Volume 43

Number 2

June 2016

SedmeSmall Enterprises Development,

Management & Extension

Journal

(An ISO 9001-2008 organisation)

EDITORIAL BOARD

Chief Editor

Associate Editors

Reviewers

Journal Coordinators

Mr. M. Chandrasekar Reddy

Dr. Dibyendu Choudhury

Dr. Girija Bai Gattu

Dr. Neeta Baporikar

Dr. Rachita Rana

Dr. A. Srihari Krishna

Dr. Sarita Kumari

Dr. Brajaballav Kar

Dr. Soumendra Kumar Patra

Dr. K. Sudarsan

Ms. P. Anjali PrasannaMr. B. Sharath Babu

Director General, ni-msme, Hyderabad, India

Faculty Member, ni-msme, Hyderabad, India

Professor & Director (Business Management), Namibia University of Science and Technology, Namibia, Africa

Professor & Director, Institute of Information Technology and Management, Janakpuri, New Delhi, India

Director, Siddhartha Educational Academy Group of Institutions, Tirupati, Andhra Pradesh, India

Professor (HRM & Managerial Economics), SIES College of Management Studies, Navi Mumbai, Maharashtra, India

Associate Professor, Kalinga Institute of Industrial Technology, Bhubaneswar, Odisha, India

Associate Professor (OM & Decision Science), Institute of Management & Information Science, Bhubaneswar, Odisha, India

Assistant Professor, Sreenivasa Institute of Technology and Management Studies, Chittoor, Andhra Pradesh, India

AN EMPRICAL NOTE ON GENERAL INSURANCE PRODUCTS

C. Sankar *

ABSTRACT

June 2016

The insurance companies have to ensure quality products at a competitive price. Companies can lower the price of the product by reducing the cost. Their survival depends upon their policy-holders. The policy-holders become confident of not losing much when an accident or uncertainty takes place. On the report of the insured about an accident the company officials send surveyors to assess the loss caused to the policy-holders. However, as several of the insurance providers are international companies having made their presence felt in several countries, the service provided by them is a reflection of the experience gained by them across the globe, and in that sense, the findings may be generalised to a great extent.

Keywords: Factors, service, products, company, price

Introduction

Insurance is a form of risk management first and foremost, used to hedge against the risk of a needy loss. Insurance is defined as the rational transfer of the risk of a loss, from one individual to another, in swap for a premium, and it can be thought of as a certain small loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance; an insured is the person or entity buying the insurance. The insurance rate is a factor used to make a decision about the amount to be charged for a certain amount of insurance exposure called the premium. Risk management, the practice of appraising and scheming risk, has evolved as a separate field of study and so carried out.

* Dr. C. Sankar is Assistant Professor, Department of Commerce, Karpagam University, Coimbatore - 641 021, Tamil Nadu; e-mail: sankarzee.c@gmail.com.mobile: 9566997631;

Review of literature

Govind Johri (2009) in his article discussed customer satisfaction with regard to General insurance industry. This new trust and innovativeness is the key to competitiveness. The survey has clearly revealed perception gaps in the area of: (i) visual appeal of document and office, (ii) product knowledge and adherence to promises, (iii) responsiveness and dependability, (iv) error-free records and empathy. Kavitha, Latha, and Jamuna (2012) in their articles on General insurance companies, part of financial sector, remarked that they were expected to show profits though they were service-oriented organisations. The premium income under these two schemes namely, personal accident, and Mediclaim schemes constituted more than 85 per cent of the total premium income for all the four schemes namely, Personal Accident, Health Insurance, Workmen’s Compensation and Mediclaim schemes. Manisha Rani (2012) in her research article focused on a survey of insurance companies in India. From 49 members of the Indian association in the directory (2011) published by the association 30 companies were selected at random to find out how customer relationship could become more effective with the aid of information technology and to see if Customer Relationship Management (CRM), when properly carried out using appropriate information technology, could yield optimal results for the organisation. Manjit Singh and Rohit Kumar (2009) in their article revealed emerging trends in the growth, financial performance, and strategies for improving the performance of General insurance companies in India. It was highlighted that public sector insurance companies were suffering from loss when it came to their core insurance business, but still managed to get good net earnings, which was mainly ascribed to the investment income. Rajeev Ahuja and Indranil De (2004) in their paper empirically confirmed that demand for insurance was limited where supply of health care services was weak. In particular, inter-state variation in demand for universal health insurance schemes for the poor in India is explained by inter-state variation in health care infrastructure and the proportion of the poor for whom the scheme is designed.

Sandhu and Neetu Bala (2011) conducted a study on Life Insurance Corporations’ customers located in the major cities namely, Amritsar, Jalandhar, and Ludhiana in Punjab, a progressive state of India. They considered a sample of 450 customers who were approached personally at their work places and residences. Managerial implication and directions for further research had also been discussed. Selvakumar and Vijayakumar (2013) undertook an empirical study based on the survey method. A policy-holder has freedom to take up a particular policy from any one of the insurance

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companies. Therefore, the study was undertaken with reference to Madurai region. Shreedevi and Manimegalai (2013) in their study attempted to compare the performance of public and private General insurance companies in terms of certain parameters. The growth rate was 55.36 per cent in 2004-05 and the highest growth rate of 61.24 per cent was recorded in 2006-07, which decreased to 24.67 per cent in 2010-11.

Insurance has come to play a major role in the life of humanity. Slowly people started to realise the need for insurance, which continues as long as life exists. In fact insurance is not restricted to any category of society in terms of caste, ages or life-styles. Also, many people have a notion that insurance is a good form of an investment, which is not right. The life insurance industry has become increasingly competitive in recent years.

Mode of operation

The policy-holders become confident of not losing much when an accident or uncertainty takes place. On the report of the insured about an accident, the company officials send surveyors to assess the loss caused to the policy-holders. The surveyor submits a report to the insurance company as to the particulars of damage like the quantum of goods or machinery lost and their value. The company, after studying the report of the surveyor, takes necessary steps to settle the claim. The claim made by the policy-holder is not always fully admitted. The insurance company takes into consideration the age of the machinery/ contraction/ installation of the asset. In case of goods, their current worth is noted. The claim of the policy-holder is settled as per the established guidelines obtainable with the insurance company concerned.

Significance of the study

The insurance companies have to ensure quality products at a competitive price. Companies can lower the price of the product by reducing the cost. Their survival depends upon their policy-holders, the factor that influences the selection of general insurance products. The study attempts to evaluate the factors influencing in selection of general insurance products. Today, only one business, which affects all walks of business, is insurance. That’s why insurance industry occupies a very significant place among financial services functioning in the world. Due to growing complexity of life, trade and commerce, individual as well as business firms are turning to manage various risks. Hence, a proper knowledge of what insurance is and what purpose does it serve to individual or an organization is consequently necessary.

June 2016

Companies must ensure that their marketing mix suits all segments of people and should be formulated based on the preference of customers.

Objectives of the study

I. To evaluate the factors influencing the selection of the products and the services of General insurance companies

ii. To offer suitable suggestions and recommendations for further improvement of the performance of General insurance companies

Methods of data collection

The study is based on both primary and secondary data. The primary data were collected from the policy-holders who had taken General insurance policies such as motor insurance policy, fire insurance policy, and health insurance policy from any branch of both public and private sector insurance companies. The General insurance companies in Salem district selected for the study were New India, United India, ICICI Lombard, Bajaj Allianz, IFFCO Tokio. For the purpose of collecting primary data, a structured interview schedule was used for policy-holders. The secondary data were collected from the annual reports of IRDA and GIC, annual reports of selected General insurance companies, magazines, various journals related to insurance, technical books, edited volumes, other articles from General insurance companies and other records published by the Salem district regional office and divisional offices of General insurance companies situated in Salem district, Tamil Nadu.

Sampling method

About 500 policy-holders were approached to collect the required data for the study. The researcher could not receive information from 50 respondents. The researcher had no option other than to fix the sample at 450. Of them 301 policy-holders were taken from public sector General insurance and 149 policy-holders were taken from private sector General insurance. The policy-holders were selected on the basis of non-random sampling by following convenience sampling method. The selected respondents belonged to different fields and hence the study covered a cross- section of society such as teachers, lawyers, doctors, engineers, businessmen, and farmers in Salem district, Tamil Nadu.

Statistical techniques for analysis

The collected data were analysed with reference to each of the objectives of the study. Descriptive analyses were employed. Analysis and interpretation were done by using SPSS -21.0 and Amos-2.10 software packages.

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Limitations of the study

I. The responses for the study were solicited from the Salem district only.

ii. The sample collected has been restricted to 450.

Level of satisfaction

Factors influencing the policy-holders to take policies in General insurance have been identified, and individual factors were analysed by the simple percentage analysis. Policy selection was a part of performance. It was based on highly favourable attitudes towards the policy and conscious commitment each time the customer purchases a policy in this category. Table -1 describes the distribution of respondents based on the level of satisfaction that customers had with their policy selection.

From table-1 it can be clearly inferred that the respondents were highly satisfied with factors like product price, reminder for renewal of policy, office appearance, motivation given by the officials to buy the policy, guidance/help at the time of purchasing the policy, promptness in issuing the policy, contacts by the development officers/agents after issuing the policy, Development officer’s attitude in helping the policy holders at the time of making claims, amount settled by the company (relative worth of the amount), and bonus for next premium payment having percentages 42.4, 52.4, 38.9, 38.4, 35.3, 44.4, 45.1, 57.3, 42.4, and 52.4 correspondingly. The respondents were satisfied with the factors of courtesy of staff, officers/agents being easily accessible, response in time, attitude of surveyor, agent’s attitude in guiding the claim settlement, company’s attitude in settling claims, moral support, convenient service, covering more services having percentages 49.1, 42.4, 53.3, 34.4, 42.4, 49.3,42.4, 52.3 and 34.4 respectively. The respondents were neutral towards factors like speed in claim settlement, knowledge of the person dealing with you, type of the product, and transparency of the policies, claim settlement percentage, benefits associated with the policy having percentages 32.7, 44.7, 48.2, 32.7, 44.7, and 48.2 correspondingly. It was found from the analysis that a majority of 57.3 per cent of respondents were highly satisfied with the development officer’s attitude in helping the policy-holders at the time of making claim in General insurance policy. From the foregoing it can be inferred that the above stated satisfying factors induce the policy-holders to purchase the policies in General insurance. Thus, the above factors were taken as those covered in the selection of General insurance policies.

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TABLE-1Factors influencing towards Level of Satisfaction

Sl.No. Factors HS S N DS HDS

1. Courtesy of staff 81 221(18.0) (49.1) (17.1) (13.8) (2.0)

2. Product price 191 170 57 30 2(42.4) (37.8) (12.7) (6.7) (0.4)

3. Officers/agents are easily accessible 171 191 81 3 4(38.0) (42.4) (18.0) (0.7) (0.9)

4. Reminder for renewal of policy 236 175 31 4 4(52.4) (38.9) (6.9) (0.9) (0.9)

5. Response in time 146 240 47 8 9(32.4) (53.3) (10.4) (1.8) (2.0)

6. Speed in claim settlement 144 129 147 21 9(32.0) (28.7) (32.7) (4.7) (2.0)

7. Knowledge of the person dealing with you 71 138 201 31 9 (15.8) (30.7) (44.7) (6.9) (2.0)

8. Type of the product 80 115 217 20 18(17.8) (25.6) (48.2) (94.4) (4.0)

9. Attitude of surveyor 149 155 85 48 13(33.1) (34.4) (18.9) (10.7) (2.9)

10. Office appearance 175 136 84 38 17(38.9) (30.2) (18.7) (8.4) (3.8)

11. Motivation given by the 173 99 89 46 43officials to buy the policy (38.4) (22.0) (19.8) (10.2) (9.6)

12. Guidance/help at the time 159 137 83 35 36of purchasing the policy (35.3) (30.4) (18.4) (7.8) (8.0)

13. Promptness in issuing the policy 200 164 80 2 4(44.4) (36.4) (17.8) (0.4) (0.9)

14. Contacts by the development officers/ 203 145 63 25 14agents after issuing the policy (45.1) (32.2) (14.0) (5.6) (3.1)

15. Development officer’s attitude in helping 258 119 47 21 5the policy holders at the time of making claims (57.3) (26.4) (10.4) (4.7) (1.1)the time of making claims

16. Agent’s attitude in guiding the 181 191 64 Nil 14claim settlement (40.2) (42.4) (14.2) (3.1)

17. Company’s attitude in settling claims 81 222 76 62 9(18.0) (49.3) (16.9) (13.8) (2.0)

77 62 9

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Source: Primary data. * Figures in brackets indicate percentage.

Sl.No. Factors HS S N DS HDS

18. Amount settled by the company (relative worth 191 171 56 30 2of the amount) (42.4) (38.0) (12.4) (6.7) (0.4)

19. Moral support 172 191 80 3 4(38.2) (42.4) 917.8) (0.7) (0.9)

20. Bonus for next premium payment 236 176 30 4 4(52.4) (39.1) (6.7) (0.9) (0.9)

21. Convenient service 146 240 48 7 9(32.4) (52.3) (10.7) (1.6) (2.0)

22. Transparency of the policies 144 130 147 20 9(32.0) (28.9) (32.7) (4.4) (2.0)

23. Claim settlement percentage 71 139 201 30 9(15.8) (30.9) (44.7) (6.7) (2.0)

24. Benefits associated with policy 81 115 217 19 18(18.0) (25.6) (48.2) (4.2) (4.0)

25. Covering more services 149 115 85 48 13(33.1) (34.4) (18.9) (10.7) (2.9)

HS : Highly satisfied; S : Satisfied; N : Neutral; DS : Dissatisfied; HDS: H igh ly dissatisfied

Suggestions and recommendations

i. The insurance companies have customer service sections and grievance redress officers. It seems that these sections were created mainly as a formality rather than for enhancing their performance and efficiency, complied as per the guidelines of Government of India. These sections need to be rejuvenated and given due importance.

ii. The respondents were given detailed information of the General insurance through their advertisement and company agents/ officers. Therefore, it is suggested that the General insurance companies may give a wide range of services to the customers and project the attractive advertisement through television (local channel), wall painting and radio (F.M). By doing so, more number of people may become aware of the services and utilise the service of General insurance.

iii.General insurance companies have to think up the strategies to increase the premium growth rate over the target growth rate in case of personal accident and workman’s compensation schemes, since the actual growth was not significant.

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iv. People are aware about the presence of insurance companies but awareness about the importance of insurance as risk avoidance tool is low. Companies advertise benefits, risk coverage, etc. IRDA would make efforts to create awareness about the social significance of General insurance among the masses.

Conclusion

The study has to evaluate the comparative performance of public and private sector General insurance companies. The metrics is validated and tested in an environment where several national and international General insurance companies are vying to capture the small scale industries General insurance market. The study has revealed the pitfalls in the performance general insurance policyholders etc., This requires immediate consideration, as it is against the recommended, practices of providing service. Social responsibility is also a dimension which needs to be strengthened by the insurance providers. However, as several of the insurance providers are multi-national companies having made their presence felt in several countries, the service provided by them is a reflection of the experience gained by them across the globe, and in that sense, the findings may be generalized to a great extent.

REFERENCES

Ahuja R., and Indranil De, (2004). Health Insurance for the Poor-Need to Strengthen Healthcare Provision, Economic and Political Weekly, 4491-4493.

Asmarubiya Begam, A., and Mohamed Nasardeen, S.M., Empirical Study on Factors Influencing Consumer Choice of Life Products, Journal of Management and Science, Special Issue2.

Gopalkrishna,B. Rodrigues, Lewlyn L.R., Varambally, K.V.M., (2008) Service Quality in General Insurance Sector: An Empirical Study, Indian Journal of Industrial Relations, 44(1).

Govind Johri, (2009). Customer Satisfaction in General Insurance Industry-A Step toward Competitiveness. A Journal of Risk and Insurance Pravartak, 4 (3).

Kavitha Tnr., Latha A., & Jamuna S. (2012). Customers’ Attitude towards General Insurance- A Factor Analysis Approach, IOSR Journal of Business and Management, 3(1), 31-36.

Rani M., (2012). CRM in Insurance Services, International Journal of Innovations in Engineering and Technology, 1 (1), 51-58.

Sandhu, H.S., & Neetu Bala, (2011). Customers’ Perception towards Service Quality of Life Insurance Corporation of India: A Factor Analytic Approach, International Journal of Business and Social Science, 2(18), 219-230.

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Sankar.C (2016). Empirical Study on Policyholder’s Opinion towards Reason of Taking General Insurance Policy, International Journal of Academic Research, 4(1), 88-92.

Sankar.C (2016). Recital of Non-Life Insurance Industry, LAP LAMBERT Academic Publishing, Germany.

Selvakumar K., & Vijayakumar S., (2013). Attitude of Policyholders towards Administration of General Insurance Companies with Reference to Madurai Region, SUMEDHA Journal of Management, 2(2), 93-116.

Shreedevi D., & Manimegalai D., (2013). A Comparative Study of Public and Private non- life Insurance Companies in India, International Journal of Financial Management (IJFM), 2(1), 13-19.

Singh M. & Kumar R., (2009). Emerging trends in financial Performance of General Insurance Industry in India. Indian Management Studies Journal, 13, 31-44.

Vinayagamoorthy A & Sankar C (2012). A Comparative Study on Service Quality Perception of Public General Insurance and Private General Insurance Companies in Salem City, ACUMEN-Marian Journal of Commerce and Management, 5 (2), 71-72.

Vinayagamoorthy A & Sankar.C (2012). Policyholders’ Awareness towards General Insurance Policy-Comparative Analysis, Journal of Development Research, 7(1), 73-85.

Web References

http://www.lonsdalebrokers.com/en/knowledge-centre/100.aspx

https://en.wikipedia.org/wiki/Insurance

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