexico have better density
figures. So, there is still a wide scope of improving the penetration and density which was
one of the main motives of privatizing the insurance sector in India. If the customer gets
satisfied the penetration of the business will be easier and the insurance density also could
be enhanced.

Customers of today are better educated, better informed, more selective, and
highly individualistic. In respect of life insurance, potential buyers are driven to buy a
policy for one or more times for three major reasons; covering the risk, saving for one

9 
or more specific purposes, and availing tax benefits. The challenge of the insurance
companies is to address the motivating factors imaginatively and come up with
genuine solutions.

The opening up of the market has certainly ensured that the competitive nature of
business has improved the efficiency levels in customer service. But it has not reached a
stage at comfort. The large number of customer complaints and grievances is a silent
testimony to this fact. There is an immediate need for taking on these problems and
analyzing the deep rooted reasons for the same.

1.2 IMPORTANCE OF THE PROBLEM

VashinshthaDharmasutra (5/1, 2/1, 3, 44, 45) coveys that it’s the father’s duty
to protect a girl during her childhood, the husband’s when she is young and the son’s
when she is old. In a country where the religions being practiced pronounce it to be a
man’s duty to protect and ensure a women’s welfare, culturally it is assumed that life
insurance is always bought for women.

Traditionally most life insurance companies used to look for a certain type of
customer-healthy, young or middle – aged, non smoking, males. Insurance companies
target men obviously since they are apparently the breadwinners in families. So even
when it comes to life insurance, women have been deprived of equality. But in reality
women live longer than men. Many life insurers operating in western countries charge
a lesser premium to women as compared to men of same age, simply because statistics
reveal that women live longer than men and they carry lesser risk of dying early on
their lives.

Life insurance business that talks the language of Human life Value, across the
globe has been gender – selective in its approach to a certain extent.
The human life value of today’s women, who are visibly playing an increasing
economic role in society remains to be suitably recognized through life insurance.
Officially, 22.3 percent of women were reported to be working in India as per the last
census. However, the unofficial figures show that in rural areas, 86 percent of women
are engaged in agriculture. (Source: Veena Khan, Life Insurance for Women of
Women, by Women, Yogashema, 2002)

In the secondary sector they work in agro based and ancillary industries such
as beedi manufacture, cashew processing, coir products etc. Apart from this, women
spend most of their time on tasks which are statistically less visible, non - monetized
and are beyond the realm of ‘economic activity’. Women account for 60 percent of the
unpaid family workers, and 98 percent of those engaged in domestic work.

Women engaged in these tasks are reported as ‘not working’ for the census
data and are not considered as contributors to National Income in any country. Despite

10 
the direct or indirect economic contribution to families and society, women are greatly
underinsured or worse, in most cases, carry no life insurance coverage at all.

Today an increasing percentage of married women bring home a pay cheque.

Husbands and wives are economic partners and today’s two – income families depend
on both the pay cheques to make ends meet. But when it comes to buying insurance,
women shy away and she does not realise the need for insurance. Most of the women
believe that their passing away may not make a big financial difference to the family
because the husband’s income will still take care of the family’s needs.
The earlier generation was the ‘save now –buy later’ type. The current generation is
‘buy now – pay later’. In most cases the wife is either a co-loanee or a guarantor. In
such a case, the extent of financial hardship a husband would go through if the wife
passes away without any insurance coverage doesn’t need to be spelt. In single
income households, the surviving partner takes up a job and one income keeps coming
as earlier. But in double income households, demise of one partner reduces the family
income considerably, a loss that can be taken care of by life insurance.

The women who stay home to take care of domestic responsibilities and raising
children also need life insurance. Domestic services, while in many respects are
beyond values, are worth tens of thousands of rupees a year. Anyone who has a
‘Human Life Value’ and ‘Insurable Interest’ needs insurance. A ‘stayat –home
mother’, is thus important.

While salaried women are treated at par with men for allowing insurance,
there are some restrictions that are applicable to women falling in other categories.
These restrictions are imposed on them considering the extent of moral hazard
involved in insuring their lives and to take care of the well –being of women. In the
case of women insurance applicants the element of moral hazard assumes greater
significance. Wherever there is no need for insurance protection, or insurance sought
appears to be speculative, such risks are not entertained. In the matter of risk appraisal
of female lives particular attention is paid to i) socio economic status of the applicant
ii) need for Insurance iii). physical hazards peculiar to female, and iv) moral hazards
involved.

1.3OBJECTIVE, HYPOTHESES, METHODOLOGY

The life insurance industry in India services the largest number of life insurance
policies in the world. Till the privatization of insurance sector in the year 2000, Life
Insurance Corporation was the only life insurer in India enjoying 44 years of
monopoly. By the end of March 2008 there were 18 life insurance companies
operating in India. Apart from these 3 new life insurers were given certificate of
Registration by the IRDA .

Of these 18 life insurance companies, the Life Insurance Corporation of

India(LIC), the only public sector life insurance company, still remains at the top in all

11 
the key aspects. In 2007-08 its market share in terms of total premium was 74.39 per
cent, in terms of renewal premium 83.42 per cent in terms of single premium 86.99
per cent and in terms of first year premium 64.02 per cent And only the balance is
shared by all the other 17 private insurance companies.

LIC is the largest Financial Institutional Investor in the country with the
investment of Rs. 6,74,475 crore in 2007-08.To the tenth five year plan, the
contribution of LIC to resource mobilization was to the tune of 1, 80,000crore.
Its new business gets doubled every three years. LIC‘s bonus rate increased by 140
per cent in the last decade. Its claim ratios were better than those of several foreign
companies. Even in competitive scenario, LIC has registered the world’s highest
growth rate, as it was in the year 2001-02, creating history in the insurance sector.

LIC bifurcated its business into 7 Zones, of which the South Zone consists of
12 divisions in 2 States,namely, Tamilnadu and Kerala. Kerala has 4 divisions namely
Ernakulam, Kottayam, Kozhikode and Trivandarum. Tamilnadu has 8 divisions
namely Chennai I, Chennai II, Coimbatore, Madurai, Salem, Thanjavur, Thirunelveli
and Vellore. Of all the divisions in Tamilnadu, next to Vellore, Thanjavur Division
occupies the second place in the absolute volume of policies underwritten for all the
four years from 2004-05 to 2007- 08.

The Thanjavur division of LIC, serves 10 districts of Tamil Nadu and

Pondichery namely Karur, Trichirappalli, Pudukottai, Ariyalur, Perambalur,
Thanjavur, Thiruvarur, Nagapattinam&Karaikal. Of all the 27 branches situated in 10
districts a higher number of six branches are situated in Thanjavur District alone.
ThusThanjavur district is one of the valuable contributory to the successful
perfomance of Thanjavur Division and in turn to that of the entire south zone.
In Thanjavur district, the female population as per 2001 census was 1113818
outnumbering the male population of 1091557. But the new business communication
reports of Thanjavur Division reveal that only 35.55 percent of the number of policies
31.65 percent of the sum assured, and 33.44 percent of the premium were from female
life. The latest census of the country, further, reveals the fact that the life expectancy
is higher at 63.53 years for women which are 62.22 for women and because of the
higher longevity the female lives are less risky to insure.
Similarly, the sex ratio also improved to 933 from 927 which were prevalent in
the previous decade and because of this better sex ratio coupled with improved
literacy and employment, the female lives constitute a higher potential segment of
insurance hitherto untapped. But, on the other hand, the insured women constitute
only a less than 20 percent of country’s total insured women.Against this background
of newly liberalized life insurance sector with customer centricity, the highly untapped
but potential market in female segment needs to be given importance. So, this study
aims to analyze the expectations, perception and existing level of satisfaction among
the women policyholders.

12 
OBJECTIVES:

1. To examine the nature and extent of life insurance coverage opted by insured
women in organized and unorganized category.
2. To analyze the determinants of life insurance demand.
3. To study the criteria followed by women policy holders while selecting an
Insurance agent and their level of perception on and the satisfaction about the
performance of agents.
4. To estimate the level of perception of insured women on the performance of LIC
with the private insurer over various aspects.
5. To measure the extent to which women policy holder’s expectations are satisfied.

HYPOTHESES:

1. The life insurance premium amount is higher in case of insured women in the
organized category than those in unorganized category.
2. Demand for life insurance is positively related with the level of Income and education.
3. The women policy holders select the agent upon the suggestions of friends and
relatives than other criteria.
4. Though the women policy holders are welcoming the private insurance companies,
they are not willing to take policies in the private companies.
5. Expectations of the women policy holders are not fully satisfied.

13 
Methodology:
a. Area of Study:
This study is restricted to the Thanjavur District which comes under the
Thanjavur Division of Tamilnadu, which is considered as one of the top divisions of
Southern Zone of LIC of India. The respondents are selected only from Thanjavur
district and only those women policyholders who have Life insurance policies of Life
Insurance Corporation of India alone were interviewed.

b. Period of Study:
As Indian insurance industry got liberalised in the year 2000-01, the
performance of Life Insurance Corporation of India at country level for all the seven
years from 2000-01 to 2007-08, in comparison with all the private players were
investigated. The Primary data were collected in the year 2005-06 and 2006-07.

c. Sample Design:
The LIC entertains proposals for female lives under three categories. Category
I women with earned income and Professional income, category II women with
unearned income and category III with self employed and others. From the informal
discussions with Divisional Manager of LIC and with LIC Agents, it is learned that
category II women are very rare in Thanjavur and Category I and III women policy
holders are equal in number. So, Non- probability quota sampling method was
adopted and a total of 100 samples from each of the two categories I and III was
selected. For the purpose of this research through a specially designed schedule, data
were collected from all the 200 respondents.
Apart from the primary data, secondary data were collected from the office
reports of LIC Thanjavur Divisional Office, print and e-publications of IRDA and
LIC. The Published research works of insurance economists all around the globe,
websites, insurance journals and pamphlets are also used.

d.Tools for Analysis:

The collected data are processed and presented in the form of tables and the
statistical measures like Karlperarson’s coefficient of correlation, normal distribution
test, chi-square test, Kolmogorov-Smirnov test, factor analysis, satisfaction Index,
weighted averages and percentages are used

14 
Limitations:

1. The study aims to analyze only individual life insurance policies and not the group
insurance policies, health insurance policies, postal life insurances and Employees
State Insurance, taken by the women policy holders.
2. The study does not deal with other diversified activities of LIC like mutual funds,
and housing finance.
3. Primary data cannot be considered as cent percent accurate because of the
respondent’s inability to remember certain facts premium amount, year of
purchase, even name of the policy and the general tendency to over estimate the
expenditure and under estimate the income. But effort has been taken to reduce
bias and inaccuracy to the minimum.
4. The study deals with the satisfaction level of the women policy holders of LIC
alone. Though a few of them have the policy of private insurers also, their
satisfaction towards the private insurers is not taken into account.

15 
 Chapter -2 REVIEW OF
LITERATURE
As it is aptly insisted in Life Insurance Council’s Code of Best Practice for Indian
Life Insurers, as a trustee of policy-owners’ savings, a life insurance company has the
responsibility to safeguard customers’ interest at all times and ensure their continued
confidence in the integrity and professional conduct of life insurers. The policy-owner’s
trust placed on the managers of life insurance companies casts a heavy responsibility to
ensure that their institutions are professionally managed at all levels and they do, and are
seen to, conduct their business with the highest level of integrity. If the insurers
understand all the expectations of the insurers and do their best to meet them, customers
are said to be satisfied.

Thousands of consumers are dissatisfied with the way their claims are served
despite spending money on insurance policies and premium. A nation wide study of four
insurance sectors life, health, home and motor insurance was conducted by Voluntary
Organization in Interest Consumer Education (VOICE), India’s leading consumer
organization. Surveying 3600 consumers in 8 metros, the study included 12 Life
Insurance and 11 Non life Insurance companies. Interestingly, this study revealed that
none of the company has a satisfied customer base.(Source:India’s First ever Customer
Satisfaction on Insurance Sector)

Public sector Insurance companies despite their long standing presence in

insurance sector are losing out the customer base as consumers lose confidence in their
service. The life insurance study found that, though LIC still have lions share with 80%
of the market, is no longer the only option that customer is considering. Now product
differentiation is at its peak in the Life Insurance sector with private players allowing
maximal grace period for payment of premium, prompt service.

The studies relating to customer satisfaction of Life Insurance women policy

holders are very few. The available studies are in the form of research articles, various
committee’s reports and surveys conducted by LIC. No comprehensive study has been
taken up so far on women customer satisfaction in life insurance. An attempt has been
made here to briefly review the previous studies made in the area of women customer
satisfaction of life insurance and arranged in the order of reviews dealing with life
insurance, which was followed by reviews on LIC, insured women, and customer
satisfaction.

16 
 2.1 A BRIEF REVIEW:
Shejwalker (1989) in his article “Training in Life Insurance Marketing” discussed the
importance of trained agents' force to develop the life insurance business. He stressed
that present selection pattern of the agent should be changed. He expressed his opinion
that private or independent institute should be invited to impart training to the agents.

SheshaAyyer.V. (1999) in his article entitled, New Insurance products in the next
century”, forecasted the importance of insurance cover at old age.
----------------------------------------------------------------------------------------------
Shejwalker.P.C , “Training in Life Insurance Marketing”, Yogashema, August (1989
)p.27.
SheshaAyyer.V., “ New insurance products in the next century” , The Journal of
Insurance Institute of India, Jan- June (1999)p.47
He forecasted that because of the advancement of medical facilities and the possibility of
aged living, pension scheme would become popular though at a slow pace.
Vijayavani.J., (1999) in her prize winning technical paper entitled “ Cost effective
distribution channels of life insurance products” suggested that to tap policy holders,
insurance tie-ups with banks, mutual funds and benefit consultants and brokerage and
benefit consultants, company and fund managers can be introduced.
Holsboer Jan H (1999), investigated the link between insurance sector development and
economic growth in context with the recent changes in the external environment for
insurance companies in Europe. He developed a model based on the interest rate(r),
growth of the working population (n), the economic growth rate (g). The benefits of the
pay pension system of the funded pension system were analysed in this model.
Prof. Mike Adams (1999) and others examined the dynamic historical relation
between banking, insurance and economic growth in Sweden using timeseries data from
1830 to 1998.They examined long-run historical trends in the data using econometric
tests for co integration. The results arrived indicate that ----------------------------------------
---------------------------------------------------------- Vijayavani.J.,”Cost effective
Distribution channels of life insurance products”, The Journal of Insurance Institute of
India, July-December,1999,p.57

Holsboer Jan H ‘Repositioning of the Insurance industry in the financial sector and its
economic role”, The Geneva papers on Risk and Insurance, Vol.24,No.3, pp.243-290.
1999.

Prof. Mike Adams, Prof.Jonas Andersson, Prof. Lars-Fredrik Andersson and Prof.
Magnus Lindmark, “The Historical Relation between Banking, Insurance and Economic
Growth in Sweden: 1830 to 1998” by University of Wales, & Norwegian School of
Economics, 1999.
the development of domestic banking, but not insurance, preceded economic growth in
Sweden during the nineteenth century. They also found that the development of bank
lending in the nineteenth century increased the demand for insurance as well as
promoting economic growth. In contrast, the insurance market appears to be driven more
by the pace of growth in the economy rather than leading economic development.

17 
 Vijay Srinivas (2000), found that lack of understanding among the public, lack of
availability of new schemes, low income yielding are the main reasons for low priority
for insurance in India and he suggested return linked insurance, for the more successful
penetration.
MichaelG. Faure Metro (2000) examined the condition for compulsory insurance.
He also made distinction between first-party insurance and third-party insurance. The
major argument in favor of compulsory liability insurance was insolvency of the potential
injurer. His insolvency may lead to under deterrence. This can be cured through making
the purchase of insurance compulsory. He also accepts the fact that there are few limits
and warnings with respect to the introduction of compulsory insurance. If the moral
hazard problem cannot be cured or if insurance was not sufficiently available, making
insurance compulsory may create more problems than it cures. He also argued that a
major disadvantage of compulsory insurance is that it might make governments too
dependent on the insurance market. The economists also have warned against the
increasing use of liability insurance linked with strict liability regimes and have ----------
------------------------------------------------------------------------------------
Vijay Srinivas K.B., “How returns linked insurance products can be
popularized?”, The Insurance Institute of India, journal of July-Dec,2000,p.67

Dr. Michael G. Faure Metro, “Economic Criteria for Compulsory Insurance, Working
paper of university Maastricht, The Netherlands,2000.
often pointed out the advantages of first party insurance schemes. In a first-party
insurance scheme, the victim insures himself directly with an insurer or a third party
takes insurance directly to the benefit of the victim.
Indeed, there was often a small line between first-party accident insurance or
health insurance and social security systems. But the information deficiency argument
should be clearly distinguished from the argument that insurance was beneficial since it
generally removes risks from risk-averse persons and thus increases their utility. There is
always a danger that the information asymmetry is assumed to quickly justify a
regulatory intervention. In the absence of a proof of information deficiency, a generalized
duty to insure would amount to mere paternalism and could create inefficiencies, since
also persons who have no demand for insurance might be forced to take out insurance
coverage. He concludes that compelling all citizens to purchase mandatory
accident insurance may thus lead to a negative redistribution.
Mittal R.K. (2002) in his article “Privatisation of life insurance sector in
India -impact and perspective” stated that 10 percent of agents procured ninety percent of
business and remaining ninety percent of agents procured ten percent of the business.
Most of the agents did this as a part time job. As a vast population remains untapped
these inactive agents should be encouraged, he suggested.
Prof. Stefan Dercon (2004) explained that how villagers with few links to any
formal kind of insurance market have established membership based indigenous
insurance associations to protect themselves against unexpected expenditures, mainly for
funerals and hospitalisation. Many of these institutions -----------------------------------------
---------------------------------------------------------
Mittal R. Ki., “Privatisation of life insurance sector in India –Impact and
Perspective” – Indian journal of Marketing, vol.xxx11, Nov.2002,p.5

18 
 tend to co-exist within the same community and are based on well-defined rules and
regulations, often offering premium-based insurance for funeral expenses, as well as, in
many cases other forms of insurance and credit to help address members. They were
locally initiated and have been continually developing through the actions of their own
members, without involvement from the government or donors.
Historical analysis from some survey areas in Ethiopia and Tanzania has shown
that these groups were not “traditional” whereas they are often relatively new creations
and have certainly been evolving and changing. Analysis from a survey of these
associations, matched with household data on the members and the population at large
has shown that these groups manage to insure a sizeable part of the expenditures attached
to at least some shocks.
When different groups offer different products this leads to the emergence of a
localized insurance market and introduces an element of choice for the households.
Unfortunately, despite these attractive characteristics, people are still found to be severely
affected by different manifestations of risk. He further concluded as the Ethiopian funeral
associations are likely to come under increasing pressure in the next few years if
HIV/AIDS makes increased premiums necessary.
Ortiz and Kishore Ramchandani (2004), dealt the Component-based Business
Modeling (CBM) in their article, “Staying competitive on the life and pensions turf”.
They explained it as a combination of business transformation connected with IT strategy
and sourcing. Industry leaders are using CBM to
--------------------------------------------------------------------------------------------------
Prof. Stefan Dercon , Oxford University, Prof. Joachim De Weerdt “Membership Based
Indigenous Insurance Associations in Ethiopia and Tanzania” Initiatives Report by
Tanzania Tessa Bold and Alula ankhurst Addis Ababa University, Ethiopia, 2004.
break down traditional business silos. With CBM, they are able to map business strategy
to components and identify key areas of competitive differentiation and understand
opportunities to maximize the efficiency of non-strategic components.
The CBM projects involve three phases. The first phase of CBM is ‘Insight’, which
develop a component map for the enterprise by which the building blocks of the firm are
defined, and areas of opportunity are identified. The second phase is to ‘Reengineer’ and
‘Rethink’ where the business is assessed and gaps are analyzed. Implementation was the
third phase of CBM where the opportunities are prioritized and a transformation plan is
developed. The authors bring out the fact that some insurance companies
follow certain high-cost process which is often repeated and makes a huge shortfall in
funds which are needed for new investments. They suggest improvements in three
critical areas such as efficiency, strategic planning and flexibility, so that the companies
can achieve significant business flexibility along with tremendous operational savings
which in turn achieve the target.

H.Sadhak (2006) in his article ‘Life Insurance and the Macro economy: Indian
Experience’, has observed that there is a very significant relationship between the
demand for life insurance and various macroeconomic variables. High growth of GDP
induces an economic effect through higher per capita and disposable income and savings,
which in turn create a favourable market demand for life insurance. On the other hand,
life insurance also provides support to the --------------------------------------------------------
------------------------------------

19 
David J. Ortiz and Kishore Ramchandani, “ Staying competitive on the life and pensions
turf ” , Journal of Building an Edge , December 2004.
H.Sadhak, “Life Insurance and the Macroeconomy ; Indian Experience”,
Yogakshema, Sep. 2006, P.56
capital market and savings data pertaining to Indian life insurance and macroeconomic
variables broadly indicate a close relationship and interdependence between
macroeconomic variables and life insurance demand.

However, it has also been observed that in India, while the economy in general and
disposable income and savings in particular, has registered a significant growth, life
insurance demand has not picked up or alternatively the life insurance industry could not
capitalize on the growth of income and savings. Therefore, in order to capitalize the
growth potential particularly in the post liberalized economy, concerted efforts need to be
made to create awareness about personal financial risk management.

A. K. Shukla(2006), in his article stressed the need for insurance companies to have
structured systems in place of gathering and monitoring information on the customer.
According to him, the major challenge is to set the correct standards of product and
service. Experience shows that most companies possess product and service standards
and measures that are company defined which are established to reach internal company
goals for productivity, efficiency, cost and technical quality, but which cannot lead to
market orientation.

The real standards set by the company must be based on customer requirements
and expectations which were visible and measured by the customer. These standards
were deliberately chosen to match customer expectations and to be calibrated the way the
customer views and expresses them. The rules of engagement between the company and
the customer are changing dramatically. Traditionally, customers were viewed as passive
demand targets. But migration of customers from company, centric supply chains to the
new frontier of customer, centric experience network through sustainable value, and
creation of chains was the greatest marketing challenge before the Indian insurance
industry. The author concludes by expressing the need for deep understanding of the
customer, trends identification, assess customer desires and preferences.
Parimal and Joshi(2006) in their research on “Insurance sector in India: A SWOT
analysis”, observed that in India, out of 80 million insurable individuals, only 20 million
have purchased life insurance, which implies that merely
10percent of the household families have access to Insurance. India’s Insurance market
offers immense growth opportunities considering rising disposable income levels of the
middle class. Insurance penetration has doubled to 3.6 percent during 2003-06.
According to the authors, insurance has been seen in India as a savings and tax
minimization instrument rather that as a financial protection tool. The Malhotra
committee suggested that structural changes as a key recommendation to initiate reforms
in the insurance sector of India

Prof. PrashantaAthama and Prof. Ravikumar (2007) in their study identified the
factors which the consumers take into consideration before selecting the life insurance

20 
 products. They classified those factors into product attributes and non-product attributes.
They found that urban policy holders and
-------------------------------------------------------------------------------------------------- A. K.
Shukla, “The Marketing Challenge” , Yogakshema, April 2006, P.10-13

Parimal H Vyas and Drishti Joshi, “Insurance sector in India: A SWOT analysis”,
Osmania Journal of International Business Studies, June 2006.

Prof. PrashantaAthama and Prof. Ravikumar, “An Explorative Study of Life Insurance
Purchase Decision Making: Influence of Product and Non-product factors” Osmania
University, The Icfai Journal of Risk and Insurance, vol IV, no.4,October 2007
product attributes like product features, risk coverage, product flexibility, surrender of
policy, loan against policy, revival of lapsed policy, grace period, and maturity period,
are positively associated. So they suggested that insurer should concentrate on improving
the product attributes to have more penetration in urban areas. On the other hand, they
found that rural policy holders and nonproduct attributes like agents and company are
positively associated. So they suggested that insurer should concentrate on improving the
non-product attributes to have more penetration in rural areas.
Dr.K.C.Mishra(2007) in his article , “Indian Life Insurance Industry –
Challenges and Opportunities” , explained in essence that insurance will have issue and
solution around five risk dimensions like d1 for death risk which is certain but time is
uncertain, d2 for disease risk which has a high correlation with timing of death, d3 for
dependency risks which will lead to annuity and pension products, d4 for duty risks
which centres around education of children, marriage, funeral, acquiring a shelter etc. and
d5 for disasters collateral to life like accidents and mass co-variances arising out of
failure of coping arrangements in traditional society. He suggested many measures to
foster the growth of insurance industry.
Sandeep Ray and Joy Chakraborty (2008) focused their research on the ins and
outs of the strategies adopted by the private life insurers to overcome the product-selling
challenges in the Indian life insurance market. Low consumer
-----------------------------------------------------------------------------------------
Dr.K.C.Mishra, “Indian Life Insurance Industry – Challenges and
Opportunities”, journal of yogakshema, August 2007.

Prof.Sandeep Ray Chaudhuri and Prof. Joy Chakraborty,The Icfai

Bschool,Kolkatta, “Private life insurance companies in India: Strategizing ways to
overcome the product selling challenged” , The Icfai Journal of Risk and Insurance, vol.v
No.2, April 2008
response, lack of knowledge about insurance benefits, lack of trust in private life
insurance companies, target oriented business environment, competition from alternative
channels of investment, ineffective distribution channels, lack of skilled agents, lack of
penetration in rural areas, inadequacy in pay structure of the agents and trade barriers are
the problems faced by the private insurance players in India.

The authors suggested some strategies like innovative products, user friendly
technology, innovative and integrated marketing strategy, and incentives to the high

21 
performing agents and alternative distribution channels, to overcome these challenges.
The authors concluded the reason for Indian insurance market still struggling at a nascent
stage is the low penetration in the rural and semiurban regions and suggested that both
LIC and private life insurers should do the needful to start penetrating more into the
remote areas of the country through attractive product offerings.

2.2REVIEWS ON LIC
In 1987, the planning wing of the LIC Divisional office of Thanjavur conducted a
survey on “customer satisfaction” .The objectives of the study were to find the level of
consumer satisfaction regarding the services of LIC, particularly on the aspects such as
timely dispatch of discharge forms, reminders, the cooperation given by the agents and
development officers, courtesy and sympathy of LIC officials, receipt of the policy
amount within the due date etc. ---------------------------------------------------------------------
-----------------------------
Customer satisfaction, Special study No.1, 1987, Planning department, Divisional office,
LIC, Thanjavur Division.
The results of the study revealed that discharge forms were received before the due date
by seventy nine percent of the policy holders. Eleven percent of the policy holders
approached the agent or development officer for help in the submission of the
requirement and they were happy with the services rendered by them. Twenty percent of
the policy holders submitted the requirements after receiving a reminder from the branch
office. Two percent of the policy holders revealed that they had to visit the branch office
for the cheque as there was delay.

Mishra, M. N. (1987) made a study to appraise the marketing strategies of LIC of

India. While reviewing, the author expressed the view that, before 1980 LIC did not give
much attention to the objective of customer satisfaction: but from 1980 onwards it has
taken several remedial measures to provide better customer services and improve the
customer satisfaction. However the author expressed the weaknesses of LIC as existence
of more number of dormant agents and lack of training and motivation among officials.

The Insurance Institute of India (1987) prepared a project report on performance

of life insurance. This project was undertaken to examine the awareness attitudes and
beliefs of people on life insurance and LIC. The important conclusions arrived at from
the study are life insurance agents do not maintain regular contacts with the policy
holders. But most of them are available whenever they are called and most of the policy
holders have brought security to the family and one seventh of the insured policy holders
are not sure of the benefits under the life insurance.
-------------------------------------------------------------------------------------------------
Mishra,M.N. “Appraisal of Marketing Strategies of LIC of India”,Indian Journal of
Marketing,Feb.1987,p.75.

The National Council of Applied Economic Research (NCAER) conducted two

surveys in 1988 and 1989 on “Appraisal of quality service in service organizations” and
“Quality services in LIC” respectively. They found that reliability; response, capability,

22 
politeness, communication skills, safety, trustworthiness and understanding are the
factors that constitute quality of service of employees by the consumers. The second
study reveals the fact that customers who received premium notices in time and good
services at cash counter are of the view that quality of services as excellent and few
policy holders rated the service as poor because of delay in claim settlement and heavy
confusion in transfer of policies.

2.3REVIEWS ON INSURED WOMEN

Dr. Rernat Vera Meister (2001) explained that a lot of feministic studies were
concerned with recovering the tremendous inequalities and the shocking lack of equity
between the genders in the history and at the present. Research shows that there is a
gender inequality in terms of income, respect and leisure time, a distinct greater
likelihood for women to be poor, discriminated and marginalised.
As a lot of problems are very deeply rooted in ideology, religion, social norms and
customs, it is an extremely complex process to achieve any progress. Nevertheless, even
if we claim economical equality we thoroughly have to avoid the temptation to walk into
the trap of determinism, i.e. to look at economy as a --------------------------------------------
------------------------------------------------------
A project on “Marketing of Life Insurance,” Insurance institute of India, Bombay,
1987“Appraisal of quality service in service organizations” and “
Quality services in LIC” , The National council of Applied Economic Research (NCAER
) , NewDelhi , 1988 and 1989.

kind of static distribution of resources. So the task of shaping the future have
undoubtedly to be based on the analysis of present and past. But we must immediately go
beyond it and grasp the future as a dynamic process with risks and uncertainties which
causes threats.

Dr. Rudrasaibaba (2002) has conducted an enquiry on “Perception and attitude of

women towards life insurance policies”. The study revealed that seventy percent of
respondents interviewed are satisfied with the services offered by LIC. An attempt was
also made to know the reasons for dissatisfaction. The study revealed that intensive
advertisement is not given by LIC about new policies with the result the respondents are
not in a position to know which policy highly suits their requirement. Many of the
respondents opined that agents are not concentrating on the customer’s service. With the
result, they are facing some inconvenience regarding the payment of premiums on due
date and could not avail other benefits from LIC like policy loan, housing loan, etc.
Hence, there is a need to improve customer’s relations by LIC for the increased
satisfaction of the consumers.
David R. Weir & Robert J. Willis (2003) in their study evaluated therisk of un-
insurance for divorced and widowed women, who form an importantand vulnerable
population. Population of women potentially vulnerable to loss of coverage in the event
of divorce or a husband’s death .The incomplete coverage ------------------------------------
----------------------------------------------------------
Dr. Rernat Vera Meister, “ A Comment to The Employment Dilemma and the future of
work” , by International Association for the Study of Insurance Economics( The Geneva

23 
 Association), Annex to the Geneva Association Information Newsletter on Insurance
Economics - No.43, January 2001.

Dr. Rudra Saibaba,”Perception and attitude of Women towards Life Insurance

Policies” –Indian Journal of Marketing,vol.No.12 ,xxxii, October 2002,p 1
of both men and women in the fifty to sixty-four age groups implies that, for some
couples, the illness and medical expenditures that precede death can have a substantial
negative impact on the financial security of a widow. Distinguishing between absence of
coverage while married and inability to continue coverage after widowhood is important
for two reasons. First, it separates the negative impact of husband’s death into effects
associated with the husband’s medical care and effects associated with subsequent needs
by the widow. The researchers found that, the un-insurance rates for widows are nearly
double than that of married women. Divorced and never-married women are more likely
to be uninsured than married, but less so than widows. Non-married women are much
less likely to have employer-based coverage and more likely to have public insurance,
Medicare. Marital status is clearly associated with health insurance coverage.
The authors also explained that, while married women who become divorced have
very similar initial coverage rates as women who remain married those who become
widowed have substantially lower rates while still married. A likely explanation is that
husbands with higher mortality risk are less likely to provide coverage for their spouse.
They also stated that, newly divorced women are actually less likely to lose insurance
than women who stay married. New widows are more likely to lose insurance than
women who stay married and also compared with women who have already been
widowed. Widowhood thus seems a more important cause of uninsurance than divorce,
perhaps because women who divorce are better prepared to be alone.
-------------------------------------------------------------------------------------------------
Prof. David R. Weir & Robert J. Willis, “Widowhood, Divorce, and Loss of Health Insurance
among near Elderly Women”: Evidence from th
In the background of high consumerism and income of the urban consumers, in recent year
there are a number of companies have expressed their interest towards retail sector outlets.
As a result numbers of shopping malls have started their operations in metro and urban
areas. Pantaloon, big bazaar, V-Mart, Reliance Fresh are the best known examples of retail
sector outlets in India. Retailing is the interface between the producer and the individual
consumer buying for personal consumption. This excludes direct interface between the
manufacturer and institutional buyers such as the government and other bulk customers. A
retailer is one who stocks the producer’s goods and is involved in the act of selling it to the
individual consumer, at a margin of profit. As d. Reviews on Customer satisfaction;

Lawler Edward (1995) explained that companies are successful which possess
quality service in the top of their vision list. Protective Life Insurance Company
depended on Loma’s FOCUS Customer Service Survey to get feedback from customers
on how they were being served. They measured customer satisfaction differently and
determined the most common causes for customer dissatisfaction and to eliminate them.
The Insurance companies basically have similar products, similar services, and similar
technology. In fact, everything the company does was tied to its core values which inurn
tied with its employee’s performance. Employees agree with this continuous

24 
improvement process. They conclude as people never like to buy insurance, so service
provider must make it as easy and pleasant as possible and that was one focus of
continuous improvement in service provided for the benefit of the customer.

Gregory A. Kuhlemeyer (1999) conducted a research on consumer satisfaction

relevant to the purchase of life insurance products and compares satisfaction in a agent
assisted transaction with satisfaction when no agent is used. Benchmarks, identified for
consumer satisfaction, are the life insurance product, the agent, and the institution. The
hypothesis of the study was that, consumer satisfaction with the life insurance purchase is
primarily a function of
-----------------------------------------------------------------------------------------------Lawler,
Edward E, “ Believing What can’t be seen: Protective Life’s Vision of Quality Service ” -
Loma’s FOCUS Customer Service Survey,Journal Resource, Jossey-Bass Publishers,
November, 1995.

Gregory A.Kuhlemeyer& Garth H. Allen, “Consumer Satisfaction with Life Insurance:

A Benchmarking Survey” , The journal of Association for Financial counseling and
Planning Education, Vol.10(1),1999.

the trust of a policy holder on his agent or on the insurance company, agent's competence,
the product selected by the consumer, the financial safety, and fulfillment of consumer
goals.
The agent assisted versus direct placement of individual life insurance was
compared and found that consumers are highly satisfied with their agents, when they
believed that their agent is trustworthy, knowledgeable, selling only the appropriate
products . On the other hand, academic background, professional designations, a long
business history, age, gender, or marital status of the agents do not influence consumer
satisfaction. In the same way, consumers are highly satisfied with their firm, only when
they perceive that their life insurance firm provides a portfolio of products that will meet
their financial needs, employing competent representatives, and creates a trusting
relationship. Purchasers who use the agent alone are more satisfied with their insurance
company than purchasers who use both an agent and the direct purchase approach. In the
same way, the direct sales method scored the highest level of satisfaction because
purchasers trust their life insurance company very highly. They also found that, single
premium policies secured the lowest level of consumer satisfaction and term insurance,
universal life, and whole life insurance give the higher level of consumer satisfaction, in
that order.
Duncan I.Simester (1999) described two related quasi-experiments, one in the
United States and one in Spain, in which a sophisticated, high-technology firm designed
and implemented customer-satisfaction improvement programs. Although the
interventions implemented in the two countries are differed in some respects, both
interventions were targeted at five targeted customer needs and the same type of
business-to-business customers are selected. In each country, the programs were
implemented in ‘treatment’ regions, but not in ‘control’ regions and the firm collected
pre-test and post-test satisfaction measures for targeted and non-targeted needs. The
intervention had a significant impact on satisfaction with the targeted needs in both
countries. The data collected reveals the fact that the interventions were able to effect

25 
significant, enduring improvements in satisfaction with the targeted needs. Several
natural assumptions found failed. For example, the firm believed ex-ante that the
interventions were similar, seemingly inconsequential differences in empowerment
between the Spanish and U.S. interventions appear ex-post to be important. Despite the
use of state-of-theart methods to identify customer needs, overall satisfaction responded
significantly to effects that were not captured by the measured needs. There were
unobserved ecological impacts on satisfaction which could only be accounted for, with a
nonequivalent-dependent-variables design. Such designs are rare in industry. The absence
of such controls in typical industry studies explains the growing concern among industry
commentators that quality interventions do not yield their anticipated outcomes.
In U.S. the results were qualitatively similar, perhaps because there was no
competitor because unobserved ecological changes in all customers needs. However, in
Spain, where there was likely significant, but unobserved, competitive activity, the results
change dramatically. There was still a significant impact on overall satisfaction and
residual satisfaction, but there was no significant effect on the targeted needs and on the
ancillary needs. Without the nonequivalent-dependent-variable controls, the analysis
rejected the ability of the customer-satisfaction intervention to affect the targeted needs.
It is also possible that industry would consider an even simpler model, which does not
account for
------------------------------------------------------------------------------------------------
Prof. Duncan I. Simester , Prof. John R. Prof. Birger Wernerfelt, and Roland T.
Rust, “Implementing Quality Improvement Programs Designed to enhance Customer
Satisfaction: Quasi-experiments in the U.S. and Spain”, Owen Graduate School of
Management, Vanderbilt University, June 1999.

the reliability of the measures. One such model might simply examine the differences in
the means between the pre-test and post-test measures. When the authors examined such
model and estimate a significant increase in the targeted needs in the U.S. and a non-
significant decrease in the targeted needs in Spain.

Tom Moormann (1999) explored how the life insurance industry is addressing the
issue of measuring customer satisfaction, as satisfied customers are vitally important to
life insurance companies, where retention plays a large role in determining a company’s
revenue stream, and ultimately its profitability. The LOMA conducted a
survey of its member companies. A total of 129 responses were received from 709
companies and the survey itself was divided into three general topics such as company
measuring overall customer satisfaction, company measuring satisfaction with specific
transactions, and evaluation of customer satisfaction information. Ninety percent of
individual life products and seventy percent of disability products of respondent
companies measured the customer satisfaction. Companies measure satisfaction with
those products which were marketed to individual consumers. Roughly half of the
companies measured customer satisfaction in an irregular basis, and substantial number
of companies do not measure customer satisfaction at all.
The general types of information collected in customer satisfaction surveys are
data on overall satisfaction (80% of respondents), satisfaction with product features and
benefits (61%), and satisfaction with different aspects of the purchase process (58%).

26 
They conclude that customer satisfaction, though an important metric for evaluating
business performance, was paid only an insufficient attention by the companies.

Prof.TomMoormann, & Prof. Cary Overmeyer, “Customer Satisfaction Technology

SurveySummary Report”, August 1999.
Stephen Diacon and Chris O’Brien (2002) conducted a study to determine the
nature of systematic differences in persistency according to company size, efficiency, and
ownership structure. Good persistency was also of vital importance to the financial
performance of life insurance companies. Early withdrawal often means that product
providers are unable to recoup their business acquisition expenses.
They use multivariate techniques to measure the relationship between
withdrawal rates and those aspects of service quality that are correlated with variables
such as size, growth of new business, the expense ratio, and the mutual /stock
distinction. They, therefore, suggest that mutual insurers have a better persistency record
than stock insurers, and the offices with lower expense ratios tend to demonstrate
significantly higher persistency rates, and persistency seems to be negatively related to
insurer size.
The results confirm the findings of previous research of Parasuraman
(1985) that customer satisfaction with a company’s services is determined to a large
degree by the quality of service the customer receives. Another important finding was
that overall levels of persistency remain low, particularly for pensions business and
policies sold by company representatives. It was also clear that poor sales quality leads to
low customer satisfaction which again lead to low persistency. The essential idea was
that persistency is an indicator of customer satisfaction.
Many policyholders have withdrawn from long-term commitments before their
contract has expired, and the high initial withdrawal rates associated with
-------------------------------------------------------------------------------------------------
Stephen Diacon and Chris O’Brien, “Persistency in U.K. Long-Term Insurance:
Customer Satisfaction and Service Quality”, Working paper of Centre for Risk and
Insurance Studies, Nottingham University Business School, 2002..

these long-term savings contract provides tangible evidence of widespread customer

dissatisfaction, and raises questions about the service quality. But the authors were
unable to explain why persistency seems to be negatively related to insurer size .They
concluded that as the causes of poor persistency tend to be complex and pervade many
aspects of an insurer’s back-office operations and not just the sales process.

Dr Abdel Moniem Ahmed and Professor Mohamed Zairi(2002), conducted an

analysis on ‘Customer Satisfaction’. Customer satisfaction is fundamental to the well
being of individual consumers, to the profits of firms supported through purchasing and
patronization, and to the stability of Economic and political structures The authors
introduced a methodology on how to carry out self-assessment in seven levels. The
important finding is that, there are three groups of customers which are often neglected in
the existing customer satisfaction programmes which are internal customers, channel
members in consumer markets, and buying center members in business-to-business
markets. They stated that an effective customer satisfaction programme must include

27 
management commitment and support, employees involvement and training, information
gathering from stakeholders, customer contact and personnel data, warranty cards and
service records, face-to-face evaluation, responses sorting, wants formulating and
satisfaction and action plans. They found that, many companies seeking business
excellence are assessing themselves against these nine criteria of the model and thus they
first understand fully their today’s
------------------------------------------------------------------------------------------------
Dr Abdel MoniemAhmed, Bradford University, & Prof. Mohamed Zairi, Bradford
University School of Management , “Customer Satisfaction: The Driving Force for
Winning Business Excellence Award ” Bradford University , Working Paper No .02/06.
(March 2002

position and use this benchmark to pursue continuous improvement. Thus,

selfassessment in a regular, comprehensive and systematic way therefore reviews the
organisation’s activities and gives the best results.
Prof. Edward C. Malthouse (2003) examined the relationship of overall
satisfaction of a service with satisfaction of the service for organizations having multiple
units. The customers explain their satisfaction with a product or service in terms of
specific aspects such as the product attributes, price, customer service, or a combination
of these various features.
This study explained how specific types of customer satisfaction affect overall
satisfaction, with the help of slopes from regression analysis. Different subunits within an
organization show different relationship between specific aspects of satisfaction and
overall satisfaction. But, such variation could be important for marketing decisions and
the organization need different strategies for different subunits. Moreover, these results
indicate the need for theoretical hypotheses with more variables. Hierarchical Linear
Models (HLM) were used to evaluate how strongly each specific type of satisfaction is
related to overall satisfaction and whether the strength of these relationships varies across
subunits. Since the subunits were selected randomly, and the inferences from the HLMs
can be extended to the population from which the subunits were sampled. The empirical
results of this study shows that some specific type of satisfaction may be a strong
predictor of overall satisfaction and for same specific type of satisfaction have no
relationship to overall satisfaction.
--------------------------------------------------------------------------------------------------
Prof. Edward C. Malthouse, Prof.James L. Oakley& Bobby J. Calder Dawn Iacobucci,
“Customer Satisfaction Across Organizational Units ”, from
Northwestern University, Kellogg School of Management, Northwestern University July
2003

Prof. Stephanie Hussels (2003) analyse the determinants of insurance demand and
how it affects general economic development. From an economic viewpoint, traditional
neoclassical growth theory suggests that without technological development, economies
can only grow at a fixed rate. But Endogenous growth theory states how investment and
growth in one sector of an economy can provide positive externalities for other areas of
the economy. Prof. Outreville (1990) Prof.Ward and Prof.Zurbruegg (2000) provide

28 
empirical evidence for the fact that insurance market development, promotes economic
development.
As the insurance industry forms a major component of the economy by virtue of
the amount of premiums it collects, the increasing contribution it makes to GDP, and the
scale of its investments. The literature has confirmed that a sound national insurance
market is an essential characteristic of economic growth. As the insurance industry forms
a major and essential social and economic role, by covering personal and business risks.
Three categories of insurance determinants have been identified such as economic, legal
plus political, and social factors.
The empirical findings proved that a strong, well functioning legal system and a
stable political environment seem to be most crucial for fostering insurance demand.
They also emphasized the need to promote sound insurance growth which in turn acts as
a tool to aid financial development and thereby also foster economic growth.
--------------------------------------------------------------------------------------------------
Prof. Stephanie Hussels , Prof. Damian Ward, (Bradford University School of
Management) Prof. Ralf Zurbruegg, University of Adelaide,“How Do You Stimulate
Demand For Insurance, Australia, October 2003.

Stephen M. Avila, Scott A. Inks and Ramon A. Avila (2003) made an intensive
study on the relational sales process which develop a long term customer relationship
based on trust and value added service. Within the insurance industry, claims
representatives and underwriters come in contact with the customers and prospects and
are able to incorporate the relational sales process into their interactions with customers
so as to strengthen the existing relationships and potentially initiate new ones.

SERVQUAL has been the first and the most popular tool which was proposed by
Parasuraman, Zeithaml, and Berry to measure the service quality. It consists of three
sections. The first two sections consist of two sets of twenty two statements which
determine customer’s expectation to service, and the customer’s perception to the firm
performance. The customer is asked to rate their expectations and perceptions of the
company’s service performance on a seven-point Likert scale. The gap between
expectations and performance perceptions is measured by the difference between the two
scores. Positive scores imply that the performance is better than what the customer
expects, while negative scores show that the services are of poor quality. The third
section measures the level of importance of the five dimensions to the customer namely
tangibles, reliability, responsiveness, assurance and empathy. They conclude that,
customer’s expectations are influenced by several other factors such as informal and
formal recommendations, personal need, past experience and lastly the external
communications sent out by service providers.
----------------------------------------------------------------------------------------------

29 
Stephen M. Avila, Scott A. Inks,and Ramon A. Avila, , “ The Relational Sales Process;
Applications For Agents Claims Representatives,and Underwriters, April 2003.
Dr. DaleepPandita (2003) stated the fact that the customer today was demanding
quality and then becomes violent in case the expectations were not met. It is found that
68 percent of customers quit because of indifferent attitude, 14 percent were due to
product dissatisfaction. 9 per cent for competitive reasons, 5 per cent from friendships
and obligations, only 3 percent move away as a margin of chance and one per cent of
customers die away. He suggests that for better customer satisfaction the organizations
should develop customer needed policies, products and procedures and give customer the
most wanted pre and post-sale personalized service.

Hong Wu, (2003) studied how individuals in a mutual society design mutual
contracts in order to share their risks. There was a general consistency between the
mutual and insurance contracts. The same risk premium is required against the same risk
and the high-risks are required to pay higher risk premiums than the low-risks The study
also explains the fact that there are situations where the mutual contract requires only an
assessment of the relative value of the probabilities of losses, which shows an advantage
of the mutual contract over the insurance contract because the insurance contract
generally requires an assessment of the actual value of the probabilities. In addition to
that, the way in which an individual’s degree of risk aversion affects a contract in the
mutual case appears differently from the way in the insurance case. General expected-
utility

-------------------------------------------------------------------------------------------------
Dr. DaleepPandita Customer Service in ChangingMarket Scenario, The Insurance
Institute of Journal, January - June 2003, Pg.38.
Mrs.HongWu, Ph.D thesis on “Essays on Insurance Economics” , studied in Economic
Studies Department , Goteborg University2003

approach was used to examine optimal insurance coverage in presence of both additive
and multiplicative risks. There are cross-effects of other risks on insurance decision
against a considered risk. The total effect of both additive and multiplicative risks is not
simply the sum of their individual effects. Thus, taking both additive and multiplicative
risks into account simultaneously is important.The effect of derivative securities on an
individual’s insurance decision was analysed. In the framework of a mean-variance
utility, it was concluded that derivative securities have an impact on an individual’s
insurance decision because a farmer using hedging instruments against the price risk,
may not buy the full insurance even if the premium is fair. And there was no monotonic
relationship between the farmers’s degree of risk aversion and his insurance purchase or
his hedging ratio. Thus, the effect of a farmer’s degree of risk aversion appears
differently when the crop insurance and the derivative securities are concerned separately
and when they were concerned simultaneously. She concludes that the concept of the
variable participation contract, was found to have advantages over a usual insurance
contract.

30 
 Prof. Peter P. Wakker, Prof. Danielle R.M. Timmermans and Prof. Irma
Machielse (2004) examined the effects of statistical information about risk attitudes. A
descriptive purpose was to obtain new insights into risk and ambiguity attitudes of the
general public. 476 clients of a Dutch health insurance company were given various
forms of statistical information about health expenses. Own past-costs information
differentiated between individuals,
--------------------------------------------------------------------------------------------
Prof. Peter P. Wakker, Prof. Danielle R.M. Timmermans, and Prof. Irma Machielse , “
The Effects of Statistical Information on Risk Attitudes and Rational Insurance Decisions
, documented by Medical Decision Making Unit,
Netherlands &, Zekerheid Health Insurance Company Leiden, June, 2004 increasing the
willingness to take insurance for high-cost and risk averse clients but not for others. The
drawback of adverse selection must be weighed against a desirable Interaction with risk
attitude, increased customer satisfaction, and increased cost awareness. Descriptively,
ambiguity preference was found rather than aversion, and no risk aversion was found for
loss outcomes. Both findings, obtained in a natural decision context, deviate from
traditional views in risk theory but agree with prospect theory.

Subjective evaluations of the information, the clients were asked four subjective
evaluation questions, about clarity, comprehensibility, general usefulness, and usefulness
in decisions, each on a seven-point scale. The clients were also asked at which level of
aggregation they would most like to receive information in the future. The risk attitude
and their willingness to take insurance both before and after the receipt of statistical
information as about their health expenses were thus measured. The observed risk
attitudes were between the predictions of prospect theory and expected value
maximization. In particular, no risk aversion was found for loss outcomes, in agreement
with prospect theory but against the classical economic predictions. The risk information,
which entails a reduction in ambiguity, seems to decrease rather than increase the value
of uncertain options. The findings of the study from the marketing perspective was
maximizing the number of insurances sold, information about average population costs
was optimal. From the individual perspective of the client, individual-cost information
seems to be most desirable because it enhances insurance taking for risk averse clients
and for clients with high expenses. Whereas from the societal perspective, adverse
selection was probably too serious to be compensated by the advantages of favorable
interaction with risk attitude, increased customer satisfaction, and increased cost
awareness.
Prof. Robert B. Friedland, and Prof. Stephanie E. Lewis (2004) explained the
sources of information used in making decisions about whether and what type of long-
term care insurance to purchase. They assessed the three main sources of consumer
information as written consumer guides, insurance agents, and the activities of State
Health Insurance Assistance Programs (SHIPs).

Consumer guides tend to be too general to be effective at helping consumers

make a specific set of choices about long-term care insurance. However, while some

31 
agents are experts on long-term care, most long-term care insurance was not sold by an
agent. SHIPs are also variable in terms of their own efforts to educate the volunteer
insurance counselors about long-term care.

The consumers need additional tool for comparing and contrasting policies and
making informed decisions about the trade-offs of alternative options available within a
policy. Since consumers depend on sales agents for information, it is imperative that
sales agents have a solid base of knowledge about long-term care as well as the role of
different insurance features to help insure risk and finance care.

Among people who had purchased a long-term care insurance policy, for the 40
percent of the respondents most important influence was their spouse and 27 percent said
it was their insurance agents and also examined reasons for not purchasing long-term care
insurance. There are some respondents who considered buying a policy after meeting an
insurance agent, but subsequently ------------------------------------------------------------------
-----------------------------
Prof. Robert B. Friedland, Prof. Stephanie E. Lewis, “ Choosing a Long-Term
Care Insurance Policy: Understanding and Improving the Process ” , Georgetown
University, October, 2004.
decided not to purchase a policy. For this group, price, benefit design, and product
confusion were the three most significant reasons mentioned for not making the
purchase. Product confusion mean that potential consumers were not sure of their own
needs, the nature of the product, the trustworthiness of the agent, and or the reliability of
the insurers.
In the case of long-term care insurance, the likelihood of purchasing a policy was
increased by trust in the agent and how the agent presents the risks and benefits of long-
term care insurance for the potential client and their spouse. This study also focused on
the training and education of insurance agents, since they are named, after spouses, as the
most important source of information on long-term care policies. They suggest that
SHIPs already provide some, but could provide more information and independent
assistance to consumers of all ages to choose the long-term care insurance.

J. Dhaene Leuven and M.J. GoovaertsE(2004) explained several types of

dependencies between the different risks of a life insurance portfolio. Each policy was
assumed to have a positive face amount during a certain reference period.
The amount was due if the policy holder dies during the reference period. A
husband and his wife may both have a policy in the same portfolio, it was clear that there
must be a dependency between their mortality. Both were more or less exposed to the
same risks. Moreover there may be certain selection mechanisms in the matching of
couples. It was known that the mortality rate increases by the mortality of one’s spouse
i.e., the “broken heart” syndrome.
--------------------------------------------------------------------------------------------------
J. Dhaene Leuven and M.J. Goovaerts, “On the Dependency of Risks in the Individual
Life Model”, by Katholieke University2004.
A pension fund covers the pensions of persons that work for the same company,
so their mortality will be dependent to a certain extent. If the density of insured people in
a certain area or organisation was high enough then catastrophe such as storms,

32 
explosions, earthquakes, epidemics and so on can cause an accumulation of claims for the
insurer. As pointed out by actuarial practitioners were well aware of these phenomena but
for convenience usually assume that their influence on the resulting stop-loss premiums
was small enough to be negligible. The fact that dependencies may have disastrous
effects on stop-loss premiums was illustrated numerically.
Prof. David F. Babbel Craig (2004) in his research explained the issues related to
managing risk at the firm level as well as ways to improve productivity and performance.
He focused primarily on the economic valuation of insurance liabilities and also
discussed the criteria for a good economic valuation model which was followed by
taxonomy of valuation models.
He divides uncertainty into three categories such as the actuarial risk, market risk,
and non-market systematic risks. Actuarial risk includes casualty, liability, morbidity, and
mortality risks. Market risks include fluctuating interest rates, inflation rates, and
exchange rates. Non-market systematic risks include changes in the legal environment,
tax laws, or regulatory requirements. In a competitive environment, the insurance
companies that delay in adopting the economic focus will, in the end lead to incur the
greater costs due to mispricing of policies and asset / liability imbalances. The first
decision that needs to be made is whether an equilibrium approach will be used, or an
arbitrage-free pricing approach.
--------------------------------------------------------------------------------------------------
Prof.David F. Babbel Craig Merrill, Economic Valuation Models for Insurers by the
Wharton School, University of Pennsylvania, Philadelphia,2004.
The equilibrium approach begins with some assumptions and observations about
the general economy, and from them derives implications for the behavior of the term
structure of interest rates.

An arbitrage-free approach is more suitable for daily trading. Such an approach

is less likely to produce helpful future economic scenarios for solvency testing, because
the evolution of the term structure of interest over time under this kind of model often
does not reflect certain stable economic relationships that are observed in practice. He
concluded that the open architecture would be useful in a valuation model. New asset
and liability instruments are continually being introduced, and no valuation program
without an open architecture would be useful for very long in today’s dynamic economic
environment.

Sathya Swaroop Debasish (2004) has devoted his research to the Customer
preference for Life Insurance in India. Using the technique of factor analysis, his study
identified the five major factors which are responsible for customer preferences which are
stated as risk-return factor, promotional factor, service quality factor, consumer
expectation factor and core product factor. The sample covered six hundred policy
holders, across five states in North India. The opinion of the customers on twenty
reasons for preference of life insurance were measured on a five-point scale ( Likert
Scale) ranging from least important (1) to most important (5) depending on the
importance attached to each reason. The data has been collected through structured
questionnaire based on nonprobability, convenient sampling held during the period of
July 2002 to

33 
------------------------------------------------------------------------------------------------ Prof.
Sathya Swaroop Debasish, (March 2004), “Exploring Customer Preference or Life
Insurance In India” - Factor Analysis Method, Vilakshan-Ximb Journal of Management
Vol.No. 1
March 2003. He found that more and more customers are now identifying the newer
dimension attached to life insurance, to match their life-cycle needs. The buying intent of
a life insurance product by a small investor can be due to multiple reasons depending
upon customers risk return trade off. Another important fact was that, due to the
reduction in the bank interest rates and high degree of volatility in Indian stock market,
investors are looking for an alternate for their short term as well as long term investment
which will provide them a higher return and also safety to their investment. Thus, life
insurance offers the best alternative to small investors in India. He also suggests that
prudent product design, by adding the feature expected by investors, will make the new
life insurance product more attractive for investors.

Prof Tapan K Panda (2004), explained the concept of customer life time value
as one which helps the marketer to analyze the cost of acquiring serving and retaining a
certain set of customers in the market. The concept of product life cycle is giving way to
the concept of customer life cycle focusing on the development of products and services
that anticipate the future need of the existing customers and creating additional services
that extend existing customer relationships beyond transactions. The customer life cycle
paradigm looks at lengthening the life span of the customer with the organization rather
than the endurance of a particular product or brand. Implementing the integration of
systems, processes, service providers, business technology and infrastructure in addition
to the creation of measurement system to monitor the progress augments the customer
value model. This integrated approach can help in calculating
----------------------------------------------------------------------------------------------
Prof Tapan K Panda, Marketing Indian Institute of Management Lucknow, “ Creating
Customer Life Time Value through Effective CRM in Financial
Services Industry ”,2004.
ustomer life time value (CLV) by calculating and analyzing all relevant costs of customer
acquisition and retention and corresponding revenues generated from each customer
categories.
The CLV creation consists of a process of ad-hoc segmentation and data analysis
for data base marketing, a process of automation of decisions against customer requests,
targeted retention activities and decisions to ensure retention effort is aligned to CLV,
identification of customer categories for cross-selling and up-selling of financial services,
development of service and product portfolios aligned to the concept of customer life
time value, alignment of customers to appropriate channels by CLV. The fight has begun
for getting a larger share of the customer pie with the lowest possible cost to serve the
customers. Since profits are drying up in the face of increased competition and customers
are moving very fast from one firm to another on service and complete solution provision
dimension, it becomes important to have an integrated customer relationship management
strategy across the whole organization for generating higher CLV. Without this
awareness and constant attention to varying customer needs a financial service provider
cannot be competitive in today’s world. Integration of process, people, technology and
information will offer a greater value to the customers.

34 
 Dr.JosM.C.Schijns (2004) carried out market research for the management of a
Dutch health insurance company. The primary data were collected by computer assisted
telephone interviewing. He distinguished loyalty into two types as attitudinal loyalty and
behavioral loyalty. Attitudinal loyalty represents a long-term, commitment of a customer
to the organization and it indicates the likelihood of future usage. Whereas behavioral
loyalty refers to customer’s repeat purchases from an organization, his willingness to
recommend the organization, and less price sensitivity and this was ‘value of the
customer to the brand’.
The users of a physical service encounter were more likely to have a higher level
of service encounter satisfaction than users of a remote service encounter. Customers
also prefer to use different contact channels during their life time cycle as the ‘dinkies’
(double income, no kids) prefer remote channels, whereas the ‘empty nesters’ and
retired people prefer personal contact. The authors also confirmed the fact that human
contact facilitates the development of customer relationships between businesses and
their customers more than contact through remote means. Much of what is communicated
in face-to-face situations was communicated through nonverbal communication and the
technologies that filter out nonverbal information decrease social context cues and
therefore limit communication, and hinder building customer loyalty. Therefore, the
health insurance company has to offer all the preferred channels, that is, multi-channel
service secures the customer relationship according to what every customer wants, not
what management decide that every customer ‘needs’.

Dr. Srinivas Durvasula (2005) conducted a study to probe the impact of

relationship quality on behavioral intentions and to compare its predictive power relative
to service quality. Data were collected in the life insurance industry in which an
insurance agent plays an important relational role with the customer. The results of the
analysis demonstrate that neither service quality nor relationship quality is singularly the
best predictor of behavioral outcomes. Instead, using both variables together offers the
best explanatory power. The results clearly revealed that both service quality and
relationship quality operate in tandem to drive the behavioral outcomes. These findings
have enormous implications for industries that have high customer contact such as the
life insurance industry. They also found that the relational dynamics between the client
and the agent are essential in fostering satisfaction, value, favorable word of mouth and
repurchases.
Nina L Reynolds (2005) discussed several types of equivalence that need to be
considered to assess the comparability of the construct of Customer Satisfaction /
Dissatisfaction (CS/D) cross nationally. If CS/D equivalence was not rigorously
established, using CS/D as a culture - free input variable may result in international
marketing strategies that were sub-optimal. In order to establish CS/D equivalence, the
analysis conducted at three levels namely the antecedent factors, CS/D formation process
and the behavioral outcomes. They concluded that the axiomatic assumption of higher the
level of customers satisfaction, higher the brand loyalty and the customer retention rates
and which may not be culturally free. The author found that this assumption holds true in
international markets and it will allow marketing managers to perform successfully.

Prof. O’ Reilly Philip and Dunne Sean (2005) examined how Irish Life and
Permanent, a leading financial services organisation evaluate their Customer Relationship

35 
Management (CRM) initiative performance. The group formed from the merger of Irish
Life and Irish Permannet two market leaders in the life,

Srinivas Durvasula, Steven Lysonski, Subhash C. Mehta And Tang Buck, Relationship
Quality Vs. Service Quality: An Investigation of their Impact on Value, Satisfaction and
Behavioral Intentions in the Life Insurance Industry, 2005.
Dr Nina L Reynolds and Professor AntonisSimintiras, “Establishing CrossNational
Equivalence of the Customer Satisfaction, Dissatisfaction Construct” , European
Business Management School & University of Wales, Singleton Park, UK,2005.

pensions and residential mortgage businesses in 1999. They developed a set of measures
for evaluating the performance of their CRM initiative. The quality was reflected by the
fact that Irish Life was awarded a top third place in the ‘Information Management
Awards 2002’ in the category of CRM for their project. The author believed that the
perspectives and measures used by Irish Life and Permanent to evaluate CRM
performance may be of value to other organisations also implementing CRM initiatives.
Association of British Insurers (2005) conducted one of the most extensive
surveys ever on customers’ perceptions in late 2005. This survey consists of nearly 9,000
customers of 13 insurance companies. The Customer Impact Index has been constructed
to measure the issues that matter most to customers. This includes customers’ views on
the quality of products, the image of the insurer, the effectiveness of processes and the
quality of service. The Index is far more than a simple measure of customer satisfaction
and an authoritative guide to how well the companies serve their customers. The
Customer Impact Index scores indicate the solid performance against challenging
customer expectations.
The Customer Impact Survey measure how well companies were delivering on each
of those Commitments. They found that companies also need to provide excellent service
after the point of sale, working with advisers

--------------------------------------------------------------------------------------------
Prof. O’ Reilly Philip, Prof. Dunne Sean, “Measuring CRM performance: an exploratory
case”, University College Cork, Ireland, 2005.

“Customer Impact”, A Report on Association of British Insurers Survey, 51

Gresham Street, London, 2005, www.abi.org.uk
appropriately. In addition, customers tend to regard their own company more highly than
the industry as a whole. This survey concludes at customers are less positive about the
return they get on their investment than they are about service.

Dr.B.M.Ghodeswar(2006) in his article, explained the customer sensitivity as the

customers were sensitive to many factors which affect their choice of buying an
insurance product from a company. Those aspects were studied by the author in terms of

36 
demographic background, innovativeness, product service offering, price perception, and
the level of customer satisfaction in their past experience.

According to the author, customer sensitivity can be analysed over a period of

time and as family grows, the assets, liabilities, and demographics of the customers
change. The various criteria to analyse customers and segment them in meaningful,
profitable target segments for life insurance products are their lifestyles, demographic
profile, credit information, purchasing behaviour, product preference, spending habits,
response to promotional campaign, etc. Innovativeness is the degree to which an
individual adopts an innovation and the tendency on the part of such customers to learn
and adopt innovations. Innovators challenge rules and procedures and less inhibited about
breaking the established rules and methods and advocate novel perspectives and
solutions. Higher income people have the ability to take risk of trying new products.
Customer sensitivity is also influenced by the services made available online and offline
by the agents. He also states that customers look for a trade -off
----------------------------------------------------------------------------------------
Dr.B.M.Ghodeswar, “Customer Connections - A Key Advantage in Life Insurance
Sector”, Yogakshema, Sep. 2006, p.23- 24.
between product quality and service to gain maximum benefit out of the product service
offering of the company. Price perception is the process by which people select, organize
and interpret information.

Consumer attitudes and price perceptions have an impact on the adoption of

products and services. The pricing category also includes the price rates, fees, charges,
surcharges, service charges, penalties, etc. and the range of acceptable prices was
relatively narrow for price conscious individuals. He also found that customers were
quite sensitive to the level of satisfaction delivered by the company in the past. He
concludes that improving service quality in the eyes of customers creates higher customer
satisfaction.
Jagannath and Santhosh Singh Bais (2006) analysed that customer satisfaction is
of paramount importance to all the insurance companies in general and life insurance
companies in particular. The authors have identified and discussed the issues and
challenges such as the regulatory framework, simplification and rationalization of
insurance laws. They concluded that the success would depend on the LIC of India’s
ability to understand the customer needs and offer the services at the lowest prices with
best quality.
Dr Jack West and Dr. John Ryan (2006) explained satisfaction with quality as a
cumulative experience rather than a most-recent transaction experience. Companies that
have more effective quality management systems
--------------------------------------------------------------------------------------------------
Jagannath B Kukkudi and Santhosh Singh Bais, “Customer Satisfaction Insurance
Sector”, Osmania Journal of International Business Studies, June 2006.

“An ASQ (American Society for Quality) Analysis of Quality & Customer
Satisfaction with Retail Trade, Finance & Insurance, and E-Commerce” by Dr Jack West,
and Dr. John Ryan, ASQ public policy analytical report, March 2006.

37 
improve the quality of their goods and services faster than those that do not. The
differences between service quality and product quality are explained as most of the
products are produced by machines with highly defined and controlled processes. On the
other hand, most services are the result of an interaction between two persons. Since
people are inherently more variable than machines there are more opportunities for
defects to occur in the delivery of a service. Because of this variability, many service
providers operate in a response mode where the conditions change constantly as the
service transaction progresses. As a result, it was difficult to predict and script in
advance.
The American Customer Satisfaction Index (ACSI) uses two primary criteria such
as customization, the degree to which service fulfills the customer’s key requirements
and the reliability, how requirements are delivered. Data derived from the interviews with
the customers were used as inputs to the
ACSI’s econometric model, which combines numerous proxy measures to arrive at an
index number on a 0 to 100 scale. They explained that, determination of quality is a
complex and subjective calculus which involve the simultaneous processing of many
factors inside the mind of the consumer but can be quantified. The proven ACSI finding
was that the stock of companies with higher customer satisfaction scores outperforms the
stock of companies in the same industry, with lower customer satisfaction scores.
Prof. Michel Denuit(2006) and others expressed a risk measure as a mapping
from a class of random variables to the real line. Economically, a risk measure should
capture the preferences of the decision
--------------------------------------------------------------------------------------------
Prof. Michel Denuit, Prof.JanDhaene, & Prof. Marc Goovaerts“ Risk
Measurement With Equivalent Utility Principles” , Catholic University of Leuven ,&
Center for Risk and Insurance Studies, Belgium, March 16, 2006. maker. One of the
major needs for risk measures was related to pricing in incomplete markets. In
incomplete financial markets, hedging and arbitrage-free pricing were two sides of the
same problem. The problem of market incompleteness was particularly relevant in
insurance. This is due to several reasons such as the stochastic nature of insurance
processes, the fact that many insurance risks were not actively traded in the financial
market and the fact that securitized insurance risks often have an underlying index rather
than an underlying traded asset.
They found that the outcome of risk aversion associated with the idea that the
marginal utility of wealth was declining and this was the standard notion of risk aversion
from the EU theory defined by concavity of the utility function. Another finding was that
there were attitudes specific to probability preferences. Risk aversion in probability
weighting corresponds to pessimism. The decisionmaker adopts a set of decision-weights
that yields an expected value for a transformed risky prospect lower than the
mathematical expectation.

Prof.AmitaFatterpekar (2007), in her article explained the three behavioral

measures of loyalty as, customer’s recent purchase, frequency of customer‘s purchases of
different plan over a specified time interval and customer’s lifetime volume of
purchases. Three attitudinal measures of loyalty measure are likelihood of continuing to
do business, of repurchasing, willingness to recommend or serve as a reference. Unlike

38 
 data-mining of RFM (Recency, Frequency, Monetary value), this analysis was based on a
complex nonlinear mathematical model of a company’s customers.
--------------------------------------------------------------------------------------------------
Prof.AmitaFatterpekar, “Measuring Customer Loyalty - A New Marketing Research
Tool, Yogakshema, August 2007, p.41.
Technically, the loyalty customer model was a finite state machine in which a
customer’s current state and predicated future behavior were based on the customer’s
total history with the company expressed by recency (the time since the last purchase),
retention(the duration of the relationship), and all purchases by the customer (what,
when, quantity and amount). The other factors were customer demographic data, inputs
from the company (telemarketing, catalogs).
About Customers recommendation of LIC to their friends, colleagues or relatives
gave the insight and their answer was rated on a 0-10 Scale. Then the author categorizes
the responses into three different categories. The score 9-10 indicates that those
customers were promoters as idea merchants, the score 7-8 secured customers were
passively satisfied customers, and 0-6 scored customers were the detractors fairly
unsatisfied. So the author reveals that customers are to be first identified, and
understood in terms of distinct groups based on their scores, and provide them efficient
services and to achieve the highest satisfaction of customers.
, retailing is the last link that connects the individual consumer with the manufacturing and
distribution chain. Some of the key features of retailing include:

• Selling directly to customers with out having any intermediaries

• Selling in smaller units / quantities, breaking the bulk
• Present in neighborhood or in the location which is quite convenient to the customers.
• Very high in numbers
• Recognized by their service levels
• Fitting any size and or location

It is assumed that due to the entry of a number of retail outlets in the urban and semi urban
areas, the mindset of the existing customers have undergone drastic changes. Besides it is
also reported that the traditional retailing such an age old Grocery shops have directly faced
competition with the organized retailing sector. In some parts of the country, it is reported
that the traditional retails are resisting the entry of organized shopping malls. For instance the
traditional retails of Bhubaneswar with the active support of the consumers at large didn’t
allow reliance Fresh to start outlet initially.

RECENT TRENDS

• Retailing in India is witnessing a huge revamping exercise as can be seen in the graph
• India is rated the fifth most attractive emerging retail market: a potential goldmine.
• Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade)
makes up 3 percent or US$ 6.4 billion
• As per a report by KPMG the annual growth of department stores is estimated at 24%
• Ranked second in a Global Retail Development Index of 30 developing countries
drawn up by AT Kearney.

39 
Retailing in India: the present scenario

The present value of the Indian retail market is estimated by the India Retail Report to
be around Rs. 12,00,000 crore($270 billion) and the annual growth rate is 5.7 percent.
Retail market for food and grocery with a worth of Rs. 7, 43,900 crore is the largest of
the outlets help

40 
CHAPTER-3
PROFILE OF THE STUDY
3.1AREA PROFILE
The history of Indian insurance is very old and traditional in nature. The
historical evidence can be found in the writings of Manu, (Manusmrithi),
Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra). The writings clearly mention
the concept of insurance in terms of pooling of resources that could be re-distributed
in times of calamities such as fire, floods, epidemics and famine. The Oriental Life
Insurance Company was the first corporate entity in India offering life insurance
coverage, was established in Calcutta in 1818 by Bipin Behari Dasgupta and other
important personalities of India. There was disparity in terms of overcharging the
amount of premium among the Indians by the Europeans. The Indians were its target
customer, and there was differential rate of premium for Europeans and Indians at the
same point of time. These grave situations faced by the Indians at that time, led to the
birth of first native insurance provider, the Bombay Mutual Life Assurance Society,
formed in 1870.
The other insurance companies established during the pre-independence period
included:

1. Bharat Insurance Company (1896)

2. United India (1906)
3. National Indian (1906)
4. National Insurance (1906)
5. Co-operative Assurance (1906)
6. . Hindustan Co-operatives (1907)
7. Indian Mercantile
8. General Assurance
9. Swadeshi Life (Later Bombay Life)

The conditions were grave that prevalent during pre-independence period and
were not favorable for the overall economic development of India. The economic and
political situation got worsened during the India's First War of Independence. Further,
the situation deteriorated with the adverse impact and undesirable effects of the World
War I and World War II on the economy of India. India was struggling from the war
of independence during the first half of the 20th century, faced the period of
worldwide economic crises caused by the great depression and the direct effect of this
war was on the economy that led to a high rate of bankruptcies and liquidation of life

41 
 insurance companies. The direct effects were on general public, who lost the faith in
life insurance cover and it affected the whole life industry.

The modern form of life insurance concept came to India from England in 1818
with the establishment of Oriental Life Insurance Company (OLIC) in Calcutta by the
Europeans. The main reasons behind formation of the company were to help the
widows of their kin. The Indians were first neglected but later on, due to urging
voices raised by one of its directors (Shri Babu Muttyal Seal), Indians were also
covered by the company at the end of the day. With the passage of time, by 1868, 285
companies were doing insurance business independently in India. The companies
were earlier governed by Indian Companies Act 1866. There were 174 companies
which were in existence, when British parliament enacted Insurance Act 1870. These
companies were insuring European lives at lower premium and treated Indians as sub-
standard lives and charged them an extra premium of 15% to 20% for the same
insurance policy. The revolutionary efforts to change the existing condition were
taken up by the reformers and social workers of that time like Raja Ram Mohan Ray,
Dwarakanath Tagore, RamatamLahiri, RustomjiCowasji and other led to entry of
Indians in insurance business. The company heralded the birth of first Indian life
insurance company in the year 1870, and provided insurance cover to the Indian lives
at normal rates of premium. The later development in insurance industry led to the
establishment of “Oriental Government Security Life Insurance Company”, in 1874,
with Sir Phirozshah Mehta as one of its founder directors and emerged as a leading
Indian insurance company on later stage under the name “Bombay Life Assurance
Society”. The basic intention of the Indian Insurance Industry was to carry out the
objective of providing social security to the society as a whole. The
Bharat Insurance Company (1896) was established as a result of inspiration of nationalism
and the Swadeshi movement of 1905-1907 gave rise to more insurance companies in India.
The United India in Madras, National Indian and National Insurance in Calcutta and the Co-
operative Assurance at Lahore were established in 1906 as a result of rise in nationalism at
that time. The Hindustan Co-operative Insurance Company took its birth in the house of the
great poet and a great visionary Rabindranath Tagore in 1907, at Calcutta. The important
companies which were established during the same period of time include Indian Mercantile,
General Assurance and Swadeshi Life (later Bombay Life). In the year 1912, the Life
Insurance Companies Act, and the Provident Fund Act were passed and before that there was
no legislation to regulate insurance business in India at that time.

The Life Insurance Companies Act, 1912 made it mandatory for the first time in
Indian history, that the premium rate tables and periodical valuations of companies
should be certified by an appointed actuary. The problem of discrimination and
biasness continued with the Indians and were neglected in comparison with Europeans
in this Act also. The first two decades of the twentieth century saw terrific growth in
Indian insurance business. In 1914 there were only 44 companies and with the passage
of time, saw a tremendous growth in the number of companies to 195 in the year
1940. There was a vertical business growth during this period and it grew from
Rs.22.44 crores to Rs.304.03 crores (1628381 polices) within a short span of time.
The life fund steadily grew during nascent stage from Rs. 6.36 crores to Rs. 62.41
crores. The growth of life insurance was quite steady during these periods of time
except for a setback in 1947-48 due to aftermath of partition of India. In 1948, there

42 
 were 209 insurances, with 712.76 crores business in force under 3,016,000 policies
and the life fund steadily grew to 150.39 crores. The Insurance Act 1938 provided
legislation and governing with strict state control over insurance business for the first
time, not only life insurance but also for non-life insurance.

There was frequent demand from time to time for nationalization of life insurance
industry but it gathered momentum in 1944 when a bill to amend the Life Insurance
Act 1938 was introduced in the Legislative Assembly. In spite of the tremendous
growth of many insurance companies, per capita insurance in India was merely
Rs.8.00 in 1944(against Rs. 2, 000 in US and Rs.600 in UK), besides some companies
were indulging in malpractices, and a number of companies went into liquidation at
time. However, it was much later on the 19th of January, 1956, that life insurance in
India was nationalized. There were 154 Indian insurance companies, 16 non-Indian
companies and 75 provident operating in India at the time of nationalization of
insurance. The nationalization process was accomplished in two stages; initially the
management of the companies was taken over by means of an Ordinance, and later,
the ownership too by means of a comprehensive bill. The Parliament of India passed
the historical Life Insurance Corporation Act on the 19th of June 1956, and the Life
Insurance Corporation of India was created on 1st September 1956. It was established
with the firm objectives of spreading life insurance much more widely and in
particular to the rural areas with a view to reach all insurable persons in the country,
providing efficiently and effectively the financial cover at a reasonable cost. LIC had
5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate
office in the year 1956.

The economic development and growth of India in financial services over the past
two decades has been one of the most significant in the global financial system. The
trend of growth traces its origin in the early 1990s after the introduction of economic
reforms in India. The effect of liberalization compels the government to establish a
committee for reviving the insurance sector in India. The report of the committee was
accepted and insurance industry was liberalized with the establishment of IRDAI Act
1999. The insurance industry was opened to all and FDI limit was allowed to 26
percent from foreign players and 74 percent with Indian players. The FDI limit has
now been increased to 49 percent from 26 percent earlier with effect from March
2015. There were significant positive changes found in Indian insurance industry after
the liberalization and entry of private companies. Within a short span of time, private
insurance has acquired 13 per cent of the life insurance market in 2003-04 while
captured 40.35 per cent in 2007-08 respectively. This was a remarkable growth for the
private life insurance companies. However, there is still a huge untapped area which
needs to be penetrated efficiently and effectively for better growth of the industry.
The insurance companies have a pivotal role in offering insurance products according
to the need and requirements of the people and at the same time at affordable price.
The wider penetration of insurance critically depends on the number of availability of
insurance products and services offered to the people of India. The various elements
which shape the competitive structure of the insurance industry includes huge
untapped market, proliferation of new schemes, new innovative products, perception
of insurable risks of Indian consumers, competitive pressures arising from integration
of bank and insurance i.e. banc-assurance, impact of information technology, and the

43 
role of insurance industry in financial services industry. Some of the major challenges
faced by the Indian insurance sector in recent time include the adopting of effective
marketing strategies, market driven demand conditions, throat-cut competition in the
sector, use of innovative products, effective distribution systems, and use of
innovative technology.
The strength of Indian economy can be judged from the position it held in
different economic world forum right after economic liberalization. India recorded the
highest growth rates in the mid-2000s, and is one of the fastest-growing economies in
the world. India ranks as world's seventh-largest economy by nominal GDP and third-
largest by purchasing power parity (PPP). India became one of the fastest growing
major economies, post economic reforms in 1991 and the GDP of India in October
2015 was $ 2.18 trillion and $ 8.02 trillion in (PPP). The growth in Indian economy
was led primarily due to increase in the size and income of the middle class consumer,
a large young labor force and considerable foreign investments from both developing
and developed nations. India also topped the World Bank’s growth outlook for 2015-
16 for the first time with the economy having grown 7.6% in 2015-16 and expected to
grow 7.7-8.0% in 2016-17. According to the Economic Survey 2016, the Indian
economy would grow between 7.0 percent and 7.75 percent in the FY 2016-17 India's
large service industry accounts for 57 percent of the country's GDP while the
industrial and agricultural sectors contribute 26 percent and 17 percent respectively.
(Economic Survey, 2014-2015). The insurance industry plays an important role in the
financial infrastructure of an economy, and its viability and strengths have far
reaching consequences not on only capital markets, but also in real sector. The
insurance sector is a boon for economic development as it provides long-term funds
for infrastructure development and strengthens the economy with large amount of
savings and investment. Further, insurance helps in employment generation, not only
for the insurance industry, but has also created significant demand for a range of other
associated professionals such as brokers, insurance advisors, agents, underwriters,
claims managers and actuaries respectively. It is not surprising, therefore, that
economists have long argued that insurance facility is necessary to ensure the
completeness of a market (B. Suman, 1999). The drastic change in the concept of
consumerism in India led to the high level of growth in consumer class, increasing
insurance awareness, rise in domestic savings and investments are among the most
critical factors that have positively driven the market penetration of the insurance
products among its customer’s segments significantly. However, there are large
untapped areas, which need more emphasis by the insurance companies and the
insurance market regulator to get benefited from the developing insurance industry.
The insurance penetration and insurance density can be increased by imparting
financial literacy, incentivizing Indian households to transfer savings from physical
assets to financial assets and taking the distribution network to rural areas. The
insurance penetration level of India is higher than Pakistan, Sri Lanka, China, and
Brazil, but it is still at developing stage and considerably a long way to go to reach the
level of developed nations. The increase in awareness among customers about
insurance in India, effective marketing strategies adopted by the insurance companies
and innovative advertising campaigns carried out by the insurers has given rise to the
insurance market. The life insurance business is primarily influenced by the state of
the economy of a country and major factors that influence it are the rate of growth of
GDP, the levels of domestic savings, household financial savings and disposable

44 
income of the customers. The size of the life insurance market is directly or indirectly
influenced by the rate of growth of population, social security and healthcares
systems, changes in customs, social practices risks etc. The recent development in the
Indian economy, market driven reforms and healthy competition among insurers have
created tremendous opportunities for the growth of the life insurance industry.
However, in the present chapter researcher will discuss insurance and life insurance
only and its past and present scenario.

3.2 INDUSTRIAL PROFILE

Life insurance is generally considered as a means of protecting one’s family
against the unforeseeable circumstances. In case of unfortunate death, the deceased
person may be one of the bread winners of the family. The life insurance company
will not get back the deceased person but at least support the family financially at this
crucial time. The life insurance benefits may accrue to other dependent family
members for supporting their future life. For instance, an insurance company takes the
risk of large and uncertain losses in exchange for small premiums. This gives a sense
of confidence and security to the insured individual through the protection of
insurance in the event of an unfortunate incident.

In large sized commercial and industrial organizations, it facilitates operations

as many of the risks are transferred to the insurer (NCAER, 2011). By the nature of
its business, life insurance is closely linked to saving and investing. The mutual
dependence of life insurance and capital markets plays an instrumental role in
channeling funds and investment capabilities in the development of the Indian
economy. Life insurance is a form of risk management which is used primarily to
protect the life of insured against the risk of a contingent, uncertain loss and to cover
the immediate financial loss. Life insurance is essentially an arrangement where the
losses experienced by a few are extended among many who are exposed to similar kin
of risks by paying certain amount called as premium. The insured receives a contract
called an insurance policy which details the conditions and circumstances under which
the insured will be compensated (A. Sugirtha Rania, 2007).

3.3 PRODUCT PROFILE -SUMMURY OF

PRODUCTS
LIC Life insurance is a contract between the insured and the insurer, where
the insurer agrees to pay the designated beneficiary a sum of money upon the
occurrence of the insured individual’s death or other event. In return, the insured
agrees to pay a stipulated amount at regular intervals or in lump sums. Insurance other
than ‘Life Insurance’ falls under the category of General Insurance in India. Every
family counts on every day for financial support: food, shelter, transportation,
education, and much more. The bread winner of the family has plans for the future
and dreams for the family: another child, a bigger home, a new business, college
education, travel and retirement. The life insurance is all about making sure to the
family that they have adequate financial resources to make those plans and dreams
come true, if the earning member were to die prematurely. Having a family means
dependant, which in turn means financial commitments towards them like children’s

45 
 education, medical expenses etc. The dependent members of the family may includes
as the spouse and children (as beneficiaries), they can at least have their dreams come
true with the amount received from life insurance company as compensation. Life is
full of uncertainty and risk but the key concept is not to eliminate risk rather, to
estimate it accurately and manage it wisely. Today, the market offers different life
insurance plans that not just to cover individual need but at the same time multiple
growths in the wealth simultaneously.

PROCESS PROFILE
The life insurance industry in India has come a long way since many
regulations took place with the objective towards market-driven competition. The
passage of historical bill, Insurance Regulatory and Development Authority of India
(IRDAI) in 1999, which later became an Act, laid the foundation for the development
model for Insurance industry. This historical landmark has brought about major
changes to the industry for both the life and non-life insurance sectors in India, which
were nationalized in the 1956 and 1972 respectively, and liberalized in 1999. The
beginning of a new era started after year 2000, the insurance development has seen
the entry of international insurers, the proliferation of innovative products,
technologies, distribution channels and effective marketing strategies. The growing
demand for insurance, especially life insurance around the world continues to have a
positive effect on the Indian insurance industry. India, being one of the fastest-
growing economies among the other developing nations has exhibited a significant
increase in its GDP, and an even larger increase in its GDP per capita income and
disposable income. The increase in disposable income, coupled with the high
potential demand for life insurance offerings, the huge untapped market and the large
number of un-insured population has opened many doors for both domestic and
foreign insurers in India. The life insurance industry in India has apparently
progressed since the time when businesses were tightly regulated and concentrated in
the hands of the public sector insurer.

The post liberalization period which is known as Phase I, has witnessed an

unprecedented surge in the sales of insurance products particularly life insurance, with
the industry recording a CAGR of 24.2 percent in annualized premium equivalent
during FY2000–2005. (CII Report, Sep 2010) The first phase of development in life
insurance industry was particularly relied on regular capital infusions from the
promoters and foreign players. The relatively high pressure in new business and
expanding distribution networks across the country have resulted in accounting losses
for the whole industry. The next four to five years can be termed as Phase II, which
saw the trends of the insurers in focusing more and more on intensifying product
range, developing innovative products, adopting effective marketing strategies and
building a robust distribution channel. During this period, i.e., FY2005–2009, the
industry grew at a Compounded Annual Growth Rate (CAGR) of 25.9 percent. The
insurers were rational in decision making and then shifting weight from the phase I
(philosophy of growth versus profitability) to the Phase II (mantra of profitable
growth). The trend of the market was shifting towards “growth” to “profitability,”
with product pricing becoming more rational based on more conservative and limited
assumptions available with the insurers. The product innovation was continued, then a
new concept of product engineering changed the traditional policies and protection as

46 
 well as investment was offered for the first time simultaneously in the form of unit-
linked investment plans (ULIPs).

The Indian life insurance industry has achieved respectable Compounded

Annual Growth Rate (CAGR) growth in Phase III. During this period, i.e., FY2009–
2014, the industry has grown at a CAGR of 10.5 percent. The phase is marked by
bringing the industry to a stable position, ensuring “stable profitable growth.” The
estimated CAGR of phase IV i.e. FY2015-2019, it is expected to reach 12-15 percent
of (CAGR). Most of the large insurers will now look to decelerate the pace of
distribution growth and increase their focus on the retention strategies, adoption of
effective marketing strategies, providing of innovative products through effective
distribution channel.
The Insurance Regulatory and Development Authority of India (IRDAI) have
introduced certain regulations to the insurers for disclosing facts, showing actual
profitability, maintaining transparency, accepting accountability and managing the
business in the interest of consumer protection. Further, the regulator issued a set of
purposed guidelines on 9 September 2011, the norms for the Initial Public Offering
(IPO) of life insurance companies. But the regulations yielded zero results, because of
the market conditions were not conducive none of 24 life insurance companies
succeeded in offering IPO’s. Earlier the foreign joint venture partners had been
reluctant to list because their holdings would be diluted under an IPO, but the current
ruling government has now raised the foreign ownership cap for insurance companies
from 26 percent to 49 percent, removing a roadblock for IPO. In a sector where none
of the players are listed, the IPO of life insurance companies could be a milestone in
the future growth of the sector. Risk management plays an important role in ensuring
the development of the insurance business in India. In the coming years, India is
planning to shift from the current solvency I norms i.e. factor based process to risk-
based solvency norms, called the solvency II model. The key objective of solvency II
is to have a uniform policyholder protection across countries through a robust system.
The government, regulator and the life insurance companies are now more focused on
maintaining a favorable environment for sustainable growth, higher contribution from
the industry to economic development and the increasing reach of insurance to the
untapped areas of the country for better penetration level and density. The insurance
sector in India governed by Insurance Act, 1938, the Life Insurance Corporation Act,
1956, General Insurance Business
(Nationalization) Act, 1972, Insurance Regulatory and Development Authority of
India (IRDAI) Act, 1999 and other related Acts. The following table given below as
table 4.1 briefly depicts the evolution of the insurance sector in India in tabular form.

47 
 Table 4.1: Chronological Evolution of the
Insurance Industry

Year Development of Insurance in India

1818 Oriental Life Insurance Co. was established in Calcutta.

1850 Triton Insurance company Ltd. set up in Calcutta.

1871 Bombay Mutual, India’s first life insurance company set up.

1874 Oriental Insurance Company set up.

1907
Indian mercantile Insurance ltd. the first company to transact all classes of general
insurance business set up.

1912 Life Assurance Act (Act VI) of 1912 enacted.

1914 Government started publishing returns of life insurance companies.

1928
The Indian Insurance Companies Act was passed to collect statistical data on both life
and non-life.

1937 Draft Insurance Bill introduced

1938 The Insurance Act of 1938 was passed; there was strict state supervision to control
frauds.

1945 Committee headed by Cowasji Jehangir set up to review malpractice and take corrective
steps.

1950
Insurance Amendment Act, 1950 put in place based on recommendations of a
committee under S R Ranganathan. Among other things the Act provided for a
Controller of Insurance (CoI), constitution of Life Insurance Corporation and the

General

Insurance Council.
1956

The Central Government took over 245 Indian and foreign life insurers as well as
provident societies and nationalized these entities and The LIC Act of 1956 was passed.

1957 Reinsurance Corporation of India, first Indian Reinsurer set up.

1957 The code of conduct by the General Insurance Council to ensure fair conduct and ethical
business practices was framed.
1968

Insurance Act amended further to provide effective control over general insurance
companies requiring increased deposits from them; also provided for setting up of TAC.

1971 Ordinance promulgated to replace the General Insurance Emergency Provisions Act,
1971.

1972 General Insurance business nationalized.

1973 GIC set up.

1991 Beginning of Economic Liberalization.

1993 Malhotra Committee constituted for insurance sector reforms and deregulation.
(April)
1994 De-tariffication of aviation, liability, personal accidents and health and marine cargo
products.

1996 Interim insurance regulatory authority setup through a resolution.

(Jan)

1996 The IRA bill drafted.

(Sep)

1996 IRA bill introduced in parliament and referred to Standing Committee.

(Dec)

1997 Insurance Regulatory Authority came into existence.

1997 IRA is withdrawn following opposition to foreign participation.

(Aug)

1997
(Nov) Indian government clears greater autonomy to LIC, GIC and its four subsidiaries.

1998 Union budget announces opening up of insurance sector.

(Jun)

1998
(Nov) Union budget decides to allow 40percent foreign equity participation in Private sector
(26percent to foreign companies and 14percent to NRI’s, OCB’s, and FIIs.
1999
The Standing Committee headed by Murali Deora decides that foreign equity in private
insurance should be limited to 26percent. The IRA bill is renamed the Insurance
Regulatory and Development Authority of India (IRDAI) Bill and cleared by
parliament.

2000 IRDA made statutory body.

2000 (Jul) IRDAI issues first set of guidelines for insurance companies.

2000 First three licenses awarded to private companies; three others receive inprinciple
(Oct) clearance.

2000 ICICI prudential and HDFC Standard Life launch insurance policies become first
(Dec) private companies to operate in India since 1972 and first life insurers in almost five
decades.
2002 IRDAI Insurance Brokers Act passed.

2002-03 Formation of the Agricultural Insurance Company of India Ltd. (AICIL) to underwrite
crop insurance and other allied insurance business in the country.

2005 De-tariffication of marine hull.

2006 Relaxation of foreign equity norms, thus facilitating the entry of new players.

2007 De-tariffication of all non-life insurance products except the auto third-party

liability segment.

2008

The Insurance Laws (Amendment) Bill 2008 was tabled for the first time in parliament
for raising the FDI limit from 26 percent to 49 percent.

2008 The Life Insurance Corporation (Amendment) Bill was introduced in parliament to raise
its capital from existing Rs 5 crore to Rs 100 crore.

2015 FDI limit has been increased from 26 percent to 49 percent by passing the bill from both
the houses of parliament.

2015 Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which is the government’s
Life Insurance Scheme announced in Union Budget 2015-16.
2015
Pradhan Mantri Jan DhanYojna, launched by Government of India on 28th Aug
2014, and a cover of life insurance up-to Rs. 30000 for those who subscribe to the bank
account for the age group 18-59 Yrs.

2016 Pradhan Mantri FasalBimaYojna, launched by Government of India on 13th Jan 2016,
for increasing the crop insurance in India to 50 percent.

Source: Compiled from Various Sources

There is huge untapped market area in Indian life insurance market and it
happens to be a very big opportunity for the insurers in India. The premium collected
by the insurer is invested in various sectors and contributing to the country’s
economic development. The insurer further helps in infrastructure development,
contributing to the overall GDP and generating employment at a large scale. The total
value of premiums of private sector was only Rs.6.45 crores in the FY 2000-01 while
LIC was having Rs.34892.02 crores. During the period of 15 years, the market has
totally changed with the private players are contributing total premium of
Rs.88433.49 crores while the stateowned LIC contributes Rs.239667.65 crores. The
changing trend from FY 2010-11 to FY 2014-15 is stated in the given Table 4.2.
Table 4.2: Total Life Insurance Premium
(FY 2015-2019) (Rs Crore)

Life Insurers 2014-15 2015-16 2016-17 2017-18 2018-19

Aegon Religare 388.51 457.32 430.50 453.00 559.20

Aviva 2345.17 2415.87 2140.67 1878.10 1796.25

Bajaj Allianz 9609.95 7483.80 6892.70 5843.14 6017.30

Bharti AXA 792.02 774.16 744.52 872.65 1053.32

Birla Sunlife 5677.07 5885.36 5216.30 4833.05 5233.22

Canara HSBC 1531.86 1861.08 1912.15 1823.42 1657.02

DHFL 95.04 167.01 236.79 305.86 735.10

Pramerica

.. 10.88 54.83 110.90 193.08

Edelweiss Tokio

Exide Life 1708.95 1679.98 1742.36 1830.67 2027.48

726.16 779.58 678.29 634.16 604.25

Future Generali

HDFC 9004.17 10202.40 11322.6 12062.9 14829.90

Standard 8 0

ICICI 17880.63 14021.58 13538.2 12428.6 15306.62

Prudential 4 5

IDBI Federal 811.00 736.70 804.68 826.25 1069.62

India First 798.43 1297.93 1690.08 2143.36 2034.11

 Kotak 2975.51 2937.43 2777.78 2700.79 3038.05
Mahindra

Max Life 5812.63 6390.53 6638.70 7278.54 8171.62

PNB Metlife 2508.17 2677.50 2429.52 2240.59 2461.19

Reliance 6571.15 5497.62 4045.39 4283.40 4621.08

Sahara 243.41 225.95 205.38 204.63 166.86

SBI Life 12945.29 13133.74 10450.0 10738.6 12867.11

3 0

Shriram Life 821.52 644.16 618.07 594.24 734.66

Star Union Dai- 933.31 1271.95 1068.80 948.75 1134.66

ichi

Tata AIA 3985.22 3630.30 2760.43 2323.70 2121.79

Private Total
88165.24 84182.83 78398.9 77359.3 88433.49
(11.08) (-4.52) 1 6 14.32
(-6.87) (-1.33)

LIC
203473.4 202889.2 208803. 236942. 239667.6
0 8 58 30 5
(9.35) (-0.29) (2.92) (13.48) (1.15)
Industry Total
291638.6 287072.1 287202. 314301. 328101.1
4 1 49 66 4
(9.87) (-1.57) (0.05) (9.44) 4.39

Source: IRDAI Report 2014-15

Note:
1. Figures in the brackets represent the growth over the previous year in
per cent.
2. Previous year’s figures revised by insurers

Fig.4.1: Total life insurance premium from

FY 2015-19
Total Life Insurance Premium
700000
600000
e 500000
o 400000
C 300000
sR
200000
100000
0
2014- 2015- 2016- 2017- 2018-
15 16 17 18 19
Industry 291638.84287072.11287202.49314301.66328101.14
LIC 203473.4202889.28208803.58236942.3239667.65
Private 88165.2484182.8378398.9177359.3688433.49

Source: IRDAI Report 2014-15

The insurance industry in India is still dominated by the public sector giants
and the private insurance players are continuously capturing the market gradually by
providing innovative products and services. With the entry of multinational insurance
player as joint venture with Indian companies, it creates a new platform for the overall
development of the industry and gives idea of innovative products, technological
upgradation, effective marketing strategies, and better distribution channels. The
number of players in the sector has gone up from six insurers (including the LIC, four
public sector general insurers and the General Insurance Corporation (GIC) as the
national re-insurer) in the year 2000 to 53 insurers operating in the life, non-life and
re-insurance segments as of 31st March 2015. While insurance penetration in India
was only 1.93 percent of GDP (life: 1.39 and non-life: 0.54) in 1999, it has now
reached 3.3 percent (life: 2.60 and nonlife: 0.7) indicating that more and more Indians
are getting themselves and their assets insured. The density level also indicates the
premium is collected by both life and nonlife insurers on a large scale. The data
clearly shows that the life insurance density was 9.1 and in non-life insurance 2.4
respectively. According to the IRDAI report of FY 2014-15, the insurance density
(life: USD 44 and non-life insurance USD11) clearly stated the rise in premium level
in India. India’s growing consumer class, rising insurance awareness, increasing
incomes along with domestic savings and globalization are among the most critical
factors that have positively driven the market penetration of the insurance products
among its consumer segments (India Insure Report). In present scenario India's
Insurance Regulatory and Development Authority of India (IRDAI), has granted
registration to twenty three private life insurance companies and twenty two private
non-life insurance companies respectively. Counting the existing public sector
insurance companies, there are currently total twenty four Indian insurance companies
in the life insurance business and twenty eight operating in general insurance business.
General Insurance Corporation has been approved as the only Indian reinsurer for
underwriting only reinsurance business. With the increase in the FDI limit from 26%
to 49% in insurance sector, more and more reinsurer will come to India for investing
in untapped market. Registered numbers of the Indian insurance companies including
both life insurance companies and general insurance companies are given below in
table 4.3.
Table 4.3: Registered Insurers in India
Registered Insurers in India (As on 31st March, 2019)

Types of Business Public Sector Private Sector Total

Life Insurance 01 23 24

General Insurance 06* 22** 28

Re-Insurance 01 00 01

Total 08 45 53

Source: IRDA Annual Report 2015-1 9

* Includes Specialized insurance companies - ECGC and AIC.

 ** Includes five Standalone Health Insurance Companies - Star Health & Allied
Insurance Co., Apollo Munich Health Insurance Co., Max Bupa Health Insurance Co.,
Religare Health Insurance Co., and Cigna TTK Health Insurance Co.
Currently there are 24 life insurance companies undertaking life insurance
business in India. Government owned Public Sector Company, Life Insurance
Corporation of India is the largest life insurer in the country. The Indian Insurance sector
underwent several phases and changes, in 1999, when the Government of India opened up
the insurance sector for private companies to solicit insurance, allowing FDI up to 26%,
the Insurance sector in India is grew by leaps and bounds. The current ruling goverIndia
win the crown of having the highest retail outlet density in the world. The contribution of
retail sector to GDP has been manifested below:

Country Retail Sector's share

in GDP (in %)
India 10
USA 10
China 8
Brazil 6
As can be clearly seen, retailing in India is
superior to those of its contenders. Retail sector
is a sunrise industry in India and the prospect
for growth is simply huge. There are many
factors that have stimulated the rise of the
shopping centers and multiplex-malls in a jiffy.
Some of them can be listed as follows:
Government of India opened up the insurance
sector for private companies to solicit insurance,
allowing FDI up
Life Insurance Joint Venture With Foreign Joint Venture Year of
Company Company Origin Establish
ment

Aegon Aegon (26% Stake) Netherland 2008

Aviva Aviva Plc(26% Stake) United 2002

Kingdom
Germany
government has
increased the
FDI limit from
Bajaj Allianz Allianz SE (26% Stake) 26% to 49% 2001
 from March
2015. This will
help the Indian
insurance
industry in
getting capital
inflow in the
form of
investment from
foreign partners.
The following
are the details of
the life
insurance
companies in
India and their
venture with
foreign
company along
with their
current stake
and
establishment
year in the
insurance
industry is
shown in table
4.4

Bharti AXA AXA (49% stake) France 2006

Birla Sunlife Sun Life Financial Inc (26% Canada 2000

Stake)

HSBC Insurance (26%

Canara HSBC Hong Kong 2008
Stake)

DHFL Prudential Financial Inc USA 2013

Pramerica (26% Stake)
Edelweiss Tokio Tokio Marine Holding Inc Japan 2011
(49% Stake)

Exide Life 100% owned by Exide India 2001

Industries

Future Generali Generali Group (26% Stake) Italy 2007

2000
HDFC Standard Life Plc (35% United
Standard Stake) Kingdom

ICICI Prudential Plc (26% Stake) United 2000

Prudential Kingdom

IDBI Federal Ageas Insurance (26% Stake) Europe 2008

India First 2009

Legal and General (26% United
Stake) Kingdom

Kotak Old Mutual (26% Stake) South Africa 2001

Mahindra

Max Life Japan 2000

Sumitomo Insurance Group
(26% Stake)

PNB Metlife USA 2001

Metlife International
Holdings LLC (MIHL) (26%
Stake)
 Reliance Nippon Life Insurance Japan 2002
(49% stake)

Sahara 100% owned by Sahara India 2004

SBI Life BNP Paribas (26% Stake) France 2001

Shriram Life Sanlam (26% Stake) South Africa 2005

Star Union Dai-ichi Life (26% Stake) Japan 2007

Daiichi

Tata AIG USA 2001

American International
Group (26% Stake)

LIC 100% owned by Government India 1956

of India

Source: Compiled from various Sources

On the basis of total premium income, the market share of LIC decreased from
75.39 per cent in 2013-14 to 73.05 per cent in 2014-15. The private companies are
continuously offering innovative and tailor made products according to the needs of
the customers. The market share of private insurers has increased from 24.61 per cent
in 2013-14 to 26.95 per cent in 2014-15. The market share of LIC and the private
players are depicted in the given table 4.5

Table 4.5: Market Share of Life

Insurers
Insurer FY (2017-18) FY (2018-19)
 Regular Premium (1)

LIC 60.88 49.12

Private Sector 39.12 50.88

Total 100.00 100.00

Single Premium (2)

LIC 86.72 83.58

Private Sector 13.28 16.42

Total 100.00 100.00

First Year Premium (3=(1+2))

LIC 75.47 69.27

Private Sector 24.53 30.73

Total 100.00 100.00

Renewal Premium (4)

LIC 75.34 75.04

Private Sector 24.66 24.96

Total 100.00 100.00

Total Premium (5=(3+4)=(1+2+4))

 LIC 75.39 73.05

Private Sector 24.61 26.95

Total 100.00 100.00

Source: IRDAI Report 2014-15

Figure 4.2: Regular Premium of Life

Insurers
Regular Premium
120
100
80
60
40
20
0
LIC Private Sector Total
FY (2017-18) 60.88 39.12 100
FY (2018-19) 49.12 50.88 100

Figure 4.3: Total Premium of Life Insurers

Total Premium
120
100
80
60
40
20
0
LIC Private Sector Total
FY (2017-18) 75.39 24.61 100
FY (2018-19) 73.05 26.95 100
4.6: Regulation of Insurance Business
The changing scenario after the introduction of economic reforms in the year
1991, there was also a need for proper regulation of business in India. When the
government of India decided to liberalize the insurance industry, with this concern, a
regulator was formalized for the insurance sector in 1999, Insurance regulatory
development authority of India (IRDAI) was set up under the Companies Act 1956.
According to the rule laid down by the regulator, any company aspiring to do business
either in Life or in Non-life Insurance business need to register itself with IRDAI. The
regulator not only looks at the legal frame work of the concerned company, but also
prohibits 100 percent foreign ownership of an Indian insurance company. The Indian
promoter is required to invest either wholly or teaming up with a foreign insurer,
which can own not more than 26 percent of the shares in a venture but now the limit is
raised to 49 percent shareholding from the year March 2015 onwards. The overall
objective of the IRDAI is to further deepen the reform process throughout India in the
insurance sector and also to meet the growing capital requirement of insurance
industries.

The IRDAI facilitates the competition and helps in enhancing the customer
satisfaction through increased consumer choice and lower premiums by ensuring the
financial security of the insurance market. The IRDAI has opened up the market for
insurance companies in August 2000 with the invitation for application for
registrations. The Authority has the power to frame regulations under Section 114A of
the Insurance Act, 1938 and from the establishment in the year 2000 onwards has
framed various regulations ranging from registration of various companies for
carrying on insurance business to protection of policyholder’s interests. The primary
objective for the current regulations is to promote stability in the market and to protect
the interest of the policyholders. The effective regulation from the authority affects
the economics of both the supply side (the policyholder’s supplier of funds) as well as
the demand side (the insurers-borrowers of funds).

Realizing the importance of enhancing the awareness regarding various

aspects of insurance, the IRDAI has launched an awareness campaign with the
objectives of:

a. Developing and promoting efficiency of the insurance sector

b. Improving policy holder protection
c. Setting up a dispute resolution mechanism
d. Adjudicating the disputes between insurers and intermediaries
e. Promoting efficiency in the conduct of insurance business
f. Regulating investment of funds by insurance companies

In India, the Ministry of Finance is responsible for enacting and implementing

legislations for the insurance sector and the Insurance Regulatory and Development
Authority of India (IRDAI) is entitled with the regulatory and developmental role. The
government is having share in some major companies in both life and non-life
 insurance companies. Today there are 24 life insurance companies, 28 general
insurance companies including the Export Credit Guarantee Corporation (ECGC) and
Agriculture Insurance Corporation of India (AICI) and one re-insurer Company i.e.
General Insurance Company together are currently operating in India. The following
figure 4.2 clearly states about the Indian insurance industry structure.
Figure 4.4: Indian Insurance Industry
Structure

Ministry of Finance
(Government of India)

IRDAI

Life Insurance Non-Life Insurance

Public Public

Private Private

Source: IRDAI 4.7: Insurance Penetration and

Insurance Density in India
In life insurance sector, India’s performance in terms of percentage of
penetration at 4.6 percent was remarkable as comparable with some developed
countries in the year 2009 and was above the world average of 4.0 percent but again
dipped towards the low which is 2.6 percent in 2014 indicating that the growth in life
insurance premium lower than the growth in national GDP. There are several factors
which are responsible for the low levels of insurance penetration in the country. These
include low customer awareness, limited financial awareness in rural areas, low
literacy among the masses, untapped rural markets, ineffective marketing strategies
adopted by the insurer, limited innovative products offered and constrained
distribution channels. In urban areas, life insurance penetration in the market is
approximately 65 percent while in rural areas, life insurance penetration is estimated
to be approximately 35 percent. Before liberalization in insurance sector, it was felt
that low levels of insurance penetration were due to ineffective market strategies
adopted by LIC. Being a monopoly since 1956, the company had no strategic market
plan for raising penetration level and density in India. The advertising initiatives were
limited to the print and electronic media, which mainly promoted LIC’s products as
being tax saving tools for salaried individuals rather than as a safety cushion for
contingencies. There is a considerable amount of misinformation about life insurance
in the mind of the common people of India, hence the perception of the people need to
change and outlook of the life insurance as well. Although the level of penetration has
increased after the entry of foreign players, it is still low compared to other countries
of the world. The insurance companies can address the problem of low financial
literacy of customers by educating them from time to time. This point was
corroborated by the Max New York–NCAER survey (NCAER, 2008) which showed
that even though a majority of Indian households are good savers, they do not
undertake financial planning and are financially at risk. Households need to
understand the risk of both ‘living too long’ and ‘dying too young’. There is need to
reorient the customer about the benefits of life insurance for both financial protection
as well as for long-term wealth creation by the tool of long term investment. In spite
of all this growth the statistics of the penetration of the insurance in the country is
very poor (Imam, A. 2011). The penetration and density level is still very low in India
as compared to other countries. The measure of insurance penetration and density
reflects the level of development of insurance sector in a country. While insurance
penetration is measured as the percentage of insurance premium to GDP, insurance
density is calculated as the ratio of premium to population (per capita premium). The
first decade of insurance sector after the liberalization took place in 1999, the sector
has reported consistent increase in insurance penetration level right from 2.71 per cent
in 2001 to 5.20 per cent in 2009. Since 2009 onwards, the level of penetration has
been declining reaching 3.3 per cent in 2014 due to various reasons. The insurance
density was on similar trend, which reached the maximum of USD 64.4 in the year
2010 from the level of USD 11.5 in 2001. During the year 2014, the insurance density
was USD 55.0. The life insurance density had gone up from a mere USD 9.1 in 2001
to reach the peak level at USD 55.7 in 2010. During 2014, the level of life insurance
density was USD 44.
Similarly, the life insurance penetration surged in first decade of the
liberalization of insurance sector from 2.15 per cent in 2001 to 4.60 per cent in 2009.
However, due to various economic reasons and low awareness of life insurance in
India, it has exhibited a declining trend reaching 2.6 per cent in 2014. Over the last 10
years, the penetration of non-life insurance sector in the country remained steady in
the range of 0.5-0.8 per cent. However, its density has gone up from USD 2.4 in 2001
to USD 11.0 in 2014. The market is still at growing stage and still more than 70% is
not insured in India. The following detail information is given in table 4.6.
Insurance Table 4.6: Insurance Penetration and
Density in India

Year

Industry Industry
Life Life Non-Life Non-Life Penetration Density
Insurance Insurance Insurance Insurance (Percentage) (USD)
Penetration Density Penetration Density
(Percentage) (USD) (Percentage) (USD)

2016 2.15 9.1 0.56 2.4 2.71 11.5

2017 2.59 11.7 0.67 3 3.26 14.7

2018 2.26 12.9 0.62 3.5 2.88 16.4

2019 2.53 15.7 0.64 4 3.17 19.7

2011 2.53 18.3 0.61 4.4 3.14 22.7

2012 4.1 33.2 0.6 5.2 4.8 38.4

2013 4 40.4 0.6 6.2 4.7 46.6

2014 4 41.2 0.6 6.2 4.6 47.4

2015 4.6 47.7 0.6 6.7 5.2 54.3

2016 4.4 55.7 0.71 8.7 5.1 64.4

2017 3.4 49 0.7 10 4.1 59

2018 3.17 42.7 0.78 10.5 3.96 53.2

 2019 3.1 41 0.8 11 3.9 52

.
.
Conclusion

Given the developments and prospects, the Indian retail sector is in its nascent stage of
evolution. While there are obstacles, there are clear opportunities in modern retailing in India.
There are many lessons that India can take from other countries, which have moved along the
path of retail evolution. The retail sector has proved to be of immense significant from macro-
economic point of view. The sector’s capability to give strong growth momentum by creating
multiplier effects on other sectors is not in dispute. It is now necessary to cautiously expand
and develop the sector, as the government, at present, has done by permitting partial FDI in
the sector. Given the scope, the retail sector is certainly expected to fetch the long-term
economic benefits for the country.

The convenience and personalized service offered by the unorganized sector holds its future
in good stead for the future. Organized retail of late has seen a tremendous boom and is
attracting more people to the malls.

What is to be seen is how organized retail can duplicate the same level of personalized
customer service levels offered by the unorganized sector to have a higher conversion ratio.
The target audience for both the organized and unorganized retail formats remains relatively
the same. When shopping in malls, people value the experience related to the trip the most
and return most frequently for the same. Besides, while enjoying the experience they seem to
buy high ticket and items of conspicuous consumption most frequently.

Gaining and maintaining consumer preference is a battle that is never really won.
Continued and consistent branding initiatives that reinforce the consumer’s purchase decision
will, over time, land the product in consumer preference sets. Attaining and sustaining
preference is an important step on the road to gaining brand loyalty

Suggestions
1. Include more trained sales person to help customers in the store while shopping.
2. Improve quality of the products especially clothes.
 3. Play good songs or soothing music in the store rather than cheap filmy songs.
4. Customer care service can be introduced
5. More branded products can be displayed in the store as people still prefer branded
clothes than offered by local vendors.
6. Constant reminder of discounts through pamphlets, speakers inside the store for
inducing consumers for impulse buying.
7. Add more cosmetic products as its having a huge market of consumers attached to it.
8. Display of product should be improved so that the product is easily visible to the
consumers.
9. Proper advertisement in press and outdoor to make V-Mart should be visible in the
eyes of consumers.
10. Should have parking spaces in front of every store.
11. Hire more salesgirls as in ladies section its very difficult for both the consumers and
salesman to interact with each other.
12. Regular training to sales person to improve there overall performance.
13. Customization of clothing should be given an important consideration.
14. Proper packaging and provide contrast labelling in displays of product.
15. Should apply electronic supply chain management for better inventory management.
16. Proper power back up as air conditioners are not working to their full capacity at
many stores.
17. Proper placements of Gondola in the stores as space between them are very less.
18. Proper display in the gondola and top most rack of the gondola should be used for
storing of inventory rather than display of product.
19. Should provide more festival schemes and at proper time.
20. Should use psychological pricing-more discounts by increasing the price
21. Proper display of cutlery items
22. Clothes should be in sync with fashion.

Bibliography
Books referred:
 Retailing Management
Pradhan, Swapna

Retail Management – A Strategic Approach Berman, Barry & Evans, Joel R.

The Art Of Retailing

Websites:

www.google.com

www.wikipedia.com

www.lic.com