Antecedent of Purchase Intention for Life Insurance

Introduction
Everyone in life faces risk. Since risk is almost always inherent in human life, it must be managed
properly (Bong et al., 2019). One way to reduce this risk is to buy an insurance policy from an insurance
company (Abdel et al., 2015). Life insurance remains an essential part of financial and social security.
Life insurance offers financial and social security to families in several ways; such as instant debt
repayment, replacement of wealth, generation of savings and replacement of income (Black and
Skipper, 2000). Life insurance is one of the fastest-growing sectors in India since 2000 as Government
allowed Private players and FDI up to 26% and recently Cabinet approved a proposal to increase it to
49%.

Due to COVID Life Insurance has become more important. The COVID-19 pandemic brought about many
uncertainties in the life of the common person. Job losses and pay cuts were problems that riddled the
working population, while India’s small businesses faced many uncertainties in their revenue share. In
addition to this unpredictability, many families also suffered the loss of loved ones directly from the
pandemic. This loss not only caused emotional hardships; it also affected the surviving members
financially, because in many cases, it meant the loss of their primary or only source of income.

The insurance penetration rate is high in the developed countries but very low in developing countries
such as India, with only 3.2 %penetration as compared to world average 7.4% (INSUNEWS)2. In India, the
mortality protection gap, the difference between the resources needed and those available, is the
highest in the Asia Pacific region at 92.2%. This means consumers have savings and insurance of
just ₹7.8 for every ₹100 needed for protection, a gap of ₹92.2, according to Mortality Protection Gap
Report 2020, Asia -Pacific, by Swiss Re

In line with expectations, the 13-month persistency ratio declined in the first quarter of 2020-2021 to
79.9% from 81.3% (sample of 12 major life insurers in India) in the fourth quarter of 2019-20, the lowest
levels for the previous six quarters, as people started conserving liquidity for the upcoming tough times.
The 61-month persistency ratio sprang a surprise by marginally increasing quarter-over-quarter to
50.1% from 49.5% in the same sample. This was due to the stickiness of longstanding policy holders not
wanting to let a policy lapse after paying regular premiums for five years.

1|Page
Fig. 1
Literature Review
Life insurance is a tool used for mitigating financial risk arising due to the untimely death of the
main bread earner of the family. It mitigates the financial risk for an individual or household by
pooling and redistributing of risk among a large group of people. These have been discussed by
theory of TRA (Theory of reasoned action) and TPB (Theory of planned behavior).

2|Page
Much of the research on insurance
markets in India has been descriptive
(Ranade and Ahuja, 1999; Rao, 1999;
Sinha, 2007). Empirical studies have
primarily looked at socio-economic
and demographic factors that affect
the purchase of insurance. These
studies (Townsend, 1994; Sen, 2008;
Kakkar and Shukla, 2010) provide an
understanding of how factors such as
income, age, education and life stage
events affect demand. However, these
studies do not provide an
understanding of the actual decision-
making process from a consumer
behavior point of view. There have
been some behavioral studies in insurance in the context of western countries (Fletcher & Hastings,
1983, 1984; Kurland, 1995; Gotllieb, 2012); in Malaysia (Haron et. al., 2011; Rahim and Amin, 2011;
Husin and Rahman, 2013) and in Nigeria (Omar, 2007; Omar and Frimpong, 2007). However, the findings
from these studies cannot be generalized to a country such as India due to differences in social, cultural,
educational, political and regulatory environment, as well as the differences in the development of
financial markets.

Methodology
The objective of this study is to understand how individuals form an intention to purchase life
insurance in India. Purchase intention is a function of individual's attitude toward life insurance,
perception of the social norms on purchase decision and individual’s control over the purchase
decisions. We will hypothesize that individual attitude, subjective norms and perceived
behavioral control is influenced by individual’s belief towards life insurance policy.
Primary data will be collected through a structured questionnaire survey that will be
administered online. Respondents are to be selected using convenient sampling technique. The
data in the final sample would consists of information for approx. 300 respondents. The target
population included existing and prospective life insurance customers. The geographic
distribution of respondents will be quite diverse with respondents surveyed from India. This
data will be used for hypothesis testing including SPSS.

3|Page
Appendix : Questionnaire

1. Age
 Under 18 years old,
 18-24 years old
 25-34 years old
 35-44 years old
 45-55 years old
 Above 55 years old
2. Gender
 Male
 Female

3. Household monthly income

 Less than Rs. 10,000/month
 Rs. 10,000 – Rs. 25,000/month
 Rs. 25,001 – Rs. 50,000/month
 Rs. 50,001-Rs. 1 lakh/month
 More than Rs. 1 Lakh / month
 Would rather not say

4. Employment Status
 Student
 Looking for work
 Homemaker
 Employed (salaried)
 Self-Employed
 Retired

5. Do you have insurance policy

 Yes
 No

6. Number of policies do you have

4|Page
  0
 1
 2
 More than 2

7. Which type of policy you have?

 Maturity
 Term plan
 Retirement
 None

8. Do you think for bonus during the contract of life insurance policy
 Yes
 No
 Maybe

9. Do you prefer buying insurance policy which cover high life coverage but has low
premium
 Yes
 No

10. Which life insurance product you mainly prefer to buy

 Coverage in case of death
 Coverage for accident
 Investment
 Early retirement
 Family security

***We are working on more questions***

*This following project has been done under the guidance of Prof Monika Mittal *

Appendix
Time slot for project:
 21st to 26th January, 2022 preparation of Questionnaire.
 27th January, 2022 to 7th February, 2022 collection of data from respondent.
 8th to 15th February, 2022 preparation of primary data for further processing.
 16TH to 25th February, 2022 analyzing of data by the use of SPSS.

5|Page
  26th February, 2022 to 10th March, 2022 preparation of final report from the facts
and figures
 11th March, 2022 submission of the project.

References
Kakar, P., & Shukla, R. (2010). The determinants of demand for life insurance in an emerging economy-
India. Margin: The Journal of Applied Economic Research, 4(1), 49-77.

Ranade, Ajit, and Rajeev Ahuja. (1999) Life insurance in India: Emerging issues. Economic and Political
Weekly: 203-212.

Fletcher & Hashting (1999). Life insurance business in India: analysis of performance. Economic and
Political Weekly, 2174-2181.

Gottlieb, D. (2012). Prospect Theory, Life Insurance, and Annuities

Md Husin, M., &Ab rahman, A. (2013). What drives consumers to participate into family takaful
schemes? A literature review. Journal of Islamic Marketing, 4(3), 264-280.

Kurland, N. B. (1996). Trust, accountability, and sales agents' dueling loyalties. Business Ethics Quarterly,
289-310.

6|Page