International Journal of Sales & Marketing Management Research and Development (IJSMMRD) ISSN 2249-6939 Vol.

3, Issue 4, Oct 2013, 1-8 TJPRC Pvt. Ltd.

INVESTORS ATTITUDE TOWARDS INSURANCE EVIDENCE FROM VISAKHAPATNAM

K. RAKESH & V S M SRINIVAS Assistant Professor, School of Management Studies, MVGR College of Engineering, Vizianagaram, Andhra Pradesh, India

ABSTRACT
From the history we understand that the insurance industry has both economic and social purpose and relevance. It provides social security and individual welfare. It reduces risk and helps to raise productivity in the economy. Also insurance companies are financial intermediaries as they collect and invest large amounts of premiums. They offer protection to the investors, provide means for accumulating savings, and channelize funds to the government and other sectors. But the recent trends show the down fall of the insurance industry because of the crisis in economy. The risk means that there is a possibility of damage or loss. Insurance is done against the contingency that it may happen. Insurance only tries to reduce the impact of risk on the owner of the asset and those who depend on that asset. Hence we find a need to understand the customers attitude towards the insurance produc ts and their level of investments. We also find an interest to study whether the socio economic status and some related factors may have any tendency to influence the investors attitude.

KEYWORDS: Insurance, Attitude, Customer, Investment, Socio Economic, Economy INTRODUCTION

Insurance is a contract between two parties where by one party called insurer undertakes in exchange for affixed sum called premiums, to pay the other party called insured a fixed amount of money on the happing of a certain event Insurance is a protection against financial loss arising of happening of an unexpected event .insurance companies collect premium to provide for this protection. A loss is paid out of the premiums collected from the insuring public and the insurance companies act as trustees to the amount collected. For example, in a life policy by paying a premium to the insurer, the family of insurer person receives a fixed compensation on the death of the insured. similarly in car insurance ,in the event the car meeting with an accident, the insurer receives the compensation to the extent of damage .it is a system by which losses suffered by a few are spread over many exposure to similar risks. Different life insurance policies may vary by frequency and amount of payments terms of coverage, and the amount and method of final payment beneficiary. In India prior to liberalization insurance protection was made available through public sector insurance companies namely, LIFE INSURANCE CORPORATION OF INDIA (LIC) and the four subsidiaries of GENERAL INSURANCE CORPORATION OF INDIA (GIC) Non Life Insurance: - The non life insurance referred to as property insurance in the years and general insurance of India - include that insurance that covers. Property losses (damages to or destructions of hones, automobile business, ships aircrafts etc)

K. Rakesh & V S M Srinivas

Life Insurance: - Life insurance is a contract between a person and an insurance company by which the person pays in a certain agreed upon amount regularly so that upon that persons death, his or her family or other beneficiary will receive a lump sum payment, which is often used to defray funeral and related expenses and thereafter .replaces the loss of income or pension benefit caused by the death of policyholder. The first two decades of the twentieth centurys saw lot of growth in insurance business .the life insurance a ct 1938 was the first legislation governing not only life insurance but also non life insurance to provide strict state control over state business. Insurance act 1938 was introduced in legislative assembly. However, it was much later on 19 th of January 1956 that life insurance India was nationalized.

OBJECTIVES
To understand the investors socio economic status and its impact on their attitude towards insurance products and analyze investors attitude towards insurance products on selected factors. To study the important parameters that investors think about before investing in insurance products. To suggest the company in adopting the methods to improve the customers attitude towards the insurance products.

METHODOLOGY
Sample Plan: The target population for this study is investors. The selection of sample is selected at random from various respondents. At most care is taken in choosing the sample from various groups uniformly. Sample Size: The sample size among the investors was restricted to 150. A sample consists of proper crass section representing the parameters of the research. The secondary sources of the data were also collected through website, brochures and other published materials. Statistical technique like chi-square test was applied for the collected primary data. Null Hypothesis (ho) The distribution of responses among all options is homogeneous. Alternative Hypothesis (h1) The distribution of responses among all options is not homogeneous. Level of Significance: 5% Chi-Square Test= (O-E)2/O O = Observed frequency E = Expected frequency

ANALYSIS & DISCUSSIONS

In view of the importance of the investors and their planning in mutual funds and for effective mobilization of the investments, it would be fruitful to examine and understand their socio-economic characteristics that influence, their behavior and performance in a large measure. Therefore, an attempt is made in this section to present the socio-economic profile of selected investors of several companies.

Investors Attitude towards Insurance Evidence from Visakhapatnam

Table 1 Age Below 35 Between 35-50 Above 50 Gender Male Female Education SSC / Intermediate Graduation Post graduation Professional Location Rural Semi urban Urban Marital Status Single Married Others Family Size <=3 6-apr >6 Current Occupation Public sector Private sector Professional Self employed Annual Income <3 lakhs 3.1 6 lakhs >6 lakhs Count 48 59 43 Count 87 63 Count 24 40 71 15 Count 33 39 78 Count 35 107 8 Count 48 50 52 Count 39 35 33 43 Count 49 58 43

The above table gives a detailed note on socio economic background of the investors which will help in understanding their attitude towards investments. By going through above information it can be understood that the instability of the attitude totally depends on the following reasons, which are considered as factors for forming of risk. Basing upon these factors the opinions of the respondents were collected which was rated on a 5 point scale starting from Highly significant to Not Relevant. They are as follows: Political Situation Economic situation Attitude of Government towards FDI Taxation Overall Investment Climate Schemes portfolio of investment Minimum initial investment Disclosure of NAV on every trading day

K. Rakesh & V S M Srinivas

Investors guidance After knowing the factors responsible for forming the risk in the investment, as a process of that attitude were

gathered from the respondents regarding to existence of risk factors in their investments. Political Situation Table 2 O 31 31 32 24 32 E 30 30 30 30 30 o-e 1 1 2 -6 2 (o-e)2 1 1 4 36 4 (o-e)2/o 0.03 0.03 0.13 1.50 0.13 1.81

At the given level of significance the responses for the options under the political situation are homogeneously distributed and hence null hypothesis is accepted. Political situation has an impact on insurance. Political instability can be the main reason most of the insurance companies are joint ventures with that of foreign companies. Therefore the performance can be affected. Economic Situation Table 3 O 25 26 43 25 31 E 30 30 30 30 30 o-e -5 -4 13 -5 1 (o-e)2 25 16 169 25 1 (o-e)2/o 1.00 0.62 3.93 1.00 0.03 6.58

At the given level of significance the responses for the options under the economic situation are not homogeneously distributed and hence null hypothesis is rejected. Insurance is part of the general economy and will be affected by the general downturn in economic situation. But, insurance products were not involved in the credit crisis. Attitude of Govt. towards FDI Table 4 O 34 33 29 27 27 E 30 30 30 30 30 o-e 4 3 -1 -3 -3 (o-e)2 16 9 1 9 9 (o-e)2/o 0.47 0.27 0.03 0.33 0.33 1.44

At the given level of significance the responses for the options under the Attitude of Govt. towards FDI are homogeneously distributed and hence null hypothesis is accepted. According to the experts, the benefits of all kinds of FDI investments are likely to be seen only in the future. FDI and its results is a long term process and it will reap the benefits after a few years of initiating it. As we know, the government has approved as much as 49% of foreign direct investments in the Indian insurance sector from 26%. This is an extremely positive sign! Now more and more key players on global insurance market will make their debut in the very active Indian insurance market. Present foreign companies will increase their shareholding, benefiting the investors all the more.

Investors Attitude towards Insurance Evidence from Visakhapatnam

Taxation Table 5 O 22 33 41 21 33 E 30 30 30 30 30 o-e -8 3 11 -9 3 (o-e)2 64 9 121 81 9 (o-e)2/o 2.91 0.27 2.95 3.86 0.27 10.26

At the given level of significance the responses for the options under the taxation are not homogeneously distributed and hence null hypothesis is rejected. There are some smart decisions that you can make to avoid future tax consequences. One of the benefits of owning life insurance is the ability to generate a large sum of money payable to your heirs in the event of your death. An even greater advantage is the federal income-tax free benefit that life insurance proceeds receive when they are paid to your beneficiary. However there is no much influence of taxation in insurance. Overall Investment Climate Table 6 O 34 30 30 27 29 E 30 30 30 30 30 o-e 4 0 0 -3 -1 (o-e)2 16 0 0 9 1 (o-e)2/o 0.47 0.00 0.00 0.33 0.03 0.84

At the given level of significance the responses for the options under Overall Investment Climate are homogeneously distributed and hence null hypothesis is accepted. The economic and financial conditions in a country that affect whether individuals and businesses are willing to lend money and acquire a stake in the businesses operating there is called investment climate. Investment climate is affected by many factors, including: poverty, crime, infrastructure, workforce, national security, political instability, regime uncertainty, taxes and rule of law, property rights, government regulations, government transparency and government accountability. Over all investment climates do have a significant impact on insurance. Schemes Portfolio of Investment Table 7 O 31 28 30 32 29 E 30 30 30 30 30 o-e 1 -2 0 2 -1 (o-e)2 1 4 0 4 1 (o-e)2/o 0.03 0.14 0.00 0.13 0.03 0.33

At the given level of significance the responses for the options under Schemes Portfolio of Investment are homogeneously distributed and hence null hypothesis is accepted. A ULIP is basically a combination of insurance as well as investment. A part of the premium paid is utilized to provide insurance cover to the policy holder while the remaining portion is invested in various equity and debt schemes. The money collected by the insurance provider is utilized to form a pool of fund that is used to invest in a portfolio of various markets instruments (debt and equity) in varying proportions just

K. Rakesh & V S M Srinivas

the way it is done for mutual funds. Therefore there is an impact in insurance prod ucts because of SCHEMES PORTFOLIO OF INVETMENTS. Minimum Initial Investment Table 8 O 27 29 32 33 29 E 30 30 30 30 30 o-e -3 -1 2 3 -1 (o-e)2 9 1 4 9 1 (o-e)2/o 0.33 0.03 0.13 0.27 0.03 0.80

At the given level of significance the responses for the options under Minimum Initial Investment are homogeneously distributed and hence null hypothesis is accepted. When the market is in down fall when we have minimum initial investments we will have more no of units in our account and when the market is in raising trend then though we invest in huge amounts we get less no of units in our account. Disclosure of NAV on Every Trading Day Table 9 O 22 37 34 28 29 E 30 30 30 30 30 o-e -8 7 4 -2 -1 (o-e)2 64 49 16 4 1 (o-e)2/o 2.91 1.32 0.47 0.14 0.03 4.88

At the given level of significance the responses for the options under Disclosure of NAV on every trading day are not homogeneously distributed and hence null hypothesis is rejected. Just the way it is for mutual funds, ULIP policy holders are also allotted units and each unit has a net asset value (NAV) that is declared on a daily basis. The NAV is the value based on which the net rate of returns on ULIPs are determined. The NAV varies from one ULIP to another based on market conditions and the funds performance. Investor Guidance Table 10 O 32 30 26 28 34 E 30 30 30 30 30 o-e 2 0 -4 -2 4 (o-e)2 4 0 16 4 16 (o-e)2/o 0.13 0.00 0.62 0.14 0.47 1.35

At the given level of significance the responses for the options under Investor Guidance are homogeneously distributed and hence null hypothesis is accepted. Investors guidance is very much important for investing in insurance plans. People are not aware of plans its advantages and disadvantages. Therefore when they are guided properly towards their financial goal with suitable schemes and plans they can be persuaded to invest in insurance.

Investors Attitude towards Insurance Evidence from Visakhapatnam

SUGGESTIONS
Consumer should be aware of the companys profile and returns associated with insurance. The financial advisor should be right enough to serve the consumers. The consumer should also be aware of the advisor who is looking after their investments. Most of the people belong to middle income class therefore new products have to be launched accordingly that suits their income Company should adopt strategies to explore that private insurance companies are also safer and secure than public insurance company. Private company has to highlight about IRDA, which will support Private life insurance. Advertisements should be more creative and should attract the investors in making insurance as a prior mode of investment. Promotional strategies such as pamphlets, hoardings at important locations where the movement of people is high should be used to create awareness towards insurance products. Whenever company launches a new product it should interact with the existing policy holder to create awareness and it also gives sense of belongingness towards customers.

REFERENCES
1. 2. http://innovareacademics.in/journals/index.php/ijbm/article/view/14 http://www.slideshare.net/karandeepghai/a-perceptual-study-on-investors-behaviour-towards-insurance-sector5238333 3. 4. Sudhindra Bhat: Financial Management Principles and Practice, Excel Books, New Delhi, 2007 LM Bhole: Financial Institutions & Markets, Tata McGraw Hill, N ew Delhi, Fourth Edition, 2004