A RESEARCH REPORT ON CUSTOMERS PERCEPTION TOWARDS LIFE INSURANCE POLICIES IN BHILAI-DURG

Submitted in partial fulfillment for the award of the degree Master of Business Administration Chhattisgarh Swami Vivekanand Technical University, Bhilai

Submitted by, Richa Vohra MBA Semester II (Section B) (Session 2008-2009)

Approved By, Dr. Sumita Dave HOD

Guided By, Mr.Souren Sarkar Reader

Shri Shankaracharya Institute of Management and Technology Junwani, Bhilai (C.G.) 490020

CERTIFICATE

This is to certify that the project Customers perception towards life insurance policies in Bhilai-Durg submitted to Shri Shankaracharya Institute of Management & Technology, Bhilai in partial fulfillment of the requirement for the award of Master of Business Administration (MBA) is a bona fide work carried out by Richa Vohra (Session B), a student of MBA II Sem, under my supervision and guidance.

Souren Sarkar Reader, SSIMT, Bhilai

Shri Shankaracharya Institute of Management and Technology Junwani, Bhilai (C.G.) 490020

[ii]

DECLARATION

I Richa Vohra, a student of MBA II Semester 2008, at Shri Shankaracharya Institute of Management & Technology hereby declare that this Project Report under the title Customers perception towards life insurance policies in Bhilai-Durg is the record of my original work under the guidance of Mr. Souren Sarkar. This report has never been submitted to anywhere else for award of any degree/diploma.

Place: Bhilai Date : 30.03.2009

Richa Vohra MBA Semester II

[iii]

ACKNOWLEDGEMENT

I would like to express our gratitude to all those who gave us the possibility to complete this Research Work. I want to thank Shri Shankaracharya Institute of Management and Technology for giving me the opportunity to carry out this Research Work in the first instance, to do the necessary research work. I have furthermore to thank our Project Guide Mr.Souren Sarkar who gave and confirmed us this Research and encouraged me to go ahead with the Project and also for those valuable guidelines and support. I would also like to thank all the faculty of the institute from whom I get lot of inputs and help and support. It was a great experience and learns many things which will help me in future.

Place: Bhilai Date : 30.03.2009

Richa Vohra MBA Semester II

[iv]

TABLE OF CONTENTS

i. ii. iii. iv. v.

CERTIFICATE DECLARATION ACKNOWLEDGEMENT TABLE OF CONTENTS EXECUTIVE SUMMARY

ii iii iv v vi Page No 1 Page No 2-7 Page No 8 Page No 9-18 Page No 19 Page No 20 Page No 21 Page No 22 Page NO 23 Page No 24

1. INTRODUCTION 2. LITERATURE REVIEW 3. RESEARCH METHODOLOGY 4. DATA ANALYSIS AND RESULTS 5. INTERPRETATION OF FINDINGS 6. RECOMMENDATIONS 7. LIMITATIONS 8. CONCLUSION vi. vii.

REFERENCES APPENDICES

[v]

EXECUTIVE SUMMARY

As the study of the customer preference towards the insurance sector plays a vital role in understanding the contribution of insurance industry. I want to study the customer perception & preferences for the various facilities provided by the insurance policies. A comparison between private insurance industries will help in assessing the expectation of the customers about the services provided by them. Study of this project has been done in Bhilai-Durg .Project began with a pilot survey in the region of Vaishali Nagar, based upon the performance in pilot survey we did some changes in the questionnaire and than I did my research in Bhilai-Durg .My questionnaire was designed based on the funnel approach. The following data analysis tools are used for the primary data, which was collected using questionnaire. Percentage method.

This analysis will provide public as well as private insurance players to improve their quality standards and also to provide better facilities to the customers.

[vi]

INTRODUCTION CUSTOMER PERCEPTION Customer perceptions are dynamic. First of all, with the developing relationship between customer and company, his perceptions of the company and its products or services will change. The more experience the customer accumulates, the more his perceptions will shift from fact-based judgments to a more general meaning the whole relationship gains for him. Over time, he puts a stronger focus on the consequence of the product or service consumption. Moreover, if the customers circumstances change, their needs and preferences often change too. In the external environment, the offerings of competitors, with which a customer compares a product or service will change, thus altering his perception of the best offer around. Another point is that the public opinion towards certain issues can change. This effect can reach from fashion trends to the public expectation of good corporate citizenship. Shells intention to dump its Brent Spar platform into the ocean significantly altered many customers perception of which company was worth buying fuel from. Research has been donning on the impact of market share on the perceived quality of a product Depending on the nature of the product and the customers preferences, increasing market share can have positive or negative effects on how the customer perceives the product. In these days customer perception is very important .When compared to customer perception of the insurance company to other insurance company. The customer perception is showing the problems of company. One company to other company will be show the difference of the customer services like high quality, low price, offering door delivery service and sometimes company offering free demo class regarding some electronic products. Thats why many people are attracted to private organization. Customer perception is an important component of our relationship with our customers.

[1]

LITERATURE REVIEW Brief History of the Insurance Sector in India Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 per cent annum. Together with banking services, it contributes to about 7 per cent to the country's GDP. Insurance is a federal subject in India and Insurance industry in India is governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. The origin of life insurance in India can be traced back to 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. It was conceived as a means to provide for English Widows. In those days a higher premium was charged for Indian lives than the nonIndian lives as Indian lives were considered riskier for coverage. The Bombay Mutual Life Insurance Society that started its business in 1870 was the first company to charge same premium for both Indian and non-Indian lives. In 1912, insurance regulation formally began with the passing of Life Insurance Companies Act and the Provident Fund Act. By 1938, there were 176 insurance companies in India. But a number of frauds during 1920s and 1930s tainted the image of insurance industry in India. In 1938, the first comprehensive legislation regarding insurance was introduced with the passing of Insurance Act of 1938 that provided strict State Control over insurance business.

Insurance sector in India grew at a faster pace after independence. In 1956, Government of India brought together 245 Indian and foreign insurers and provident societies under one nationalized monopoly corporation and formed Life Insurance Corporation (LIC) by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore. The (non-life) insurance business/general insurance remained with the private sector till 1972. There were 107 private companies involved in the business of general operations and their operations were restricted to organized trade and industry in large cities. The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from January 1, 1973. The 107 private insurance companies were
[2]

amalgamated and grouped into four companies: National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).

In 1993, the first step towards insurance sector reforms was initiated with the formation of Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra. The committee was formed to evaluate the Indian insurance industry and recommend its future direction with the objective of complementing the reforms initiated in the financial sector. Key Recommendations of Malhotra Committee

Structure

Government stake in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that All the insurance companies should be given greater freedom to operate.

these subsidiaries can act as independent corporations.

Competition

Private Companies with a minimum paid up capital of Rs.1billion should be No Company should deal in both Life and General Insurance through a single Foreign companies may be allowed to enter the industry in collaboration with Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in

allowed to enter the industry.

Entity.

the domestic companies.

each state. Regulatory Body

The Insurance Act should be changed. An Insurance Regulatory body should be set up.
[3]

Controller of Insurance should be made independent.

Investments

Mandatory Investments of LIC Life Fund in government securities to be GIC and its subsidiaries are not to hold more than 5% in any company.

reduced from 75% to 50%.

Customer Service

LIC should pay interest on delays in payments beyond 30 days Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in

the insurance industry. Malhotra Committee also proposed setting up an independent regulatory body - The Insurance Regulatory and Development Authority (IRDA) to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives.

Insurance sector in India was liberalized in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. There is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent. The opening up of the insurance sector has led to rapid growth of the sector. Presently, there are 16 life insurance companies and 15 non-life insurance companies in the market. The potential for growth of insurance industry in India is immense as nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be well below international standards.

[4]

Some of the important milestones in the life insurance business in India are:

185o Non life insurance debuts with triton insurance company 1870 Bombay mutual life assurance society is the first Indian owned Life insurer 1912 - The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928 - The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.

1938 - Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956 - 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907 - The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957 - General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct
[5]

and

sound

business

practices.

1968 - The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.

1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st Jan.

1973- insurers amalgamated and grouped into four companys viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

[6]

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA The life insurance industry in India grew by an impressive 47.38%, with premium income at Rs. 1560.41 billion during the fiscal year 2006-2007. Though the total volume of LIC's business increased in the last fiscal year (2006-2007) compared to the previous one, its market share came down from 85.75% to 81.91%. The 17 private insurers increased their market share from about 15% to about 19% in a year's time. The figures for the first two months of the fiscal year 2007-08 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. With the opening up of the insurance industry in India many foreign players have entered the market. The restriction on these companies is that they are not allowed to have more than a 26% stake in a companys ownership. Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 19 private life insurance companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. Some of these products include investment plans with insurance and good returns (unit. inked plans),multipurpose . insurance plans, pension plans, child plans and money back plans.

[7]

RESEARCH METHODOLOGY

Research Objectives :1. To find out the customers reason towards investment in life insurance policies. 2. To identify major attributes which effects the decision making process of purchase of life insurance policies. 3 .To identify major market players offering life insurance policies. Data collection There are two types of data collection method use in my project work report. -Primary data -Secondary data. For my project, I decided on primary data collection method for observing customer perception towards insurance and approaching customers directly in the field, comparing and references to know their preference on insurance policies for my project through questionnaire. I decided on secondary data collection method was used by referring to various websites, books, magazines, journals and daily newspapers for collection information regarding project under study In my project, I decided primary data collection method because my study nature does not permit to apply observational method. In survey approach .I selected a questionnaire method for taking a customer view because it is feasible from the point of view of my subject & survey purpose. I conducted 150 sample of survey in my project. SAMPLE SIZE: SAMPLING METHOD: The sample size is 150 I used simple random sampling to collect the data.

[8]

DATA ANALYSIS AND RESULTS

1. Number of life insurance policies customer holds: Option 0-1 2-3 4-5 5&above Number of respondents 72 59 15 5 Percentage 48% 39% 10% 3%

Figure-1 .

NUMBER OF LIFE INSURANCE POLICIES OF POLICY HOLDER 80 70 60 50 40 30 20 10 0

Series1

72

59 15

5 5 and above

0 to 1

2 to 3

4 to 5

Interpretation :-

[9]

Figure 1 shows that among 150 respondents, 48% are having 0-1 policies, 39% are having 2-3 policies, 10% are having 4-5 policies and 3% are having 5 or more policies. So, major respondents are 0-1 policy holder.

2. Rationale behind holding the Life insurance policies:-

options Tax saving instrument Necessity of life Both of the above Safety for loan

Number of respondents 111 9 11 19

Percentage 7% 6% 74% 13%

Figure-2

RATIONALE BEHIND HOL DING THE LIFE INSURANCE POLICY

13%

7%

6%

TAX SAVING INSTRUM ENT NECESSITY OF LIFE F OR SAF ETY AND SECURITY BOTH OF A BOVE AS A SAFETY FOR LOAN

74%

Interpretation :Figure 2 shows that among 150 respondents, 111 i.e. (74%) consider insurance as tax saving, safety and Security instrument and 19 i.e. (13%) consider it as for safety for a loan and 11 i.e. (7%) consider it for tax saving and 9 i.e. (6%) consider it as a necessity of life for

[10]

safety and security. So, most of the respondents consider it both as tax saving instrument and as necessity of life for safety and security as rationale behind holding a life insurance policy.

3. Type of insurance policies preferred by customers:-

Options Endowment (long term) Cash back(returns in regular intervals)

Number of respondents 15 20

Percentage 10% 13% 33% 10%

Unit linked(equity based) 50 Single premium(short term) 15

Figure -3

PREFERENCE ON TYPE OF LIFE INSURANCE POLICIES ( MEAN) 60 50 40 30 20 10 0

50 15 ENDOWMENT (LONG TERM) 20 CASH BACK( RETURNS IN REGULAR INTERVALS) UNIT LINKED( EQUITY BASED) 15 SINGLE PREMIUM

Series1

Interpretation :-

[11]

Figure 3 Figure 3 shows that among 150 respondents according to Mean taken most preferred life insurance policy is Unit linked (Mean-50)

4. According to customer, what should be the moderate return from the investment in the life insurance policies?

Option Less than 5% 5-8% 8-11% 11&above

Number of respondents 19 21 43 67

Percentage 13% 14% 29% 45%

Figure-4
RETURN FROM THE INVESTMENTS IN THE LIFE INSURANCE POLICIES

19 67 21
LESS THAN 5% 5-8% 8-1% 1 1%AND ABOVE 1

43

Interpretation :Figure 4 shows that among 150 respondents, 45% preferred a return of 11% and above, 29% liked to have a return of 8-11% while 14% and 13% respondents preferred it to be 5-8% and less than 5% respectively. So, most preferred return from the investment in the life insurance policies is 11% and above.
[12]

5. In which income group customer belongs?

Option 20-30 30-40 40-50 50&above

Number of respondents 17 69 37 27

Percentage 11% 46% 25% 18%

Figure-5

AGE GROUP
80 70 60 50 40 30 20 10 0 20-30 30-40 40-50 50-60 17 69 37 27
Series1

Interpretation :-

Figure 5, shows that among 150 respondents, 46% respondents are of the age group 30-40 years while 25% and 18% of respondents are of age group 40-50 and 50-60 years respectively and only 11% belong to age group 20-30 years. So, maximum number of respondents belongs to age group 30-40 years. 6. In which income group customer belongs?

[13]

Option Less than 3lacs 3-5lacs 5-8lacs 8lacs&above

Number of respondents 36 41 51 22

Percentage 24% 27% 34% 15%

Figure-6

INCOME GROUP OF POLICY HOLDERS

22

36
LESS THAN 3 LACS 3-5 LACS 5-8 LACS

51 41

8 LACS AND ABOVE

Interpretation :Figure 6 shows that among 150 respondents, 34% belong to income group of 5-8 lacs while 27% and 24% respondents are from income group 3-5 lacs and less than 3 lacs resp. and only 15% respondents belong to income group 8 lacs and above. So, maximum no. of respondents belongs to income group of 5-8 lacs

7. Sum total of insurance policies customer holds:

[14]

option Less than 50000 50000-1lacs 1-1.5lacs 1.5&above

Number of respondents 13 77 29 31

Percentage 9% 51% 19% 21%

Figure-7

SUM TOTAL OF INSURANCE POLICIES OF POLICY HOLDERS

90 80 70 60 50 40 30 20 10 0

77 29 100000150000 31 150000 AND ABOVE

Series1

13 LESS THAN 50000-100000 50000

. Interpretation :. Figure 7 shows that among 150 respondents sum total of amount of insurance policy premium of 51% policy holders is between 50,000-1 lac while for 21% and 19% policy holders sum total of amount of insurance policy premium is 1.5 lacs and more and between 1 lac-1.5 lacs resp. and only 9% policy holders sum total of amount of insurance policy premium is less than 50,000. So, maximum no. of policy holders are having sum total of amount of insurance policy premium as 50,000-1 lac. 8. Type of life insurance policy customer prefers is recommended by.

Option Family

Number of respondents 80
[15]

Percentage 53%

Friends Advisor Others

40 20 10

27% 13% 7%

Figure-8

Interpretation :Figure -8 shows that among 150 respondents 53% respondents have taken life insurance policies by the recommendation of family, 27% have taken by the recommendation of friends, 13% & 7% by the recommendation of advisor &others, so maximum no. of life insurance policies is recommended by family.

9. The customer have taken the life insurance policy through:

Option Agent Online Self Others

Number of respondents 96 14 23 17
[16]

Percentage 64% 9% 15% 11%

Figure-9

Interpretation:-

Figure-9 shows that among 150 respondents, 64% respondents have taken life insurance policies through agent, 9% have taken through online, 15% & 11% have taken through self & other means. So , maximum no. of respondents have taken through agent.

10 .Which companies provide better facility in the life insurance policy:

Option LIC SBI LIFE HDFC HSBC ICICI

Number of respondents 34 21 24 12 54
[17]

Percentage 23% 14% 16% 8% 36%

OTHERS

5 Figure-10

3%

Interpretation :-

Figure-10 shows that among 150 respondents, 23% respondents thinks that LIC provides better facilities, 14% & 16% thinks that SBI & HDFC provides better facilities, 8% & 3% thinks that HDFC & others provides better facilities. So maximum no. of respondents preferred ICICI for providing better facilities. INTERPRETATION OF FINDINGS

The buying of Life insurance policies is dependent on income. There is no impact of age on the rationale behind holding life insurance policy. Unit linked life insurance policy is preferred the most. Among 150 respondents maximum no. of policy holders are having sum total of amount of insurance policy premium as 50,000-1 lac.

[18]

Among 150 respondents maximum no. of respondents belongs to income group of 58 lacs. Most of the life insurance policies is recommended by the family of respondents. Among 150 respondents maximum number of respondents belongs to age group 3040 years. Among 150 respondents most of the respondents consider life insurance both as tax saving instrument and as necessity of life for safety and security as rationale behind holding a life insurance policy.

Among 150 respondents most preferred return from the investment in the life insurance policies is 11% and above. According, to the customer major market player who offer better facilities in the life insurance policies is ICICI . Most of the respondents have taken life insurance policies through agents.

[19]

RECOMMENDATIONS

Life insurance companies should be more reliable and stable towards their investors by providing better facilities. Life insurance companies should give emphasis on their after-sale-service. The promotional activities of insurance companies should be good. Life insurance companies should provide the necessary information and the importance of life insurance to the customers.

They should adopt better marketing techniques to increase awareness among the customers.

[20]

LIMITATIONS

Some of the difficulties and limitations faced by me during my research work, which are as follows:

Lack of awareness among the people Bad image of the people towards Insurance sector Lack of awareness about the earning opportunity in the Insurance sector The sample size chosen for the questionnaire was only 150 and that may not Customers do not like their money locked up for many years. Many people do not agree to fill the questionnaire because of lack of time

represent the true picture of the consumer perception about the Life Insurance sector.

[21]

CONCLUSIONS

I have come to know about the customer perception about the insurance sector and how it varies with their age group and income.

The buying of Life insurance policies is dependent on income. There is no impact of age on the rationale behind holding life insurance policy. Unit linked life insurance policy is preferred the most. All the insurance company must advertise more in the market because not all people know more about life insurance policy. Most number of people wants guaranteed returns so company must focus on this for the customer investment. The unit linked concept must be specifically promoted. People should not be afraid to invest money in insurance and must use it as an effective tool for tax planning and long term.

[22]

REFERENCES TEXT BOOKS 1. PHILIP KOTLER (2001) Marketing Management, Prentice Hall Pvt.Ltd., New Delhi, Millennium edition.

2. KOTHARI C.R. (1999) Research Methodology, Wishwa Prakashan, New Delhi, 2nd edition.
3. LEON G. SCHFFMAN and LESLIE LAZAR KANUK (2007)

Consumer Behavior, Prentice Hall Pvt.Ltd., New Delhi, 9th edition.

[23]

APPENDICES

Questionnaire Dear respondents, I am a student of Shri Shankracharya institute of management & technology. As a part of my curriculum I am conducting a study on CUSTOMERS PERCEPTION TOWARDS LIFE INSURANCE POLICIES IN BHILAI/DURG It would be a great help if you please spare some of your time to fill this questionnaire. The responses would be kept strictly confidential & use to data analysis.

Q .1 Please tick the appropriate option. Age 20-30 30-40 40-50 50&above

Annual income

>3lacs

3-5lacs

5-8lacs

8&above

Q .2 Number of Life insurance policies you hold? 0-1 4-5 2-3 5& above

Q.3 According to you, what is the rationale behind holding the Life insurance policy? (Please tick one) As a tax instrument. As a necessity of life for safety and security. Both of the above.

[24]

As a safety for loan. Q .4 According to you, what should be the moderate return from the investment of the life insurance policies? Less than 5% 3-5%

8-11%

11%&above

Q .5 which type of life insurance policies do you prefer? Endowment (long term) Cash back(returns in regular intervals) Unit linked(equity based) Single premium(short term) Q .6 what is the sum total of all life insurance policies you hold? Less than 50,000 1-1.5lacs Q .7 How have you taken your life insurance policies? Agent Online Self Others 50,000-1lacs 1.5&above

Q .8 The life insurance policies you have taken is recommended by: Family Friends
[25]

Adviser

Others

Q .9 according to you which company provides better facilities in their life insurance policies? Please tick any one on the scale given below. S.NO 1. 2. 3. 4. 5. 6. NAME OF BANKS LIC HDFC HSBC SBI LIFE ICICI OTHERS

[26]