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INTRDUCTION

 LIFE INSURANCE IN INDIA Insurance has become an integral aspect in everyone‟s life today. It is a
written contract of insurance that offers protection against future loss. The life insurance generally
helps to insure the life of people. A definite compensation is provided by the insurer to the insured
person.
 The non-life insurance provides financial support to people or companies and helps them to
overcome the losses. The basic human trait is to be averse to the idea of taking risks. There is
always an urge to minimize the risks and provide protection against possible failure. The risk
includes fire, the perils of sea, death, accidents and burglary. Any risk may be insured against at a
premium commensurate with the risk involved.

Thus collective bearing of risk is insurance that provides reasonable degree of security and assurance that
insured will be protected in the event of a calamity or failure of any sort. There are number of forces
driving the service sector today. Five environmental variables universally affect all industries are; buyer,
competitors, government, technology and globalization. In addition, there are four factors of particular
importance to service providers- change in how quality is perceived, cost control, customer services and
the new definitions of the customer. Services are relatively intangible, produced and consumed
simultaneously and often less standardized than goods. These heterogeneous characteristics of services
present special challenges and strategic marketing opportunities to the service marketers. The real
competition between the service marketers is set on after globalization, financial reforms and information
technology progression.
The service marketing organisation has to adopt professional management approach and its marketers
have to imbibe the qualities of professionalism in order to meet the expectation of the policyholders.
Hence, in this study an attempt has been made to discuss the status of insurance in economy, penetration
of insurance industry, key issues in insurance, behaviour of policyholders, regulations and legislations
insurance industry and other such emerging areas of marketing of insurance, which is one of the leading
services in our country.1 The life insurance market was underdeveloped in the developing counties and
started to open up new vistas and increase its cover with the entry of private players under the Chapter 1:
Life Insurance In India 2 supervision of regulatory bodies. Initially the life insurance was seen more as a tax
saving instrument than a life insurance product. The pace of coverage extension was found to be awfully
inadequate. In recent times, there has been growing awareness about life insurance products and the
various associated benefits among the policyholders. The private players customized the insurance
products and introduced innovations in annuity, health, education and pension plans. Offerings like Unit
Linked Insurance Plans (ULIPs) have done their bit to draw attention of individuals towards the insurance
segment.
Tax benefits have also contributed to their allure and helped in popularizing insurance products.
Conversely, there are products like medical insurance or mediclaim as it is commonly referred to, which
can add value to an individual‟s insurance portfolio, but are relatively lesser known. People started
thinking that life insurance also caters to the increased savings from the households thus increasing the
much needed domestic savings. Awareness in the benefit of life insurance as such and also as a secondary
investment instrument had to the increased interest in the life insurance products. The advertisement,
promotional activities, ecommerce, m-commerce and viable strategic planning by the new entrants in the
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insurance market have also helped in spreading the consumer awareness and policy benefits. The
distribution of life insurance in innovative methods apart from the standard agent based model has also
helped in creating awareness and interest among people. On-line insurance, kiosks for mallsurance,
bankasurance and other emarketing activities are insisting marketers to cater varying needs of intellectual,
rational and busy policyholders as a faster mode of communication approached by a mass all over the
world. An insurance policy is primarily meant to protect the income of the family‟s breadwinners. The idea
is if the insured die, dependents may hereto continue to live comfortably. The circle of life begins at birth,
followed by education, marriage and eventually, after a lifetime of work, people look forward to a life of
retirement. Finances too tend to change as people go through the various phases of our life. In the first
twenty years of our life, they are financially and emotionally dependent on parents and there are no
financial commitments to be met. In the next forthcoming years, they gain financial independence and
provide support to their families.

CHAPTER 1 –
Life Insurance In India 3 also the stage when the income may be insufficient to meet the growing expenses
of a young household. In the following twenty years, as the children grow and become financially
independent, people see their savings grow, a nest egg put away for life after retirement. The final twenty
years of life, post retirement is the time to reap the rewards of hard work. Life insurance is also being
promoted as a vehicle for investment. The unique feature of insurance is; it covers the risk of life and
provides better return for investment.
Most people would like to invest in insurance for risk hedging and tax saving potential. The government
provides tax saving benefits for insurance. This is encouraging people to save their money. The other
options of investment are mutual funds, share market, gold, government bonds/securities, bank and post
office deposits.
The fluctuations and financial crisis in stock market is also changing attitude of consumers for exploring
new pattern of investments. Some of the government investments plans provides return and benefits after
certain periods at limited time only. Life insurance provides returns and risk coverage for whole life. The
return may come to the policyholders on monthly, quarterly, half yearly and annual basis. This feature is
possible in money back policy and in some other life insurance products.

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1.1 INSURANCE CONCEPT, NEED AND MEANING

 The insurance industry has both economic and social purpose and relevance. It provides social
security and promotes individual welfare. Generally the insurance companies are big investors in
long gestation infrastructure development projects. Insurance reduces risk and helps to raise
productivity in the economy.
 2 Insurance is a device for the transfer of risks of individual entities to an insurer who agrees for a
consideration (called premium) to assume to a specified extent losses suffered by the insured.
Insurance covers insurable risks and the probability of insurable risk can be determined or
forecasted for example risk related to life, property, riots, thefts are insurable.
 3 The insurance companies are also financial intermediaries as they collect and invest large amount
of premiums in government projects. They offer protection to the investors, provide means for
accumulating savings and channelize funds to the government and other sectors. They are a
contractual saving agency which receives In India.

Chapter 1: Life Insurance 4 mostly without fail, steady inflow of funds in the form of premiums
or regular contribution to pension plans. They are also in a position to predict, relatively accurately,
when and what amounts of insurance or pension benefits have to be paid. Further, liabilities in
most of the cases are long term liabilities, for many life policies are held for 30 or 40 or even more
years. As a result, the liquidity is not a problem for them and their major activity is in the field of
long-term investments. Since the offered life-cover to the investors, the guaranteed rate of return
specified in insurance policies is relatively low. Therefore, they do not need to seek high rates of
return on their investments. As a combined result of all these factors, the investments of insurance
companies have been largely in government bonds, mortgages, state and local government clams
and corporate bonds. The insurance companies are active in the following fields among other life,
health and general and they have begun to operate the pension schemes and mutual funds also.
Insurance business consists of spreading risks over time and sharing them between persons and
organisations. The major part of insurance business is life insurance, the operations of which
depend on the laws of mortality. Pension business is a specialised form of assurance provides social
security to old aged population.
1.1 Concept and Definitions Any property human or animal life or any event that may lead to the loss of
a legal right, including value or the creation of legal liabilities is referred to as the subject matter of
insurance. Insurance is an event that may or may not occur. LIC crystallizes essence of insurance by a
saying “Little Price- For a Priceless Security.” General Definitions: These are conceived by writers
who perceive insurance as an instrument to manage and mitigate various risks associates with
human activities. In other words at a relatively specific and negligible cost insurance substitutes a
large and unspecified financial loss. Contractual Definitions: Contractual definitions perceived
insurance as a legally enforceable contract of indemnity to indemnify losses that occur due to the
given contingencies insured against. Life insurance is a contract under which one person, in
consideration of a premium paid either in lump sum or by monthly, quarterly, half-yearly or yearly
payments, Chapter 1: Life Insurance In India 5 undertakes to pay to the person for whose benefit the
insurance is made, a certain sum of money either on the death of the person whose life is insured or
on the expiry of a specified period of time.

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1.2 Fundamental Definitions: Fundamental definitions looks at insurance purely as a device to minimize
and compensate losses arising out of various hazards to the economy and business activity in a
specific and global economic system. Definition of an Insurance Contract as per IFRS-4: The
International Accounting Standards Boards (IASB) while circulating the International Financial
Reporting Standards for insurance (IFRS-4) in March 2004, prescribing insurance accounting and
disclosure, define a contract of insurance as “a contract under which one party (that is insurer)
accept significant insurance risk from another party (the policyholder) by agreeing to compensate
the policyholder if a specified, uncertain future event (insured event) adversely affect the
policyholder.

1.3 Need for Life Insurance As life insurance became more established and useful tool for a number of
situations, including: I) Temporary needs/ threats-The original purpose of life insurance remains an
important element, namely providing for replacement of income on death etc. Typically in the case
of the breadwinner dying an early death. II) Regular Savings-Providing for ones family and oneself, as
a medium to longterm exercise (through a series of regular payment of premiums). This has become
more relevant in recent times as people seek financial independence from their family. III)
Investment- Insurance also helps in building up of savings while safeguarding it from the ravages of
inflation. Unlike regular saving products, investment products are traditionally lump sum investment,
where the individual makes a one-time payment. IV) Retirement-Provision for one‟s own later years
becomes increasingly necessary, especially in a changing cultural and social environment. Therefore,
a suitable insurance policy can provide periodical payments in one‟s old age.

Chapter 1: Life Insurance In India 6

V) Minimizing Risk- Life cannot be compensated by anything but financial help in hard time can
support anyone. An earning member in family wants to secure his family who are financially
dependent and need life insurance. Nevertheless, the question is „how much life insurance is
required‟ at a time. There are many factors that are relevant in determining the amount of life cover
one should buy at a time. It is essential that a particular level of income should be maintained for the
family even when its breadwinner is not around.
VI) Social security- Insurance also provide some social security that insured expects in future such as
a particular sum of money for the education and wedding of children. One may like to buy an
insurance policy for a specific sum to meet such a lump sum commitment.
VII) Transfer of risk- Payment of insurance premium results in an outflow of disposable income.
Insurance may solve future cash inflow problems that will occur during ones lifespan. Therefore,
provide a cover and transfer the risk.
VIII) Diffusion of risk- The amount and mode of payment spend on insurance is as per the option
picked by one according to his own choice. Therefore one can park funds according to their choice of
risk and return.
IX) Profitable opportunity- Our present age is a critical factor in deciding the quantum of insurance
that one can afford. The rates of premium go up with the advancing age of the life assured. Hence,
one can buy more insurance for the same premium at a younger age than at an older age. The final
decision rests upon a careful consideration and balance of all the above factors. The need for
minimum protection may be quite high, but the current need for disposable income may not
immediately permit buying adequate insurance.

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XI) Tax Savings- If people have an option of risk coverage with guaranteed return and tax saving they
will surely prefer it. Generally policyholders take into account the tax benefit under Section 80C

1.4 The Five Simple Rules for Life Insurance In the event of any misfortune, well-planned life
insurance can protect loved ones from financial difficulties. However, in most cases people find it
difficult to estimate Chapter 1: Life Insurance In India 7 the correct value of insurance they
need. Partly this is because life insurance needs change through different stages of life. There are
several simple methods available to broadly estimate one‟s life insurance needs. Five simple rules of
are: 1. Income rule: The most basic rule of thumb is provided by the income rule which holds that
individual insurance cover should be at least around eight to ten times one's gross annual income.
For example, a person earning a gross annual income of 1 lakh should have about ` 8 to 10 lakh in life
insurance cover. 2. Income plus expenses rule: This rule suggests that an individual needs insurance
equal to five times of his gross annual income, plus the total of basic expenses like housing or car
loans, personal debt, child‟s education, etc. .

Premiums as percentage of income: By this rule, payment of insurance premium depends on

disposable income. In other words, one should decide the quantum of insurance after meeting the
regular outgo from salary. From the first two rules, one can make a broad estimate of the minimum
insurance one should have.
The premium as percentage of income rule can help one finetune his cash flow by committing an
appropriate percentage of his income for paying life insurance premium. 4. Capital fund rule: This
rule suggests that if one need ` 1 lakh per annum for his family needs and assuming one do not have
any other income-generating assets, one may like to create a capital fund of ` 12.5 lakh (` 1.25
million) which can yield ` 1 lakh (` 100,000) annual income at the rate of 8 percent per annum One
may therefore buy a life insurance policy of ` 12.5 lakh.
5. Family needs approach: This rule holds that one purchases enough life insurance to enable his
family to meet various expenses in the event of key earning person‟s death. Under the family needs
approach, one has to divide his family's needs into two main categories: immediate needs at death
(cash needs) and ongoing needs (net income needs).The are various stages in life such as initial
stage, married, married with children and empty nest. In every Chapter 1: Life Insurance In India 8
stage of life cycle the set of needs may differ individual to individual and even within a person it
varies from time to time. There is a broad relationship between needs and policyholder satisfaction
over a period of time. Thus, not much life insurance is needed in the initial stage. The same is true in
the empty nest stage. The maximum need for life insurance arises during the mid-phase, when one is
married and has children. In other words, one may go for life insurance so long as the satisfaction
level increases and once the satisfaction surpasses the need-level, the importance of life insurance
declines. If one may consider inflation, there could even be a negative rate of real return at the time
of maturity of his insurance policies. Therefore, while it is important to secure his family‟s well being
through adequate insurance of the lives of the earning members, over-investing in insurance is a
mistake.

1.5 Advantages and Features of Life Insurance (I) Insurance products are better than a
traditional saving instrument: As well as providing a secure vehicle to build up savings. In the event
of premature death, of say the main earner in the family, the policy will pay out the guaranteed sum
assured, which is likely to be significantly more than the total premiums paid. With more traditional
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savings vehicles, such as fixed deposits, the only return would be the amount invested plus any
interest accrued. (III) Insurance provides easy settlement and protection against creditors: Once a
person is appointed for receiving the benefits (nomination) or a transfer of rights is made
(assignment), a claim under the life insurance contract can be settled easily. In addition, creditors
have no rights to any monies paid out by the insurer, where the policy is written under trust. Under
the Married Women‟s Property Act (M.W.P Act), the money available from the policy forms a kind of
trust which cannot be attached by judgment creditors. (IV) Insurance helps to achieve the purpose of
the Life Assured: If someone receives a large sum of money, it is possible that they may spend the
money unwisely or in a speculative way. To overcome this, the person taking the policy can instruct
the insurer that the claim amount is given in installments. Chapter 1: Life Insurance In India 9 (V)
Insurance can be enchased and facilitates quick borrowing: Some contracts may allow the policy to
be surrendered for a cash amount, if a policyholder is not in a position to pay the premium. A loan,
from certain policies, can be taken for a temporary period to tide over the difficult. Some lending
institutions will accept a life insurance policy as collateral for a personal or commercial loan. (VI)
Disability Benefits: Death is only the hazard that is insured. Many policies also include disability
benefits. These provide for waiver of future premiums and payments of monthly installments spread
over certain time period.
(VII) Tax Relief and savings: The policyholder obtains Income Tax rebated by paying the
insurance premium. The specified forms of saving which enjoy a tax rebate, under section 88 of the
Income Tax Act, include Life Insurance Premiums and contributions to a recognized Provident s
section 10 (10D) and other sub-sections of Section 80 of the Income Tax Act. 1.2 GROWTH AND
TRENDS IN GLOBAL INSURANCE INDUSTRY Global economy is reshaping and restructuring day by day
and dynamic competitive forces are influencing all the segment of societies and business activities
including insurance. Increasing demand of life insurance is an opportunity for global insurers and
new entrants. The emerging insurance market is opening a new way for transnational and
multinational corporations too. The increasing life expectancy, better health care facilities and
increasing population are some of the causes influencing demand of life insurance in many countries.
Strong economic growth and catch-up dynamics has positive impact on growth trend. The
profitability of life business continued to improve in many countries as costs were cut, guaranteed
interest rates were reduced, changes in repo rates and reverse repo rates and profit participation
was adjusted to reflect the low interest environment. All these improvements have reflected in the
increased level of life insurer‟s risk capital. The global growth performance in insurance business
varied between industrialized countries and emerging markets. While industrialized countries shown
a small growth where as emerging markets exhibited a robust growth in the insurance sector.
Chapter 1: Life Insurance In India 10 Insurance is contributing a fair percentage in GDP in various
countries and life insurance is a major part in service sector in most of the countries. The latest
insurance sector statistics is an evidence of expansion and unexplored potential in the sector. The
potential and performance of the insurance sector is universally assessed with reference to two
parameters; i) Insurance Penetration and ii) Insurance Density. Insurance penetration is defined as
the ratio of premium underwritten in a given year to the gross domestic product (GDP). Insurance
density is defined as the ratio of premium underwritten in a given year to the total population
(measured in USD for convenience of comparison). The worldwide insurance premium was
amounted to US$ 3723 billion in 2006. The growth in life insurance premium was about 7.7 percent
which was the highest since 2000. It may be interesting to note that in most of the countries the

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growth in life insurance premium was faster than growth in the economic activity. In emerging
markets, the growth in life insurance tripled to 21.1 percent from 7.5 percent in 2006. The insurance
density was 330.6 in the year 2006 and 358.1 in the year 2007. Further the insurance density was
increased and it was recorded 369.7 USD in the year 2008. The macroeconomic environment in 2007
across the globe was characterized by marginally slower economic growth and rising inflation driven
by a steep increase in food, oil and energy prices. Key interest rates diverged, but were generally
low. Though strong at the end of 2007, stock markets fell in early 2008 leads to financial crisis all
over the world influenced the investments and savings. In this backdrop worldwide insurance
premium amounted to US Dollar 4061 billion in 2007 as against US Dollar 3723 billion in 2006. Of the
total premium, life insurance premium amounted to US Dollar 2393 billion and the remaining US
Dollar 1668 billion by general insurance business. At this level, the global total premium increased by
3.3 percent in real terms in 2007 compared to 5.0 percent in 2006. The growth in life insurance
premium was about 5.4 percent.
While the premium grew by 4.7 percent in industrialized countries, it grew by 13.1 percent in
emerging market economies. The continued expansion of life insurance business in industrialized
countries was through pension and annuities products driven by an aging population, nuclear
families, increasing number of singles and reductions in state social security benefits.
In the Chapter 1: Life Insurance In India 11 case of emerging economies, strong economic growth,
relatively young population and an expanding middle class contributed to higher insurance sales.
In emerging markets, the growth in life insurance was 13.1 percent during 2007 as against 21.1
percent in 2006.4 The profitability of life insurance business continued to improve in many countries
as costs were cut, guaranteed interest rates were reduced and profit participations was adjusted to
reflect the low interest rate environment.
12

Life business accounted for USD 2491 billion and nonlife insurance accounted for USD 1779 billion.
The life premium in the industrialised countries declined by 5.3 percent and in the emerging markets
increased by 15 percent in 2008. The financial crisis and the economic downturn severely impacted
sales of single premium products and unit-linked products. The profitability of life insurers
deteriorated in 2008 due to low investment yields, high cost of guarantees and low revenues from
asset management fees. The outlook for insurance industry in 2009 was uncertain due to many
challenges. Reduced demand, low interest rates and the need for additional capital by many
companies were some of the major challenges for the insurance industry in the year 2009. Average
insurance density (per capita premium) in dollar terms for industrialized countries stood at USD
3655, of which USD 2175 was for life insurance. As per the World Insurance Report published by
reinsurance major Swiss Re, the global insurance premium for the year 2009 was USD 4066 billion,
which is 1.1 percent (inflation adjusted) lower than USD 4220 billion reported during the previous
calendar year 2008. The share of life insurance business was 57 percent in total premium collection.
While life insurance business collected USD 2331 billion as premium, the same for non-life business
was USD 1735 billion. During 2009, the premium in life insurance business fell by 2 percent on
account of double digit decline in premium collection in USA and UK.
However, compared to 2008, when life insurance premium fell by 5.8 percent, this is an
improvement on account of the improved sentiment in the calendar year 2009. The global insurance
premium for the calendar year 2010 was USD 4339 billion, which is 2.7 per cent (inflation-adjusted)
higher than USD 4109 billion reported during the previous calendar year 2009. The share of life
insurance business was 58 per cent in total premium collection. The Chapter 1: Life Insurance In
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India 12 prospects for life insurance in the year 2011 are promising as growth resumes in the
sector.5 The insurance companies are keeping their eyes on two global giants India and China. The
Insurance density of India was USD 47.4, in 2008 which continued to be dominated by life insurance
business (USD 41.2). Insurance penetration (insurance premium as percent of GDP) measures the
level of insurance activity relative to the size of the economy. As GDP per capita rises, it is expected
that individuals will purchase more insurance. The insurance penetration was 5.10 percent and Non-
life: 0.70 per cent). The insurance density stood at USD 64.4 in 2010 (Life: USD 55.7 and Non-life:
USD 8.7). The latest Swiss Re report reveals that the insurance penetration in India was 4.6 percent
in 2008 consisting of 4.0 percent in life business and 0.6 percent from non-life business, unchanged
from 2007. Two global giants India and China reported strong performance in both life and non-life
business. China reported 19 percent of growth in its life-insurance premium and 20 percent in non-
life insurance premium. Life insurance business in India grew by 14.2 percent in US Dollar.
Strong economic growth, consequent increase in household disposable income, penetration of
insurance companies to uncovered markets and introduction of compulsory motor third-party
liability are the major contributing factors for the strong performance of Chinese insurance industry.
The global insurance statistics indicates United Kingdome, Switzerland, United States, France,
Australia, Hong Kong, Japan, Singapore and Taiwan have highest insurance density.
Introduction of new products and new channels of distribution and penetration of private insurance
companies in uncovered markets were the major contributing factors. However, profitability of
insurance companies in the non-life business was affected due to detariffication and consequent
reduction in premium rates
. The figures provided below are showing global insurance trends: Chapter 1: Life Insurance In India
13 0 5 1 0 1 5 2 0 2 5 3 0 Premiums/GDP - Total / Primes/PIB - Total (As a percentage of GDP / En
pourcentage du PIB) Global Trends in Life Insurance (Premium and GDP) 0 5,000 1 0,000 1 5,000 2
0,000 2 5,000 3 0,000 35,000 Premiums per capita - Total / Primes par tête - Total (US dollar per
inhabitant / Dollar des EU par habitant) Source: Insurance Statistics Yearbook 1998-2007: 2010
Edition Global Trends in Life Insurance (Premium Per Capita)

1.6 GROWTH AND TRENDS IN THE ASIAN LIFE INSURANCE MARKET The Asian market is also showing
enormous untapped potential for life insurance and many multinational insurers are focusing their
marketing strategies for this region. The Asian life insurance market accounted for approximately 30
percent of global life premiums in 2004, with total premium volume of approximately US$ 556
billion. Although growth in recent years has been relatively modest, due to continuing uncertainty in
the economy, which dominates the region in terms of premium Chapter 1: Life Insurance In India 14
volumes, the region experienced 7.4 percent growth in premiums during 2004. However, this
disguises important regional trends, with strong growth in China, Hong Kong and Taiwan being offset
by declining volumes in South Korea and more modest growth in demand in Japan. High growth
rates are expected to persist in most countries, supported by rising incomes, an increasing level of
risk awareness and the general economic development of the region. In reality, Asia is home to life
insurance markets of vastly differing sizes and characteristics. Japan, is a mature market with the
second highest level of insurance penetration globally. In contrast, the South-East Asian countries of
Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam combined accounted for little
more than 3 percent of the region‟s premiums in 2004 and were generally characterized by low
levels of life insurance penetration. According to a report prepared by Ernst and Young, China
reported approximately 44 percent increase in premiums from bancassurance sales in the year 2010
as compared to the same period in the prior year.
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1.7 This contrasts sharply with premiums from agency sales, which increased by only 17 percent over
the same duration. Insurance premiums from Internet sales in China similarly grew, surpassing the
US$1 billion mark (7.8 billion) in 2009. Although it is difficult to predict whether this channel will see
the same growth in China as it has in other markets, it is clearly now a permanent facet of the
market. In Malaysia, bancassurance is growing strongly and is estimated to have a market share of
around 45 percent. Thailand also enjoys robust bancassurance sales of around 30 percent. In India,
several insurers have all announced linkages with banks to sell both life and non-life insurance.
Ministry of Finance in India urging banks to enter in the insurance market and the same time, the
traditional agency channel must forced to follow review of unit-linked commission structures by the
industry regulator, IRDA year. Foreign insurer have captured only 4.8 percent of Chinese life and
health insurance market. In India, the foreign ownership cap of 26 percent is a significant
impediment, limiting foreign investors‟ leverage over local management. Other countries in the
region do not erect such daunting ownership obstacles and permit a more level playing field.
Malaysia, for instance, now allows 70 percent foreign ownership, although entering the market still
remains difficult. Meanwhile, the maximum allowable ownership in Thailand has increased from 25
percent to 49 percent. Ernst and Young anticipate further regional Chapter 1: Life Insurance In India
15 evolution, but not revolution, in Asia-Pacific markets in 2011. Each insurer‟s strategic
prioritization and response to the opportunities presented may reap significant rewards. Early
movers may especially benefit by their immediate actions, while the insurers who wait to discern the
short-term mistakes of others may similarly attain valuable traction. Indefinitely postponing a
response to the current market opportunities seems ill-advised, given the chief attraction of the
Asia-Pacific market the world‟s fastest remarkable growth rate. This alone explains why many
multinational insurers are either preparing plans for further investment in the region, or are in the
thick of implementing them. By 2015, approximately 39 percent of the world‟s economy is predicted
to be in Asia-Pacific. Ernst and Young has identified three key issues that influence insurers looking
to share in this growth in 2011: i) Adjusting and expanding distribution strategies amid shifting
demographics and consumer buying patterns, ii) Developing strategies to shape and comply with the
heightened pace of local and global regulatory and accounting developments and iii) Developing
dependable capital sources required to support accelerating business growth. Within this outlook,
countries have been classified as Mature, Developing or Emerging markets. For the purpose of this
outlook, we have broadly classified the various countries as follows: TABLE 1: Country and Category
Assigned To Insurance Market Category Country Mature Australia, Hong Kong, Japan, Korea, New
Zealand, Singapore, Taiwan Developing China, India, Malaysia, Thailand Emerging Indonesia,
Philippines, Vietnam Source: 2011 E and Y Asia-Pacific Insurance Outlook The Contemporary Issues in
Asian markets: Asian industry professionals expect significant premium growth throughout the
region. This premium growth forecast is based on strong economic fundamentals, growing trade
flows, increasing specialization and sophistication of the Asian corporate landscape, including its
insurance markets. The need for local insurance markets to provide risk management techniques for
rapidly maturing economies forms the basis of strong premium growth. Chapter 1: Life Insurance In
India 16 This growth creates a wealth of opportunities for both the local and international insurance
companies. However, to be successful in the Asian market, there are a number of factors to take into
consideration. Overall growth of the entire region: The region‟s economic growth is considered both
as a challenge and great opportunity for Asia. In fact, the Chinese economy‟s purchasing power is
now the second largest in the world and its economic output is expected to be the largest within a
few decades but will not sustain in longer run. Meanwhile, economists expect India‟s output to grow
by around 6 percent a year over the next 10 to 15 years and the political and business environments
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are expected to stabilize further.6 However, while the incredible growth rate of both the countries
must not be ignored, it should not obscure the importance of other Asian nations, for example,
those in South East Asia. The ASEAN countries represent a fast-growing region and one which is keen
to strengthen its ties with the international markets and with the US and Europe in particular. It is
essential to realize that the entire Asian region is blossoming. A particular challenge for the
insurance industry is to ensure that the world and the global insurance market, knows there is much
more to the Asian growth story than simply China and India. The uniformity in regulatory system: A
common regulatory structure is highly demanded to reduce costs and free up resources for
innovation. Obviously, each country is different and will have certain factors unique to it. Those
regulatory systems which do not follow similar principles, however, tend to be less efficient and
more costly. Such extra costs will not be met by the shareholders of insurers indefinitely and
ultimately will be passed on to policyholders. On one hand, the challenge for Asian regulators is to
ensure that their standards are harmonized, efficient and fair. Doing so will help all insurers to
provide their specialist services throughout the region, creating fairer competition and the better
deals for policyholders. On the other hand, the challenge for international players is to have a clear
understanding on regulatory issues and the priorities of regulators in order to influence. Moreover
upcoming joint ventures and foreign investments are also forcing to reform traditional regulatory
system. Chapter 1: Life Insurance In India 17 The global expertise: Meaningful experience and
expertise brought to the region is one of the critical success factors in helping this burgeoning
market to tap its full potential. The region‟s insurance markets will, for now, continue to require the
injection of significant expertise from global industry to cope with the rapid growth. Nevertheless,
local insurers will ultimately want to build on their own technology platforms rather than paying
indefinitely for foreign expertise. With such transfer of know- how, developing Asian insurance
markets can benefit from the full resources and experience the global industry has to offer. This
model for success has nothing to do with transience and everything to do with teamwork. Indeed, it
rests on a foundation of cross-continental communication and teamwork that is right in line with the
collaborative culture of Asia. Quality at third world price: In the globalization policy, insurance
companies face an instable business scenario. Radical changes are taking place to the
internationalization of activities, the appearance of new risks, new types of covers to match with
new risk situations and unconventional and innovative ideas on policyholder service. The existing
insures are facing difficulties from non-traditional competitors that are entering the competitive
market with new approach, through new channels and new insurance products to cater need of
various segments of policyholders. New type of risk coverage such as natural calamities, terrorism
and such unforeseen situations are covered by insurers. Therefore, quality of service is the main
influencing factor in the insurance market where product and service attributes decide the success
of insurance companies. The global insurance industry is showing immense potential for the
insurance companies showing interest in designing diversified schemes, custom offerings and follow
policyholder relation management. The experience after seventies in insurance sector showed that
the ultimate objective remained largely unfulfilled due to the relatively low spread of insurance in
Indian and Asian market, the efficient and quality functioning of the public sector insurance
companies and the untapped potential for mobilizing long term financial resources to finance the
growth of infrastructure, the government set up an insurance returns. Chapter 1: Life Insurance In
India 18 1.4 LIFE INSURANCE AND INSURANCE SECTOR IN INDIA
1.8 Role of Insurance in Indian Economy The role of insurance goes beyond its primary purpose of
spreading the risk and thereby minimizing the loss. The huge fund collected by way of premium from
policy holders and the amount retained by them as solvency funds to meet unforeseen
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contingencies. Insurance plays significant role in shaping economy of a nation. The contribution of
the insurance sector to the growth of economy is gauged by the rate of penetration. The reported
insurance penetration of around 1.5 percent of GDP of India until the 1990s was considered lowest
in the world. Year 2009-10 the average is considered 2.2 percent which is less as compared to other
countries. In an economy insurance provides optimum utilization of capital, it encourages thrifts and
saving among individuals and also offers risk covers at a cost effective price to the society. Insurance
companies are investing large amount of funds in infrastructure and generating ample of
employment for India as a leading public insurance company.
1.9 Foreign Direct Investment (FDI) Policy in Indian Life Insurance sector The FDI norms presented in
2006 restricts the foreign participation in an Indian Insurance Company to 26 percent of the latter's
share capital. Although the LIC still remains the largest player in the market, the private companies
are emerging with a bunch of lucrative policies and investment opportunities for people belonging to
all sections of the society. Such policies are promoted through attractive marketing strategies and
luring the society at large. 7
1.10 Development of Insurance in India The origin of concept of insurance is adumbrated in antiquity.
Various authors attribute the development of the concept to different communities and tribes. Some
aver that the Indus valley was the cradle of insurance, while other believes that Eionis, an ancient
ethnic community of Greece, nurtured this concept of risk sharing. Insurance in India can be traced
back to the Vedas. For instance, “Yogakshema” the name of LIC of India‟s corporate headquarter
which is derived from the Regveda. The term “Yogakshema” means community insurance that was
prevalent around 1000 BC and practiced by Aryans. During seventies and eighties insurance was
conceived as Chapter 1: Life Insurance In India 19 means to provide money for English widows. First
insurance company in India was started in 1870 in Bombay as a part of financial sector reform. The
first stock companies entered into insurance segment were charted and incorporated business in
England in 1720. In the year 1753 first life insurance Corporation offered insurance benefits in
America only for American Ministers and their dependents. Independence of its origin and
antecedents, insurance today occupies an important place in the socio-economic life of all civic
societies. Insurance has got its origin from the concept of Indemnity against the loss, which has
occurred due to some unavoidable circumstances. Though the concept of insurance is old as history
of mankind to some 6000 years, it got its presences registered in India somewhere in 1818 with
opening up of Oriental Life Insurance Company in Calcutta by Europeans. The first Indian Insurance
Company, Bombay Mutual Life Assurance Society was established in1870, later on the development
of Indian Life Insurance companies such as United India in Madras, National Indian and National
Insurance in Calcutta and the Co-operative assurance at Lahore were amongst those companies
which were formed to treat the Indian populace at par. With increase in the pressure from Indian
intellect, to give the Indian Insurance Companies act, 1912 and Provident Fund act of 1938 which
was not only governed the Life Insurance Industry but also had its speared to the Non-life Insurance
Industry. With the increase in atrocities from all these companies, the demand to amend the
prevailing act of 1938 assumed velocity. Therefore, in the year 1956 the act was passed as Life
Insurance and Prevailing act, 1956, which called for nationalization of all the Insurance Companies
working in India under one name as Life Insurance Corporation of India (LIC). Till 1999 LIC was the
only life insurance player in the Indian Life Insurance field, when government of India decided to
amend the then prevailing act prohibiting the private life insurance player to enter the Indian
market. It was Insurance Regulator Authority, 1999 (IRA) that gave the freedom the private players
to play in the field. But the basic motive for introducing such an act was not fulfilled as the amended
act was further to add the element of development to the concept and thus came the current
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prevailing act such as Insurance Regulatory and Development Authority (IRDA), 1999. It was further
amended to incorporate the element of competitiveness. Thus, government of Chapter 1: Life
Insurance In India 20 India via IRDA permitted the private insurance player also to enter the Indian
field and made some provision for foreign insurance companies that if they want to enter the Indian
market they can do so but to the extent of 26 percent of share only with any of the Indian partner.
Today various private life insurance companies are working in India, some in wholly owned format
and some as a joint venture with foreign company or with Indian company. Together they hold the
market share of approximately 24 percent in life insurance market. Still LIC holds the kingship with
almost 76 percent of market share. Indian Insurance Sector was nationalized under the Life
Insurance Act 1956. After the nationalization of Life Insurance in 1956, there have been fundamental
changes in the organisational objectives of Life Insurance Corporation of India (LIC). The insurance
business was attempted to be expanded even in rural areas. The purpose was to reach all the
potential users of the services. Despite the various measures adopted by both the Corporations, the
insurance business couldn‟t get much positive response, especially in rural areas. This needs a
change in the marketing practices of LIC. The main task is to transform the potential policyholders
into actual policy holders. This paradigm shift in Indian Insurance is showing positive signs for our
economy especially in private sector. In the long history of Indian Insurance, the first drastic
transition took place in 1956 with the nationalization of the life insurance business in India followed
by the nationalization of the general insurance industry in 1971. There has been a life insurance
business in India since 1818. Till 1956, the insurance business was mixed and decentralized. There
was a large number of companies (245) before centralization) of different ages, sizes and patterns of
organisation, which conducted only life insurance business and there were some companies whose
main business was general insurance, but they did life insurance also. In addition there were a
number of „Provident societies‟. In 1956, the life insurance business of all companies as mentioned
was nationalized and a single monolithic organisation, the Life Insurance Corporation of India, was
set up. Today the life insurance is almost entirely in the hands of LIC. The post and Telegraph
Department conducts some business in this area for its employees, but the volume of that business
in relation to that of LIC, is negligible and declining. A major step taken by the Government in
Chapter 1: Life Insurance In India 21 1991 with a dawn in realization in the public sectors that
without policyholders there would be no business and that policyholders are an equally important
part of a business. A well-developed insurance sector contributes to economic growth by
encouraging risk taking by entrepreneurs. Insurance is also perceived as a tool of wealth
management. A well-managed insurance industry offers risk- specific and riskadequate insurance
covers at a cost effective price to the society. Many developing economies tap the insurance
premium mobilized by the insurance companies as a source of national development and
infrastructure financing. Insurance not only helps in the assessment of the economic value of
insurance cover offer to society but also as an economic model which reduces the aggregate value of
risk in an economy by the process of risk transfer. Insurance also provides the optimal utilization of
capital without any necessity to lock in huge amount of capital to provide cost contingencies arising
out of risk events. Life insurance encourages thrift and saving among individuals thereby contributing
to the economic growth by encouraging capital formation. The three prominent phases of
development of insurance are briefly elaborated: Phase I (1818-1956) : Many (245) private insurance
companies (only), competitive market. Phase II (1956-2000) : Nationalization, public sector or state
monopoly (only one company). Phase III (After 2000) : Opened to the entry of private domestic and
foreign companies, mixed sector of public and private sector units, oligopoly of public sector
companies (12 life insurance and 12 general insurance companies). With the nation‟s expanding
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infrastructure in a state of imminent collapse, India couldn‟t have afforded to be lumbered with sub-
optimally performing monopoly insurance companies and therefore the passage of the Insurance
Regulatory and Development Authority Bill on December 2, 1999 heralds an era of cautious
optimism where stakes are high for all parties concerned. Chapter 1: Life Insurance In India 22 1.5
GROWTH AND TRENDS IN INDIAN INSURANCE INDUSTRY The Indian economy registered an
impressive growth rate of 7.4 percent in 2009-10 following 6.7. This was achieved against the
backdrop of a broad based recovery in the second half of the financial year. The overall stability of
the financial system of India continued to positively impact business confidence. The major source of
worry, however, is the inflationary conditions which changed significantly in 2009-10, particularly, in
the second half of the year. Positive development was, however, observed in demand for private
investment during the last quarter of 2009-10 and has been particularly robust in the first quarter of
2010- 11. The contribution of the industrial sector to the overall growth increased sharply at 28
percent in 2009-10 (9.5 percent in 2008-09); while the growth in the services sector was lower at 8.3
percent in 2009-10 (9.3 percent in 2008-09). Although there has been some concern around the
crisis emanating from the sovereign debt in the Euro area and its likely impact about the durability of
the global recovery, the overall movement in growth has been positive. The prominent feature of
Indian insurance are described briefly:
1.11 The participants and growth Since opening up, the number of participants in the industry has gone
up from six insurers (including Life Insurance Corporation of India, four public sector general insurers
and General Insurance Corporation as the national reinsurer) in the year 2000 to 48 insurers
operating in the life, non-life and reinsurance segments (including specialised insurers, viz., Export
Credit Guarantee Corporation and Agriculture Insurance Company). Three of the non-life insurance
companies, viz., Star Health and Alliance Insurance Company, Apollo Munich Health Insurance
Company and Max Bupa Health Insurance Company function as standalone health insurance
companies. The insurance penetration was 2.32 percent (Life 1.77 percent and Non life 0.55 percent)
in the year 2000 when the sector was opened up for private sector. It had increased to 5.20 percent
in 2009 (Life: 4.60 percent and Nonlife: 0.6 percent). The insurance density stood at USD 54.3 in
2009 (Life USD 47.7 and Non-life USD 6.7) from USD 9.9 in 2000 (Life USD 7.6 and Non-life USD 2.3).
The first year premium, which is a measure of new business secured, underwritten by the life
insurers during 2009-10 was ` 1,09,894 crore as compared to ` 87,331 crore in 2008-09 registering a
Chapter 1: Life Insurance In India 23 growth of 25.84 percent against negative growth rate of 6.81
percent during 2008-09. In terms of linked and non-linked business during the year 2009-10, 54.53
percent of the first year premium was underwritten in the linked segment while 45.47 percent of the
business was in non-linked segment (51.13 and 48.87 percent respectively in 2008-09). The total
premium underwritten by the life insurance sector in 2009-10 was ` 2,65,450 crore as against `
2,21,785 crore in 2008-09 exhibiting a growth of 19.69 percent (10.15 percent in 2008-09). At
present one public and 22 private insurer are commencing business in the area of life insurance in
India.
1.12 The Share and Position in Global Market The life insurance market, which was underdeveloped in
the country started to open up new vistas and increase its cover with the entry of the private players
in 1999 when the government opened up the sector. Prior, to this, penetration of life insurance had
been low, even though LIC had been steadily covering some ground. The private players customized
the products and introduced innovations in annuity or pension products. The market is currently
growing at the good pace. India ranked 9th in life insurance business among the 156 countries
according to the survey conducted by Swiss Re. During 2009, the life insurance premium in India
grew by 10.1 percent (inflation adjusted). However, during the same period, the global life insurance
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premium had contracted by 2 percent. The share of Indian life insurance sector in global market was
2.45 percent during 2009, as against 1.98 percent in 2008. New companies are entering into the
market and they are needed for penetrating the market further. The insurance density of life
insurance sector had gone up from USD 9.1 in 2001 to USD 47.7 in 2009. Similarly, insurance
penetration of life sector had gone up from 2.15 per cent in 2001 to 4.60 per cent in 2009. There is
another dimension to this growth. People also see life insurance as an instrument to invest as
savings in other investment options are unable to attract middle class segment. However, vast
sections of society are still to be brought under life insurance. There are vast rural areas that are yet
to learn about life insurance and even in urban areas, the poor are still out of the purview of life
insurance. A large population is still uninsured in rural as well as urban segment. New companies are
entering into the market and they are needed for penetrating the market further. Chapter 1: Life
Insurance In India 24
1.13 Contemporary Issues in Indian Insurance Industry The Saving Culture and untapped potential for life
insurance: India‟s propensity to save, though lower than China, is substantially high at 17 percent.
While the survey may be influenced by vagaries of sampling, responses suggest a striking
sophistication in the savings culture. More than 90 percent respondents have a bank account and 66
percent have invested in life insurance. The Indian insurance market is the seventh-largest in the
world and is one of the fastest growing. More importantly, we observe that the investment in life
insurance increases with income levels and purchasing powers of consumers. A similar trend is
observed in stock market participation (less than 10 percent on average), which rises sharply in high
income groups. 8 The investment in life insurance also caters to the increased savings from the
households thus increasing the much needed domestic savings. Growing demand of life insurance:
The scope of life insurance is recognised by the insurance corporation‟s world over. Insurance titans
are opening new vistas to the Indian life insurance for the two important reasons; Firstly, the
population of young working people (25-35 years of age) is expected to increase in India. Secondly,
the reported insurance penetration of around 1.5 percent of GDP of India until the 1990s was
considered to be lowest in the world. The average global insurance penetration during the period
1995-2001was around 7.50 percent as against the average penetration in India was around 2.2
percent. This also indicates that India‟s insurance potential lies dormant and remain to be
harnessed. There are various factors influencing insurance industry in India such as globalisation,
easy entry of private player, product mix offered by private players, instable investment
environment and unpredictable consumer. In spite of the changes, variations and dynamism of
insurance sector various new policies were issued during 2002- 2007 and with a remarkable growth
in the number of new policies issued. The LIC faced downfall in the percentage of number of policies
issued, it was measured approximately -1.61 in the year 2007-2008 and further -4.52 in the year
2008-2009. In the case of life insurance, the individual new business premium under this segment
stood at ` 130 crore under 36.51 lakh policies in 2010-11. The same for the group business amounted
to ` 155 crore premium under 1.52 crore lives. LIC contributed most of the Chapter 1: Life Insurance
In India 25 business procured in this portfolio by garnering ` 123 crore of individual premium from
29.51 lakh policies and ` 138 crore of group premium. The insurance penetration is defined as a ratio
(in percent) of premium to Gross Domestic Product and insurance density is defined as a ratio (in
percent) of premium to population. Marketing Environment: The gradual liberalisation of insurance
business, the separation of non-life and life business, introduction of capital adequacy, solvency
based regulation of the insurance sector and such other factors are influencing unstable market
environment. An Insurance Regulatory Authority Bill was passed in 1999. The new regulator,
Insurance Regulatory and Development Authority (IRDA) took office at the same time to oversee and
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regulate the market. The Indian life insurance market is drawing intense attention, fuelled in part by
the fast expansion of its insurance markets and the fact that this growth potential is now available to
all (subject to the regulatory restriction on foreign equity holding). India is the second most populous
country of the world with more than one billion population. The economic growth record is strong
(more than 6 percent during the past one decade). In spite of these positive developments, the life
insurance market in India is extremely under-penetrated. Tables 2 and 3 provide a comparison of
Indian insurance penetration and density levels with the Asian and global markets for 2003 to 2010.
The comparison of insurance penetration and density is shown below: TABLE 2: Life Insurance
Penetration (Percentage): International Comparison Country/region 2003 2004 2005 2006 2007
2008 2009 2010 India 2.26 2.53 2.53 4.10 4.00 4.00 4.60 4.40 Asia 5.74 5.58 5.16 5.00 4.60 - - - World
4.59 4.55 4.34 4.50 4.40 4.10 4.00 4.00 Source: Swiss Re, Sigma various volumes TABLE 3: Life
Insurance Density: International Comparison Country/region 2003 2004 2005 2006 2007 2008 2009
2010 India 12.9 15.7 18.3 33.2 40.4 41.2 47.7 55.7 Asia 140.1 147.2 149.6 154.6 156.7 - - - World
267.1 291.5 299.5 330.6 358.1 369.7 341.2 364.3 Source: Swiss Re, Sigma various volumes Chapter 1:
Life Insurance In India 26 Indian insurance market is recording remarkable growth and immense
potential. The growth recorded in insurance premium was higher in India as compared to Asian
insurance market during 2009-2010. The world statistics is also showing negative growth (-0.2)
whereas Indian market and Asian market are showing positive growth. The wide difference indicates
immense potential in Indian market and is to be more strong in future (more than 6 percent during
the past one decade). TABLE 4: Growth in Insurance Premium: Real Growth (Percentage) in Premium
During 2009* Country Insurance Premium Growth (2009) Insurance Premium Growth (2010)
Industrialized country -2.8 1.8 Emerging Markets 4.2 13 Asia 1.8 4.2 India** 10.1 4.2 World -2.0 3.2
Source: Swiss Re, Sigma No. 3/2010. Note: * calendar year. ** Financial Year 2009-10 The number of
insurance policies sold in India is increased in public and private sector during 2008 to 2010 and the
recorded growth in public sector was highly positive 22.59 in 2009. The total number of policies
increased in the year 2010 from 8454751 to 48106668. TABLE 5: Life Insurance Policies in India
Insurer Year 2008 Growth Year 2009 Growth Public 4819546 -23.36 5908412 22.59 Private 2725468
43.99 2546339 -06.57 Total 7545014 -07.78 8454751 12.05 Source: IRDA Annual Report 2010-11 The
number of life insurance policyholders has increased approximately 12 percent in India in the year
2008 to 2010 as shown in the table above. The insurance industry in India has seen an array of
changes in the past few decades. The year 2009 saw an up rise in the Indian insurance sector as
major structural changes with the fast changing liberalization; globalization and privatization policies,
the changing and growing needs and demands of people have made the insurance industry more
Chapter 1: Life Insurance In India 27 competitive. Both public and private players now offer greater
choice in terms of products and services. They also make valuable efforts to create awareness about
the benefits and significance of insurance although there is still a blocking point among the people.
The share of Indian life insurance sector in global market was 2.45 percent during 2009, as against
1.98 percent in 2008. The year 2009-10 witnessed a 1.39 per cent increase in the number of
individual agents. The number of the agents has gone up from 29.38 lakh as on 1st April, 2009 to
29.78 lakh as on 31st March, 2010

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RESEARCH METHODOLOGY

A systematic process and methodology is needed to conduct a research in a successful manner. This
section highlights the methodology and process used to conduct the present research. This section
highlights the objectives and procedure of the study. Further, this section discusses the research
methodology adopted for attaining the objectives of the study. Properly conducted research reduces the
uncertainty level for the top management in making critical decisions. Hence it is extremely important to
describe the research methodology here.
2.1:
Justification of the Present Study The present study “Challenges and Opportunities in Life Insurance Sector
of India (A comparative study of public and private sector)”, includes impact of privatisation on public
sector. Many attempts have been made to explore this area, but no systematic research has been
specifically conducted on “Challenges and Opportunities in Life Insurance Sector of India (A comparative
study of public and private sector)” due to non availability of sufficient data, this field has remain
untouched by the researchers. Hence, there is need and justification for comprehensive study to evaluate
it. The present study aims to bridge such a gap and hence the present study has been taken up.
2.2
: Objectives of the Study The overall objective is to evaluate the “Challenges and Opportunities in Life
Insurance Sector of India (A comparative study of public and private sector)”. To achieve overall objective
various sub-objectives have been established, these are:  To compare the business earned by the LIC of
India and the private life insurance companies.  To compare & study the trend after introduction of
private life Insurance companies on LIC of India. 72  To compare the business earned amongst the private
insurers.  To investigate the consumer behavior towards life insurance in the state of Haryana  To
investigate and compare the satisfaction of intermediaries of public and private insurance sector in the
state of Haryana  To determine and investigate which of private insurance companies has gained more
popularity among the rural and urban respondent in the state of Haryana  To offer suggestions and
recommendations for improvement in private and public life insurance sector. In modern times,
management research has reached a stage of development where the traditional methods and techniques
require synthesis and extension. Now, research has become a more complex, cost incurring and time
consuming activity. Therefore, a systematic process and methodology was needed to conduct the research
in a successful manner. Research methodology is the systematic method/process dealing with enunciation
of identifying a problem, collection of facts or data, analyzing these data and reaching a certain conclusion
either in the form of solutions towards the problem concerned or certain generalizations for some
theoretical formulation (Hasouneh, 2003). It also comprises of a number of alternative approaches and
interrelated and frequently overlapping procedures and practices. Since there were many aspect of
research methodology, the line of action had to be chosen from a variety of alternatives. The decision of a
suitable method can be arrived at through the assessment of objectives and comparison of various
alternatives. Research methodology used in the present study is as under:
2.3

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: Research Type Type of research is based on the nature of data. In the light of the nature of data, the
present research is mainly of a quantitative nature, as most of the findings of the 73 present study are
based on quantified measures. However, the researcher also manipulated the casualty and consequences,
which also represented a sign of qualitative research. In the light of purpose of research, the present study
was mainly of applied nature as the researcher tried to test the impact of private life insurance companies
on public sector life insurance i.e. life insurance corporation of India. Further, the survey method was
adopted by selecting and studying a sample chosen from the population (Life Insurance companies
providing services to their policyholders, channel partners and employees etc.) to discover the relevant
incidence, distribution and interrelation of variables.
2.4:
Research Design Reliability and validity of the research required planning of inquiry, i.e. the detailed
strategy of how the research would be conducted. A good research design depends on two aspects of its
designing: first, specifying what one wants to find out, i.e., properly posing the problem or properly
phrasing the issues to be studied or the logical structure of inquiry; and second, determining how to do it,
i.e., collecting data through scientific and appropriate methods, using effective techniques of data analysis
and rational and meaningful deductions (Ahuja, 2001). Therefore, the researcher had to take great care in
the preparation of the research design (Thanulingom, 2003). There are many types of research design and
there was no standard or ideal research design to guide the researcher; much different research design
may accomplish the same objectives. Broadly, research design can be of three types: (1) Exploratory (2)
Descriptive and (3) Casual/Experimental. In the present study, mainly exploratory research design had been
adopted, as the main purpose of this study was to make comparative study of private and public sector life
insurance companies in India and to achieve new insights into it. Since the scope of the study was very vast,
the present study also represented some characteristics of descriptive research design.
2.5:
Sample Design In most if the cases of research studies, it becomes almost impossible to examine the entire
universe; the only alternative thus, was to resort to sampling. The present study is also of the same nature.
According to Manheim (1977), “a sample is a part of the 74 population which is studies in order to make
inferences about the whole population”. Thus, a good sample would be a miniature version of the
population, which would involve the following:  Sample Unit (Unit of Analysis)  Sample Techniques and
 Sample Size 3.5.1: Sample Unit: The sample unit is the individual, group, or other entity that is selected
for the survey. This is also known as the unit of analysis when the survey data are examined statistically
(Fink, 1995). Since the major objectives of the present study was to make comparative study of private and
public sector life insurance companies in India, to compare the business earned by the LIC of India and the
private life insurance companies, eight life insurance companies of India (Life Insurance Corporation of
India, ICICI Prudential Life Insurance Company, HDFC Life Insurance Company, Bajaj Allianz Life Insurance
Company, SBI Life Insurance Company, Reliance Life Insurance Company, Birla SunLife Life Insurance
Company and Kotak Life Insurance Company) had been considered as sample unit. The life insurance
companies of India selected above as sample units for this study on the basis of their respective market
shares, to compare and study the trend after introduction of private life Insurance companies on LIC of
India, the premium underwritten by the two segment i.e. public sector and private sector is taken, to
compare the business earned amongst the private insurers, all twenty two life insurance companies of
private sector ( ICICI Life Insurance Company, Bajaj Allianz Life Insurance Company, SBI Life Insurance
Company, HDFC Standard Life Insurance Company, Birla Sunlife Life Insurance Company, Reliance Life

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Insurance Company, Max New York Life Insurance Company, Tata AIG Life Insurance Company, Aviva Life
Insurance Company, Kotak Life Insurance Company, Metlife Insurance Company, ING Vysya Life Insurance
Company, Canara HSBC Life Insurance Company, Shriram Life Insurance Company, IDBI Federal Life
Insurance Company, Star Union Dai-ichi Life Insurance Company, Bharti AXA Life Insurance Company,
Future Generali Life Insurance Company, India First Life Insurance Company, Sahara Life Insurance
Company, DLF Pramerica Life Insurance Company and Aegon Religare Life Insurance Company) had been
considered as sample unit. One of the major purposes of the present study was to find out the
policyholders 75 behaviour and preference towards different life insurance companies in India in the state
of Haryana; therefore, policyholders of selected life insurance companies was also considered as sample
unit. The Haryana state is divided into four commissioned viz. Ambala, Hisar, Rohtak and Gurgaon.
Respondents belongs to these districts and nearby villages were contacted for the study of behavior and
preference towards life insurance sector in India, to examine which of private insurance companies has
gained more popularity among the rural and urban respondent, ten private life insurance companies of
India (ICICI Prudential Life Insurance Company, HDFC Life Insurance Company, Bajaj Allianz Life Insurance
Company, SBI Life Insurance Company, Reliance Life Insurance Company, Birla SunLife Life Insurance
Company, Kotak Life Insurance Company, Tata AIG Life Insurance Company, Max New Life Insurance
Company and Future Generali Life Insurance Company) had been considered as sample unit, to analyse the
satisfaction among intermediaries (advisors, assistant sales manager, sales managers etc.), related to the
factors that motivates the employees to excel, eight life insurance companies of India (Life Insurance
Corporation of India, ICICI Prudential Life Insurance Company, HDFC Life Insurance Company, Bajaj Allianz
Life Insurance Company, SBI Life Insurance Company, Reliance Life Insurance Company, Birla SunLife Life
Insurance Company and Kotak Life Insurance Company) had been considered as sample unit. The life
insurance companies of India selected above as sample units for this study again on the basis of their
respective market shares and their popularity among the people in the state of Haryana.
2.6:
Sampling Techniques: The procedure that a researcher adopts in selecting the unit for the sample is known
as sampling technique. There are mainly two types of sampling, the first type of sampling is known as
Probability Sampling and the second type of sampling is known as Non Probability Sampling. In Probability
Sampling each sample has a known probability of being included in the sample, but Non-Probability
Sampling does not allow the researcher to determine this probability. Such samples are chosen based on
judgment regarding the characteristics of the target population and the needs of the survey. 76 In the
present study, Non-Probability sampling technique was used. The selection of the units was made on the
basis of non-probability sampling technique, viz, ‘QUOTA’ sampling. The data was obtained from the
various respondents within the organizations (Customer Support Executives, advisors, assistant sales
manager, sales managers etc). Officials of the selected life insurance companies of India) and from outside
the organizations (Policy holders of the selected life insurance companies of India) also, through
appropriate questionnaires and schedules. In the present study the researcher approached only those
prospective respondents (policyholders) who have to previous experience related to services offered by
selected Life Insurance Companies. The researcher approached prospective respondents (policyholders) in
branches and divisional offices of selected life insurance companies in selected cities. This method proved
very beneficial, as it was really difficult and in fact impractical to compile an exhaustive list of the
respondents (policyholders) from the entire population.
: Sample Size: Sample size means the number of sampling units selected from the population for the
purpose of investigation. No doubt, sample size must be sufficiently large so that we can have a
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representative sample. But, money and time constraints tend to limit the size of sample. The population
addressed under the present study consists of life insurance sector of India. The sample unit included
Eleven leading Life insurance companies (based upon market share) viz, Life Insurance Corporation of India,
(ICICI Prudential Life Insurance Company, HDFC Life Insurance Company, Bajaj Allianz Life Insurance
Company, SBI Life Insurance Company, Reliance Life Insurance Company, Birla SunLife Life Insurance
Company, Kotak Life Insurance Company, Tata AIG Life Insurance Company, Max New Life Insurance
Company and Future Generali Life Insurance Company, which a large number of policyholders and offices
located in Haryana and Delhi were chosen. To achieve research objectives of present study, information
was collected from two types of respondents. One, the internal respondents targeted was from the middle
management and lower management. Total 500 persons (customer care executives, advisors, assistant
sales manager, sales managers etc.) were contacted for the purpose. Second, the external respondents
targeted were those policyholders of selected life 77 insurance companies, who had taken life insurance
policies offered by different Life Insurance companies. 300 external respondents were selected from the
state of Haryana. Exhibit No. 3.1 and Exhibit No. 3.2 indicates the details of both types of samples of
respondents. Table 3.1 Sample from Internal Respondents (Employees) Sr. No. Name of Insurance
Company Sample Quota Per cent of Sample Quota 1 Life Insurance Corporation of India 185 37 2 ICICI
Prudential Life Insurance Company 45 9 3 Bajaj Allianz Life Insurance Company 45 9 4 Birla SunLife Life
Insurance Company 45 9 5 Tata AIG Life Insurance Company 45 9 6 HDFC Life Insurance Company 45 9 7 SBI
Life Insurance Company 45 9 8 Kotak Life Insurance Company 45 9 Table 3.2 Sample from External
Respondents (Policyholders) Sr. No. Name of Insurance Company Sample Quota Per cent of Sample Quota
1 PUBLIC SECTOR Life Insurance Corporation of India 200 67 2 PRIVATE SECTOR Private Life Insurance
Companies 100 33 Five conditions were established to permit collection of the most representative
samples: 1) Customers should be allowed to rate and review about the various services of life insurance
companies based on their own service experience; 2) Customers should not be financially, socially, and
emotionally motivated to express their opinions favoring the reviewed insurance companies; 3) Customers
should be encouraged to post both dissatisfied and satisfied reviews. 78 4) The results of market survey are
accurate. The validity of the model is based around the results of empirical studies. 5) Policyholders
responses can be documented and captured and they remain stable during the whole process. 3.6 Data
Collection In research process, the result will be good if the data put in is good. If poor and unrelated data
are collected, naturally poor and misleading conclusion will be drawn. Therefore, due consideration should
be given to the type and method of data collection (Wilkinson and Bhandarkar, 2000). There are two types
of data: primary data and secondary data. Since the scope of the study was really very vast, both types of
data have been collected. Primary data was collected through the well- structured comprehensive
questionnaire. Sets of two questionnaires were prepared which have been given in Annexure 8.1 and 9.1. 
Annexure 8.1: Questionnaire for customer care executives, advisors, assistant sales manager, sales
managers etc., of the selected life insurance companies of India.  Annexure 9.1: Questionnaire for the
Policyholders of selected life insurance companies of India. Well-structured questionnaires were prepared
for the purpose of collecting the necessary information. The questionnaires were prepared in the two
phases. In the first phase, unstructured in-depth interviews were conducted to create initial questionnaire.
Further, expert opinions on the questionnaires were collected supported by extensive literature review of
similar studies carried out in various countries of the world and improvements were made to the
questionnaires. This necessitated some changes in the final version of the questionnaire. In the second
phase, a pilot survey was also conducted with 4 life insurance companies (Life Insurance Corporation of
India, SBI Life Insurance Company, ICICI Prudential Life Insurance Company and Bajaj Allianz Life Insurance
company) and 50 customers to evaluate how well the questionnaire was understood, and also to test

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alternative wordings of questions, 79 alternative response options and determining whether some other
response should be provided. During the interview process, some weaknesses in the design were also
found. Some of the respondents had reservations about some questions in the initial questionnaire, due to
the sensitive nature of topic addressed. In various questions, internal respondents were asked to rate
(highly satisfied to highly dissatisfied) the various reasons behind the factors affecting customer retention
process and also factors that motivates intermediaries to provide excellent services for customer
satisfaction, rather than asking only one reason. The survey also helped the researcher in rewording and
restructuring the questionnaire. The validation of the questionnaires was done by the feedback from the
academicians, practitioners and by the issues identified by relevant literature. Finally, the structured
questionnaires were prepared and the survey was conducted by explaining the purpose of the research to
the respondents. The content of the first questionnaire (for intermediaries) included the company profile;
some strategic questions like commission/salary, working environment, promotional avenues in the
organisation etc. were asked to rate (highly satisfied to highly dissatisfied)in the questionnaire The second
part of the first questionnaire (for intermediaries) included statements related to factors affecting the
satisfaction level of the intermediaries. These statements were included after extensive literature review of
the similar studies. According to Jillian Dawes Farquhar (1994), study findings financial service retailers
were aiming to retain customers through building relationships but lack of management appreciation for
staff expertise and the burden for service quality and retention appears to fall upon staff. The study also
finds that the staff appeared to view themselves as key players in retaining customers and, since
information systems and structure appear not to provide the required support, there are grounds for this
view. Dennis J. Adsit Rath & strong Inc., and Steven Crom and Dana Jones Rath & Strong, Inc., (1996) study
found positive relationships between employee attitudes, departmental performance and customer
satisfaction with service quality. Krosnick and Petty (1995) found strong evidence for effect of attitude
strength on behaviour and the fact that behavioural intentions leads towards satisfaction. Krosnick and
Petty also referred to the strong impact of attitude strength on behaviour and the processing of
information. 80 Reichheld and Sasser (1990), found that Customer Retention requires a positive climate in
which everyone in the organization works towards keeping customers. According to Bowen and Lawler
(1995), study if staffs were given more power, greater access to information and adequate knowledge, they
would be in a better position to recover situations or delight customers. Internal marketing supports the
creation of a positive climate of cooperation where everyone in the organization was working towards
keeping customers (Reichheld and Sasser, 1990). Segments focused HRM policies, practices and procedures
activated employee’s energies and provided direction and, activation and direction were the keys to the
motivation of employee’s (Locke and Latham, 1990). This focusing of employees was recognized as
“culture” and others have called it “climate” (Schneider, 1990). Steve Macaulary and Sarah Cook (1995)
concluded that teamwork is a term most people pay more lip-service to than practice. Deanne N. Den
Hartog and Robert M. Verburg (2002) study provided more insight into the relationship between perceived
leader behaviour and employees’ willingness to provide excellent service as well as their perceptions of
service quality. Supervisors’ supportive behaviours, providing useful information, giving feedback, fair
evaluations of performance and their direct stimulation of service related behaviours were all found to be
positively related to service outcomes. Neeru Malhotra and Avinandan Mukherjee (2004) study indicated
that job satisfaction and organizational commitment of employees had a significant impact on service
quality delivered. Avinandan Mukherjee and Neeru Malhotra (2006) research revealed that role clarity
plays a critical role in explaining employee perceptions of service quality. Yong-Ki Lee, Jung- Heon Nam,
Dae-Hwan, and Kyung Ah Lee (2006) analysed the structural relationship between empowerment, service
training, service reward, job attitudes such as job satisfaction and organizational commitment, and
customer-oriented prosocial behavior of employees. Respondents of the first questionnaire (for
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 CHAPTER 1 -

employees) and asked to rate (highly satisfied to highly dissatisfied) these statements. Based on above
discussion the researcher had used these key dimensions and their respective service features to develop
survey questionnaire for policyholders to assess the perceived level of consumer services provided by
selected life insurance companies of India. 81 The policyholder’s questionnaire included expectations
regarding different dimensions (Reliability, Responsiveness, Competence, Easy to use, Product Portfolio,
Security and Convenience) of customer services offered to policyholders by the concerned life insurance
company. This questionnaire also included perceptions regarding different dimensions (Reliability,
Responsiveness, Competence, Easy to use, Product Portfolio, Security and Convenience) of consumer
services provided to policyholders by the concerned life insurance company. The same questionnaire
included questions regarding importance weight related to different dimensions (Reliability,
Responsiveness, Competence, Easy to use, Product Portfolio, Security and Convenience) of consumer
services offered by the selected life insurance company of India. The questionnaires mentioned above,
contain several type of questions keeping in view the objectives of the present study. Easily
understandable and answerable questions were prepared and were carried to the respondents to be filled
up by the. In all the cases, personal interviews are conducted by the researcher to secure correct and
collect necessary information. The present study analysis was also based on the secondary data, which
were collected from various international and national journals of repute, annual reports of various
Government institutions of India like IRDA, RBI etc.
, text books, magazines of repute, annual reports of selected life insurance companies, annual reports of
various financial institutions and commercial and social associations like CII, FICCI, Gartner, Oxford’s
Economic survey etc.
For this purpose researcher explored many libraries (CII, ICSAR, FICCI, American Cultural and British
Library, and also of various universities). Online libraries, Internet and online database were highly used for
the purpose of data collection. Some important information was also complied from the different
international and national newspapers. 3.7 Frequency Distribution Tables of Questionnaire-1 (Employees)
Table 3.3: Survey Response Rate Total Sample Size Response Received Usable Response Received Response
Rate (%) 500 350 314 62.8 82 Table 3.4: Insurance Company wise response rate Name of Insurance
Company Frequency Percent Cumulative Percent Life Insurance Company of India 104 33.13 33.13 ICICI
Prudential Life Insurance Company 30 9.554 42.684 HDFC Standard Life Insurance Company 30 9.554
52.238 Bajaj Allianz Life Insurance Company 30 9.554 61.792 RELIANCE Life Insurance Company 30 9.554
71.346 Birla Sunlife Life Insurance Company 30 9.554 80.9 SBI Life Insurance Company 30 9.554 90.454
KOTAK LIFE Insurance Company 30 9.554 100 Total 314 However 350 respondents gave the information as
per our requirement. Later on the information given by 36 (10.29%) respondents was not found
satisfactory. Hence finally information given by 314 (89.71%) respondents was taken into study according
to the requirement of the objective. Out of 314 persons in total 104 (33.13%) belongs to LIC and 30
(9.554%) each belongs to ICICI, HDFC, Bajaj Allianz, Reliance, Birla Sunlife, SBI and Kotak Life Insurance
Company 3.8 Frequency Distribution Tables of Questionnaire-2 (Policyholders) Table 3.5: Survey Response
Rate Total Sample Size Response Received Usable Response Received Response Rate (%) 300 154 121 40.33
Table 3.6: Insurance Companies wise Response Rate Name of Insurance Company Frequency Percent
Cumulative Percent Public Sector Life Insurance Corporation of India 96 79.34 79.34 Private Sector Private
Life Insurance Companies 25 20.66 100 Total 121 100 83 Table 3.7: Gender of the Policyholders Gender
Frequency Percent Cumulative Percent Male 81 66.94 66.94 Female 40 33.06 100 Total 121 100 Table 3.8:
Age Group of Policyholders Age Group Frequency Percent Cumulative Percent 45 yrs 31 29 100 Total 121
100 Table 3.9: Profession of Policyholders Nature of Profession Frequency Percent Cumulative Percent
Business 15 12.4 12.4 Service 56 46.3 58.7 Professional 11 9.1 67.8 Farmers/Others 39 32.2 100 Total 121
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 CHAPTER 1 -

100 Table 3.10: Monthly Income of Policyholders Income Group Frequency Percent Cumulative Percent
50000 p.m. 7 5.8 100 Total 121 100 84 Table 3.11: Residential Status of Policyholders Residential Status
Frequency Percent Cumulative Percent Urban 60 49.6 49.6 Rural 61 50.4 100 Total 121 100 Table 3.12:
Qualification of Policyholders Qualification Frequency Percent Cumulative Percent Under Graduate 40 33.1
33.1 Graduate 46 38.0 71.1 Post Graduate 35 28.9 100 Total 121 100 Out of 154 responses received, 121
(78.36%) were usable responses and of which 81 (66.94%) were males and 40 (33.06%) were females; 96
(79.34%) were policy holders of LIC, 25 (20.66%) were policy holders of ; 74(46.5%) surveyed policy holders
belong to 25-45 yrs, 31 (29.0%) belong to >45 yrs, and 16 (24.5%) belong to 50001 household income
group; 60(49.6%) of surveyed policy holder were residents of urban area, 61(50.4%) were residents of rural
area; 40 (33.1%) surveyed policy holders were under graduates, 46 (38%) were graduates and 35 (28.9%)
were post graduates. 3.9 Data Processing and Analysis The task of data collection would be complete when
all entries (or almost all) would be filled with the appropriate responses or values (Galtung, 1967). After the
data had been collected the researcher turns to the task of data processing and further analyzing these
data. “Data Processing and analysis”, the task was to take the completed data matrix, which is amenable to
processing, and do two things with, in this order: (1) 85 Processing: to recast the matrix, concentrate and
otherwise deal with it so that the data would be as amenable to analysis as possible and (2) Analysis: to see
the data in the light of the objectives and theories, and draw conclusion that would be amenable to the
theory formation as possible (Galton, 1967). In the present study, responses from respondents were coded
and tabulated in SPSS 11.0 and Microsoft excel-2003 statistical and analytical packages. The process was
used for the each type of the questionnaires. The responses of respondents were given in all the tables in
the term of both the frequency, percentages and cumulative. For analyzing the data, both simple and
advanced statistical tools were used. In some cases simple statistics like average, percentage, weighted
average and mean score were applied. Exploratory research required some advanced tools; therefore to
find out and analyse the results of the study statistical tests like Variate Difference Method, Comparative
Mean, Standard Deviation, Chi Square test, Independent t-test, Paired t-test and ANOVA analysis etc were
used. The test was conducted at 95 percent confidence level (or 5 per cent level of significance).
2.7
Statistical Tools Used To facilitate the analysis in a meaningful way, certain statistical tools were found to
be useful; most prominent of these have already been named above. A brief description of these tools is
provided below: 3.10.1 Variate Difference Method Variate Difference Method is an important tool of “Time
Series Analysis” given by O. Anderson and enables us to estimate the variance of the random component of
the series. The variate difference method essentially consists of the following steps: 1. First the difference
table is prepared for the original series as shown: Time (t) Premium Ut Δ Ut (Δ Ut)2… Where Ut = Actual
Premium/log value of actual premium Δ Ut = Deviation from Ut (Δ Ut)2 = Square of Δ Ut 86 2. Then values
for V1 = μ2΄(ΔUt) , V2 = μ2΄(Δ²Ut) , V3 = μ2΄(Δ3Ut) … are 2 4C2 6C3 calculated till Vi and Vi +1, i = 1,2,3… do
not differ significantly, i.e. if V1 and V2 do not differ significantly then either of them is regarded as an
estimate of variance V. If they differ significantly then we calculate V3. If V2 and V3 do not differ
significantly than any of them can be taken as an estimate of variance V other wise V4 is calculated and the
same process is repeated till two successive estimates are homogeneous. 3. The significance of difference
between two successive estimates is then tested obtaining the following test statistic: Rk = Vk- Vk+1 Vk If
magnitude of Rk  1.96, the difference is interpreted as significant at 5% level of significance otherwise non
significant. If V1 = V2 then degree of polynomial which is best fitted to the data may be taken as 1 i.e. the
straight line is best fitted to the given data. Similarly, if V2 = V3 than the curve of second degree will be the
best fitted to the given data and so on. The above procedure is applied simultaneously for log Ut in place of
Ut. First it is tested as to whether V1 = V2 in case of the original values and also this is tested for the values
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of log Ut. If no significant difference is found then exponential curve of the form y = abx is fitted to the
given data. If no significant difference is found in both the cases i.e. in case of Ut and log Ut values, then
the case where magnitude of Rk is lesser is taken and accordingly that curve is taken as best fitted to the
given data.
2.8
Trend Line by Method of Least Square Method of least square is the best method of measuring trend. This
method can be fitted to economic and business time series to make future predictions. Linear Trend: Linear
trend is represented by : Y = a + bX where 87 Y = trend value X = t  A; t denote the given years and A is
assumed mean taken in such a way that X = 0 a = a constant that represents value of Y variable when X =
0 b = a constant that represents slope of trend line. This discloses the change in value of Y variable when
there is a unit change in X. The trend line drawn with the help of linear equation: Y = a + bX, is called as line
of best fit. The values of a and b are obtained using the following two normal equations: Y = na + bX XY
= aX + bX 2 where n is the number of observations. This implies that a = n Y , b = 2 X XY   ( X = 0)
Values of a and b so obtained can be substituted in Y = a + bX to get the trend line. Exponential Trend: If
the time series is increasing or decreasing by a constant percentage rather than constant absolute amount,
the fitting of exponential trend is considered appropriate.
Such tendency is found in many business data. Exponential trend is represented by : Y = abx Where a is Y –
intercept and b the slope of the curve at the origin of X In the logarithmic form, the above equation is
written as under: LogY =log a + Xlogb When plotted on a semi-logarithmic graph, the curve gives a straight
line (or called logarithmic straight line). However, on an arithmetic scale chart, the curve gives a non linear
trend. Under the method of least square, the values of the constants a and b are obtained by solving
following two normal equations:  log Y = log a +log b (X log Y) = log aX + log bX² Values of a and b so
obtained can be substituted in Y = abx to get the trend line. Remark: While making the calculations taking
logarithms the base has been taken as 10 88 3.10.3 t-Test In the present study, t-test has been used for
testing (i) if the sample mean (x) differs significantly from the hypothetical value 0 of the population
mean (ii) the significance of the difference between two sample means t-Test for Single Mean Suppose we
want to test if the sample means differ significantly from hypothetical value 0 of the population mean.
The null hypothesis, therefore, is H0 :  = 0 The test statistic under null hypothesis is given by t = S/ n x
S.E. x x 0      It follows student’s t-distribution with n - 1 d.f. wherex =   n i 1 i x n 1 , S 2 =    
n i 1 2 i (x x) n 1 1 (x1, x2,…,xn is a random sample of size n) Calculated value of t is compared with the
tabulated value of t at certain level of significance. If calculated | t | > tabulated t, the null hypothesis is
rejected and if calculated | t | < tabulated t, H0 may be accepted at the level of significance adopted. t-Test
for Difference of Means Suppose we want to test if the means of two independent sample (x1, x2,…, 1n x )
and (y1, y2,…, 2n y ) of sizes n1 and n2 are equal: The null hypothesis is H0 = 1 = 2 where 1 and 2 are
respective population means. The test statistic under null hypothesis is given by t = 1 2 . . 1 1 n n S x y S E x
y x y      where 89    1n i 1 i 1 x n 1 x ,    2n j 1 j 2 y n 1 y S 2 = n n 2 (x x) (y y) 1 2 2 n j 1 2 j 1 n i
1 2 i         It follows student’s t-distribution with n1 + n2  2 d.f. 3.10.4 Paired t-Test for
Difference of Means This test is applied when the (i) sample sizes are equal, and (ii) the two samples are
not independent but the sample observations are paired together, i.e., the pair of observations (x1, y1),
(x2, y2),…, (xn, yn) corresponds to the same sample unit. The problem is to test if the sample means differ
significantly or not. Let di = xi  yi, i = 1, 2,…, n. The null hypothesis is H0 : 1 = 2 where 1 and 2 are
respective population means. The test statistic under null hypothesis is given by t = S/ n d whered =   n
i 1 i d n 1 , S 2 =     n i 1 2 i (d d) n 1 1 It follows student’s t-distribution with (n  1) d.f. Note: One-

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 CHAPTER 1 -

tailed test has been applied for single mean and two-tailed test has been applied for difference of means. A
test for any statistical hypothesis where the alternative hypothesis is one tailed (two-tailed) is called one-
tailed (two-tailed) test. For example, a test for testing the mean of a population H0 :  = 0 against the
alternative hypothesis H1 :  > 0 (right tailed) or H1 :  < 0 (left tailed) is a single tailed test; and against
the alternative hypothesis H1 :   0 is known as two-tailed test. The tabulated values of t used in the
present study can be seen from the following table: 90 Level of significance 1% 2% 5% 10 % d.f.= 8 d.f.= 16
d.f. = 8 d.f.= 16 d.f. =8 d.f.= 16 d.f. = 8 d.f.= 16 Twotailed test 3.36 2.92 2.90 2.58 2.31 2.12 1.86 1.75 One-
tailed test 2.90 2.58 NA NA 1.86 1.75 1.40 1.34 3.8.5 Analysis of Variance (ANOVA) Analysis of variance is
an elegant and versatile technique. It is being widely used in determining whether or not the means of
more than two samples are equal. Basically it is a procedure by which the variation is analysed into its
various components corresponding to the various sources of variation. Thus analysis of variance is a
method of splitting the variance for analytical purposes for testing the difference between different groups
of data for homogeneity. This technique in short is referred to as ANOVA and enables us to make
inferences about whether samples are drawn from populations having same means. Anova Table for One-
Way Classified Data Sources of Variation Sum of Squares (S.S) d.f. Mean Sum of Squares (MS) F Treatment
SST k-1 MST = k 1 SST  F = MSE MST Error SSE nk MSE = n k SSE  Total TSS n1 where n is the total
number of observations and k is the number of treatments. F is F- statistic used for testing whether the
means of different treatments are equal. It follows Snedecor’s F-distribution with (k -1, n-k) d.f. Calculated
value of F is compared with tabulated value of F at certain level of significance. If calculated value of F >
tabulated value of F, we reject the null hypothesis that mean treatment effects are equal, otherwise we
accept the hypothesis. Steps for calculating various sums of squares are as follows: 1. First of all grand total
(G) of all the observations is obtained. 91 2. Correction Factor (C.F.) = n G 2 2. Raw sum of squares = Sum of
squares of all the observations. 3. TSS = Raw sum of squares - C.F. 4. SST =  i 2 i i ) n T (  C.F. where Ti =
sum of observations of ith treatment ni = number of observations of ith treatment. 5. SSE = TSSSST The
study had also applied SERVQUAL (Berry, Parasuraman, Zeithaml, 1985) model with few modification
supported by various studies, to assess the satisfaction of intermediaries of selected life insurance
companies. A five point Likert scale was used to measure the intensity of the attitude of customers and
officials of selected insurance companies, towards the selected dimensions of consumer services. The
respondents were asked to rate the variables, using five point Likert scale, which ranged from highly
satisfied (1) to highly dissatisfied (5). The weighted average scores were also calculated at the appropriate
places where the respondents were asked to rank/rate different statements, either according to degree of
their importance or according to the extent they agree with the statement as the case may be. 3.10.6 Chi-
Square test The Chi- square test (²-test) is an important test amongst several tests of significance
developed by the statisticians. Chi-Square, symbolically written as ² (pronounced as Ki-square), is a
statistical measure used in the context of sampling analysis for testing the significance of a population
variance. As a non-parametric test, it can be used as a test of goodness of fit and as a test of independence
of attributes. Chi-Square test is applicable to a very large number of problems in practice and as a non-
parametric test, it is described as follows: ²-test as a non-parametric test ²-test is an important non-
parametric test and as such no rigid assumptions are necessary in respect of the type of population. We
require only the degrees of freedom 92 for using this test. As a non-parametric test ²-test can be used (i)
as a test of goodness of fit and (ii) as a test independence of attributes. (i) ²-test as a test of goodness of
fit ²-test is used in testing the hypothesis that the observed sample distribution agrees with the
theoretical distribution i.e. there is no difference between the observed and expected frequencies. The
significance of the difference between observed and expected frequencies are tested as follows: Given
that: O (Observed frequency): O1’ O2` O3` ………On E (Expected frequency): E1’ E2` E3` ……….En We
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 CHAPTER 1 -

calculate ² = ] ( ) [ 2  E O E d.f. = k-1 Now if the calculated value of ² < tabulated ² for (k-1) d.f., we
accept the hypothesis and conclude there is no significant difference between the observed and expected
frequencies otherwise we reject the hypothesis. (ii) ²-test as a test independence of attributes In case of
contingency table, we set up the hypothesis that the two attributes are independent and on the basis of
this assumption, we calculate expected frequency of each cell with the following formula: Expected
frequency (E) = Total of row in which it occurs X Total of column in which it occurs Total number of
observations And finally, we calculate ² = ∑∑ (Oi-Ej)² i j Eij Here, degrees of freedom = (r-1) (c-1), where r is
the number of rows and c is the number of columns Now if calculated value of ²< tabulated value of ² at
5% level of significance for (r-1) (c-1) d.f., we accept the hypothesis otherwise reject it and conclude
accordingly 3.11 Limitations of the Study The rapid growth of insurance sector and use of latest
information technology created new opportunities for the researcher to gather and analyse data in order
to learn about individuals, companies and societies. Thus the topic ‘comparative study of public and 93
private life insurance sector’ offered a vast scope for the study. However, it was not possible to cover all
the aspects of comparative study. Hence the researcher  As the main objective of the present research
was to study the public and private life insurance sector in the Indian context, technical aspect of electronic
customer relationship management technologies was not covered properly.  Since the scope of the study
in this particular field was really very vast and the collected data provided huge information; therefore the
researcher might reveal some other interesting results. But, the researcher limited the result of present
study according to objectives of the study. However, the researcher tried to include all the necessary
information for justifying the result of the study.  The sample size of present study was relatively small to
generalize the results in the Indian context. But time and financial factors did not allow the researcher to
select very large sample size. However the researcher made the justification by taking into consideration
mainly one insurance Company of Public Sector and seven life insurance companies of private sector on
basis of their market share, and the region selected for study was really highly technical. Therefore, it
would be logical to conclude that the result might be generalized in the context of Haryana State. The
Haryana state is divided into four commissioned viz. Ambala, Hisar, Rohtak and Gurgaon. Respondents
belongs to these districts and nearby villages were contacted for the study of behavior and preference
towards life insurance sector in India and analyse the satisfaction among intermediaries (advisors, assistant
sales manager, sales managers etc.), related to the factors that motivates the employees to excel. But, for
future research this factor should be taken into consideration.  The result of the present study was based
on the opinions and experiences of the respondent. In opinions survey there would always be possibilities
of individual biasness in opinions, and results look unreliable. This biasness could not be eliminated. 
There might be drop error i.e. the respondents who are willing as well as able may not be contacted. 94 
There might be go error i.e. the respondents who are unable or unwilling may included in the sample.
However, the large sample base as well as the pretesting would further reduce the chances of these errors.
 There might be chances of different perceptions on the wording of the questionnaire or scale. Besides,
training was also imparted to the survey staff so that the wording as well as the presentations can
homogenized. 3.12 Organisation of the Study The study comprises of seven chapters: Chapter 1 –
Introduction: gives a detailed introduction and role of the insurance sector. Chapter 2 – Review of
Literature: gives a brief survey of the existing studies. Chapter 3 – Research Methodology: gives a lucid
description of the research methodology, the objectives of the study, and the sources from where
information has been collected, the techniques/statistical tool applied for analysing the data collected, the
period of study under observation and profile of the organisations under study. Chapter 4 – Trend and
Comparative Analysis of Business Earned by Various Life Insurers: concentrates on the comparison of
business earned by LIC and Private Life Insurance companies. Chapter 5 – Consumer Behaviour and
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 CHAPTER 1 -

Preferences: concentrates on the consumer behavior and their preferences. Chapter 6 – Satisfaction of
Intermediaries: concentrates on satisfaction of intermediaries in public and private life insurance sector.
Chapter 7 – Summary-Findings and Suggestions: is the concluding chapter which takes up the major
findings of the study related to the results, the reasons for such results, implications of the results apart
from incorporating a few suggestions with a view to ensure the role of insurance sector in the economic
development in an effective manner. Bibliography Appendices.

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a) companies would not have gathered a sizable market share for the first quarter that ended in June
2003. The growth on a year-on-year basis for National Insurance worked out to 15.55%. While the
other GIC subsidiary companies have recorded a growth 17 Economic and Political Weekly (1971) ,
“General Insurance Room for More Efficiency — and Honesty”, 15 May 1971, Vol.VI, No.20, pp 974-
975. Review of Literature 35 of less than 4%. According to the report, the growth rates of other players
were as follows.
b) a) New India Assurance - 1.49% b) United India Insurance - 2.86% c) Oriental Insurance Company -
3.78% According to the report, it appears that the private sector players are helping in widening the
market base despite handicaps such as: a) Lack of infrastructure b) Inadequate manpower, c) Low
capital base. In growth terms, ICICI Lombard continues to lead the pack with a premium of Rs.126
crore, reflecting a growth of nearly 250% on annuity over the year basis. The growth rates of other
players were as follows: a) Bajaj Allianz - 73% b) Royal Sundaram - 61% c) Tata AIG - 68% 18 2.2.12 In
the paper, “BPO and Insurance services the future and the potential”, C.P. Udayachandran reports
that, the Indian insurance sector will see tremendous changes in the future years. Traditionally, they
have been depending on the slow paper based business processes.
c) The challenge before them is to reduce costs, reduce processing time and enhance business
profitability. The author also feels that we are going to witness 18 Market Trends (2003), "Current
News-NIC numbers prop up public sector insurance flock" , Niseema Publishers, July – September,
Vol.V,No.3, p 5. Chapter-2 36 rapid changes in the manner these are tackled with effective and
efficient IT solutions and robust business processes.
d) 19 2.2.13 The Economic and Political Weekly, under the title “Privatisation of insurance industry”
reported that, the nationalised Life lnsurance Corporation of India and General Insurance Corporation
of India have contributed not only for social security of the insured public but for the sustenance of
India's planned development of its economy catering to social needs. The Malhotra committee
recommendations, if accepted, will destroy these important sources of mobilisation of people's savings
for the economic growth of the country. The government's move will bring into play all the ills that
afflicted this industry before nationalisation when people's money was grossly abused for the private
gain of the monopolists.The concept of competition, which is being talked about, would only lead to a
rate war and malpractices endangering, in the process, policy monies. The LIC and GIC in the public
sector have, by conserving premiums and building up enormous resources, successfully protected
policy monies. The unmatched claim settlement record of LIC and GIC would bear this out
e) .20 2.2.14 Ajit Ranade and Rajeev Ahuja in his article “Issues in Regulation of Insurance” discussed
some selected issues relating to regulating insurance business, with particular reference to the
scenario in India. 19 C.P.Udayachandran (2005), “BPO and Insurance services: The Future and the
Potential”, Ernakulam Insurance Institute/E11) journal, published by EII, March 2005, Issue 1,Vol. 3 ,p4.
20 Economic and Political Weekly (1994), “Letters to Editor- Privatisation of Insurance Industry”, 9
July1994,Vol.XXIX,No.28,p 1694. Review of Literature 37 According to them in the Indian insurance
market, the regulator must assure new entrants of a level playing field vis-a-vis hitherto monopoly
incumbents. The initial focus of the regulator must be on financial soundness and prior experience of
entrants. Tariff and contract standardisation must also be done in the initial stage.
f) The objective of serving the weaker sections of society will be better served with a separate
instrument. Regulating a publicly held monopoly such as LIC is virtually redundant, since the profit
motive and guarding its monopoly status may not be paramount objectives to a public sector firm, and
there may be inbuilt procedures in its operations to deal with issues normally addressed by a regulator.
But regulation is an imperative at the commencement of competition, especially in the insurance
sector which is vulnerable to market failure. In a sense, apart from the protection of consumer
14
 CHAPTER 1 -

interest, in the Indian context, the regulator’s main brief would also be to conduct a fair competition,
but not let it become ‘cut-throat competition’ that results in multiple bankruptcies and market
implosion. Of course the current competition between the four subsidiaries of the present GIC is only
notional, since there is not much pricing and strategic autonomy. In most countries with longer
tradition of a competitive insurance industry, the primary objective of regulation has been protection
of consumer interest.
g) Consumer protection has two aspectsprotection – against losses arising from the insolvency of
institutions, and protection against losses caused by fraudulent practices and other market conduct
abuses. A regulator’s main objective is to promote competition and efficiency. To the extent that
competition might not lead to efficiency due to various reasons such as asymmetric and imperfect
information these concerns are addressed in the nuts and bolts of regulatory design. But this objective
of efficiency is not to be confused with the objective of Chapter-2 38 promoting welfare or other social
goals, which are the functions of the government. Promoting welfare involves a subjective judgment of
the social welfare function (ie., trading off the welfare of the rich (advantaged) versus the poor
(disadvantaged)) which in turn is a matter of social choice manifested perhaps by electoral politics.
Thus the regulator’s job is only to promote efficiency, both in a static and dynamic sense.21 2.2.15 M.
Siva Narayana, Deputy Manager, The Oriental Insurance Co. Ltd., in his article “Forgotten monies of the
non-life insurers”, explore the alternate ways and means to improve the non premium revenue of non-
life insurers in order to reduce their Under writing losses and to augment their net worth. He discussed
about the most important but least bothered or most neglected concept - the RECOVERIES which arise
mostly from the claims payments made by the insurers where they have legal rights to recover the
same from the third parties/ claimants/carriers etc. And he also explains the important source of
recoveries for the nonlife insurers, where the insurers neglect / put in cold storage after payment of
claims. They are Motor Accident Claims Tribunal (MACT), Marine Claims, Fire Claims, Motor Claims,
and Miscellaneous Claims etc. He concluded by proposing to establish a RECOVERY CELL at DO/RO
level by the insurers to recover their forgotten money.22 21 Ajit Ranade and Rajeev Ahuja (2000),
“Issues in Regulation of Insurance”, Economic and Political Weekly, 29 January 2000, Vol.35, No.5, p
331. 22 M. Siva Narayana(2010), “Forgotten monies of the Non-life insurers”,The Insurance Times,First
monthly Journal on Insurance in India in Service Since 1981,Vol.XXX,No.12 December 2010,ISSN-0971-
4480, pp 27-28. Review of Literature 39 2.2.16 Shanmukha Rao Padala, and Dr. Syed Fasiuddin in their
article “Indian Bancassurance - A Composition Under Globalised Economic Scenario” reported that
bancassurance is a win-win model for insurance companies and banks. Its simplest form is the
distribution of insurance products through a bank distribution channel. In this field of bancassurance,
banks are using the strategic marketing practices and IT enabled practices like data warehousing and
mining, and more customer focused applications.
h) The present trends of banking operations across the globe have been ever changing and competitive.
Whether the banks are in private or public sector, the questions of survival and customer relation
management is the primary objective across the globe. According to them with the opening up of this
sector to private players, competition has become more intense and the public sector has been
challenged with a flood of new products and new means of marketing. Instead of falling back on the
individual agents for business, new insurance companies have started to experiment with other
channels such as bancassurance and insurance brokers.They concluded that ,according to the
Associated Chamber of Commerce and Industry of India (ASSOCHAM) an unprecedented growth of
over 200% is likely to be seen in Indian insurance business by 2010-11 in which private insurance
business would grow by 140% in view of aggressive marketing technique adopted by them as against
35- 40% of Government owned insurance companies growth rate. For this purpose the banks as well as
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 CHAPTER 1 -

insurance organizations are functioning with more diversified financial products with diversified
strategic approaches in the globalized financial environment. It can be possible to the insurance
companies are implementing the various strategic collaborative decisions like bancassurance, insured-
mutual fund policies (popularly known as 'Market Plus'), doing the banking business like sanction of
loans and advance to Chapter-2 40 customers for house construction and other personal purposes,
collecting the fixed deposits from public etc.23 2.2.17 Dr. M. Vidyasagar Reddy “A Decade of
Liberalisation of Insurance Sector in India”, reported that the global financial meltdown has left India
largely unaffected. There is universal acknowledgement that this is due to the strong presence of
public sector in the Indian banking and insurance industries. The world realized at great peril that
finance capital is fundamentally in search of quick profits and hence speculative in character rather
than having any enduring links with the industry. Therefore, efforts are being made to tame the
finance capital and as a result many of the financial institutions including insurance companies have
been taken over by the governments in the developed countries. Therefore, India must remain
cautious. The plans to further liberalise the insurance industry must be given up. Today, there is a
conflict between the IRDA and SEBI over ULIPs and between RBI and SEBI over interest futures. The
government must take steps to settle these conflicts and strengthen the regulatory mechanism for the
orderly growth of the financial sector, insurance included. 24 2.2.18 H. Ansari in his article “Insurance
Reforms” reported that nationalization of insurance helped in deployment of massive financial 23
Shanmukha Rao Padala, Dr. Syed Fasiuddin(2009), “Indian Bancassurance - A Composition Under
Globalised Economic Scenario”, Osmania Journal of International Business Studies, July - December
2009,pp 84-91. 24 Dr. M. Vidyasagar Reddy (2010), “A Decade of Liberalisation of Insurance Sector in
India”,Journal of Commerce& Management Thought,Vol. I, No. 3 / July 2010,pp 237-238.
www.IndianJournals.com, Downloaded from IP - 210.212.129.125 on dated 3-June-2011. Review of
Literature 41 resources. It also helped in spread of insurance with LIC becoming a household name in
the country. However, as was then the prevailing culture in public sector, with the passage of time, the
responsibility and accountability parameters deteriorated resulting in consumer detriment. Though
insurance business in the country grew by leaps and bounds - both in the life and nonlife sectors - and
a unique low-cost model of insurance was developed for the first time in the world by public sector
companies, the servicing parameters in the insurance sector came down and the ‘chalta hai’ (laidback)
attitude prevailed. According to him Insurance is ‘people-centric’ in character. Insurers deal with
people who are their policyholders, beneficiaries, claimants, intermediaries and even employees. The
government since inception perhaps has exercised more control over the business of insurance than
any other business activity. Even when this business was in the hands of private players prior to 1956
(for life insurance) and 1973 (pertaining to general insurance), regulatory control was exercised
exclusively at the state level.

25 2.2.19 Dr. S.C. Das in his paper “Cost Management Practices in Non-Life Insurance Companies : A
Comparative Study”, presented that the performance of the general insurance industry in the first
three decades after nationalization has been impressive in terms of growth. But while premiums have
shown strong growth, claims and operating expenses, both in absolute terms and relative to
premiums, have grown faster. Claims as a proportion of premiums, have increased from 51 per cent in
1972-73 to 69 per cent in 1990-91 to 73 per cent in 1992-93, largely due to the motor insurance
business. But since the opening up of Indian insurance market, over the years with the effective cost
control measures, the claims cost has 25 H. Ansari (2006), “Insurance Reforms”, IRDA
Journal,Vol.IV,No.3, published by C.S.Rao on behalf of Insurance Regulatory and Development
Authority, pp 21-24. Chapter-2 42 been reduced to 54.11 per cent in 2004-05 (% of claims expenses to
14
 CHAPTER 1 -

gross direct premium). Operating expenses in 1972-73 (when the sector was nationalized), which were
30 per cent of gross premium, reduced substantially due to merger efficiencies to 24 per cent in 1990-
91 and further to 22 per cent in 2004-05. The steep increase in motor claims over the years has
resulted in an underwriting profit of 8 per cent in 1972-73 being converted into a loss of 4 per cent and
20 per cent in 1990-91 and 2004-05, respectively. Investment income has shown strong growth over
the years largely driven by increasing yield due to higher interest rates. Overall, despite underwriting
losses, net profits have grown from 6.3 per cent in 1972-1973 to 12 per cent and 13 per cent in 1990-
91 and 2004-05, respectively due to increasing investment income. Internationally, many insurers lose
money on products and make up with investment income. 26 2.2.20 ICRA Moody’s Global Insurance, “
Indian General Insurance Outlook Major Changes Expected as Deregulation Continues”, reported that
with the Indian economy forecast to grow at 7.5% in 2008 and given rising income levels and higher
risk awareness among insurers, the country’s insurers are optimistic about demand for their products.
However, intense competition from new entrants, deregulation and a moderation in returns from the
equities market will pressure pricing and ultimately shortterm profitability. At the same time, despite
rising inflation and a severe correction in the stock market, the prevailing view in Asia is that while
China and India are not insulated from the credit crisis afflicting the US and EU, domestic demand is
strong enough to support GDP growth. Being less 26 Dr. S.C. Das (2007), “Cost Management Practices
in Non-Life Insurance Companies: A Comparative Study”, www.insurance.com, dated 4-09-2007,
January-June 2007, pp 3-8. Review of Literature 43 export dependent, India is also less vulnerable than
some of its neighbours. Rising income levels, low penetration for most consumer products, availability
of financing and changes in lifestyles/ aspirations are likely to sustain consumer demand over the next
few years. In the short term, the focus on infrastructure development will keep the economy going,
even if the tightening in credit leads to a slowdown in consumer spending.27
2.2.21 According to S V Mony in his article “New initiatives in the insurance sector: opportunities and
challenges”, reports that the insurance sector in India is nearly 150 years old. It is now in the third
phase of its existence. The first phase was the long-growth phase before the two nationalizations in
1956 and 1971 of life and general insurance respectively. At that point of time, there were more than
200 life insurance companies and 108 general insurance companies. They were all private sector
insurers with the exception of one state-owned general insurer. Several overseas insurers were
operating in India through branches. In the second phase, the entire sector became a state monopoly.
In the third phase, we now have several new private sector players competing with the large public
sector insurers. Based on the current trends, it seems that, in ten years, the market will have about 35
to 40 players, equally distributed between life and general insurance sectors. Several large global
insurers operate in India through joint ventures. In the short time since the market was opened up, a
comprehensive set of legislative instruments has been introduced. Relatively high capital 27 ICRA
Moody’s Global Insurance(2008), “ Indian General Insurance Outlook Major Changes Expected as
Deregulation Continues”, Indian General Insurance Industry Outlook,www.moodys.com, p 1. Chapter-2
44 requirement combined with tight solvency norms and the long lead time for returns has kept the
number of players relatively small. All the new players are promoted by corporate with financial
strength and commitment supported by reputed global insurers with long standing. Stability of the
market is, therefore, ensured and customers’ interests in terms of security are expected to be well
taken care of. 28 2.3 Regional Studies 2.3.1 Dinesh Kumar, “Role model of Branch Manager in the
emerging scenario”, reported that in Kerala private sector competitors have consolidated in the metro
cities and their activity is percolating to the lesser cities. Result is more competition in the existing
market.

14
 CHAPTER 1 -

29 2.3.2 Dr.M.K.Sukumaran Nair of Cochin University of Science and Technology, in his paper, reports
that privatization is no answer to rescue the industry. Lot of flexibility should be brought in the existing
system. Accountability should be there to make the system efficient. Dynamism should certainly be
inculcated by restructuring the system. With collective effort of sections of employees, insurance
sector can become a responsible and efficient public sector organization. According to him, dynamism
can be brought by induction of the following 3c’s. a) Customer Orientation b) Collective effort – of
employees, customers and Management. 28 S V Mony (2005), “Insurance Industry in India: Structure,
Performance, and Future Challenges”, Insurance Industry in India, Vikalpa ,Volume 30 , No 3 , July –
September 2005, p 97. 29 Dinesh Kumar (2004), “Role Model of Branch Manager in the Emerging
Scenario”, Market Trends, Niseema Publishers, April – June, Vol.VI,No.2, p. 12 Review of Literature 45
c) Cumulative effort – flexible working system. 30 2.3.3 According to ‘Market Trends’, a monthly
magazine of National Insurance Company Limited, reports that the year 1999-2000 was not bright for
general insurance industry in Kerala. In fact, it was one of the worst periods during the last decade. The
growth rate for the year was only a mere 10.2%, whereas the previous lowest was 15.27% registered
during 1991-92. 31 2.3.4 The magazine “Insurance Master”, reports that in Kerala, private sector
insurance companies have consolidated in the metro cities. And insurance industry has Ombudsmen in
12 cities. Each Ombudsman is empowered to redress customer grievances in respect of insurance
contracts on personal lines where insured amount is less than Rs.20 lakhs, in accordance with the
Ombudsman scheme. 32 The insurance sector in India is developing into a highly vibrant one. The
above summary of literature clearly reflects this trend. From all perspectives the sector is all set to take
off. The numbers of books received at the local level are few because of non-availability. However the
people of Kerala have started reposing greater faith in private sector insurance. This should lead to
more literature at this level. …..YZ….. 30 Dr.M.K.Sukumaran Nair (1999), “Injecting dynamism in
Insurance Sector”, Ernakulam Insurance Institute Publication , Vol.7,March 1999, pp 4-5. 31 ‘Market
Trends’ (2000), “Current News”, Niseema Publishers, April 2000, Vol.2,No.4, Niseema Publishers, p 7.
32 Insurance Master (2006), A Magazine for Insurance, The Global Publishing House, Kerala Vol.1, Issue-5, Feb
2006, P 16.

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 CHAPTER 1 -

DATA ANALYSIS,AND INTERPRETATION

DATA ANALYSIS, INTERPRETATION AND FINDINGS This chapter deals with the description of the
sample of 1000 policyholders focused on demographic factors (gender, age, religion, residence) data
analysis and its interpretation. The chapter has been divided into three major sections.
.Section 4.1
deals with important descriptive statistics, demographic profile of the policyholders, and
frequency distribution.
The section 4.2
deals with designing of the constructs with respect to objective and hypotheses of the study,
analyzing the validity of various constructs related to the study. The construct validity includes
convergent, discriminant as well as face validity. After analyzing the constructs validity the structural
model was tested and explained.
Section 4.3
provides associations with the variables with respect to various demographic characteristics of
the policyholders. In this section comparison of mean values, p-values, z-statistics and t-statistics is
also provided for the purpose of testing various hypotheses.
4.1 DEMOGRAPHIC PROFILE OF THE POLICYHOLDERS :-
The marketing concept was born out of the awareness that marketing starts with the
determination of policyholder wants and ends with satisfaction of those wants. The entire business
environment operates in a dynamic scenario where it is not easy to solve the puzzle of buyer decision
making. Policyholders vary tremendously in terms of age, income and educational levels. Marketers
also find it useful to distinguish different policyholder groups and segments and to develop product
and services tailored to these needs.
Thus presentation of sample profile would provide a clearer understanding of the marketing
environment in which policyholders are placed. Policyholders purchase decisions are significantly
influenced by their cultural, social and geographical factors that are uncontrollable by marketers.
Therefore this section elaborates profile of the policyholders.
Chapter 4: Data Analysis, Findings and Interpretation 212 TABLE
4.1:Characteristics of the policyholders on the basis of location or residence (N=1000) Region
Frequency Percent Rural 500 50.0% Urban 500 50.0% Total 1000 100.0% As policyholder behaviour of
Indian policyholder forms a part of this study, an attempt has been made to draw a broad sketch of
rural and urban policyholders. As the country is vast geographically, market by great diversity in
climate, religion, region, language, life style, educational level and economic status, Indian policyholder
present a varied view. Hence the sample comprised of rural and urban areas, from different regions
and religions. The total numbers of policyholders were 1000, where 500 policyholders were those from
rural background and 500 policyholders were from urban areas
as shown in table 4.1. The graphical representation is also provided herewith.
TABLE 5.2: Characteristics of the policyholders on the basis of Gender (N=1000) Gender Frequency
Percent Male 770 77.0% Female 230 23.0% Total 1000 100.0%
Chapter 4: Data Analysis, Findings and Interpretation 213 The second important demographic variable
was gender which is an important variable for marketers in more than one aspect. In this chapter it is
proposed to discuss demographic and socio-economic profile of the policyholders. Demographic
characteristics deal with vital statistics about the policyholder such as their age, sex, religion, location,

14
 CHAPTER 1 -

marital status and education whereas socio-economic characteristics deal with financial position,
occupation, income, wealth and other such attributes.
The total number of policyholders was 1000 where 230 (23%) policyholders were females and 770
(77%) policyholders were males as shown in table
4.2. The graph also represents that there was a fair percentage of male policyholders.
TABLE 4.3: Characteristics of the policyholders on the basis of Age groups (N=1000) Age Group
Frequency Percent Below 25 years 195 19.5% 25-34 years 309 30.9% 35-44 years 192 19.2% 45-54
years 96 9.6% 55-64 years 176 17.6% 64 or Above 32 3.2% Total 1000 100.0% Chapter 5: Data Analysis,
Findings and Interpretation 214 People buy goods and services during their life time. Segmenting the
market by age provides useful insight into the potential size of markets.
As shown in the table 4.3 the policyholders were grouped in six categories and 195 (19.5%)
policyholders were below 25 years of age, 309 (30.9%) policyholders were 25-34 years old, 192
policyholders (19.2%) were 35- 44 years old, 96 (9.6%) policyholders were 45-54 years old, 176 (17.6%)
policyholders were 55-64 years old and only 32 (3.2%) policyholders were those above 64 years of age.
The graph also indicates there was a fair representation of young policyholders who purchased life
insurance. TABLE 4.4: Characteristics of the policyholders on the basis of Income groups (N=1000)
Income Group (Annual) Frequency Percent Less than 1 Lakh 88 8.8% 1 to 1.5 Lakh 109 10.9% 1.5 to 2.5
Lakh 184 18.4% 2.5 to 5 Lakh 275 27.5% 5 to 10 Lakh 264 26.4% 10 Lakh and above 80 8.0% Total 1000
100.0%
Chapter 4: Data Analysis, Findings and Interpretation 215 It is obvious that unless people have money
or assurance of acquiring it, they cannot be regarded as potential policyholders. The amount of money
they can spend will also affect the types of goods they are likely to buy. For this reason most of the
analyst study income data. On the social scene the emergence of a large middleclass perhaps the most
significant of all developments from the marketing point of view. The middle class in now emerging as
the “Consumption Community’ in the country are recognized as educated and rational policyholders.
On the basis of income groups of the policyholders it was observed that 88 (8.8%) policyholders were
those earning less than `1 lakh, 109 (10.9%) policyholders were those earning between ` 1-1.5 lakh,
184 (18.4%) policyholders were those earning between ` 1.5-2.5 lakh, 257 (27.5%) policyholders were
those earning between ` 2.5-5 lakh, 264 (26.4%) were those earning between 5-10 lakh and only 80
(8%) were earning `10 lakh and above as shown in the table 5.4. The graph also represents that there
was a fair percentage of policyholders’ falls in the middle class income group of ` 2.5-5 lakh followed by
5-10 lakh. TABLE 5.5: Characteristics of the policyholders on the basis of owner’s wealth (N =1000)
Owner’s Wealth Frequency Percent Below 10 Lakh 283 28.3% 10-50 Lakh 325 32.5% 50 Lakh-1 Crore
192 19.2% 1-5 Crore 72 7.2% 5-10 Crore 104 10.4% More Than 10 Crore 24 2.4%
Chapter 4: Data Analysis, Findings and Interpretation 216 Owner’s Wealth Frequency Percent Below
10 Lakh 283 28.3% 10-50 Lakh 325 32.5% 50 Lakh-1 Crore 192 19.2% 1-5 Crore 72 7.2% 5-10 Crore 104
10.4% More Than 10 Crore 24 2.4% Total 1000 100.0% Consumption is also shaped by family wealth
and expenditure pattern therefore it is important to consider owners’ wealth for analysis. As shown in
the table above the policyholders grouped in six groups on the basis of owner’s wealth. The table 5.5
shows that 283 (28.3%) policyholders had wealth below ` 10 lakh, 325 (32.5%) policyholders had
wealth of ` 10-50 lakh, 192 (19.2%) policyholders had wealth of ` 50 lakh-1 crore, 72 (7.2%)
policyholders had wealth of ` 1-5 crore, 104 (10.4%) policyholders had wealth of ` 5-10 crore and only
24 (2.4%) policyholders had wealth of more than ` 10 crore.
The graph also represents that there was a fair percentage of policyholders acquired wealth between `
10-50 lakh.
Chapter 4: Data Analysis, Findings and Interpretation 217 TABLE
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 CHAPTER 1 -

4.6: Characteristics of the policyholders on the basis of family head (N =1000) Head of family
Frequency Percent Grand Father 69 6.9% Father 539 53.9% Brother/Sister 56 5.6% Mother 40 4.0%
You 200 20.0% Spouse 96 9.6% Total 1000 100.0%
As shown in the table 4.6 the policyholders showed mixed responses related to heads in their families,
in 69 (6.9%) cases grandfather was head of the family, in 539 (53.9%) cases father was the head of the
family, in 56 (5.6%) cases sibling (brother or sister) was heads of the family, in 40 (4%) cases mother
was head of the family, in 200 (20%) cases policyholders themselves were head of their family and only
in 96 (9.6%) cases spouse of the policyholder was head of the family.
Chapter 4: Data Analysis, Findings and Interpretation 218 Table 5.7: Characteristics of the policyholders
on the basis of occupations of the policyholders (N =1000) Occupation Frequency Percent Agriculture
72 7.2% Self Employed-Shop 109 10.9% Self Employed-Other 80 8.0% Business Owner 125 12.5%
Service Professionals Pvt. 302 30.2% Govt. Employees 208 20.8% Dependent 56 5.6% Retired from Pvt.
Job 8 .8% Retired from Govt. Job 40 4.0% Total 1000 100.0% The rapid social and economic
development taking place in the country is more apparent in the economic activities of policyholder in
insurance. With growth in urbanization large number of policyholders entering in the job market.
As shown in the table 4.7 policyholders were surveyed from different occupational backgrounds.
Seventy two (7.2%) policyholders were farmers, 109 (10.9%) policyholders were shop owners, 80
(8.0%) policyholders were self employed, 125 (12.5%) policyholders were business owner, 302 (30.2%)
policyholders were serving private sector, 208 (20.8%) were government employees, 50 (5.6%)
policyholders were dependent, 8 (0.8%) were retired from private jobs and 40 (4.0%) policyholders
were retired from government jobs. The graph also represents that there was a fair percentage of
service professionals followed by
Chapter 4: Data Analysis, Findings and Interpretation 219 government employees in the sample size.
TABLE 4.8: Characteristics of the policyholders on the basis of educational qualifications of the
policyholders (N =1000) Educational Qualifications Frequency Percent Below 10th 64 6.4% 10th Pass 61
6.1% 12th Pass 152 15.2% Graduate 301 30.1% Diploma Holder 128 12.8% Post Graduate 230 23.0%
Professional 64 6.4% Total 1000 100.0% Education is a means to provide systematic instruction to
make the policyholders intellectually superior and rational.
Spread of education certainly leads to liberal attitude, information sharing, social and legal reforms
and a desire to acquire high standard of living. Education therefore is determining a factor which is
likely to bring about a change for the better in the society and to enhance the status of policyholder
awareness.
As shown in the table 4.8 policyholders were from different educational backgrounds. In the sample
surveyed 64 (6.4%) policyholders were studied up to below tenth standard, 61 (6.1%) policyholders
were studied up to tenth standard, 152 (15.2%) policyholders were studied up to twelfth standard.
It was also observed that out of 1000 only 301 (30.1%) policyholders were graduates, 128 (12.8%)
Chapter 4: Data Analysis, Findings and Interpretation 220 policyholders were diploma holders, 230
(23%) policyholders were post graduates and 64 (6.4%) policyholders were professionally qualified.
The graph also represents that there was a fair percentage of graduate policyholders. TABLE 5.9:
Characteristics of the policyholders on the basis of Life cycle stage (N =1000) Personal Status (Life-
cycle- stage) Frequency Percent Single(Unmarried) 270 27.0% Married, no child 96 9.6% Married,
child/Children below 5 years 112 11.2% Married, children 5-18 years 266 26.6% Married, Children in
College 72 7.2% Married, living with working children 112 11.2% Separated, without children 8 .8%
Married, child/children separated 24 2.4% Separated, living with children 8 .8% Widow/widower and
Single 24 2.4% Remarried 8 .8% Total 1000 100.0% With the tremendous economic and social changes,
transformation in attitude and beliefs, increased geographical mobility in search of income, wealth,
14
 CHAPTER 1 -

occupation, increased standard of living the extended families will becoming less popular. Nuclear
family has become the vogue of family life styles in India. In the present study a family which has two
adults and one to three children is treated as small or nuclear
Chapter 4: Data Analysis, Findings and Interpretation 221 family. Big family or extended family is one
which has more than two adults and more than three children.
As shown in the table 4.9 in the sample surveyed 270 (27%) policyholders were unmarried, 96 (9.6%)
policyholders were married and had no child, 112 (11.2%) policyholders were married and had
child/children below 5 years of age, 266 (26.6%) policyholders were married and had child/children
between 5-18 years of age, 72 (7.2%) policyholders were married and had college going child/children,
112 (11.2%) policyholders had working child/children, 8 (0.8%) policyholders were not living with their
child/children, 24 (2.4%) policyholders were widow or widower and only 8 (0.8%) policyholders were
remarried. The graph presented above also represents that there was a sound number of singles and
married policyholders who had children between 5-18 years.
TABLE 4.10: Number of children in the family of policyholder (N =1000) No of children Frequency
Percent Nil 381 38.1% 1 219 21.9% 2 240 24.0% 3 128 12.8% 4 or more 32 3.2% Total 1000 100.0% The
family is defined as two or more persons related by blood, marriage or adoption who resides together.
In a more dynamic sense individual who constitute a family might be described as members of the
most basis social group who live together and interact to satisfy their personal and mutual needs.
Family is a primary group
Chapter 4: Data Analysis, Findings and Interpretation 222 exercising considerable influence on
policyholder behaviour. The table 5.10 shows that 381(38.1%) policyholders had no child, 219 (21.9%)
policyholders had single child, 240 (24%) policyholders had two children, 128 (12.8%) policyholders
had three children and only 32 (3.2%) policyholders had four or more children. The graph also
represents that there was a fair percentage of policyholders who had no child in their family followed
by number of policyholders who had two children in their family. TABLE 4.11: Earning members in
family of policyholder (N =1000) Earning Members Frequency Percent 1 269 26.9% 2 571 57.1% 3 120
12.0% 4 or more 40 4.0% Total 1000 100.0% Family may be extended, joint or nuclear. Policyholder
behaviour researches have revealed that in every family there is role specialisation for example ‘Karta’
in joint family decides the household products to be bought, in extended family the decider may be
one of the grand parent and in nuclear it is the housewife who has a more decisive role to play. The
table 5.11 shows that 269 (26.9%) policyholders had only one earning member in their family, 571
(57.1%) policyholders had two earning members in their family, 120 (12%) policyholders had three
earning members in their
Chapter 4: Data Analysis, Findings and Interpretation 223 family and only 40 (4.0%) policyholders had
four or more earning members in their family. The graph also represents that there was a fair
percentage of policyholders who had 2 earning members in their family.
TABLE 4.12: Religion of policyholders (N =1000) Religion Frequency Percent Hindu 896 89.6% Muslim
24 2.4% Sikh 48 4.8% Christian 16 1.6% Others 16 1.6% Total 1000 100.0% The table 4.12 shows that
the policyholders were surveyed from different religions, 896 (89.6%) policyholders were Hindus, 24
(2.4%) policyholders were Muslims, 48 (4.8%) policyholders were Sikhs, 16 (1.6%) were Christians and
16 (1.6%) were from other religions not listed in the questionnaire
The graph also represents that there was a fair percentage of Hindu policyholders followed by Sikhs
and Muslims.
Chapter 4: Data Analysis, Findings and Interpretation 224 TABLE 4.13: Home ownership of
policyholders (N =1000) Home ownership Frequency Percent Yes 771 77.1% No 229 22.9% Total 1000
100.0% The table 5.13 shows that 771 (77.1%) policyholders had home ownership whereas 229
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 CHAPTER 1 -

(22.9%) policyholders had no home ownership. The graph also represents that there was a fair
percentage of home owners in the sample size.
TABLE 4.14: Type of vehicle policyholders posses (N =1000) Type of Vehicle Frequency Percent Heavy
Motor Vehicle 117 11.7% Light Motor Vehicle 547 54.7% Motor Cycle/Scooter geared 192 19.2%
Scooter non-geared 40 4.0% None 104 10.4% Total 1000 100.0%
Chapter 4: Data Analysis, Findings and Interpretation 225 The table 4.14 shows that in the sample
surveyed 117 (11.7%) policyholders had heavy motor vehicle, 547 (54.7%) had light motor vehicle, 192
(19.2%) policyholders had geared motor cycle/scooter, 40 (4%) had non-geared scooter whereas only
104 (10.4%) policyholders had no vehicle. The graph also represents that there was a fair percentage of
policyholders those who posses light motor vehicle. TABLE 4.15: Type of back accounts policyholders
operates (N =1000) Type of Bank Account Frequency Percent Personal 643 64.3% Joint 96 9.6% Both
261 26.1% Total 1000 100.0% The table 4.15 shows that 643 (64.3%) policyholders were operating
personal bank account, 96 (9.6%) had joint account whereas 261 (26.1%) were operating both joint as
well as personal accounts.
The graph also represents that there was a fair percentage of policyholders who were operating
personal account.
Chapter 4: Data Analysis, Findings and Interpretation 226 TABLE 4.16: Property of policyholders (N
=1000) Own Property (Agriculture/ Commercial land) Frequency Percent Yes 640 64.0% No 360 36.0%
Total 1000 100.0% The table 4.16 shows that 640 (64%) policyholders were property owner
(agriculture or commercial) whereas 360 (36%) policyholders were not owner of any kind of property.
TABLE 5.17: Card policyholders operates (N =1000) Type of credit/debit card Frequency Percent Credit
Card 189 18.9% Debit Card/ATM 739 73.9% Kisan Credit Card 24 2.4% Master/Visa card 48 4.8% Total
1000 100.0% The table 4.17 shows that 189 (18.9%) policyholders were credit card holders, 739
(73.9%) were debit card holders, 24 (2.4%) were kisan credit card holders and only 48 Chapter 5: Data
Analysis, Findings and Interpretation 227 (4.8%) were master/visa card holders. DEMOGRAPHIC
PROFILE OF RURAL AND URBAN POLICYHOLDERS TABLE 5.18: Gender and Region (N =1000) Gender
Gender Regionality Total Rural Urban Male 407 363 770 Female 93 137 230 Total 500 500 1000 The
table 4.18 shows that the number of male policyholders was more in rural (407) as well as urban areas
(363) as compare to female policyholders in rural (93) and urban areas (137).
TABLE 4.19: Age Group and Region (N =1000) Age Group Age Group Regionality Total Rural Urban
Below 25 years 146 49 195 25-34 years 162 147 309 35-44 years 92 100 192 45-54 years 12 84 96 55-
64 years 69 107 176 64 or Above 19 13 32 Total 500 500 1000
Chapter 4: Data Analysis, Findings and Interpretation 228 The table-4.19 shows that number of young
policyholders was more in rural (below 25 years 146, below 35 years was 162) as well as in urban area
(below 25 years was 49 and below 35 was 147), followed by the policyholders of 55 to 64 years of age
(69 in rural and 107 in urban area)There was a fare participation of each age group in the sample.
TABLE 5.20: Income Group and Region (N =1000) Income Group (Annual) Regionality Total Rural Urban
Less than 1 Lakh 59 29 88 1 to 1.5 Lakh 78 31 109 1.5 to 2.5 Lakh 91 93 184 2.5 to 5 Lakh 176 99 275 5
to 10 Lakh 74 190 264 10 Lakh and above 22 58 80 Total 500 500 1000 Income group of an individual
plays a vital role in buying insurance policy.
The above table 4.20 provide the details about the income groups of the policyholders.

In Chapter 4: Data Analysis, Findings and Interpretation 229 the sample surveyed 59 rural and 29
urban policyholders were earning less than ` 1 lakh, 78 rural and 31 urban policyholders were earning
between ` 1 – 1.5 lakh, 91 rural and 93 urban policyholders were earning between ` 1.5 to 2.5 lakh, 176
rural and 99 urban policyholders were earning between ` 2.5 to 5 lakh, 74 rural and 190 urban
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 CHAPTER 1 -

policyholders were earning between ` 5 to 10 lakh and 22 rural and 58 urban policyholders were
earning above ` 10 lakh per annum.
4.21: Owner’s Wealth and Region (N =1000) Owner's Wealth in family Regionality Total Rural Urban
Below 10 Lakh 194 89 283 10-50 Lakh 191 134 325 50 Lakh-1 Crore 58 134 192 1-5 Crore 13 59 72 5-10
Crore 27 77 104 More Than 10 Crore 17 7 24 Total 500 500 1000 It was observed on the basis of
owners wealth of a household that in the sample surveyed owners of 194 rural and 89 urban
policyholders had a wealth below 10 lakhs,191 rural and 31 urban policyholders had wealth between `
10 – 50 lakhs
Chapter 4: Data Analysis, Findings and Interpretation 230 followed by 58 rural policyholders and 134
urban policyholders had the wealth between ` 50 to 1 Crore as shown in table 4.21. TABLE 4.22: Head
of Family and Region (N =1000) Owner/head of your family Regionality Total Rural Urban Grand Father
57 12 69 Father 255 284 539 Brother/Sister 22 34 56 Mother 24 16 40 You 114 86 200 Spouse 28 68 96
Total 500 500 1000 The table 5.22 shows that in case of 57 rural and 12 urban policyholders head of
the family was Grand Father where as in case of 255 rural policyholders and 284 urban policyholders
father was the head of family. It was also observed in case of 114 rural and 86 urban policyholders
were the head in their families.
Chapter 4: Data Analysis, Findings and Interpretation 231 TABLE 5.23: Occupation and Region (N
=1000) Occupation Regionality Total Rural Urban Agriculture 55 17 72 Self Employed-Shop 77 32 109
Self Employed-Other 44 36 80 Business Owner 42 83 125 Service Professionals Pvt. 121 181 302 Govt.
Employees 93 115 208 Dependent 41 15 56 Retired from Pvt. Job 1 7 8 Retired from Govt. Job 26 14 40
Total 500 500 1000 The table 4.23 shows that there were a fair percentage of service professionals
(121 in rural and 181 urban areas), government employees (93 rural and 115 urban policyholders)
followed by self-employed and farmers in the sample surveyed.
Chapter 4: Data Analysis, Findings and Interpretation 232 TABLE 4.24: Educational Qualifications and
Region (N =1000) Educational Qualifications Regionality Total Rural Urban Below 10th 48 16 64 10th
Pass 49 12 61 12th Pass 114 38 152 Graduate 131 170 301 Diploma Holder 48 80 128 Post Graduate 90
140 230 Professional 20 44 64 Total 500 500 1000 The information in the table 4.24 reveals that 48
rural and 16 urban policyholders were not educated up to 10th standard, 49 rural and 12 urban
policyholders were studied up to 10th standard, 114 rural and 38 urban policyholders were educated
up to 12th standard. It was also observed that 131 rural and 170 urban policyholders were graduates,
48 rural and 80 urban policyholders were diploma holders, 90 rural and 140 urban policyholders were
post graduates whereas 20 rural and 44 urban policyholders were professionally qualified.
Chapter 4: Data Analysis, Findings and Interpretation 233
TABLE 4.25: Personal Status (Life-stage) and Region (N =1000) Personal Status of the policyholders
Regionality Total Rural Urban Single (Unmarried) 181 89 270 Married, no child 33 63 96 Married,
child/Children below 5 years 68 44 112 Married, children 5-18 years 119 147 266 Married, Children in
College 33 39 72 Married, living with working children 28 84 112 Separated, without children 1 7 8
Married, child/children separated 11 13 24 Separated, living with children 8 0 8 Widow/widower and
Single 18 6 24 Remarried 0 8 8 Total 500 500 1000 The table 5.25 make clear that there was 181 rural
and 89 urban policyholders were unmarried, 33 rural and 63 policyholders were married without
children, 68 rural and 44 urban policyholders were married and living with children. It was also
observed that 1 rural and 7 urban policyholders were separated and have no issues, 11 rural and
Chapter 5: Data Analysis, Findings and Interpretation 234 13 urban policyholders were married and
their children were not living with them, 8 rural policyholders were separated and living with their
children, 18 rural and 6 urban policyholders were widow/widowers. There were a fair percentage of

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 CHAPTER 1 -

married policyholders in urban 147 and rural 119 areas that had children aged between 5-18 years of
age.
TABLE 4.26: Earning Members in Family and Region (N =1000) Earning Members in family Regionality
Total Rural Urban 1 122 147 269 2 323 248 571 3 29 91 120 4 or more 26 14 40 Total 500 500 1000 The
information in the table 4.26 reveals that 121 rural and 147 urban policyholders had only one earning
member in their family, 323 rural and 248 urban policyholders had two earning members in their
family, 29 rural and 91urban policyholders had
Chapter 4: Data Analysis, Findings and Interpretation 235 three earning members in their family
followed by 26 rural and 14 urban policyholders had four or more earning members in their family.

TABLE 4.27: Number of Children and Region (N =1000) Number of Children Regionality Total Rural
Urban Nil 212 169 381 1 122 97 219 2 74 166 240 3 68 60 128 4 or more 24 8 32 Total 500 500 1000
The information in the table 4.27 reveals that 212 rural and 169 urban policyholders had no child, 122
rural and 97 urban policyholders had one child, 74 rural and 166 urban policyholders has two children,
68 rural and 60 urban policyholders had three children and 24 rural and 8 urban policyholders had four
or more children in their family.
Chapter 4: Data Analysis, Findings and Interpretation 236 TABLE 5.28: Religion and Region (N =1000)
Religion of the policyholders Regionality Total Rural Urban Hindu 465 431 896 Muslim 9 15 24 Sikh 9 39
48 Christian 9 7 16 Others 8 8 16 Total 500 500 1000
The table 4.28 shows that there were 465 rural and 431 urban policyholders were Hindus, 9 rural and
15 urban policyholders were Muslims, 9 rural and 39 policyholders were Sikhs, 9 rural and 7 urban
policyholders were Christians and 8 rural and 8 urban policyholders were from other religion.
Chapter 4: Data Analysis, Findings and Interpretation 237 TABLE 4.29: Home Ownership and Region (N
=1000) Home Ownership Regionality Total Rural Urban Yes 372 399 771 No 128 101 229 Total 500 500
1000 The table 4.29 shows 372 rural and 399 urban policyholders had home ownership whereas 128
rural and 101 urban policyholders do not have their own homes.
TABLE 4.30: Type of Vehicle and Region (N =1000) Type of Vehicle Regionality Total Rural Urban Heavy
Motor Vehicle 48 69 117 Light Motor Vehicle 215 332 547 Motor Cycle/Scooter geared 141 51 192
Scooter non-geared 24 16 40 None 72 32 104 Total 500 500 1000
Chapter 4: Data Analysis, Findings and Interpretation 238 The information in the table 5.30 reveals that
48 rural and 69 urban policyholders were owner of heavy motor vehicle, 215 rural and 332 urban
policyholders were owner of light motor vehicle, 141 rural and 51 urban policyholders had geared two
wheeler, 24 rural and 16 urban policyholders had non-geared two wheeler and only 72 rural and 32
urban policyholders were not owner of any vehicle.
TABLE 4.31: Type of Bank Account and Region (N =1000) Type of bank account Regionality Total Rural
Urban Personal 371 272 643 Joint 36 60 96 Both 93 168 261 Total 500 500 1000
Chapter 4: Data Analysis, Findings and Interpretation 239 The information in the table 4.31 reveals
that 48 rural and 69 urban policyholders were owner of heavy motor vehicle, 215 rural and 332 urban
policyholders were owner of light motor vehicle, 141 rural and 51 urban policyholders had geared two
wheeler, 24 rural and 16 urban policyholders had non-geared two wheeler and only 72 rural and 32
urban policyholders were not owner of any vehicle. TABLE 4.32: Property Ownership and Region (N
=1000) Own property(agriculture/commercial/land) and Regionality Regionality Total Rural Urban Yes
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 CHAPTER 1 -

316 324 640 No 184 176 360 Total 500 500 1000 The table 4.32 shows 316 rural and 324 urban
policyholders were owner of property whereas 184 rural and 174 urban policyholders do not own
property.
Chapter 4: Data Analysis, Findings and Interpretation 240 TABLE 4.33: Type of Card and Region (N
=1000) Type of credit/debit Regionality Total Rural Urban Credit Card 77 112 189 Debit Card/ATM 383
356 739 Kisan Credit Card 16 8 24 Master/Visa card 24 24 48 Total 500 500 1000 The information in
the table 5.33 reveals that 77 rural and 112 urban policyholders were owner of credit cards, 383 rural
and 356 urban policyholders were owner of debit cards/ATMs, 16 rural and 8 urban policyholders were
owner of kisan credit cards whereas 24 rural and 24 urban policyholders were owner of master visa
cards.
TABLE 4.34: Insured Amount and Region (N =1000) Approximate amount insured by the policyholders
in life insurance policy/policies Rural Urban Frequency Percent Frequency Percent 1-3 Lakh 416 83.2
363 72.6 4-7Lakh 65 13.0 100 20.0 More than 7Lakh 19 3.8 37 7.4 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 241 The information in the table 4.34 reveals
that 83.2 percent rural and 72.6 percent urban policyholders insured approximately ` 1 to 3 laks of, 13
percent rural and 20 percent urban policyholders insured ` 4 to 7 laks and 3.8 rural and 8.4 percent
urban policyholders insured more than ` 7 laks.
PREFERENCES OF INSURANCE POLICIES AND REGION The information collected from the respondent
revealed that policyholders posses more than one policy of same company of different companies.
Therefore, the data related to types of insurance plan chosen by policy holders and detail of the
insurer provided below: TABLE 4.35: Whole Life Scheme Whole Life Scheme Rural Urban Frequency
Percent Frequency Percent Yes 70 14.0 82 16.4 No 430 86.0 418 83.6 Total 500 100.0 500 100.0 The
information in the table 4.35 reveals that only 14 percent rural and 16.4 percent urban policyholders
had whole life insurance policy. The whole life policies were not popular among rural and urban
policyholders.
Chapter 4: Data Analysis, Findings and Interpretation 242 TABLE 4.36: Endowment Scheme
Endowment Scheme Rural Urban Frequency Percent Frequency Percent Yes 339 67.8 269 53.8 No 161
32.2 231 46.2 Total 500 100.0 500 100.0 The information in the table 4.36 reveals that 67.8 percent
rural and 53.8 percent urban policyholders had endowment life insurance scheme.
Therefore it is stated that endowment schemes were quite popular among rural and urban
policyholders. TABLE 4.37: Term Insurance Plan Term Insurance Plan Rural Urban Frequency Percent
Frequency Percent Yes 60 12.0 52 10.4 No 440 88.0 448 89.6 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 243 The information in the table 4.37 reveals that
only 12 percent rural and 10.4 percent urban policyholders had Term insurance plans. Term insurance
plans were not popular among rural and urban policyholders. TABLE 4.38: Periodic Money Back Plan
Periodic Money Back Plan Rural Urban Frequency Percent Frequency Percent Yes 34 6.8 14 2.8 No 466
93.2 486 97.2 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 244 The information in the table 4.38 reveals that
only 6.8 percent rural and 2.8 percent urban policyholders had periodic money back plan. Periodic
money bank plans were least preferred by the sample policyholders. TABLE 4.39: Medical Benefits
Linked Insurance Medical Benefits Linked Insurance Rural Urban Frequency Percent Frequency Percent
Yes 38 7.6 82 16.4 No 462 92.4 418 83.6 Total 500 100.0 500 100.0 The information in the table 4.39
reveals that only 7.6 percent rural and 16.4 percent urban policyholders had medical benefit linked
insurance. Medical benefit linked insurance plans were least preferred by the sample policyholders.
Chapter 4: Data Analysis, Findings and Interpretation 245 TABLE 5.40: Children Plan Children Plan Rural
Urban Frequency Percent Frequency Percent Yes 105 21.0 84 16.8 No 395 79.0 416 83.2 Total 500
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 CHAPTER 1 -

100.0 500 100.0 The information in the table 4.40 reveals that only 21 percent rural and 16.8 percent
urban policyholders had children plan. Children plan were opted by rural and urban policyholders but
were not popular among sample policyholders.
TABLE 4.41: Joint Life Plan Joint Life Plan Rural Urban Frequency Percent Frequency Percent Yes 61
12.2 91 18.2 No 439 87.8 409 81.8 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 246 The information in the table 4.41 reveals
that only 12.2 percent rural and 18.2 percent urban policyholders had whole life insurance policy.
The joint life plan were least preferred by the sample policyholders. TABLE 5.42: Capital Market
Limited Plan Capital Market Limited Plan Rural Urban Frequency Percent Frequency Percent Yes 18 3.6
6 1.2 No 482 96.4 494 98.8 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 247 The information in the table 4.42 reveals
that only 3.6 percent rural and 1.2 percent urban policyholders had capital market linked plan.
Capital market linked plans were least preferred by the sample policyholders.
TABLE 4.43: Group Schemes Group Schemes Rural Urban Frequency Percent Frequency Percent Yes 24
4.8 - - No 476 95.2 500 100.0 Total 500 100.0 500 100.0 The information in the table 4.43 reveals that
only 4.8 percent rural policyholders had group life insurance schemes. Group schemes were least
preferred by the sample policyholders in rural as well as urban segment.
TABLE 4.44: Social Security Social Security Rural Urban Frequency Percent Frequency Percent Yes 16
3.2 - - No 484 96.8 500 100.0 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 248 The information in the table 4.44 reveals
that only 3.2 percent rural policyholders had social security schemes. Social security plans were least
preferred by the sample policyholders. TABLE 4.45: Education Plan Education Plan Rural Urban
Frequency Percent Frequency Percent Yes 17 3.4 7 1.4 No 483 96.6 493 98.6 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 249 The information in the table 4.5 reveals that
only 3.6 percent rural and 1.2 percent urban policyholders had educational plan. Educational plans
were least preferred by the sample policyholders. TABLE 4.46: Pension Plan Pension Plan Rural Urban
Frequency Percent Frequency Percent Yes 26 5.2 38 7.6 No 474 94.8 462 92.4 Total 500 100.0 500
100.0 The information in the table 4.46 reveals that only 5.2 percent rural and 7.6 percent urban
policyholders had pension plan. Pension plans were least preferred by the sample policyholders in
rural and urban segments.
Chapter 4: Data Analysis, Findings and Interpretation 250 TABLE 4.47: Growth Plan Growth Plan Rural
Urban Frequency Percent Frequency Percent Yes 37 7.4 35 7.0 No 463 92.6 465 93.0 Total 500 100.0
500 100.0 The information in the table 4.47 reveals that only 7.4 percent rural and 7 percent urban
policyholders had capital market linked plan.
Growth plans were least preferred by the sample policyholders. TABLE 4.48: Unit Linked Plan Unit
Linked Plan Rural Urban Frequency Percent Frequency Percent Yes 68 13.6 100 20.0 No 432 86.4 400
80.0 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 251 The information in the table 4.48 reveals
that only 13.6 percent rural and 20 percent urban policyholders had unit linked plan. Unit linked plans
were less poplar among the sample policyholders. TABLE 4.49: Systematic Investment Plan Systematic
Investment Plan Rural Urban Frequency Percent Frequency Percent Yes 24 4.8 8 1.6 No 476 95.2 492
98.4 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 252 The information in the table 4.9 reveals that
only 4.8 percent rural and 1.6 percent urban policyholders had systematic investment plan. Systematic
investment plans were least preferred by the sample policyholders. TABLE 4.50: Individual Plan
Individual Plan Rural Urban Frequency Percent Frequency Percent Yes 306 61.2 142 28.4 No 194 38.8
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 CHAPTER 1 -

358 71.6 Total 500 100.0 500 100.0 The information in the table 4.50 reveals that only 61.2 percent
rural and 28.4 percent urban policyholders had individual plan. Individual plans were quite popular
among the rural policyholders. TABLE 4.51: Money Back Plan Money Back Plan Rural Urban Frequency
Percent Frequency Percent Yes 144 28.8 56 11.2 No 356 71.2 444 88.8 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 253 The information in the table 5.51 reveals that
only 28.8 percent rural and 11.2 percent urban policyholders had capital money back plan. Money back
plans were also less preferred by the sample policyholders in both the segments. TABLE 5.52: Special
Plan Special Plan Rural Urban Frequency Percent Frequency Percent Yes 16 3.2 - - No 484 96.8 500
100.0 Total 500 100.0 500 100.0 The information in the table 5.52 reveals that only 3.2 percent rural
policyholders had special plan. Special plans were least preferred by the sample policyholders.
Chapter 4: Data Analysis, Findings and Interpretation 254 TABLE 5.53: Health Plan Health Plan Rural
Urban Frequency Percent Frequency Percent Yes 25 5.0 23 4.6 No 475 95.0 477 95.4 Total 500 100.0
500 100.0 The information in the table 5.53 reveals that only 5 percent rural and 4.6 percent urban
policyholders had health plan. Health plans were least preferred by the sample policyholders in rural
and urban segments. TABLE 5.54: Multiplier Plan Multiplier Plan Rural Urban Frequency Percent
Frequency Percent Yes 16 3.2 8 1.6 No 484 96.8 492 98.4 Total 500 100.0 500 100.0

Chapter 4: Data Analysis, Findings and Interpretation 255 The information in the table 5.54 reveals that
only 3.2 percent rural and 1.6 percent urban policyholders had Multiplier plan. Multiplier plans were
least preferred by the sample policyholders. TABLE 5.55: Plan with Flexible Investment Option Plan
with Flexible Investment Option Rural Urban Frequency Percent Frequency Percent Yes 16 3.2 8 1.6 No
484 96.8 492 98.4 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 256 The information in the table 5.55 reveals
that only 3.2 percent rural and 1.6 percent urban policyholders had plan with flexible investment
option. Plans with flexible investment option were least preferred by the sample policyholders in both
the segments. TABLE 5.56: Security Security Rural Urban Frequency Percent Frequency Percent Yes 384
76.8 304 60.8 No 116 23.2 196 39.2 Total 500 100.0 500 100.0 The information in the table 5.56
reveals that only 76.8 percent rural and 60.8 percent urban policyholder’s posses a policy with security.
Social security is one of the criteria thee policyholders expect to be part of most of the policies.
Chapter 5: Data Analysis, Findings and Interpretation 257 TABLE 5.57: Security and Critical Pension
Security and critical pension Rural Urban Frequency Percent Frequency Percent Yes 60 12.0 100 20.0
No 440 88.0 400 80.0 Total 500 100.0 500 100.0 The information in the table 5.57 reveals that only 12
percent rural and 20 percent urban policyholders had a policy with security and critical pension plan
features. TABLE 5.58: Systematic Investment Plan Systematic Investment Plan Rural Urban Frequency
Percent Frequency Percent Yes 15 3.0 65 13.0 No 485 97.0 435 87.0 Total 500 100.0 500 100.0

Chapter 4: Data Analysis, Findings and Interpretation 258 The information in the table 5.58 reveals
that only 3 percent rural and 13 percent urban policyholders opted for a policy with systematic
investment plan. TABLE 5.59: Saving Plan Saving Plan Rural Urban Frequency Percent Frequency
Percent Yes 366 73.2 242 48.4 No 134 26.8 258 51.6 Total 500 100.0 500 100.0 The information in the
table 5.59 reveals that only 73.2 percent rural and 48.4 percent urban policyholders preferred a policy
offering saving plan.

Chapter 4: Data Analysis, Findings and Interpretation 259 TABLE 5.60: Risk Disability Risk Disability
Rural Urban Frequency Percent Frequency Percent Yes 16 3.2 8 1.6 No 484 96.8 492 98.4 Total 500
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 CHAPTER 1 -

100.0 500 100.0 The information in the table 5.60 reveals that only 3.2 percent rural and 1.6 percent
urban policyholders preferred a policy with risk disability plan. TABLE 5.61: Critical Plan Critical Pension
Rural Urban Frequency Percent Frequency Percent Yes 15 3.0 49 9.8 No 485 97.0 451 90.2 Total 500
100.0 500 100.0

Chapter 4: Data Analysis, Findings and Interpretation 260 The information in the table 5.61 reveals that
only 3 percent rural and 9.8 percent urban policyholders chosen life insurance with critical pension
plan. TABLE 5.62: Security Illness Security Illness Rural Urban Frequency Percent Frequency Percent Yes
9 1.8 31 6.2 No 491 98.2 469 93.8 Total 500 100.0 500 100.0 The information in the table 5.62 reveals
that only 1.8 percent rural and 6.2 percent urban policyholders preferred a policy with security illness
plan. TABLE 5.63: Annuity Insurance Annuity Insurance Rural Urban Frequency Percent Frequency
Percent Yes 8 1.6 8 1.6 No 492 98.4 492 98.4 Total 500 100.0 500 100.0

Chapter 4: Data Analysis, Findings and Interpretation 261 The information in the table 5.63 reveals
that only 1.6 percent rural and 1.6 percent urban policyholders chosen a policy with annuity schemes.
TABLE 5.64: Flexibility Investment Portfolio Flexible Investment Portfolio Rural Urban Frequency
Percent Frequency Percent Yes 8 1.6 32 6.4 No 492 98.4 468 93.6 Total 500 100.0 500 100.0

Chapter 4: Data Analysis, Findings and Interpretation 262 The information in the table 5.64 reveals that
only 1.6 percent rural and 6.4 percent urban policyholders opted for life insurance with flexible
investment portfolio plan. TABLE 5.65: Payer’s Benefit Payer's Benefit Frequency Percent Frequency
Percent Yes 8 1.6 8 1.6 No 492 98.4 492 98.4 Total 500 100.0 500 100.0 The information in the table
5.65 reveals that only 1.6 percent rural and 1.6 percent urban policyholders opted for life insurance
with payer’s benefit plan. TABLE 4.66: Risk Coverage Risk Coverage Frequency Percent Frequency
Percent Yes 341 68.2 251 50.2 No 159 31.8 249 49.8 Total 500 100.0 500 100.0
Chapter 4: Data Analysis, Findings and Interpretation 263 The information in the table 5.66 reveals
that only 68.2 percent rural and 50.2 percent urban policyholders favored life insurance with maximum
risk coverage plan. TABLE 5.67: Investment in Equity Funds Investment in equity funds Frequency
Percent Frequency Percent Yes 8 1.6 40 8.0 No 492 98.4 460 92.0 Total 500 100.0 500 100.0 The
information in the table 5.67 reveals that only 1.6 percent rural and 8 percent urban buyer preferred a
policy where investment in equity funds is offered to the policyholders.

Chapter 4: Data Analysis, Findings and Interpretation 264 TABLE 5.68: Investment in Growth Funds `
Frequency Percent Frequency Percent Yes 8 1.6 16 3.2 No 492 98.4 484 96.8 Total 500 100.0 500 100.0
The information in the table 5.68 reveals that only 1.6 percent rural and 3.2 percent urban
policyholders had preferred a policy with growth funds. TABLE 5.69: Investment in Debts Funds
Investment in debts funds Frequency Percent Frequency Percent Yes 13 2.6 27 5.4 No 487 97.4 473
94.6 Total 500 100.0 500 100.0

Chapter 4: Data Analysis, Findings and Interpretation 265 The information in the table 5.69 reveals that
only 2.6 percent rural and 5.4 percent urban policyholders opted for a policy with debt funds. TABLE
5.70: Investment in Liquid Funds Investment in liquid funds Frequency Percent Frequency Percent Yes
8 1.6 - - No 492 98.4 500 100.0 Total 500 100.0 500 100.0 The information in the table 5.70 reveals that
only 1.6 percent rural policyholders preferred policy where money is invested in liquid funds.
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 CHAPTER 1 -

Chapter 4: Data Analysis, Findings and Interpretation 266 TABLE 5.71: Maturity Safety Switch Options
Maturity Safety Switch Options Frequency Percent Frequency Percent Yes 218 43.6 123 24.6 No 282
56.4 377 75.4 Total 500 100.0 500 100.0 The information in the table 5.71 reveals that only 43.6
percent rural and 24.6 percent urban policyholders opted for life insurance with maturity safety switch
options. TABLE 5.72: Auto Fund Rebalancing Auto Fund Rebalancing Frequency Percent Frequency
Percent Yes 8 1.6 - - No 492 98.4 500 100.0 Total 500 100.0 500 100.0

Chapter 4: Data Analysis, Findings and Interpretation 267 The information in the table 5.72 reveals that
only 1.6 percent rural policyholders opted for a life insurance policy where the money is invested in
auto fund rebalancing scheme. TABLE 5.73: Milestone Withdrawals Milestone Withdrawals Frequency
Percent Frequency Percent Yes 8 1.6 - - No 492 98.4 500 100.0 Total 500 100.0 500 100.0 The
information in the table 5.73 reveals that only 1.6 percent rural policyholders

Chapter 4: Data Analysis, Findings and Interpretation 268 preferred a plan where milestone
withdrawals are possible. TABLE 5.74: Partial Withdrawals Partial Withdrawals Frequency Percent
Frequency Percent Yes 80 16.0 48 9.6 No 420 84.0 452 90.4 Total 500 100.0 500 100.0 The information
in the table 5.74 reveals that only 16.0 percent rural and 9.6 percent urban policyholders preferred a
policy where partial withdrawals are possible. TABLE 5.75: Settlement Options Settlement Options
Frequency Percent Yes 56 11.2 64 12.8 No 444 88.8 436 87.2 Total 500 100.0 500 100.0

The information in the table 5.75 reveals that only 11.2 percent rural and 12.8 percent urban
policyholders preferred a life insurance where settlement options is provided to them.

Chapter 4: Data Analysis, Findings and Interpretation 269 TABLE 5.76: Revival Policy Revival of Policy
Frequency Percent Frequency Percent Yes 302 60.4 194 38.8 No 198 39.6 306 61.2 Total 500 100.0 500
100.0 The information in the table 5.76 reveals that only 60.4 percent rural and 38.8 percent urban
policyholders preferred a life insurance where revival of policy is easier.

Chapter 4: Data Analysis, Findings and Interpretation 270 TABLE 5.77: Policyholders of Different Life
Insurance Companies Insurance Company No. of Policyholders Bajaj 189 HDFC 112 SBI Life 355 Aviva
16 Canara Bank HSBC 24 AMP Sanmar 0 ICICI 200 ING Vysya 24 Birla Sunlife 24 Sahara 16 Max New
York 149 Shriram Life 8 LIC 920 Tata AIG 235 Reliance Life 32 Kotak Mahindra 40 Metlife India 0 Others
16 Total 2360 The table values indicated that the approached policyholders were holding different life
insurance policies from different companies and there were many policyholders who had more than
one policy from the same or different companies. The majority of policyholders bought LIC policy and
they preferred to continue the association with the company. SBI life, Tata AIG and ICICI are also
holding good position in the minds of policyholder.

Chapter 4: Data Analysis, Findings and Interpretation 271 The graph 5.77 indicates that there was a
fair representation of LIC policyholders in the sample size (920) followed by SBI life insurance and
TATAAIG. Therefore it is inferred that LIC is holding major market share in the insurance sector and
winning policyholders faith.

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Chapter 4: Data Analysis, Findings and Interpretation 272 CORRELATIONS ANALYSIS TABLE 5.78:
Correlation between Region and Type of Insurance Policy Rationality Type of Insurance Policy Rural
Urban Whole Life Scheme .451** -.056 Endowment Scheme .125** .118** Term Insurance Plan .492**
-.043 Periodic Money Back Plan .673** -.122* Medical Benefits Linked Insurance .634** -.156*
Children Plan .353** -.057 Joint Life Plan .488** -.060 Capital Market Limited Plan .041* -.014 Group
Schemes .810** .00 Social Security 1.000** 1.000** Education Plan .969** -.015 Pension Plan .776**
.445** Growth Plan .643** -.135* Unit Linked Plan .458** -.164* Systematic Investment Plan .010 -
.016 Individual Plan .145** -.080 Money Back Plan .286** -.145* Special Plan 0.034 .00 Health Plan
.793** -.028 Multiplier Plan 0.001 .00 Plan with Flexible Investment Option .000* -.016 The above
table reveals the information that Endowment Scheme, Periodic Money Back Plan, Medical Benefits
Linked Insurance, ULIPS, Social Security, Pension Plan are closely linked with the urban region as there
is a significant correlation between urban region and above plans. Therefore because of information
search and awareness of urban respondents these plans were popular among urban policyholders.
Periodic, Money Back Plan, Medical Benefits Linked Insurance, ULIPS and Growth Plan show

Chapter 4: Data Analysis, Findings and Interpretation 273 negative correlation with rural region due to
poor awareness of rural policyholders. TABLE 5.79: Correlation between Gender and Type of Insurance
Policy Gender Type of Insurance Policy Rural Urban Whole Life Scheme -.074 -.091* Endowment
Scheme -.043 -.156** Term Insurance Plan .034 -.129** Periodic Money Back Plan .129** .104*
Medical Benefits Linked Insurance -.037 .090* Children Plan .146** .084 Joint Life Plan .162** -.070
Capital Market Limited Plan .092* .068 Group Schemes .107* 0.00 Social Security .087 0.00 Education
Plan .090* .073 Pension Plan .112* .041 Growth Plan .135** .169** Unit Linked Plan .175** .049
Systematic Investment Plan .107* .078 Individual Plan .094* -.150** Money Back Plan .304** -.123**
Special Plan .087 0.00 Health Plan -.079 .135** Multiplier Plan .087 .078 Plan with Flexible Investment

Option .087 .078 The above table reveals the information that Periodic Money Back Plan, Children
Plan, Joint Life Plan, Capital Market Limited Plan, Pension Plan, ULIPS, Systematic Investment Plan,
Individual Plan, Money Back Plan are closely linked with the gender in urban region as there is a
significant positive correlation. Whereas Endowment,

Chapter 4: Data Analysis, Findings and Interpretation 274 Term Insurance Plan, Individual, Money back
plans shows negative correlation with gender in rural region. TABLE 5.80: Correlation between
Occupation and Type of Insurance Plan Occupation Type of Insurance Policy Rural Urban Whole Life
Scheme -.191** -.065 Endowment Scheme .078 .076 Term Insurance Plan -.046 -.159** Periodic
Money Back Plan .017 .033 Medical Benefits Linked Insurance -.161** -.086 Children Plan -.243** .081
Joint Life Plan -.067 .190** Capital Market Limited Plan -.214** -.295** Group Schemes -.168** 0.00
Social Security -.178** 0.00 Education Plan -.176** -.015 Pension Plan -.179** -.290** Growth Plan -
.172** .056 Unit Linked Plan -.135** .171** Systematic Investment Plan -.202** -.016 Individual Plan
.251** .222** Money Back Plan -.062 .182** Special Plan -.178** 0.00 Health Plan -.227** .107*
Multiplier Plan -.178** -.016 Plan with Flexible Investment Option -.178** -.016 The above table
reveals that occupation has negative correlation with several plans rural and urban segments such as
Capital market plan, Pension plan, ULIPs etc.

Chapter 4: Data Analysis, Findings and Interpretation 275 TABLE 5.81: Correlation between Age and
Type of Insurance Plan Age Type of Insurance Policy Rural Urban Whole Life Scheme -.202** -.281**
Endowment Scheme .214** .312** Term Insurance Plan -.375** .026 Periodic Money Back Plan -
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 CHAPTER 1 -

.366** -.162** Medical Benefits Linked Insurance -.204** -.109* Children Plan -.223** -.172** Joint
Life Plan -.312** .262** Capital Market Limited Plan -.400** -.225** Group Schemes -.279** 0.00
Social Security -.370** 0.00 Education Plan -.370** -.070 Pension Plan -.244** -.076 Growth Plan -
.168** -.066 Unit Linked Plan .367** .193** Systematic Investment Plan -.330** -.168** Individual
Plan .331** .040 Money Back Plan -.286** .194** Special Plan -.370** 0.00 Health Plan -.270** .078
Multiplier Plan -.370** .109* Plan with Flexible Investment Option -.370** .017 The above table
reveals that age is also associated with type of Insurance plans. Endowment schemes and ULIPs had a
positive correlation with age whereas Whole life, Money back, Children and Capital market linked
plans had negative correlation with age of the policyholders.

Chapter 4: Data Analysis, Findings and Interpretation 276 TABLE 5.82: Correlation between
educational level and type of insurance Education Type of Insurance Policy Rural Urban Whole Life
Scheme -.202** -.281** Endowment Scheme .214** .312** Term Insurance Plan -.375** .026 Periodic
Money Back Plan -.366** -.162** Medical Benefits Linked Insurance -.204** .262** Children Plan -
.223** .168** Joint Life Plan -.312** .262** Capital Market Limited Plan -.400** -.177** Group
Schemes -.279** .085 Social Security -.370** .065 Education Plan -.370** .470** Pension Plan -.244**
.114* Growth Plan .168** .145** Unit Linked Plan -.367** .193** Systematic Investment Plan -.330** -
.168** Individual Plan .331** .613** Money Back Plan -.286** .194** Special Plan -.370** .008 Health
Plan -.270** .078 Multiplier Plan -.370** .109* Plan with Flexible Investment Option -.370** .017 The
above table reveals that education is also linked with type of insurance plan selected by the
policyholders. Education level have negative correlation with different types of insurance plans such as
Systematic investment plan, Capital market plan, Whole life and periodic money back plans in both the
region. Education was positively correlated with Endowment and Growth plans in both the regions.

Chapter 4: Data Analysis, Findings and Interpretation 277 TABLE 5.83: Correlation between income
group and type of insurance Income Type of Insurance Policy Rural Urban Whole Life Scheme .260**
.208** Endowment Scheme .132** .275** Term Insurance Plan -.149** -.183** Periodic Money Back
Plan .187** .174** Medical Benefits Linked Insurance .169** .253** Children Plan .252** -.161** Joint
Life Plan .205** .356** Capital Market Limited Plan -.311** -.154** Group Schemes .268** .098 Social
Security -.285** .078 Education Plan .298** .167** Pension Plan .166** .033 Growth Plan .264** -.068
Unit Linked Plan .184** -.008 Systematic Investment Plan .213** -.083 Individual Plan .249** .582**
Money Back Plan -.027 -.004 Special Plan .285** 0.009 Health Plan .281** 136** Multiplier Plan -
.285** .203** Plan with Flexible Investment Option -.285** -.179** The above table reveals that
income of respondents had positive correlation with type of Insurance plans. Whole Life Scheme,
Endowment Scheme, Periodic Money Back Scheme, Medical Benefit Linked Scheme, Joint Life Plan,
Individual Plan and Health Plan have positive correlation with income group whereas Capital Market
Plan and Term Insurance had negative correlation with income group.

Chapter 4: Data Analysis, Findings and Interpretation 278 TABLE 5.84: Correlation between Personal
status and type of insurance Personal Status Type of Insurance Policy Rural Urban Whole Life Scheme -
.159** -.164** Endowment Scheme .073 .291** Term Insurance Plan -.186** .073 Periodic Money
Back Plan -.252** -.285** Medical Benefits Linked Insurance -.201** -.086 Children Plan -.223** -
.148** Joint Life Plan -.308** .118** Capital Market Limited Plan -.306** -.108* Group Schemes -
.173** .073 Social Security -.296** .063 Education Plan -.292** -.007 Pension Plan -.192** -.111*
Growth Plan -.079 .052 Unit Linked Plan -.275** .229** Systematic Investment Plan -.269** -.125**
Individual Plan .123** .544** Money Back Plan -.246** .237** Special Plan -.296** .023 Health Plan -
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 CHAPTER 1 -

.200** .018 Multiplier Plan -.296** .051 Plan with Flexible Investment Option -.296** -.008 The above
table reveals that personal status of respondents also shown negative correlation with type of
Insurance plans in rural and urban segment in case of Whole Life Scheme, Periodic Money Back Plan,
Children Plan, Capital Market Linked Plan, Pension Plan and Systematic Plan.

Chapter 4: Data Analysis, Findings and Interpretation 279 TABLE 5.85: Correlation between amount
insured and other variables Approximate amount insured by you in life insurance policy/policies
Gender -.096* Age Group .302** Income Group (Annual) .303** Owner's Wealth in family .461**
Owner/head of your family .257** Your Occupation .358** Educational Qualifications -.058 Personal
Status .366** Earning Members in family residing with you .152** Number of Children you have
.237** Regionality .258* Religion .273** Home Ownership .184** Type of Which Vehicle you posses -
.111* Type of bank account you have .458** Own property(agriculture/commercial/land) -.033 Type of
credit/debit card used .191** The above table reveals that amount of life insurance is positively
correlated with age, income, wealth, occupation, head in family, personal status of respondents,
earning members in family, region, religion, home ownership, type of bank account etc.

Chapter 4: Data Analysis, Findings and Interpretation 280 5.2 CONFIRMATORY FACTOR ANALYSIS AND
DESIGNING OF THE CONSTRUCTS Confirmatory factor analysis (CFA) is a statistical technique used to
verify the factor structure of a set of observed variables. CFA allows the researcher to test the
hypothesis that a relationship between observed variables and their underlying latent constructs
exists. The researcher uses knowledge of the theory, empirical research, or both, postulates the
relationship pattern a priori and then tests the hypothesis statistically CFA allows the researcher to test
the hypothesis that a relationship underlying latent construct(s) exists. The researcher uses knowledge
of the theory, empirical research, or both, postulates the relationship pattern a priori and then tests
the hypothesis statistically.

The use of CFA could be impacted by:  The research hypothesis being testing  The requirement of
sufficient sample size (e.g., 5-20 cases per parameter estimate)  Measurement instruments 
Multivariate normality  Parameter identification  Outliers  Missing data  Interpretation of model
fit indices A suggested approach to CFA proceeds through the following process:  Review the relevant
theory and research literature to support model specification  Specify a model (e.g., diagram,
equations)  Determine model identification (e.g., if unique values can be found for parameter
estimation; the number of degrees of freedom, (df), for model testing is positive) collect data 
Conduct preliminary descriptive statistical analysis (e.g., scaling, missing data,

Chapter 4: Data Analysis, Findings and Interpretation 281 collinearity issues, outlier detection)
estimate parameters in the model assess model fit present and interpret the results. Confirmatory
factor analysis (CFA) provides enhanced control for assessing unidimensionality (i.e., the extent to
which items on a factor measure one single construct) than exploratory factor analysis (EFA) and is
more in line with the overall process of construct validation. In this study, confirmatory factor analysis
model is run through AMOS software. Confirmatory Factor Analysis is a statistical technique used to
verify the factor structure of a set of observed variables. Confirmatory Factor Analysis (CFA) allows the
researcher to test the hypothesis that a relationship between observed variable and the underlying
latent construct exists. The researcher uses the knowledge of the theory, empirical research or both,
postulates the relationship patter a priori and than tests the hypothesis statistically. Confirmatory
Factor Analysis could occur with the development of measurement instruments such as satisfaction
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 CHAPTER 1 -

scales, attitude or policyholder service questionnaires. In this research a blueprint is developed,

questions written, appropriate scales were determined. The research instrument was used after
conducting spade work and pilot survey, data collected and Confirmatory Factor Analysis completed.
Confirmatory Factor Analysis allows the researcher to test the hypothesis that a relationship between
the observed variables and their underlying latent construct (s) exists. Various dimensions of
Confirmatory Factor Analysis are defined below: Validity Analysis The validity of scale may be defined
as the extant to which differences in observed scale reflect true differences among objects on the
characteristics being measured, rather than systematic or random errors. Some of the important
validity tests generally considered includes content, construct, discriminant and criterion related
validity. Content validity Content validity also called face validity which consists of a subjective but
systematic evaluation of the repetitiveness of the contents of a scale. The content validity of a

Chapter 4: Data Analysis, Findings and Interpretation 282 construct can be defined as the degree to
which the measure spans the domain of the constructs. For the present study, the content validity of
the instrument was ensured as the service quality dimensions and items were identified from the
literature and were thoroughly reviewed by professionals and academicians. Construct Validity
Construct validity is a type of validity that addresses the construct or characteristic of the defined
measuring scale. Construct validity require the a sound theory of the nature the construct being
measured and how it is related to other construct. It involves the assessment of the degree to which
an operationalization correctly measures its targeted variables. Establishing construct validity involves
the empirical assessment of unidimensionality, reliability and validity (convergent and discriminant
validity). In the present study, in order to check for unidimensionality, a measurement model was
specified for each construct and CFA was run for all the constructs. Individual items in the model were
examined to see how closely they represent the same construct.
A comparative fit index (CFI) of 0.90 or above for the model implies that there is a strong evidence of
unidimensionality. The CFI values obtained for all the six dimensions in the scale are equal to or above
0.90 as shown in the respective constructs. This indicates a strong evidence of unidimensionality for
the scale. Once unidimensionality and reliability of a scale is established, it is further subjected to
validation analysis.

Convergent Validity It is a measure of construct validity that measures the extant to which the scale
correlates positively with other measures of the same construct. It is the degree to which multiple
methods of measuring a variable provide the same results. Convergent validity can be established
using a coefficient called Bentler-Bonett coefficient. Scale with values of 0.90 or above shows strong
evidence of convergent validity (Bentler and Bonett, 1980). The values for the Bentler- Bonett
coefficient are summarized for all the six dimensions. All the dimensions have a value of more than
0.90, thereby demonstrating strong convergent validity.

Chapter 4: Data Analysis, Findings and Interpretation 283 Discriminant Validity Discrminant validity
assesses the extant to which a measure does not correlate with other construct from which it is
suppose to differ.
It involves demonstrating a lack of correlation among differing a construct. It is the degree to which
the measures of different latent variables are unique. Discriminant validity is ensured if a measure
does not correlate very highly with other measures from which it is supposed to differ. For assessing
discriminant validity, two chi-square comparison models were considered. The two comparison models
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 CHAPTER 1 -

are referred as Model 1 and Model 2. The comparison of chi-square statistic for Model 1 and Model 2
provides support for discriminant validity.
Criterion-related Validity It is a type of validity that examines whether a scale performs as expected in
to other variables selected as meaningful criteria .It is established when a criterion, external to the
measurement instrument is correlated with the factor structure. In the present study, criterion validity
is established by correlating the policyholder perceived service quality scale scores with overall service
quality, which is considered to be the outcome construct.
The correlations values also supports that all the dimensions have significant positive correlations with
overall service quality. Thus, criterion related validity is established for all the dimensions. A construct
can be defined as the latent variable which cannot or difficult to be measured directly from the
policyholders.
Hence a set of variables is to be included in the construct for its measurement. Before finalizing the
set of variables in the construct the content validity is to be assured. The best practice to ensure the
content validity is to show the set of possible variables in the construct to five academicians as well as
five industry experts. After analyzing the advice received from these experts the constructs along with
the set of variables is finalized. In this way the issue of content validity is resolved. After ascertaining
the content validity the next issue was to analyze the validity of each individual construct. The
construct validity consists of convergent validity, discriminant validity and face validity.

The Chapter 4: Data Analysis, Findings and Interpretation 284 convergent validity can be tested with
help of factor loadings of each individual variable to the construct. The high Factor loadings indicate
convergent validity and since high factor loadings indicate that the variable is highly explained by the
construct, hence it will not be explained by any other construct which indicates the presence of
discriminant validity. The description of various constructs, the set of variables in each construct and
their factor loadings are shown as below:- Table 5.86: Possible Construct Name of Construct Parameter
First Construct: Selection Criteria (recommendation) Second Construct: Source of Information Third
Construct: Purpose of Buying Fourth Construct: Feeling and Attitude Fifth Construct: Service Attributes
Sixth Construct: Product Attributes Seventh Construct: Service Attributes Eight Construct: Agents
Attributes Ninth Construct: Other Attributes Structural Equation Modeling Traditional statistical
methods normally utilize one statistical test to determine the significance of the analysis.

However, Structural Equation Modeling (SEM), CFA specifically, relies on several statistical tests to
determine the adequacy of model fit to the data. The chi-square test indicates the amount of
difference between expected and observed covariance matrices. A chi-square value close to zero
indicates little difference between the expected and observed covariance matrices. In addition, the
probability level must be greater than 0.05 when chi-square is close to zero. The Comparative Fit Index
(CFI) is equal to the discrepancy function adjusted for sample size. CFI ranges from 0 to 1 with a larger
value indicating better model fit. Acceptable model fit is indicated by a CFI value of 0.90 or greater (Hu
&Bentler, 1999).

Chapter 4: Data Analysis, Findings and Interpretation 285 Policyholder decision making process an
analysis The policyholder decision to purchase or reject a product is the moment of final truth for the
marketer. It signifies whether the marketing strategy has been wise, insightful and effective or
whether it was poorly planned and missed the mark. Thus the marketers are particularly interested in
policyholder decision making process. Therefore various aspects of decision making process were
considered and constructs were designed accordingly. Root Mean Square Error of Approximation
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 CHAPTER 1 -

(RMSEA) is related to residual in the model. RMSEA values range from 0 to 1 with a smaller RMSEA
value indicating better model fit. Acceptable model fit is indicated by an RMSEA value of 0.06 or less
(Hu & Bentler, 1999). If model fit is acceptable, the parameter estimates are examined. The ratio of
each parameter estimate to its standard error is distributed as a z statistic and is significant at the 0.05
level if its value exceeds 1.96 and at the 0.01 level it its value exceeds 2.56 (Hoyle, 1995).

Unstandardized parameter estimates retain scaling information of variables and can only be
interpreted with reference to the scales of the variables. Standardized parameter estimates are
transformations of unstandardized estimates that remove scaling and can be used for informal
comparisons of parameters throughout the model. Standardized estimates correspond to effect-size
estimates.

Chapter 4: Data Analysis, Findings and Interpretation 286 Table 5.87: Construct Selection criteria on
the basis of Recommendations (buying decision) Source of Information Purpose of buying Feelings and
attitude Service attribute Product attributes Agents attributes Other factors My own decision. News
paper /magazines Extra money at the time of my retirement. Premium amount gives me adequate
coverage Reputation and loyalty Type of insurance plan Agent provides error free services The State
financial policy and interest rates My employer’s suggestion. Television Extra money at the time of my
retirement. Feel secure after buying adequate insurance Ambience and experience Risk coverage
Committed to fulfill promises timely Novelty products on the insurance market. Recommended by
family member Internet /E-mails Extra money in case of emergency (illness, accident). Insurance is
better than investment in stock market Comfort and promptness Premium or cost of coverage Perform
the service right in first instance Details of insurance terms and conditions. My Friend’s suggestion
Agent To avoid incurring unnecessary costs of insurance in future Premium instalments are affordable
for me Quality of services offered Variety and associated range of products Provides accuracy (such as
payment record) Legal aspects of the policy I consider. Insurance agent’s suggestion. Office/Workplace
Circular/Notices To maintain same life style over years I will receive guaranteed fund value Hassel free
paper work and documentation Tax benefits Providing satisfactory services. My spouse’s suggestion.
Spouse/children Death protection for family members Insurance policy will grant loan facility
Presentation, appearance and surroundings Payment option (mode of payment) Prompt, responsive
and reliable. Recommended during advertisement Friends To provide financial support to spouse
Flexible investment option plans are risky Clarity of contract and terms in document Product flexibility
(surrender, loan, revival) Cooperative and friendly.

Insurance Experts/advisors To save tax SMS/Reminders about premium payment Maturity period and
grace period Known and trustworthy.

Chapter 4: Data Analysis, Findings and Interpretation 287 Selection criteria on the basis of
Recommendations (buying decision) Source of Information Purpose of buying Feelings and attitude
Service attribute Product attributes Agents attributes Other factors Word of mouth SMS/Reminder
alerts about new products Growth and benefits Properly remind about the due premium. Bankers
Information brochures, leaflets and letters Explain features, advantages and benefits of the policy
Promotional telephone call/sms Application of latest technology in providing services Thoroughness of
follow up on questions/ enquiries/ requests prior to purchase decision Memorable advertisement
Attire of the agent is acceptable Attitude of agent towards policyholders is good Behaviour of agent is
good with policyholders Agent have enough past experience in the field Attention focused on your
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 CHAPTER 1 -

priorities Awareness about terms and conditions of policy. Chapter 5: Data Analysis, Findings and
Interpretation 288 5.2.1 Analyzing the Construct Validity After ascertaining the content validity the
next issue is to analyze the validity of each individual construct. The construct validity consists of
convergent validity, discriminant validity and face validity.
The convergent validity can be tested with help of factor loadings of each individual variable to the
construct. The high Factor loadings indicate convergent validity and since high factor loadings indicate
that the variable is highly explained by the construct, hence it will not be explained by any other
construct which indicates the presence of discriminant validity. In describing a construct three types of
variables were used in this structural modeling.
Manifest variable (Observed behavior, usually dependent) Latent Variable (Unobserved behavior,
explanatory) Residual Variable (Unobserved behavior, unexplained) The description of various
constructs, the set of variables in each construct and their factor loadings are shown as below:-
5.2.2 Factors Influencing Policyholders in Selecting the Insurance Policy (Selection Criteria) The first
construct defined as the factors influencing policyholders in selecting the insurance policy along with
the set of variables are shown below in figure 5.1. The first construct consists of seven manifest, seven
residual and one latent variable. The regression weights of each variable as result of the construct are
shown in table 5.88. As shown in the table all the regression weights are high and significant. Hence
the construct validity is ensured and can be concluded that the construct significantly explains the
variables. The standardized regression weights as well as the multiple squared correlations are shown
in table 5.88. The high value of the standardized weights indicates the higher influence of the construct
to the variable. The squared multiple correlations indicate the percentage of variance of the measured
variable that can be explained with the help of the variations in the construct. The results as shown in
table 5.88 indicate that the agent of the insurance company is the most influencing

Chapter 4: Data Analysis, Findings and Interpretation 289 criteria for the policyholder of the insurance
policy followed by the friends and family members. The agents being the most informed source has
maximum influence on the policyholders as compared to other sources especially in rural segment. The
advertisements of the insurance companies also influence the policyholders in deciding the insurance
policy. The squared multiple correlation of insurance agent indicates that the 67 percent of the
variance of the impact of insurance agent that can be explained with the help of the selection criteria.
The fit of the model is shown in table 5.89.
The results indicate that the model is fit. TABLE 5.88: Regression Weights Selection Criteria Suggestion
of Buying the Insurance Estimate Standardised Regression Weight Squared Multiple Correlation S.E.
C.R. P Nobody influenced me, it was my own decision. 1.000 .221 .049 My employer’s suggestion.
1.051 .312 .098 .194 5.41 *** Recommended by family member 2.632 .755 .570 .409 6.44 *** My

Friend’s suggestion 2.585 .742 .551 .402 6.43 *** Insurance agent’s suggestion. 3.289 .819 .672 .508
6.47 *** My spouse’s suggestion. 1.950 .411 .169 .332 5.87 *** Recommended during advertisement
2.586 .583 .339 .413 6.26 *** TABLE 5.89: Model Fit Selection Criteria Model Fit Statistic Chi-square
632.485 CFI .725 NFI .722 RFI .583 RMSEA .210 LO 90 .196 HI 90 .224

Chapter 4: Data Analysis, Findings and Interpretation 290 The Chi-square value is presented in the
matrices. The RMSEA value indicates the amount of unexplained variance or residual is large than 0.06
or less critical. CFI and NFI value are not in complete agreement but are very close to the criteria (0.90
or larger) for acceptable model. The model fit statistics from AMOS output is shown in the table 5.89.
FIGURE: 5.1 5.2.3 Sources of Information Influencing Policyholders in Selecting the Insurance Policy In
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 CHAPTER 1 -

order to increase the awareness about the importance of insurance policies among the investors, the
insurance companies uses different sources to pass on the necessary

Chapter 4: Data Analysis, Findings and Interpretation 291 information to their prospective
policyholders. The various source of information may be TV, newspapers, agents, phone calls, internet,
emails, mobile SMS, print media etc. The second construct represents the impact of various sources of
information in influencing the policyholders in selecting the insurance policy along with the set of
variables. The construct consists of eleven manifest, eleven residual and one latent variables are
shown below in fig. 5.2. People have easy access to news papers and variety of other sources of
communication due to which policyholders are exposed to new products, opinions and
advertisements. In the present study the importance of various sources of communication was
analysed. The regression weights of each variable as result of the construct are shown in table 5.90. As
shown in the table all the regression weights are high (more than 0.5) and significant. Hence the
construct validity is ensured and can be concluded that the construct significantly explains the
variables. The standardized regression weights as well as the multiple squared correlations are shown
in table 5.90 .The standardizes regression weights indicates comparative influence of the construct to
its variables.
The high value of the standardized weights indicates the higher influence of the construct to the
variable. The squared multiple correlations indicate the percentage of variance of the measured
variable that can be explained with the help of the construct. It is found from the results that the most
influential source of information for policyholders was insurance agent and friends. This is due to the
fact that still today the policyholders from the rural background do not have the enough awareness
about the websites and internet. The insurance agents in most of the rural areas are actually the
persons who commands good position in the society and can influence the policyholders in deciding
and buying the insurance policies. The office workplace notifications/ circulars also influence the
policyholders in selecting the insurance policy especially for the service class policyholders. The
squared multiple correlations of insurance agent and friends indicate that the 81 percent of the
variance of the impact of insurance agent and friends that can be explained with the help of the
selection criteria. The fit of the model is shown in table 5.91. The results indicate that the construct is
fit.

Chapter 4: Data Analysis, Findings and Interpretation 292 TABLE 5.90: Regression Weights Sources of
Information Sources of Information Estimate Standardised Regression Weight Squared Multiple
Correlation S.E. C.R. P News paper /magazines 1.000 .291 .085 Television 1.575 .426 .181 .202 7.804
*** Internet /E-mails -.218 -.073 .005 .100 -2.175 .030 Agent 5.149 .903 .816 .560 9.195 ***
Office/Workplace Circular/Notices 3.137 .706 .498 .353 8.890 *** Spouse/children 1.159 .276 .076
.182 6.378 *** Friends 4.860 .903 .816 .529 9.195 *** Insurance Experts/advisors 2.633 .570 .325 .309
8.512 *** Word of mouth 5.955 .862 .743 .651 9.148 *** Bankers .089 .026 .001 .114 .777 .437
Promotional telephone call/sms 1.898 .580 .336 .222 8.546 *** TABLE 5.91: Model Fit Sources of
Information Model Fit Statistic Chi-square 3372.77 CFI .538 NFI .535 RFI .419 RMSEA .275 LO 90 .267 HI
90 .283 The Chi-square value is presented in the matrices. The RMSEA value indicates the amount of
unexplained variance or residual is large than 0.06 or less critical. CFI and NFI value are not in complete
agreement but are very close to the criteria (0.90 or larger) for acceptable model. The model fit
statistics from AMOS output is shown in the table 5.91.

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Chapter 4: Data Analysis, Findings and Interpretation 293 FIGURE: 5.2 5.2.4 Purpose of Buying the
Insurance Policy The policyholder buy the product or a service in order to satisfy some need or wants.
The insurance policy is a service which actually covers the risk of loss due to some unwanted
happenings with the person insured. The insurance policies also help the persons in saving their
income tax and provide them lump sum money at the time of maturity of the policy so that the long
term liabilities can be fulfilled with that money. The third construct is defined as the purpose of buying
the insurance policy consists of eight manifest, eight residual and one latent variable. The third
construct represents the perception of the policyholders about the different purpose of buying the
insurance policy. The construct along with the set of variables are shown below in fig. 5.3. The
regression weights of each variable as result of the construct are shown in table 5.92. As shown in the
table all the regression weights are high and significant. Hence the construct validity is ensured and
can be concluded that the construct significantly explains the variables. The standardized regression
weights as well as the multiple squared correlations are shown in table 5.92 .The standardizes
regression weights indicates comparative influence of the construct to its variables. The high

Chapter 4: Data Analysis, Findings and Interpretation 294 value of the standardized weights indicates
the higher influence of the construct to the variable. The squared multiple correlations indicate the
percentage of variance of the measured variable that can be explained with the help of the construct.
The results indicate that the most important purpose of buying insurance policy is to provide death
protection for family members in case of any untoward incident as well as the saving of the income
tax. The results also indicate that another important purpose of buying insurance to provided once self
some extra money in case of emergency (illness, accident). It can be concluded from the results that
the purpose to cover the risk of life and to save the family members from the financial loss due to
unwanted events in the life is the main purpose to buy the insurance policies. For service class
policyholders the saving of income tax is another main reason to buy the insurance policy. TABLE 5.92:
Regression Weights Purpose of Buying Purpose of Buying Estimate Standardised Regression Weight
Squared Multiple Correlation S.E. C.R. P To provide myself with some extra money at the time of my
retirement. 1.000 .619 .383 To provide my dear ones with some extra money at the time of my
retirement. .796 .406 .165 .069 11.557 *** To provide myself with some extra money in case of
emergency (illness, accident). 1.883 .814 .663 .093 20.263 *** To avoid incurring unnecessary costs of
insurance in future .464 .239 .057 .066 7.021 *** To invest/save money to maintain same life style
over years .377 .138 .019 .092 4.106 *** To provide death protection for family members in case of
any untoward incident 2.265 .884 .781 .107 21.235 *** To provide financial support to spouse .710
.363 .132 .068 10.430 *** To save tax 1.998 .837 .701 .097 20.624 *** Chapter 5: Data Analysis,
Findings and Interpretation 295 TABLE 5.93: Model Fit Purpose of Buying Model Fit Statistic Chi-square
1601.101 CFI .602 NFI .600 RFI .439 RMSEA .281 LO 90 .270 HI 90 .292 The squared multiple correlation
of death protection, indicates that the 78 percent of the variance of the impact of insurance agent and
friends can be explained with the help of the selection criteria. The statistics for goodness of fit of the
model is shown in table 5.93. The results indicate that the model is fit.

CONCLUSION & SUGGESTIONS

CONCLUSION 

5.1

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The insurance industry in India has changed rapidly in the challenging economic environment
throughout the world. In the current scenario, Indian insurance companies have become competitive
in nature and are providing appropriate distribution channels to get the maximum benefit and serve
customers in manifold ways.  Indian Insurance industry has big opportunity to expand, given the
large population and untapped potential. The insurance market in India has witnessed dynamic
changes including entry of a number of global insurers. Most of the private insurance companies are
joint ventures with recognized foreign institutions across the globe. Saturation of markets in many
developed economies has made the Indian market even more attractive for global insurance majors.
5.2
 The Indian Insurance Industry has undergone several changes in trends and policies in the year
2010. The US$ 41 billion industry is considered the fifth largest life insurance market, and is growing at
a rapid pace of 32-34% annually, according to 323 the Life Insurance Council. State-owned Life
Insurance Corporation (LIC) of India has recorded about 37% growth in its new business premium to
US$ 15.1 billion during April to January FY 2010, the data from IRDA stated. Overall, 23 life insurers in
the country collectively mopped US$ 21.35 million as new first year premium during the period, a 26%
increase from US$ 17 billion during April-January 2009-2010.
5.3
 Out of this, the 22 private life insurers together accounted for US$ 6.26 billion worth of new
business in April-January 2010- 11, compared to US$ 5.91 billion in the year ago period, a growth of
about 6%. Among the private life insurance players, SBI Life saw its premium collections from new
business grew by 9% to US$ 1.1 billion during the period, while ICICI Life's premium collections from
new businesses grew to US$ 1.15 billion April-January 2010-11, from US$ 964 million during the same
period last year.
5.4
 During the 1997-98 LIC sum assured through policies 63927.83 Crore Rs. In 1998-99 LIC sum assured
75606.26 Crore Rs. In 1999-00 LIC sum assured 91490.94 Crore Rs. In 2000-01 LIC sum assured
124950.63 Crore Rs. In 2001-02 LIC sum assured 192784.96 Crore Rs. We can see that LIC gets success
in new business. 324  In 1997-98 LIC's number of polices are 850.03 in lakh. In 1998-99 LIC'S number
of polices are 917.26 in lakh. In 1999-00 LIC's number of polices are 1013.89 in lakh. In 2000-01 LIC's
numbers of policies are 1131.11 in lakh. In 2001-02 LIC's number of policies 1258.76 in lakh. We can
see that LIC's position is very good. Numbers of policies are increased.
5.4
 LIC, set out with clear objectives, grew steadily and spread the message of insurance to the farthest
corners of the nation. From a new business of Rs. 329 crore sum assured under 9.5 lakhs policies
procured during the period of 16 months from 1.9.56 to 31.12.57, LIC progressed to the new business
of Rs. 91,213 crore under 170 lakhs policies in the year ending on 31st March, 2000. The first premium
received reached Rs. 4,959 crore compared to Rs. 13 crore in 1957. Its rural business was significant,
representing 16.7% of the total number of policies. The bonus rates were n the rising curve. As a
learning organization, it took periodical steps to reorganize its functions and, by empowering the staff,
could take the range of services nearest to the policy holders.

5.5
 The vast premium income mobilized by LIC helped the nation in economic development, especially
in building up infrastructure. In 1999-2000, its accumulated investment in 325 infrastructure was Rs.

14
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1,17,888 crore, helping the country in improving the quality of the people at large through the
enhancement of basic amenities like potable water, drainage, housing, electrification and transport.
5.6
 LIC has made notable contributions to the development of the equity market. It has participated in
the establishment of institutions lie NSC, IDBI, UTI and NIA. LIC has taken advantage of information and
Technology and initiated measures for the convenience of the policy holders.  The other index,
insurance penetration, is the ratio of annual gross insurance premium to the gross domestic product
(GDP). The country's life insurance premium was mere a 1.39% and for non-life, it was still lower, at 0.6
per cent. The comparative figures for other countries are: Malaysia (2.16 and 1.72) South Korea (8.39
and 2.89) south Africa (13.92 and 2.62) and China (1.02 and 0.61). In1999, in the global insurance
market, the US accounted for one-third of the total premium and Japan had 21.29 per cent share. India
could account for a mere 0.36 per cent only. So, the insurance industry, even in the nationalized set
up, could not make the desired progress in keeping pace with international standards. 326  Insurance
companies not only provide risk cover to infrastructure projects, they also contribute long-term funds.
In fact, insurance companies are an ideal source of long term debt and equity for infrastructure
projects. With long term liability, they get a good asset- liability match by investing their funds in such
projects. IRDA regulations require insurance companies to invest not less than 15 percent of their
funds in infrastructure and social sectors. International Insurance companies also invest their funds in
such projects.
5.7
 The Life Insurance Corporation of India has been a nationbuilder since its formation in 1956. True to
the objectives of nationalization, the LIC has mobilised the funds invested by the people in life
insurance for the benefit of the community at large. The LIC has, over the years, been investing a major
part of its funds primarily in the socially oriented sector. As at 31st March, 2004, 83.18% of its total
investments were in the public sector, 0.63% were in the co-operative sector and 16.19% in the private
sector.
5.8
 The total funds, so invested for the benefit of the community at large have accumulated to
Rs.321753.53 crore as at 31st March, 2004 after meeting the liabilities towards the claims, 327
management and other expenses, registering an accretion of Rs.48384.41 crore during the year 2003-
2004.  Under the Corporation's scheme of providing financial assistance for piped water supply and
drainage schemes, 63 urban/local bodies in 5 States and the Union Territory of Chandigarh have
benefited during the year. In addition, 1448 Schemes in 2 states have also received financial assistance
from the Corporation for rural piped water supply schemes during the year. The investment in this
sector up to 31st March, 2004 was Rs.7111 crore. (Including Investment in Irrigation).
5.9
 The Corporation also provides financial assistance to state electricity boards/power corporations for
power generation projects by way of loans/subscriptions to their bonds. The Corporation's investment
of Rs.21217 crore up to 31st March, 2004 in the power sector makes the Corporation the largest single
contributing factor in the progress of electrification schemes in the country.  The Corporation has
also been extending financial assistance to state level apex co-operative housing finance societies, the
benefits of which are passed on to individuals through primary societies. Besides, the Corporation is
providing finances by way 328 of subscribing to bonds of housing finance institutions like Housing
Development Finance Corporation, Housing and Urban Development Corporation, National Housing
Bank etc.

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The total contribution of the Corporation up to 31st March, 2004 to housing development activities by
way of loans/bonds to state governments, state-level apex societies, HDFC, HUDCO, NHB, LIC HFL etc.
and loans under mortgage housing schemes amounted to Rs.20694 crore.
5.10
 The Corporation has been assisting development of road transport by providing financial assistance
to State Road Transport Corporations for augmenting their fleet of buses. The total investment in this
sector up to 31st March, 2004 was Rs.1373 crore.  With largest number of life insurance policies in
force in the world, Insurance happens to be a mega opportunity in India. It’s a business growing at the
rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking
services, it adds about 7 per cent to the country’s GDP. Gross premium collection is nearly 2 per cent of
GDP and funds available with LIC for investments are 8 per cent of GDP. 329  A well-developed and
evolved insurance sector is needed for economic development as it provides long term funds for
infrastructure development and at the same time strengthens the risk taking ability. It is estimated
that over the next ten years India would require investments of the order of one trillion US dollar. The
Insurance sector, to some extent, can enable investments in infrastructure development to sustain
economic growth of the country.
5.11
 Insurance penetration has witnessed commendable increase from 1.77 in the year 2000 to 4 in the
year 2007 in life insurance sector. Non-life penetration has increased from 0.55 percent to 0.60
percent during this period. Insurance industry has witnessed a business growth of more than 5 times
from Rs. 44705 crore in the year 2000-01 to Rs. 253272 crore in the year 2008-09. Assets under
management of the sector has grown more than 3 fold in matter of 8 years from Rs. 218471.63 crore
in 2000- 01 to Rs.818321.69 crore in 2007-08.  In the nine years since the Insurance sector was
opened up in the year 2000, Insurance industry has witnessed a business growth of more than five
times, from Rs. 44705 crore in 2000-01 to Rs. 253272 crore in 2008- 09. Ever since, there has been
paradigm shift in the meaning and relevance of 'Insurance' to 330 the common man. This growth
process in the sector has pioneered abundant opportunities in terms of employee generation. In this
scenario, Chartered Accountants (CAs) are thrust with responsibility to authenticate various
information submitted to the Regulator by an insurance company. While insurance companies need
experts to present their performance meaningfully to the public, stakeholders need professional
advices for a meaningful interpretation of the same. Role of CAs, therefore, comes to the forefront in
such a scenario.  From the given table, CAGR has been calculated on different periodicals, during
2000-05 total amount of insured as well as assessable deposits was 14.51, 18.57 respectively . Again
during 2005-10 it was 21.55 as well as 23.56. while it was 16.63, 20.04 respectively during 2010. Which
represents fluctuation of insured deposits as well as assessable deposits.
5.12
 From the given table, CAGR has been calculated on different periodicals, during 2000-05 Surplus
Balance, Investment Reserves, Total Liabilities Assets as well as Investments in central Government
Securities was 20.42, 12.64, 18.75, 16.96 respectively. Again during 2005-10 it was 20.42, 20.66, 20.85,
20.03 respectively. But during the decade it was 20.83, 24.92, 331 21.01, 18.17 respectively during
2010. Which represents fluctuation of insured deposits as well as assessable deposits.  In fact
infrastructure investments are ideal for asset-liability matching for life insurance companies given their
long term liability profile. According to preliminary estimates published by the Reserve Bank of India,
contribution of insurance funds to financial savings was 14.2 per cent in 2005-06, viz., 2.4 per cent of
the GDP at current market prices. Development of the insurance sector is thus necessary to support

14
 CHAPTER 1 -

continued economic transformation. Social security and pension reforms too benefit from a mature
insurance industry.

5.13
 The insurance sector in India, which was opened up to private participation in the year 1999, has
completed over seven years in a liberalized environment. With an average annual growth of 37 per
cent in the first year premium in the life segment and 15.72 per cent growth in the nonlife segment,
together with the largest number of life insurance policies in force, the potential of the Indian
insurance industry is still large. Life insurance penetration in India was less than 1 per cent till 1990-91.
During the 1990s, it was between 1 and 2 per cent and from 2001 it was over 2 per cent. In 2005 it had
increased to 2.53 per cent. 332  Insurance agents numbering over 6.24 lakhs in rural areas. In the
financial year Policies sold in rural areas (2004-05) - No. of policies - 55 lakhs, Sum assured 46,000
crores, (2005-06) - No. of policies - 65 lakhs, Sum assured 66,000 crores, (2006-07) - No. of policies - 84
lakhs, Sum assured 99,500 crores, (2007-08) - No. of policies - 109 lakhs, Sum assured 1,38,000 crores,
(2008-09) - No. of policies - 133 lakhs, Sum assured 1,98,000 crores, (2009-10) - No. of policies - 158
lakhs, Sum assured 2,14,000 crores, Social security No. of lives covered 2009-10 17.4 lakhs 2004-05
42.1 lakhs.
5.14
 Life insurance industry provides increased employment opportunities. Employees in insurance
sector as on 31st March, 2005 is around 2 lakhs. Many agents depend on insurance for their livelihood.
No. of agents on 31st March 2004 – 15.59 lakhs. Brokers, corporate agents, training establishments
provide extra employment opportunities. Many of these openings are in rural sectors.  The
researcher identifies the links between insurance, financial sector performance and growth in
substantial detail, helping define the insurance – economic growth relationship and supporting the
policy conclusions. The thrust of these links is that insurers encourage a greater efficiency and depth in
the 333 financial sector, by complementing, competing, and otherwise improving the services offered
by other financial institutions.  With largest number of life insurance policies in force in the world,
Insurance happens to be a mega opportunity in India. It’s a business growing at the rate of 15-20 per
cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds
about 7 per cent to the country’s GDP. Gross premium collection is nearly 2 per cent of GDP and funds
available with LIC for investments are 8 per cent of GDP.
5.15
 Yet, nearly 80 per cent of Indian population is without life insurance cover while health insurance
and non-life insurance continues to be below international standards. And this part of the population is
also subject to weak social security and pension systems with hardly any old age income security. This
itself is an indicator that growth potential for the insurance sector is immense.  India ranks 23rd in
the world with total insurance business (premiums) of a little over $7.2 billions (non-Life: over $2
billions, 32nd rank; life: over $5 billions, 20th rank). The spread and reach of insurance remains, even
after so many years of nationalisation, skewed and urban-oriented. India has an 334 insurance density,
which is premium $ per capita of only 7.6 (non-life: 2.2; life: 5.6), and ranks 82nd in the world.
Insurance penetration, which is premium as share of GDP (per cent), in India is a measly 1.95 (non-Life:
0.56; life: 1.39), and ranks 51st in the world.  All over the world, regulation of the insurance sector
has been taking new dimensions ever since the process of globalisation begun. It is being increasingly
felt that a balanced and sustained growth of the insurance sector is necessary for the sustenance of
the globalisation process. Developed countries have had a long tradition of insurance supervision and

14
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have come to appreciate the benefits of a sound supervisory regime. There, the paradigm of insurance
regulation has shifted to more proactive super vision, monitoring, and facilitation of the business.

5.17
 India had 16% of the world population, but only 1.68% of the world life insurance market in 2006.
India is also far behind world averages in terms of insurance penetration, and insurance density. A
mere 20% of the insurable population aged 20 to 60 years is currently covered by life insurance. The
average number of policies (life/non-life) held by per Indian 335 consumer is just 1.33 as against 5.2
policies per consumer in mature markets.  With life insurance premiums being just 2.5% of GDP and
general insurance premiums being 0.65% of GDP, the opportunities in the Indian market place is
immense. The next five years will be challenging but those that can build scale and market share will
survive and prosper.
5.18
 In life insurance business, India ranked 9th among the 156 countries for which data are published by
Swiss Re. During 2009, the life insurance premium in India grew by 10.1 per cent (inflation adjusted).
However, during the same period, the global life insurance premium had contracted by 2 per cent. The
share of Indian life insurance sector in global market was 2.45 per cent during 2009, as against 1.98 per
cent in 2008.  The non-life insurance sector witnessed a marginal growth of 1.6 per cent during 2009.
However, its performance was better when compared to global non-life premium, which contracted by
0.1 per cent during the same period. The share of Indian non-life insurance premium in global non-life
insurance premium remained very low at 0.46 per cent and India ranked 26th in global non-life
insurance premium. 336
5.19
 The insurance density of life insurance sector had gone up from USD 9.1 in 2001 to USD 47.7 in
2009. Similarly, insurance penetration of life sector had gone up from 2.15 per cent in 2001 to 4.60 per
cent in 2009.  The penetration of non-life insurance sector in the country remains near-constant for
the last 9 years at around 0.60 per cent. However, there is a marginal increase in density, which has
increased from USD 2.4 in 2001 to USD 6.7 in 2009.  The non-life insurance industry underwrote a
total premium of 34,620 crore in 2009-10 as against 30,352 crore in 2008-09 (Table 6.2) registering a
growth of 14.06 per cent as against an increase of 9.09 per cent recorded in the previous year. The
public sector insurers exhibited an impressive growth in 2009-10 at 14.49 per cent; more than twice
the previous year’s growth rate of 7.12 per cent. In contrast, the private non-life insurers registered a
growth of 13.44 per cent, which is only marginally higher than 12.09 per cent achieved during the
previous year. The figures reflect a comparative hardening of rates in the industry.
5.20
 The premium underwritten by 13 private sector insurers in 2009-10 was 13,977 crore as against
12,321 crore in 2008-09. ICICI Lombard continued to be the largest private sector non- 337 life
insurance company, which accounted for a market share of 9.52 per cent, although its market share
declined from 11.21 per cent in 2008-09. Bajaj Allianz, the second largest private sector non-life
insurance company, which underwrote a total premium of 2,482 crore, also saw its market share
depleting from 8.63 per cent in 2008-09 to 7.17 per cent during the year under review. Of the 13
private insurers, 11 reported an increase in premium underwritten (9 out of 10 in 2008-09). Two of the
non-life insurers had started operations in 2009-10.  In the case of public sector non-life insurers, all
four companies expanded their business with an increase in their respective premium collections.
While the market shares of Oriental Insurance and United India increased in 2009-10 over 2008-09, the
shares declined in case of National and New India. United India underwrote a premium of 5,239 crore
14
 CHAPTER 1 -

in 2009-10 as against 4,278 crore in the previous year, which helped to improve its market share to
15.13 per cent in 2009-10 from 14.09 per cent in the previous year. It reported a growth of 22.47 per
cent, which is higher than the industry average for 2009-10. New India Assurance with an insurance
premium of 6,043 crore remains the largest general insurance company in India with market share of
17.45 per cent. 338

5.21
 In August 2005, the private players in the life insurance business have increased their market share
to 23.93 per cent. Among them ICICI prudential is ranked first in capturing the market followed by
Bajaj Allianz and HDFC Standard. In the General Insurance sector the private players have captured
27.35 per cent. Among them ICICI-Lombard is ranked first, followed by Bajaj Allianz and IFFCO-Tokio. 
The healthy competition in the sector enabled the State owned insurers of our mother country to
reduce its market share to 76.07 per cent and 72.65 percent in life and non-life business respectively.
Moreover, private insurers have planned to increase their market share in the next five years. The
public insurers have to enrich its approach to withhold its share.
5.22
 Under the Corporation's scheme of providing financial assistance for piped water supply and
drainage schemes, 63 urban/local bodies in 5 States and the Union Territory of Chandigarh have
benefited during the year. In addition, 1448 Schemes in 2 states have also received financial assistance
from the Corporation for rural piped water supply schemes during the year. The investment in this
sector up to 31st March, 2004 was Rs.7111 crore. (Including Investment in Irrigation).  The
Corporation also provides financial assistance to state electricity boards/power corporations for power
generation 339 projects by way of loans/subscriptions to their bonds. The Corporation's investment of
Rs.21217 crore up to 31st March, 2004 in the power sector makes the Corporation the largest single
contributing factor in the progress of electrification schemes in the country.
5.23
 The Corporation is providing finances by way of subscribing to bonds of housing finance institutions
like Housing Development Finance Corporation, Housing and Urban Development Corporation,
National Housing Bank etc. The total contribution of the Corporation up to 31st March, 2004 to
housing development activities by way of loans/bonds to state governments, state-level apex societies,
HDFC, HUDCO, NHB, LIC HFL etc. and loans under mortgage housing schemes amounted to Rs.20694
crore.  The Corporation has been assisting development of road transport by providing financial
assistance to State Road Transport Corporations for augmenting their fleet of buses. The total
investment in this sector up to 31st March, 2004 was Rs.1373 crore.  In 1997-98, the scope of the
socially oriented sector has also been widened to accommodate infrastructure projects both in 340 the
public and the private sectors pertaining to ports, railways (BOLT Projects), roads, highways. The total
investment in this sector up to 31 st March, 2004 was Rs. 1272 crore.
5.24
 The Corporation also helps to boost the industrial growth in the country. The Corporation's
assistance to state level finance corporations and all India finance corporations like IDBI, IFCI, ICICI
Bank etc. by way of subscription to bonds/debentures issued by such institutions, also indirectly helps
development of small scale and medium scale industries. The Corporation also makes investment in
the corporate sector in the form of long/medium term loans to companies/corporations. The total
investment mode by way of loans as at 31st March, 2004 was Rs.6647 crore and by way of subscription
to shares/debentures as at 31st March, 2004 was Rs.88570 crore. All these make a distinct
contribution towards growth in industrialisation and generation of skilled and unskilled employment
14
 CHAPTER 1 -

opportunities in the country.  After passing out more than one decade of economic reforms all
sectors : Social, Infrastructure, Power, Railway, Telecom, Municipility, Housing as well as Water Supply
has been put on top priority which again represent the growth and development of Indian economy.
341  The total funds, so invested for the benefit of the community at large accumulated to
10,95,841.34 crore as on 31st March 2010The investment of the Corporation's funds is governed by
Section 27A of the Insurance Act, 1938, subsequent guidelines/ instructions issued there under from
time to time by the Government of India and the IRDA by way of regulations.

5.25
 Investment portfolio of LIC Pension Fund is basically debt oriented, 85% are to be invested in debt
instruments, up to 15% in equity and/ or equity related mutual funds schemes and up to 5% Money
Market Instruments. The net asset value of Central Government scheme as on 31st March 2010 was
Rs. 12.3524 and that of State Government scheme was Rs. 10.6027. Annualized returns for Central
Government funds was 11.7620% and that of State Government funds was 7.8566% by 31st March
2010.  The various sources of funds available for investment by life insurers can be broadly classified
as funds from (i) traditional products and (ii) ULIP products. The total funds invested by life insurers as
on 31st March, 2010 was 12,05,155 crore (9,16,365 crore in 2008-09), of these 3,31,619 crore (27.52
per cent of total funds) represents ULIP funds and the remaining 8,73,536 crore (72.48 per cent) is the
contribution by traditional products. The 342 share of ULIP funds in total investments has continued to
grow in recent years reflecting the public preference for these products. During the year under review,
ULIP funds contributed 55 per cent of the incremental investments (26.39 per cent in 2008-09). While
ULIP funds contributed 1,58,856 crore (39,686 crore in 2008-09) of the incremental investments, the
contribution by the traditional products was 1,29,934 crore (1,10,710 crore in 2008-09).
5.26
 Based on a further segregation of funds under the traditional products and ULIP, Life Fund
contributed 7,32,613 crore (60.79 per cent), Pension and General Annuity & Group Fund 1,40,923
crore (11.69 per cent) and ULIP Fund 3,31,619 crore (27.52 per cent) of the total investments of the life
insurance companies. During 2009-10, the share of ULIP funds in total investment has gone up
considerably from 18.85 per cent in 2008-09 to 27.52 per cent.  Non-Life insurers contributed 5 per
cent of total investments made by the insurance industry. The total amount of investments made by
the sector, as on 31st March, 2010, was 66,372 crore (58,893 crore as on 31st March, 2009). During
2009- 10, the net increase in investments by the industry stood at 7,479 crore (12.70 per cent growth
over previous year). 343
5.27
 The pattern of investments made by the nonlife insurers remained the same as was in the previous
year, in tune with the prescription laid down under the Investment Regulations. As on 31st March,
2010, the investments in Central Government Securities and Approved Investments stood at 16,038
crore (24.16 per cent) and 24,256 crore (36.55 per cent) respectively.  In the nine years since the
Insurance sector was opened up in the year 2000, Insurance industry has witnessed a business growth
of more than five times, from Rs. 44705 crore in 2000-01 to Rs. 253272 crore in 2008- 09. Ever since,
there has been paradigm shift in the meaning and relevance of 'Insurance' to the common man. This
growth process in the sector has pioneered abundant opportunities in terms of employee generation.
In this scenario, Chartered Accountants (CAs) are thrust with responsibility to authenticate various
information submitted to the Regulator by an insurance company. While insurance companies need
experts to present their performance meaningfully to the public, stakeholders need professional
14
 CHAPTER 1 -

advices for a meaningful interpretation of the same. Role of CAs, therefore, comes to the forefront in
such a scenario.  During 2000-05 total amount of insured as well as assessable deposits was 14.51,
18.57 respectively . Again during 2005-10 it 344 was 21.55 as well as 23.56. while it was 16.63, 20.04
respectively during 2010. Which represents fluctuation of insured deposits as well as assessable
deposits.  During 2000-05 Surplus Balance, Investment Reserves, Total Liabilities Assets as well as
Investments in central Government Securities was 20.42, 12.64, 18.75, 16.96 respectively. Again during
2005-10 it was 20.42, 20.66, 20.85, 20.03 respectively. But during the decade it was 20.83, 24.92,
21.01, 18.17 respectively during 2010. Which represents fluctuation of insured deposits as well as
assessable deposits.

5.28
 T-bills index aims to capture portfolio returns when a certain sum is invested in the short term
instruments. The short term instruments have been gaining importance as market participants are
increasingly using these instruments for their treasury operations. In 2002-03, the T-bills constituted
only 3.48% of the total outright trade in the market but in 2004-05, the same increased substantially to
21.75%. In the beginning of the current fiscal, the T-bills trading activity has seen substantial growth
and constitutes about 47% of the total trading till April 25, 2005. The increasing activity at the
shorterend of the market highlights the importance of T-bills in the current scenario. However, the
market reality is that all sub- 345 time bucket segments of the short term market are not equally
liquid.  The accumulated investments of the insurance sector increased by 30.38 per cent (18.61 per
cent in 2008-09) to 12,71,527 crore as on 31st March, 2010 as against 9,75,258 crore as on 31st March,
2009. The life insurers continued to contribute a significant component of the investments made by
the insurance industry at 95 per cent of total investments (93.96 per cent in 2008-09). In the same
vein, the contribution of public sector companies stood at 82 per cent of the total investments held by
the sector, although with the stabilisation of the operations of the private sector insurers, their
portfolio of investments has been growing at a fast pace in recent years.
5.29
 The pattern of investments of the life insurers remained unchanged as on 31st March, 2010 when
compared to 31st March, 2009 and was in line with the prescriptions laid down by the IRDA as to the
pattern of investment, under the Investment Regulations. Central Government Securities and
Approved Investments are two major avenues for parking of funds by the life insurers.  The pattern
of investments of the life insurers remained unchanged as on 31st March, 2010 when compared to
31st 346 March, 2009 and was in line with the prescriptions laid down by the IRDA as to the pattern of
investment, under the Investment Regulations. Central Government Securities and Approved
Investments are two major avenues for parking of funds by the life insurers.  Based on a further
segregation of funds under the traditional products and ULIP, Life Fund contributed 7,32,613 crore
(60.79 per cent), Pension and General Annuity & Group Fund 1,40,923 crore (11.69 per cent) and ULIP
Fund 3,31,619 crore (27.52 per cent) of the total investments of the life insurance companies. During
2009-10, the share of ULIP funds in total investment has gone up considerably from 18.85 per cent in
2008-09 to 27.52 per cent.  Non-Life insurers contributed 5 per cent of total investments made by
the insurance industry. The total amount of investments made by the sector, as on 31st March, 2010,
was 66,372 crore (58,893 crore as on 31st March, 2009). During 2009- 10, the net increase in
investments by the industry stood at 7,479 crore (12.70 per cent growth over previous year).  The
pattern of investments made by the nonlife insurers remained the same as was in the previous year, in
tune with the 347 prescription laid down under the Investment Regulations. As on 31st March, 2010,
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the investments in Central Government Securities and Approved Investments stood at 16,038 crore
(24.16 per cent) and 24,256 crore (36.55 per cent) respectively.
5.30
 At the end of March 2010, LIC held 65 per cent market share in terms of new business income
collection with the private sector contributing the remaining 35 per cent share in 2009- 10.According
to IRDA, total premium collected in 2009-10 was US$ 24.64 billion, an increase of 25.46 per cent over
US$ 19.64 billion collected in 2008-09.A growth of 18 per cent is expected in total premium income
and is likely to cross the US$ 64.93 billion mark, according to B Mathur, Secretary General, Life
Insurance Council.  The basis of penetration India racket 38 in the year 2005 and the year 2004 in it
ranked 44. The growth of life insurance industry in India during this premium growth was more than
100 percent. The general insurance industry did not calk matching growth. Life insurance penetration
in India increased from 1.77% in 2000 to 4.1% in 2006, before declining to 4% in 2007.

5.31
 A well-developed and evolved insurance sector is needed for economic development as it provides
long-term funds for 348 infrastructure development and at the same time strengthens the risk taking
ability. The life insurance industry posted a loss of Rs 4,878 crore in the financial year 2008-09, as
against a loss of Rs 3,413 crore in 2007-08, according to data released by the insurance Regulatory and
Development Authority in its annual report.  In 2008-09, the industry posted a negative growth of
7.16 percent in fresh business premium. While the largest life insurer, Life Insurance Corporation of
India, was able to increase its profits, most of the private players continued to incur huge losses. LIC’s
profit increased 13 percent to Rs 957 crore in 2008-09, from Rs 845 crore in 2007-08.  Total revenue
generated in 2007-08 by LIC is 1, 49,782.99 crore against just Rs.51, 561, crore, generated by all 21
private players. It shows that even after opening up of the insurance industry and heavy competition
from the private players, LIC observed a continuous growth in its revenue generation. One more
observation is that, there has been a slowdown in the premium growth for private insurers in 2007-08
(82.50) when compared to previous year 2006-07 (87.31). 349
5.32
 As on 31.3.2009 LIC’s investments in the government and social sector investments stand at Rs.5,
29,525 crores. During first two years of the current five year plan, LIC already contributed Rs. 218510
crores to the five year plan.  The Insurance Industry has grown (premium as percentage of GDP) from
2.3 per cent in 2001 to 5.2 per cent in 2011.The report estimates the total insurance premium at
approximately Rs $350-400 billion in 2020 with Life Insurance making 90% of the premiums. The
profitability of the industry is negative as they have spent their energies in expanding their base in a
rapidly growing market without concentrating on the margins leading to a cumulative loss by private
insurers of around $3.5 billion. However the huge size of the insurance market which has been
estimate at an astounding $350 billion in premium by 2020 is attracting companies in droves. Almost
all major global insurance companies have a presence in India through JV (as government regulations
only allow 26% holding).  The total investment portfolio of the insurers in India as at the end of
March, 2005 was Rs. 4,65,864 crore. The total premium collected by the insurers both life and non-life
in 2004-05 was Rs.1,00,335 crore. The major contribution came from life insurance. The insurance
penetration i.e., premia as percentage of GDP was 3.17 per cent in 2004. While this ratio is steadily 350
increasing, it is far below the world average of 8.06 per cent. This shows the vast potential that exists.
5.33:-
 Suggestions:  The evidence suggests that insurance contributes materially to economic growth by
improving the investment climate and promoting a more efficient mix of activities than would be
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undertaken in the absence of risk management instruments. This contribution is magnified by the
complementary development of banking and other financial systems.  There are two traditional ways
to measure the role of insurance in the economy. Insurance density shows the average annual per
capita premium within a country, converted from local currency into US dollars. India occupies a very
low position with $8.5 (2.4 non-life and 6.1 for life) compared to Malaysia $140.4 (62.3 and 78) South
Korea $1,022.8 (262.3 and 760.5) South Africa $490.9 (77.9 and 413.0) and China $13.3 (5.0 and 8.3). 
The Indian Health insurance market has emerged as a new and lucrative growth avenue for both the
existing firms and new entrants. Health Insurance premium collections were US$ 1750 million in 2009-
10 as compared to US$ 893.76 million in 2008- 351 09, IRDA said in its annual report 2009-10. It
should, however, be noted that figures for 2009-10 include policies served by third party
administrators (TPAs) as well as those directly served by insurers whereas figures of 2008-09 include
policies by TPAs only.
5.34

 It is estimated that at any given point of time 40 to 50 million people are on medication for major
sickness in India. About 200 million workdays are lost annually due to sickness. Survey data indicate
that about 60% people use private health providers for outpatient treatment while 60 % use
government providers for in-door treatment. The average expenditure for care is 2-5 times more in
private sector than in public sector.  The Government of India liberalised the insurance sector 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. Under the current guidelines, 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.
 An important recent reform is the withdrawal of the special privileges enjoyed by the Unit Trust of
India, a public sector 352 mutual fund that was the dominant mutual fund investment vehicle when
the reforms began. Although the Unit Trust did not enjoy a government guarantee, it was widely
perceived as having one because its top management was appointed by the government. The Trust
had to be bailed out once in 1998, when its net asset value fell below the declared redemption price of
the units, and again in 2001, when the problem recurred. It has now been decided that in the future,
investors in the Unit Trust of India will bear the full risk of any loss in capital value. This removes a
major distortion in the capital market, in which one of the investment schemes was seen as having a
preferred position.
5.35
 Over the last 50 years India has achieved a lot in terms of health improvement.
But still India is way behind many fast developing countries such as China, Vietnam and Sri Lanka in
health indicators (Satia et al 1999). In case of government funded health care system, the quality and
access of services has always remained major concern. A very rapidly growing private health market
has developed in India. This private sector bridges most of the gaps between what government offers
and what people need. However, with proliferation of various health care technologies and general
price rise, the cost of care has also become very expensive and unaffordable to large segment of
population. The government and people have 353 started exploring various health financing options to
manage problems arising out of growing set of complexities of private sector growth, increasing cost of
care and changing epidemiological pattern of diseases.  The depth and efficiency of a country’s
financial sector largely determine how well its economy allocates resources. Wide agreement has been
reached regarding the importance of a strong financial sector to economic growth. Greater financial
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depth (i.e. greater variety and availability of financial services and instruments) advances economic
growth by providing economic agents more opportunities to save, invest, and borrow. Financial
efficiency is a measure of how cost effectively these economic agents operate. Greater financial depth
and efficiency translate into increased levels of financial intermediation, investment, and productive
resource allocation.
5.36
 As we can see from the numbers, the potential for expansion of the market is huge especially with
rising per capita income and a growing middle class that is expected to constitute 32% of the total
population in 2010. The insurance penetration levels as a percentage of GDP is expected to grow to 6%
by 2012 from the current 4.8% which would translate to a CAGR of 13% for the industry in the next five
years. 354  India with about 200 million middle class household shows a huge untapped potential for
players in the insurance industry. Saturation of markets in many developed economies has made the
Indian market even more attractive for global insurance majors. The insurance sector in India has come
to a position of very high potential and competitiveness in the market. Indians, have always seen life
insurance as a tax saving device, are now suddenly turning to the private sector that are providing
them new products and variety for their choice.

5.37
 During 2009-10, all life and non-life insurance companies were compliant with the stipulations on
pattern of investment as laid down in the Investment Regulations. However, General Insurance
Corporation of India (GIC) had failed to comply with the provisions on minimum mandatory investment
required to be made in Central Government securities. The Corporation was levied a penalty of 5 lakh
during 2009-10. All the insurers, both life and non-life had carried out their Risk Management System
audit and the concurrent audit through independent external audit firms for their investment
functions. This requirement has been mandated for all insurers effective financial year 2009-10.

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