CHAPTER -V ANALYSIS - 1 CUSTOMER PROFILE AND PREFERENCES

5.1 INTRODUCTION The study has been conducted at Chennai and Tiruchirapalli covering both customers and agents. This chapter aims to analyse the responses received from customers. The principal objective behind the analysis is to understand the profile of customers and their preferences while buying life insurance policy. Preferences of customer will include how they would like to be contacted, key reasons for buying life insurance products and sources of information required to them.

The term customer connotes different meanings under different contexts. According to Webster online dictionary, customer is one who purchases a commodity or service. Similarly Wikipedia defines customer as someone who makes use of or

receives the products or services of an individual or organization. Groups or individuals who have a business relationship with an organization, those who receive and use or are directly affected by the products and services of the organization are also defined as customers. For the purpose of this study, a customer is an individual, male or female having an independent income. Income earning is considered important for the purpose of this study, as life insurance products provide financial security to the dependants in the unfortunate happening of the death of the breadwinner.

5.2

DEMOGRAPHIC VARIABLES Demographic variables such as age, sex, education and income are useful to

understand the customers preference.

In the following tables (5.1 to 5.6), the

demographic features of the customers surveyed are presented.

Table 5.1: Age groups of customers Chennai Age group < 30 30-40 40-50 >50 Total
Source: Primary data

Tiruchirapalli No. of Respondents 35 17 12 6 70 Percentage 50.00 24.29 17.14 8.57

No. of Respondents 82 106 65 36 289

Percentage 28.37 36.68 22.49 12.46

The above table indicates that out of 289 respondents surveyed in Chennai, more than 65% of the respondents are in the age group of less than 40 years. This age group is the target segment for both life and pension products. Similarly in Tiruchirapalli more than 74% of the respondents are in the age group of less than 40 yrs. Balance 35% in Chennai and 25% in Tiruchirapalli are more than 40 yrs of age and are the target segments for pension and savings products. Currently around 31% of Indias population of approximately 1.08 billion is 15 years old or younger and 5% is older than 64 years. This leaves the balance 64% in the working age or economically active cohort of 15-64 years. By the year 2030, the 15-39 age groups will account for close to 46% of the population, which is economically active, implying a huge potential customer base for life insurance industry. (Mathur, 2006)

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Table 5.2: Sex of the customers Chennai Sex Male Female Total
Source: Primary data

Tiruchirapalli

No. of No. of Percentage Percentage Respondents Respondents 213 76 289 73.70 26.30 52 18 70 74.29 25.71

As regards the sex of the respondents, it is observed that of the respondents 73.70 percent in Chennai and 74.29 percent in Tiruchirapalli are male and rest 26.30 percent in Chennai and 25.71% in Tiruchirapalli are female.

Table 5.3: Educational qualification of customers Chennai Qualification Upto Higher Secondary Under Graduation Post Graduation Professional Qualification Total
Source: Primary data

Tiruchirapalli

No. of No. of Percentage Percentage Respondents Respondents 48 113 88 40 289 16.61 39.10 30.45 13.84 11 28 25 6 70 15.71 40.00 35.71 8.57

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Figure 5.1 Educational qualifications of customers (in percentages)

Source: Primary data

Over 82 percent of the total respondents were graduates, post graduates or holders of professional qualification. Only 16.61 percent in Chennai and 15.71 percent in Tiruchirapalli have qualification upto Higher Secondary (HSC). Table 5.4: Mother tongue of customers Chennai Mother tongue Tamil Telugu Malayalam Hindi Others Total
Source: Primary data

Tiruchirapalli

No. of No. of Percentage Percentage Respondents Respondents 178 38 37 18 18 289 61.59 13.15 12.80 6.23 6.23 55 7 2 0 6 70 78.57 10.00 2.86 0.00 8.57

Since the survey was conducted in the state of Tamilnadu, over 61 percent in Chennai and 78 percent in Tiruchirapalli of the respondents have Tamil as their mother tongue and the rest have other languages like Telugu, Malayalam and Hindi as their mother tongue.

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Table 5.5: Size of the family of customers Total members in the family <=2 3-4 >4 Total
Source: Primary data

Chennai

Tiruchirapalli

No. of No. of Percentage Percentage Respondents Respondents 82 28.37 28 40.00 162 45 289 56.06 15.57 18 24 70 25.71 34.29

The study reveals that 84.43 percent in Chennai and 65.71 percent in Tiruchirapalli of the respondents have size of the family as 4 or less. Basically it implies the breaking up of the joint family system and emergence of nuclear families. Emergence of nuclear families emphasizes the need for life insurance as the natural protection available under the joint family system, which in the event of death of a bread winner is not available in the nuclear family set up. It can also be observed, although the sample size is small, the percentage of large families i.e. more than 4 members is higher in Tiruchirapalli than in Chennai. Table 5.6: Income level of customers Monthly Income (Rupees) <=20000 20000-40000 40000-60000 >60000 Total
Source: Primary data

Chennai

Tiruchirapalli

No. of No. of Percentage Percentage Respondents Respondents 148 75 38 28 289 51.21 25.95 13.15 9.69 45 16 5 4 70 64.29 22.86 7.14 5.71

As regards monthly income, 51.21 percent in Chennai and 64.29 percent in Tiruchirapalli have monthly income less than Rs.20,000. Similarly 9.69 percent in Chennai and 5.71 percent in Tiruchirapalli have monthly income greater than

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Rs.60,000/-. Monthly income is a key determinant in the purchase of life insurance products. With the rising income and increase in standard of living, individuals buy life insurance products to protect the current standard of living and normally it is observed that the increase in income leads to increase in the purchase of life insurance products. According to MGI income Consumer demand model, Indias economic growth will increase the economic prosperity of the population. The deprived class, i.e. Individuals with less than Rs.90,000 income per annum, which stood at 49% of the total population in the year 2005, is expected to reduce to 18% of the population in the year 2025. Similarly the higher income group i.e. individuals with income greater than Rs.500,000 per annum, which is at a meager 2% of the population in the year 2005 is expected to increase to 15% in the year 2025. Growing personal income also portends huge potential for life insurance market in India.

5.3

INVESTMENT PREFERENCES OF CUSTOMERS From the table 5.7 it can be observed that in respect of investment products, Life

insurance, Bank/Post office deposits and Mutual fund are the top 3 investment products availed by respondents in the city of Chennai, with Life Insurance having highest usage percentage. Bank/Post office deposits, Life insurance and mutual fund are the top 3 in the city of Tiruchirapalli. Respondents in Tiruchirapalli preferred Bank/Post office deposits, which are relatively lower risk investment options. Chennai scores high on Home loan and credit card usage over Tiruchirapalli, indicating behaviour of consumers willingness to leverage. 41.18 percent of the respondents in Chennai have availed credit card as against only 14.29 percent in Tiruchirapalli. Table 5.7: Financial products availed by customers Finance Products Chennai Tiruchirapalli

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No. of Respondents

Percentage to total

No. of Respondents

Percentage to total

Investment Products Bank/Post office Deposits RBI/Government of India bonds Company deposit Life Insurance Mutual fund Pension Savings Shares & Stocks Credit Products Home Loan Credit card Car Loan Total number of respondents
Source: Primary data

180 41 45 233 99 53 68 67 119 37 289

62.28 14.19 15.57 80.62 34.26 18.34 23.53 23.18 41.18 12.80

51 18 11 42 39 17 25 10 10 15 70

72.86 25.71 15.71 60.00 55.71 24.29 35.71 14.29 14.29 21.43

Multiple responses possible and hence the total percentage may exceed 100 percent

Table 5.8: Average financial products availed by customers

Chennai Tiruchirapalli

Total number of respondents (a) Investment Products Total of all responses (b) Average per respondent (c=b/a) Credit Products Total of all responses (d) Average per respondent (e=d/a)
Source: Primary data

289

70

719 2.49

203 2.90

223 0.77

35 0.50

Respondents in Chennai have availed 2.49 products on an average as against 2.90 products in Tiruchirapalli (Table 5.8) denoting that the customers in Tiruchirapalli are using more number of investment products than the customers at Chennai. In

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respect of credit products the respondents in Chennai have availed 0.77 products as against 0.50 for respondents in Tiruchirapalli implying high credit leverage by respondents in Chennai. Table 5.9: Mean ranking of Investment preferences of customers
Investment Options Chennai Bank deposit Life insurance Post office deposit Mutual Fund -Growth RBI/ Government bonds Equity shares Mutual Fund Debt scheme Company deposit Pension Source: Primary data 2.67 2.67 4.08 4.23 5.15 5.23 5.84 6.26 6.60 Mean ranking Tiruchirapalli 2.58 2.79 4.64 3.26 5.44 4.93 6.15 6.11 6.31 Total 2.65 2.69 4.18 4.03 5.21 5.17 5.90 6.23 6.55

Bank deposit is the most preferred investment option for respondents in both Chennai and Tiruchirapalli followed by life insurance (Table 5.9). According to recent Reserve Bank of India report, Bank deposits constitute 47.4 percent of total household savings during the year 2005-06 and the preference stems from the fact of safety of investments. Pension investment is the least preferred option in both the cities.

Table 5.10: Age group analysis of investment preferences of customers (Mean ranking)
Age group Investment options < 30 30-40 40-50 >50 Total

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Bank deposit Life insurance Mutual fund -Equity schemes Post office deposit Equity shares RBI/ Government of India bonds Debt mutual fund schemes Company deposit Pension Source: Primary data

2.86 2.52 3.93 4.55 5.27 5.39 5.79 5.75 6.95

2.68 2.72 4.31 4.00 5.05 4.99 5.81 6.68 6.9

2.69 2.78 3.74 4.14 5.05 5.29 6.05 6.51 5.76

1.83 2.97 4.00 3.63 5.56 5.17 6.35 5.88 5.46

2.65 2.69 4.03 4.18 5.17 5.21 5.90 6.23 6.55

Note: Analysis for consolidated data1

Bank deposit, as the most preferred investment option, finds very high favour with higher age groups. Similarly the preference for Post office deposit also increases with increase in age group. An interesting observation is that equity shares have better ranking and hence preference in the age groups 30-40 and 40-50. Ranking for Pension steadily increases with the age group, indicating the respondents changing preference for their own security as the age increases. From the above table (5.10), it can be inferred that as the age increases, the preference for low risk investment increases.

Table 5.11: Income group analysis of investment preferences of customers (Mean ranking)
1

Analysis for consolidated data refers to analysis of combined data collected from both Chennai and Tiruchirapalli

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Investment options <=20000

Monthly Income group

2000040000 4000060000 >60000 Total

Bank deposit Life insurance Mutual fund -Equity schemes Post office deposit Equity shares RBI/ Govt. of India bonds Debt mutual fund schemes Company deposit Pension
Source: Primary data
Note: Analysis for consolidated data

2.40 2.47 4.47 3.89 5.67 5.10 6.29 6.13 6.71

2.70 2.79 3.49 4.56 4.94 5.49 5.59 6.51 6.39

3.19 2.81 3.16 4.65 4.10 4.89 4.83 6.11 6.37

3.37 3.62 4.00 4.44 4.07 5.42 5.58 6.29 6.13

2.65 2.69 4.03 4.18 5.17 5.21 5.90 6.23 6.55

In the above table (5.11), the investment preference has been analysed according to the income group of respondents and it can be observed that as the income level increases preference for bank deposit comes down. Similarly the preference for life insurance goes down with increase in income level. On the contrary preference for equity shares goes up as the income level increases indicating greater risk taking attitude of the higher income group.

Table 5.12: Employment group analysis of investment preferences of customers (mean ranking)

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Employment group
Investment options Governm ent Service Public Sector Private Sector Busine ss Professi onal Others Total

Bank deposit Life insurance Mutual fund -Equity schemes Post office deposit Equity shares RBI/ Govt. of India bonds Debt mutual fund schemes Company deposit Pension
Source: Primary data

2.14 2.76 4.17 3.49 6.43 4.95 6.11 6.76 6.00

2.65 2.49 4.13 4.07 5.04 6.00 6.19 5.96 6.04

2.82 2.57 3.98 4.32 5.05 5.29 5.99 6.37 6.41

2.85 2.71 4.07 4.59 4.72 5.02 5.32 5.91 7.12

2.67 3.18 3.79 4.43 4.60 5.27 6.05 5.95 6.95

2.34 2.89 4.06 3.84 5.48 4.71 5.86 6.00 7.00

2.65 2.69 4.03 4.18 5.17 5.21 5.9 6.23 6.55

Note: Analysis for consolidated data

It can be inferred from the table (5.12) that those who are in government service and public sector prefer investment in Bank deposit, which connotes their low risk taking nature. On the contrary, those who are engaged in business and professional pursuits prefer investment in equity shares and are willing to take relatively higher risk. RBI /Government of India bonds, which again represent a low risk low return investment option, are preferred by those who are in government jobs. Respondents employed in Private Sector and professionals prefer equity based mutual funds, as their ranks are lower than other employment segment respondents.

5.4

ADEQUACY OF LIFE INSURANCE

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Table 5.13: Existing life insurance cover of customers Total life insurance cover No Insurance <=1 Lakhs 1-3 Lakhs 3-6 Lakhs > 6 Lakhs Total
Source: Primary data

Chennai

Tiruchirapalli

No. of No. of Percentage Percentage Respondents Respondents 65 68 73 51 32 289 22.49 23.53 25.26 17.65 11.07 41 14 6 4 5 70 58.57 20.00 8.57 5.71 7.14

22.49 percent in Chennai and 58.57 percent in Tiruchirapalli do not have life insurance cover. Only 11.07 percent in Chennai and 7.14 percent in Tiruchirapalli have insurance in excess of Rs. 6 Lakhs. Out of the total of 359 respondents, only 6 respondents have life cover more than Rs. 20 Lakhs and only one customer had a life cover of Rs.40 Lakhs, which is the highest.

Table 5.14: Minimum life insurance cover calculation Current Income per month Rs Current Income pa Rs Current Bank interest rate p.a. Corpus / Deposit required for substituting the income Rs (a) (b=a*12) (c) (d=b/c) 15000 180000 8% 2250000

Source: Primary data

Key assumption for calculation of the minimum life insurance cover requirement is that a minimum of Rs.15,000 is required to run a family and the family of the

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breadwinner requires a minimum of Rs.180,000 pa to continue to maintain their current standard of living, ignoring the effects of inflation (Table 5.14). Minimum Life cover is a corpus, interest of which at current interest rate will be equal to the annual income of the breadwinner. In the above example, a corpus of Rs.22,50,000 at current bank interest rate of 8% will provide Rs.1,80,000 as interest to the family and hence Rs.22.50 lakhs is the minimum life cover requirement. Upon applying these minimum life insurance criteria to the respondents, it can be observed that only 6 customers have life insurance cover in excess of Rs. 6 lakhs. The balance 98% of the respondents from both Chennai and Tiruchirapalli are significantly underinsured. The above calculations point towards the potential available in the India. Indian life insurance market has significant potential on account of low penetration combined with low expenditure on life insurance. Even today, only about one third of the addressable population in the country is covered under insurance and the ones who are covered are under-covered, as the last ten years income levels have shot up significantly. (Sivakumar, 2008)

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Hypothesis No: 5.1 Null Hypothesis: There is no association between the income groups of respondents in Chennai and their existing life cover. Table 5.15: ChiSquare test for association between the income groups of respondents in Chennai and their existing life cover.
Income Group Not insured 38 (25.7) [58.5] 9 (12) [13.8] 9 (23.7) [13.8] 9 (32.1) [13.8] 65 Existing life insurance cover Greater Less 1 -3 3-6 than 6 than 1 Lakh Lakhs Lakhs Lakh s 44 44 16 6 (29.7) (29.7) (10.8) (4.1) [64.7] [60.3] [31.4] [18.8] 12 20 23 11 (16) (26.7) (30.7) (14.7) [17.6] [27.4] [45.1] [34.5] 7 5 11 6 (18.4) (13.2) (28.9) (15.8) [10.3] [6.8] [21.6] [18.8] 5 4 1 9 (17.9) (14.3) (3.6) (32.1) [7.4] [5.5] [2] [28.1] 68 73 51 32 ChiSquar e value P value

Total

<=20000 20000 to 40000 40000 to 60000

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75 51.784 38
0.000**

> 60000 Total

28 289

Source: Primary data Note: 1) ** denotes 1 percent level of significance 2)* denotes 5 percent level of significance

Since P value is less than 0.01, the null hypothesis is rejected at 1% level of significance. Hence there is an association between the income group of respondents in Chennai and their existing life cover.

Life insurance consumption increases with increase in income. It can be observed that 85 percent of the respondents in the income group of less than 20000 per month have life cover of Rs.3 lakhs or less. On the other hand 32 percent of the respondents in the income group of greater than Rs.60,000 per month have life cover of over Rs. 6 lakhs.

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Hypothesis No: 5.2 Null Hypothesis: There is no association between the income groups of in Tiruchirapalli and their existing life cover. respondents

Table 5.16: Chi Square test for association between the income groups of respondents in Tiruchirapalli and their existing life cover.
Income Group Not insured 28 (62.2) [68.3] 8 (50) [19.5] 3 (60) [7.3] 2 (50) [4.9] 41 Existing life insurance cover Greater Less 1 -3 3-6 than 6 than 1 Lakhs Lakhs Lakhs Lakh 9 5 2 1 (20) (11.1) (4.4) (2.2) [64.3] [83.3] [50] [20] 3 1 2 2 (18.8) (6.3) (12.5) (12.5) [21.4] [16.7] [50] [40] 2 (40) [40] 2 (50) [14.3] 14 6 4 5 Row Total 45 ChiSquare value P value

<=20000

20000 to 40000

16 16.319 5 0.177

40000 to 60000

> 60000 Column Total

4 70

Source: Primary data

Since P value is greater than 0.05, the null hypothesis is accepted. . Hence there is no association between the income group of respondents in Tiruchirapalli and their existing life cover. It may be interpreted that penetration of life insurance is low in Tiruchirapalli and hence even the higher income groups are not having corresponding life insurance cover. It means that the non-metro markets like Tiruchirapalli still hold huge potential for life insurance products.

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5.5

PURPOSE OF BUYING LIFE INSURANCE Table 5.17: Purpose of buying life insurance products by customers
PURPOSE Chennai Mean ranking Tiruchirapalli 1.71 2.48 2.91 3.77 5.36 5.30 5.25 Total 1.88 2.78 3.21 3.76 4.83 5.07 5.29

Life Insurance cover Savings for Childrens education, Marriage etc Availing Income tax benefit Savings for Old age, Pension Agents recommendation Recommendation from Friends/Relatives Housing Loan Cover Source: Primary data

1.91 2.84 3.26 3.76 4.74 5.02 5.29

From the above table (5.17) it can be observed that the main purpose of buying insurance is purely for life insurance cover, which is followed by savings for children. Availing Income tax benefit ranked as 3rd in the list of purposes may be due to rising income levels of customers. Tiruchirapalli has a score lower than Chennai in respect of availing Income tax benefit indicating a buying behaviour directed through tax incentives. Incidentally reasons like agents recommendation and recommendation from friends/relatives have higher mean score for Tiruchirapalli indicating lower preference to such purposes.

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Figure 5.2: Invest India Income and Savings Survey, 2007

Source: The Economic Times, April 2, 2008

According to a recent Invest India Income and Savings Survey, 2007 (The Economic Times April 2008), Investment plan and payments of childrens educations or marriage are the main motivators of existing life insurance customers. (Figure 5.2) These observations are fairly similar to the one observed in the current study.

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Table 5.18: Age group analysis of purpose of buying life insurance (Mean ranking) Age group PURPOSE < 30 30-40 40-50 >50 Total Life cover Savings for Childrens education, Marriage etc Availing Income tax benefit Savings for Old age, Pension Agents recommendation Recommendation from Friends/Relatives Housing Loan Cover
Source: Primary data
Note: Analysis for consolidated data

2.21 3.23 3.20 3.78 4.67 4.86 5.15

1.83 2.53 3.32 3.88 4.81 5.13 5.24

1.54 2.48 3.14 3.79 5.33 5.31 5.59

1.75 2.94 3.03 3.21 4.38 5.00 5.23

1.88 2.78 3.21 3.76 4.83 5.07 5.29

Buying life insurance products for life cover purpose and also for savings for Childrens education or marriage are the most identified purposes for the 40-50 age group respondents. While comparing preferences across different age groups, respondents in the age group of greater than 50 have higher preference for savings for old age, pension, agents recommendation and also for availing income tax benefit. Recommendations from friends/relatives and Home loan cover are the main purposes for the age group less than 30. As a reach out strategy, agents need to ask for

references from each customer, those who are less than 30 years of age in particular.

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Table 5.19: Income group analysis of purpose of buying life insurance (Mean Ranking) Monthly Income group PURPOSE Life Insurance cover Savings for Childrens education, Marriage etc Availing Income tax benefit Savings for Old age, Pension Agents recommendation Recommendation from Friends/Relatives Housing Loan Cover
Source: Primary data
Note: Analysis for consolidated data

<=20000 2.04 2.82 3.46 3.60 4.78 5.10 5.18

2000040000 1.86 2.60 2.60 4.07 5.25 5.16 5.20

4000060000 1.60 2.69 3.19 3.87 4.64 4.68 5.61

>60000 1.38 3.19 3.75 3.58 4.09 5.00 5.82

Total 1.88 2.78 3.21 3.76 4.83 5.07 5.29

Life insurance cover has been ranked as the main purpose of buying by the customers across all income groups. Incidentally the customers in the income group of more than Rs.60,000 per month have the highest preference for life cover across all income groups and purposes. Respondents in the income group of 20,000 to 40,000 have given higher ranking for savings for children and availing income tax when compared with other income groups. Similarly respondents in the income group of greater than 60,000 also have higher preference to Savings for old age, recommendation from agents and friends/relatives over other income groups.. Understanding the preferences and purposes of different income groups and there by developing appropriate need analysis and product recommendation can increase the success rate of life insurance agents/distributors

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Table 5.20: Employment group analysis of purpose of buying life insurance (Mean ranking)
PURPOSE Life Insurance cover Savings for Childrens education, Marriage etc Availing Income Tax benefit Savings for Old age, Pension Agents recommendation Recommendation from Friends/Relatives Housing Loan Cover Source: Primary data Governme nt Service Public Sector Employment group Private Busine Profes Sector ss sional Others Total

1.67 2.77 3.25 3.13 4.69 5.38 5.81

1.53 2.83 3.00 3.92 4.82 4.83 4.96

2.05 2.88 3.49 3.70 4.79 4.88 5.15

2.00 2.46 2.89 4.11 5.00 5.13 5.39

1.81 3.17 2.62 3.96 4.77 5.43 5.27

1.66 2.64 3.35 3.78 4.93 5.24 5.48

1.88 2.78 3.21 3.76 4.83 5.07 5.29

Note: Analysis for consolidated data

Life cover continues to be the principal purpose across employment groups. Respondents employed in Government departments have accorded higher rating for savings for old age and agents recommendation amongst all employment groups. Similarly respondents employed in public sector, i.e. quasi government organizations have given higher ranking for life insurance cover, recommendation from

friends/relatives and housing loan cover over other employment groups.

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5.6

EVENT PROMPTERS FOR BUYING LIFE INSURANCE Table 5.21: Classification of event prompters for buying life insurance

Sl. No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Got married recently

Events

Nature of Triggers

Had a child/Birth of a child Purchased a home through a home loan Relative or a close friend died recently Saw an insurance advertisement in magazine/newspaper Agent contacted Friends recommended product, agent Auditor/Chartered Accountant suggested life insurance Attended a seminar on life insurance at office Taken a new job, changed job Taken a loan for doing/expanding business Reviewed my life cover as apart of financial planning Started to think of Childrens education, marriage Tax Saving

Life triggers

Passive Triggers

Recommendation triggers

Work based Triggers

Financial planning Triggers

Table 5.22: Classification of triggers for buying life insurance

Nature of Triggers Life triggers Passive Triggers Recommendation triggers Work based Triggers Description Life triggers are triggers or events arising out of ones own life which prompt an individual to buy life insurance. Events happening in the neighbourhood Triggers arising out of recommendation by an agent, recommendation by a friend, relation or an advice by the auditor Triggers arising out of work, business or events in the work place Triggers arising out of financial planning exercise of an individual

Financial planning Triggers

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The above tables 5.21 and 5.22 list down the probable prompters for buying insurance by the respondents and also their classification based on the nature of the triggers Table 5.23: Event prompters for buying life insurance by customers
Event prompters Taken a loan for doing/expanding business Got married recently Attended a seminar on life insurance at office Relative or a close friend died recently Taken a new job, changed job Auditor/Chartered Accountant suggested life insurance Had a child/Birth of a child Purchased a home through a home loan Saw an insurance advertisement in magazine/newspaper Reviewed my life cover as apart of financial planning Friends recommended product, agent Started to think of Childrens education, marriage Agent contacted Tax Saving Chennai No. of Percenta Respon ge dents 25 28 40 38 48 51 53 57 69 86 98 109 102 171 8.65 9.69 13.84 13.15 16.61 17.65 18.34 19.72 23.88 29.76 33.91 37.72 35.29 59.17 Tiruchirapalli No. of Percenta Respon ge dents 8 10 7 12 10 8 15 14 14 26 23 20 28 32 11.43 14.29 10 17.14 14.29 11.43 21.43 20 20 37.14 32.86 28.57 40 45.71 Total No. of Percenta Respon ge dents 33 38 47 50 58 59 68 71 83 112 121 129 130 203 9.2 10.6 13.1 13.9 16.2 16.4 18.9 19.8 23.1 31.2 33.7 35.9 36.2 56.5

Total of responses 975 227 1202 Source: Primary data Note: Multiple entries possible and hence total may not add up to 100% or sample size.

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Respondents were asked to select the prompters amongst the list, which prompted them to buying life insurance products. Respondents were also had the option to select more than one prompter. A total of 1202 responses were received from 359 respondents indicating an average of 3.34 prompters per respondent, indicating there are multiple prompters or triggers leading to buying of life insurance products. Tax saving is the leading prompter for buying life insurance products in both Chennai and Tiruchirapalli. Top 5 prompters account for 58% of the total of the prompters .All the 3 financial planning triggers find a place in the Top 5 prompters of buying insurance. 2 out of the 3 recommendation triggers find a place in Top 5 prompters.

The responses for prompters for insurance are analysed based on the respondents income groups, age groups and employment groups with an objective to find any significant association between these demographic factors of the respondents and the prompters of insurance.

Respondents were grouped on the basis of their income in four categories ie monthly income less than <=20000, between 20000 and 40000, between 40000 and

60000 and greater than 60000. Similarly respondents were grouped based on their.empolyment status i.e. Government Service. Public Sector, Private Sector, Business, Professional and Others. The following age grouping i.e. less than 30, between 30-40, between 40-50 and greater than 50 are used for analyzing the relationship with prompters for insurance buying.

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Hypothesis No: 5.3 Null Hypothesis: There is no association between the income groups, age groups and employment groups of customers and the event prompters in life insurance. Table 5.24: Chi Square test for association between the income groups, age groups and employment groups of customers and the event prompters in life insurance.
Income Group Age group ChiSquare value P value Employment group Chi-Square value P value

Events Got married recently Had a child/Birth of a child Purchased a home through a home loan Relative or a close friend died recently Saw an insurance advertisement in magazine/newspaper Agent contacted Friends recommended product, agent Auditor/Chartered Accountant suggested life insurance Attended a seminar on life insurance at office Taken a new job, changed job Taken a loan for doing/expanding business Reviewed my life cover as apart of financial planning Started to think of Childrens education, marriage Tax Saving

ChiSquare value

P value

0.622 4.639 5.397 3.678 9.149 13.473 5.446

0.891 0.200 0.144 0.298 0.027* 0.004** 0.142

12.981 28.037 1.936 2.114 2.319 4.835 2.338

0.005** 0.000** 0.586 0.549 0.509 0.184 0.505

11.619 4.977 9.675 4.843 10.712 3.296 8.591

0.040* 0.419 0.085 0.435 0.057 0.655 0.127

6.049

0.109

1.567

0.667

4.392

0.494

5.374 8.560 1.215 5.880 5.946 19.640

0.146 0.036* 0.749 0.118 0.114 0.000**

1.763 25.968 0.601 6.514 40.755 10.080

0.623 0.000** 0.896 0.089 0.000** 0.018*

5.825 8.800 11.391 1.576 9.090 4.209

0.324 0.117 0.044* 0.900 0.105 0.519

Source: Primary data Note: 1) ** denotes 1 percent level of significance 2)* denotes 5 percent level of significance
3) Analysis for consolidated data

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Each of the 14 prompters were analysed for their association with age, income and employment groups. The resultant values i.e. Chi Square values, P value of each of the prompters have been tabulated above. The first event prompter Got married

recently has a strong association with age groups (at 1% level of significance) and employment groups (at 5% level of significance). Respondents who are employed in private sector and in business have stated that Got married recently is a prompter for them to buying life insurance. Second prompter Had a child / Birth of a child has

strong association (at 1% level of significance) with age groups and 34 percent of the respondents in the age group 30 to 40 have stated that this is an event prompter. Insurance advertisement in magazine or newspaper has an association (at 5% level of significance) with income groups of respondents and more so for the respondents who are in the income level of less than Rs.40,000 per month. . The prompter Agent contacted has an association (at 1% level of significance) with Income group of

respondents and contact by agent is seen as a significant influencer by the respondents who are in the income level of less than Rs.40,000 per month.

The prompter Taken a new job, changed job has an association (at 5% level of significance) with income group of respondents and more so for respondents in the income level of less than Rs.40,000/-. The prompter Taken a new job, changed job also has significant association at 1% level of significance with age group of respondents and this prompter is seen as significant by respondents in age group of less than 40. Providing for childrens education and marriage has a significant association (at 1% level of significance) with age group of respondents and respondents in the age group of more than 30 years have stated that providing for childrens future expenses is a significant prompter. Similarly Tax savings as a prompter has significant association

with Income groups and age groups of respondents.

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5.7

SELLERS OF THE POLICY Table 5.25: Sellers of life insurance policy to customers
Who sold the policy? Chennai
No. of Respondents Percentage

Tiruchirapalli
No. of Respondents Percentage

Individual Agent Bank Financial Distributor Total Source: Primary data

231 32 20 283

81.63 11.31 7.07

47 3 16 66

71.21 4.55 24.24

81.63 percent of the respondents from Chennai and 71.21 percent of the respondents from Tiruchirapalli have bought their policy through an individual agent, which clearly demonstrates the dominance of this channel.

Table 5.26: Acquaintance with agent by customers

How acquainted? Agent is a friend Agent referred by a friend or relative Agent referred by Auditor/ Advisor Agent is a relative Called the company after seeing the advertisement Agent, not known to me, but called on Number of responses Chennai
No. of Respondents Percentage

Tiruchirapalli
No. of Respondents Percentage

112 77 24 38 19 36 306

36.6 25.16 7.84 12.42 6.21 11.76

28 14 10 14 4 9 79

35.44 17.72 12.66 17.72 5.06 11.39

Source: Primary data Note: Multiple entries possible and hence total may not add up to 100% or sample size.

159

A total of 306 responses are received from 283 respondents from Chennai and 79 responses from 66 respondents from Tiruchirapalli, indicating there are more than one way of knowing the agent. Agent, who is a friend or an agent referred by a friend or relative, is preferred by the customers. Similarly agents doing cold call, i.e. calling on unknown customers is also a prevalent method of approaching a customer.

Figure: 5.2: Ways of acquaintance with agent (in percentage)

From the above figure (5.2) it can be observed that in Tiruchirapalli agent referred by auditor /advisor and agents being a relative have higher percentages than in Chennai. Agent is friend, called the company and cold calls by agent have almost similar percentage of respondents both in Chennai and Tiruchirapalli. Customers are

comfortable dealing with a friend, relative or an agent referred by a friend. In a multi ethnic, multi cultural society like India, the informal community based networking plays a vital role in determining the effectiveness of agent. (Srinivasan, 2001) It is important for the agent to approach his friends and relatives for business during start up and expand the base through seeking references from them.

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5.8

TYPE OF INTERACTION WITH AGENT WHILE BUYING Table 5.27: Mean ranking of type of interaction with agent by customers Type of interaction
Chennai Tiruchirapalli Total

Met the agent face to face Spoke to the agent on phone Received the information on email, Post, courier Got information from Website of the life insurance company
Source: Primary data

1.13 1.50 1.64

1.13 1.55 1.11

1.13 1.51 1.55

1.95

1.23

1.83

Figure 5.3: Mean rank of type of interaction with agent by customers

Source: Primary data

It can be observed from the above table that meeting the agent face to face is the most preferred method of interaction by all the respondents. Respondents from Tiruchirapalli have preferred receiving information on email, post or courier to meeting the agent face to face.

161

Table 5.28: Age group analysis of types of interaction by customers (Mean ranking) Interaction Met the agent face to face Spoke to the agent on phone Received the information on email, Post, courier Got information from Website of the life insurance company
Source: Primary data
Note: Analysis for consolidated data

Age group < 30 30-40 40-50 >50 Total

1.24 1.64 1.78 2.13

1.18 1.55 1.64 1.81

1.00 1.46 1.39 1.78

1.00 1.13 1.00 1.16

1.13 1.51 1.55 1.83

It can be inferred from Table 5.28 that as the age increases the ranking reduces indicating the preference for the method of interaction. Respondents in the higher age group prefer more personal interactions like meeting in person or speaking on phone. Respondents in the age group of 40 to 50 and above 50 grouping prefer meeting the agent face to face absolutely. Table 5.29: Income group analysis of types of interaction by customers (Mean ranking) Income group Interaction <=20000 1.26 1.63 1.81 2.08 2000040000 1.05 1.38 1.37 1.68 4000060000 1.09 1.60 1.06 1.31 >60000 1.00 1.03 1.24 1.41 Total 1.13 1.51 1.55 1.83

Met the agent face to face Spoke to the agent on phone Received the information on email, Post, courier Got information from Website of the life insurance company
Source: Primary data

Note: Analysis for consolidated data

162

Respondents in the higher income group prefer to meet the agent face to face while buying and this is the most preferred interaction method of respondents. Respondents in the income group of 40000 to 60000 prefer to receive the information over email or post to meeting the agent face to face.

Table 5.30: Employment group analysis of types of interaction by customers (Mean ranking)
Employment status

Interaction
Met the agent face to face Spoke to the agent on phone Received the information on email, Post, courier Got information from Website of the life insurance company Source: Primary data

Governm ent Service

Public Sector

Private Sector

Business

Professional

Others

Total

1.12 1.17 1.17 1.76

1.12 1.47 1.21 1.47

1.10 1.63 1.66 1.71

1.09 1.38 1.58 1.96

1.25 1.75 1.82 2.11

1.25 1.50 1.69 2.25

1.13 1.51 1.55 1.83

Note: Analysis for consolidated data

A similar preference of meeting the agent face to face by the respondents can be observed across all employment groups. Respondents employed in public sector prefer to receive information on email, post and courier to speaking to the agent on phone.

163

5.9

SALES TOOLS USED BY AGENTS Table 5.31: Listing by customers of sales tools used by agents Tools used by the agent
No of respondents Chennai 180 157 134 133 133 125 289 Tiruchirapalli 45 35 39 37 31 35 70 Total 225 192 173 170 164 160 359

Projection on maturity value over a period of time/duration of the policy Has shown comparison with products of other life insurance companies Explained the sales literature Has shown me pension requirement post my retirement and need for saving Has shown me future cost of education, marriage Has given reference of other customers who have bought the policy Total number of respondents

Source: Primary data Note: Multiple entries possible and hence total may not add up to 100% or sample size.

According to customers projected maturity values, comparison with the competition products are the tools widely used by the agents. education and customer reference are the least used tools by agents. Figure 5.4: Ranking of sales tools used by Agents Future costs of

Source: Primary data

164

Projected maturity value calculation is the most used sales tool in both Chennai and Tiruchirapalli. Agents in Chennai use sales tools like Competition comparison and future cost of education or marriage calculation more widely than agents in Tiruchirapalli. Explanation of sales literature and Pension calculation are used more in Tiruchirapalli. Table 5.32: Feedback of customers on effectiveness of tools used by agent
Mean rating

Tools used by the agent

Chennai Has shown me pension requirement post my retirement and need for saving Has shown me future cost of education, marriage Projection on maturity value over a period of time/duration of the policy Has shown comparison with products of other life insurance companies Explained the sales literature Has given reference of other customers who have bought the policy

Tiruchirap alli

Total

3.77 3.76 3.61 3.64 3.46 3.47

4.11 3.61 3.40 3.26 3.56 3.43

3.84 3.73 3.57 3.57 3.48 3.46

Source: Primary data Note: Rating Scale of 1 to 5, with 1 indicating lowest effectiveness and 5 the highest.

Respondents have rated pension calculation, future cost of education, marriage and projected maturity value as the top 3 effective sales tools used by agents. Respondents from Tiruchirapalli have rated explanation of sales literature as more useful than projected maturity value calculation. Each of the six sales tools used by agents are analysed for their difference amongst age, income and employment groups. The resultant F and P values of each of the association have been tabulated below.

165

Hypothesis No: 5.4 Null Hypothesis: There is no significant difference among age groups of customers with regard to effectiveness of sales tools used by agents Table 5.33: ANOVA for significant difference among age groups with regard to effectiveness of sales tools used by agents
Feedback on effectiveness of sales tools used by agents
Projection on maturity value over a period of time/duration of the policy Explained the sales literature Has shown comparison with products of other life insurance companies Has given reference of other customers who have bought the policy Has shown future cost of education, marriage Has shown pension requirement post my retirement and need for saving

Age group < 30 3.37a 3.60 3.59 3.63 3.67 3.85 30-40 3.43a 3.62 3.66 3.52 3.79 3.8 40-50 4.02b 3.25 3.42 3.22 3.87 3.77 >50 3.63ab 3.12 3.50 3.11 3.00 4.11 F value 2.792 2.079 0.471 1.404 1.899 0.534 P value 0.041* 0.105 0.703 0.244 0.132 0.659

Source: Primary data Note: a) * in a cell denotes significant at 5% level b) ** in a cell denotes significant at 1% level c) Different alphabets between age group denotes significant difference at 5% level
d) Analysis for consolidated data

Since P value is less than 0.05, the null hypothesis is rejected with regard to the sales tool Projection on maturity value of the policy. Based on Duncan Multiple Range test, the age group 40-50 has significant difference with the age groups less than 30 and 30-40. In respect of all other sales tool used, since P value is greater than 0.05, the null hypothesis is accepted implying there is no difference between age group.

166

Hypothesis No: 5.5 Null Hypothesis: There is no significant difference among income groups with regard to effectiveness of sales tools used by agents. Table 5.34: ANOVA for significant difference among income groups with regard to effectiveness of sales tools used by agents
Feedback on effectiveness of sales tools used by agents
Projection on maturity value over a period of time/duration of the policy Explained the sales literature Has shown comparison with products of other life insurance companies Has given reference of other customers who have bought the policy Has shown me future cost of education, marriage Has shown me pension requirement post my retirement and need for saving

Income Group <=20000 3.36 3.60 3.64 3.47 3.75 3.83 2000040000 3.64 3.38 3.54 3.55 3.7 3.86 4000060000 3.79 3.29 3.42 2.85 3.53 4.00 >60000 4.09 3.20 3.47 3.71 3.93 3.73 F Value 2.394 1.121 0.354 1.719 0.368 0.168 P Value 0.069 0.342 0.786 0.165 0.776 0.918

Source: Primary data Note: a) * in a cell denotes significance at 5% level b) ** in a cell denotes significance at 1% level
c) Analysis for consolidated data

In respect sales tool used, since P value is greater than 0.05, the null hypothesis is accepted implying there is no difference between income groups with regard to the effectiveness of sales tools used.

167

Hypothesis No: 5.6 Null Hypothesis: There is no significant difference among employment groups with regard to effectiveness of sales tools used by agents Table 5.35: ANOVA for difference among employment groups with regard to effectiveness of sales tools used by agents
Employment Group

Feedback on effectiveness of sales tools used by agents

Projected on maturity value Explained the sales literature

Gover nmen t Servi ce

Public Sector

Private Sector

Busines s

Professi onal

Others

F Value

P Value

2.7a 2.84a

3.75c 3.5bc

3.92c 3.63bc

3.45bc 3.52bc

3.88c 4.00c

2.95ab 3.28ab

5.367 3.423

0.001** 0.006**

Comparison with 3.44 4.13 3.57 3.35 3.7 3.5 1.359 competition products Has given reference of other customers who have 3.47 3.80 3.29 3.70 3.58 3.5 0.8912 bought the policy Has shown me future cost 3.79 3.94 3.60 3.65 4.25 3.94 0.932 of education, marriage Has shown me pension requirement post my 3.44 3.81 3.99 3.63 4.23 4.00 1.849 retirement and need for saving Source: Primary data Note: a) * in a cell denotes significance at 5% level b) ** in a cell denotes significance at 1% level c) Different alphabets between age group denotes significant difference at 1% level d) Analysis for consolidated data

0.242 0.489 0.462 0.106

Since P value is less than 0.01, the null hypothesis is rejected with regard to the sales tools Projection on maturity value of the policy and sales literature. Customers in government service and in other occupations are attributing higher effectiveness to both Projection on maturity value of the policy and sales literature

than in other employment groups. Customers employed in public sector, private sector and in business have expressed similar effectiveness in respect of these two sales tools. Since the P value is more than 0.05, the null hypothesis is accepted with regard to all other sales tools.

168

5.10 OBSERVATION OF AGENTS ATTRIBUTES Table 5.36: Observation of agents attributes by customers
Chennai Tiruchirapalli Mean score Rank Total Mean score Rank

Observation of Agent

Mean score

Rank

Agent can be trusted Agent was knowledgeable about life Insurance Agent described the product, features well Agent had my interest in mind while meeting/selling me Agent called me very frequently Agent described the disadvantages, limitation of the product Has exaggerated on the product feature Tried to pressurize me to buy the policy quickly Has pushed one product without understanding my requirement Seemed to be in a hurry Source: Primary data

3.65 3.73 3.58 3.47 3.19 3.02 2.85 2.83 2.71 2.66

2 1 3 4 5 6 7 8 9 10

3.39 3.01 3.33 3.21 3.10 3.36 3.04 3.01 3.17 2.99

1 8 3 4 6 2 7 9 5 10

3.60 3.59 3.53 3.42 3.17 3.08 2.89 2.87 2.80 2.72

1 2 3 4 5 6 7 8 9 10

Agent can be trusted, agent is knowledgeable and agent described the product features well are the top 3 observations on the agents, who sold the policy to the customers. The clients trust of the agent rests on the expectations regarding the fiduciary obligation of the agents towards the clients. In other words, the relationship between agent and client assumes that the agent will act specifically in the best interests of the client (Cupach, 2002)

169

Figure 5.5: Ranking of observation of agents attributes by customers

Strongly disagree

Strongly agree

Source: Primary data

From the above figure it can be observed that the respondents from Tiruchirapalli and Chennai differ in their observation about the life insurance agents. Respondents from Tiruchirapalli have rated agent can be trusted at the top rank as against respondents from Chennai who have ranked this trait at second position. This fact is also corroborated from the ranking of explaining the limitation of the product. While respondents from Tiruchirapalli have ranked this trait at second position, it has been given sixth rank by Chennai respondents. Knowledge levels of agents gets a rank of one at Chennai but has been relegated to eighth position by the respondents from Tiruchirapalli. There is also a tendency of pushing a product without understanding the requirement of the customers on the part of the agents in Tiruchirapalli as the respondents have ranked this trait at fifth position as against the ninth rank given by the respondents in Chennai.

170

5.11

DIFFICULTY IN DECISION MAKING WHILE BUYING LIFE INSURANCE

Table 5.37: Difficulty in decision making while buying life insurance by customers
DIFFICULTY IN DECISION MAKING Chennai Deciding on what type of Insurance to buy Decide on the Sum assured Decide on the life insurance company Understanding the policy details, benefits 2.66 3.01 3.06 3.03 Mean score Tiruchirapalli 2.31 2.66 2.59 2.89 Total 2.59 2.94 2.97 3.00

Source: Primary data Note: Rating Scale of 1 to 5, with 1 indicating the most difficulty and 5 the least

Deciding on what type of life insurance product to choose is the most difficult aspect of buying for the respondents. A mean score of 2.31 by the respondents of Tiruchirapalli indicates that they are finding it more difficult than their counterparts in Chennai (Mean score 2.66). Deciding on the life insurance company has been found to be the least difficult one for Chennai customers. All the four difficulties in decision making by customers while buying life insurance products have been analysed for any significant difference among the age groups, income groups and employment groups of customers. The resultant F and P values of each of the analysis have been tabulated below.

171

Hypothesis No: 5.7 Null Hypothesis: There is no significant difference among age groups of customers with regard to difficulty in decision-making in life insurance buying Table 5.38: ANOVA for difference among age groups with regard to difficulty in decision making in life insurance buying
Difficulty in decision making Decide on type of insurance Decide on Sum Assured Decide on life insurance company Understanding policy details Age group < 30 2.47 2.88 2.85 3.15 30-40 2.71 3.04 3.07 3.10 40-50 2.66 2.97 3.01 2.83 >50 2.45 2.79 2.95 2.62 F Value 0.980 0.709 0.765 2.361 P Value 0.402 0.547 0.514 0.071

Source: Primary data Note: a) * in a cell denotes significance at 5% level b) ** in a cell denotes significance at 1% level c) Analysis for consolidated data

In respect of difficulties in decision making, since P value is greater than 0.05, the null hypothesis is accepted implying there is no difference among age groups with regard to the difficulties in decision making and all the age groups are having similar difficulties in decision making. Hypothesis No: 5.8 Null Hypothesis: There is no significant difference among income groups of customers with regard to difficulty in decision making in life insurance buying Table 5.39: ANOVA for difference among income groups with regard to difficulty in decision making in life insurance buying
Difficulty in decision making Decide on type of insurance Decide on Sum Assured Decide on life insurance company Understanding policy details
Source: Primary data

<=20000 2.46 2.92 2.93 3.16

2000040000 2.71 2.96 3.08 2.84

Income Group 40000>60000 60000 2.74 2.98 2.77 2.72 2.84 3.03 3.16 2.91

F Value 1.715 0.114 1.048 2.126

P Value 0.163 0.952 0.371 0.097

Note: Analysis for consolidated data

172

In respect difficulties in decision making, since P value is greater than 0.05, the null hypothesis is accepted implying there is no difference among income groups with regard to the difficulties in decision making and all the income groups are having similar difficulties in decision making. From the above tables (Table 5.38 and 5.39) it can be inferred that the difficulty of decision making in respect of all the four key issues does not have any difference amongst the age groups or income groups and the difficulty experienced does not change with the age profile or income profile of the respondents Hypothesis No: 5.9 Null Hypothesis: There is no significant difference among employment groups with regard to difficulty in decision making in life insurance buying Table 5.40: ANOVA for difference among employment groups with regard to difficulty in decision making in life insurance buying
Employment group Gover nment Servic e Public Sector Private Sector Busines s Profes sional Others F Value P Value

Decide on type of 2.05a 2.79b 2.62b 2.64b 3.00b 2.49a 2.717 0.02* insurance Decide on Sum 2.75 3.05 2.92 2.90 3.28 2.92 0.919 0.468 Assured Decide on life 2.71 3.03 2.86 3.26 3.09 3.05 1.647 0.146 insurance company Understanding 3.02 2.92 2.92 3.07 3.16 3.13 0.342 0.887 policy details Source: Primary data Note: a) * in a cell denotes significance at 5% level b) ** in a cell denotes significance at 1% level c) Different alphabets between age group denotes significant difference at 5% level
d) Analysis for consolidated data

Since P value is less than 0.05, the null hypothesis is rejected with regard to the difficulty in deciding on the type of insurance. Based on Duncan Multiple Range test, the employment groups Government service and others are significantly different from other employment groups in respect of difficulty in deciding on the type of insurance.

173

5.12

FINANCIAL PLANNING Financial planning is the process of meeting life goals through proper

management of finances. Life goals can include buying a home, saving for children's education or planning for retirement. It is a process that consists of specific steps (Figure 5.6) that help to take a big-picture of integrating long financial perspective from the current financial position of an individual. Using these steps it can be worked out as to what an individual must do to reach future goals from the current financial position.

Figure 5.6: Personal financial planning process

Reassess and revise financial plan

Assess current financial status

Create and implement a financial plan

Identification and development Financial Goals

Evaluation of alternative options, risks

Developing of alternative options

174

The first step in personal financial planning is to assess the current financial situation with regard to income, savings, expenses and current liabilities. Preparation of a list of assets, debts and expected expenses set the foundation for a good financial planning. The second step involves identification and development of financial goals for self and family. Specific financial goals with time frame need to be developed. Providing for education of children, accumulating corpus for pension and provision for buying house are a few examples of personal financial goals. Third step involves developing alternative courses of action and listing down all probable options. Fourth step consists of evaluating each of the alternatives in the light of current financial position, personal ambitions and general economic conditions. Risks in each of the options need to be evaluated and this risk evaluation needs significant information on economic and financial conditions. Fifth step envisages creating and implementing a financial plan. Creation of plan follows the evaluation of alternatives and requires help from professionals in financial industry for implementation due to regulations governing financial products distribution. Finally the plan has to be continuously reevaluated, reassessed and revised based not only on the emerging economic and financial factors but also on personal life events.

175

5.12.1 AWARENESS OF FINANCIAL PLANNING Table 5.41: Financial planning awareness by customers in Chennai
FINANCIAL PLANNING AWARENESS Total No of respond ents Aware and have done the appropriate savings/investme nt
No of respondents

Aware of the requirement but not planned for it

No of responden ts

Not aware of such requirem ent

No of responden ts

%
62

%
24

%
14 22 40 37

Investing Savings

289

180

69

40

Life insurance 289 127 44 99 34 63 requirement Pension 289 60 21 112 39 117 requirement Future cost of 289 86 30 95 33 108 education/marria ge Source: Primary data Note: Multiple entries possible and hence total may not add up to 100% or sample size.

180 respondents in Chennai are aware and have acted about investing their savings. 56 percent of the respondents in Chennai belong to either aware but not acted or not aware of the quantum of life insurance requirement and this further reinforces the potential for life insurance. 79 percent of the respondents are either aware but not acted or not aware of their pension requirement and 70 percent of the respondents have either aware but not acted or not aware of future cost of education or marriage. This illustrates the kind of sales tools and information, an agent can present to the customer for better success.

176

Table 5.42: Financial planning awareness by customers in Tiruchirapalli

Total No of responde nts Aware and have done the appropriate savings/investme nt
No of respondent s

FINANCIAL PLANNING AWARENESS

Aware of the requirement but not planned for it

No of responde nts

Not aware of such requirement

%
50 34 31

%
26 33 33

No of respondents

%
24 33 36 41

Investing Savings Life insurance requirement Pension requirement

70 70 70

35 24 22

18 23 23

17 23 25

Future cost of 70 21 30 20 29 29 education/marriage Source: Primary data Note: Multiple entries possible and hence total may not add upto 100% or sample size.

35 respondents in Tiruchirapalli are aware of and have acted about investing their savings. 66 percent of the respondents in Tiruchirapalli are either aware but not acted or not aware of the quantum of life insurance requirement. Similarly 69 percent of the respondents in Tiruchirapalli are either aware but not acted or not aware of their pension requirement and 70 percent of the respondents are either aware but not acted or not aware of future cost of education or marriage, indicating the market potential for pension and childrens products Each of the four financial planning activities is analysed for its association with age groups, income groups and employment groups of customers. The resultant F and P values of each of the groups have been tabulated below.

177

Hypothesis No: 5.10 Null Hypothesis: There is no significant association between the income groups, age groups and employment groups of respondents with regard to awareness of financial planning Table 5.43: Chi-Square test for association between the income groups, age groups and employment groups with regard to awareness of financial planning
Income Group Chi P Square Value Value Investing Savings Life insurance requirement Pension requirement Future cost of education/marriage 20.364 6.319 16.117 0.002** 0.388 0.013* Age group Chi P Square Value Value 2.487 14.697 13.737 0.869 0.023* 0.033* Employment group Chi Square Value 4.469 6.364 5.884 P Value 0.923 0.784 0.825

21.992

0.001**

39.000

0.000**

8.149

0.614

Source: Primary data Note: a) * in a cell denotes significance at 5% level b) ** in a cell denotes significance at 1% level
c) Analysis for consolidated data

It can be inferred from the above table that respondents financial planning awareness of knowing how to invest savings has a significant association (at 1% level of significance) with the income group of respondents and the awareness on investment of savings increases with increase in income level. Awareness on life insurance

requirement has an association (at 5% level of significance) to age group of respondents implying higher awareness with increase in age group. Pension requirement awareness has association with Income group and age group of respondents (at 5% level of significance) implying higher awareness on pension requirement with increase in age group and income of respondents. Future cost of education awareness has significant association with Income group and age group of respondents (at 1% level of significance) implying significant increase in awareness with increase in age and income of respondents.

178

5.12.2 PERSONAL FINANCIAL PLANNING Personal financial planning, which encompasses the saving and insurance decisions of individuals, has been confined to high networth individuals in the past. However, there are a number of reasons to expect it to become much more widespread in the future. (Purcal, 1999) In this section, the attempt is to understand how many of the respondents have done financial planning in some form or other. Table 5.44: Personal financial planning of customers
FINANCIAL PLANNING No Plan, do not need one (a) No planning done so far, but need to have one (b) Financial planning mentally done, but not written down (c) Have a financial Plan developed with the assistance from financial advisor (d) Have a financial planning developed on own (e) Some form of financial planning (f) =(c+d+e) Total Source: Primary data Chennai
No. of Respondents

Tiruchirapalli

Total
No. of Respondents

%
27 33 22

No. of Respondents

%
24 23 14

%
26 31 20

78 95 63

17 16 10

95 111 73

23

12

31

30 116 289

10

19 37 70

27

49 153 359

14

27 percent of the respondents in Chennai and 24 percent in Tiruchirapalli have outrightly said that they neither have a financial plan nor need one. A predominant of 33 percent in Chennai and 23 percent in Tiruchirapalli stated that although they do not have a plan now but they need one. Another 22 percent in Chennai and 14 percent in

Tiruchirapalli stated that they have a plan but have not documented the same. Only 8 percent of the respondents in Chennai and 12 percent in Tiruchirapalli have said they

179

have a financial plan developed with assistance from financial advisor.

Finally 10

percent of the respondents in Chennai and 27 percent in Tiruchirapalli have claimed that they have developed a financial plan on their own. In the current scenario of complexity in investments market coupled with the emergence of nuclear families, it is important for an individual to make appropriate financial plan to meet both planned and unplanned financial exigencies for self and family. Hypothesis No: 5.11 Null Hypothesis There is no significant association between the age groups and personal financial planning

Table 5.45: Chi-Square test for association between the age groups and personal financial planning
Personal financial planning Age group No Plan 31 (26.5) [32.6] 27 (22) [28.4] 21 (27.3) [22.1] 16 (38.1) [16.8] 95 No Plan need one 43 (36.8) [38.7] 51 (41.5) [45.9] 13 (16.9) [11.7] 4 (9.5) [3.6] 111 Mentally done 23 (19.7) [31.5] 19 (15.4) [26] 21 (27.3) [28.8] 10 (23.8) [13.7] 73 Done but assistance 8 (6.8) [25.8] 10 (8.1) [32.3] 9 (11.7) [29] 4 (9.5) [12.9] 31 Done own 12 (10.3) [24.5] 16 (13) [32.7] 13 (16.9) [26.5] 8 (19) [16.3] 49 Total ChiSquare value P value

TOTAL <30

117

30-40

123

40-50

77

27.345

.007**

> 50

42

Total

359

Source: Primary data Note: a) * in a cell denotes significance at 5% level b) ** in a cell denotes significance at 1% level
c) Analysis for consolidated data

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Since P value is less than 0.01, the null hypothesis is rejected at 1% level of significance. Hence there is a significant association between the age groups of respondents and personal financial planning by them. The need for proper financial plan increases with increase in age of customers. Hypothesis No: 5.12 Null Hypothesis: There is no significant association between the income groups and personal financial planning Table 5.46: Chi-Square test for association between the income groups and personal financial planning
Personal Financial Planning Income group No Plan 59 (30.6) [62.1] 19 (20.9) [20 7 (16.3) [7.4] 10 (31.3) [10.5] No Plan need one 68 (35.2) [61.3] 20 (22) [18] 17 (39.5) [15.3] 6 (18.8) [5.4] Mentally done 32 (16.6) [43.8] 26 (28.6) [35.6] 7 (16.3) [9.6] 8 (25) [11.9] Done but assistan ce 16 (8.3) [51.6] 8 (8.8) [25.8] 6 (14) [19.4] 1 (3.1) [3.2] Done own 18 (9.3) [36.7] 18 (19.8) [36.7] 6 (14) [12.2] 7 (21.9) [14.3] 49 Row Total ChiSquare value P value

<=20000

193

20000 to 40000 40000 to 60000

91
24.709

0.016*

> 60000

32 359

Column 95 111 73 31 Total Source: Primary data Note: a) * in a cell denotes significance at 5% level b) ** in a cell denotes significance at 1% level
c) Analysis for consolidated data

Since P value is less than 0.05, the null hypothesis is rejected at 5% level of significance. Hence there is a significant association between the income groups of respondents and personal financial planning by them. With the increase in income, customers start formulating some form of personal financial planning.

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Hypothesis No: 5.13 Null Hypothesis There is no significant association between the employment groups and personal financial planning

Table 5.47: Chi-Square test for association between the employment groups and personal financial planning
Personal financial planning Employment group No Plan No Plan need one 17 38.6 15.3 6 15.8 5.4 41 28.3 36.9 19 31.1 17.1 9 28.1 8.1 19 48.7 17.1 111 Mentally done Done but assistance Done own 6 13.6 12.2 4 10.5 8.2 22 15.2 44.9 9 14.8 18.4 5 15.6 10.2 3 7.7 6.1 49 Row Total ChiSquare value P value

15 4 2 34.1 9.1 4.5 15.8 5.5 6.5 14 10 4 Public sector 36.8 26.3 10.5 14.7 13.7 12.9 37 35 10 Private 25.5 24.1 6.9 Sector 38.9 47.9 32.3 13 11 9 Business 21.3 18 14.8 13.7 15.1 29 6 9 3 Professional 18.8 28.1 9.4 6.3 12.3 9.7 10 4 3 Others 25.6 10.3 7.7 10.5 5.5 9.7 Column Total 95 73 31 Source: Primary data Note: a) * in a cell denotes significance at 5% level b) ** in a cell denotes significance at 1% level Government
c) Analysis for consolidated data

44

38

145 25.369 61 0.188

32

39 359

Since P value is more than 0.05, the null hypothesis is accepted. Hence there is a no association between the employment group of respondents and personal financial planning by them.

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5.12.3

REVIEW OF FINANCIAL PLANNING

A persons stage in life and financial situation has an effect on what type of service and interaction he wants after the sale. Reviews are an opportunity to discuss other financial needs of a customer. Customers are concerned about retirement planning and parents are looking for help in planning for their childrens higher education or marriage. Customers want frequent contact with agents regarding their financial needs. According to a study on customers by LIMRA, more than half of all recent buyers want to review their policy and financial goals within 2 years of purchase. (Terry, 2005) Table 5.48: Review of financial planning by customers
Chennai Tiruchirapalli
No. of Respondents

Review of financial plan

No. of Respondents

Percentage

Percentage

Review done Review not done Total of respondents, who have done some form of financial planning (Refer table 5.44)
Source: Primary data

72 44 116

62 38

27 10 37

73 27

116 respondents in Chennai and 37 respondents from Tiruchirapalli have responded stating they do some form of financial planning. 62 percent of the 116

respondents in Chennai and 73 percent of the 37 respondents in Tiruchirapalli have stated that they review their financial plan regularly.

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Table 5.49: Periodicity of review of financial plan

PERIODICITY OF REVIEW ONCE A YEAR ONCE IN 2 YRS RARELY Total (Review done only) Source: Primary data Chennai
No. of Respondents

Tiruchirapalli
No. of Respondents

Percentage

Percentage

56 9 7 72

78 12 10

22 2 3 27

82 7 11

Of the respondents who do financial planning 78 percent in Chennai and 82 percent in Tiruchirapalli do a review of their financial plan once a year. 10 percent from Chennai and 11 percent from Tiruchirapalli rarely do a review of their financial plan. It is evident that there is a need for appropriate advice to customers on the necessity for financial plan and for periodical review of the same.

The figure 5.7 depicts the progressive movement into financial planning and review done by number of respondents. This indicates an opportunity for continuous engagement by agent with their customers to help in the formulation, review, reassessment and modification of their financial road map. Life insurance agents need to equip themselves with the methodology of personal financial planning for their customers.

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Figure 5.7: Financial Planning: Progressive status of number of customers

78 respondents
review once a year

99 respondents
review their financial plan

153
respondents do financial planning Total number of respondents

359

Source: Primary data Note: Analysis for consolidated data

Table 5.50: Sources of help for review of financial plan for customers
HELP FOR REVIEW SELF AGENT DISTRIBUTOR AUDITOR Chennai
No. of Respondents Percentage

Tiruchirapalli
No. of Respondents Percentage

52 13 3 4 72

72 18 4 6

17 8

63 30 0

2 27

Total (Review done only)

Source: Primary data

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Of the respondents who do review, 72 percent in Chennai and 63 percent in Tiruchirapalli do their review by themselves. 18 percent of respondents in Chennai and 30 percent in Tiruchirapalli get their review done with the help of life insurance agents. Auditors also provide assistance to respondents for reviewing their financial plan.

Table 5.51: Agents offer for help for review of financial plan for customers
AGENTS OFFER HELP FOR REVIEW YES NO Chennai
No. of Respondents

Tiruchirapalli
No. of Respondents

Percentage

Percentage

37 35 72

51 49

13 14 27

48 52

Total (Review done only)

Source: Primary data

Of the respondents who review their financial plan 51 percent in Chennai and 48 percent in Tiruchirapalli, receive offer for review of financial plan from life insurance agents but in actual number terms only 50 of the 359 respondents i.e. only 14 percent receive offer to help on financial planning.

Table 5.52: Periodicity of agents offer for help for review of financial plan for customers
Chennai FREQUENCY OF VISIT Once in 6 months Once a year Once in 2 years Only during new product launch Total (Agents offer for help in review) Source: Primary data
No. of Respondents

Tiruchirapalli
No. of Respondents

Percentage

Percentage

19 10 6 2 37

51 27 16 6

9 3 0 1 13

69 23 0 8

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Of the total of 50 respondents who receive offer to help review on financial plan, 51 percent in Chennai and 69 percent in Tiruchirapalli state that agents visit them once in 6 months. 27 percent of the respondents in Chennai and 23 percent in Tiruchirapalli affirm that agents visit them once a year. 6 percent of the respondents in Chennai and 8 percent in Tiruchirapalli state that agents meet them only when a new product is launched. According to LIMRA, customers tend to go to their primary advisors when making investment decisions and shopping for financial products. Interestingly, financial advisors arent widely viewed as counsellors, despite the fact that many advisors may see themselves in that role. Customers feel that agents help the most when it comes to 1) getting impartial advice, 2) Choosing appropriate investments and 3) matching products with individual consumers needs. Secondly Advisors help somewhat when it comes to 1) Identifying how much people need to save 2) providing encouragement on financial goals and 3) helping people monitor their financial progress toward their goals. Finally Advisors dont help at all when it comes to serving as a financial counsellor (Goodenow, 2007).

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5.13

SOURCES OF LIFE INSURANCE INFORMATION Table 5.53: Sources of life insurance information for customers

Sources of information Life Insurance Agent Relatives, Friends Advertisements in Print media TV or Radio programs Internet Insurance company mailers, Information during Seminar at office Attended a financial seminar Total number of respondents

Chennai

Percentage on total respondents

Tiruchirapalli

Percentage on total respondents

Total

238 181 159 110 103 66 61 41 289

82% 63% 55% 38% 36% 23% 21% 14%

57 47 37 35 33 24 22 12 70

81% 67% 53% 50% 47% 34% 31% 17%

295 228 196 145 136 90 83 53

Source: Primary data Multiple responses from customer is possible and hence percent may not add up to 100

More than 80% of the respondents in both Chennai and Tiruchirapalli consider life insurance agent as their primary source of information. Relatives and friends and advertisements in addition to life insurance agents complete the top 3 sources of information on life insurance products. It is important for the life insurance agent to remain in connect with the customers to provide them with information which will pave way for additional business or customer reference.

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Hypothesis No: 5.14 Null Hypothesis: There is no significant difference between mean ranks towards sources of information Table 5.54: Friedman test for significant difference between mean ranks towards sources of information
Source of Information Life Insurance Agent Relatives, Friends Insurance company mailers, Advertisements in Print media Internet Information during Seminar at office TV or Radio programs Attended a financial seminar Source: Primary data
Note: Analysis for consolidated data

Mean Rank 6.08 5.33 3.80 4.98 4.31 3.72 4.41 3.38

Chi -Square value

P value

348.0743

0.000**

Since P value is less than 0.01, Null hypothesis is rejected at 1% significance, implying significant difference between the mean rankings of sources. Life insurance

agent is a key source of information for customers who bank on him for information. Friends and relatives are also sources of information for the customers. Due to the convoluted nature of insurance products, many consumers of insurance will never fully understand exactly what they have purchased. Thus clients are at a distinct

disadvantage with respect to product knowledge and they must rely heavily on the integrity of the sales agent (Cupach, 2002)

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5.13.1 USEFULNESS OF SOURCES OF LIFE INSURANCE INFORMATION Table 5.55: Usefulness of sources of life insurance information to customers
Chennai Tiruchirapalli Mean Rating Rank Total Mean Rating

Sources of information Life Insurance Agent TV or Radio programs Internet Attended a financial seminar Relatives, Friends Advertisements in Print media Insurance company mailers, Information during Seminar at office Source: Primary data
Note: Analysis for consolidated data

Mean Rating

Rank

3.91 3.76 3.70 3.68 3.87 3.6 3.58 3.48

1 3 4 5 2 6 7 8

3.47 3.89 4.03 4.08 3.38 3.95 3.75 3.41

6 4 2 1 8 3 5 7

3.83 3.79 3.78 3.77 3.77 3.66 3.62 3.46

Analysis of usefulness of sources of information gives out a divergent ranking by respondents from Chennai and Tiruchirapalli. Although the respondents from both

Chennai and Tiruchirapalli have ranked life insurance agent as the primary source of information, they have given differential score on usefulness of the Life insurance agent as a source of information. While the respondents from Chennai have ranked

usefulness of life insurance agent as a source number one, respondents from Tiruchirapalli have ranked it in sixth position. Figure 5.8: Ranking of usefulness of sources of information

Source: Primary data

190

The accompanying graph (Figure 5.8) depicts the ranking on the usefulness of information sources. The respondents from both Chennai and Tiruchirapalli have shown divergent opinion on the usefulness sources of information. Financial Seminar has

been ranked as the most useful source by the respondents from Tiruchirapalli but has been given 5th rank by the respondents from Chennai.

5.14

REFERENCE FROM CUSTOMERS Table 5.56: Asking for reference by agents Customers observation

Reference from customers

Chennai No. of Respondents Percentage

Tiruchirapalli No. of Respondents Percentage

Asking & Giving Asking & Not giving No request Total

Source: Primary data

103 71 115 289

35 25 40

30 9 31 70

43 13 44

Taking reference from existing customers is the most effective way of expanding customer base in life insurance business. Ability of the agents to build personal

credibility with the clients, defines his success not only in business but also in getting references. From our earlier observations also, it can be found that customers prefer

agents who are their friends or relatives or agents who are referred by their friends and relatives. It is important for the life insurance agents to ask their existing customers to provide references of their friends and relatives. Only 35 percent of the respondents in Chennai and 43 percent in Tiruchirapalli state that they provided reference to agents, when agents sought them for. 25 percent of the respondents in Chennai and 13

percent in Tiruchirapalli have not provided reference to agents when asked for by agents, but a majority of respondents from both Chennai and Tiruchirapalli stated that

191

agents do not ask for reference at all. Customers are comfortable meeting with agents referred by friends or relatives. It is important to ask for reference from existing

customers for expanding the customer base. Agents need to be trained in the art of obtaining references from customers, which should include when and how to ask for references and follow up communications.

192

REFERENCES:

Cupach William R and Carson James M, The influence of compensation on product recommendation made by insurance agents, Journal of business ethics, 2002.

2 3 4 5 6

Goodenow, Ingrid R, and Painter-Eggers Poly, Another inconvenient truth. Are consumers prepared for their financial futures?, LIMRA, 2007. Invest India Incomes and Savings Survey, 2007, For futures sake, The Economic Times, April 2,2008 Mathur Sanjay - The base of the Indian Pyramid, UBS Investment Research, March 2006 MGI India Consumer demand model, The Economic Times, May 26, 2007, Purcal, T Sachi, Optimal Consumption, Portfolio Selection and Life Insurance for Financial Planning, School of Actuarial Studies, University of New South Wales, 1999.

7 8

Sivakumar, Srividhya, Life insurers the road ahead, The Hindu Business Line, July 27, 2008. Srinivasan, Vasanthi, Prakah, P, Sitharamu. S, Selection of agents: A challenge for the Indian insurance industry, Centre for Insurance Research and Education, Indian Institute of Management, Bangalore, 2001.

Terry, Karen, After the sale- what new buyers want from their insurers/agents, LIMRA, 2005

Asian Economic Perspectives

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