CHAPTER 2

Research Methodology
2.1 Introduction

Research in simple language refers to a search for knowledge. One can also define
research as a methodical and orderly search for relevant information on a specific topic.
In fact, research is an art of scientific investigation. According to Clifford Woody,
research comprises defining and redefining problems, formulating hypothesis or
suggested solutions; collecting, organising and evaluating data; making deductions and
reaching conclusions; and at last carefully testing the conclusions to determine whether
they fit the formulating hypothesis.

The word research is composed of two syllables ―Re‖ and ―Search‖. ―Re‖ is the prefix
meaning ‗Again or over again or a new‘ and ―Search‖ is the latter meaning ‗to examine
closely and carefully‘ or ‗to test and try‘. Inquisitiveness is a distinctive feature of all
human beings. We are curious to know about ourselves, our environment, our institutions
and so on. Together they form, a careful, methodical study and investigation in some
field of knowledge undertaken to establish principles / policies.

According to Redman and Mory, research is a ―systematized effort to gain new

knowledge‖. It is an academic activity and therefore the term should be used in a
technical sense. Research is an original, in addition to the available information, which
contributes to its further progression. It is an attempt to follow truth through the methods
of study, observation, comparison and experiment. In sum, research is the search for
knowledge, using objective and systematic methods to find solution to a problem.

The simple meaning of research is to search for facts – answer to questions and solutions
to problems. A systematic approach is essential in a good research. Each step must be so
planned that it leads to next step. Planning and organization are essential part of
systematic approach. Research inculcates scientific and inductive thinking and it
promotes the development of logical habits of thinking and organization.

According to J.W.Best, ―Research is considered to be formal, systematic, intensive

process of carrying on the scientific method of analysis. It involves a more systematic
structure of investigation usually resulting in some sort of formal record of procedures
and report of result or conclusions.‖

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Research Objectives:

To develop new theories, concepts or tools for study of unknown phenomenon.

To make suitable predictions of future events by use of general laws developed
through research.
To verify and /or to test the existing facts and theories and to improve the
knowledge pertaining to these so as to be able to handle situations and events
To explore and/or analyse relationships or inter-relationships between variables
so as to obtain effects by causative factors.
To find solutions to problems in the form of applied research. By solving
problems this type of research improves the quality of life.

Types of Research

Descriptive Research - Descriptive research consists of surveys and searching the

existing facts of different types. The main objective of descriptive research is describing
the state of affairs as it prevails at the time of study. The term ‗ex post facto research‘ is
generally used for descriptive research studies in social sciences and business research.
The most important characteristic feature of this method is that the researcher has no
control over the variables here. He/she has to only state what is happening or what has
happened. It includes survey methods of all kinds, including correlational and
comparative methods.

Analytical Research – It includes research conduct to analyze the subject matter with
already available data and information. It involves the thorough study and estimation of
available information in an attempt to explain difficult phenomenon. It is a specific type
of research that involves vital thinking skills and the estimation of facts and information
relative to the research being conducted. A variety of people including students, doctors
and psychologists use this type of research during studies to find the most relevant
information. From such kind of research, a person finds out important details to add new
ideas.

Applied Research – This type of research is to solve some practical problem related to
modern world. It is an attempt to find a solution to an urgent problem encountered by an
industry, a company, an organisation or the society is known as applied research.
Researchers engaged in such researches aim at representing certain conclusions

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confronting a social or business problem. Applied research is also referred to as an action
research

Fundamental Research - According to Travers, ―Basic Research is designed to add to

an organized body of scientific knowledge and does not necessarily produce results of
immediate practical value‖. It mainly concerns generalizations and formulation of a
theory. In other words, ―Gathering knowledge or adding to the knowledge‘s sake is
termed ‗pure‘ or ‗basic‘ research‖ (Young in Kothari, 1988) without being relevant to an
immediate problem. Researches relating to pure mathematics or concerning some natural
phenomenon are examples of Fundamental Research. Similarly, studies relating to
human behaviour also fall under the fundamental research.

Quantitative Research - Quantitative research relates to the factors that can be

expressed in terms of quantity or quantified. It involves the measurement of quantity or
amount. Various available statistical and mathematical methods are adopted for analysis
in such research, which includes correlation, regressions and time series analysis etc.

Qualitative Research - It is concerned with qualitative phenomena, or more specifically,

the aspects related to or involving quality or kind. For example, an important type of
qualitative research is ‗Motivation Research‘, which investigates into the reasons for
certain human behaviour. The main aim of this type of research is finding the essential
motives and desires of human beings by carrying in-depth interviews. The other
techniques employed in such research are story completion tests, sentence completion
tests, word association tests, and other similar projective methods.

Conceptual Research – It is the research related to some abstract idea or theory.

Philosophers and thinkers use it for building the new concepts or for reinterpreting the
existing ones. Conceptual research focuses on the concept or theory that explains or
describes the phenomenon being studied.

Empirical Research - Such type of research exclusively relies on the observation or

experience with barely any consideration for theory and system. It is also known as
experimental type of research, in which it is required to first collect the facts and their
sources, and actively take measures to stimulate the production of desired information. In
this type of research, the researcher first formulates a working hypothesis, and then
gathers sufficient facts to prove or disprove the stated hypothesis. He/she formulates the

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experimental design, which according to him/her would manipulate the variables, so as
to obtain the desired information.

Other Types of Research - One-time research which is carried on for single time
period whereas longitudinal research which is carried on over several time-periods.
Simulation research are abstractions of reality (and models, too). Often they
deliberately emphasize one part of reality at the expense of other parts. Simulation is the
imitation of the operation of a real-world process over time. The act of simulating
something first requires that a model be developed; this model represents the key
features, behaviours and functions of the selected physical or abstract system or
procedure to carry out the research. Historical research is one which utilizes historical
sources like documents, remains, etc. to study events or ideas of the past, including the
philosophy of persons and groups at any remote point of time. Exploratory research, as
clear from the name, is the type of research intends simply to explore the research
questions and does not intend to offer final and definite solutions to existing problems.
Thus various types of researches are conducted depending upon the study.

This chapter focuses on the processes, techniques and tools applied to achieve the
defined objectives of the study undertaken. This chapter is a presentation of all the
systematic methods. It describes the research process followed and steps involved in
undertaking the research. Through the application of scientific procedure, it has been
tried to find out the problems in terms of customer acceptance for Life Insurance
services. The chapter describe research methods used, sampling techniques, data
collection methods (primary or secondary), scale items used, data analysis techniques
and data presentation methods. Other sub headings are under:

2.2 Research Objectives

Objective of the study

The prime objective of any research can be summarized as to discover new fact and
ideas; Verify and test important facts; Analyze an event or process or phenomenon to
identify the cause and effect relationship; Develop new scientific tools, concepts,
theories to solve and understand scientific and non-scientific problems. The aim of the
primary research is to conduct a cross-sectional study to examine the consumer

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behaviour towards life insurance products of public and private life insurance company
i.e. with regard to LIC and HDFC Life.

Sub Objectives

1. To study the level of awareness among consumers for life insurance products.
2. To study the consumer‘s behaviour towards life insurance products.
3. To evaluate the level of satisfaction among existing customers.
4. To examine the customers and sales personnel relationship.
5. To draw conclusions and suggest measures for achieving better customer
satisfaction in life insurance companies.

Information components

With the above objectives in mind the following information was gathered from
respondents.

Demographics

- Age
- Gender
- Education
- Occupation
- Marital Status
- Family income
- Family size

Term of insurance policy

Total number of policies bought from same company

Value of Life Insurance (monetary terms)

Premium payment plan

Purpose of purchasing Life Insurance

Most important feature that influence their decision to purchase Life Insurance policy

Preferred source of information about life insurance products

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Perception about product features

Perception about company brand image

Perception about service quality

Perception about sales person relationship

Perception about customer satisfaction and loyalty status

2.3 Research Design

A Research design is a plan of action to be carried out in connection with a research

project. It is the conceptual structure within which research is conducted and it
constitutes the blue print for the collection, measurement and analysis of data. It is the
specification of methods and procedures for acquiring the information needed for solving
the problem. Decisions regarding what, where, when, how much, by what means
concerning an inquiry or a research study constitute a research design. A research design
is the framework or plan for a study used as a guide in collecting and analyzing data.

There are 3 basic types of research design namely exploratory, descriptive, and causal.
The names of the three types of research design describe their purpose very well. The
goal of exploratory research is to discover ideas and insights. Descriptive research is
concerned with describing a population with value to important variables. Causal
research is used to establish cause-and-effect relationships between variables.

To the best of researcher knowledge, there are very few, other studies in the context of
the India, which attempt to capture customer perspective on life insurance products. The
present study followed both exploratory and descriptive research approach. Exploratory
research is carried out via review of existing literatures in formation of Hypothesis.
Further descriptive research approach is used to test the hypotheses and present
conclusions from data analysis. The present study uses quantitative approach of problem
solving. This includes a quantitative, descriptive, and comparative research with cross-
sectional survey of data from customers of life insurance products. Survey data is
employed to estimate population characteristics and to explore the significance of
predictor variables. The research that will be carried on Consumer Behaviour towards
Life Insurance Products is Descriptive in Nature. It focuses on particular aspects of

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consumer awareness, behaviour, interpersonal relationships etc. It is a fact finding
investigation with adequate interpretation.

Quantitative data analysis used SPSS 19 and consisted of two primary stages. First,
descriptive statistics were calculated on all variables. Means and standard deviations
were calculated for variables on a ratio or interval scale. Frequencies and percentages
were provided for nominal or ordinal scaled variables. The second stage of the
quantitative analyses presented inferential statistics used to test the research hypotheses.

2.3.1 Hypothesis development

The present study tested the effects of institutional and personal factors on purchase
behaviour of life insurance products. The following hypotheses have been formulated to
fulfil above mentioned objectives.

H1

Null

Customers have negative perception towards features of life insurance products

Alternate

Customers have positive perception towards features of life insurance products

H2

Null

Customers have negative perception towards brand image of life insurance companies

Alternate

Customers have positive perception towards brand image of life insurance companies

H3

Null

Customers have negative perception towards service quality of life insurance companies

Alternate

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Customers have positive perception towards service quality of life insurance companies

H4

Null

Customers have negative perception towards customer relationship building activities of

life insurance companies

Alternate

Customers have positive perception towards customer relationship building activities of

life insurance companies

H5

Null

Customers are not satisfied with their life insurance services

Alternate

Customers are satisfied with their life insurance services

H6

Null

Customers are not loyal towards life insurance services

Alternate

Customers are Loyal towards life insurance services

H7

Null

There is no significant difference in consumer behaviour with regard to LIC and HDFC
Life.

Alternate

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There is significant difference in consumer behaviour with regard to LIC and HDFC
Life.

2.3.2 Data Collection methods

This research work is in the form of empirical and exploratory study for which the
information was gathered from the Primary and Secondary sources.

Primary Data: For primary data, a well fabricated questionnaire has been
prepared. This was filled by the respondents who purchased any life insurance
product either from a public sector company like LIC or from a private sector
company like HDFC Life.

Secondary Data: Secondary data was collected by:

1. Print media
a.) Various studies already being conducted in this area
b.) Books
c.) Magazines
d.) Journals
e.) Newspapers
f.) Periodicals
g.) Reports
2. Electronic media
a.) E-Books
b.) Online journals
c.) Websites

Data Collection Tool

The proposed research format is based on cause-effect relationship between independent

and dependent factors. Questionnaire method was used for data collection. All selected
respondents received a survey questionnaire as part of data collection process. It is a
form containing a series of questions to be asked to respondents. Structured
questionnaire containing easily understandable questions were prepared. The starting
point for development of the questionnaire was to create an initial version, that to be
used for testing. The Questionnaire‘s accuracy and reliability were checked with pilot

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test before finalization which has also included the testing of reliability of scales used
and the validity of the questions. Pilot test were used for improving the questionnaire and
some questions will then appropriately rewritten.

Data Collection period

Surveys were distributed directly to users over a period of one year i.e. from January
2015 to December 2016.

Questionnaire Design

The questionnaire was structured into three main substantive sections. In the first section,
respondents were asked about their demographic profile, which included gender, age,
and occupation, income and family information. The next section constitutes the general
information relating to life insurance sector. The last section includes questions asking
about behavioural perception towards product features, brand image, service quality and
satisfaction towards life insurance products.

Piloting testing

The piloting strategy is used for this survey. Two stages of pilot work were carried out
before the main fieldwork stage:

• a small-scale cognitive testing stage

• a pilot stage carried out by interviews

Cognitive testing seeks to understand the thought processes that a respondent uses in
trying to answer a survey question. The aim is to see whether he/she understands both
the question as a whole and any key specific words and phrases it might contain, what
sort of information is needed to retrieve in order to answer the question. Five cognitive
interviews were carried out face to face, with respondent having different socio-
demographic characteristics.

After changes were made to the questionnaire based on findings from the cognitive
testing, a pilot survey was conducted. The questionnaire was tested in a forum of 10
experts and 5 university faculties to ensure the relevance of questions and sections in the
survey. After the pilot had taken place, amendments were then made to the questionnaire
for clarity, to enable some new questions to be added, and to remove others.

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Response Rate

The total number of respondents contacted was more than 500 but due to incomplete
responses and other faults the final responses subjected to data analysis are 500. In order
to reduce the number of un-returned completed questionnaires, on the spot completion of
questionnaires was demanded. The high response rate of 84 percent approx was the
effect of the constant direct contact and reminders to the respondents.

2.3.3 Scope of Study

Geographical Scope

The study is based on the data collected from some selected locations in Jaipur. The
sample consists of all age groups of insurable population which includes private
employees, businessman, government employees etc. To meet customers various
branches of LIC and HDFC Life was also approached in Jaipur.

Operational scope

The purpose of this research is not to construct a fresh theory, but to investigate the
research questions and fulfil research objectives based on empirical research and
secondary data. Furthermore, in this thesis, we will generate hypotheses from theories
and then, we will use empirical research data to test the hypotheses.

2.3.4 Sampling

Sampling is defined as the selection of some portion of a population on the basis of

which a judgment or inference about the aggregate or totality is made. A sampling design
is a definite plan for obtaining a sample from the sampling frame. It refers to the
technique or the procedure the researcher would adopt in selecting some sampling units.
Sampling design incorporates population and sampling unit, determining the sampling
techniques and sampling size.

Population

A population is the aggregate of all the elements that share some common set of
characteristics and that comprise the universe for the purpose of the research problem.
All the items under consideration in any field of inquiry constitute a ‗universe‘ or

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‗population‘. The universe of present study consists of all customers of life insurance
products.

Sample unit:

Individual customer

Sample size:

Total sample size is 500. Out of which, 250 respondents of LIC customers and 250
respondents of HDFC Life customers.

Sampling Technique:

Sampling techniques may be broadly classified as non-probability and probability

sampling. Non-probability relies on the personal judgment of the researcher rather than
chance to select sample elements. Probability sampling includes simple random
sampling, Systematic Sampling, Stratified Sampling, Cluster Sampling, and other
sampling techniques. In probability sampling, sampling units are selected by chance.
Commonly used non-probability sampling techniques are Convenience Sampling,
Judgment Sampling. Convenience sampling is a non-probability sampling technique
where subjects are selected because of their convenient accessibility and proximity to the
researcher. The subjects are selected just because they are easiest to recruit for the study.
In all forms of research, it would be ideal to test the entire population, but in most cases,
the population is just too large that it is impossible to include every individual. This is
the reason why present research relies on sampling techniques like convenience
sampling, the most common of all sampling techniques. Many researchers prefer this
sampling technique because it is fast, inexpensive.

In present research, the respondents were selected using convenience sampling (using a
cross-sectional design) from different demographics profiles. The sample of the present
study, represented the population with respect to demographic dimensions i.e. gender, age
and income. Care was taken to make the sample representative of the actual population.

Scale Development

In present study, demographic variables like age, gender, occupation, marital status,
education, income group, family size were measured as nominal variables. While one of

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the objectives of this was to understand the sample characteristics and other is to conduct
analysis in the demographic context. Other scale items used to measure customer
perception on life insurance products.

Multiple scale items were considered to be more reliable measures for the present
sample. The present study used a non-comparative Likert‘s Scale technique for
measuring attitude. The respondents were asked to rate different items capturing their
perception using a 5-point likert type scale, where 5 indicated Strongly Agree,while 1
represented Strongly Disagree. It is the most frequently used summated scales in the
study of social attitudes follow the pattern devised by Likert. For this reason they are
often referred to as Likert-type scale.

DIMENSIONS

SCALE ITEM

Product features

Company has flexible products/ new products that meet customer needs.

Product has hassle free settlement process.

Allow online premium payments and electronic clearing system etc.

Product has provision of flexible payment schedule.

Reasonable surrender value/ penalty in case the policy is discontinued before maturity or
late premium payment.

Brand Image

Reputation of the insurance company is Good.

Does high reputation of the company help to build image in the society.

Does a LIC product help you build status in the society.

Does an HDFC product help you build status in the society.

Service

Branches are at convenient locations.

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Claims are settled timely.

Prompt help from the company personnel.

Company has effective customers‘ grievance handling procedures.

Timely revival of lapsed policies, change of nominations, and mode of premium

payment etc.

Information is shared proactively through e-mail or SMS.

Company has convenient operating hours.

Relationship Building

Sales personnel gives full information regarding terms and conditions of the policy.

Sales personnel are well informed.

Company gives timely reminder of instalments.

Sales personnel give personal attention.

Employees are courteous and friendly.

The information shared is true and helpful.

Satisfaction

All the terms and conditions as shared are fulfilled.

Decision to choose the company was wise.

Fully satisfied with the company.

Loyalty

I like to purchase more policies from the same company.

I will recommend company product to friends and family.

A questionnaire was developed on Likert scale on attributes explaining customers‘

perception towards life insurance services provided by various financial institutions.

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2.3.5 Data Analysis Technique

Data Preparation and Cross Tabulation

The unwieldy data is condensed into a few manageable groups and tables for further
analysis. Researcher classified the raw data into purposeful and usable categories.
Coding operation is usually done through which the categories of data are transformed
into symbols that may be tabulated and counted. With coding the stage is ready for
tabulation. Tabulation is a part of the technical procedure wherein the classified data are
put in the form of tables. Data is tabulated by computers.

Researcher has used data analysis tools such as advanced Excel and the SPSS to analyze
the data. Coding is first made in Excel and then this data is imported from Excel. After
importing the data, variables were declared first in SPSS. Statistical package for social
science (SPSS.19) was used to analyse the data.

Statistical Analysis

Analysis work after tabulation is generally based on the computation of various

percentages, coefficients, etc., by applying various well defined statistical formulae.
Statistics helps the researcher in designing the research, analyzing its data and drawing
conclusions there from. Statistics is divided into major areas that are descriptive statistics
and inferential statistics. Descriptive statistics deals with development of certain indices
from raw data while inferential statistics deals with the process of generalization.

In the process of analysis, relationships or differences supporting or conflicting with

original or new hypotheses is subjected to tests of significance to determine with what
validity data can be said to indicate any conclusion(s). Hypothesis testing will result in
either accepting the hypothesis or in rejecting it. In present study, the hypotheses were
tested through the use of one or more of such tests, depending upon the nature and object
of research inquiry. The criterion that is used for accepting or rejecting a null hypothesis
is called significance of p-value.

The data obtained in the present study were analyzed using suitable statistical tools. The
following statistical treatments were used for interpretation of data. Mean scores, for
each item was calculated by adding the weights given to each item in the scales by all the

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respondents and then dividing the total scores by number of respondents. Statistical tests
were applied in order to find out the significance of relationship defined in hypothesis.

Major statistical tools applied:

1. One Sample T test

This function gives a single sample Student t test with a confidence interval for the mean
difference. To reiterate, the one-sample t-test compares the mean score of a sample to a
known value, usually the population mean (the average for the outcome of some
population of interest). The basic idea of the test is a comparison of the average of the
sample (observed average) and the population (expected average), with an adjustment for
the number of cases in the sample and the standard deviation of the average. The one-
sample t-test is used to determine whether a sample comes from a population with a
specific mean. This population mean is not always known, but is sometimes
hypothesized. The single sample t method tests a null hypothesis that the population
mean is equal to a specified value. If this value is zero (or not entered) then the
confidence interval for the sample mean is given

x−µ
t=
𝑠 2 /n

Where

x = sample mean

µ = specified value to be tested

s = sample standard deviation, and

n = size of the sample.

The dependent variable should be measured at the interval or ratio level (i.e.,
continuous). Examples of variables that meet this criterion include revision time
(measured in hours), intelligence (measured using IQ score), exam performance
(measured from 0 to 100), weight (measured in kg), and so forth. The data should be
independent (i.e., not correlated/related), which means that there is no relationship
between the observations. This is more of a study design issue than something you can
test for, but it is an important assumption of the one-sample t-test. There should be no

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significant outliers. Outliers are data points within the data that do not follow the usual
pattern. The problem with outliers is that they can have a negative effect on the one-
sample t-test, reducing the accuracy of your results. By default, SPSS uses 95%
confidence intervals (Labeled as the Confidence Interval Percentage in SPSS). This
equates to declaring statistical significance at the p < .05 level. For this research, keep
the default 95% confidence intervals.

2. Independent Sample „t‟ Test

This is a statistical technique that is used to compare two population means. We set up
two hypotheses. The first is the null hypothesis, which assumes that the mean of two
samples are equal. The second hypothesis will be an alternative hypothesis, which
assumes that the means of two paired samples are not equal.

Mathematically,

H0: µ1 = µ2 Where, µ1 and µ2 are the hypothesized mean for group 1 and 2
respectively.

H1: µ1 ≠ µ2

The statistical significance of the data has been tested using Student‘s Independent
sample ―t‖ test at 95 percent confidence level. The data qualify certain assumptions, that
the dependent variable (scores) should be measured on a continuous scale and the
independent variable should consist of two categorical independent groups. The result
table above provides results for two tests- Levene‘s test for Equality of Variances and t-
test for Equality of Means. Levene's Test for Equality of Variances has been used with
assumptions that the variances for the two groups are equal. If this null hypothesis is
rejected at 5 percent significance level, then test statistics for ‗no equal variance‘ is
considered for interpretation of the t-test for Equality of Means.

3. Multiple Regressions

In linear multiple regression, the model specification is that the dependent variable,yi is
a linear combination of the parameters (but need not be linear in the independent
variables). For example, in simple linear regression for modeling n data points there is
one independent variable: xi, and two parameters, β0 and β1 :

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straight line:

yi = β0 + β1 xi +∈i , 𝑖 = 1, … , 𝑛.

In multiple linear regressions, there are several independent variables or functions of

independent variables. Adding a term in xi2 to the preceding regression gives:

parabola:

yi = β0 + β1 xi + β1 xi2 +∈i , 𝑖 = 1, … , 𝑛.

This is still linear regression; although the expression on the right hand side is quadratic
in the independent variable x i, it is linear in the parameters β0 , β1 and β2 . In both
cases, ∈i is an error term and the subscript i indexes a particular observation.

Given a random sample from the population, we estimate the population parameters and
obtain the sample linear regression model:

yi = β0 + β1 xi

The residual,ei = yi − yi , is the difference between the value of the dependent variable
predicted by the model, yi , and the true value of the dependent variable, yi . One method
of estimation is ordinary least squares. This method obtains parameter estimates that
minimize the sum of squared residuals, SSE also sometimes denoted RSS:

SSE = e2i
i=1

Minimization of this function results in a set of normal equations, a set of simultaneous

linear equations in the parameters, which are solved to yield the parameter
estimators, β0 and β1 :

In the case of simple regression, the formulas for the least squares estimates are

𝑥𝑖 − 𝑥 𝑦𝑖 − 𝑦
β1 = and β0 = 𝑦 − β1 x .
𝑥𝑖 − 𝑥 2

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Where 𝑥 is the mean (average) of the x values and 𝑦 is the mean of the y values. Under
the assumption that the population error term has a constant variance, the estimate of that
variance is given by:

SSE
∂2∈ =
n−2

This is called the mean square error (MSE) of the regression. The denominator is the
sample size reduced by the number of model parameters estimated from the same data,
(n-p) for p regressors or (n-p-1) if an intercept is used. In this case, p=1 so the
denominator is n-2.

The standard errors of the parameter estimates are given by

1 x2
σβ0 = σ∈ + 2
n 𝑥𝑖 − 𝑥

1
σβ0 = σ∈ 2
𝑥𝑖 − 𝑥

Under the further assumption that the population error term is normally distributed, the
researcher can use these estimated standard errors to create confidence intervals and
conduct hypothesis tests about the population parameters.

2.4 Review of Literature

Moullee et al, (2013), showed in his article that insurance consumption decision is
influenced by monetary considerations such as consumer‘s evaluation of a service in
monetary terms and the search for the possibility to reduce the amount of premiums
payable for insurance and indicated that demographical and socio-economical are
responsible for consumer behaviour.

Das, Sanjay Kanti, (2012), made an effort to study the investment habits and preferred
investment avenues of the household. This study examines the investment attitude, their
preferences & knowledge about capital market institutions and instruments. This study
also reveals that in most cases investors across all categories found them to be safer in
taking up the insurance policies.

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Complex, highly intangible services such as life insurance consist largely of credence
properties. Insurance providers engage in relationship-building activities that emphasize
buyer-seller interaction and communication. Economists contend consumers are prone to
make quality generalizations based on the strength of these relationships, perhaps to the
detriment of price competition. The Crosby, L. A., & Stephens (1987) report contrary
results suggesting that, though relationship marketing adds value to the service package,
it is not a substitute for having a strong, up-to-date core service.

Research by Brown, J. R., & Goolsbee, A. (2002) study provides empirical evidence on
how Internet comparison shopping sites affected the prices of life insurance in the 1990s.
With micro data on individual insurance policies and with individual and policy
characteristics controlled for, hedonic‐type regressions show that increases in Internet
use significantly reduced the price of term life insurance. Further evidence shows that
prices did not fall with rising Internet usage in the period before the sites began, nor for
insurance types that were not covered on the sites. The results suggested that the growth
of the Internet has reduced term life prices by 8–15 percent. The results also showed that
the initial introduction of the Internet search sites is initially associated with an increase
in price dispersion within demographic groups, but as use spreads, the dispersion falls.

Campbell, R. A. (1980) argues that financial economists typically assume that capital
income uncertainty, derived from investments in uncertain returned marketable
securities, represents the major source of household consumption uncertainty. But, for
many households, if not most, labor income uncertainty dominates capital income
uncertainty. Their study analyzes households optimal reactions to labor income (human
capital) uncertainty that is derived from the possibility of their wage earners' non–
survival. By introducing a risk resolution mechanism—an insurance market—and
allowing for the possibility that future tastes may be state–dependent, simple demand–
for–insurance equations are mathematically derived to explicitly describe households
optimal responses to human capital uncertainty.

Zietz, E. N. (2003) presented that for almost 50 years researchers have sought to explain
consumer behavior concerning the purchase of life insurance. Their study examined the
literature relating to specific demographic and economic factors that may be identifiable
as traits influencing the demand for life insurance, and discusses general environmental
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issues that may relate to life insurance demand. By organizing the wealth of literature in
a useful and systematic format, noting consistencies and contradictions, this examination
seeks to provide a better understanding of how and why life insurance purchases are
made.

Beck, T., & Webb, I. (2003) commented that life insurance has become an increasingly
important part of the financial sector over the past 40 years, providing a range of
financial services for consumers and becoming a major source of investment in the
capital market. But what drives the large variation in life insurance consumption across
countries remains unclear. Using a panel with data aggregated at different frequencies for
68 economies in 1961-2000, their article finds that economic indicators--such as
inflation, income per capita, and banking sector development--and religious and
institutional indicators are the most robust predictors of the use of life insurance.
Education, life expectancy, the young dependency ratio, and the size of the social
security system appear to have no robust association with life insurance consumption.
The results highlight the importance of price stability and banking sector development in
fully realizing the savings and investment functions of life insurance in an economy.

Cummins, J. D., Tennyson, S., & Weiss, M. A. (1999) examined the relationship
between mergers and acquisitions, efficiency, and scale economies in the US life
insurance industry. They estimate cost and revenue efficiency over the period 1988–1995
using data envelopment analysis (DEA). The Malmquist methodology was used to
measure changes in efficiency over time. They found that acquired firms achieve greater
efficiency gains than firms that have not been involved in mergers or acquisitions. Firms
operating with non-decreasing returns to scale (NDRS) and financially vulnerable firms
are more likely to be acquisition targets. Overall, mergers and acquisitions in the life
insurance industry have had a beneficial effect on efficiency.

Fukuyama, H (1997) investigated productive efficiency and productivity changes of

Japanese life insurance companies by focusing primarily on the ownership structures
(mutual and stock) and economic conditions (expansion and recession). This research
indicates that mutual and stock companies possess identical technologies despite
differences in incentives of managers and in legal form, but productive efficiency and
productivity performances differ from time to time across the two ownership types under
different economic conditions.

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Zelizer, V. A. (1978) perform a Qualitative analysis of historical data concerning the
diffusion of life insurance in the United States during the 19th century helps to explore
the problem of establishing monetary equivalents for those aspects of the social order,
such as death, that are culturally defined as above financial relationships. The financial
evaluation of a man's life introduced by the life insurance industry was initially rejected
by many as a profanation which transformed the sacred event of death into a vulgar
commodity. By the latter part of the 19th century, the economic definition of the value of
death became finally more acceptable, legitimating the life insurance enterprise.
However, the monetary evaluation of death did not desacralize it; life insurance emerged
as a new form of ritual with which to face death.

Hau, A. (2000) develop a model of life insurance holding is formulated. It takes into
account the liquidation values and liquidity of estate assets and the ability of life
insurance death benefits to bypass the probate process. Tobit regressions based on the
model are run using the U.S. Survey of Consumer Finances 1989 data set. The results
showed net worth (fixing net liquid assets and annuity wealth) and annuity wealth (fixing
net liquid assets and net worth) to be positively related to life insurance holding.
Moreover, net liquid asset holding (fixing net worth and annuity wealth) and charitable
motives also affect life insurance holding.

Babbel, D. F. (1985) studied a real price index is created for whole life insurance sold in
the United States from 1953 to 1979. New purchases of whole life insurance are shown
to be negatively related to changes in this cost index, contrary to what has been widely
accepted in the insurance literature, but consistent with economic theory. The existence
of strong price elasticity of demand for whole life insurance does not ensure, however,
that the insurance industry manifests a high degree of price competition.

Sen, S. (2008) commend that during the post-1990 period, services sector in most of the
Asian economies witnessed growth fuelled by substantial changes in the financial sector
of these economies. The insurance industry, in most of the Asian economies, ASEAN
and SAARC economies in particular, was publicly owned and remained isolated from
participation of either domestic private insurers or foreign insurers or participation of
both. But, regulatory reforms and policy changes in the ASEAN economies during the
post-financial crisis period and the process of economic liberalization in some of the
SAARC countries and China led to phenomenal changes in the growth pattern of the

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insurance industry in these economies. Their study was divided into two parts: the first
part is focused on four SAARC countries, two countries fromGreater China Region and
six ASEAN countries for the 11- year period (1994-2004) to understand economic and
other socio-political variables, whichmay play a significant role in explaining the life
insurance consumption pattern in these economies. Secondly, an independent exercise is
undertaken to re-assess whether or not the variables best explaining life insurance
consumption pattern for twelve selected Asian economies in the panel are significant for
India for the period 1965 to 2004. Some variables were strongly capable of determining
life insurance demand in both the analytical exercises.

In the past two decades, many emerging economies have been witnessed the strong
growth of their life insurance industry. While research in the demand for life insurance
has attracted much attention since the 1960s, most studies have focused on cross‐country
studies or well‐established markets in developed countries. As a result of cross‐national
variations in life insurance consumption, it has been argued in the literature that factors
shaping the demand for life insurance are complex and varied from one country to
another. Paper by Hwang, T., & Gao, S. (2003) aimed to examine key determinants of
the demand for life insurance in China with a view to explaining the rapid growth of the
life insurance industry in China since its economic reform in 1978. Empirical
investigation using a time series data analysis has shown that the main factors which
have influenced people in China to purchase life insurance products are directly
associated with the successful economic reform leading people to progress to higher
layers of economic security, the increase in the level of education and the change in
social structure. However, their research has not found a negative effect of inflation on
life insurance consumption, even China experienced high inflation in the mid‐1990s.

Kjosevski, J. (2012) identified determinants of the demand of life insurance in 14

countries in Central and South- Eastern Europe (CSEE). They used fixed-effects panel
model for the period 1998 - 2010 allowing each cross-sectional unit to have a different
intercept term serving as an unobserved random variable that is potentially correlated
with the observed regressors. They use two measures as a demand for life insurance: life
insurance penetration and life insurance density. The research results show that higher,
GDP per capita, inflation, health expenditure, level of education and rule of law are the
most robust predictors of the use of life insurance. Real interest rates, ratio of quasi-
money, young dependency ratio, old dependency ratio control of corruption and
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government effectiveness do not appear to be robustly associated with life insurance
demand.

Eisenhauer, J. G., & Halek, M. (1999) estimated the effect of household wealth on the
demand for life insurance using survey data from a broad cross-section of the USA. This
procedure allows them to test the Pratt-Arrow hypothesis of decreasing absolute risk
aversion (DARA). Additionally, they estimate the relative magnitude of prudence, the
propensity to take precautions when faced with risk. They found that life insurance
purchases increase with wealth, and that on average American households exhibit about
94 per cent as much prudence as risk aversion.

Liebenberg, A. P., Carson, J. M., & Dumm, R. E. (2012) suggested that neither the
choice to own life insurance nor the amount purchased is consistently related to the
presence of children in the household. While these perplexing findings are based on a
static framework, they alternatively examine life insurance demand in a dynamic
framework as a function of changes in household life cycle and financial condition. Their
results indicate both a statistically and economically significant relation between life
events, such as new parenthood, and the demand for life insurance. They also provide
new evidence in support of the emergency fund hypothesis: households in which either
spouse has become unemployed are more likely than other households to surrender their
whole life insurance.

Chen, Ibbotson, Milevsky, & Zhu (2006) argued that financial planners and advisors
increasingly recognize that human capital must be taken into account when building
optimal portfolios for individual investors. But human capital is not simply another pre-
endowed asset class; it contains a unique mortality risk in the form of the loss of future
income and wages in the event of the wage earner's death. Life insurance hedges this
mortality risk, so human capital affects both optimal asset allocation and demand for life
insurance. Yet, historically, asset allocation and life insurance decisions have been
analyzed separately. Their article develops a unified framework based on human capital
that enables individual investors to make these decisions jointly.

Jappelli, T., & Pistaferri, L. (2003) suggested that taxation can have a large impact on
household portfolio selection and allocation. Paper analyzed the tax treatment of life
insurance, considering the cancellation of tax incentives in Italian life insurance contracts
for investors with high marginal tax rates and the introduction of incentives for those

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with low rates. Using repeated cross-sectional data from 1989 to 1998, study found that
the tax reforms had no effect on the decision to invest in life insurance or the amount
invested. The likely explanations are the lack of information and lack of commitment to
long-term investment.

Truett, D. B., & Turett, L. J. (1990) study compares the demand for life insurance in
Mexico with that in the United States. It provides a brief historical perspective on the
growth of life insurance purchases in the two countries and employs regression analysis
to estimate life insurance demand functions. The principal findings are that age,
education, and level of income affect the demand for life insurance and that the income
elasticity of demand for life insurance is much higher in Mexico than in the United
States.

Li, Moshirian, Nguyen, & Wee (2007) examined the determinants of life insurance
consumption in OECD countries. Consistent with previous results, they find a significant
positive income elasticity of life insurance demand. Demand also increases with the
number of dependents and level of education, and decreases with life expectancy and
social security expenditure. The country's level of financial development and its
insurance market's degree of competition appear to stimulate life insurance sales,
whereas high inflation and real interest rates tend to decrease consumption. Overall, life
insurance demand is better explained when the product market and socioeconomic
factors are jointly considered. In addition, the use of GMM estimates helps reconcile our
findings with previous puzzling results based on inconsistent OLS estimates given
heteroscedasticity problems in the data.

Enz, R. (2000) study the S-Curve Relation Between Per-Capita Income and Insurance
Penetration. Models that assume a constant income elasticity of demand for insurance
have the unrealistic implication that insurance penetration grows without constraint.
Their article introduces a logistic function that allows income elasticity to 0vary as the
economy matures. Econometric estimations yield a so-called S-curve, for which the
income elasticity of demand is equal to one at specific low and high levels of income, but
may reach two or more at intermediate income levels. Long-term forecasts for insurance
premiums based on GDP projections are possible for countries that either conform to the
S-curve model or deviate consistently from it. Analysing deviations from the S-curve

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allows the identification of outlier countries, in which factors other than GDP drive
insurance demand.

Hwang, T., & Greenford, B. (2005) examined some of the key factors affecting life
insurance consumption in mainland China, Hong Kong, and Taiwan. It also attempts to
gain an understanding of the different characteristics of the market in life insurance in
each territory. Income and life insurance consumption are found to be strongly
correlated, which is consistent with previous studies. Education is a significant factor.
Price is found to be insignificant, largely conflicting with previous studies. Levels of
social security are not significantly related. The one-child policy in mainland China has a
negative effect on life insurance consumption. Differences in the level of economic
development reveal a variation in life insurance consumption. Generally, the more
advanced the economy, the greater the life insurance consumption. However, mainland
China, which is a low-income country, shows the greatest potential.

Colquitt, L. L., & Hoyt, R. E (1998) used data collected from the annual statements of
571 life insurers, separate models are estimated for the probability and degree of use of
futures and options by life insurers for the purpose of hedging economic risk. The results
support the informational economies hypothesis, the bankruptcy costs and
underinvestment hypotheses, and the managerial discretion hypothesis. The results also
suggest that an insurer's matching of asset and liability durations (on-balance-sheet
hedging) serves as a substitute for hedging with futures and options (off-balance-sheet
hedging) and that the use of reinsurance serves as a signal for those firms that are
predisposed to hedging firm risk.

Financial economists typically assume that capital income uncertainty, derived from
investments in uncertain returned marketable securities, represents the major source of
household consumption uncertainty. But, for many households, if not most, labor income
uncertainty dominates capital income uncertainty. Study by Campbell (1980) analysed
households optimal reactions to labor income (human capital) uncertainty that is derived
from the possibility of their wage earners' non‐survival. By introducing a risk resolution
mechanism—an insurance market—and allowing for the possibility that future tastes
may be state‐dependent, simple demand‐for‐insurance equations are mathematically
derived to explicitly describe households optimal responses to human capital uncertainty.

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Lewis, F. D. (1989) commented that a breadwinner's demand for life insurance depends
on the demographic structure of his or her household. The author captures the
relationship by extending Menahem E. Yaari's life insurance framework to include the
preferences of all household members explicitly. In many households, the insured is the
husband and the beneficiaries are his wife and offspring. Their demand for insurance of
the husband's life is derived from a life cycle model in which income is uncertain. The
results are intuitively appealing in that they describe the explicit calculation made by
purchasers of life insurance. Empirical estimates based on observed life insurance
ownership also are encouraging.

Lin, Y., & Grace, M. F. (2007) conducted a survey of Consumer Finances and examine
the life cycle demand for different types of life insurance. Specifically, they tested for the
consumer's aversion to income volatility resulting from the death of a household's wage-
earner through the purchase of life insurance. They first develop a financial vulnerability
index to control for the risk to the household. They also examined the life cycle demand
for life insurance using several definitions of life insurance. They found, in contrast to
previous research, that there is a relationship between financial vulnerability and the
amount of term life or total life insurance purchased. In addition, they found older
consumers use less life insurance to protect a certain level of financial vulnerability than
younger consumers. Secondly, study provides evidence that life insurance demand is
jointly determined as part of a household's portfolio. Finally, study examined the impact
of family members' nonmonetary contribution on the household's life cycle protection
decision. Result provide some evidence that households take into account the value of
nonmonetary contribution in their insurance purchase.

Chakraborty, J., & Sengupta, P. P. (2016) presented that in the pre-reform era, Life
Insurance Corporation of India (LICI) dominated the Indian life insurance market with a
market share close to 100 percent. But the situation drastically changed since the
enactment of the IRDA Act in 1999. At the end of the FY 2012- 13, the market share of
LICI stood at around 73 percent with the number of players having risen to 24 in the
country‘s life insurance sector. One of the reasons for such a decline in the market share
of LICI during the post-reform period could be attributed to the increasing competition
prevailing in the country‘s life insurance sector. At the same time, the liberalisation of
the life insurance sector for private participation has eventually raised issues about
ensuring sound financial performance and solvency of the life insurance companies
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besides protection of the interest of policyholders. The present study is an attempt to
evaluate and compare the financial performances, solvency, and the market concentration
of the four leading life insurers in India namely the Life Insurance Corporation of India
(LICI), ICICI Prudential Life Insurance Company Limited (ICICI PruLife), HDFC
Standard Life Insurance Company Limited (HDFC Standard), and SBI Life Insurance
Company Limited (SBI Life), over a span of five successive FYs 2008-09 to 2012- 13. In
this regard, the CARAMELS model has been used to evaluate the performances of the
selected life insurers, based on the Financial Soundness Indicators (FSIs) as published by
IMF. In addition to this, Solvency and the Market Concentration Analyses were also
presented for the selected life insurers for the given period. The study revealed the
preexisting dominance of LICI even after 15 years since the privatisation of the country‘s
life insurance sector.

Bala (2011) argued that service quality has become a highly instrumental co-efficient in
the aggressive competitive marketing. For success and survival in today‘s competitive
environment, delivering quality service is of paramount importance for any economic
enterprise. Life Insurance Corporation of India, the leading insurance company has set up
‗benchmarks‘ in enervating the whole concept of service quality. Their study aims to
measure customers‘ perception towards life insurance service quality by applying a
framework developed by Sureshchandar et al. (2001). An advocated procedure has been
used to develop, refine and validate a scale. Data has been collected from 337 customers
from the three cities of Punjab (a progressive State of India). The findings of the study
demonstrate that five-factor structure as proposed by Sureshchandar et al. (2001) has
been refined to sevenfactor construct (consisting of 34 items) representing Proficiency;
Media and presentations; Physical and ethical excellence; Service delivery process and
purpose; Security and dynamic operations; Credibility; and Functionality. Besides, the
study also investigates the relationship between each of the generated service quality
dimensions and customers overall evaluation of life insurance service quality. It reveals
that among these seven factors, three viz., Proficiency; Physical and ethical excellence;
and Functionality have significant impact on the overall service quality of Life Insurance
Corporation of India. Managerial implications and directions for further research have
also been discussed.

Tone, K., & Sahoo, B. K. (2005). applies a new variant of data envelopment analysis
model to examine the performance of Life Insurance Corporation (LIC) of India. The
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findings show a significant heterogeneity in the cost efficiency scores over the course of
19 years. A decline in performance after 1994–1995 can be taken as evidence of
increasing allocative inefficiencies arising from the huge initial fixed cost undertaken by
LIC in modernizing its operations. A significant increase in cost efficiency in 2000–2001
is, however, cause for optimism that LIC may now be realizing a benefit from such
modernization. This will stand them in good stead in terms of future competition. Results
from a sensitivity analysis are in broad agreement with the main findings of the study.

Outreville, J. F. (2015) provides evidence that risk aversion is negatively correlated with
higher education and human development. The results have important implications for
macroeconomic empirical studies and the demand for financial assets and more
specifically on the demand for life insurance. Assuming the same degree of RRA for
utility-maximizing consumers should be limited to homogeneous samples.

Ranade, A., & Ahuja (1999) article presents an overview of Life Insurance operations in
India, and have identified the emerging strategic issues in light of liberalisation and the
impending private sector entry into insurance. The need for private sector entry has been
justified on the basis of enhancing the efficiency of operations, achieving a greater
density and penetration of life insurance in the country, and for a greater mobilisation of
long-term savings for long gestation infrastructure projects. In the wake of such coming
competition, the LIC, with its 40 years of experience and wide reach, is in an
advantageous position. However, unless it addresses strategic issues such as changing
demography and demand for pensions, demand for a wider variety of products, and
having greater freedom in its investments, LIC may find it difficult to adapt to liberalised
scenario.

Auerbach, A. J., & Kotlikoff, L. J. (1985) in their study about Life Insurance of the
Elderly, commedted that Despite a general reduction in poverty among the aged, roughly
one third of elderly nonmarried women are officially poor. Many of these women are
widows.The fact that poverty rates are significantly larger for widows than for married
women suggests that many households may fail to buy sufficient life insurance. Paper
considers the adequacy and determinants of life insurance among the elderly. Its
principal conclusions are:(1) Combined private and public life insurance is inadequate
for a significant minority of elderly households;(2) Of those elderly households in which
the husband's future income representsa significant fraction of total household resources,

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roughly half are inadequately insured;(3) Households do not significantly offset Social
Security's provision of survivor insurance by reducing their private purchase of life
insurance; and(4) The actual determinants of the purchase of life insurance appear to
differ greatly from those predicted by economic theory.

Hammond, J. D., Houston, D. B., & Melander, E. R. (1967) study the relationships
between life insurance premium expenditures and various economic and demographic
characteristics of households are examined in the context of cross-sectional data. Income,
net worth holdings, and stage in the life cycle of the household and education and
occupation of the household head are generally determined to be significantly related to
premium expenditures. Estimates of the variable coefficients in a linear model and
estimates of the income elasticity of premium expenditures are provided.

Kumar & Srivastava (2013) paper seeks to offer the most decipherable and widely
applicable antecedents of customer loyalty. It explores the extant literature on customer
loyalty and brings out seven variables which are responsible for formation of customer
loyalty. Further, the relative importance of these variables has been ascertained through
Multiple Regression Analysis which revealed that service quality and commitment are
the strongest predictors of customer loyalty in the Indian life insurance industry. The
paper also attempts to assess the loyalty status of life insurance customers in India and
draw a comparison between public and private sector life insurance companies in order
to provide significant insights to the life insurance companies that may assist them in
devising better loyalty practices. The findings suggest that Indian customers do care
about the public sector status of a financial service provider as it entails a sense of
security and stability and thus creates a difference between customer loyalty of public
sector life insurer and that of private sector life insurer. The paper holds significant
implications for academicians interested in dynamics of customer loyalty as well as the
marketers of life insurance services who are concerned with customer relationship.

Buchardt, Møller, & Schmidt (2015) setup of a semi-Markov process in a finite state
space, They consider a life insurance contract. First, without the modelling of
policyholder behaviour, they show how to calculate the expected cash flow associated
with future payments, and to that end they present a version of Kolmogorov‘s forward
integro-differential equation. The semi-Markov model is then extended to include
modelling of surrender and free policy behaviour, and the main result is a modification

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of Kolmogorov‘s forward integro-differential equation, such that the cash flow can be
calculated without significantly more complexity than the cash flow without
policyholder modelling. The result is also demonstrated for the traditional Markov case
where there is no duration dependence, and numerical examples are studied.

Lee, Lee, & Chiu (2013) paper applied the panel seemingly unrelated regressions
augmented Dickey-Fuller (SURADF) test to re-investigate the stationarity properties of
real life insurance premiums per capita and real gross domestic product (GDP) per capita
for 41 countries within three levels of income covering 1979–2007. Our empirical results
first reveal that the variables in these countries are a mixture of I(0) and I(1) processes,
and that the traditional panel unit-root tests could lead to misleading inferences. Second,
for the estimated half-lives, the degrees of mean reversion are greater in high-income
countries. Third, there is concrete evidence favoring the hypothesis of a long-run
equilibrium relationship between real GDP and real life insurance premiums after
allowing for the heterogeneous country effect. The long-run estimated panel parameter
results indicate that a 1% increase in the real life premium raises real GDP by 0.06%.
Finally, they determine that the development of life insurance markets and economic
growth exhibit long-run and short-run bidirectional causalities. These findings offer
several useful insights for policy-makers and researchers.

Anagol, Cole & Sarkar (2013) conducted a series of field experiments to evaluate the
quality of advice provided by life insurance agents in India. Agents overwhelmingly
recommend unsuitable, strictly dominated products that provide high commissions to the
agent. Agents cater to the beliefs of uninformed consumers, even when those beliefs are
wrong. They also find that agents appear to focus on maximizing the amount of
premiums (and therefore their commissions) that customers pay, as opposed to focusing
on how much insurance coverage customers need. A natural experiment requiring
disclosure of commissions for a specific product results in agents recommending
alternative products with high commissions but no disclosure requirement. A follow-up
agent survey sheds light on the extent to which poor advice reflects both the commission
incentives and agents‘ limited product knowledge.

Gera, R. (2011) identified and discuss the key conceptual and empirical
inter‐relationships between service encounter variables of perceived agent service
quality, overall customer satisfaction and perceived value and their relationships with

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behavioural outcomes of repurchase, recommendation and complaint intentions in the
life insurance services in India. A total of 258 valid responses were generated from
existing customers of life insurance services on the selected variables. The relationships
were tested by structural equation modeling using AMOS version 4.0. The initial
hypothesized model was rejected and a model was modified till acceptable fit was
achieved. The results provide empirical support for the comprehensive nature of direct
and indirect effects of service quality, value perceptions and overall satisfaction on future
behavioural intentions (BI). The study identifies the key agent service quality attributes
of product knowledge, empathy, reliability and trust as important antecedents of
favourable behavioural outcomes. Agent service quality, satisfaction and value
perceptions have significant affect on recommendation intentions.

Anagol, Cole, & Sarkar (2014) commented that global economic growth and financial
liberalization are rapidly increasing the size and depth of insurance markets in emerging
markets, and millions of consumers are purchasing life insurance for the first time.
Insurance can be a complicated product, and many households in emerging markets have
low levels of financial literacy. Many life insurance products are complex, and insurance
companies, agents, and/or brokers may stand to profit by steering customers toward
policies that offer relatively less value to consumers but relatively higher commissions to
agents. In their paper, they consider regulation of the sales of insurance as a means for
reducing the amount of misselling that occurs. Their research was inspired by a field
experiment they conducted in India, in which they sent mystery shoppers (experimental
auditors) to visit life insurance agents and solicit financial advice. The experiment and
results are reported in Anagol, Cole, and Sarkar (2013). A key finding of the experiment
was that life insurance agents often gave unsuitable advice: For some types of clients,
agents recommended the wrong product more than 80 percent of the time.2 Because
Indian insurance law is a work in progress, they ground our analysis in a consideration
of the regulatory regimes used to govern insurance sales in the United States.

Cummins, J. D., & Rubio-Misas, M. (2016) examines the impact of integration on the
efficiency of European Union (EU) life insurance markets for the post deregulation
period 1998-2007. To assess the effects of deregulation, they first estimate cost and
revenue efficiencies by applying the metafrontier data envelopment analysis (DEA)
approach, which facilitates efficiency comparisons across countries. In the second stage,
they test the degree of inter-country convergence as well as cross sectional dispersion by
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using panel data models. Our findings show that efficiencies have converged and that the
dispersion of mean efficiency scores across countries has been reduced, providing
evidence of integration in the EU life insurance market. Results also show the β-
convergence and σ-convergence in meta technology efficiency ratios suggesting that
technological discrepancy among the life insurance markets of major EU countries has
decreased. They also find that financial market development, legal and governmental
systems, as well as competitive intensity affect insurance market performance and
integration.

Tan, Yen, Hasan, & Muhamed, K. (2014) examines the socio-demographic determinants
of household expenditures on life insurance in Malaysia. Cragg‘s two-part regression
model is applied to data of 20,313 sample households from the 2009–2010 Malaysian
Household Expenditure Survey to examine the determinants of purchase decisions and
expenditure level for life insurance. Results of marginal effects, segmented by ethnicity,
suggest that while socio-demographic factors are important determinants of life
insurance demand, the effects vary across ethnic groups in Malaysia. For instance,
wealth and education levels are associated with purchase likelihoods and amount of life
insurance premiums purchased across ethnic groups. However, household size, regional
location, urbanicity, and occupation type are associated with life insurance demand
within certain ethnic groups only. Based on these results, several observations are noted
vis-à-vis the life insurance market in Malaysia.

Kelkar, James, & Kumar (2006) Examine the question of What is the preparedness of the
Indian insurance industry to deal with the growing frequency and severity of natural
disasters? They argue that the continuation of present practices is not sufficient to
address the challenges posed by climate change. The potential impact of climate change
on the Indian economy can be severe, given the country's history of disaster losses,
which is compounded by growth in population concentrations and burgeoning
development in coastal and flood-prone areas. Targeted strategies are needed to deal with
the rising costs of claims caused by climate change in a fledging Indian insurance
market. The key challenges are to improve penetration of the available insurance
products and to develop innovative delivery mechanisms to improve the access of the
most vulnerable communities. Insurance is only a part of the solution, and must be
combined with other measures that foster genuine preparedness and adaptation.

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Ramamoorthy et al. (2016) investigated customer-perceived service quality dimensions,
satisfaction, and behavioural intentions in the context of the Indian life insurance sector.
The study explores the relationship between service quality, satisfaction, and behavioural
intentions by linking both constructs at their dimensional level. A modified SERVQUAL
instrument was used to capture customers‘ perceived service quality, followed by
exploratory factor analysis to study the dimensionality of service quality, satisfaction,
and behavioural intentions in the Indian life insurance industry. Structural equation
modelling was used to probe the influence of the dimensions of service quality,
satisfaction, and resultant behavioural intentions. The results of The study validate
previous research findings that identify reliability and responsiveness as key dimensions
of service quality. Reliable and responsive customer support had significant impacts on
customer satisfaction and behavioural intentions in the Indian life insurance industry.

Halan, M., Sane, R., & Thomas (2014) commented that regulation of retail finance has
been the subject of policy interventions in several countries, including India. Much of the
regulatory change in India has been carried out with little support of empirical evidence.
Their paper is motivated by questions of the evidence of losses due to mis-sales of
financial products. It constructs two measures of the loss to customers due to mis-selling
of life insurance policies. The first is calculated using the value of lapsed policies, and
the second uses the persistence of premium payments. Both arrive at estimates of around
USD 28 billion lost between 2004 and 2011.

Dragos (2014) argued that Urbanisation, incomes and their distributions, and the
population degree of education are relevant factors for the development of insurance
sector. This study estimates the different effects of the previously mentioned factors for
life and non-life sector. They used the econometrics of panel data on 17 emerging
economies from Asia and Europe over a 10-year period. They showed that urbanisation
influenced significantly the life insurance demand in Asia, but not in Europe. Also,
education was found to be significant only for the non-life sector in both regions and
income was non-significant in Asia for non-life sector.

Tang, B. P. (2001) examined the impacts of demographics and psychographics on

sources from which customers derived perceived value in the life insurance industry.
Factor analysis and K-means clustering method were used to develop psychographic
segments. A major conclusion was that demographic and psychographic characteristics

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were found to have significant influence on sources from which customers derived value.
The results revealed that some sources of customer value such as ―relational quality,‖
―price‖ and ―corporate image‖ were differentiated significantly across psychographic
segments. While ―service‖ and ―product‖ qualities were not significantly affected by
psychographics, service quality was found to be the core factor to all customers. The
study also echoed extant findings that combining demographics and psychographics
would provide marketers with richer insights

Maegebier & Gatzert (2016) article is to study the impact of disability insurance on an
insurer's risk situation for a portfolio that also consists of annuity and term life contracts.
They provide a model framework using discrete time non homogeneous bivariate
Markov renewal processes and in a simulation study focus on diversification benefits as
well as potential natural hedging effects (risk-minimizing or risk-immunizing portfolio
compositions) that may arise within the portfolio because of the different types of
biometric risks. Our analyses emphasize that disability insurances are a less efficient tool
to hedge shocks to mortality and that their high sensitivity toward shocks to disability
risks cannot be easily counterbalanced by other life insurance products. However, the
addition of disability insurance can still considerably lower the overall company risk.

Lehtonen, T. K. (2014) examined how life insurance is pictured, that is, explained and
concretized with words and visual images, in the promotion of private life insurance in
Finland between 1945 and 2000. In principle, life insurance can only be used for
assessing and securing the economic value of life. The empirical material shows,
however, that life insurance, as an object, can only exist if economic value and other
values constantly overflow into each other, and calculation and affect are made to
intertwine. In order to objectify their potential customers' lives as economic potential, as
commodities, insurance companies have indeed had to objectify life – yet not only in
terms of monetary value, but simultaneously and as importantly, also as something that is
irreducible to monetary value. Hence the promotion of life insurance enacts a double
stabilization of objects. On the one hand, advertisements and leaflets show how life
insurance matters, what it is capable of, and thus stabilize the understanding of insurance
itself as a tool. On the other hand, the promotional materials both stabilize and mobilize
‗life‘ as an assemblage of heterogeneous practices and modes of valuation that is
irreducible to economic potential.

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Keneley, M. (2004) studied Australian life insurance industry. He commented that in the
wake of the deregulation of the financial sector in Australia in the 1980s and 1990s the
life insurance industry has undergone a period of rapid change and reorganisation. Part
of this adjustment has been the move towards the integration of financial service
provision and the rise of bancassurance. Paper investigates the strategies adopted by
Australian life insurers as they moved into the increasingly competitive environment
triggered by the lifting of government restrictions on banking practices. It compares the
approach of life insurers with that adopted in an earlier period of expansion and change.
During the 1950s and 1960s an influx of foreign owned insurance companies into the
Australian market precipitated the diversification of domestic life insurers into other
insurance markets. The catalyst for change in both cases was the change in information
costs brought about by the change in the competitive environment. The experience of the
Australian life insurance market would suggest that there is a link between changing
information costs and changing organisational structures. However this link is
circumscribed by the institutional environment.

Lin, M., Chen, C. H., & Chen, C. J. (2011) evaluates the profitability of 28 Taiwan life
insurance companies from year 2003 to 2005. Life insurance industry has the mechanism
of modulating and stabilizing the entire financial industry. The performances of life
insurance industry often affect the overall economical development. The maturity of
investment concepts and the liberalization of investment on insurance industry of the
government policies in recent years have created a profitable environment for
investment. Under the responsibility to the policyholders, the performances and
operational capability are the important evaluation indexes to evaluate whether life
insurance companies stay stable and profitable. They cluster life insurance companies
into three groups by seven profitability indexes, and find there are significant differences
in capital allocation and operational capability, at the end they analyze and compare the
diversities between these three groups.

Yen, Liu, Tsai, & Lai (2012) examined the relationship between life insurance service
providers‘ attributes and customers‘ perceived relationship quality and the moderating
effects of customer gender on the relationship between service providers‘ attributes and
relationship quality. Survey data from 276 customers of three life insurance companies in
Taiwan indicate that service providers‘ attributes are positively related to customers‘
perceived relationship quality. Also, customer gender has a significant moderating effect
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on the relationship between service providers‘ attributes and relationship quality.
Implications of these findings as well as future research directions are subsequently
discussed.

Outreville, J. F. (2013) propose a review of 85 empirical papers examining the

relationships between insurance and economic development, that is, the insurance-
growth nexus. When looking at the economic importance of the insurance sector, most
papers in the past have looked at the demand side (the level of economic development is
an explanatory variable among other factors that affect the demand for insurance).
Because the role of the insurance sector and its contribution to development is at the
agenda of international organizations and because the importance of the relationship
between financial development and economic growth has been well recognized and
emphasized in the field of economic development, more recent papers have examined the
causality links between insurance and economic development and the role of insurance
as a significant determinant in the process of economic growth.

Using U.K. microeconomic data, Inkmann, J., & Michaelides, A. (2012) analyzed the
empirical determinants of participation in the life insurance market. They find that term
insurance demand is positively correlated with measures of bequest motives like being
married, having children, and/or subjective measures of strong bequest motives. They
then showed that a life-cycle model of life insurance demand, saving, and portfolio
choice can rationalize quantitatively the data in the presence of a bequest motive. These
findings provide evidence supporting the presence of a bequest motive.

Chan (2012) examined the interplay between local culture, the state, and economic
actors' agency in producing variation across markets. I adopt a political–cultural
approach to examining why life insurance has been far more popular in Taiwan than
Hong Kong, despite the presence of a cultural taboo on the topic of premature death in
both societies. Based on interview data and documentary references, the findings reveal
that as an independent state, the Taiwanese government heavily protected domestic
insurance firms during their emergence. These domestic firms adopted a market-share
approach by re-defining the concept of life insurance to accommodate the local cultural
taboo. The colonial Hong Kong government, on the other hand, adopted laissez-faire
policies that essentially favoured foreign insurance firms. When faced with the tension
between local adaptation and the profitability of the business, these foreign firms chose

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the latter. Their reluctance to accommodate local cultures, however, resulted in a smaller
market. I argue that state actions mediate who the dominant economic players are and
that the nature of the dominant players affects the extent of localization. Specifically, the
presence of competitive domestic players alongside transnational corporations is more
likely to produce varieties of capitalism.

The life insurance industry in developing Asian economies is under-developed compared

with global standards. The low market penetration is attributed to full or partial
government ownership and entry restrictions on foreign insurers. Regulatory changes and
adoption of liberal policies have aided the growth of the life insurance industry in the
past decade. At the same time, economic and social factors were expected to promote
insurance awareness and consumption. In this context, Sen, S., & Madheswaran (2013)
analysed the factors explaining life insurance demand in 12 Asian economies, including
economies from the South Asian Association for Regional Cooperation and Association
of Southeast Asian Nations regions, as well as China. The results suggest that income,
financial depth, inflation, the real interest rate, and the youth dependency ratio are
significant determinants of life insurance consumption. Foreign ownership and improved
regulations may foster growth. But urbanisation and the literacy rate are among the few
determinants found not to have the impact observed in previous studies. The research
highlights the limitations of studies using macrodata and contributes to understanding of
the growing insurance industry in the region.

The primary reason for buying life insurance is to provide financial protection for family
members in case of the unexpected death of the wage earner. The two major types of life
insurance are term and cash-value insurance. Term is believed to be the least expensive.
Kim, DeVaney & Kim, J. (2012) examined ownership of life insurance among families
with a respondent between the age of 24 and 66 and with incomes below $80,000. About
one-third of the sample of 454 respondents had purchased life insurance on either the
respondent or spouse/partner. Although there were some differences in predicting term
versus cash-value insurance, saving regularly and income were the two most consistent
predictors of life insurance purchase.

Millo, G., & Carmeci (2015) propose a subregional panel approach to the determinants
of life insurance development, with new methodological tools, applied to Italian data.
Our sample has enough variability in observables and less unobserved heterogeneity than

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cross-country ones, but is potentially affected by spatial dependence and serial
correlation. They propose an encompassing estimator, showing that the spatial diffusion
process of life insurance is driven by idiosyncratic shocks in neighbors. Our results
partly reconcile the aggregate perspective with survey evidence supporting, in contrast to
international studies, a negative link between education and risk aversion, and
identifying the positive effect of young dependents predicted by theory.

Ramanathan, K.V., (2011), research has resulted in the development of a reliable and
valid instrument for assessing customer perceived service quality, awareness level, and
satisfaction level of customers towards life insurance industry. Here, service quality
needs to be measured using a six dimensional hierarchal structure consisting of
assurance, competence, personalized financial planning, corporate image, tangibles and
technology dimensions.

This would help the service managers to efficiently allocate resources, by focusing on
important dimensions first. There is no right and wrong in this. The success of marketing
insurance depends on understanding the social and cultural needs of the target
population, and matching the market segment with the suitable intermediary segment.

Meera C. and Eswari D.M., (2011), explored a study on customer satisfaction towards
cross selling of insurance products and supplementary services in Coimbatore district,
centers around the dependent variable customer usage behaviour and their relationship
with the related independent variables such as Age, Gender, Marital status, Education,
Occupation, Family, Income, No. of years banking and Frequency of Visit to bank.
Statistical tools ANOVA and Garrett ranking were used and revelled that cross selling of
insurance product is not influenced by age of respondent but have strong opinion on
cross selling of insurance product is associated with education (UG), occupation
(Business), and frequency of bank visit.

Serenmadevi R., Saravanaraj M.G. and Natajan M. Lathe, (2011), conducted a study on
the insurance product pattern and consumer preference for ULIP Life Insurance Product
with reference to Delhi City to find out how much the consumer in Delhi city prefer for
ULIP Life Insurance. The collected data were analyzed by using simple percentage
analysis, weighted average method, ranking method, Analysis of variance, chi-square, F-
test and correlation and it is found that most of the customer are satisfied with ULIP and
enjoys an excellent perception of brand value.

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Bharadhwaj, C.L., (2011), in his article on ―Practising the Spirit of Service – CSR in
Insurance‖ contends that insurers need not look far for implementing the Corporate
Social Responsibility (CSR) Philosophy but adopt simple practices of serving the
clientele effectively and demonstrate their zeal to improve the overall standards of life.
CSR is the deliberate inclusion of public interest into corporate decision-making and the
honouring of a triple bottom line: people, planet and profit.

Gupta, P.K., (2010), in his book on ―Insurance and Risk Management‖ has attempted to
give a more in-depth analysis on the functional areas of insurance business, design and
development of products, management of claims, pricing and marketing of products and
the financial operations of insurance companies. It also elaborates the Asset-Liability
Management Aspects of the insurance companies.

Prakash Anand, Jha Sanjay Kumar and Kallurkar S.P., (2010), the research describe
Indians attitude towards service quality for life insurance business presented through
different demographical factors. This research reveals that, type of customer personality,
age, gender, levels of education, and monthly income influence the attitude towards the
service quality and also provides the research implications useful for business
transformation and further development of research on service quality.

Dutta Subit, (2010), in his thesis on ―Marketing Strategy of Life Insurance Corporation
of India in the context of Liberalisation of Insurance Sector (A Study with Special
reference to Silchar Division)‖ makes a study of the insurance marketing strategies of the
public sector giant after liberalisation in Silchar Division and finds that the customer
awareness has improved on insurance products and also the efficiency of marketing of
these products by the Corporation is also augmented due to increased competition from
private insurance players.

School Skyline Business, (2010), examined the customer preference for purchasing life
insurance product during 2009. Out of the 500 people surveyed, 70.60% respondents said
that tax saving was the most important motivator for taking up a Life Insurance Policy.
67.40% said that financial security was the most important motivator.

Mishra, K.C. and Venugopal, R.,(2009) in their book on ―Life Insurance Underwriting‖
discuss at length underwriting basics, philosophy and guidelines of underwriting, sources
of underwriting information, physiological systems, technology in underwriting, pricing

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fundamentals and modern developments and practices in the technology of underwriting.
All these aspects are very useful to have an in-depth understanding on insurance
underwriting.

Sahoo, S.C. and Das, S.C., (2009) in their book on ―Insurance Management‖ provide a
comprehensive insight into the basics of risk management and life insurance. The various
facets of the IRDA‘s regulations are also analysed at appropriate places in the book. It
also covers the social and rural sector obligations of the insurance companies, role of
information technology in insurance marketing and various aspects of competitive
environment such as mindset of the consumers, adequacy of capital, market related
policies and cost-consciousness.

Sathish, S.V., (2009) in his article entitled ―Life Insurance Marketing – A Phenomenon‖
contends that insurance marketing requires intriguing creativeness of the insurers
implying updating knowledge on the markets with global perspective which calls for
availability of enough right data or information at the hands of the operating offices.

Verma Amitabh, (2008) in his article on ―Retention of Life Insurance Business – Need
for Improvement‖ opines that high business retention ratios indicate the health of a
company and further adds that insurers should adopt dynamic methods of insuring so that
a customer does not go out of their reach.

Sharma Anuradha,(2008), in her article on ―Life Insurance Evaluation–Current

Perspective‖ observes that the demand for life insurance products is driven by several
economic factors like prices of insurance, government tax, the general economic
environment, income, inflation and interest rates. The burgeoning insurance market in
India has been able to generate considerable interest and awareness among people.
Insurance field has been creating new vistas for attracting talent and in this process had
reduced unemployment.

Chauhan Monica, (2007), in the thesis entitled ―A Study of Factors Affecting Selection
of Life Insurance Products‖ states that the insurance industry is mostly a customer-
oriented industry and customers are demanding more and more of innovative insurance
products to fulfil their needs and obligations. The important factors affecting the
selection of life insurance products are identified by the researcher and these are the

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product characteristics, terms of premium payment, duration of the policy, number of
switch-offs in the solution, risk coverage and return on the policies.

Tewari Sanjeev Kumar, (2007), in his thesis on ―An Analytical and Critical Study of
Fund Management of Life Insurance Corporation of India‖ states that investment
operations are crucial to the business of the LIC. The Corporation, over a long period of
time, has built up a large corpus of fund. LIC of India has required investing the funds to
the best advantage of the investors keeping in view the national priorities.

Sharma Rajendra Prasad, (2006), in his thesis on ―A Comparative Study of Marketing

Strategies of Selected Public and Private Sector Life Insurance Companies‖ finds that
there is much innovativeness in the marketing strategies adopted by the private insurance
players. The private insurance players are mostly technology-driven and hence they are
on the forefront in the area of introducing on-line and mobile marketing strategies.

Kotler, (1973) considers insurance to be in the category of "unsought goods," along with
products such as preventive dental services and burial plots. Mehr and Cammack (1976)
agrees that Insurance is usually thought of as a product that spreads the risk of serious,
but low-probability, losses among a group of individuals, thus providing some financial
protection to each individual. Smith ML (1982) in his study presented that a life
insurance contract provides a package of options to the policy owner that is not exactly
duplicated by any other combinations. Hence, life insurance enjoys a unique position in
the field of investments. Insurance company required to provide efficient services to get
confidence of customer toward company, however, allow customers to an undue delay is
an important reason to lose the confidence (Govind, 2006).

Tajudeen, Ayantunji and Dallah (2009) reported that the people with education have
more positive attitude toward life insurance products as compared to the people who
have less education. Respondents who have highest positive attitude towards insurance
are the people in age 56 and 65 years than other age groups. People in this age group are
at the end of the active life and they are more aware of their post retirement. They also
found that high household income groups have highest positive attitude toward insurance
than the low household incomes groups, in fact, the wealthy household comparatively
feel protected commonly in Nigerian economic environment. The low household income
groups are less authorized and attracted towards life insurance as they feel that it is
further than their reach.

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Sanu, Jaiswal and Panday (2009) found that demographic risk is the risk that life tables
change in a nondeterministic way. It is threat to financial stability of an insurance
company. The opposite influence of changes in mortality laws on the market value of life
insurance creates natural hedging opportunities. Their research found that ease of
procedures is a contributing factor towards the study. This factor includes various
variable statements which are co-operative and friendly agent, settlement of claims easy
and timely, the company provides claims on time, and agent is well informed about
policies.

Customer perceived that life insurance is a long-term investment (Ravipa L. and Mark
S., 2004). With the long-term policy of life insurance, customers want to confirm that
they understand how to receive their money back when the maturity date of insurance
policy in the future, or that their family knows how to get it when they have any
unfortunately happen. Customers need personal attention and promise from salespeople
whom they trust to make sure their money will not be lost. Besides that, customers want
to have someone who will help them take care their interest and help in claim
settlements.

In the study of quality life in developing countries with orientation to South Africa,
Moller (2007) found that income and social security which are the own wages, ability to
provide for family, insurance against illness and death, and income in old age have been
regarded as one of the major pointers of quality of life, this point of view stresses the
importance of insurance to human life.

The review of literature suggests that most of the studies have examined the benefits of
life insurance and overcoming resource constraints. A review of the literature provides
limited empirical research on the customer perspective on Life insurance products.
Moreover, very few researchers have been studied in Indian context. The present study
focus on the perception towards Life insurance products; and also compares the
satisfaction level of consumers between the products of a public and private sector life
insurance companies.

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