MAJOR RESEARCH PROJECT

On
A STUDY OF AWARENESS OF LIFE INSURANCE PRODUCTS: WITH
SPECIAL REFERENCE TO RURAL AREAS NEAR INDORE
For partial fulfillment of the requirement for the degree of
Master of Business Administration (Full-Time)
Batch 2014-2016

Submitted to:

Submitted by:

Prof. Amit Kumar

Arpita Gaikwad

IBMR, IPS ACADEMY

Rajendra Nagar, A.B. Road, Indore-452012 (M.P.)

1 | Page

PREFACE

The bookish knowledge of any program, which we get from educational institutions, is
not enough to be used in our day-to-day life. The more practical knowledge we have, the
more beneficial it is for our learning.

To make the students aware of the working of the business world every student of
MASTER OF BUSINESS ADMINISTRATION (4th Semester) has to undergo a major
research project where he/she experiences many aspects of business under the
supervision of Professional Managers.

I strongly believe that the knowledge gained from this experience is more than the
knowledge gained from the theories in the book.

PLACE: INDORE
Name: Arpita Gaikwad
Date:

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CERTIFICATE

This is to certify that Ms. Arpita Gaikwad, student of Institute of Business Management
and Research, IPS Academy, Indore of MBA (Full time) program has prepared Major
research project report on topic A STUDY OF AWARENESS OF LIFE INSURANCE
PRODUCTS: WITH SPECIAL REFERENCE TO RURAL AREAS NEAR
INDORE under my guidance.

Internal Examiner (Guide)

External Examiner

Director
IBMR, IPS Academy

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STUDENT DECLARATION
I Arpita Gaikwad, student of Institute of Business Management and Research, IPS
Academy, Indore of MBA (Full time) program has prepared Major research Project report
on topic A STUDY OF AWARENESS OF LIFE INSURANCE PRODUCTS: WITH
SPECIAL REFERENCE TO RURAL AREAS NEAR INDORE.

The Research as per my knowledge is original and genuine and not published in any
research journal previously.

Student Name & Signature

Arpita Gaikwad
MBA (4th Sem)
2014-2016

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ACKNOWLEDGEMENT
I often wondered why the project reports always began with acknowledgement. Now
when I have undertaken project myself, I did realize that project report involves not just
the researcher but so many people that help in making the research possible. Therefore, I
take pleasure in beginning the most beautiful part of the report.
I fall short of words to express my gratitude to my guide Prof. Amit Kumar who despite
their busy schedule were able to find some time to guide me through trouble and solve
my problems to the best of abilities. Without their unfailing guidance, encouragement and
patience this project would not have been possible. It has been a great learning
experience under him.
I am thankful to my faculty guide Prof. Amit Kumar who gave me detailed instructions
during MRP.

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INDEX

Particulars
Introduction
Rationale of Study
Objective of Study
Literature Review
Research Methodology
Data Analysis & Interpretation
Summary of Findings & Discussion
Implications & Scope
Suggestions & Limitations
Conclusion
Bibliography
Questionnaire

Page No.

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CHAPTER ONE
INTRODUCTION

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1.1 INTRODUCTION OF INSURANCE:

Insurance occupies an important place in the complex modern world since risk, which
can be insured, has increased enormously in every walk of life. This has led to growth
in the insurance business and evolution of various types of insurance covers. The
insurance sector acts as a mobilizer of savings and a financial intermediary and is also
a promoter of investment activities. It can play a significant role in the economic
development of a country, while economic development itself can facilitate the
growth of the insurance sector. This chapter provides an overview of the insurance
sector in India, its origin and growth. It begins by defining insurance as a concept,
followed by a discussion on the importance of insurance for individuals, households,
and the economy. The penetration of the insurance business and insurance density in
India are compared with those in other countries. The need to create and enhance the
level of awareness about different aspects of insurance is also discussed.
1.2 CONCEPT OF INSURANCE:
Insurance is a form of risk management which is used primarily to hedge against the
risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of
the risk of loss, from one entity to another, in exchange for payment. Insurance is
essentially an arrangement where the losses experienced by a few are extended among
many who are exposed to similar risks. It is a protection against financial loss that
may occur due to an unexpected event. The transaction involves the insured assuming
a guaranteed and known, relatively small, loss in the form of payment to the insurer in
exchange for the insurer's promise to compensate or indemnify the insured in the case
of a large, possibly devastating loss. The insured receives a contract called an
insurance policy which details the conditions and circumstances under which the
insured will be compensated.
Insurance can be classified broadly into: (a) life insurance, and (b) general or non-life
insurance.
(a) Life insurance or life assurance is a contract between the policy owner and the
insurer, where the insurer agrees to pay the designated beneficiary a sum of money
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upon the occurrence of the insured individuals death or other event, such as
terminal or critical illness. In return, the policy owner agrees to pay a stipulated
amount at regular intervals or in lump sums. Life-based contracts tend to fall into
two major categories:
Protection policies: designed to provide a benefit in case of a specified event,
typically against lump sum payment. A common form of this policy is term
insurance.
Investment policies: the main objective is to facilitate the growth of capital by
single or regular premiums. The common forms in this category include whole
life, universal life and variable life policies.
(b) General insurance or non-life insurance policies, including automobile and
homeowners policies, provide payments depending on the loss from a particular
financial event. General insurance typically comprises any insurance cover that is
not deemed to be life insurance. Some categories of general insurance policies are:
vehicle, home, health, property, accident, sickness and unemployment, casualty,
liability, and credit. The terms of insurance generally depend on the company
providing the cover.
1.3 IMPORTANCE OF INSURANCE:
Life insurance is generally considered a means of protecting ones family against the
unforeseen circumstance of the death of an earning member. However, there are a
number of other benefits that are not apparent. Some benefits accrue to the individuals
and their families, while others assist economic development. For instance, an
insurance company takes the risk of large and uncertain losses in exchange for small
premiums. This gives a sense of confidence and security to the insured individual
through the protection of insurance in the event of an unfortunate incident. In large
sized commercial and industrial organizations, it facilitates operations as many of the
risks are transferred to the insurer. Insurance, particularly life insurance, is one of the
ways of providing for the future. A life insurance policy which gives an annuity is a
combination of protection and investment. It increases the creditworthiness of the
assured person because it can provide funds for repayment in the event of death. It
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also reduces losses owing to theft, robbery, fire accidents, etc. In addition, it serves as
a solution to social problems. For instance, while compensation is available to victims
of industrial injuries and road accidents, financial difficulties on account of old age,
disability or death is minimized.
Investment of accumulated resources by the insurer facilitates the overall
development of the country. Capital is usually risk averse, but if insurers provide
protection against risks, then several investors would come forward to invest their
funds.
In many developed countries, citizens are to a certain extent protected by social
security schemes provided by the government. These schemes offer financial aid to
citizens who are eligible on grounds of unemployment, old age, sickness, disability,
etc. The social security scenario in India is quite different, having traditionally been
the responsibility of the family or community. However, with industrialization,
urbanization, breakup of the joint family system and weakening of family bondage, it
has become necessary to provide social security arrangements that are
institutionalized and regulated by the state rather than the society.
Issues relating to social security are listed in the directive principles of state policy.
While social security and insurance, employment and unemployment form Item 23 of
the concurrent list, the welfare of labour including conditions of work, provident fund,
employees liability, workmens compensation, invalidity and old age pension and
maternity benefits form Item 24, also of the concurrent list. During the initial years of
development planning, it was believed that with the process of development, a greater
number of workers would join the organized sector and eventually get covered by
formal social security arrangements. However, the actual experience has proved
otherwise. There is now almost a stagnation of employment in the organized sector
with increase in the inflow of workers into the informal sector. The unorganized
workforce is characterized by scattered and fragmented areas of employment,
seasonality, lack of job security and low legislative protection. Currently, out of an
estimated workforce of nearly 400 million, only less than 10 per cent have the
benefits of formal social security protection. Although the government has a few
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centrally funded social assistance programmes like National Old Age Schemes and
National Family Benefit Schemes, the number of people covered as well as the
benefits is very meager. Furthermore, in a country like India, where there is no
provision for unemployment benefits, the concept of insurance becomes extremely
important.
1.4 ORIGIN OF INSURANCE:
Maritime insurance is the oldest form of insurance and is followed by life insurance
and fire insurance. Insurance was prevalent in ancient Greece and among the maritime
peoples with whom the Greeks traded. It developed first as a means of spreading the
huge risks involved in early maritime enterprises, evolving much later during the
fourteenth century in the commercial cities of Italy. This practice of marine insurance
gradually spread to London during the sixteenth century. The history of marine
insurance is closely associated with the origin and rise of Lloyds group of shipowners. Today, Lloyds is considered the largest underwriter in the world. In the USA,
the first insurance company was established by Benjamin Franklin in 1752. Since the
mid nineteenth century, insurance has developed significantly to cover other kinds of
risks.
In India, the history of life insurance can be traced to 1818 when Anita Bhavsar
started the Oriental Life Insurance Company in Kolkata. This organization was
basically founded to serve European clients and hence Indians who opted for an
insurance cover were charged a much higher premium. The reason given was that
Indians had a lower life expectancy on account of their lifestyle, while in fact this was
a planned effort to keep Indians out of any kind of progress The Company failed in
1834.Then, in 1870 the British Insurance Act was passed and the last three decades of
nineteenth century saw the emergence of the Bombay Mutual Life Assurance Society
(1871), which became the first organization to charge the same premium from all
residents of India irrespective of their origin or nationality. The Oriental (1874) and
Empire of India (1897) insurance companies began their activities in the Bombay
Residency in the late nineteenth century. This period, however, was dominated by
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foreign insurance offices such as Albert Life Assurance, Royal Insurance, and
Liverpool and London Globe Insurance, which did good business in India.
The history of general insurance can be traced to the Industrial Revolution in the West
and the consequent growth of sea-faring trade and commerce. A legacy of British rule,
General Insurance in India has its roots in the establishment of Triton Insurance
Company Ltd in 1850 in Calcutta. Its first Indian counterpart, the Indian Mercantile
Insurance Ltd, which launched its operation in Bombay in 1907, was the first
company of its type to transact all general insurance business.
1.5 OVERVIEW OF THE INDIAN INSURANCE SECTOR:
Insurance business has been traditionally classified into life insurance and non-life
insurance (also known as general insurance). The insurance industry of India consists
of 52 insurance companies of which 24 are in life insurance business and 28 are nonlife insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole
public sector company. Out of 28 non-life insurance companies, there are six public
sector insurers, which include two specialized insurers namely Agriculture Insurance
Company Ltd for Crop Insurance and Export Credit Guarantee Corporation of India
for Credit Insurance. Moreover, there are 5 private sector insurers are registered to
underwrite policies exclusively in Health, Personal Accident and Travel insurance
segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich
Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Religare
Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd.
In addition to 52 insurance companies, there is sole national re-insurer, namely,
General Insurance Corporation of India. Other stakeholders in Indian Insurance
market include approved insurance agents, licensed Corporate Agents, Brokers,
Common

Service

Centres,

Web-Aggregators,

Surveyors

and

Third

Party

Administrators servicing Health Insurance claims.

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Insurance Laws (Amendment) Act, 2015 provides for enhancement of the Foreign
Investment Cap in an Indian Insurance Company from 26% to an Explicitly
Composite Limit of 49% with the safeguard of Indian Ownership and Control.
Insurance penetration of India i.e. Premium collected by Indian insurers is 3.30% of
GDP in FY 2014-15. Per capita premium underwritten i.e. insurance density in India
during FY 2014-15 is US$ 55.0.

Table 1: Registered Insurers in India (As on 31st March, 2015)

Type of Business
Life Insurance
Non-Life

Public Sector

Private Sector
1
*6

Total

23
**22

24
28

Insurance
Re-insurance
1
0
1
Total
8
45
53
*Includes specialized insurance companies - ECGC and AIC. **Includes five
Standalone Health Insurance Companies - Star Health & Allied Insurance Co.,
Apollo Munich Health Insurance Co., Max Bupa Health Insurance Co., Religare
Health Insurance Co., and Cigna TTK Health Insurance Co.
1.6 INSURANCE PENETRATION AND DENSITY IN INDIA
Two important indicators of the level of development of the insurance sector in any
country are:
i.

Level of insurance penetration which is measured as the percentage of insurance

ii.

premium in gross domestic product (GDP); and

Insurance density ratio (wherein insurance density is defined as the per capita
expenditure on insurance premium and is directly correlated with per capita GDP).
Both insurance penetration and density have increased significantly over the years,
especially with the opening up of the insurance industry to the private sector.
However, the increase has been marginal as far as the non-life insurance sector is
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concerned. While the density of life insurance in India grew from US$ 9.1 in 2001 to
US$ 47.7 in 2009, the density in the non-life insurance industry for the same period
grew from US$ 2.4 to US$ 6.7. Similarly, penetration in the life insurance sector
increased from 2.15 per cent in 2001 to 4.60 per cent in 2009 and very marginally in
the non-life insurance sector from 0.56 per cent in 2001 to 0.60 per cent in 2009.
Thus, penetration in the non-life insurance sector has remained virtually constant over
the years. Indias insurance penetration is lower than the world average which in 2009
was 7.0 percent, while for India it was 5.2 per cent. Although, the penetration of
Indian insurance is higher than that of some South Asian countries like Pakistan
(0.7%), Bangladesh (0.9%) and Sri Lanka (1.4%), it lags behind other Asian countries
like Japan (9.9%), South Korea (10.4%) and Singapore (6.8%).
Several factors are responsible for the low levels of insurance penetration in the
country. These include low consumer preference, untapped rural markets and
constrained distribution channels. In urban areas, life insurance penetration in the
market is approximately 65 per cent, and is considerably lesser in the low-income
unbanked segment. In rural areas, life insurance penetration in the banked segment is
estimated to be approximately 40 per cent, and at best is marginal in the unbanked
segment. Before opening the sector to private insurers, it was felt that low levels of
insurance penetration were due to ineffective market strategies adopted by LIC. Being
a monopoly, the company had no strategic market plan. Advertising initiatives were
limited to the print and electronic media, which mainly promoted LICs products as
being tax saving tools for salaried individuals. Although the level of penetration has
increased after the entry of other players, it is still low compared to other countries.
According to consumer feedback, the problem has been exacerbated due to:
Agents inability to clearly explain the features of the products;
Lengthy documents that are not user friendly; and
The perception that agents are only concerned with their commissions.

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CHAPTER TWO
RURAL INSURANCE

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2.1

INTRODUCTION:

India lives in villages. Out of the total of 1210.2 million people in the country, the size
of rural population is 833.1 million which constituted 68.84% of total population,
according to the Census 2011. During 2001-2011 the rural population increased by
90.4 million, and the number of villages increased by 2,279. The majority of worlds
rural population lives in rural India. With its vast size and widespread array of
consumers, the marketers of financial products such as life insurance have been
exploring the opportunities to understand and penetrate into rural markets.
The life insurers in India had underwritten 11.3 million policies in the rural sector, out
of 44.1 million new policies underwritten by them in 2012-13. The Life Insurance
Corporation of India (LIC), a public sector giant, had underwritten 25.44% of their
new policies and private insurers had underwritten 26.99% of their new policies in the
rural sector (Saraswathy, M. 2014). Approximately one-fourth of Indias population
lives in 638,365 villages spread over 32 lakh square kilometers. According to the
National Council for Applied Economic Research (NCAER) study, there are almost
twice as many 'lower middle income' households in rural areas as in the urban areas
(Majumdar, Ramajuj 2007).
Products from Life Insurance-a way of Ensuring Economic Security:
It is an accepted fact that any person values more, the service that comes at a cost than
that which comes free. When people are made partners in programs of social security
they will utilize them much more effectively. Life insurance is a definite social
security intervention mechanism that has not been recognized adequately, especially
in the context of the needs of rural India.
Illness is one major factor that contributes to human deprivation and economic
insecurity. It affects both the patient and his dependents. Further, it makes the
community around him that much vulnerable to disease, if the effected is not in a
position to prevent or cure him in time. This leads to more insecurity. Hence, it is both
in the interest of self, as well as the community to insure oneself.

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Insurance can truly be a direct link between macroeconomic needs of the country for
productive resources by capital accumulation and micro need for better and secure life
of the individual.
LIC claims that over 51 % of its new policies are sold in rural areas. The impetus on
rural thrust can be further visualized from the fact that nearly half of LICs agents are
from rural areas and over half of its branches are in no facility areas.But the well
known but not admitted fact is that, in LIC the classification of business secured is on
the basis of residency of the Agent than the residency of the insured population in
rural areas. It is only rural Postal Life Insurance that really covers rural population.
Life Insurance in Rural Channels of India:
At present 8-10% rural households are covered under life insurance schemes and
remaining 90% can be targeted for new innovative insurance schemes. About 200
million rural populations out of 700 million have the surplus money to save money to
their available option post offices and a few limited commercial banks rural extension
counters. With the majority of the population still residing in rural areas, the
development of rural insurance will be critical in driving overall insurance market
development over the longer term. There is a need to create a broader awareness about
life insurance in all geographic areas in India through specific collective campaigns.
This is an important precondition to developing insurance and increasing penetration.
Awareness is lacking not only in rural areas, small towns and among the less educated
persons. Even in urban areas, vast segments of population seem to have erroneous
perception or impression which needs to be corrected. Before proceeding to rural
channels we try to give concepts of perception.
Rural Customer Perception of Life Insurance
Customer awareness or perception as a concept is of universal concern for all
economies of the world. In the context of a booming Indian economy and
unprecedented growth being witnessed by Insurance industry - especially life
insurance -, it would be interesting to examine this concept in depth. Perception is
defined as "the process by which an individual receives, selects, organizes, and
interprets information to create a meaningful picture of the world". Perception is the
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process by which an individual selects, organizes and interprets information to create

a meaningful picture of the world. Individuals act and react on the basis of their
perceptions, not on the basis of objective reality. Hence, for a marketer to know the
customers perception is more important than their knowledge of objective reality.
What consumers think about a product, and what it actually is affects their actions.
Individuals make decisions and take actions based on what they perceive to be reality
is very important to marketers to understand the whole notion of perception and is
related concepts, so they can more readily determine what factors influence
consumers to buy. The companies are trying to trigger growth in rural areas. They are
identifying the fact that rural people are now in the better position with disposable
income. The low rate finance availability has also increased the affordability of
purchasing the insurance products by the rural people. Marketer should understand the
price sensitivity of a consumer in a rural area. The buying behavior of the rural
consumers in India is influenced by several factors, such as socio-economic
conditions, cultural environment, literacy level, occupation, geographical location,
extensive efforts on the part of sellers, exposure to the media, etc.

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CHAPTER THREE
COMPANY PROFILE

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3.1 INTRODUCTION TO LIFE INCORPORATION OF INDIA (LIC):

Life

Insurance

Corporation

is

an

Indian state-owned insurance

group and investment company headquartered in Mumbai. It is the largest

insurance

company

in

India

with

an

estimated

asset

value

of 1560482 crore (US$230 billion). As of 2013 it had total life fund of

1433103.14 crore with total value of policies sold of 367.82 lakh that year.
The Life Insurance Corporation of India was founded in 1956 when the Parliament
of India passed the Life Insurance of India Act that nationalized the private
insurance industry in India. Over 245 insurance companies and provident societies
were merged to create the state owned Life Insurance Corporation.
3.2 HISTORY:
Life Insurance in its modern form came to India from England in the year 1818.
Oriental Life Insurance Company started by Europeans in Calcutta was the first
life insurance company on Indian Soil. All the insurance companies established
during that period were brought up with the purpose of looking after the needs of
European community and Indian natives were not being insured by these
companies. However, later with the efforts of eminent people like Babu Muttylal
Seal, the foreign life insurance companies started insuring Indian lives. But Indian
lives were being treated as sub-standard lives and heavy extra premiums were
being charged on them. Bombay Mutual Life Assurance Society heralded the birth
of first Indian life insurance company in the year 1870, and covered Indian lives at
normal rates. Starting as Indian enterprise with highly patriotic motives, insurance
companies came into existence to carry the message of insurance and social
security through insurance to various sectors of society. Bharat Insurance
Company (1896) was also one of such companies inspired by nationalism. The
Swadeshi movement of 1905-1907 gave rise to more insurance companies. The
United India in Madras, National Indian and National Insurance in Calcutta and
the Co-operative Assurance at Lahore were established in 1906. In 1907,
Hindustan Co-operative Insurance Company took its birth in one of the rooms of
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the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The
Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life)
were some of the companies established during the same period. Prior to 1912
India had no legislation to regulate insurance business. In the year 1912, the Life
Insurance Companies Act, and the Provident Fund Act were passed. The Life
Insurance Companies Act, 1912 made it necessary that the premium rate tables
and periodical valuations of companies should be certified by an actuary. But the
Act discriminated between foreign and Indian companies on many accounts,
putting the Indian companies at a disadvantage.
The first two decades of the twentieth century saw lot of growth in insurance
business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose
to 176 companies with total business-in-force as Rs.298 crore in 1938. During the
mushrooming of insurance companies many financially unsound concerns were
also floated which failed miserably. The Insurance Act 1938 was the first
legislation governing not only life insurance but also non-life insurance to provide
strict state control over insurance business. The demand for nationalization of life
insurance industry was made repeatedly in the past but it gathered momentum in
1944 when a bill to amend the Life Insurance Act 1938 was introduced in the
Legislative Assembly. However, it was much later on the 19th of January, 1956,
that life insurance in India was nationalized. About 154 Indian insurance
companies, 16 non-Indian companies and 75 provident were operating in India at
the time of nationalization. Nationalization was accomplished in two stages;
initially the management of the companies was taken over by means of an
Ordinance, and later, the ownership too by means of a comprehensive bill. The
Parliament of India passed the Life Insurance Corporation Act on the 19th of June
1956, and the Life Insurance Corporation of India was created on 1st September,
1956, with the objective of spreading life insurance much more widely and in
particular to the rural areas with a view to reach all insurable persons in the
country, providing them adequate financial cover at a reasonable cost.

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3.3 ORGANIZATIONAL SETUP OF LIC:

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from
its corporate office in the year 1956. Since life insurance contracts are long term
contracts and during the currency of the policy it requires a variety of services
need was felt in the later years to expand the operations and place a branch office
at each district headquarter. Re-organization of LIC took place and large numbers
of new branch offices were opened. As a result of re-organization servicing
functions were transferred to the branches, and branches were made accounting
units. It worked wonders with the performance of the corporation. It may be seen
that from about 200.00 crores of New Business in 1957 the corporation crossed
1000.00 crores only in the year 1969-70, and it took another 10 years for LIC to
cross 2000.00 crore mark of new business. But with re-organization happening in
the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum
Assured on new policies.
Today LIC functions with 2048 fully computerized branch offices, 113 divisional
offices, 8 Zonal offices, 1381 Satellite offices and the corporate office. LIC's Wide
Area Network covers 113 Divisional offices and connects all the branches through
a Metro Area Network. LIC has tied up with some Banks and Service providers to
offer on-line premium collection facility in selected cities. LICs ECS and ATM
premium payment facility is an addition to customer convenience. Apart from online Kiosks and IVRS, Info Centres have been commissioned at Mumbai,
Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and
many other cities. With a vision of providing easy access to its policyholders, LIC
has launched its SATELLITE SAMPARK offices. The satellite offices are smaller,
leaner and closer to the customer. The digitalized records of the satellite offices
will facilitate anywhere servicing and many other conveniences in the future.

3.4 OBJECTIVES OF LIC:

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Spread Life Insurance widely and in particular to the rural areas and to the
socially and economically backward classes with a view to reaching all
insurable persons in the country and providing them adequate financial
cover against death at a reasonable cost.
Maximize mobilization of people's savings by making insurance-linked
savings adequately attractive.
Bear in mind, in the investment of funds, the primary obligation to its
policyholders, whose money it holds in trust, without losing sight of the
interest of the community as a whole; the funds to be deployed to the best
advantage of the investors as well as the community as a whole, keeping in
view national priorities and obligations of attractive return.
Conduct business with utmost economy and with the full realization that the
moneys belong to the policyholders.
Act as trustees of the insured public in their individual and collective
capacities.
Meet the various life insurance needs of the community that would arise in
the changing social and economic environment.
Involve all people working in the Corporation 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.
3.5 MISSION AND VISION:
Mission: Ensure 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.

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 Vision:

A trans-nationally

competitive

financial

conglomerate

of

significance to societies and Pride of India.

3.6 BOARD OF DIRECTORS:
Members on the Board of the corporation Shri S.K. Roy (Chairman, LIC of India)
Shri V K Sharma (Managing Director, LIC of India)
Smt Usha Sangwan (Managing Director, LIC of India)
Shri Shantikanta Das
Smt Snehlata Das
Shri Ashwani Kumar (CMD, Dena Bank)
Shri Sanjay Kallapur (Non- Official Member)

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CHAPTER FOUR
LITERATURE REVIEW

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41. RIVIEW OF LITERATURE:

There are various studies related to Insurance Sector in India and abroad. It was found
that the numerous numbers of literatures is available on insurance industry and its
various aspects. Few relevant reviews are putting here in the context, they are as
follows:
The Malhotra Committee (1993) - Highlights the importance of the rural branch
postmasters who enjoy a position of trust in the community. They have the capacity to
canvass life insurance business within their respective areas. Accordingly, the
Government of India accepted the recommendation and permitted Postal Life
Insurance to extend its coverage to the rural areas to transact life insurance business
with effect from 24.3.1995, mainly because of the vast network of post offices in the
rural areas and low cost of operations. The Department of Posts within a short span of
time, made a very positive impact on the rural populace. As on 31st March 2015, there
are more than 23.51million Rural Postal Life Insurance policies in India (RPLI).

Randhey and Ahuja (1999) - Says that 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 grater mobilization of
long-term savings for long gestation infrastructure projects.

Rao Tripti D (2000) - Stated that Privatization of insurance industry is based on the
view that competition would enhance efficiency through increased resource
utilization. It would spill over as benefits to the consumers in terms of reduction in
premium costs with proper pricing policy and wider choice. Liberalization may also
increase the scope of operation of insurance business from limited area to untapped
areas like health, crop and unemployment.

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Machiraju Apparao (2002) - Argues that it is an undisputed fact that about 75% to
80% of the insurance population is yet to be covered in India. It is estimated that in
terms of lives, the figure could be around 20 crores. Those who are insured also are
not adequately insured. Insurance policies are sold, but not insuring the people based
on needs.
Raju Satya R. (2004) - Found that the insurance agents, development officers
employees, executives at different levels should work together to achieve the
objectives and mission and also to face the present and future competition as a
challenge. The insurance product and services should be designed and offered as per
the customer requirements.
Palande et al (2007) - Found that the Insurance industry is going to witness sea
changes in its marketing strategies. The existing and the new insurers will devise
different strategies to retain and enhance their market share. It would be done by
various methods by bringing in new practices, settings new service standards and
creating new benchmarks.
Mckinsey & Company (2007) - By 2012 about 10.3 million household with income
greater than Rs 2 lakh will control more than 22 percent of rural consumption.
Furthermore rural India will not be one market. Pockets of attractive rural market will
emerge in certain parts of India. Players will need to understand their needs, design
products to match them and create distribution models to reach a highly fragmented
consumer base cost effectively.
Ranjan Das & Raveendra (2008) - The rural market for life insurance is different
from the urban market in terms of needs, income levels and distribution (seasonality
for example), penetration of media, awareness and so on. Except LIC of India, no
other player has paid much attention to the rural sector in spite of their fully meeting
the IRDA obligations.
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Celent (2008) - The report published says that Indias life insurance market is
booming and the market has grown at a healthy CAGR of 24% over the past 5 years.
Most of this growth is from the urban areas. The increase in competition is forcing
insurance providers to look beyond urban centers and take their trade to the more
challenging rural hinterlands of the country, where only 3% of the population of more
than 720 million people has any form of life insurance coverage.
Gopinath (2009) - 70% of India lives in rural areas but have no access; or have
negligible access to insurance. Due to wide geographical disparity and high
distribution costs, insurers have been chary of venturing into this territory. With
increasing rural incomes and improving infrastructure, rural and micro insurance
offers immense possibilities. But with opportunities, this sector throws various
operational challenges as well, for the insurers - rural and social sector insurance
should not be approached as a legal or statutory requirement, but as a business
opportunity. With proper safe guards, this sector can contribute immensely to the top
line as well as bottom line. Doing well while doing good is very much possible.
Jawaharlal (2009) - Observes that it is not entirely on account of poverty in the rural
areas that there is a lopsided growth in insurance business. If tackled properly, there is
vast potential to be tapped.
Sadhak (2009) - Argues that marketing of life insurance is not a mere selling. It
involves trust building, identification of financial knowledge gap and personalized
service content strategy. The approach, the product and the distribution needs to have
a different look than that followed for the urban market.

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Selvakumar& Priyan (2010) - Found that insurance companies are increasingly

taping the semi-urban and rural areas to take across the message of protection of life
through insurance cover. Higher level of protection implies that customers are more
conscious of the need for risk mitigation, grater security, and about the future of their
dependents. Insurance sector has been evolving and improving its underwriting and
risk management abilities.
Gyanendra Singh L and Jyoti Kumar NVR (2013) - In their study points out that in
Mizoram, the rural and urban ratio of LIC policyholders during 2009-10 was 14:86,
and in the first half yearly report from April to September, 2010 the ratio was 20:80
indicating that only 17.21 per cent of the total NOPs during the period was from rural
policyholders of Mizoram, much below the national average of 23.83. Rural India
offers tremendous growth opportunities for insurance companies.
Dr. Ashfaque Ahmed (2013) - In his study perception of life insurance policies in
rural India reveled that there is low level of awareness and understanding of life
insurance products. There are various factors that influence consumer thinking when
they are planning to invest in insurance scheme. Most of the customers show their
interest in life insurance having higher risk coverage and also for good return with
safety. The roles played in perception of life insurance policies in rural market by
members of the family varies with knowledge parameters as well as with the typed of
products and sometimes with the company name also. While a number of
psychological variables are useful in obtaining into consumers perception towards
buying life insurance policies in rural areas. The insurance company name also plays
an important role in purchasing.

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CHAPTER FIVE
RATIONALE OF STUDY

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