A Comparative Study On Customer Perception Towards LIC of India in View of Increased Competition by Private Companies A Research Done in 2009

CHAPTER - I
1.1 - Introduction
With largest number of life insurance policies in force in the world, Insurance happens to be a mega
opportunity in India. It’s a business growing at the rate of 15-20 % annually and presently is of the order
of Rs 450 billion. Together with banking services, it adds about 7 % to the country’s GDP. Gross premium
collection is nearly 2 % of GDP and funds available with LIC for investments are 8 % of GDP.
Yet, nearly 80 % of Indian population is without life insurance cover while health insurance and non-life
insurance continues to be below international standards. And this part of the population is also subject to
weak social security and pension systems with hardly any old age income security. This itself is an
indicator that growth potential for the insurance sector is immense.
A well-developed and evolved insurance sector is needed for economic development as it provides long
term funds for infrastructure development and at the same time strengthens the risk taking ability. It is
estimated that over the next ten years India would require investments of the order of one trillion US
dollar. The Insurance sector, to some extent, can enable investments in infrastructure development to
sustain economic growth of the country. The growing number of wealthier as well as aging Indian middle
class is set to offer a strong business potential for the country’s untapped life insurance market.
Insurance is a federal subject in India. There are two legislations that govern the sector- The Insurance
Act- 1938 and the IRDA Act- 1999.
The insurance sector in India has come a full circle from being an open competitive market to
nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance
sector reveals the 360 degree turn witnessed over a period of almost two centuries.
As the twentieth century has come to a close and we have move into the third millennium, we can see
many developments and changes taking place around us with all the industries and firms within each
SIVA SIVANI INSTITUTE OF MANAGEMENT 1
industry trying to keep pace with the changes and diverse needs of the people. Though for decade
together, marketers have regarded ‘customer’ as the king and evolved all activities to satisfy him or her,
giving this concept a momentum it is necessary to understand the Perception and Expectations of the
customer in respect various aspects & attributes so as to design a successful and an acceptable product or
service.
This can largely be attributed to the prevailing market situation. Not only has competition become
intense but over and above with the market being flooded with many me-too products, the challenge
before the marketer is to understand the diversity of consumer expectations and offer goods/services
accordingly. Today the company image is built and made known by its customers. Thus the success of the
firm will be determined by how effective it has been in meeting the diverse consumer needs and wants by
treating each customer as unique and offering products and services to suit his or her needs.
Therefore today all the firms are engaged in a process of creating a lifetime value and relationship with
their customers, a step towards developing knowledge regarding its customers needs is the utmost
important. The current study is an attempt to measure the various parameters as perceived by the
customers and to help the company in serving its customers in a much better and efficient manner.
1.2 - Scope of the study

The scope of the study lies in finding out the perception of customers in Lucknow city through
responses taken by 300 customers during a period of 60 days and highlighting the key areas which require
some concern on part of LIC of India and improving upon which the company may strengthen its
customer base. The present study, analysis, findings and suggestions proposed by the present researcher
will be of immense use for future researcher with similar studies in insurance market.

1.3 Significance of the study :
High quality products with quality support services both in terms of international standards and
competitiveness have entered into our country. Customer satisfaction has emerged as the key differentiator
and defining attribute. The study is very much significant because it brings out the differences in various
parameters like awareness, service quality, problems faced and rationale behind investment between the
products of LIC and private sector companies and these are the main attributes which build up the
customer perception and loyalty towards a company. The study is significant also because it will help LIC
to create a positive impact on its customers by working on its lacking qualities.
1.4 Objectives of the study :
For every problem there is a research. As all the researches are based on some and my study is
also based upon some objective and these are as follows :
I ) To test the awareness of customers on various aspects of life insurance policies offered by LIC
and other private sector insurance companies and find whether there is any relation between
them.
II ) To study the service quality being offered by LIC and private sector insurance companies and
test if any relation exists.
III ) To analyze various problems confronted by the policyholders of LIC and private sector
insurance companies and determine the relation between the two.
IV ) To clearly understand the rationale behind the investment in policies of LIC and private
sector insurance companies.
V ) To analyze the various aspects of LIC and do a complete SWOT analysis of the organization.

1.5 Review of Literature :
1) Retention of the Customers is the essence of Insurance business, Imtiyaz.H Ltd.VASI DO,
Insurance Times (Pg 20).Feb 2007-:
Retaining a customer is four time cheaper than acquiring a new one. The retention of the customers is of
utmost importance in the insurance industry in specification. Insurance business is of the relationship
building process. were one customer leads to the building of other one. A satisfied customer is like a word
of mouth advertisement for the company. The needs of the existing customers should be identified and
satisfied well rather than only concentrating at the new accounts. All possible measures needs to taken to
retain the customers as it is lesser costlier as well as provides stability to the business .
2) Trends in Life Insurance Business—Unit Linked Insurance Plans, IRDA annual report 2007-08,
box item 1, page no. 15 -:
It wasn’t too long back when the good old endowment plan was the preferred way to insure oneself
against an eventuality and to set aside some savings to meet one’s financial objectives. The traditional
endowment policies were investing funds mainly in fixed interest Government securities and other safe
investments to ensure the safety of capital. Thus the traditional emphasis was always on security of capital
rather than yield. However, with the inflationary trend witnessed all over the world, it was observed that
savings through life insurance were becoming unattractive and not meeting the aspirations of the
policyholders.
The policyholder found that the sum assured guaranteed on maturity had really depreciated in real value
because of the depreciation in the value of money. The investor was no longer content with the so called
security of capital provided under a policy of life insurance and started showing a preference for higher
rate of return on his investments as also for capital appreciation. It was, therefore found necessary for the
insurance companies to think of a method whereby the expectation of the policyholders could be satisfied.
The object was to provide a hedge against the inflation through a contract of insurance. Decline of assured
return endowment plans and opening of the insurance sector saw the advent of ULIPs on the domestic
insurance horizon. Today, the Indian life insurance market is riding high on the unit linked insurance
plans.

3) Sampada kapse & D.G kodwani, Insurance as an investment option, The Insurance Time, May
2003
At national as at individual level the excess of income after consumption level savings as funds for
investment. Surplus funds can be invested in either real asset or in financial assets. Purpose of investment
is to protect one’s wealth against erosion of value due to inflation and to earn risk adjusted return. There
are three motives which drive people to purchase insurance products in India.
_ Desire to cover risk
_ Tax benefit
_ Saving motives
It is argued that in this paper that in the changing scenario for the insurance sector there is going to be a
good opportunities for insurance sector to expand its market base. For this purpose there is need to
improve the features of the insurance products to make them more liquid or short term schemes could be
increased. It is shown that although rewards implied by the insurance products particularly by the tax
benefits are quite close to those observed in banks and small saving scheme of the governments. The
performance of mutual funds which come in many different types is found to be reasonable compared to
the risk involved. The survey indicates that it may not be very difficult to win over the confidence of small
investors towards insurance policies if good marketing techniques are adopted to educate the targeted
population about the uses of insurance policies from investment point of view.
4) Samuel B Sekar, Research associate, Academic wing, The ICFAI University, Customer – driven
innovation in insurance products, Insurance Chronicle, page 33, July 2006-:
Insurance is one product which is not demanded by a customer, but supplied to him by massive education
and drive marketing. Insurance ought to be bought not sold. The new concept of demand side innovation
focuses more on customer’s social and economic reality striving to deliver maximum value to the
customer at an affordable price. Therefore, when the customer becomes the primary focus including him
in the invention process becomes mandatory. But, there are certain areas of insurance innovations where
the customers cannot be involved. A case in point is the recent insurance product invention called
Telematic Auto Insurance. It’s a product by the Progressive Auto Insurance, which monitors the driving
behaviour of its auto insurance policyholder. The new machine grabs information and automatically

transmits it to the insurer. This information received is regularly analyzed to judicially conclude the
intensity of risk the person is exposed and the corresponding premium he is eligible to pay. This is an
example of supply side innovation, where it is strictly not possible to include the customer in the
innovation process. Though, there are instances where the customer is involved in the testing phase, his
inclusion in the conception phase makes an innovation demand-driven.

CHAPTER - II
2.1 Historical Perspective :
Insurance in India
The Britishers opened general insurance in India around the year 1700.
The first company, known as the Sun Insurance Office Ltd. was set up in Calcutta in the
year 1710.
Insurance companies like Bombay Insurance Company Ltd was established in 1793.
In 1818 it was conceived as a means to provide for English Widows.

The Bombay Mutual Life Insurance Society started its business in 1870.
It was the first company to charge same premium for both Indian and non-Indian lives.
The Oriental Assurance Company was established in 1880.
Till the end of nineteenth century insurance business was almost entirely in the hands of overseas
companies.
Insurance regulation formally began in India with the passing of the Life Insurance Companies
Act of 1912 and the provident fund Act of 1912.
Several frauds during 20's and 30's sullied insurance business in India.
By 1938 there were 176 insurance companies.
The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided
strict State Control over insurance business.
The insurance business grew at a faster pace after independence.
The Government of India in 1956, brought together over 240 private life insurers and provident
societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC)
was born.
Nationalization was justified on the grounds that it would create much needed funds for rapid
industrialization.

What Is Life Insurance?
Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on
the happening of the event insured against.
The contract is valid for payment of the insured amount during:
 The date of maturity, or
 Specified dates at periodic intervals, or
 Unfortunate death, if it occurs earlier.
Why We Need Insurance :

Life insurance is a contact by which you can protect yourself against specific uncertainties by paying a
premium over a period. Since each one of us during our lives are faced with numerous risks-falling health,
financial losses, accident and even fatalities.
 Protection
You need life insurance to be there and protect the people you love, making sure that your family has a
means to look after itself after you are gone. It is a thoughtful business concept designed to protect the
economic value of a human life for the benefit of those financially dependent on him.
 Retirement
Life insurance makes sure that you have regular income after you retire and helps you maintain your
standard of living. It can ensure that your post-retirement years are spent in peace and comfort.
 Savings and Investments
Insurance is a means to Save and Invest. Your periodic premiums are like Savings and you are assured of
a lump sum amount on maturity. A policy can come in handy at the time of your child’s education or
marriage! Besides, it can be used as supplemental retirement income.
 Tax Benefits
Life insurance is one of the best tax saving options today. Your tax can be saved twice on a life insurance
policy-once when you pay your premiums and once when you receive maturity benefits. Money saved is
money earned.
 Myths of Insurance :
i) Insurance is just meant for saving tax.
ii) Insurance does not give good returns
iii) Insurance products are not flexible

2.2 Industry Profile :
INDIAN INSURANCE INDUSTRY

Insurance is a big opportunity in a country like India with a large population and untapped potential. The
life insurance business (measured in the context of first year premium) registered a growth of 23.88 % in
2007-08, (94.96 % achieved in 2006-07). The general insurance business (gross direct premium) has
registered a growth of 11.72 % in 2007-08 (3.52 % achieved in 2006-07). This has resulted in increasing
insurance penetration in the country. Insurance penetration or premium volume as a ratio of GDP, for the
year 2007 stood at 4.00 % for life insurance and 0.60 % for non-life insurance. The level of penetration,
particularly in life insurance, tends to rise as income levels increase. India, with its huge middle class
households, has exhibited growth potential for the insurance industry. Saturation of markets in many
developed economies has made the Indian market even more attractive for global insurance majors. The
insurance market in India has witnessed dynamic changes including entry of a number of global insurers
in both life and non-life segment.
Most of the private insurance companies are joint ventures with recognized foreign players across the
globe. Over the last eight years, consumer awareness has improved. Competition has brought more
product innovation and better customer servicing. This made a positive impact on the economy in income
generation and creating employment opportunities in this sector.
At present there are a total of 21 companies in the life insurance business in India and only LIC is in the
public sector and rest all 20 companies are in the private sector.

Table of Life Insurance Companies as on 31st March, 2009
SI FOREIGN REGISTRATION DATE OF YEAR OF
No. INSURERS PARTNERS NUMBER REGISTRATION OPERATION
1 HDFC Standard Standard Life
Life Insurance Co. Ltd.
Assurance, UK 23.10.2000 2000-01
101
2 Max New York New York Life,
Life Insurance Co. Ltd.
USA 15.11.2000 2000-01
104
3 PRIVATE COMPANY- Prudential, U.K.
Prudential
24.11.2000 2000-01
Life Insurance Co. Ltd. 105
4 Om Kotak Life Insurance Old Mutual,
Co. Ltd. South Africa 10.01.2001 2001-02
107
5 Birla Sun Life Insurance Co. Sun Life, Canada
Ltd. 31.01.2001 2000-01
109
6 Tata-AIG Life Insurance Co. American
International
Ltd.
Assurance Co., 110
12.02.2001 2000-01
USA
7 SBI Life Insurance Co. Ltd. BNP Paribas
Assurance SA,
29.03.2001 2001-02
111
France
8 ING Vysya Life Insurance ING Insurance
International
Co. Ltd. 02.08.2001 2001-02
B.V., Netherlands 114
9 Allianz Bajaj Life Insurance Allianz, Germany
Co. Ltd. 03.08.2001 2001-02
116
10 Metlife India Insurance Co. Metlife
International
Ltd.
Holdings Ltd., 117
06.08.2001 2001-02
USA
11 Reliance Life Insurance Co.
Ltd.
(Earlier AMP Sanmar Life 121
Insurance Company 03.01.2002 2001-02
from 3.1.02 to 29.9.05)
12 AVIVA Aviva
International 122
Holdings Ltd., UK 14.05.2002 2002-03

13 Sahara Life Insurance Co. . 127 06.02.2004 2004-05
14 Shriram Life Insurance Co. Sanlam, South

Ltd. Africa 17.11.2005 2005-06
128
15 Bharti AXA Life Insurance AXA Holdings,
Co. Ltd. France 14.07.2006 2006-07
130
16 Future Generali India Life Pantaloon Retail
Ltd.; Sain
Insurance Company Ltd.
Marketing 133
Network Pvt. Ltd. 04.09.2007 2007-08
(SMNPL),
Generali, Italy
17 IDBI Fortis Fortis, 135
Life Insurance Company Ltd.
Netherlands 19.12.2007 2007-08
18 Canara HSBC OBC HSBC, UK
08.05.2008 2008-09
136
19 Aegon Religare Religare,
Netherlands 27.06.2008 2008-09
138
20 DLF Pramerica Life Prudential of
Insurance Co. Ltd. America, USA 27.06.2008 2008-09
140
21 Life Insurance Corporation
of India
512
Besides Life Insurance, all the above-mentioned companies provide coverage in Medical Insurance,
Automobile Insurance, Accident Insurance, Home Insurance and many others. In short, the future of
insurance companies in India looks bright.
Contribution to Indian Economy

 Life Insurance is the only sector which garners long term savings.
 Spread of financial services in rural areas and amongst socially less privileged.
 Long term funds for infrastructure.
 Strong positive correlation between development of capital markets and insurance/pension
structure.
 Employment generation.

International Comparision of Life Insurance Penetration :
The table below shows that India is doing well in comparison to several countries but still the life
insurance penetration is still low and there is a huge scope for growth in the insurance industry.
Table 1 -
2005 2006 2007

INDIA 2.53 4.1 4
USA 4.14 4 4.2
CHINA 1.78 1.7 1.8
GERMANY 3.06 3.1 3.1
FRANCE 7.08 7.9 7.3
JAPAN 8.32 8.3 7.5
ENGLAND 8.9 13.1 12.6
CANADA 3.05 3.1 3.2
ITALY 4.86 4.7 4
Chart 1 -
14
12
10
2005
8
2006
6
2007
4
2
0
A
Y
D
A
A
N
A
Y
DI
AL
IN
D
N
AN
US
PA
AN
NA
LA
IN
CH
IT
JA
M
G
FR
CA
ER
EN
G
Insurance penetration is measured as ratio (in per cent) of premium (in US Dollars) to GDP (in US Dollars)
Interpretation – The above table shows that since the total premium collected is just 4% of India’s
GDP in 2007 as compared to France, Japan, England which have very high
penetration so there is a great scope for growth of life insurance in India .

Number of Life Insurance Offices- Company wise (as on 2008-09)
Table 2 -
INSURER 2008 2007 2006 2005 2004 2003 2002 2001
PRIVATE 6391 3072 1645 804 416 254 116 13

SECTOR
LIC 2522 2301 2220 2197 2196 2191 2190 2186
INDUSTRY 8913 5373 3865 3001 2612 2445 2306 2199
TOTAL
Expansion of Offices
The number of offices of the life insurers has increased dramatically in the year 2007-08 from 5373 at the
beginning of the year to 8913 by the end of the year, showing a growth of over 65 %. A major portion of
this expansion was in the private sector whose offices more than doubled from 3072 to 6391. LIC’s
offices increased at a more modest 10 % from 2301 offices to 2522.
New Policies issued : Life Insurers (as on 2008-09) :

Table 3 -
INSURER 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03
LIC 37612599 38229292 31590707 23978123 26968069 24545580

(21.01) (31.75) (-11.09) (9.87) (96.75)
(-1.61)
PRIVATE 13261558 7922274 3871410 2233075 1658847 825094

(104.64) (73.37) (34.62) (101.05) (3.25)
SECTOR
(67.40)
INDUSTRY 50874157 46151566 35462117 26211198 28626916 25370674
TOTAL
Figure in bracket indicates the growth over the previous year in percent.

Chart 2 -
Growth Rate over past years
120
100
80
60 LIC
40 Private Companies
20
0
2007-08 2006-07 2005-06 2004-05 2003-04 2002-03
-20
New policies underwritten by the industry were 508.74 lakhs in 2007-08 as against 461.52 lakhs during
2006-07 showing an increase of 10.23 %. While the private insurers exhibited a growth of 67.40 %,
(previous year 104.64 %), LIC showed a decline of 1.61 % as against a growth of 21.01 % in 2006-07.
The market shares of private insurers and LIC, in terms of number of policies underwritten, were 26.07%
and 73.93% as against 17.17% and 82.83% respectively in 2006-07. We can clearly see that private
companies are catching up as they are registering a continuously high growth rate as compared to LIC
which is a matter of concern.
Total Life Insurance Premium( as according to IRDA handbook

2007-08 )
Life insurance industry recorded a premium income of Rs.201351.41 crore during 2007-08 as against
Rs.156075.85 crore in the previous financial year, recording a growth of 29.01 per cent. Regular premium,
single premium and renewal premium in 2007-08 were Rs.54888.16 crore (27.26 per cent); Rs.38824.36
crore (19.28 per cent); and Rs.107638.89 crore (53.46 per cent), respectively. The table below shows the
trend followed during past seven years in terms of total life premium collected.

Table 4 -
INSURER 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03
LIC 149789.99 127822.84 90792.22 75127.29 63533.43 54628.49
(40.79) (20.85) (18.25) (16.30) (9.65)
(17.19)
PRIVATE 51561.42 28253.00 15083.54 7727.51 3120.33 1119.06

(82.50)
(87.08) (95.19) (147.65) (178.83) (310.59)
SECTOR
INDUSTRY 201351.41 156075.84 105875.76 82854.80 66653.75 55747.55
(29.01)
(47.38) (27.78) (24.31) (19.56) (11.28)
TOTAL
Figure in the bracket represent the growth over the previous year in percent.
Chart 3 -
Growth Rate over past years
350 310.59
300
250
200 178.83 LIC
147.65
150 Private companies
87.08 95.19
100 82.5
40.79
50 17.19 20.85 18.25 16.3 9.65
0
2007-08 2006-07 2005-06 2004-05 2003-04 2002-03
Interpretation -From the above table 4 and chart 3 we can clearly see that private companies are
registering encouraging growth rates in terms of total premium collection over the past few years as
compared to LIC’s normal and ordinary growth.

New Business Premium (Individual and Group) of Life Insurers
for 2007-08 Channel wise :
Table 5 -
Life Insurer Individual Corporate Brokers Direct Total New Referrals
Agents Agents Business(
Selling
Individual and
group)
PRIVATE 53.46 28.12 1.61 16.81 100.00 6.96
TOTAL
LIC 82.98 1.32 0.05 15.85 100.00 -
INDUSTRY 72.17 11.02 0.61 16.20 100.00 2.51
TOTAL
Chart 4 -
The share of corporate agents which was 8.42 % in 2006-07 has increased to 12.33 % in 2007-08. Within
the corporate agency channel, while the banks’ share grew from 5.46 % in 2006-07 to 7.97 % in 2007-08,
the others grew from 2.96 % to 4.36 % in the corresponding years. The share of corporate agents in the
new business premium procured by the private life insurers was significant at 29.92 % in 2007-08 as

compared to 24.99 % in 2006-07, while for LIC the share fell to 1.59 % in 2007-08 from 2.14 % in the
previous year.
Performance in the first quarter of 2008-09
(i) Life insurance:

The life insurers underwrote a premium of Rs.14320.20 crores during the first quarter in the current
financial year as against Rs.12511.80 crores in the comparable period of last year recording a growth of
14.45 %. Of the total premium underwritten, LIC accounted for Rs.7524.56 crores and the
private insurers accounted for Rs. 6795.64 crores. The premium underwritten by LIC declined by 12.31 %
while, that of private insurers increased by 72.88 %, over the corresponding period in the previous year.
The number of policies written at the industry level declined by 7.78 %. While the number of policies
written by LIC declined by 23.36 %, in the case of private insurers they grew by 44.00 %. Of the total
premium underwritten, individual business accounted for Rs.10995.90 crores and group business for Rs.
3324.30 crores. In respect of LIC, individual business was Rs. 5275.71 crores and group business was
Rs.2248.85 crores. In the case of private insurers, they were Rs.5720.19 crores and Rs.1075.45 crores
respectively. The market share of LIC was 52.55 % in the total premium collection and 63.88 % in
number of polices underwritten, lower than 68.58 % and 76.87 % respectively reported in the previous
year. Under the group scheme 56.13 lakhs lives were covered recording a growth of 8.51 % over the
previous period. Of the total lives covered under the group scheme, LIC accounted for 38.96 lakhs and
private insurers 12.77 lakhs. The life insurers covered 12.50 lakhs lives in the social sector with a
premium of Rs.17.10 crores and underwrote 13.53 lakhs policies with a premium of Rs.1275.78 crores in
the rural sector.
The total capital of the life insurers at end March 2008 stood at Rs.12296.42 crores. The additional capital
brought in by the existing private insurers during 2007-08 was Rs.3787.01 crores and the two new
entrants, brought in equity of Rs.385 crores making the total additional capital brought in 2007-08 by the
private insurers to Rs. 4172.01 crores. Of this, the domestic and the foreign joint venture partners added
Rs.3160.12 crores and Rs.1011.88 crores respectively.

The private insurers also seem to be scoring big in other ways- they are persuading people to take out
bigger policies. For instance, the average size of a life insurance policy before privatization was around Rs
50,000. That has risen to about Rs 80,000. But the private insurers are ahead in this game and the average
size of their policies is around Rs 1.1 lakhs to Rs 1.2 lakhs- way bigger than the industry average.
Buoyed by their quicker than expected success, nearly all private insurers are fast- forwarding the second
phase of their expansion plans. No doubt the aggressive stance of private insurers is already paying rich
dividends. But a rejuvenated LIC is also trying to fight back to woo new customers.
2.3 COMPANY PROFILE :
Life Insurance Corporation of India

The Life Insurance Corporation of India popularly known as “LIC of India” was incorporated on
September 1, 1956 by nationalizing 245 Indian as well as foreign companies . It was established 52 years
ago with a view to provide an insurance cover against various risk in life.the luminaries who spearheaded
this move at that time visualised an entity that will provide life insurance to Indians, especially the vast
rural masses, at an economical cost and channel the savings for the betterment of the nation. It is the
largest life insurance company in India and also the countries largest investor. It is fully owned by the
Government of India and headquartered in Mumbai.
The subsidiary companies under LIC are:
LIC of India, International

A joint venture offshore company promoted by LIC, commenced its operation in july1989. The primary
objective is to the US-dollar denominated policies which cater to the insurance needs of non-resident in
Indians. It provides insurance services to policyholders who residing in Gulf. The LIC International
operates in all Gulf Cooperation Council (GCC) countries.
LIC Nepal
A joint venture company formed in September 2001 with the Vishal Group of Industries with a capital
base of Rs.250mn. It is one of the largest capitalized insurance companies of Nepal. It has joint share
between LIC of India (55%) Vishal Group (25%) and has a public participation to the extent o 20%.

Life Insurance Corporation Lanka Limited (LICL)
A joint venture company formed in 2003 with the Bartleet Group of Companies, it is one of the oldest and
reliable institutions in Sri Lanka. The combined strengths of these two formidable companies has enabled
LICL to emerge as the premier provider of Life Insurance in Sri Lanka. The Indian-based blue-chip also
has offices in UK, Mauritius, Fiji, and in all Middle East countries.
LIC Housing Finance

Incorporated on june 19, 1989; its main objective is to provide long term finance for construction or
purchase of houses or apartments. The company provides long terms finance to individuals for purchase,
construction, repair and renovation of new \ existing flats\houses. It also provides finance on existing
property for business, personal needs and gives loans to professionals for purchase or construction of
clinics\ nursing homes\ diagnostic centers\office space and also for purchase of equipments. It has set up a
representative office in Dubai and Kuwait to cater to the non- resident Indians in countries covering
Bahrain, Dubai, Kuwait, Qatar and Saudi Arabia. It has client group of over 9,40, 000prudent house
owners who enjoy the company’s financial assistance.
LIC Housing Finance Limited Care Homes

It is a Wholly-owned subsidiary of LIC Housing Finance. It builds and operates “Assisted Community
Living Center” for senior citizens. It operates a network of approximately 6 regional offices, 13 back
offices, and 127marketing offices.
Vision
“To emerge as a transnationally competitive financial conglomerate of significance to societies and be the
pride of India “ .
Mission
Explore and enhance the quality of life of people through financial security by providing products and
services of aspired attributes with competitive returns and by rendering resources for economic
development.

Objective of LIC
 Spread life insurance widely in particular to the rural areas and socially and economically
backward classes. This is done with a view to reach all the insurable persons in the country and
provide them adequate financial cover against death at a reasonable cost.
 To maximize mobilization of people’s savings by making insurance linked savings adequately
attractive.
 Bearing in mind, the primary obligation to its policyholders, whose money it holds in trust, the
investible funds to be deployed to the best advantage of the investors as well as the national
priorities and the obligations of attractive returns.
 To conduct business with utmost economy and keeping gin mind that the money belongs to the
policyholders.
 It acts as a trustee of the insured public in its individual and collective capacities.
 To meet the various life insurance need of the community that would arise in the changing social
and economic environment.
 It ensures that all people working in the corporation are involved to the best of their capability in
furthering the interests of the insured public by providing efficient service with courtesy.
 Promote amongst all agents and employees of the corporation a sense of participation, pride and
job satisfaction through discharge of their duties with dedication towards achievement of corporate
objective.
Board of Directors
Chairman TS Vijayan
D.K. Mehrotra, Thomas Mathew T, A.K.

Managing Director Dasgupta
Finance Secretary and secretary( financial

services) Arun Ramanathan
Department of Financial Services, Ministry
of finance, Govt. of India
Addl. Secretary, Dept. of Economic
Affairs, Ministry of Finance Sindhushree Khullar

Chairman cum Managing Director Yogesh Lohiya
GIC of India
Chairman and Managing Director, Export
Import, Bank of India T.C. Venkat Subramaniam
Products and Services

LIC has eight zonal offices and 105 divisional offices located in different parts of India. It compromises of
2,048 branches and employs over 10, 02, 149 agents for soliciting life insurance business from public. LIC
has extended its activities in 12 countries from outside India, primarily to cater to the insurance needs of
non-resident Indians.
LIC aims at strengthening it relationship with its vast customer base by providing value-added service
such as credit cards and offering premium payment facility to the policyholders. It is the largest insurance
player in India and its objective is to channelize its funds for the benefit of the community at large. It
enjoys a near monopoly power in the solicitation and sale of life insurance policies in India. The
corporation has major business houses as clients, under the group business of India. It has more than
1,18,000 corporate clients covering more than 3,15,00,000 members.
Apart from the corporate group insurance business the pension& group schemes is responsible for
‘Aam Aadmi Bima Yojna’,a social security schemes for the rural landless households under the aegis of
the Government of India.LIC has been investing a major portion of its funds in socially-oriented sectors
with a view to reach every insurable person in the country and provide adequate financial cover against
death at a reasonable cost. Another goal is to mobilize people’s savings adequately attractive.LIC has
recently tied up with Policybazaar.com an insurance portal that enables the consumers to get detailed
information on the policy. It is one of the leading online non-life and life insurance aggregator to sell its
policy Jeevan Aastha on the internet.

Insurance Plans
The following insurance plans are on offer. They provide the most suitable options that can fit customer’s
requirement.
LIC Product Portfolio

Children Plans Money Back Plans
 Jeeevan Anurag  Jeevan Varsha
 CDA Endowment Vesting at 21  The Money Back Policy-20 years
 CDA Endowment Vesting at 18  The Money Back Policy-25 years
 Jeevan Kishore  Jeevan Surabhi-15 Years
 Child Career Plan  Jeevan Surabhi-20 Years
 Child Fortune Plus  Jeevan Surabhi-25 Years
 Marriage Endowment or Educational  Bima Bachat
Annuity Plan
 Jeevan Chhaya
Special Money Back Plan for women
 Child future Plan  Jeevan Bharti-1
Plans for Handicapped Dependents
 Jeevan Aadhar
 Jeevan Vishwas Whole Life Plans
 The Whole Life Policy
Endowment AssurancePlans
 The Endowment Assurance Policy  The Whole Life Policy –Limited Payment
 The Endowment Assurance Policy-Limited  The Whole Life Policy – Single Premium
Payment  Jeevan Anand
 Jeevan Mitra (Double Cover Endowment  Jeevan Tarang
Plan)
 Jeevan Mitra (Triple Cover Endowment Term Assurance Plans
 Two year Temporary Assurance Plan
Plan)
 The Convertible Term Assurance Policy
 Jeevan Anand
 Anmol Jeevan- 1
 New Janraksha Plan
 Amulya Jeevan -1
 Jeevan Amrit

Joint Life Plan Plans for High Worth Individuals
 Jeevan Sathi  Jeevan Shree-1
 Decreasing Term Assurance To Cover  Jeevan Pramukh
Home Loan Payment Unit Linked Plans
 Mortgage Redemption  Market Plus –I
Pension Plans  Profit Plus

 Jeevan Nidhi  Fortune Plus
 Jeevan Akshay-VI  Money Plus-I
 New Jeevan Dhara-I  Child Fortune Plus
 New Jeevan Suraksha-I Special Plans
Group Scheme Golden Jubilee Plan
 Group Term Insurance Schemes  New Bima Gold Special Plan
 Group Term Insurance Scheme in Lieu of  Bima Nivesh 2005

EDLI  Jeevan Saral
 Group Leave Encashment Scheme  Jeevan Madhur
 Group Mortgage Redemption Assurance  Health Plus
Scheme Social Security Scheme
 Janashree Bima Yojna (JBY)
 Gratuity Plus
 Siksha Sahayog Yojana
 Group critical Illness Rider
 Aam Admi Bima Yojana
Unit linked insurance plans (ULIPs) are insurance plans that combine the benefit of investment
with insurance. They give the investor an option to put a part of their premium in various investment
portfolios and derive the benefits depending upon the performance of the funds chosen by them. ULIPs
were launched at an opportune time when stock markets had just taken off. Being market- linked, they
were major beneficiaries of the secular rise in stock markets. ULIPs have gained high acceptance due to
the attractive features they offer. These include:

1. Flexibility
 Flexibility to choose Sum Assured.
 Flexibility to choose premium amount.
 Option to change level of Premium even after the plan has started (Top up facility).
 Flexibility to change asset allocation by switching between funds.
2. Transparency
 Changes in the plan & net amount invested are known to the customer.
 Convenience of tracking one’s investment performance on a daily basis.
3. Liquidity
 Option to withdraw money after few years (comfort required in case of exigency).
 Low minimum tenure.
 Partial / Systematic withdrawal allowed
4. Fund Options
 A choice of funds (ranging from equity, debt, cash or a combination).
 Option to choose fund mix based on desired asset allocation.
Traditionally, endowment plans have invested in government securities, corporate bonds and the money
market. ULIPs however, have a broader choice. They invest across the board in stocks, government
securities, corporate bonds and money market instruments. Of course, within a ULIP there are options
wherein equity investments are capped.The common types of funds available in ULIPs are Bond Fund,
Protector Fund, Secure Fund, Balanced Fund, Growth Fund, Index Fund, and Enhancer Fund. Depending
on one’s risk appetite one can choose the fund. However the investment risk is borne by the investor.
The common type of charges, fees and deductions in ULIPs are Premium allocation charges, Mortality
charges, Fund management charges, Policy/administration charges, Surrender charges, Fund switching
charges and Service tax.
Insurance companies are required to declare the NAV of various ULIPs on a daily basis. The movement of
NAV enables the policy holder to assess the performance of his investment and accordingly make
intervention in the form of switches, withdrawal and top-ups. After opening up of the insurance sector,
Unit-linked insurance policies (ULIPs) have become increasingly popular.

Analysis of figures for the last three years indicates the growth pattern of unit linked business.
Table 6 -
TRENDS IN LIFE INSURANCE BUSINESS—UNIT LINKED INSURANCE PLANS
Unit Linked Business (%) Non-linked Business (%)
2005-06 2006-07 2007-08 2005-06 2006-07 2007-08
Private 82.30 88.75 90.33 17.70 11.25 9.67
LIC 29.76 46.31 62.31 70.24 53.69 37.69
Industry 41.77 56.91 70.30 58.23 43.09 29.70
Chart 5 -
Interpretation – The above graph shows that during the past few years ULIP plans have become more
and more popular among the investors because of the returns they provide in addition
to the insurance cover.

Performance of LIC of India
The number of new policies marketed grew from 14.69 lakhss in 1961 to 2.18 croress in 2004-05 and
the sum assured under this business rose to high of Rs. 1,79,886.66 cr in 2004-05 from Rs.336.67 cr in
1957. The total funds of the corporation also grew from Rs. 702.80 cr in 1961 to Rs. 4,16,910.36 cr in
2004-05. Investments , which were Rs. 329.74 cr in 1957 rose to a high of Rs.4,13,800.95 cr in 2004-05
,allof which gets deployed for the development of the nation.The LIC has huge investible funds and the
main source comes from the premiums collected from the policy holders.
The Corporation invests these funds in various states, industries and also in various other countries.
The LIC, while investing its funds, has to consider various factors and forces such as safety, liquidity and
productivity of funds plus various other regulatory bindings in terms of investment norms, asset- liability
management etc. In short, the LIC has to make its investments within the ambit of these bindings as a
result, the corporation is not in apposition to pursue a prudent investment policy due to which its
investment income may come under pressure. Adding fuel to the fire, the falling interest rate would also
adversely affect the investment performance of the Corporation.
Still at present LIC continues to be the dominant life insurer even in the post-liberalization phase of
the Indian insurance industry. It is on new growth trajectory surpassing its own past records. The
average premium growth so far has been 20%. With the targeted Rs.1,75,000 crores total premium by
the end of current fiscal, The life insurance giant is looking a market share about 75%.
The corporation has crossed many milestones and has set unprecedented performance records in
various aspects of life insurance business. The state- owned corporation is targeting a business of over
Rs.3,00,000 crores by2011-12. The life insurance major expects its assets size to grow about
Rs.6,00,000cr or 75% in the next three years.
In the current fiscal year, the company has recruited about two lakhs insurance agent across the
country, which is more than double of the 90,000 agents hired in the previous fiscal. It has also hired
4,500 development officers in the current fiscal year and 5,000 new officers could be hired in the next
fiscal.
It has bagged various awards which include Loyalty Award 2009, Golden Peacock Innovative
Product/Service Award 2009, Readers Digest Trusted Brand Award 2008 in the Platinum Category,
CNBC ‘Awaaz’ Consumer Awards 2008 and NDTV Profit Business Leadership Award 2008.The

Economic Times Brand Equity Survey rated LIC as the No.1 service brand of the country for the 5th
consecutive year. In the chart below is shown the market share of LIC and private in terms of total
premium collected. ( refer table 4 for data )
Market Share in %
Chart 6 -
2001-02 99 1
2002-03 98 2
2003-04 95 5
LIC
2004-05 91 9
Private companies
2005-06 86 14
2006-07 82 18
2007-08 74 26
0 20 40 60 80 100 120
The bar graph clearly indicates that market share is continuously declining for LIC over the past few
years.
Investment Portfolio of LIC of India

The Life Insurance Corporation of India has been a nation builder since its formation in 1956. True to
the objective of nationalization, the LIC has mobilized the funds invested by the people in the life
insurance for the benefit of the community at large.
The corporation has deployed the funds to the best advantage of the policyholders as well as the
community as a whole, true to the spirit of nationalization. National priorities and obligation of
reasonable returns to the policyholders are its main criteria for the investment.
The total funds, so invested for the benefit of the community at large accumulated to Rs 751129 crores
(provisional) as on 31st march 2008. The investment of the corporation’s funds is governed by Section
27A of the insurance act, 1938 subsequent guidelines/instructions issued there under by the
Government of India from time to time and the IRDA by way of regulations. As per the prescribed
investment pattern approved by IRDA, the controlled funds are invested as follows :
 Not less than 50% is invested in Government securities or other approved investments.
 Not less than 15% is invested in infrastructural and social sector investments.
 Not less than 35% in other investments, to be governed by exposure prudential norms

Total funds of LIC
Year Total funds Growth trend Annual growth(%)
1999-00 1,61,002.22 100.00 -
2000-01 1,93,621.69 120.26 20.26
2001-02 2,45,039.82 152.20 26.56
2002-03 2,77,160.34 172.15 13.11
2003-04 3,46,022.54 214.92 24.85
2004-05 4,16,910.36 258.95 20.49
Compiled from the annual reports of LIC of India
Investment in Government and social sector :
As on
Type of investment 31-3-2006 31-3-2007 31-3-2008
Central Government 236959 272498 297943

securities
State Government & 58928 64285 89234
other Govt. guaranteed
marketable secrities
Infrastructure & social
sector investment
Housing 19807 22451 24325
Power 29740 37881 41120
Irrigation/ water supply 8288 7500 6649
& sewage
Roads, ports and bridges 725 1516 1154
Others including 3954 4398 8774
railways
Total 358401 410529 469191

Awards and achievements of LIC :
Golden Peacock Innovative Product / Service Award – 2009
Loyalty Award 2009
Readers Digest Trusted Brand Award 2008 in the Platinum category
CNBC Awaaz Consumer Awards 2008

The SWOT analysis involves an in depth study of the strength and weakness of the provided
organization and it also provides information to the promoter, consultant, other agencies and helps in long
term viability of the project.
Strength :
 It is the oldest and most well experienced player having a Pan India presence.
 LIC has a strong and very well developed distribution network.
 It is having a huge consumer base and is evolved as one of the most powerful brands of the
country.
 It has a large product portfolio and claim settlement is easier to get.
 It has the advantage of government guarantee is accompanied with it.
Weakness :
 Its employees and other staff are lethargic and least motivated to render prompt and sincere
customer service.
 After sales customer grievance redressal mechanism is inefficient.
 Agents not taking into account the needs of people and promote policies having high
commissions only.
 Very slow decision making process and internal problems between top management and lower
cadre staff.
 The top management or bosses are mediocre and there is large scale corruption in main office.
 The development officers and agents who are the foundation pillars of LIC are not provided with
extra funds and powers to promote its products aggressively.
Opportunity :
 Emergence of a huge middle income consumer market in the country
 People becoming more aware and demanding so there is scope for a whole lot of innovative
products.
 Pension markets, health insurance and large real estate portfolio.
Threats :
 There is too much internal discord.
 Entry of new private players in industry.
 Red-tapism is very much persistent.

2.4 Departmental details :
The organization having a such a huge size has to have a well defined hierarchical structure and LIC is not
an exception to this fact. A well defined proper organization structure with officials with exact knowledge
of their duties is a must for an organization to prosper. LIC has a vast network of offices across the length
and breadth of our country and abroad so it has defined and maintained its organizational structure in the
following way.
LIC has its main central head office at ‘Yogaakshema’ Jeevan bima marg at Mumbai. Then it is followed
by eight zonal offices namely central zone, eastern zone, east central zone, northern zone, north
central zone, southern zone, south central zone, western zone respectively. After these eight zonal
offices there are several divisional offices under each zonal office and these divisional offices are mostly
in each big city. At last comes the branch office and there are several branch offices under each divisional
office. At all the branch offices there is a branch manager and several departments and the major function
of these branch offices is sales and servicing of the policies.
In a branch office the top most is a branch manager and under his control are seven different departments
with each of these departments functioning independently to each other. These seven departments are as
follows :
1. Sales Department – This department is mainly concerned with the sale of new policies and is headed
by Assistant Branch Manager Sales(ABMS). The internal agent of LIC is the
Development Officer who has the job of communicating and training the Free
Lancing agents. It is the development officer who continuously encourages the
agents to get new business and the income, performance and commission through
policy selling comes under the jurisdiction of this department.
2.New Business Department – This department performance the very important function of underwriting
new policies which are sent to it for authentication. It checks that all the information
provided by the customer is true and the proposal form and all other details and
proofs are legal. After scrutinizing the new policy it issues the first premium
receipts(FPR) and then issues the policy bond. If anything is found insufficient the
proposal form is sent back to the sales department to correct the mistake and again
submit it.

3.Policy Service Department – After the policy bond is issued, the case is passed on to this department to
take care of after sales service of the policy. It takes care of the premium dates and
if the policy is lapsed then its revival is done by this department. Also if any loan is
required by the customer against his/her policy then its approval has to be given
from the policy service department only.
4. Accounts Department – It is responsible for processing of all the cheques and loans which come to it.
The details regarding financial aspects are covered under this department .
5.Claims Department – All types of claims i.e. survival benefit claim, maturity claim and death claim are
settled by this department. In case of death claim if death occurs after three years
then no investigation is involved in the settlement process and if it occurs before
three years then proper investigation is done and the claim is considered to be an
early claim case.
6. Micro Department – This department has the all important function of co-ordinating with each
department. Each day’s business is collected and its four copies are made and
one copy is sent to the divisional office, second is submitted to the branch manager,
third remains with the incharge of micro department and fourth in the branch office.
7. Office Service Department – This department takes care of all miscellaneous tasks of office and
dispatch of cheques, loans etc come under the responsibility of this department.

Central Head
Office
Zonal Office
Divisional
Office
Branch
Office
Sales
Dept. Claims
Dept.
New Business
Dept. Office Service
Dept.
Accounts Micro Dept.

Dept. Policy Service
Dept.

CHAPTER - III
3.1 Research Methodology :
Introduction :
Being a comparative study of public and private sectors, the researcher selected LIC of India from the
public sector and the private sector insurance companies. The study is mainly based on primary data
collected from field source. The primary data is collected through a comprehensive interviews, schedules
and discussions with the customers of LIC and customers of private companies. Secondary data is
collected from various bibliographical sources such as journals, novels, magazines, publications and
various websites including the official website of IRDA, LIC and various other company websites. The
published research reports and market studies also helped the researcher to guage into the problem.
Research design :
The research is divided into two parts. The first part helps us to understand the level of awareness, service
quality, problems faced and the investor’s motive of investment, the second part deals with extracting
important findings from this information and analyzing the measures required to correct problems if any.
Research sample :
A sample of 300 respondents, 151 from LIC and 149 from private sector were identified randomly for
detailed study and analysis. The researcher used stratified random sampling technique for collecting the
primary data. The population of Lucknow city is divided into three stratums such as old, new and cantt
area and an equal number of samples are drawn from each stratum.
Statistical tools used :

Statistical tools like weighted averages, percentages, Chi-square test, mean and standard deviation etc are
used for the analysis of data. For the purpose of analyzing the awareness level a two point rating scale is
used. A two point and a three point scale is used to test the various aspects covering the awareness level,
service quality and problems faced by the consumers.
3.2 Statement of the Problem :
Customer satisfaction is the true differentiator for the success of any business and is more so in insurance
where the products are perceived to be intangible. Referring to the Tables 3 and 4 and also chart 2, 3 and 6
it has been found that growth rate as well as the market share of LIC is constantly decreasing in
comparison to the private companies so to improve on the correctional areas, the four main aspects i.e.
awareness level, service quality, problems faced and rationale behind investment has to be known.
3.3 Formulation of Hypothesis :
Keeping the above mentioned objectives in mind and to have a disciplined direction to the
enquiry, the following hypotheses have been formulated:
I) Ho : There exists a relation between the awareness level and the type of company customers
choose for taking up an insurance policy.
II) Ho : There exists a relation between the level of satisfaction by the service quality and the type
of company customers choose for taking up an insurance policy.
III) Ho : There exists a relation between the grievance redressal mechanism and the type of
company customers choose for taking up an insurance policy.
IV) Ho : There exists a relation between the claim settlement process and the type of company
customers choose for taking up an insurance policy.
Date Processing and Analysis:

Data are process with the help of computer software and Statistical analysis are made with the help of
Excel sheet and SPSS (statistical package for social sciences).Firstly, the answers ticked by the
respondents were recoded while assigning the numerical values. These values were entered into a master
sheet and later with the help of a code book these numerical values were further entered into the
spreadsheet format on the computer. These raw data were processed with the help of the statistical pack as
stated. In order to present the results and analyze them, percentage tables, cross-tabulations were made.

Limitations of the study :
In spite of every care taken on the part of the researcher there were certain limitations which
could not be overcome and are as follows :
 Some of the persons were not so responsive.

 Possibility of error in data collection because many of investors may have not given the actual
answers of my questionnaire.
 Sample size is limited to 300 people only. The sample size may not adequately represent the whole
market.
 Some respondents were reluctant to divulge personal information which can hinder the validity of
all responses.
 The research study was confined to Lucknow city only.
The above are some of the aspects which posed real problems in the way of completion of the research
work but the majority of respondents were cooperative and my gratitude are due to them.

CHAPTER - IV
4.1 Data analysis and interpretation :
Analysis of Data :
The demographic profile of the respondents is analyzed on the basis of age, gender, occupation,
educational qualification and annual income. The age distribution of sample respondents is shown in
Table 7 below :
Table 7 – Age Group Distribution
Age Group Below 20-40 40-60 Above Total

20 60
Number of 13 151 116 20 300
Respondents
Percentages 4.3 50.3 38.7 6.7 100
Chart 7 -
Age Distribution of Respondents
160
140
120
100
80 Number of Respondents
60
40
20
0
Below 20 20-40 40-60 Above 60
Interpretation
It is clear from Table 7; a vast majority of respondents (85%) fall in the age band of 20-60 years. Out of
300 respondents around 50% are between 20-40 years and 38% are between 40-60 years of age.

Table 8 – Gender of respondents
Gender Number of Percentage

Respondents
Male 205 68.3
Female 95 31.7
Total 300 100
Chart 8 -
Sex of respondents
Female
32%
Male
68%
Interpretation
Out of the 300 samples drawn 205 (68%) are male and it depicts the domination men in the life insurance
sector. Only 95 (32%) of them are females.

Table 9 – Occupation Distribution
Occupation Number of Percentages

Respondents
Professional 49 16.3
Employee 140 46.7
Business 48 19.3
Agriculture 53 17.7
Total 300 100
Chart 9 -
Occupational Distribution
160
140
120
100
60
40
20
0
l
ee
re
s
na
es
tu
oy
sio
sin
ul
pl
ric
es
Bu
Em
Ag
of
Pr
Interpretation
Occupation wise, around 46% of respondents are employees and the rest are equally represented by
professionals, businessmen and agriculturists.

Table 10 – Educational Qualification of Respondents
Educational Number of Percentages

Qualification Respondents
Upto High 48 16
School
Intermediate 67 22.3
Degree & 143 47.7
above
Technical 42 14
Total 300 100
Chart 10 -
Educational Qualification of Respondents
160
140
120
100
60
40
20
0
e
te
al
ol
ov
ho
ia
c
ni
ab
ed
Sc
ch
rm
&
Te
h
ee
te
ig
In
H
gr
to
De
Up
Interpretation
It is also revealed from Table I, that more than 60% of the respondents are graduates or technically
qualified. Remaining 22% are intermediate and only 16% are high school passed.

Table 11 – Annual Income of Respondents
Annual Income Number of Percentages

Respondents
Below 60,000 60 20
60,000- 119 39.7
1,20,000
1,20,000- 51 17
1,80,000
1,80,000- 37 12.3
2,40,000
Above 2,40,000 33 11
Total 300 100
Chart 11 -
Annual Income of Respondents
140
120
100
80
Number of Respondents
60
40
20
0
00
0
0
00
00
00
00
,0
,0
0,
0,
0,
40
60
,2
,8
,4
2,
-1
w
-1
-2
lo
e
00
00
00
ov
Be
,0
,0
,0
Ab
60
20
80
1,
1,
Interpretation
Around 60% of the respondents have an annual income below 1,20,000 and only 17% have income in the
range of 1,20,000-1,80,000. Also 11% have income above Rs 2,40,000.

Table 12- Type of the policy
Type of Number of Percentages

Policy Respondents
Whole Life 13 4.3
Endowment 42 14
Money 55 18.3
Back
Pension 24 8
Fund
ULIP 155 51.7
Others 11 3.7
Total 300 100
Chart 12 -
Type of Policy
180
160
140
120
100
60
40
20
0
t
IP
fe
s
nd
ck
en
er
Li
UL
Fu
Ba
m
th
le
O
on
ho
ey
do
i
on
W
ns
En
Pe
Interpretation
Out of the total population more than 50% of the respondents have unit linked insurance plans (ULIP) and
only 18% have money back policies and endowment plans are with only14% of customers.

Table 13- Periodicity of the Policy
Periodicity of Number of Percentages

Policy Respondents
5 years 22 7.3
5-15 years 125 41.7
15-25 years 116 38.7
Above 25 37 12.3
years
Total 300 100
Chart 13 -
Periodicity of Policy
140
120
100
80
Number of Respondents
60
40
20
0
5 years 5-15 years 15-25 years Above 25
years
Interpretation
The table spells that around 80% of the respondents have policies with a maturity period of 5 to 25 years
and only 12% have policies with a maturity period of more than 25 years.

Awareness level of Respondents :
As a contractual relationship exists between the insurer and the insured, it is the duty of the insurance
company to disclose of the policy details. The policy holders are not excused with any ignorance to the
contract and it is the policyholders to get acquainted with the rules and regulations of the policy. So the
study about awareness level of customers assumes paramount significance.
Table 14 -
Yes No Number of
Respondents
LIC 103 48 151
Private 66 83 149
Company
Total 169 131 300
Chart 14 -
Awareness Level
No 48 83
LIC
Private Company
Yes 103 66
0 50 100 150 200
Interpretation – From the graph it is clear that 68.2% of respondents of LIC are aware of all details of
their policy where as only 44.3% of private company policyholders know about all
their policy terms and conditions.
Hence it is gratifying to note that LIC is more transparent and divulge concrete details about policy and
empower its policy holders in a much better way.

Testing hypothesis I :
Chi-Square Tests
Asymp. Sig. (2- Exact Sig. (2- Exact Sig. (1-

Value df sided) sided) sided)
a
Pearson Chi-Square 17.439 1 .000
b
Continuity Correction 16.480 1 .000
Likelihood Ratio 17.619 1 .000
Fisher's Exact Test .000 .000
Linear-by-Linear Association 17.381 1 .000

b
N of Valid Cases 300
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 65.06.
b. Computed only for a 2x2 table
Here since the Chi-square value is 0.000 which is less than 0.05 so there exists a relation between the
awareness level and type of company one chooses for investing his money. Hence the null hypothesis is
proved.
Satisfaction Level about service qualities :

Like any other service sector, the insurance sector is also evaluated by its ability to provide quality
services to its customers. In the modern market, the products are designed exclusively for the customers
and the quality is the leading criterion for the selection of particular product. Hence, the insurance
providers should realize the changes in the market and adopt new weapons in the form of high quality
services.
Table 15 -
LIC Private Total
Company
Fully Satisfied 85 50 135
Partially 43 57 100
Satisfied
Not Satisfied 23 42 65
Total 151 149 300

Chart 15 -
Private Company LIC
15%
28%
34%
Fully Satisfied Fully Satisfied
Partially Satisfied Partially Satisfied
28% 57%
Not Satisfied Not Satisfied
38%
Interpretation – From the above tables it shows that 57% customers are fully satisfied with LIC’s
service quality and comparatively only 34% are satisfied by private companies. Also
38% in private and 28% in LIC are only partially satisfied and remaining are not
satisfied.
It is evident that customers, in general, are satisfied with the quality of services provided by LIC and there
is significant difference in the service quality across both sectors.
Testing hypothesis II :
Chi-Square Tests
Asymp. Sig. (2-

Value df sided)
a
Here also the Chi-square value is 0.000 which is less than 0.05 so the null hypothesis that relation exists
between the level of satisfaction and type of the company one chooses for buying a policy is proved.

Problems faced by the Customers :
The problems faced by policyholders are many and varied. It is the duty of any insurance company to
make an amicable settlement of these problems. Some important problems faced by policyholders
analyzed are complex formalities for opening a policy, levy hidden charges, excessive penalties for non
payment of premium, undue delay in settlement of claims, lack of timely communication, lack of co-
operation by officials/agents, inefficient grievance redressal mechanism, misleading information by the
agents and lack of technical knowledge or training. A few of them have been taken into account here.
Table 16 – Accessibility of the employee/agents
Yes No Total
LIC 102 49 151
Private 117 32 149
Company
Total 219 81 300
Chart 16 –
LIC Private Company
21%
32%
Yes Yes
No No
68%
79%
Interpretation – LIC clearly lags behind from private companies as only 68% customers against 79%
of private company customers say that employees of the company are always
accessible.

Table 17 – Complex formalities
Yes No Total
LIC 92 59 151
Private 79 70 149
Company
Total 171 129 300
Chart 17 –
LIC Private Company
39%
Yes 47% Yes
No 53% No
61%
Interpretation – In LIC 61% customers feel that the formalities for opening a policy are too complex
and the documentation is time taking but only 53% feel this in case of private sector.
Hence in all there is more or less the same response about the complex formalities in
both the sectors.

Table 18 – Grievance redressal mechanism
LIC Private Total

Company
Fully Satisfied 63 39 102
Partially 42 61 103
Satisfied
Not Satisfied 46 49 95
Total 151 149 300
Chart 18 –
LIC Privat e Company
26%
30% 33%
42% Fully Satisfied Fully Sat isf ied

Partially Satisfied Part ially Sat isf ied
Not Sat isfied
Not Satisfied
28% 41%
Interpretation – From the above figure it is clear that 42% and 26% customers are fully satisfied with
the grievance redress mechanism of LIC and Private company respectively. But also
an alarmingly high % of customers of LIC and Private company i.e. 30% and 33%
respectively are not satisfied with their process.
Testing hypothesis III :
Chi-Square Tests
Asymp. Sig. (2-

Value df sided)
a
a. 0 cells (.0%) have expected count less than 5. The minimum expected count
is 47.18.
Here the null hypothesis is proved since Chi-square value 0.01 is less than 0.05 and so there exists a
relation between the grievance redress mechanism and type of company.

Table 19 – Claim Settlement Process
Yes No Total
LIC 125 26 151
Private 105 44 149
Company
Total 230 70 300
Chart 19 –
LIC Private Company
17%
30%
Yes Yes
No No
70%
83%
Interpretation – It is a matter of concern for LIC that around 83% say that it makes undue delay in
claim settlement where as for private companies this % is 70%.
Testing hypothesis IV :
Chi-Square Tests
Asymp. Sig. (2- Exact Sig. (2- Exact Sig. (1-

Value df sided) sided) sided)
a
b
Continuity Correction 5.685 1 .017
Fisher's Exact Test .014 .008

b
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 34.77.
b. Computed only for a 2x2 table

Since the Chi-square value is 0.012 which is less than 0.05 so null hypothesis is proved and there exists a
relation between claim settlement process and the type of the company. Therefore null hypothesis is
proved.

Table 20 – Information by the agent
Yes No Total
LIC 104 47 151
Private 124 25 149
Company
Total 228 72 300
Chart 20 –
LIC Private Company
17%
31%
Yes Yes
No No
69%
83%
Interpretation – According to the figure we can infer that where 83% customers of private company
the agent provides them with correct information only 69% say this in case of LIC.

Rationale behind the investment
Table 21 -
Factors LIC Private

Company
Individual Risk Coverage 1 1
Tax Benefits 3 4
Growth and return on investment 4 2
Risk Coverage of Family 2 3
Child Welfare 5 5
Table 21 shows that the most important drive for taking an insurance policy by a customer is the
individual risk coverage irrespective of the sectors. The rationale behind taking an insurance policy is
almost same in both the sectors. The most proximate reasons are risk coverage, tax benefits, children’s
welfare and growth and return of investment. Advertising of the company, classes or seminars conducted
by various organizations and influence of the peer group do not play a major role in the investment
decision of the customer.

CHAPTER - V
5.1 Findings and Recommendations :

Every study is completed only if it has certain outcomes in the form of findings and certain
recommendations for the correction of faulty areas that have been found during the course of the study.
Findings from the data :

Following are the important findings of the study :
1) Refering table 7 and chart 7 it is clear that the majority i.e. more than half of investor’s investing in
insurance are the young people in the age group of 20-40.
2) Refering table 8 and chart 8 it can be said that males dominate in having life insurance policies.
3) Referring table 9 and chart 9 it can be said that majority of people having life insurance are
employed.
4) The most preferred plan among the investor’s is unit linked plans because of its high returns.(refer
table 12 and chart 12)
5) Almost 80% of the policies sold have the periodicity of 5-25 years.(refer table 13 and chart 13)
6) It is very much clear that the awareness level of the customers of LIC is much higher than that of
the private sector.(refer table 14 and chart 14)
7) A greater number of customers of LIC are either fully or partially satisfied but there is not much
significant difference across sectors in terms of service quality satisfaction level.(refer table 15 and
chart 15)
8) Employees or agents of LIC are not easily accessible when compared to private sector and
customers have to try several times in order to meet LIC employees etc.(refer table 16 and chart
16)
9) Most of the respondents of LIC feel that formalities for opening a policy are too complex and take
longer time.(refer table 17 and chart 17)
10) Two fifth of the customers of LIC are fully satisfied with its grievance redress mechanism while
only one fourth are fully satisfied in case of private sector.(refer table 18)
11) It is a threat for LIC that more than four fifth of the customers of LIC feel that it unduly delays in
claim settlement.(refer table 19 and chart 19)
12) Also a lesser number of customers of LIC feel that their agent provides them with the correct and
relevant information in comparison to customers of private company.(refer table 20 and chart 20)
13) From table 21 it is evident that individual risk coverage is the most preferred criteria among the
investors irrespective of both the sectors. Hence the rationale behind investment is more or less
same.
Recommendations :
 To increase the level of insurance penetration LIC may focus on bringing products that suit to the
rural customers.( refer table 1 and chart 1)
 The company if possible should invest in advertising, conduct road shows, and spend money on
hoardings, so that it can better propogate awareness about its various lesser known products.
 LIC should also tie up with several other banks apart from the existing ones to sell its products i.e.
through bancassurance ( refer chart 4)
 The company has the option of tying up with local NGO’s for selling its rural insurance products.
 Customer friendly documentation i.e. it should be made easier and faster( refer finding 9).
 LIC should keep a check that its agents equally promote all its products( refer finding 14).
 LIC may provide additional funds to its development officers and agents( refer finding 14).
 All the hidden charges should clearly be stated in the form and explained by the agent and LIC
should provide better training to its agents. (refer finding 12).
 Claim settlement process should be made fast and must not involve lengthy decision making
process( refer finding 11).
 Some special focus should be laid on individual risk coverage while designing the products.(refer
table 21).

Learning
This project has given me a good opportunity to learn a lot about the insurance sector in general and LIC
in particular and especially about the basic technicalities involved right from selling to servicing and lastly
the claim settlement process. I also had a chance to see how closing takes place in insurance companies.
While dealing with retail customers I had a really enriching experience. I learnt how to judge a customer
and offer him/her a product which would interest him. Also working in a real office environment provided
me an enriching experience.
Conclusion :
The entry of private sector insurance companies into the Indian insurance sector triggered off a series of
changes in the industry. Even with the stiff competition in the market place, it is evident from the study
that the public sector giant LIC dominates the Indian insurance industry. In today’s competitive world,
customer satisfaction has become an important aspect to retain the customers, not only to grow but also to
serve. Increased competition, wide range of product offerings and multiple distribution channels cause
companies to value satisfied and highly profitable customers. Customer service is the critical success
factor in a company and providing top notch customer service differentiates great customer service from
indifferent customer service.

A Comparative Study On Customer Perception Towards LIC of India in View of Increased Competition by Private Companies A Research Done in 2009

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A Comparative Study On Customer Perception Towards LIC of India in View of Increased Competition by Private Companies A Research Done in 2009

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CHAPTER - I

1.2 - Scope of the study

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1.4 Objectives of the study :

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In 1818 it was conceived as a means to provide for English Widows.

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 Specified dates at periodic intervals, or

 Unfortunate death, if it occurs earlier.

Why We Need Insurance :

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INDIAN INSURANCE INDUSTRY

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14 Shriram Life Insurance Co. Sanlam, South

Contribution to Indian Economy

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2005 2006 2007

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PRIVATE 6391 3072 1645 804 416 254 116 13

New Policies issued : Life Insurers (as on 2008-09) :

LIC 37612599 38229292 31590707 23978123 26968069 24545580

PRIVATE 13261558 7922274 3871410 2233075 1658847 825094

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Total Life Insurance Premium( as according to IRDA handbook

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PRIVATE 51561.42 28253.00 15083.54 7727.51 3120.33 1119.06

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PRIVATE 53.46 28.12 1.61 16.81 100.00 6.96

INDUSTRY 72.17 11.02 0.61 16.20 100.00 2.51

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Performance in the first quarter of 2008-09

(i) Life insurance:

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2.3 COMPANY PROFILE :

Life Insurance Corporation of India

LIC of India, International

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LIC Housing Finance

LIC Housing Finance Limited Care Homes

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D.K. Mehrotra, Thomas Mathew T, A.K.

Finance Secretary and secretary( financial

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Products and Services

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LIC Product Portfolio

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Pension Plans  Profit Plus

 Group Term Insurance Scheme in Lieu of  Bima Nivesh 2005

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LIC 29.76 46.31 62.31 70.24 53.69 37.69

Industry 41.77 56.91 70.30 58.23 43.09 29.70

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Investment Portfolio of LIC of India

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Investment in Government and social sector :

Central Government 236959 272498 297943