Life insurance

CHAPTER 1

INTRODUCTION

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1.1 INTRODUCTION OF INSURANCE:-

Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a
number of persons who are exposed to it and who agree to ensure themselves against that risk.
Risk is uncertainty of a financial loss.

Insurance is a policy from large financial institutions that offers a person, company, or other
entity reimbursement or financial protection against possible future losses or damages.

1.2 MEANING OF INSURANCE:-

The meaning of insurance is important to understand for anybody that is considering buying an
insurance policy simply understanding the basics of finance. Insurance is a hedging instrument
used as a precautionary measure against future contingent losses. This instrument is used for
managing the possible risks of the future.

Insurance is bought in order to hedge the possible risks of the future which may or may not take
place. This is a mode of financially insuring that if such an incident happens then the loss does
not affect the present well-being of the person or the property insured. Thus, through insurance, a
person buys security and protection.

A simple example will make the meaning of insurance easy to understand. A biker is always
subjected to the risk of head injury. But it is not certain that the accident causing him the head
injury would definitely occur. Still, people riding bikes cover their heads with helmets. This
helmet in such cases acts as insurance by protecting him/her from any possible danger. The price
paid was the possible inconvenience or act of wearing the helmet; this is equivalent to the
insurance premiums paid. Though loss of life or injuries incurred cannot be measured in financial
terms, insurance attempts to quantify such losses financially. Insurance can be defined as the
process of reimbursing or protecting a person from contingent risk of losses through financial
means, in return for relatively small, regular payments to the insuring body or insurance
company.

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1.3 HISTORY OF INSURANCE

The concept of insurance is believed to have emerged almost 4500 years ago in the ancient land
of Babylonia where traders used to bear risk of the caravan by giving loans, which were later
repaid with interest when the goods arrived safely

The concept of insurance as we know today took shape in 1688 at a place called Lloyd’s
Coffee House in London where risk bearers used to meet to transact business. This coffee
house became so popular that Lloyd’s became the one of the first modern insurance
companies by the end of the eighteenth century.

Marine insurance companies came into existence by the end of the eighteenth century. These
companies were empowered to write fire and life insurance as well as marine. The Great Fire
of London in 1966 caused huge loss of property and life. With a view to providing fire
insurance facilities, Dr. Nicholas Barb on set up in 1967 the first fire insurance company
known as the Fire office.

The early history of insurance in India can be traced back to the Vedas. The Sanskrit term
‘Yogakshema’ (meaning well-being), the name of Life Insurance Corporation of India’s
corporate headquarters, is found in the Rig Veda. The Aryans practiced some form of
‘community insurance’ around 1000 BC.

Life insurance in its modern form came to India from England in 1818. The Oriental Life
Insurance Company was the first insurance company to be set up in India to help the widows
of European community. The insurance Companies, which came into existence between 1818
and 1869, treated Indian lives as subnormal and charged an extra premium of 15 to 20 per
cent. The first Indian insurance company, the Bombay Mutual Life Assurance Society, came
into existence in 1870 to cover Indian lives at normal rates.

The Insurance Act, 1938, the first comprehensive legislation governing both life and non-life
branches of insurance were enacted to provide strict state control over insurance business.
This amended insurance Act looked into investments, expenditure and management of these
companies.

By the mid- 1950s there were 154 Indian insurers, 16 foreign insurers, and 75 provident
societies carrying on life insurance business in India. Insurance business flourished and so
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did scams, irregularities and dubious investment practices by scores of companies. As a result
the government decided to nationalize the life assurance business in India. The Life
Insurance Corporation of India (LIC) was set up in 1956. The nationalization of life
insurance was followed by general insurance in 1972.

1.4THE IMPORTANCE OF INSURANCE:-

Insurance benefits society by allowing individuals to share the risks faced by many people.
But it also serves many other important economic and societal functions. Because insurance is
available and affordable, banks can make loans with the assurance that the loan’s collateral
(property that can be taken as payment if a loan goes unpaid) is covered against damage. This
increased availability of credit helps people buy homes and cars. Insurance also provides the
capital that communities need to quickly rebuild and recover economically from natural
disasters, such as tornadoes or hurricanes.

Insurance itself has become a significant economic force in most industrialized Countries. Employers buy
insurance to cover their employees against work-related Injuries and health problems. Businesses also
insure their property, including technology Used in production, against damage and theft. Because it
makes business operations safer, Insurance encourages businesses to make economic transactions, which
benefits the
Economies of countries. In addition, millions of people work for insurance companies and
Related businesses. In 1996 more than 2.4 million people worked in the insurance industry
In the United States and Canada. Insurance as an investment that offers a lot more in
terms of returns, risk cover & was also that tax concessions & added bonuses Not all effects
Of insurance are positive ones. The possibility of earning insurance
payments motivates some people to attempt to cause damage or losses. Without the
Possibility of collecting insurance benefits, for instance, no one would think of arson, the
Willful destruction of property by fire, as a potential source of money.

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1.5TYPES OF INSURANCE:-

Insurance occupies an important place in the modern world because of the risk, which
can be insured, in number and extent owing to the growing complexity of present day
economic system. The different type of insurance have come about by practice within
insurance companies, and by the influence of legislation controlling the transacting of
insurance business, broadly, insurance may be classified into the following categories:

INSURANCE

NON-LIFE
LIFE INSURANCE
INSURANCE

MISCELLANEOUS
GENERAL
INSURANCE
INSURANCE

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1.6 EVOLUTION OF INSURANCE ORGANIZATION

With a view to serve the society, the insurance organizations have been
developed in different forms with innovation of insurance practice for social welfare and
development; some of these forms are outlined here.

a) Self-insurance
The arrangement in which an individual or concern sets up a private fund to meet the
future risk. If some losses happened in the future the firm meets the loss out of the fund. While it
may be called ‘self-insurance’ it is not a single matter of fact, insurance at all because there is no
hedge, no shifting, or distributing the burden of risk among larger Persons. It is merely a
provision to meeting the unforeseen event. Here the insured become the insurer for the particular
risk. But it can be effectively worked only when there is wide distribution of risks subjected the
same hazard.

b) Partnership
A partnership firm may also carry on the insurance business for the sake of profit. Since
it is not an entity distinct from the persons comprising it, the personal liability of partners in
respect to the partnership debts is unlimited. In case of huge loss the partners may have to pay
from their own personal funds and it will not be profitable to them to starts insurance business .in
the early period before the advent of joint stock companies many insurance undertakings were
partnership firms or unincorporated companies

c) Joint stock companies

The joint stock companies are those, which are organized by the shareholders who
subscribe the necessary capital to start the business. These are formed for earning profits for the
stockholders who are the real owners of the companies. The management of a company is
entrusted to a board of directors who is elected by the shareholders from amongst themselves.
The company can operate insurance business and policyholders have nothing to do with the
management of the concern. But in life insurance it is the practice to share certain portion of
profit among the certain policyholders.

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d) Mutual fund companies

The mutual fund companies are co- operative association formed for the
Purpose of effecting insurance on the property of its members. The policyholders are
Themselves the shareholders of the companies each member is insured as well as insured. They
have power to participate in management and in the profit sharing to the full extent. Whenever
the income is

More than the expenses and claims, it is accumulated I the form of saving and is entitled in
reducing the rate of premium. Since the insured are insurers also, they always try to reduce the
management expenses and to keep the business at sound level.

e) Co-operative insurance organizations

Cooperative insurance organizations are those concerns, which are
Incorporated and registered under Indian cooperative societies Act. The concerns are also called
‘cooperative insurance societies’ these societies like mutual fund companies are on profit
organization .the aim is to provide insurance protection to its members at the lowest reasonable
net cost .the Indian insurance Act. 1938, has provided special provisions for the co-operative
insurance societies, but after nationalization the societies have ceased to exist.

f) Lloyd’s Association
Lloyd’s association is one of the greatest insurance institutions in the world.
Taking its name from the coffee house Lloyd where underwriters assembled to transact business
and pick-up news. The organization traces its origins to the latter part of the seventeenth
century .so it is the oldest insurance organization in existing form in the world. In 1871, Lloyds
Act was passed incorporating the members of the association into a single corporate body with
perpetual succession and corporate seal .the powers of Lloyds Corporation were extended from
the business of marine insurance to the other insurance and guarantee business. The Lloyds
Association also publishes, Lloyds list and register of shipping for the information of insuring
public and the insurers

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g) State Insurance

The government of a nation, sometimes, owns the insurance and runs the
Business for the benefit of the public. The state insurance is defined as that insurance which is
under public sector. In Brazil, Japan and Mexico, the insurance are largely nationalized.
Previously, the state undertook only those insurances, which were regarded
As vital for the national interest.

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1.7 INTRODUCTION OF LIFE INSURANCE:-

Life insurance may be defined as a contract in which the insurer in consideration of a certain
premium either in lump sum or other periodical payments, agrees to pay to the assured or to the
person for whose benefits the policy is taken, a stated sum of money on the happening of a
particular event contingent on the duration of human life. Thus, under a whole-life assurance, the
policy is payable at the of the assured and under an endowment policy, the money is payable on
the assureds’ surviving a stated period of years.

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1.8 MEANING OF LIFE INSURANCE:-

According to sec (2) (11) of the Insurance Act, Life insurance business means “the
business effecting contracts upon human life”. It includes:-

a. Any contracts whereby the payment of money is assured upon death (except death by
accident only) or the happening of any contingency dependent on human life.

b. Any contract which is subject to the payment of premium for a term dependent on human
life.

c. Any contract which include the granting of disability and double or triple indemnity,
accident benefits, the granting of annuities upon human life, and the granting of super-
annulation allowances.

1.9 HISTORY OF LIFE INSURANCE:-

The story of insurance is probably as old as the story of mankind. Life Insurance in its
modern form came to India from England in the year 1818. Oriental Life Insurance Company
started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the
insurance companies established during that period were brought up with the purpose of looking
after the needs of European community and Indian natives were not being insured by these
companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the
foreign life insurance companies started insuring Indian lives. But Indian lives were being treated
as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual
Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870,
and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic
motives, insurance companies came into existence to carry the message of insurance and social
security through insurance to various sectors of society. Bharat Insurance Company (1896) was
also one of such companies inspired by nationalism. The Swedish movement of 1905-1907 gave
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rise to more insurance companies. The United India in Madras, National Indian and National
Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In
1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the
Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile,
General Assurance and Swedish Life (later Bombay Life) were some of the companies
established during the same period. Prior to 1912 India had no legislation to regulate insurance
business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were
passed. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables
and periodical valuations of companies should be certified by an actuary. But the Act
discriminated between foreign and Indian companies on many accounts, putting the Indian
companies at a disadvantage.

The first two decades of the twentieth century saw lot of growth in insurance business. From 44
companies with total business-in-force as Rs.22.44 corer, it rose to 176 companies with total
business-in-force as Rs.298 corer in 1938. During the mushrooming of insurance companies
many financially unsound concerns were also floated which failed miserably. The Insurance Act
1938 was the first legislation governing not only life insurance but also non-life insurance to
provide strict state control over insurance business. The demand for nationalization of life
insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a
bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However,
it was much later on the 19th of January, 1956, that life insurance in India was nationalized.
About 154 Indian insurance companies, 16 non-Indian companies and 75 provident were
operating in India at the time of nationalization. Nationalization was accomplished in two stages;
initially the management of the companies was taken over by means of an Ordinance, and later,
the ownership too by means of a comprehensive bill. The Parliament of India passed the Life
Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India
was created on 1st September, 1956, with the objective of spreading life insurance much more
widely and in particular to the rural areas with a view to reach all insurable persons in the
country, providing them adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate
office in the year 1956. Since life insurance contracts are long term contracts and during the
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currency of the policy it requires a variety of services need was felt in the later years to expand
the operations and place a branch office at each district headquarter. Re-organization of LIC took
place and large numbers of new branch offices were opened. As a result of re-organization
servicing functions were transferred to the branches, and branches were made accounting units.
It worked wonders with the performance of the corporation. It may be seen that from about
200.00 cores of New Business in 1957 the corporation crossed 1000.00 cores only in the year
1969-70, and it took another 10 years for LIC to cross 2000.00 corer mark of new business. But
with re-organization happening in the early eighties, by 1985-86 LIC had already crossed
7000.00 corer Sum Assured on new policies. Today LIC functions with 2048 fully computerized
branch offices, 109 divisional offices, 8 zonal offices, 992 satellite offices and the Corporate
office. It has crossed the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005,
posting a healthy growth rate of 16.67% over the corresponding period of the previous year.
From then to now, LIC has crossed many milestones and has set unprecedented performance
records in various aspects of life insurance business. The same motives which inspired our
forefathers to bring insurance into existence in this country inspire us at LIC to take this message
of protection to light the lamps of security in as many homes as possible and to help the people
in providing security to their families.

1.10KEY FEATURES OF LIFE INSURANCE

1) Nomination: -

When one makes a nomination, as the policyholder you continue to be the owner of the
policy and the nominee does not have any right under the policy so long as you are alive. The
nominee has only the right to receive the policy monies in case of your death within the term
of the policy

2) Assignment: -

If your intention is that your policy monies should go only to a particular

person, you need to assign the policy in favor of that person.

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3) Death Benefit:

The primary feature of a life insurance policy is the death benefit it provides. Permanent
policies provide a death benefit that is guaranteed for the life of the insured, provided the
premiums have been paid and the policy has not been surrendered.

4) Cash Value: -

The cash value of a permanent life insurance policy is accumulated throughout the life of the
policy. It equals the amount a policy owner would receive, after any applicable surrender
charges, if the policy were surrendered before the insured's death.

5) Dividends: -

Many life insurance companies issue life insurance policies that entitle the policy owner to
share in the company's divisible surplus.

6) Paid-Up Additions: -

Dividends paid to a policy owner of a participating policy can be used in numerous ways,
one of which is toward the purchase of additional coverage, called paid-up additions.

7) Policy Loans: -

Some life insurance policies allow a policy owner to apply for a loan against the value of
their policy. Either a fixed or variable rate of interest is charged. This feature allows the
policy owner an easily accessible loan in times of need or opportunity.

8) Conversion from Term to Permanent: -

When in need of temporary protection, individuals often purchase term life insurance. If one
owns a term policy, sometimes a provision is available that will allow her to convert her policy to
a permanent one without providing additional proof of insurability.

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1.11 BENEFITS OF LIFE INSURANCE

1) Risk cover: -

Life Insurance contracts allow an individual to have a risk cover against any unfortunate
event of the future.

2) Tax Deduction: -

Under section 80C of the Income Tax Act of 1961 one can get tax deduction on premiums up
to one lakh rupees. Life Insurance policies thus decrease the total taxable income of an
individual.

3) Loans: -

An individual can easily access loans from different financial institutions by pledging his
insurance policies.

4) Retirement Planning: -

What had provided protection against the financial consequences of premature death may
now be used to help them enjoy their retirement years. Moreover the cash value can be used
as an additional income in the old age.

5) Educational Needs: -

Similar to retirement planning the cash values that flow from one’s life insurance schemes
can be utilized for educational needs of the insurer or his children.

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1.12 SOME OF THE IMPORTANT OF LIFE INSURANCE:-

1818:- Oriental Life Insurance Company, the first life insurance company on Indian soil started
functioning.

1850:- Non life insurance debuts with triton insurance company.

1870:- Bombay Mutual Life Assurance Society, the first Indian life insurance company started its
business.

1912:- The Indian Life Assurance Companies Act enacted as the first statute to regulate the life
insurance business.

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

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

1956:- 245 Indian and foreign insurers and provident societies taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a
capital contribution of Rs.5 Crore from the Government of India.
The General insurance business in India, on the other hand, can trace its roots to the Triton
Insurance Company Ltd., the first general insurance company established in the year 1850 in
Calcutta by the British. Some of the important milestones in the general insurance business in
India are:-

1907:- The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of
general insurance business.

1957:- General Insurance Council, a wing of the Insurance Association of India, frames a code
of conduct for ensuring fair conduct and sound business practices.

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

1972:- The General Insurance Business (Nationalization) Act, 1972 nationalized the general
insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and
grouped into four companies’ viz. the National Insurance Company Ltd., the New India

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Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance
Company Ltd. GIC incorporated as a company.

1.13 Objectives of life insurance:-

The objectives of life insurance are as follows:-

 Spread Life Insurance widely and particular to the rural areas and to the socially
and backward classes with a view to reaching all insurable persons in the county
and providing them adequate financial cover against death at a reasonable cost.

 Maximize mobilization of people’s savings by making insurance-linked savings

adequately attractive.

 Bear in mind, in the investment of funds, the primary obligation to its

policyholders, whose money it holds in trust, without losing sight of the interest
of the community as a whole, the funds to be developed to the best advantage of
the investors as well as a whole, keeping in view national priorities and
obligations of attractive return.

 Conduct business with utmost economy and with the full realization that money
belong to the policyholder

 Act as trustees of the insured public in their individual and collective capacities.

 Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.

 Involve all people working in the corporation to the best of their capability in
furthering their interests of the insured public by providing efficient service with
courtesy.
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 Promote amongst all agents and employees of the corporation a sense of

participation, pride and job satisfaction through discharge of their duties with
dedication towards to achievement of corporate objective.

 Proper understanding and analysis of life insurance industry.

 To know about brand awareness of Kotak Life Insurance and customer’s

preference about Kotak Life Insurance.

 Conduct market survey on a sample selected from the entire population and
derived opinion on that research.

 According the market survey come know about how much potential of insurance
market in our city.

 And base on analysis of the result thus obtained make a report on that research.

 Training aims at recruiting maximum number of Life Advisors and to Sell the
maximum policies for the company and bring the business for the company
whichever is going at the particular point of time.

 Along with it I will be gaining the thorough knowledge of insurance sector. This
will give me in more confidence in marketing products given to me.

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1.14 Limitation of insurance:-

Some of the difficulties and limitations faced by me during my training are as follows:

 Lack of awareness among the people – This is the biggest limitation found in
this sector. Most of the people are not aware about the importance and the necessity of
the insurance in their life. They are not aware how useful life insurance can be for their
family members if something happens to them.

 Perception of the people towards Insurance sector – People still consider

insurance just as a Tax saving device. So today also there is always a rush to buy an
Insurance Policy only at the end of the financial year like January, February and March
making the other 9 months dry for this business.

 Insurance does not give good returns – Still today people think that Insurance
does not give good returns. They are not aware of the modern Unit Linked Insurance
Plans which are offered by most of the Private sector players. They are still under the
perception that if they take Insurance they will get only 5-6% returns which is not true
nowadays. Nowadays most of the modern Unit Linked Insurance Plans gives returns
which are many times more than that of bank Fixed deposits, National saving certificate,
Post office deposits and Public provident fund.

 Lack of awareness about the earning opportunity in the Insurance

sector – People still today are not aware about the earning opportunity that the
Insurance sector gives. After the privatization of the insurance sector many private giants
have entered the insurance sector. These private companies in order to beat the
competition and to increase their Insurance Advisors to increase their reach to the
customers are giving very high commission rates but people are not aware of that.

 Increased competition – Today the competition in the Insurance sector has become
very stiff. Currently there are 14 Life Insurance companies working in India including the
LIC (life insurance Corporation of India). Today each and every company is trying to
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increase their Insurance Advisors so that they can increase their reach in the market. This
situation has created a scenario in which to recruit Life insurance Advisors and to sell life
Insurance Policy has become very very difficult.

1.15 Few Life Insurance policies are:

Whole life policies - Cover the insured for life. The insured does not receive money
While he is alive; the nominee receives the sum assured plus bonus upon death of the insured.

Endowment policies - Cover the insured for a specific period. The insured receives
Money on survival of the term and is not covered thereafter.

Money back policies - The nominee receives money immediately on death of the
Insured. On survival the insured receives money at regular intervals during the term.
These policies cost more than endowment with profit policies.

Annuities / Children's policies - The nominee receives a guaranteed amount of money at a pre-
determined time and not immediately on death of the insured. On survival the insured receives

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money at the same pre-determined time. These policies are best suited for planning children's
future education and marriage costs.

Pension schemes - are policies that provide benefits to the insured only upon retirement. If the
insured dies during the term of the policy, his nominee would receive the benefits either as a
lump sum or as a pension every month.

1.16 PRINCIPLES OF LIFE INSURANCE:-

1. ELEMENTS OF A VALID CONTRACT:-

Contract of life insurance has the essential elements of a general contract, since the life
insurance contract is a contract as defined in the Indian Contract Act. A valid contract of life
insurance comes into existence where the essential elements of agreement [offer and acceptance,
competency of the parties, free consent of the parties, legal consideration and legal objectives]
are present.

2. INSURABLE INTREST:-

A person cannot insure the life of another unless he has an insurable interest in it. The
risk against this policy is the death of the insured. A person has unlimited insurable interest in his
own life. A husband is presumed to have insurable interest in his wife’s life and vice-versa. In
life insurance the insurable interest must exist at the time of the contract of insurance.

3. UTMOST GOOD FAITH:-

Insurance contracts however contract are i.e. one base on utmost good faith or the
contract of utmost good faith. The insured is bound to disclose all material facts and figures
known to him but unknown to the insurer. Every fact which is likely to influence the mind of the
insurer in deciding whether to accept the proposal or in fixing the rate of premium in materials
for this purpose. Similarly, the insurer is bound to exercise the same good faith in disclosing the
scope of insurance which is prepared to grant. In life insurance, age, income, education,
occupation, halt, family size, etc. are some examples of material facts that should be disclosed at
the time of entering into the contract.

4. WARRANTIES:-

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Warranties are an important feature of life insurance contract. Warranties are the basis
of the contract between the proposer and the insurer. If any statement whether material or non-
material facts and figures are untrue the contract shall be null and void and the premium paid by
him may be forfeited by the insurer. The policy issued will contain that the proposal and personal
statement shall form part of the policy and be the basis of the contract.

5. ASSIGNMENT AND NOMINATION:-

Both assignment and nomination are essential features of life insurance policy.
Assignment of a life policy means transferring the rights of the assured in respect of the policy,
to the assigner. In the case of the nomination, a person is merely named to collect the amount to
be paid by the insurer on the death of the assured.

6. CAUSE IS CERTAIN:-

In life assurance policy, the insurer has to pay the insured amount one day or other
because the death of the assured or his reaching a particular age is certain to happen.

7. PREMIUM:-

The premium is the price for the risk of loss undertaken by the insurer. In the case
of insurance, premium is usually required to be paid in cash and advance payment of the
premium is a condition of a binding contract of insurance. The amount of premium for payment
of insured is paid monthly or annual installments for a certain period. In life insurance, the
premium is calculated on the average rate of mortality and the fixed periodical premium may
continue either until death or a specified number of years. Premium is payable till the maturity of
the policy.

8. TERM OF POLICY:-

An insurance policy specifies the terms and conditions or period of time; it covers
often the nature of risk against which insurance is sought, determines the period or life of the
policy. A life insurance policy may cover a specified number of years, or the balance of the
insured life or the balance.

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9. RETURN OF PREMIUM:-

Premium is the consideration for the risk run by the insurers, and if the risk insured against is not
run, then the consideration fails, the policy does not attach, and as a consequence the premium
paid can be recovered from the insurer. The general principle applicable to the claim for the
return of the premium is that if the insurers have never been on the risk, they cannot be said to
have earned the premium.

1.17 Types of life insurance policies

Whole life insurance

Whole life is a form of permanent insurance, with guaranteed rates and guaranteed
cash values. It is the least flexible form of permanent insurance.

Universal life insurance

Universal life is similar to whole life, except that you can change the death benefit
(the money paid to the beneficiary when the insured person dies), the amount of
premiums and how often you pay the premiums.

Variable life insurance

Variable life insurance is the riskiest form of permanent insurance, but it can also give
you the best return for your money. Essentially, the life insurance company will invest
your insurance premiums for you. If the investments do well, the death benefit and
cash value of the policy go up. If they do poorly, they go down. It's a little like putting
your savings into the stock market.

Group life insurance

Many companies allow their employees to buy group life insurance through the company.
Usually, you can get very good rates for this insurance but you have to give the insurance
up when you stop working there. For that reason, group insurance can be a good way to
buy a little extra life insurance, but it does not make sense to make it your main policy.

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There are a number of policies for specific insurance needs. Some of these
include:

1. Family income life insurance.

This is a decreasing term policy that provides a stated income for a fixed period of
time, if the insured person dies during the term of coverage. These payments continue
until the end of a time period specified when the policy is purchased.

2. Family insurance.
A whole life policy that insures all the members of an immediate family -- husband,
wife and children. Usually the coverage is sold in units per person, with the primary
wage-earner insured for the greatest amount.

3. Senior life insurance.

Also known as graded death benefit plans, they provide for a graded amount to be
paid to the beneficiary. For example, in each of the first three to five years after the
insured dies, the death benefit slowly increases. After that period, the entire death
benefit is paid to the beneficiary. This might be appropriate if the beneficiary is not
able to handle a large amount of money soon after the death, but would be in a better
position to handle it a few years later.

4. Juvenile insurance.

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This is life insurance on a child. Coverage is paid for by an adult, usually the parents
or guardians. Such policies are not considered traditional life insurance because the
child is not producing an income that needs to be protected. However, by buying the
policy when the child is young, the parents are able to lock in an extremely low
premium rate and allow many more years of tax-deferred cash value buildup

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5. Credit life insurance.

This insurance is designed to pay off the balance of a loan if you die before you have
repaid it. Credit life insurance is available for many kinds of loans including student
loans, auto loans, farm equipment loans, furniture and other personal loans including
credit cards. Credit life insurance can be purchased by an individual. Usually it is
sold by financial institutions making loans, like banks, to borrowers at the time they
take out the loan. If a borrower dies, the proceeds of the policy repay the loan
directly to the lender or creditor.

6. Mortgage insurance
This decreasing term coverage is designed to pay off the unpaid balance of a
mortgage if you die before the mortgage is paid off. Premiums are generally level
throughout the term of the policy. The policy is usually independent of the mortgage,
meaning that the financial institution granting the mortgage is separate from the
insurance company issuing the policy. The proceeds of the policy are paid to the
beneficiaries of the policy, not the mortgage company. The beneficiary is not required
to use the proceeds to pay off the mortgage.

7. Annuity
An annuity is a form of insurance that enables you to save for your retirement.
Basically, you give the insurance company money for a certain period of time, and
then after you retire they will pay you a certain amount of money every year until you
die. There are many different forms of annuities.

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CHAPTER 2

RESEARCH METHODOLOGY

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2.0 RESEARCH METODOLOGY:-

Research always starts with a question or a problem. Its purpose is to question through the
application of the scientific method. It is a systematic and intensive study directed towards a
more complete knowledge of the subject studied. Marketing research is the function which links
the consumer, customer and public to the marketer through information- information used to
identify and define marketing opportunities and problems generate, refine, and evaluate
marketing actions, monitor marketing actions, monitor marketing performance and improve
understanding of market as a process.

Marketing research specifies the information required to address these issues, designs, and the
method for collecting information, manage and implemented the data collection process,
analyses the results and communicate the findings and their implication.

2.1 RESEARCH DESIGN

A research design is a basic plan, which guides the researcher in the collection and
Analysis of data required for practicing the research. Infect the research design is the
Conceptual structure where the research is conducted. It constitutes the ‘Blue Print’ for
The collection, measurement and analysis of the data. The study is carried out to
Understand the Consumer Perception about life insurance companies in Mumbai
City .For this study the researcher used exploratory research design. This research covers
30 consumers in Mumbai, belonging to various age groups.

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2.2 STATEMENT OF THE PROBLEM

This Study will help us to understand the consumer’s perception about life
Insurance companies. This study will help the companies to understand, how a
Consumer selects, organizes and interprets the Quality of service and product
Offered by life insurance companies.

SCOPE OF THE STUDY

This study is limited to the consumers within the limit of Mumbai city
The study will be able to reveal the preferences, needs, perception of the
Customers regarding the life insurance products, it also helps the insurance
Companies to know whether the existing products are really satisfying the
Customer’s needs.

NEED FOR THE STUDY

1) The deeper the understanding of consumer’s needs and perception, the earlier
The product is introduced ahead of competitors, the expected contribution
Margin will be greater .Hence the study is very important.

2) Consumer markets and consumer buying behavior can be understood before

Sound product and marketing plans are developed

3) This study will help companies to customize the service and product,
According to the consumer’s need.

4) This study will also help the companies to understand the experience and
Expectations of the existing customers.

5) Apart from creating, manufacturing and distribution capabilities for life

Insurance products, an in depth study of the consumers, their preferences and
Demand for their product is very necessary for setting up an efficient marketing network.

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2.3 DATA COLLECTION:-

After the research methodology, research problem in marketing has been identified and
selected; the next step is together the requisite data. There are two types of data collection
method – primary data and secondary data.

In our live project, we decided primary data and secondary data collection method
because our study nature does not permit to apply observational method. In survey approach we
had selected a questionnaire method for taking a customer view because it is feasible from the
point of view of our subject & survey purpose.

Any organization whether big or small, private or public need different types of
information are to know its popularity. I have gathered secondary data and primary data and
collected information from the combination of these two data.

Secondary data: -

Secondary data consist of information that already exists somewhere, having

been collected for another purpose. I have gathered secondary data from website of
different operators, different magazines, newspapers and libraries.

Primary data:-

Primary data are those, which are collected for the first time. Primary data is collected
by framing questionnaires. The questionnaire contained questions, which are both open ended
and closed-ended. Open-ended question are questions requiring answers in the responder’s own
words. Closed-ended questions are those wherein the respondent has to merely check the
appropriate answer from a list of options available. Any doubts raised by the respondents were
clarified to get the perfect answers from the distributors.
Open-ended questions yielded more insightful information, whereas closed-Ended questions
Were relatively simple to tabulate and analyze

I have taken great care while collecting primary data to answer that it is relevant,
accurate, current and unbiased. I have taken a sample of 30 people. I have visited them
personally to get data

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2.4 SAMPLING METHOD AND SAMPLE SIZE

The process of drawing a sample from a large population is called sampling.

Population refers to the total of items about which information is defined. Well-selected samples
may reflect fairly and accurately the characteristics of the population.

Sample size: -

I have taken sample size of 30 respondents. Because the population is too large so it is
difficult to survey.

2.5 LIMITATIONS:

I am a human being, so there is some limitation of the human beings which is reflected in
this research.

The following are the limitation of this research study.

1) The sample size of 30 might not represent the perception of whole population, as
the sample size is too small for total population of Mumbai city.

2) The attitude of the research might be biased.

3) One of the most influencing and most critical limitations is that I am not trained
for the research study and this is my first study. I tried hard to come at conclusion,
but there is lack of expertise.

4) Another limitation is that there is lack of time. If I give more time then studies
will be more effective.
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5) It is difficult to know if all the respondents gave accurate information; some

respondents tend to give misleading information.

6) Due to time constraints the sample size was relatively small and would definite
have been more representative if I had collected information from more
respondents.

There are some limitations of this study. But in spite of their limitation I worked with the
enthusiasm. And I tried to give the best results to the research of this report.

2.6 OBJECTIVE OF STUDY

1) To get some good market exposure by dealing with the prospects face to face.

2) To improve our ability to sell a financial product like life insurance.

3) To know the perception of the consumer about life insurance.

4) To get a deep knowledge of the financial product like insurance.

5) To get some information about the market share of Reliance Life Insurance as compared
to the giants like LIC and to know the standing of the company in the market.

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CHAPTER 3

LITERATURE REVIEW

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INTRODUCTION

This chapter presents the review of literature relating to the study undertaken. A
brief review of literature would be of immense help to the researcher in gaining an insight
into the selected problem. It would help in gaining good knowledge of the area under
study. This study is the first of its category in the way as it attempts to compile the views
given by expert commissions, research bodies and individual researchers with reference
to private life insurance, level of awareness, policyholders’ level of satisfaction with Life
Insurance Corporation of India and Private Life Insurance companies. The reviews
presented below are based on internet search, perusal of related literature available in
libraries and from various publications of books, newspapers, journals, magazines and
research studies made on this topic.

3.1 REVIEWS RELATED TO LIFE INSURANCE POLICY HOLDERS

AWARENESS

Chaudhary (2012) explained that today India is one of the fastest growing economies of
the world. The Insurance Industry contributes to the financial sector of an economy and
also provides social security to the people of a country. The income earning capacity and
increasing rate of literacy are the key factors of the growth of the Insurance industry. This
sector provides for the long term contractual savings and security. The investors in life
insurance are looking for both good return and life risk coverage. This study is conducted
in Panipat city to check the awareness and satisfaction level of insurance buyers/
consumers. To achieve these objectives, a questionnaire is designed to collect the data of
buyers of insurance.

Dar (2013) carried out a community-based cross-sectional study towards the awareness
of life insurance in the population of Jammu and Kashmir State. A total number of 242
respondents from 242 households were interviewed by using a pretested questionnaire
after obtaining informed consent from the participants. The awareness of life insurance
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was found to be 64.0 per cent. Around 45.0 per cent of the respondents came to know
about life insurance from the media which played an important role in the dissemination
of information. The mean premium amount agreeable to be paid by the respondents for
life insurance was found to be Rs.1804.00; even the low socio-economic group of people
was also willing to part with a reasonable amount of Rs. 697.00 annually for life
insurance. The middle and low socio-economic groups favored government life insurance
compared to private life insurance as they have more faith on Government Company. The
findings indicate that government should come out with a policy, where the public can be
made to contribute to a life insurance scheme to ensure unnecessary events and also
better utilization of life insurance facilities.

Choudhuri (2014) analyzed that the customers are very much conscious about their
needs and requirements towards insurance. Based on the several factors, customers are
now selecting different kinds of products in their life where their awareness about the
several existing life insurance products varies situation wise, culture wise, nation wise,
sector wise, industry wise and obviously over times. On the other hand, like any other
company, Life Insurance Corporation of India (LICI) is adopting various strategies to
develop customers’ awareness about the various products as well as involving in the
fulfillment of various needs and requirements of the customers through their selection of
different life insurance policies available in the market. Observing present scenario of the
LICI customers’ product awareness and their current transactional life insurance policies,
in this study the investigation of customers’ product awareness and transaction gap in
Life Insurance Corporation of India has been conducted in Burdwan district, West
Bengal. In this study, accepted 221 usable responses were considered as the sample size
and statistical package SPSS 16 was used to perform the analyses.

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3.2 REVIEWS RELATED TO PUBLIC AND PRIVATE LIFE INSURANCE

Dhanabhakyam and Anita (2011) explained that the insurance sector, along with other
elements of marketing, as well as financial infrastructure have been touched and
influenced by the process of liberalization and globalization in India. The customer is the
king in the market. Life insurance companies deal in intangible products. With the entry
of private players, the competition is becoming intense. In order to satisfy the customers,
every company is trying to implement new creations and innovative product
characteristics to attract customers. Keeping this in mind, the present study is designed to
analyze the innovation in Life insurance sector in India.

Sreenivas and Anand (2012) found in the Indian context that the insurance habits among
the general public during the independence decade was rare but there was a remarkable
improvement in the Indian insurance industry soon after the economic reform era due to
healthy competition from many national as well as international private insurance
players. In this study attempt has been made to analyze the investors’ perceptions towards
public and private life insurance companies in India with special reference to Karnataka.

Tiwari and Yadav (2013) determined that the deregulation of the Indian Insurance
market, low insurance market penetration and the anticipated potential of the Indian
insurance industry make it an attractive opportunity for private entrants. With the
progress of IRDA reforms and enactment of IRDA act 1999, liberalization of the
insurance market in India gave entry to many private insurers, resulting in drastic changes
in respect to people’s choice of companies. With the expansion of the market, insurance
penetration and density of the country have been improves, leading to a competition
within the companies in terms of policies sold, collection of premium income, first
premium income, market share, settlement of claims and others. In India life insurance is
regarded as more than a mere risk cover and is considered an important avenue of
investment. Indian investors therefore, evaluate the past track record and risk potential of
an Insurer before taking a policy investment decision. In this study an attempt has been
made to analyze the investors’ risk perceptions towards public and private life insurance
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companies in India with special reference to Madhya Pradesh. The study has been
conducted with the help of a structured close-ended questionnaire which was
administered to 200 potential investors who have already made investment in life
insurance policy. Necessary statistical tools such as percentage and ranking method have
been used for the purpose of data analysis and comparison. The study expects to reveal
that although a number of private insurance companies have entered the Indian life
insurance market, but Life Insurance Corporation of India still seems to be the first
choice for many of the investors due to its strong brand image and the perceived safety
that is associated with it.

Rao (2014) explained that liberalization of the financial services sector has led to
insurance companies functioning increasingly under competitive pressures; so companies
are consequently directing their strategies towards increasing customer satisfaction and
loyalty through improved service quality. With the opening of insurance industry to
private players, the competition has intensified and it has become very difficult for the
companies to attract and retain the policyholders. Every company has recognized the
need for shifting from a traditional strategy to survive in the market. It is in this context,
the process of CRM has been adopted by all private and public sector insurance
companies as well. CRM technologies and campaign management tools are maturing and
finding wider adoption with large insurance companies. This study is an endeavor to
examine and evaluate the various CRM initiatives in life insurance companies and
compare the strategies used by public sector LIC with private sector companies.

3.3REVIEWS RELATED TO POLICY HOLDERS BUYING BEHAVIOUR

Eck and Nizovtsev (2006) stated that to determine the major reasons for the lack of
success in marketing life insurance in Latin America and the Caribbean. Their results
point at the importance of cultural variables of which the most significant is the
percentage of the population that professes to be Catholic. They attribute this to a strong
correlation between religious beliefs and risk preferences. The other major factor is the
population’s attitude toward financial instruments in general. Both results are robust to
the model specification. The findings should be of interest to insurance companies
attempting to market life insurance throughout the world.

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 Life insurance

Sahu et al. (2009) expressed that the life is full of risk and uncertainties. Since, the men
are the social human being has certain responsibilities too. Indian consumers have big
influence of emotions and rationality on their buying decisions. They believe in future
rather than the present and desire to have a better and secured future, in this direction life
insurance services have its own value in terms of minimizing risk and uncertainties.
Indian economy is developing and having huge middle class societal status and salaried
persons. Their money value for current needs and future desires here the pendulum
moves to another side which generate the reasons behind holding a policy. Here, the
attempt has been made in this research to study the buying behavior of consumers
towards life insurance services.

Dragota and Ileanu (2011) inferred that proclaimed in an international context, Romania
had a special position, with both positive and negative aspects in its evolution. Even
during a crisis period, starting with 2008, Romania life insurance penetration rate had a
continuous growing trend, but it has lagged behind other countries, from Europe or from
other continents. The statistics for Romania proved that more steps must be done,
primarily in terms of people’s mentality to recognize the usefulness of this sector. Based
on our field research of 870 respondents in a nationally representative statistical survey of
urban environment in Romania, a binary logit model identified the age, the education
level, income per capita and gender as predictors for the probability a life insurance
policy to be chosen against an optional private pension. Different result between regions
suggests as adequate a regional approach in future management plans regarding life
insurance penetration.

Babita and Anshuja (2012) stated that human life is a most important asset and life
insurance is the most important type of insurance which provides financial protection to a
person and his family at the time of uncertain risks or damage. Life insurance provides
both safety and protection to individuals and also encourages savings among people. LIC
of India plays a vital role in the welfare of human well-being by providing insurance to
millions of people against life risks such as uncertain death or accident. The present
exploratory and descriptive based study was selected with an objective to identify those
factors which influence customers policy buying decision and also analyze the
preferences of customers while life policy investment decision-making. Various insurance
related factors have been discussed in this study. The data for the study has been collected
from both primary and secondary sources. The study area is limited to Jabalpur district,
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 Life insurance

of Madhya Pradesh and sample size is 150 policyholders of LIC and different private life
insurers have been selected through a stratified and purposive sampling method.
Researcher has taken few hypothesis based on demographic and insurance based
preference factors and tested them with the help of various statistical tools like chi-
square, correlation and weighted average method. The analyzed data has been presented
in the form of table, bar graphs and pie-charts. LIC is the most accepted and popular
brand in life insurance, the market share of private insurers are gradually increasing with
people trust and better services offered by them are some of the main findings of the
study. Insurance companies should spread more awareness about life insurance, reduction
in premium amount and giving more attention on need based innovative products are
some of the suggestions provided by the researcher. The research concludes with that
demographic factors of the people play a major and pivotal role in deciding the purchase
of life insurance policies.

Both primary and secondary sources. The study area is limited to Jabalpur district, of
Madhya Pradesh and sample size is 150 policyholders of LIC and different private life
insurers have been selected through a stratified and purposive sampling method.
Researcher has taken few hypothesis based on demographic and insurance based
preference factors and tested them with the help of various statistical tools like chi-
square, correlation and weighted average method. The analyzed data has been presented
in the form of table, bar graphs and pie-charts. LIC is the most accepted and popular
brand in life insurance, the market share of private insurers are gradually increasing with
people trust and better services offered by them are some of the main findings of the
study. Insurance companies should spread more awareness about life insurance, reduction
in premium amount and giving more attention on need based innovative products are
some of the suggestions provided by the researcher. The research concludes with that
demographic factors of the people play a major and pivotal role in deciding the purchase
of life insurance policies.

Prajapati and Barad (2013) explained that the life insurance basically is a tool against
protection of life or against any unforeseen event or death of individuals. It provides
financial protection against such risks. The purpose of investments in life insurance for
every individual might differ. At present there are 23 private life insurance companies and

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one public life insurance company. This large number of life insurance companies and
having wide range of products confuse the investors as to which product and of which
company to purchase. So marketers are interested to know the investment pattern of life
insurance investors in order to form their marketing strategies. The present study is an
attempt to know the behavior of individual with related to life insurance and also to know
the problems faced by them. The study revealed that Insurance advisor is the main
influencer in investment decision of life insurance investors and they depend largely on
the insurance advisor.

Divya (2014) observed that the business of insurance is related to the protection of the
economic values of asset every asset has a value the owner of any product. Expect some
value from it. Every asset is expected to last for a certain period of time during which it
will provide benefits. After that the benefit may not be available. There is a life time for
machine in a factory or a law on a motor car. The owner of this so he must manage his
asset to get optimum benefit. An accident or some other unfortunate event may destroy it
or make incapable of giving benefits. In that case owner and those who are enjoying the
benefit, there from would be deprived of the benefit. There may be a substitute plan. But
it would not be ready. It is an unpleasant situation. Insurance is a mechanism that helps to
reduce the effects of adverse situations. This study is aiming to know the preference of
the consumer about the investment made on insurance policies. So the study reveals the
different attitude of consumer to words it. So, through this study the researcher tries to
give some recommendation and suggestion for existing products and services of
insurance.

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3.4 REVIEWS RELATED TO LIFE INSURANCE POLICY HOLDERS

PERCEPTION

Chowdhury (2007) found that this is the law of nature that people have to live and play
with hazards and to some extent insurance policy can free people from those frustrations.
Even if this is true, people of Bangladesh still don’t prefer to insure themselves. One may
think that the people of Bangladesh are risk lover; on the other hand other may contradict
by saying that their low purchasing power doesn’t permit them to avail insurance policy.
This study will highlight those issues relating to non-popularity of insurance companies
in Bangladesh. To find marketing side problems, Gap-model of service marketing will be
fitted to the insurance industry of Bangladesh.

Kothari, (2011) stated that the life insurance is one of the most important social security
measures undertaken in the country. Based on primary data generated through direct
contacts, this study attempts to identify determinants of life insurance ownership in the
country. This resulted into finding out what factors play very important role in life
insurance policies purchase. Total 100 respondents were there used in this study. Item to
total correlation was applied to check the consistency of the questionnaire. The measures
were standardized through computation of reliability and validity tests. Factor analysis
was applied to identify the underlying factors. The findings of this study provide the
individual perception about the insurance policies.

Jain and Saini (2012) stated that the consumer demeanor is the study of when, why,
how, and where people do or do not buy a products/services. It blends elements from
psychology, sociology, social anthropology and economics. The study of consumer
behavior provides marketers to understand and predict the future market behavior. Life
Insurance is the fastest growing sector in India since 2000 as Government allowed
Private players and foreign direct investment (FDI) up to 26%. Life Insurance in India
was nationalized by incorporating Life Insurance Corporation of India (LIC) in 1956.
Life insurance industry in India being in nascent stage has been found very sensitive to
myriads of issue particularly when someone talks of buying pattern. Consumer choice of
one product over other products has been the issue of concern for many of the researcher
and for the organization, who has already putted lot of hard work in developing the
product. Their research discuss about the effect of demographical element in consumer
purchasing attitude for Life Insurance in India.

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 Life insurance

Vinoth (2013) stated that the life insurance is an excellent way of providing retirement
savings and also protecting families from financial hardship. For women, life insurance is
often a more effective way of saving for retirement. The research study is entitled
“Attitude of Working Women in Private Banks towards investing in Life Insurance with
special reference to Coimbatore City” with the objectives of to study and analyze the
preference of Life Insurance products, To analyze the kind of policy mostly preferred by
the private bank working women’s, the reason for investing in Life Insurance and to find
the satisfaction of working women on the quality of service of the Insurance Companies.
It found that majority of the Private Bank Working Women’s were prefer Life Insurance
Corporation of India for investing in Life Insurance Policies, Money Back insurance
policy is the most familiar kind of policy among the private bank working women’s and
savings and tax benefit are most common reason for investing in Life Insurance Policies.

Muthukumar and Rajesh (2014) identified that the life insurance plays a significant
role, in the individual lives as well as the society. For the individuals, life insurance is a
life saver since it offers protection and extends a hand of protection to those who feel
depressed and are left without any support due to the

Sudden, unexpected demise of the breadwinner of the family. It has an element of saving
for investment in future. It offers a safe and secured future, by providing financial
assistance at times of need that is for meeting the educational expenses of the children or
marriage and so on. It provides loan facilities which improve the credit worthiness of the
policy holder. A life insurance policy may be used to avail loan facility, directly from the
life insurance company or can be given as a collateral security for obtaining financial
assistance from banks and other financial institutions. In case of death, life insurance
provides security for the family and provides guaranteed payment when there is reduction
in the earning power, due to old age, sickness, accident and so on. Life insurance is a
means of savings and the relief given by the government towards the savings, promotes
the habit of thrift and savings among the people.

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3.5 REVIEWS RELATED TO LIFE INSURANCE POLICY HOLDERS

SATISFACTION

Arulsuresh (2011) suggested that the success of the life insurance business depends on
the awareness of the policyholders about the products and satisfaction of the
policyholders regarding the service rendered by LIC of India. Life insurance being a
service sector is no exception to this principle. The basics of Customer Relations
Management (CRM) include a business strategy that focuses on developing and retaining
the relationships existing between customer and organization. CRM also provides the
customer with a much needed avenue to find expression for his problems, ideas and
suggestions. Hundreds of sales leads are lost yearly as disinterested employees pay slack
attention to customer suggestions. A venue is required for these suggestions. This is
supplied by CRM implementation.

krishnan and Selvamani (2012) stated that the customer satisfaction as continues to be
one of the most important topics in insurance companies. Consequently, theorists are
continuing to explore new models and methods that may unlock meaningful information
about customer satisfaction. This study was conducted on in various parts of Chennai city
who had taken policies. This study was done through the being asked to fill up the
questionnaires which were specifically designed to find out their satisfaction level
towards the insurance policies of HDFC SLIC. The company deals with varieties of
policies like individual products, group products, social products and rural products. The
company has number of customers. The research design used for this study is descriptive
research. The data were collected on both primary and secondary data. The sample size of
the study is 150 customers used to this study. Data analysis was carried out and findings
are listed down. Suitable suggestions have been provided and hope it’s useful for the
company. This study revealed that the most of them are satisfied with the policies they
have taken and there are certain who were not comfortable with the company policies.
The company should take these into consideration and have to improve where they are
weak.

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Khan (2013) observed that consumer satisfaction is always a question mark in minds of
sellers as it is very difficult to find that what exactly consumer want from the seller. For the
very same reason this research is conducted that how customer satisfaction can be gained
with the help of customer value and relation base marketing. Customer satisfaction is one of
the most important issues in marketing field from beginning and its play a crucial role in firm
profit maximization. Study collect data from 150 policy holders of different insurance
companies of Peshawar Pakistan on systematic random sampling method. A structured
questionnaire used to collect data from the respondents. Study shows that value added
services and conflict handling are the major reason for the customer satisfaction. Managers
can use this study and can implement these findings in their business for their customer
satisfaction and more money earnings

Sogunro and Abiola (2014) observed that the modern societies belief life insurance scheme,
which is designed to be backbone of man survival, ensure financial security and offers
readymade source of long term capital financing for the infrastructural project is capable of
combating the besetting problem of man so that life can be made easy and continuous. The
dramatic increase in competition within the insurance sector and the needs of insurance by
people has concurrently resulted in more policy options being available in Nigeria market.
The different types and attributes of life insurance plans are to provide quality in the
products, so as to satisfy human wants. This study is carried out to measure the buyers' trade-
offs among multi-attributed products and services (utilities) that are derived from purchasing
a particular life insurance plan using descriptive statistical analysis (Mean Score). The result
show that the policyholders generally are not satisfied with the Life insurance products based
on the attributes attached to each of the product.

3.6 REVIEWS RELATED TO INSURANCE SERVICE QUALITY

Dinesh et al., (2011) stated that the research study aims to assessing the service offered by
the Reliance Life Insurance Company Limited in South Tamil Nadu, along with compare
those key service dimensions with their perception and satisfaction. Questionnaire was used
as a tool for procure data from the policyholders and those data used to evaluate the level of
perception and satisfaction for the construction of questionnaire which include 17 questions
for testing the attributes for perception and 6 questions were used to testing the attributes for
satisfaction with the rating scale provided as 5 point scale. Chi-square test used to testing the
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significant level of perception and satisfaction with demographic data provide by the policy
holders. Major findings of this research study are: Professional category respondents have
high perceptional level with regards to the financial credential of the company, Most of the
respondents have high perceptional level in servicing aspect of timely reminder of dues, most
of the respondents have high satisfaction level of claim admissibility and claim settlement
and Salaried class respondents mostly satisfied for taking insurance as a tax exemption tool.
Major suggestions of this study are: Improving the behavior of employees towards the
customer centric approach and improving the response level of employees towards customer
requests, appoint a person for collecting renewals in the convenient time of the policyholders.
All the operating office must be installed with Touch screen facility for proving information
instantly.

Bodla and Chaudhary (2012) stated that to ascertain the expected and perceived service
quality level along with gaps on the basis of Service Quality model in one of the leading
private sector company, ICICI Prudential Life Insurance Company (ICICIPLI). Though
collectively, private sector has significantly captured the market share initially, but now days,
most of the private sector companies are struggling for a regular growth in business and
market share, and the selected company is one of them. Also the customers often complaints
of poor services in life insurance services, which obviously means there is something wrong
in customer strategies of these companies. The same is proved in the findings of research,
that there exists a significant gap in service quality expected and perceived by the customers
of ICICIPLI and it is recommended that company should think strategically to improve its
customer services on selected dimensions of service quality so that the business growth rate
and market position may improve.

Kumari and Murthy (2013) observed the quality of service delivery results in customer
satisfaction and their retention as it reinforces the perception that the value of service
received is greater than the price paid for it. Quality improvement and adherence to accepted
forms of quality are central to the modern concept of marketing of services. Customer service
assumes vital importance in the marketing programmers of all modern organizations
including service organizations. As Insurance is a service industry, the main focus is on the
efficient and effective delivery of services to the policy holders. The most important factors
in the insurance industry are security of the amount insured and customer satisfaction. The
best way of surviving and prospering in the competitive environment is through providing
prompt relevant and efficient customer services at measurable cost. After liberalization of the
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insurance sector it has been duly realized by all the players that customer satisfaction is the
pivotal element for enhancing business performance. In order to attain sustainable growth in
the competitive environment, offering quality service is the only differentiating factor.

Began (2014) analyzed that the effect of service quality on policy holder satisfaction in
Salem Division of Tamil Nadu. The Salem Division consists of 18 branches. Since the
number of policy holders in each branch was large, the policy holders could not be selected
on a proportional basis, a sample of 360 policy holders, 20 from each branch were selected
on the basis of convenience sampling method. The study reveals that policyholders have low
levels of satisfaction with the basic amenities, service qualities, ease of procedure, company-
client relationship and technology. The study further reveals that the overall satisfaction of
the policyholders is poor in Life Insurance Corporation in the study area. The study indicates
that there is a strong relationship between the service quality and a policyholder’s satisfaction
and service quality is a strong predictor of customer satisfaction.

3.7 RESEARCH GAP

Review of related literature in the area of life insurance services, products, private life
insurance companies, awareness about insurance policies, perception of the policy holders,
buying behavior of the policy holders and policy holder satisfaction had been made by the
researcher to establish validity of the research topic: “Comparative Analysis on Preference
and Satisfaction of Life Insurance Policy Holders”. Various research studies conducted by
eminent researchers for a span of two decades have been reviewed and the researcher
understood the gaps in the earlier studies. The researcher understood no studies were
conducted about the policy holder’s service quality perception along with their satisfaction.
Further, in the recent years no studies were conducted in Dharmapuri district related to this
comparative research study and hence the researcher has undertaken to understand the
satisfaction level on services of Public and Private Life Insurance Companies.

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CHAPTER 4

DATA ANALYSIS, INTERPRETATION AND PRESENTATION

46
 Life insurance

4.1 INTRODUCTION TO ANALYSIS:-

In order to extract meaningful information from the data them. The analysis can be
conducted by using simple statistical tools like percentages, averages and measures
of dispersion. Alternatively the collected data may be analyzed; the data analysis is
carried out. The data are first edited, coded and tabulated for analyzing by using
diagrams, graphs, charts, pictures etc. Data analysis is the process of planning the
data in an ordered form, combining them with the existing information and
extracting from them.

Interpretation is the process of drawing conclusions from the gathered data in the
study. In this research the researcher has analyzed the data using percentages and
graphs.

4.2 DATA ANALYSIS TOOLS USED:

In this research the data analysis tools used are percentages and graphs. The
various attributes were analyzed separately and the importance to each was
calculated on the basis of the percentage. The rank having the maximum
percentage was taken to be preferred importance to the particular attribute.

After looking at each attribute separately, all the attributes were considered
together to develop a map on the most preferred rank for all the attributes.

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 Life insurance

TABLE 1

AGE OF RESPONDENTS

SL.NO AGE IN YEARS NUMBER PERCENTAGE

OF OF
RESPONDENTS RESPONDENTS

1. 21 – 30
11 36.67%

2. 31 – 40
4 13.33%

3. 41 – 50
5 16.67%

4. 51 – 60
6 20%

5. 61 – 70
0 0%

6. 71 – 80
4 13.33%

TOTAL
30 100%

SOURCE: - SURVEY DATA

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 Life insurance

GRAPH 1

AGE OF RESPONDENTS

PERCENTAGE OF RESPONDENT
36.67%

20.00%
16.67%
13.33%

13.33%

21-30
31-40
41-50
51-60
0.00%
61-70
71-80

INFERENCE: The above table classified the respondents according to their age group.
The majority of the respondents belong to the age group 21 to 30 years with 36.67% and
the second age group is 31 to 30 years and 71-80 with 13.33% each .followed by 51-60
year with 20%.

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 Life insurance

TABLE 2

DIFFERENCIATION OF RESPONDENTS BASED ON THEIR OCCUPATION

SL.NO OCCUPATION NUMBER OF PERCENTAGE

RESPONDENTS OF
RESPONDENTS

1. STUDENTS 3 10%

2. GOVERNMENT 13 43.33%
EMPLOYEES

3. PRIVATE 11 36.67%
EMPLOYEES

4. HOUSE WIVES 2 6.67%

5. RETIRED 1 3.33%
PERSONS

TOTAL 30 100%

SOURCE: - SURVEY DATA

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 Life insurance

GRAPH 2

DIFFERENCIATION OF RESPONDENTS BASED ON THEIR OCCUPATION

PERCENTAGE OF RESPONDENTS
6.90%
10.34%

STUDENTS
GOVERNMENT EMPLOYEES
PRIVATE EMPLOYEES
37.93% HOUSE WIVES

44.82%

INFERENCE: It could be inferred that majority of consumers of life insurance policies

are government employees with 43.33% and private employees with 36.67%.
Followed by students with 10% house wives with 6.67% and retired persons with
3.33%.

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 Life insurance

TABLE 3

TABLE SHOWING INCOME GROUP OF RESPONDENTS

SL.NO INCOME NUMBER OF PERCENTAGE

GROUP RESPONDENTS OF
RESPONDENTS

1. LESS THAN 2 6.67%

5000

2. 5001 – 10,000 2 6.67%

3. 10001 – 15000 5 16.67%

4. 15001 – 20000 5 16.67%

5. 20001 – 25000 6 20%

6. GREATER 10 33.33%
THAN 25000

TOTAL 30 100 %

SOURCE: - SURVEY DATA

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 Life insurance

GRAPH 3

GRAPH SHOWING INCOME GROUP OF RESPONDENTS

Income Group
Less than
6.69% 5,000
6.69%
5,001-10,000
33.11%
10,001-15,000
16.72%
15,001-20,000

20,001-25,000

16.72% More than

25,000
20.06%

INFERENCE: The majority of dominant income group having life insurance policies
belong to the income group of greater than 25000, which is high class group. Followed
by the income group is average.

Table 4

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 Life insurance

TABLE SHOWING HAVE INSURANCE POLICY OF RESPONDANCE

RESPONSE NUMBER OF PERCENTAGE OF

RESPONDENTS RESPONDENTS

YES 18 60%

NO 12 40%

Total 30 100 %

SOURCE: - SURVEY DATA

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 Life insurance

GRAPH 4

GRAPH SHOWING HAVE LIFE INSURANCE POLICY OF

RESPONDANCE

Life Insurance Policy

70%

60%

50%

40% Life Insurance Policy

30%

20%

10%

0%
Yes No

INFERENCE: this table shows that 60% people have life insurance policy. And 40% of
people do not have life insurance policy.

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 Life insurance

TABLE 5

RESPONDENTS PREFERENCE TO INVEST THEIR MONEY

NUMBER OF PERCENTAGE OF

RESPONDENTS RESPONDENTS

INSURANCE 19 63.33%
COMPANY

BANK 11 36.67%

TOTAL 30 100 %

SOURCE: - SURVEY DATA

GRAPH 5

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 Life insurance

RESPONDENTS PREFERENCE TO INVEST THEIR MONEY

Investments
70.00%

60.00%

50.00%

40.00% Investments

30.00%

20.00%

10.00%

0.00%
Insurance Company Bank

INFERENCE: From the table it is clear that majority of people (63.33%) prefer to invest
in insurance company and others (36.67%) prefer to invest in bank.

TABLE 6

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 Life insurance

TABLE SHOWING ATTRIBUTES FROM RESPONDENTS

SL.NO ATTRIBUTE RESPONDENTS

1. RETURN ON 11
INVESTMENT

2. COMPANY 9
REPUTATION

3. PREMIUM 0
OUTFLOW

4. SERVICE 6
QUALITY

5. PRODUCT 4
QUALITY

SOURCE: - SURVEY DATA

GRAPH 6
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 Life insurance

GRAPH SHOWING ATTRIBUTES FROM RESPONDENTS

RESPONDENTS
RESPONDENTS

12 11

10 9
8

6
6
4
4
2

0
T
EN N 0
M IO
ST AT W
VE T LO Y
I N EP
U TF LI T Y
ON R O U
QU
A
ALI T
RN NY M E QU
PA IU IC T
ETU M EM RV UC
R CO PR SE D
O
PR

INFERENCE: This table shows the strengths and weaknesses of the company, and what
are the important criteria or attributes on which decision making is done. From this table
we can infer that consumers give more importance for Return on investment, secondly
they prefer company reputation, and then followed by service quality, product quality
and premium outflow.

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 Life insurance

TABLE 7

FACTORS WHICH INFLUENCED TO SELECT LIFE INSURANCE

COMPANY

SL.NO FACTORS RESPONDENTS RANK

1. PERSONAL INTEREST 8 1

2. FAMILY 7 2

3. AGENTS 6 4

4. FRIENDS 2 5

5. ADVERTISEMENT 0 6

6. OTHERS 7 3

SOURCE: - SURVEY DATA

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 Life insurance

GRAPH 7

FACTORS WHICH INFLUENCED TO SELECT LIFE INSURANCE

COMPANY

Respondent

23.33% PERSONAL INTEREST

26.67%
FAMILY
AGENTS
FRIENDS
ADVERTISEMENT
6.67%
OTHERS

23.33%
20.00%

INFERENCE: This table is helpful in knowing which media is best suitable for
promoting a life insurance company. It can be seen that personal factor influences a
consumers to select a life insurance company, followed by family, agents, friend and
advertisements.

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 Life insurance

TABLE 8

VALUE OF RESPONDENTS LIFE INSURANCE POLICY

SL.NO AMOUNT NUMBER OF PERCENTAGE OF

RESPONDENTS RESPONDENTS

1. < 10000 0 0%

2. 10000 – 25000 4 13.33%

3. 25000 – 50000 6 20%

4. 50000-100000 8 26.67%

5. > 100000 12 40%

SOURCE: - SURVEY DATA

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 Life insurance

GRAPH 8

VALUE OF RESPONDENTS LIFE INSURANCE POLICY

900%

800%

700%

600%

500%

400% Life Insurance Policy

300%

200%

100%

0%
< 10000 10000 – 25000 25000 – 50000 50000-100000

INFERENCE: It can be inferred that majority of consumers buy the life insurance policy
which costs more than Rs. 1,00,000 followed by Rs. 50,000 to Rs.1,00,000, followed by
Rs. 25,000 to Rs. 50,000.

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 Life insurance

TABLE 9

RATINGS OF THE SERVICES OFFERED BY THE RESPONDENT’S

LIFE INSURANCE COMPANY

RATINGS NUMBER OF PERCENTAGE OF

RESPONDENTS RESPONDENTS

EXCELLENT 6 20%

VERY GOOD 10 33.33%

GOOD 7 23.33%

AVERAGE 5 16.67%

POOR 2 6.67%

TOTAL 30 100 %

SOURCE: - SURVEY DATA

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 Life insurance

GRAPH 9

RATINGS OF THE SERVICES OFFERED BY THE RESPONDENT’S

LIFE INSURANCE COMPANY

PERCENTAGE OF RATINGS

6.67%
20.00%
16.67% EXCELLENT
VERY GOOD
GOOD
AVERAGE
POOR

23.33% 33.33%

INFERENCE: From this table it could be inferred that 33.33% of the consumers have
rated service offered as very good, 23.33% of them have rated them as good 20%of them
have rated as excellent and 16.67% of them have rated as average

TABLE 10
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 Life insurance

CONSUMERS WILLINGNESS TO COMMUNICATE THE SERVI OFFERED

BY THEIR LIFE INSURANCE COMPANY

RESPONSES NUMBER OF PERCENTAGE OF

RESPONDENTS RESPONDENTS

YES 21 70%

NO 9 30%

TOTAL 30 100 %

SOURCE: - SURVEY DATA

GRAPH 10

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 Life insurance

CONSUMERS WILLINGNESS TO COMMUNICATE THE SERVI OFFERED

BY THEIR LIFE INSURANCE COMPANY

PERCENTAGE OF RESPONDENTS
80%

70%
70%
60%

50% PERCENTAGE OF
RESPONDENTS
40%

30%
30%
20%

10%

0%
YES NO

INFERENCE: From this table it can be noted that the majority of consumers (70%)
would like to communicate to others about the service offered by life insurance
companies and 30 % of consumers would not like to communicate the service offered.

TABLE 11
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 Life insurance

CONSUMERS WILLINGNESS TO CONTINUE WITH THE SAME LIFE

INSURANCE COMPANY

RESPONSES NUMBER OF PERCENTAGE OF

RESPONDENTS RESPONDENTS

YES 26 86.67%

NO 4 13.33%

TOTAL 30 100 %

SOURCE: - SURVEY DATA

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 Life insurance

GRAPH 11

CONSUMERS WILLINGNESS TO CONTINUE WITH THE SAME LIFE

INSURANCE COMPANY

RESPONSES

13.33%
YES
NO

86.67%

INFERENCE: From this table it can be noted that the majority of consumers (86.67%)
would like to continue with the same life insurance company and 13.33% of consumers
would not like to continue with the same life insurance company.

CHAPTER 5

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 Life insurance

CONCLUSION AND SUGGESTIONS

5.1 CONCLUSION

An Insurance policy is an investment oriented plan. As compared to other investment

plans, the investment portfolio of the Insurance Policy functions like a mutual fund and
other investment. It is invested in a portfolio of debt and equity instruments, in
conformity with the announced investment policy. Hence it grows or erodes in line with
the performance of that portfolio.

From this study it reveals that the consumer’s attitude towards Insurance Policy and
Insurance Company changed a lot. A 5 years before the consumers and the general public
were not interested to take an Insurance Policy but now days there are many options and
choices in front of the customers. They are interested to take high return policies in order
to secure their lives. People are aware of all the benefits and returns of insurance policies.
As a result of this new international and domestic companies are coming to the Indian
Market.

Since there are many players in the Indian Insurance Market the competition level is very
high. So the companies are introducing new schemes. From this it is found that The LIC
is the major market share holder in the insurance field. Even if there are many players in
this field still it is an untapped market. Only a few portion of Indian population is insured.

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 Life insurance

5.2 RECOMMENDATIONS AND SUGGESTIONS

With regard to insurance companies, consumers respond at different rates, depending on

the consumers characteristics. Hence Insurance companies should try to bring their new
product to the attention of potential early adopters.

a) Due to the intense competition in the life insurance market, the life insurance
companies have to adopt better strategies to attract more customers.

b) Keeping the cost, quality and return on investment in tact is necessary in order to
tackle the competition.

c) Life insurance products are taken mainly by middle and higher income group.
Hence they should be regarded as maim targeted income groups. Life insurance
products which are suitable for lower income group should also be released so that
the market share increases.

d) Return on investment, company reputation and premium outflow are most

preferred attributes that are expected by the respondents. Hence greater focus
should be given to these attributes.

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 Life insurance

e) Private life insurance companies should adopt effective promotional strategies to

increase the awareness level among the consumers.

f) Life insurance companies should ask for their consumer feedback to know
whether the consumers are really satisfied or dissatisfied with the service and
product of the companies. If they are dissatisfied, then the reasons for
dissatisfaction should be found out and should be corrected in future.

g) The LIC brand name has earned a lot of goodwill and enjoys high brand equity. As
there is intense competition in life insurance market, LIC should work hard to
maintain its top position and offer better service and product.

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 5.3 BIBLIOGRAPHY

1) Dr. Singh, Avatar, Principles of Insurance Law, S Chand & Sons, Delhi, 2003.

2) Leon G. Schiff man, Lestie Lazar Kanwk, Consumer Behavior, Himalaya

Publishers, Delhi,2004

3) Kotler Philip, Marketing Management, Pearson Education Inc. 11th

Edition.

4) Stanton William J, Etzel Michael J, Walker Bruce J, Fundamentals of

Marketing, McGraw-Hill international, Singapore, 2002

5) Ravi Shankar, Services Marketing, Prentice Hall, 2000.

6) Valarie Azithaml, Marry Jo Bittner, Services of Marketing, Prentice Hall, 2001

World Wide Web:

 www.lic.com
 www.irda.org
 www.wikipedia.com
 ANNEXURE

QUESTIONNAIRE

A STUDY CONDUCTED TO UNDERSTAND THE CONSUMER’S

PERCEPTION ABOUT LIFE INSURANCE POLICIES

1. Name:

2. Age:

3. Address:

4. Occupation:

5. Monthly income:

0<5000 5001-10,000 10,000-15,000

15,000 -20000 20,001-25,000 more than 25,000

6. Do you have a Life Insurance Policy with any Life Insurance Company?

Yes No

6. a) If yes, name the Company___________________________________

b) Name the policy which you own_____________________________

7. Do you prefer to invest your money in an Insurance company or in a Bank?

Insurance Company Bank

8. What factors do you consider while selecting a life insurance company?

 Premium Outflow Company Reputation

Service Quality Product Quality

Return on Investment

9. What factors influenced to select a Life Insurance company

Personal interest Friends Family

Agents Advertisements others

10. What is the value of your life insurance?

0 >10,000 10,000-25,000 25,000-50,000

50,000-1, 00,000 >1, 00,000

11. How do you rate the service offered by your Life Insurance Company?

Excellent Very Good Good

Average Poor

12. Would you like to communicate the service offered by your Life Insurance?
Company to others?

Yes No

13. Would you like to continue with the same Life Insurance Company?

Yes No

14. Any suggestions for improving the service offered by life insurance companies