RESEARCH PAPER ON CUSTOMER SATISFACTION INDEX OF LIC and ICICI Prudential

Topic: Satisfaction of customers of LIC and ICICI prudential. Purpose: For the purpose of improvement of marketing strategies
or to increase the efficiency & effectiveness of the marketing strategies.

A Research Paper by Prateek Deep

PREFACE
The wave of liberalisation sweeping India since 1992 has completely changed the way business was done in the country. Today in most industries, government companies are marginalised due to competition. In Insurance sector, Life Insurance Corporation of India (LIC) has owned majority of market share. But recently, the insurance company is losing its market share because the private insurance companies are grabbing the market in a big way. The topic has been chosen because of interest in this sector and good awareness of its features. During execution of this project, various problems that were taking care of, are finding out prospecting people for my sample and searching for more information about the company and its competitors from Books, Journals, internet, company booklets and customers. This task is done for learning how to execute an effective research work and how to plan to increase the efficiency & effectiveness of the marketing strategies.

ACKNOWLEDGEMENT
This work has been completed by the grace of god and with the help of the management faculty i.e. Md. Shariq, IISE, Lucknow and Dr Hemant Mishra, FIeMITS, Lucknow. Besides the above mentioned experts, I want to pay special thanks to Prof. Rameshwar Tandon (Research Professor, IISE, Lucknow) and Dr. Shail Mishra (Director, FIeMITS, Lucknow) to whom special cooperation made this task done. This research work on customer satisfaction index includes the analysis and interpretation of the various data collected with the help of the questionnaire.

ABSTRACT
The topic has been chosen as Life Insurance Company of India on which I did my valuable and conclusive research. The main objective of this research is the assessment of customer satisfaction index for the purpose of improvement of marketing strategies or to increase the efficiency & effectiveness of the marketing strategies. The Life Insurance Corporation of India is the only Public Sector Life Insurance Company in India. There are more than 12 Life Insurance Companies in Private Sector in India. Still the majority of the market share (nearly 80%) is owned by the LIC. With the change in the Indias economic philosophy from the early 1990s, and the subsequent relaxation of state control over several sectors of the economy, the monopolistic position of the Life Insurance Corporation of India was diluted and it has had to compete with a number of other corporate entities, Indian as well as transnational Life Insurance brands. During the research work, a considerable help has been taken from Books, journals, internet surfing and the company booklets provided by a nearby LIC and ICICI Prudential branch where I had collected all the information about the companies, their products and its competitors. Then a questionnaire has been prepared, where I put all those questions which helped me in finding out customer satisfaction index of the product of that company and its rival company. I had visited various places in Lucknow (Capital of Uttar Pradesh) for filling the questionnaire (Approximately 200) and collected data in the form of facts and figures. My research is conclusive work because I have mainly focused on finding out the customer satisfaction index of LIC against its competitor ICICI prudential, which was the actual requirement of this research. My findings show that people living in urban areas are mostly covered by insurance companies but life of those who live in rural areas is still not covered by any plan

being offered by the companies. In India, people want good quality with lower price. In insurance sector, LIC is having monopoly but still its customers are not satisfied with its service so that they are going for private insurance companies. In India, most of the people prefer to purchase different plans being offered by LIC for their insurance coverage because it is a government company but this mentality of the customers could not live more and is being changed by private insurer and thats why LIC is losing its market share. As per customersopinion, private insurance companies are giving tough competition to LIC. My recommendations regarding the above findings of research give stress on improving the customer satisfaction. LIC needs to concentrate on their services that they are providing presently. LIC should also launch insurance plans focusing on rural customers because rural areas are still not covered by insurance companies. There is a dire need of innovative insurance products of LIC in the competitive market emphasizing more on protection (from untimely death) than savings. The corporation also should advertise its products in the rural market for awareness among potential consumers.

TABLE OF CONTENT
INTRODUCTION:
OBJECTIVE OF PROJECT COMPANY PROFILE

RESEARCH PROCESS:
RESEARCH DESIGN SAMPLE DESIGN
POPULATION SAMPLING UNIT SAMPLE SIZE

DATA COLLECTION TECHNIQUE USED

ANALYSIS AND INTERPRETATION FINDINGS RECOMMENDATIONS LIMITATIONS OF RESEARCH WORK CONCLUSION BIBLIOGRAPHY

OBJECTIVE OF PROJECT:
The main objective of this project is the assessment of customer satisfaction index for the purpose of improvement of marketing strategies or to increase the efficiency & effectiveness of the marketing strategies.

COMPANY PROFILE: LIFE INSURANCE CORPORATION

The Life Insurance Corporation of India is the only Public Sector Life Insurance Company in India. There are more than 12 Life Insurance Companies in Private Sector in India. Still the majority of the market share (nearly 80%) is with the LIC of India. LIC was established in the year 1956 and it has become a synonym for Life Insurance in India. LIC ranks among top 10 Insurance Companies in the world. It has 2048 branches all over India, with its Head Quarters at Mumbai and divided into 100 Divisions under seven Zones.

History
The Oriental Life Insurance Company, the first corporate entity in India offering life insurance cover was established in Calcutta in 1818 by Bipin Behari Dasgupta and others. Europeans in India were its primary target market, and it charged Indians huge premiums. The Bombay Mutual Life Assurance Society, formed in

1870, was the first native insurance provider. Other insurance companies established in the pre-independence era included

Bharat Insurance Company (1896) United India (1906) National Indian (1906) National Insurance (1906) Co-operative Assurance (1906) Hindustan Co-operative (1907) Indian Mercantile General Assurance Swadeshi Life (later Bombay Life)

The first 150 years were marked mostly by turbulent economic conditions. It witnessed, Indias First War of Independence, adverse effects of the World War I and World War II on the economy of India, and in between them the period of worldwide economic crisis triggered by the Great depression. The first half of the 20th century also saw a heightened struggle for Indias independence. The aggregate effect of these events led to a high rate of bankruptcies and liquidation of life insurance companies in India. This had adversely affected the faith of the general public in the utility of obtaining life cover. The Life Insurance Act and the Provident Fund Act were passed in 1912, providing the first regulatory mechanisms in the Life Insurance industry. The Indian Insurance Companies Act of 1928 authorized the government to obtain statistical information from companies operating in both life and non-life insurance areas. The subsequent Insurance Act of 1938 brought stricter state control over an industry that had seen several financially unsound ventures failing. A bill was also introduced in the Legislative Assembly in 1944 to nationalize the insurance industry.

Nearly a decade after India achieved independence, the Parliament of India passed the Life Insurance of India Act on 19th June 1956, and the Life Insurance Corporation of India was created on 1st September, 1956, by consolidating the life insurance business of 245 private life insurers and other entities offering life insurance services. Nationalization of the life insurance business in India was a result of the Industrial Policy Resolution of 1956, which had created a policy framework for extending state control over at least seventeen sectors of the economy, including the life insurance. The company began operations with 5 zonal offices, 33 divisional offices and 212 branch offices.

Current status
Over its existence of around 50 years, Life Insurance Corporation of India, which commanded a monopoly of soliciting and selling life insurance in India, created huge surpluses, and contributed around 7 % of Indias GDP in 2006. The organization at present comprises 2048 branches, 100 divisional offices and 7 zonal offices, and employs over 1 million agents. It also operates in 12 other countries, primarily to cater to the needs of Non Resident Indians.

Subsidiaries
LIC owns the following subsidiaries:

Life Insurance Corporation of India International: This is a joint venture offshore company promoted by LIC which commenced operations in July, 1989 with the objectives of

offering US$ denominated policies to cater to the insurance needs of NRIs and providing insurance services to holders of LIC policies currently residing in the Gulf. LIC International operates in all GCC countries.

LIC Nepal: A joint venture company formed in 2001 with the Vishal Group of Industries, Nepal. LIC Lanka: A joint venture company formed in 2003 with the Bartleet Group of Companies, Sri Lanka. LIC Housing Finance: Incorporated in 19th June 1989, its main objective is to provide long term finance for construction or purchase of houses or apartments. It has a Dubai office.

Opening up of Insurance

With the change in the Indias economic philosophy from the early 1990s, and the subsequent relaxation of state control over several sectors of the economy, the monopolistic position of the Life Insurance Corporation of India was diluted, and it has had to compete with a number of other corporate entities, Indian as well as transnational Life Insurance brands. Financial sector reforms in mutual funds and banking sectors allowed foreign direct investment and foreign institutional investment. In the insurance sector a committee on Reforms in the insurance sector, popularly known as the Malhotra Committee, was appointed in 1993 by the Government to review the working of the insurance industry. At that time, it was observed that though the nationalization of Insurance had contributed to security of savings, India stree

lagged much behind other developing nations in Asia in the area of insurance coverage and penetration. The Malhotra committee in its report submitted in 1994, recommended opening up of the insurance industry. The key recommedations included: 1. Permitting private companies with a minimum paid up capital of ruppes one hundred crores to enter the industry. 2. Prohibition of composite insurers. 3. Permitting foreign companies to enter the industry in the joint venture mode with domestic companies. The other recommendations included induction of alternate distribution channels for ensuring a rapid growth of insurance in India, setting up of an insurance regulatory body making the controller of Insurance independent, and also suggesting amendments of the Insurance Act 1938. The Government responded by establishing an interim Insurance Regulatory Authority in January, 1996. However, on the issue of opening up of the sector, an intense debate followed for several years before a consensus emerged that this step was justified for increasing the penetration of insurance in the country. Ultimately the Insurance Regulatory and Development Authority Act, 1999 was passed. Today in terms of its mandate and the number of people to be served by way of increased penetration of insurance, the Indian Insurance regulator IRDA is perhaps the largest developer of insurance business in the world.

Insurance scenario after opening up:

With the opening up of the isnurance sector, new private companies started registering in both Life and Non-Life Sectors. As on date, 13 new private Life companies have been registered.

Similarly, eight, new private Non-Life insurers are working in India along with all erstwhile four subsdiaries of LIC. The paid-up equity capital of all insurance companies as on 31st March, 2004.was figured as Rs. 5067.67 crores.

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LTD.

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Bank has 74% stake in the company and Prudential plc has 26%. ICICI and Prudential came together in 1993 to form Prudential ICICI Asset Management Company, which has today emerged as one of the leading mutual funds in India. The two companies bring together two of the strongest financial service brands in Asia, known for their professionalism, excellent quality of service and long term commitment to YOU. Riding on the success of this relationship, the two companies joined hands once more in 2000, to form ICICI Prudential Life Insurance, with a commitment to provide leading-edge life insurance solutions. ICICI Prudential has recruited and trained over 60,000 insurance advisors to interface with and advise customers. Further, it leverages its state-of-the-art IT infrastructure to provide superior quality of service to customers. The company has network with 12 bancassurance tie-ups, having agreements with ICICI Bank, as well as some corporate agents. It has also tied up with organisations like Dhan for distribution of

Salaam Zindagi, a policy for the socially and economically underprivileged sections of society. PROFILE
COMPANY NAME: ICICI PRUDENTIAL LIFE INSURANCE CO. LTD. INDIAN PARTNER: ICICI BANK FORIGN PARTNER: PRUDENTIAL plc EQUITY RATIO: 74:26 COMMENCEMENT OF OPERATION: 19 TH DECEMBER, 2000 FIELD OF OPERATION: LIFE HOME ADDRESS: ICICI PRUDENTIAL LIFE INSURANCE COMPANY, ICICI PRULIFE TOWERS, 1089, Appasaheb Marathe Marg, Prabhadevi, MUMBAI- 400025

CEO OF THE COMPANY: Ms. SHIKHA SHARMA MANAGEMENT: Board of Directors

Ms. Chanda D. Kochhar, Chairperson Mr. N. S. Kannan, Director Mr. K. Ramkumar, Director Mr. Barry Stowe, Director Mr. Adrian OConnor, Director Mr. Keki Dadiseth, Independent Director Prof. Marti G. Subrahmanyam, Independent Director Ms. Rama Bijapurkar, Independent Director Mr. Vinod Kumar Dhall, Independent Direct Mr. V. Vaidyanathan, Managing Director & CEO

Management Team
Mr.V.Vaidyanathan, Managing Director & CEO Ms. Anita Pai, Executive Vice President - Customer Service, Technology & Marketing Dr. Avijit Chatterjee, Appointed Actuary Mr. Puneet Nanda, Executive Vice President

RESEARCH DESIGN:
This is a conclusive research work because in this research work I have mainly focused on finding out the customer satisfaction index of LIC against its competitor which was the actual requirement of this research. A conclusive research is one where we only give a conclusion to the topic and does not explore anything or give suggestions for further improvement.

SAMPLE DESIGN: POPULATION:

Here the population consists of those people who are living in LUCKNOW.

SAMPLING UNIT:
A particular unit of the sample consists of those people who have purchased life insurance policy either from LIC or ICICI prudential.

SAMPLE SIZE:
The sample size is 200 i.e. large sample tests.

DATA COLLECTION TECHNIQUE USED:

The data has been collected in two ways. Firstly, I prepared a questionnaire where I included all those questions with the help of which I found out the preferences of the customers about the life insurance company and their product so that with the help of that primary data I could do my research work. Secondly, secondary data was collected from Books, Journals, internet and booklets provided by the companies. Primary data was mainly prepared for the analytical description of the project.

1) Do you have any insurance policy?

POLICY PURCHASED BY CUSTOMERS

YES NO

As we see that most of the people are covered by insurance policy because they belong to urban areas.

2) Are you satisfied with your insurance company?

CUSTOMERS SATISFIED WITH THEIR INSURANCE COMPANY

YES NO

As we observe that most of the customers are satisfied with their insurance companies but there is good amount of customers who is not satisfied.

3) You prefer to purchase insurance policy from which company?

CUSTOMERS PREFERRED TO PURCHASE INSURANCE POLICY

LIC ICICI PRODENTIAL BAJAJ ALLIANZ HDFC STANDARD BIRLA SUNLIFE

LIC is still customers first preference as we see in the graph. But private insurance companies are challenging LIC in a big way.

4) Which company do you feel is the toughest competitor of LIC?

TOUGHEST COMPETITOR OF LIC

ICICI PRODENTIAL BAJAJ ALLIANZ HDFC STANDARD BIRLA SUNLIFE

According to the customers, ICICI prudential and Bajaj allianz is the toughest competitor of LIC.

5) Please rank the following features on a scale of 1-5.

LIC LIC FEATURES IMPORTANCE RATING SCORE

(I) BRAND NAME RELIABILITY AWARENESS PREMIUM PATTERN GROWTH & SECURITY ULIP FACILITY TAX SAVING NO. OF INSURANCE PLANS SERVICES AVAILABITY 4.32 4.44 4.21 4.45 4.66 4.67 4.72 (R1) 4.85 4.76 4.75 4.25 4.89 4.75 4.55 (S1)=I*R1 20.952 21.1344 19.9975 18.9125 22.7874 22.1825 21.476

ICICI ICICI PRUDENTIAL PRUDENTIAL RATING SCORE

(R2) 4.32 4.45 4.55 3.43 3.89 3.95 4.56 (S2)=I*R2 18.6624 19.758 19.1555 15.2635 18.1274 18.4465 21.5232

4.65 4.75 4.25 Y=45.12

4.68 4.35 4.69

21.762 20.6625 19.9325 T=209.7993

4.64 4.75 4.25

21.576 22.5625 18.0625 U=193.1375

Customer Satisfaction Index (%) =

For LIC = (T/5Y)*100 = (209.7993/5*45.12)*100 = 93% For ICICI prudential = (U/5Y)*100 = (193.1375/5*45.12)*100 = 85%

1. People living in urban areas are mostly covered by insurance company but those who living in rural areas are still not covered by insurance company. 2. In India, people want good quality with lower price. In insurance sector LIC is having monopoly but still customers are not satisfied with their service so that they are going for private insurance companies. 3. In India most of the people prefer to purchase LIC for their insurance coverage because it is a government company but this mentality of the customers is changed by private insurer and thats why LIC losing their market share. 4. As per customersopinion, private insurance companies are trying to give best service in every respect to grab the market and giving tough competition to LIC.

1. In order to improve the customer satisfaction, LIC needs to concentrate on their services that they are providing presently because customers are having other options to get themselves insured. 2. LIC should launch their insurance plans focusing on rural customers because rural areas are still not covered by insurance companies. 3. With the private companies coming out with innovative insurance products emphasising more on protection (from untimely death) than savings, the market preference has changed in the last 3 to 4 years. So LIC should launch their product by giving more protection than savings. 4. LIC needs to create more awareness about their product to the rural areas so that people of rural areas are aware of it and start to insured their life like others. We can take the help of Integrated marketing communications (IMC) to use promotional tools in a unified way so that a synergistic communication is created. 5. Advertising message strategies should focus on promoting brand recall with the help of slogans and jingles in the ad, linking a key attribute to the brand name with the help of Unique Selling Proposition (USP), Feel-Good Ads, Humour Ads and Fear-Appeal Ads and situating brand socially.

Boundaries define the area or the framework under which a particular work has to be executed. Here boundaries are defined by the limitations of the work. Various limitations of this research work are:

i)

Time constraint: The work to be done had only 25

days for execution.

ii)

Place constraint: The area in which the work was

performed included only LUCKNOW region. It is not a descriptive research work.

There is no doubt that LIC has a huge number of satisfied customers around the country and they will never left LIC for other private insurance company. Recently, it has been seen that the market share of LIC is going downwards because some private insurance companies through their huge advertisement, better services, and best insurance plans attract a lot of customers. For LIC it is necessary to be in the race with full efficiency and heavy advertisement otherwise they will lose some more market share in recent future. Advertising is the granddaddy of all the promotional and marketing tools. Internet advertising, can yield fruitful results for LIC.

New Deal in Insurance-Edited by Prof. M Gangadhara Rao Promotion & Integrated Marketing Communications-By Richard J. Semenik Insurer-A monthly issue of ICICI Prudential www.indiatimes.com www.capitalmarket.com www.licindia.com www.iciciprolife.com www.indiainfoline.com