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ZENITH

International Journal of Multidisciplinary Research


Vol.1 Issue 8, December 2011, ISSN 2231 5780

AN EMPIRICAL STUDY OF LIFE INSURANCE PRODUCT AND


SERVICES IN RURAL AREAS
HARNAM SINGH*, DR MADHURIMA LALL**
*Project Fellow, UGC Major Research Project in Department of Applied Economics,
University of Lucknow, Lucknow. Uttar Pradesh, India.
**Associate Professor in Applied Economics, Faculty of Commerce,
University of Lucknow, Lucknow, Uttar Pradesh, India.

ABSTRACT
Life Insurance is one of the fastest growing and emerging markets in India. Insurance penetration
in the country is low mainly in rural area. The Insurance Industry has a significance contribution
in socio-economic development. A majority of the underprivileged & rural poor society is still
not insured and untouched by the benefits of Life Insurance. There is a tremendous scope for
developing insurance business in the rural areas where human life and income generating rural
assets need more protection. IRDA has acknowledged various reforms and initiatives for the
welfare of rural people i.e. Micro- insurance especially designed to provide life insurance benefit
to rural and economically backward class of the society.
Present study is based on primary data which is collected through paper questionnaire. Randomly
selected Respondents (Life Insurance Policyholders) based on Uttar Pradesh and evaluative
research methodology carried out in this paper. Aim of the present study is to examine the
opportunities for insurers in the rural market and what would be new strategies to tap the highly
underinsured rural area. Its also an attempt to understand consumer behavior in the insurance
sector and identify challenges faced by insurance companies and how to overcome with those
challenges.
KEYWORDS: Life Insurance, Insurance Policy, Customer preference, Customer Satisfaction.
______________________________________________________________________________

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Insurance Companies are focusing on customer satisfaction through increased customer choice
and lower premiums, while ensuring the financial security of the insurance market. Insurance
companies are targeting upon the customers by giving them a basket of returns with a mission to
make them delight and satisfied. The Insurance sector has obviously started growing at a rapid
place after the sector was opened up. The credit for enlarging the market should however goes to
the private sector as they came up with an aggressive market strategy to establish their presence.
The public sector has in its turn, redrawn its priorities, revamped their marketing strategy, and
together the public and private sectors have enlarged the market. India, with its huge middle
class households, has exhibited potential for the insurance industry. This has made international
players to look at the Indian market. Moreover, saturation of markets in many developed
economies has made the Indian market all the more attractive for global insurance majors.

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INTRODUCTION

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

REVIEW OF LITERATURE
There are various studies related to Insurance Sector in India and abroad. It was found
that the numerous numbers of literatures is available on insurance industry and its various
aspects. Few relevant reviews are putting here in the context, they are as follows:
Randhey and Ahuja (1999), Says that need for private sector entry has been justified on the basis
of enhancing the efficiency of operations, achieving a greater density and penetration of life
insurance in the country, and for grater mobilization of long-term savings for long gestation
infrastructure projects.
Rao Tripti, D. (2000) stated that Privatization of insurance industry is based on the view that
competition would enhance efficiency through increased resource utilization. It would spill over
as benefits to the consumers in terms of reduction in premium costs with proper pricing policy
and wider choice. Liberalization may also increase the scope of operation of insurance business
from limited area to untapped areas like health, crop and unemployment.
Raju Satya R. (2004), Found that the insurance agents, development officers employees,
executives at different levels should work together to achieve the objectives and mission and also
to face the present and future competition as a challenge. The insurance product and services
should be designed and offered as per the customer requirements.
Palande et al (2007) found that the Insurance industry is going to witness sea changes in its
marketing strategies. The existing and the new insurers will devise different strategies to retain
and enhance their market share. It would be done by various methods by bringing in new
practices, settings new service standards and creating new benchmarks.

IMPORTANCE OF THE STUDY


The development of insurance industry has been spurred by product innovation, vibrant
distribution channels coupled with targeted publicity and promotional campaign by the insurers.
Innovations have come not only in the form of benefits attached to the products, but also in the
delivery mechanism through various marketing tie-ups both within the realm of financial
services and outside. All these efforts have brought life insurance closer to the customer as made
it more relevant. The insurance companies are increasingly tapping the semi-urban and rural

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The research review identifies the links between insurance, financial sector performance
and growth in substantial details, helping define the insurance economic growth relationship and
supporting the policy conclusions of this report.

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Selvakumar& Priyan (2010) found that insurance companies are increasingly taping the semiurban and rural areas to take across the message of protection of life through insurance cover.
Higher level of protection implies that customers are more conscious of the need for risk
mitigation, grater security, and about the future of their dependents. Insurance sector has been
evolving and improving its underwriting and risk management abilities.

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

areas to take across the message of protection of life through insurance cover. The Industry has a
significance contribution in socio-economic development of the nation.
PURPOSE OF STUDY
1. To analyze the awareness about insurance policies and purpose of investment in
insurance companies
2. To study the age group, background and family size of existing customers of
insurance companies.
3. To study which type of insurance policy preferred by the customers and influencing
factors for choose insurance companies.
4. To study convenient source for getting insurance policy for common people.
5. To examine the satisfaction about insurance premium policy and opportunities for
insurers in the rural market.
TOOLS & TECHNIQUES
A well structured questionnaire and in-depth interview method was used to collect
primary data for the analysis purpose. A survey is carried out on randomly selected 104
respondents (Life Insurance Policyholders) who based in Uttar Pradesh. The researcher depends
on primary data for the purpose of analysis and Interpretation. Data are presented in the form of
tables and diagrams for easy understanding.
RESULTS AND DISCUSSION OF LIFE INSURANCE PRODUCTS AND SERVICES
The level of penetration tends to rise as income increases, particularly in life insurance.
Discussion and results about life insurance and services based on the respondents view are:

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At the time of determination of Insurance premium age factor play very crucial role for
the insurance companies as well as customers. If age group low then insurance companies
charges low premium and if it high then charged higher premium because mortality rate
increases according to age. Table 1 shows age groups of the respondents

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AGE GROUP

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

TABLE 1: AGE GROUP


(N=104)
Age

No. of Respondents

23-25

28

26-28

24

30-33

20

36-38

16

44-62

16
Mean

20.8

Median

20

SD

5.215361924

Source: Surveyed Data.

293

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Above table 1 depicts the age group divided into four categories 24-25, 26-28, 30-33, 3638, 44-62. The no. of respondent falling in each category is 28,24,20,16 and 16 respectively. The
mean value is 20.8, median value is 20 and Standard deviation of frequencies is 5.215. The data
shows that the maximum no. of respondents are falling in first two age group which is 23to 28
(No. of Respondents 52). The Insurance is a matter of security of life, whether senior people in
served data is less than younger people that is why the more respondents are falling in first two
age groups. It shows figure 1.

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

FIGURE: 1 AGE GROUPS (IN YEARS)

Source: Surveyed Data.


BACKGROUND OF RESPONDENTS
Insurance is a subject matter of Sale and not to purchase. It cannot be divided by
insurance companies according to background but in this study we found respondents
have urban and rural both background.
TABLE 2 BACKGROUND
(N=104)

Urban

44

Rural

60
Mean

52

Median

52

SD

11.3137085

Source: Surveyed Data.


The background of surveyed data is divided in urban and rural both. It shows wide phenomena of
Indian Insurance Industry. Rural respondents eager to take insurance policy if, there are provided

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No. of Respondents

294

Background

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

according to their need. The data shows the maximum number of respondent that is 60, have a
rural background and 44 respondents have urban background. The mean value of surveyed data
is 52. Median value is also 52 and standard deviation of frequencies is 11.313. Awareness about
insurance plays a very crucial role in its marketing. Weather the urban people in surveyed data is
less than rural people that is why the more respondents are falls in rural backgrounds. It shows
figure 2.
FIGURE: 2 BACKGROUNDS OF RESPONDENTS

Source: Surveyed Data.


FAMILY SIZE
Insurance is family protection device. Insurance cover should be appropriate according to
family size. If dependents on earning member are more then insurance cover should be more and
for fewer dependents it should be according to need. Table 3show the surveyed data of family
size.
TABLE 3 FAMILY SIZE

No. of Respondents

01 to o3

28

04 to 05

44

06 to 07

24

08 to 10

16

295

Family size

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(N=104)

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

Mean

28

Median

26

SD

11.77568

Source: Surveyed Data.


The family size in surveyed data is divided into four categories 1to 3, 4 to 5, 6 to 7 and 8
to 10. The no of respondent falling in each category is 28, 44, 24 and 16 respectively. The mean
value is 28, median value is 26 and standard deviation of frequencies is 11.775. The data shows
that the maximum number of respondents falling in first two family size category which is 1 to
5(no of respondents 72). Whether the large family size in surveyed data is less than small family
size that is why the more respondents are falling in first two family sizes. It shows figure 3.

PURPOSE OF INVESTMENT
Investment in Insurance policy fulfilled so many purposes at a time. It may be financial
compensation, family safety, tax rebate, risk cover and returns. In surveyed data purpose of
investments in insurance company shows table 4.

296

Source: Surveyed Data.

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FIGURE: 3 FAMILY SIZES

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

TABLE 4 INVESTMENT PURPOSE


(N=104)
Purpose

No. of Respondents

Tax Rebate

48

Financial Compensation

Family Safety

12

Risk Cover

56

Maximum Return

12

Other

0
Mean

22

Median

12

SD

23.83275058

Source: Surveyed Data.

297

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The purpose of investing in surveyed data is divided in five categories tax rebate, financial
compensation, family safety, risk cover and maximum return. The number of respondent falling
in each category is 48, 4, 12, 56 and12 respectively. The mean value is 22, median value is 12
and standard deviation of frequencies is 23.832. The data shows that the maximum number of
respondent are falling in first and fourth categories that is tax rebate and risk cover purpose (no
of respondents 48 and 56). Financial compensation and family safety is a basic things for
insurance purpose, whether the financial compensation , family safety and returns in surveyed
data is less than tax rebate and risk cover purpose thats is why the more respondents are falling
in first and fourth purpose groups. Its shown in the following figure.

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

FIGURE: 4 PURPOSE OF INVESTMENT

Source: Surveyed Data.


TYPES OF INSURANCE POLICY HAVING BY CUSTOMERS
Everyone gets insurance policy/products according to their needs. Whose evolved in
hazardous job the prefer term insurance and who having aim for a time period letter prefer
endowment plans. Unit linked insurance plans fulfilling all purposes but it having more cost
compare to traditional plans. In surveyed data shown about plans who having by the respondents.
TABLE 5 TYPES OF INSURANCE POLICY HAVE
(N=104)
No. of Respondents

Term Insurance

48

Endowment plan

48

ULIP

28

Other

8
Mean

33

Median

38

SD

19.14854216

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Types of Policy

298

Source: Surveyed Data.

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

The types of insurance policy having by the respondents in surveyed data is dividing in to
four categories term insurance, endowment plan ,ULIP and other. The number of respondent
falling in each category is 48, 48, 28 and 8 respectively. The mean value is 33, median is 38 and
standard deviation of frequencies of respondents is 19.148. The data shows that the maximum
numbers of respondents are falling in first two categories which are term insurance and
endowment plan (number of respondents 96). Unit Linked insurance and other insurance plans
are play a very crucial role in this globalised era, whether the ULIP and other plans in surveyed
data having by the respondents is less than traditional plans that is why the more respondents
falling in first two purposes.
REASON FOR PREFERRING INSURANCE COMPANY
Selection of a particular items varied person to person .Insurance company is not an
exception of it. When anyone going to chose an insurance company for its policy or products he
analyze all the factors related to it, then he overcome on the final decision. Insurance is a long
term investment for the security and safety of his beloved family so he takes decisions very
carefully. In surveyed data provided some factors to the respondents for selecting insurance
company. Following table shows the various factors preference which is necessary for getting
final selection.
TABLE 6 REASON FOR PREFERRING INSURANCE COMPANY

Brand Name
No. of Branches
Location
Quality of
service

Rank
-1

Rank
-2

Rank
-3

Rank
-4

Rank5

Rank
-6

Rank
-7

Rank
-8

Ran
k

224

84

96

60

64

12

24

III

84

24

16

36

32

56

VIII

32

28

72

40

64

36

64

16

VII
I

384

140

96

60

32

Behavior of
Insurance Agent

56

48

100

80

84

24

Administration
Charges

32

56

48

80

64

108

16

140

120

80

64

24

48

Value Added
Service

VI
V

299

Factors

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Fina
l

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

Provided By
Insurance
Company

IV

Quality of
Insurance
Policy/Product

II
160

140

120

100

32

12

12

Source: Surveyed Data.


The factors for preferring insurance company divided in to eight major factors Brand
name, number of branches, location, quality of service, behavior of insurance agent,
administration charges, value added service provided by insurance company and quality of
insurance policy/product. Data shows preferred rank by all respondents on every factor. Data
shows that quality of service gets total 712 points and hold 1st Rank and quality of Insurance
Policy/ Product securing 2nd position with 576 points. Brand name gets 3rd Ranked with 568
points.
CONVENIENT SOURCE FOR GETTING INSURANCE
In this globalised and competitive scenario getting insurance policies is not a difficult task
for any. Anyone who willing to pay premium can take insurance policy by various authority who
involved in insurance business as like banks, insurance agents, financial institutions and some
websites also providing these facilities. In below table shows most convenient source for getting
insurance policy chosen by respondents.
TABLE 7 CONVENIENT SOURCE FOR GETTING INSURANCE
(N=104)
No. of Respondents

Insurance Agent

76

Bank

20

Brokers

Direct Insurance Co.

12
Mean

22.4

Median

16

SD

30.93218389

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Source

300

Source: Surveyed Data.

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

The convenient source for getting insurance in surveyed data is divided into four categories
insurance agent, bank, brokers and direct insurance company. The number of respondent falling
in each category is 76, 20, 4 and 12 respectively. The mean value is 22.4, median is 16 and
standard deviation of the frequencies is 30.932. The table shows that the maximum no. of
respondents falling in first source category which is Insurance agent (no. of respondents 76). It is
a traditional source of getting insurance policy. Whether the last three categories sources in
surveyed data is less than the first insurance agent source. It shows the personnel relationship of
people and insurance agents is stronger than other sources that is why the more respondent are
falling in first Insurance agent categories. It can be seen in following figures.
FIGURE: 5 CONVENIENT SOURCE FOR GETTING INSURANCE POLICY

Source: Surveyed Data.

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Premium of insurance policy which is cost of risk transfer should be appropriate according
to risk. According involvement of hazardous element premium increased or decreased. In the
surveyed data respondents gave opinion about the satisfaction with the premium policy of the
insurance company. It shows table 8.

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PREMIUM POLICY SATISFACTIONS

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

TABLE: 8 PREMIUM POLICY SATISFACTIONS


(N=104)
Opinion

No. of Respondents

Yes

88

No

16
Mean

52

Median

52

SD

50.91168825

Source: Surveyed Data.


The premium policy satisfaction in surveyed data divided in to two categories first one is yes and
second one is no. the no of respondent falls in yes category 88 and no category is 16. The mean&
median value is 52 and standard deviation of frequency is 50.911. The table shows that the
maximum 88 respondents is falling in Yes satisfied category and only 16 respondents falling in
no unsatisfying categories. According to data IRDA should be giving instruction for Insurance
companies improving premium of insurance policy by decreasing its cast that why 16
respondents falling in last un satisfying category. It can be seen in the below figure also.

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FIGURE: 6 POLICY PREMIUM SATISFACTIONS

302

Source: Surveyed Data.

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

Above figure 6 depicts large number of customers satisfied with the premium policies and
services of insurance companies. A very few respondents are not satisfied with the premium
policies of the companies because Unit linked Insurance Policies (ULIP) evolved after the
privatization of market and ULIP has more cost as administration charges and other hidden costs.
CONCLUSION
During the study and analysis of data, following conclusions have been found based on the study
objectives. They are:
1. It was found that in post-liberalized-era, government service men of 26-45 age group
population are more aware of buying insurance policy for several purposes.
2. Mostly urban educated graduates or post graduate people purchase maximum risk cover
plans by insurance companies, as compared to others degree holders. Less number of the
Intermediates passed respondents is under insurance covers because they are not able to
get suitable products.
3. The 4-6 family size is having maximum insurance policies as compared to other family
sizes in the study area.
4. Medium income group population, who belongs to Rs. 100,000-300,000 income range
buying more insurance products as compared to other income groups in the study area.
5. Although Insurance companies are fulfilling so many purposes of investments & savings
at a time, but maximum respondents buy insurance policies for tax rebate and family
safety.
6. In the case of other than insurance products customers preferred brand name and location
but in Insurance industry customer is preferring Quality of insurance product and
Services. The insurance advisers behavior is also a major factor for influencing
customers.

8. Large number of customers satisfied with the premium policies and services of insurance
companies. It shows brighter future for the customers as well as insurance industry in
India.
9. This globalised economy affected the Indians values and family system. So that more
nuclear families believed on insurance sector for covering their risk and future plans.
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7. During the study it was found, although there are so many insurance distribution channels
have grown like banks, financial institutions, corporate agents etc. but even then
insurance agents are dominating in case of selling and distribution of insurance products.

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1. The key challenges for insurance companies to provide insurance plans to low income

ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

households by minimizing transaction costs.


2. Micro insurance products should be developed for under privileged people & for rural
areas population products designed according to their needs and income.
3. Insurance plans should be more feasible and the endowment plan should be easily access
to the customers and also try to reduce the mortality charges because average age has
been increased.
4. Insurance company should call to the customer and define the policy benefits. If anyone
not satisfied with the policy terms and conditions it should be minimum one month time
period to surrender their policy.
5. Insurance companies should recruit qualitative insurance agents so that they will provide
after sale service because it has been seen that insurance agents are only bothered for
new. The insurers should work toward development of alternate distribution channels for
insurance policies.
6. Its enhancing to village area there are number of groups which should be covered by the
insurance company.
7. Government should more focus on rural areas awareness about insurance products.
8. More transparency should be schemes and while making final payments to nominee.
9. Insurance policy should be more transparent, reduce the administration charges &
minimize hidden cost as much as possible.
10. Insurance company should be provide quality products, better services, clarity in terms,
discloser of hidden charges if any and minimum guarantee of the invested funds.
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Raju Satya R., Human Side of Insurance Sector GITAM Excel Series New Deal in
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Selvkumar M. & Priyan Vimal J. (2010), Indian Life Insurance Industry: Prospect for Private
Sector, The Journal ,Vol. XXXIV (1) pg 52-57

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Rao, Tripti D.(2000), Privatization and foreign participation in (Life) Insurance Sector,
Economic& Political Weekly, pp 1107-1119, (March 25-31,2000), vol.35(13).

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Randhey Ajit and Ahuja Rajeev (1999),Life Insurance in India: Emerging Issues Economic&
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ZENITH
International Journal of Multidisciplinary Research
Vol.1 Issue 8, December 2011, ISSN 2231 5780

Rao Gangadhar M, Shivaramakrishna K & Sheela P (2004) New Deal in Insurance, GITAMExcel Series, Excel Books Private Limited.
Narayan H. (2008), Indian Insurance-A Profile, Jaico Publishing House, New Delhi.
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Kumar Jagendra (2007), Insurance Sector: Opportunities and Challenges, Insurance Sector
Reforms in India: Challenges and opportunities, Karshak Art Printers, Hyderabad. Pp.127.