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Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
Page 1
TABLE OF CONTENTS
SL. NO. Particulars Page No. 1 Executive Summary 2
2
2.1
2.2
Introduction
Literature Review
Buying Behavior
3
3
5
3
3.1
3.2
3.3
3.4
3.5
Industry Overview
Structure of the Industry
Why do we take Insurance policy
What is Life and General Insurance
Insurance Industry in India
Global Scenario
9
9
10
11
14
25
4
4.1
4.2
4.3
4.4
4.5
Company Overview
About IDBI Life Insurance Co Ltd
Product Profile
Vision, Mission and Values
S.W.O.T Analysis
Organizational Chart
31
31
34
36
37
39
5
5.1
5.2
Project Profile
Objectives of Study
Methodology
42
42
42
6
6.1
6.2
Analysis
Sample Distribution
Factor Analysis
44
44
49
7 Findings 55
8 Recommendation 57
9 Conclusion 59
10 Learning Outcome 61
11 Limitations 62
12
12.1 Annexure
Questionnaire
63
63
13 References 68
TABLE AND CHARTS
Table No. Particulars Page No.
1 Structure of the Company 9
2 Market Share 24
3 Organizational Chart 39
4 Sample Distribution (Pie Charts) 44
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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EXECUTIVE SUMMARY
Our Internship in IDBI Federal Insurance Co Ltd. Kick started on 23rd
April 2011.We
started our training session on 25th
April. The training was imparted to give us in
depth knowledge regarding the product, Incomesurance and the different sales
techniques to pitch for our prospective clients.
The work assigned to me was to achieve a sales target of 1.5 lakhs in terms of
premium amount collected. I managed to make total sales of 1.15 lakhs. While
making these sales I got a chance to meet many different people from diverse
backgrounds and occupations to discuss on insurance related topics.
Along with this I prepared my report titled ―Factors determining Buying Behavior of
consumers while purchasing Life Insurance‖. Buying behavior is a vast and important
marketing subject. The primary objective of my project is to identify the key factors
which influence a prospective consumer of life insurance the most when considering
the purchase of an insurance product. A questionnaire was prepared with the help of
my company guide and I surveyed 100 respondents. The analysis was done using an
SPSS technique called factor analysis.
From the study and analysis done is this report, we can conclude that there are 5
major factors which influence a consumer of life insurance. They are Customer
service, Transactions options, Favorable compatibility, corporate image and
Safety.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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INTRODUCTION
PURPOSE OF THIS REPORT:
Literature Review:
Consumer behavior is the study of how individuals, groups, and organizations select,
buy, use and dispose of goods, services, ideas, or experiences to satisfy their needs
and wants.
With respect to financial products from an insurance company the consumer behavior
is not clearly defined.
Consumer behavior for services generally vary from that of products, however when
it comes to financial products the available literature on buying behavior falls short.
The aim of this project is to identify all possible factors which influence consumers
one way or the other with respect to Life Insurance financial products.
In today‘s corporate and competitive world, I find that insurance sector has the
maximum growth and potential as compared to the other sectors. Insurance has the
maximum growth rate of 70-80%.According to the report by Market research firm
RNCOS, analyzing ―the Indian Insurance Market‖. Life insurance is a sector which is
largely driven by propensity of people to save. Thus, life insurance products which
provide higher elements of saving as compared to protection will be more popular
with customers. In India unit linked insurance products (ULIPS) account more than
half of the insurance sales. Ulip‘s provide package of benefits in a single product
which include risk cover, investment and tax saving facility.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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With largest number of life insurance policies in force in the world, Insurance
happens to be a mega opportunity in India. It's a business growing at the rate of 15-20
per cent annually and presently is of the order of Rs 450 billion. Together with
banking services, it adds about 7 per cent to the country's GDP. Gross premium
collection is nearly 2 per cent of GDP and funds available with LIC for investments
are 8 per cent of GDP.
Yet, nearly 80 per cent of Indian population is without life insurance cover while
health insurance and non-life insurance continues to be below international standards.
And this part of the population is also subject to weak social security and pension
systems with hardly any old age income security. This it is an indicator that growth
potential for the insurance sector is immense.
In the introduction stage of the Product Life Cycle, a firm seeks to build awareness
and develop a market for the product, and IDBI Federal Life Insurance Co Ltd is in its
introduction stage of its PLC.
So this report will help me recommend to IDBI Federal Life Insurance Co
Ltd , those crucial factors which influence a prospective Life insurance customer the
most when they go ahead in purchasing a life insurance product, so that they can
attract maximum customers by concentrating on these crucial factors and thus develop
a market for their product.
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BUYING BEHAVIOR
Consumer behavior is the study of how individuals, groups, and organizations select,
buy, use and dispose of goods, services, ideas, or experiences to satisfy their needs
and wants.
Five Stages to the Consumer Buying Decision Process (For complex decisions).
Actual purchasing is only one stage of the process. Not all decision processes lead to a
purchase. All consumer decisions do not always include all 6 stages, determined by
the degree of complexity.
The 5 stages are:
Problem Recognition
Information Search
Evaluation of alternatives
Purchase Decision
Post purchase Behavior
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The four type of consumer buying behavior are:
Routine Response/Programmed Behavior--buying low involvement frequently
purchased low cost items; need very little search and decision effort;
purchased almost automatically. Examples include soft drinks, snack foods,
milk etc.
Limited Decision Making--buying product occasionally. When you need to
obtain information about unfamiliar brand in a familiar product category,
perhaps. Requires a moderate amount of time for information gathering.
Examples include Clothes--know product class but not the brand.
Extensive Decision Making/Complex high involvement, unfamiliar, expensive
and/or infrequently bought products. High degree of
economic/performance/psychological risk. Examples include cars, homes,
computers, education. Spend a lot of time seeking information and deciding.
Information from the companies MM; friends and relatives, store personnel
etc. Go through all six stages of the buying process.
Impulse buying, no conscious planning.
Categories that Affect the Consumer Buying Decision Process
A consumer, making a purchase decision will be affected by the following three
factors:
1. Personal
2. Psychological
3. Social
The marketer must be aware of these factors in order to develop an appropriate MM
for its target market.
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HOW DO WE FIND OUT BUYING BEHAVIOR WHEN IT COMES TO LIFE
INSURANCE FINANCIAL??
1. Historically the factors affecting consumer behavior have been broadly
classified as:
· Cultural Factors
· Social Factors
· Personal Factors
For financial products however we can‘t use this framework, we can say that buying
of insurance can be attributed to Personal Factors, but these also include the concepts
of PERSONALITY and SELF-CONCEPT which do not explain the buying behavior
of insurance.
2. The motivational theories of consumer behavior which have been formulated
are:
· FREUD‘S Theory
· MASLOW‘S Theory
· HERZBERG‘S Theory
However, none of these theories give valuable insight when it comes to motivation for
buying financial products.
3. The Five-Stage Buying Decision Model is widely accepted as a basic framework
for the consumer behavior:
Problem Recognition – Information Search – Evaluation of alternatives – Purchase
Decision – Post purchase Behavior
It is known that consumers do not always pass through all five stages in buying a
product; they might skip or reverse some. Keeping this in mind we can say this model
is helpful to get a basic idea of how consumers buy financial products. The
information sources are vital in educating the consumers and this can be done through
Personal, Commercial and Public Sources. The evaluation of alternatives however
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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can‘t be explained for financial products. There is no information available as to how
people filter out alternatives when it comes to deciding on a particular financial
product offering.
4. Elaboration Likelihood Model
Richard Petty and John Cacioppo‘s model of attitude formation and change, describes
how consumers make evaluations in both low- and high- involvement circumstances.
They describe the Central Route where attitude formation is based on diligent,
rational consideration of the most important product information; and the Peripheral
Route where attitude formation is due to association with some positive or negative
peripheral cues which include celebrity endorsement as well as insurance agents.
This particular model gives a basic idea as to how people may develop attitudes
towards insurance products. The central route will not differ as the products offered in
this industry are tailored to suit the needs of the consumer. The peripheral cues are the
most important as the brand name; advertisements, agents etc. play an important role
in attitude formation for the consumer.
It would thus be helpful to understand all these cues in order to create favorable
attitude towards IDBI Federal Financial Products.
5. Low-Involvement Marketing Strategies
One type of Low-Involvement Marketing Strategy is to design advertising to trigger
strong emotions related to personal values or ego-defense. This can be observed in the
insurance industry as most advertisements are designed in order to trigger feelings of
uncertainty which can be quelled by purchase of an insurance product.
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INDUSTRY OVERVIEW
STRUCTURE OF THE INDUSTRY
In India, the Ministry of Finance is responsible for enacting and implementing
legislations for the insurance sector with the Insurance Regulatory and Development
Authority (IRDA) entitled with the regulatory and developmental role. The
government also owns the majority share in some major companies in both life and
non-life insurance segments. Both the life and non-life insurance sectors in India,
which were nationalized in the 1950s and 1960s, respectively, were liberalized in the
1990s. Since the formation of IRDA and the opening up of the insurance sector to
private players in 2000, the Indian insurance sector has witnessed rapid growth.
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Why do we take insurance policies?
Most of us may think that insurance is for those who have married and have a family.
But let us check why do we take insurance and what are the benefits or insurance
policies. Now the insurance companies are mushrooming with so many insurance
products and try to attract more customers by putting old wines in new fancy bottles.
At this scenario we may think that these policies are only for making money for
insurance companies. But there are so many advantages for insurance policies. Let us
discuss some of them.
The insurance policies can be classified into life insurance and other insurance
policies. The life insurance policies secure our family or dependents when the policy
holder‘s death or disability occurs due to any reason. Other insurance policies protect
the financial loss due to any special circumstances such as accident, theft, illness,
natural calamities etc. etc.
The main benefit of life insurance policies is when the death or disability of the policy
holder occurs they will provide an amount as per the terms of life insurance to the
dependents of the policy holder and it will be a relief for them.
Through insurance policy one can secure the future of his/her children by providing
financial help for higher education or for marriage etc.
The person can avail tax benefit according to the law of the land from the insurance
policy and from the premium amount he/she is paying.
You can take an immediate loan from insurance companies with the help of policy
you are holding as per the terms of the policy you have joined.
When you get back the maturity value of insurance policy you can satisfy any
financial needs such as buying property, higher education of children, paying off any
existing loan etc.
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What is INSURANCE?
Insurance is a risk management technique primarily used to hedge against the risk of a
contingent, uncertain loss that may be suffered by those individuals or entities that
have an insurable interest in scarce resources, by transferring the possibility of this
loss from one interested person, persons, or entity to another. The scarce resources
referred to here fall into three divisions: human resources, financial resources, and
capital, or tangible resources.
What is LIFE INSURANCE?
Human life is subject to risks of death and disability due to natural and accidental
causes. When human life is lost or a person is disabled permanently or temporarily,
there is a loss of income to the household. The family is put to hardship. Sometimes,
survival itself is at stake for the dependants. Risks are unpredictable. Death/disability
may occur when one least expects it. An individual can protect himself or herself
against such contingencies through life insurance.
Life insurance is insurance on human beings. Though Human life cannot be valued, a
monetary sum could be determined which is based on loss of income in future years.
Hence in life insurance, the Sum Assured (or the amount guaranteed to be paid in the
event of a loss) is by way of a ‗benefit‘ in the case of life insurance. Life insurance
products provide a definite amount of money to the dependants of the insured in case
the life insured dies during his active income earning period or becomes disabled on
account of an accident causing reduction/complete loss in his income earnings.
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An individual can also protect his old age when he ceases to earn and has no other
means of income – by purchasing an annuity product.
There are a number of life insurance products which offer protection and also coupled
with savings.
A term insurance product provides a fixed amount of money on death during the
period of contract.
A whole life insurance product provides a fixed amount of money on death.
An Endowment Assurance product provided a fixed amount of money either on death
during the period of contract or at the expiry of contract if life assured is alive.
A money back assurance product provides not only fixed amounts which are payable
on specified dates during the period of contract, but also the full amount of money
assured on death during the period of contract.
An annuity product provides a series of monthly payments on stipulated dates
provided that the life assured is alive on the stipulated dates.
A linked product provides not only a fixed amount of money on death but also sums
of money which are linked with the underlying value of assets on the desired dates.
There are a variety of life insurance products to suit to the needs of various categories
of people—children, youth, women, middle-aged persons, old people; and also rural
people, film actors and unorganized labourers.
Life insurance products could be purchased from registered life insurers notified by
the IRDA. Insurers appoint insurance agents to sell their products. Public who are
interested to buy life insurance products should receive proper advice from insurance
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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agents/insurer so that a right product could be chosen to suit particular financial
needs.
Thus life insurance policies offer protection and security to families and provide
happiness to society.
What is GENERAL INSURANCE?
Insurance other than ‗Life Insurance‘ falls under the category of General Insurance.
General Insurance comprises of insurance of property against fire, burglary etc,
personal insurance such as Accident and Health Insurance, and liability insurance
which covers legal liabilities. There are also other covers such as Errors and
Omissions insurance for professionals, credit insurance etc.
Non-life insurance companies have products that cover property against Fire and
allied perils, flood storm and inundation, earthquake and so on. There are products
that cover property against burglary, theft etc. The non-life companies also offer
policies covering machinery against breakdown, there are policies that cover the hull
of ships and so on. A Marine Cargo policy covers goods in transit including by sea,
air and road. Further, insurance of motor vehicles against damages and theft forms a
major chunk of non-life insurance business.
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Insurance Industry in India:
Indian insurance is a flourishing industry, with several national and international
players competing and growing at rapid rates. Thanks to reforms and the easing of
policy regulations, the Indian insurance sector been allowed to flourish, and as Indians
become more familiar with different insurance products, this growth can only
increase, with the period from 2010 - 2015 projected to be the 'Golden Age' for the
Indian insurance industry.
The insurance sector in India has started from being an open competitive market to
nationalization and back to a liberalized market again. Tracing the developments in
the Indian insurance sector reveals the 360-degree turn witnessed over a period of
almost two centuries.
Indian insurance companies offer a comprehensive range of insurance plans, a range
that is growing as the economy matures and the wealth of the middle classes
increases. The most common types include: term life policies, endowment policies,
joint life policies, whole life policies, loan cover term assurance policies, unit-linked
insurance plans, group insurance policies, pension plans, and annuities. General
insurance plans are also available to cover motor insurance, home insurance, travel
insurance and health insurance.
Due to the growing demand for insurance, more and more insurance companies are
now emerging in the Indian insurance sector. With the opening up of the economy,
several international leaders in the insurance sector are trying to venture into the India
insurance industry.
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A brief history of the Insurance sector:
The history of the Indian insurance sector dates back to 1818, when the Oriental Life
Insurance Company was formed in Kolkata. A new era began in the India insurance
sector, with the passing of the Life Insurance Act of 1912.
The Indian Insurance Companies Act was passed in 1928. This act empowered the
government of India to gather necessary information about the life insurance and non-
life insurance organizations operating in the Indian financial markets.
Some of the important milestones in the life insurance business in India are:
1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies were taken over by the
central government and nationalized. LIC formed by an Act of Parliament, viz. LIC
Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.
The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in
the year 1850 in Calcutta by the British.
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Some of the important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India,
frames a code of conduct for ensuring fair conduct and sound business practices.
1968: The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalization) Act, 1972 nationalised the
general insurance business in India with effect from 1st January 1973.
107 insurers amalgamated and grouped into four companies‘ viz. the National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd. and the United India Insurance Company Ltd. GIC
incorporated as a company.
INDIAN INSURANCE MARKET HISTORY
Insurance has had a very long history in India, life insurance was introduced in India
with the starting of Oriental life insurance Company in Kolkata in the year
1818.General insurance came a quite later, and it started its operations with the onset
of Triton Insurance Company which had a base in Kolkata. History of insurance can
be further divided in three areas a) pre-nationalization, b) nationalization and c) post
Nationalization. Life insurance was first nationalized in 1956, followed by general
insurance in 1973.General insurance corporation of India was set as controlling body,
all this was initiated against the economic reforms of 1991.This was followed by
many such acts and amendments including insurance regulatory development act
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(IRDA) passes in 1999.Private players were encouraged in the insurance sector and
they effectively started operations from 2001.
INSURANCE MARKET-PRESENT
Insurance sector was opened for private players with the starting of the 20th
century.
After economic reforms in 1991, economy was liberalized. Since then there has a
rampant and dynamic growth in the field of insurance. Most of private players have
entered this sector with joint collaborations across the globe. There are now 29
insurance companies operating in the Indian market – 14 private life insurers, nine
private non-life insurers and six public sector companies. The insurance sector has
intensified and companies are formulating survival strategies due to immense
competition in a de-tariff scenario. There is pressure from both within the country and
outside on the Government to increase the foreign direct investment (FDI) limit from
the current 26% to 49%, which would help this sector to expand.
Indian Insurance: Sector Reforms:
In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor
R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend
its future direction. The aim of the Malhotra Committee was to assess the
functionality of the Indian insurance sector. This committee was also in charge of
recommending the future path of insurance in India.
The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector. The reforms were aimed at "creating a more efficient
and competitive financial system suitable for the requirements of the economy
keeping in mind the structural changes currently underway and recognizing that
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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insurance is an important part of the overall financial system where it was necessary
to address the need for similar reforms…"
In 1994, the committee submitted the report and some of the key recommendations
included:
1) Structure
Government stake in the insurance Companies were to be brought down to 50%.
Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations.
All the insurance companies should be given greater freedom to operate.
2) Competition
Private Companies with a minimum paid up capital of Rs.1bn should be allowed to
enter the industry.
No Company should deal in both Life and General Insurance through a single entity.
Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.
Postal Life Insurance should be allowed to operate in the rural market.
Only One State Level Life Insurance Company should be allowed to operate in each
state.
3) Regulatory Body
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry) should be made
independent.
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4) Investments
Mandatory Investments of LIC Life Fund in government securities to be reduced from
75% to 50%.
GIC and its subsidiaries are not to hold more than 5% in any company (There current
holdings to be brought down to this level over a period of time).
5) Customer Service
LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked pension plans.
Computerization of operations and updating of technology to be carried out in the
insurance industry The committee emphasized that in order to improve the customer
services and increase the coverage of the insurance industry should be opened up to
competition.
But at the same time, the committee felt the need to exercise caution as any failure on
the part of new players could ruin the public confidence in the industry. Hence, it was
decided to allow competition in a limited way by stipulating the minimum capital
requirement of Rs.100 crores. The committee felt the need to provide greater
autonomy to insurance companies in order to improve their performance and enable
them to act as independent companies with economic motives. For this purpose, it had
proposed setting up an independent regulatory body.
The Insurance Regulatory and Development Authority Act of 1999 brought about
several crucial policy changes in the insurance sector of India. It led to the formation
of the Insurance Regulatory and Development Authority (IRDA) in 2000.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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The goals of the IRDA are to safeguard the interests of insurance policyholders, as
well as to initiate different policy measures to help sustain growth in the Indian
insurance sector.
The Authority has notified 27 Regulations on various issues which include
Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-
insurance, Obligation of Insurers to Rural and Social sector, Investment and
Accounting Procedure, Protection of policy holders' interest etc. Applications were
invited by the Authority with effect from 15th August, 2000 for issue of the
Certificate of Registration to both life and non-life insurers. The Authority has its
Head Quarter at Hyderabad.
Major Policy Changes
Insurance sector has been opened up for competition from Indian private insurance
companies with the enactment of Insurance Regulatory and Development Authority
Act, 1999 (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance
Regulatory and Development Authority (IRDA) was established on 19th April 2000
to protect the interests of holder of insurance policy and to regulate, promote and
ensure orderly growth of the insurance industry. IRDA Act 1999 paved the way for
the entry of private players into the insurance market which was hitherto the exclusive
privilege of public sector insurance companies/ corporations.
Under the new dispensation Indian insurance companies in private sector were
permitted to operate in India with the following conditions:
Company is formed and registered under the Companies Act, 1956;
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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The aggregate holdings of equity shares by a foreign company, either by itself
or through its subsidiary companies or its nominees, do not exceed 26%, paid
up equity capital of such Indian insurance company;
The company's sole purpose is to carry on life insurance business or general
insurance business or reinsurance business.
The minimum paid up equity capital for life or general insurance business is
Rs.100 crores.
The minimum paid up equity capital for carrying on reinsurance business has
been prescribed as Rs.200 crores.
The Authority has notified 27 Regulations on various issues which include
Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-
insurance, Obligation of Insurers to Rural and Social sector, Investment and
Accounting Procedure, Protection of policy holders' interest etc. Applications were
invited by the Authority with effect from 15th August, 2000 for issue of the
Certificate of Registration to both life and non-life insurers. The Authority has its
Head Quarter at Hyderabad.
Insurance companies:
IRDA has so far granted registration to 12 private life insurance companies and 9
general insurance companies. If the existing public sector insurance companies are
included, there are currently 13 insurance companies in the life side and 13 companies
operating in general insurance business. General Insurance Corporation has been
approved as the "Indian reinsurer" for underwriting only reinsurance business.
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Protection of the interest of policy holders:
IRDA has the responsibility of protecting the interest of insurance policyholders.
Towards achieving this objective, the Authority has taken the following steps:
IRDA has notified Protection of Policyholders Interest Regulations 2001 to
provide for: policy proposal documents in easily understandable language;
claims procedure in both life and non-life; setting up of grievance redressal
machinery; speedy settlement of claims; and policyholders' servicing. The
Regulation also provides for payment of interest by insurers for the delay in
settlement of claim.
The insurers are required to maintain solvency margins so that they are in a
position to meet their obligations towards policyholders with regard to
payment of claims.
It is obligatory on the part of the insurance companies to disclose clearly the
benefits, terms and conditions under the policy. The advertisements issued by
the insurers should not mislead the insuring public.
All insurers are required to set up proper grievance redress machinery in their
head office and at their other offices.
The Authority takes up with the insurers any complaint received from the
policyholders in connection with services provided by them under the
insurance contract.
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MAJOR PLAYERS IN THE INSURANCE SECTOR:
Govt. Regulated
Postal Life Insurance.
LIC.
Pvt. Players
Bajaj Allianz Life Insurance Co. Ltd
Birla Sun Life Insurance Co. Ltd
HDFC Standard Life Insurance Co. Ltd.
ICICI Prudential Life Insurance Co. Ltd.
ING VYSYA Life Insurance Co. Ltd.
MAX New York Life Insurance Co. Ltd.
Met Life India Insurance Co, Pvt. Ltd.
Kotak Mahindra Old Mutual Life Insurance Co. Ltd.
SBI Life Insurance Co. Ltd.
TATA AIG Life Insurance Co. Ltd.
Reliance Life Insurance.
Aviva Life Insurance Co. Pvt. Ltd.
Sahara India Life Insurance Co. Ltd
IDBI FEDERAL Life Insurance Co. Lt
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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NAME OF THE PLAYER MARKET SHARE (%) Name of the Player Market share (%)
LIFE INSURANCE CORPORATION OF INDIA 68.7
ICICI PRUDENTIAL 6.25
SBI LIFE INSURANCE 6.01
HDFC life 3.23
Bajaj Allianz 2.75
IDBI Federal 0.40
others 12.66
http://blog.bharatbuysell.com/news/1537/lic-wins-race-in-market-share-
private-insurers-gloomed
http://www.capitalmarket.com/cmedit/story25-0.asp?SNo=465376
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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GLOBAL SCENERIO OF INSURANCE COMPANIES
Life insurance not plays an important role in national economy but also in
international economy. Marine cargo insurance provides risk coverage for shipper
sand the banks, which finance international trades. This role becomes all the more
important in the context of an active government policy to encourage exports. Indian
life insurers operates in more than 30 countries through agencies, branches, associates
companies. These operations earn foreign exchange.
The global insurance industry is one of the largest sectors of finance. It ranges from
consumer to corporate and industrial insurance, and even reinsurance, or insurance of
insurance. The major insurance markets of the world are obviously the US, Europe,
Japan, and South Korea. Emerging markets are found throughout Asia, specifically in
India and China, and are also in Latin America.
Given the evolving and growing socio-economic conditions worldwide, insurance
companies are increasingly reaching out across borders and are offering more
competitive and customized products than ever before.
With the internet and other forms of high-speed communication, companies and
individuals are now able to purchase insurance and related financial products from
almost anywhere in the world. Increasing affluence, especially in developing
countries, and a rising understanding of the need to protect wealth and human capital
has led to significant growth in the insurance industry. Given the evolving and
growing socio-economic conditions worldwide, insurance companies are increasingly
reaching out across borders and are offering more competitive and customized
products than ever before. Some of the foreign insurance companies are mentioned
below:
1. Prudential plc. , Est. in London in 1848, through its business in the US and Asia,
the UK and Europe, provides retail financial services and products to more than
16 million customers, policy holder and unit holders worldwide. Prudential has
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
Page 26
brought to market an integrated range of financial services products that now
includes life assurance, pensions, mutual funds, banking, investment management
and general insurance. In Asia, Prudential is the leading European life insurance
company with a vast network of 23 life and mutual fund operations in twelve
countries –China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the
Philippines, Singapore, Taiwan, Thailand and Vietnam.
2. American International Group, Inc. (AIG) is a major American insurance
corporation based at the American International Building in New York City. The
British headquarters are located on Fenchurch Street in London, continental
Europe operations are based in La Defense, Paris, and its Asian HQ is in Hong
Kong. According to the 2008 Forbes Global 2000 list, AIG was the 18th-largest
company in the world. American International Group, Inc. is the leading U.S.
based and financial services and international insurance organization and the
largest underwriter of commercial and industrial insurance in the United States. Its
member companies write a wide range of commercial and personal insurance
products through a variety of distribution channels in over 130 countries and
jurisdictions throughout the world. AIG's Life Insurance operations comprise of
the most extensive worldwide network of any life insurer. AIG's global businesses
also include financial services and asset management, including aircraft leasing,
financial products, trading and market making, consumer finance, savings
products.
3. AXA The insurance world revolves around this AXA. The company, which
started as a sleepy collection of mutual insurance companies, is today one of the
world's largest insurers and a financial management powerhouse. In the US, AXA
owns AXA Financial, which controls life insurance firm AXA Equitable and
investment manager Alliance Bernstein. The company also has major subsidiaries
in the UK (AXA UK), Japan (AXA Life), Germany (AXA Konzern), Australia
(AXA Asia Pacific), and Belgium (AXA Belgium). The companies offer life
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
Page 27
insurance, personal and commercial property and financial services, casualty
insurance, and asset management services. It has about E1 trillion (or $1.45
trillion) in assets under management.
4. Allianz SE Allianz SE offers a range of insurance products and services --
including life, health, and property/casualty coverage for individuals and
businesses -- through some 100 subsidiaries and affiliates operating all over the
globe (though its key markets are France, Germany, Italy, and the US) is one of
the world's biggest insurers,. In addition to selling insurance, Allianz provides
private equity investment through Allianz Capital Partners, institutional asset
management and retail services through Allianz Global Investors, and banking
services through Allianz Bank. Allianz operates as a Societas Europaea, a joint
stock company that is ruled by European Union standards.
5. ING Grope N.V., a financial services company, provides banking, investment,
life insurance, and retirement services worldwide. The company offers wealth
accumulation, savings, and mortgage products and services to individuals, and
small-and medium-sized businesses, as well as a range of banking products
through independent banking agents; and credit products through agents, brokers,
and vendors. It provides current account services and payments systems, such as
savings accounts, mortgage loans, consumer loans, credit card services,
investment products, and life and non-life insurance products, as well as asset
management services. The company also provides wealth management services to
high net worth individuals. In addition, it offers various financial products, such as
mutual funds, e-brokerage, payment accounts, and pensions; and lending,
payments and cash management, structured finance, leasing and commercial
finance, and financial markets products and services. Further, the company offers
life insurance, investments, and retirement services for retail customers; a range of
traditional, unit-linked, and variable annuity policies written for individual and
group customers; mandatory and voluntary pension funds; fire, motor, disability,
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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transport, and third party liability insurance for individual and commercial/group
clients; and disability insurance products and complementary services for
employers and self-employed professionals, such as dentists, general practitioners,
and lawyers, as well as manages equity, fixed income, and structured investments
for institutional investors and private label investment funds. As of December 31,
2009, ING Group N.V. had approximately 250 retail banking branches in the
Netherlands; 800 in Belgium; 430 in Poland/central Europe; and 460 in Asia. The
company was founded in 1991 and is based in Amsterdam, the Netherlands.
6. New York Life New York Life is the largest mutual life insurance company in the
United States and one amongst the largest life insurers in the world. The
company's clients include The NY Bar Association, the Air Line Pilots
Association, American College of Surgeons, and The American Institute of
Architects. The company has also insured many U.S. Presidents, entertainers and
professional athletes. On the side of investments New York Life's affiliates
provide institutional asset management and trust services and, NYLIFE Securities
LLC, a subsidiary, provide an array of securities products and services such as
institutional and retail mutual funds, including 401(k) products. The company was
founded in 1845 as Nautilus Insurance and became New York Life in 1849. The
company is mutually held, not publicly-traded. New York Life has 10,000 sales
agents across the U.S. and offices in Argentina, China, Hong Kong, India,
Mexico, South Korea, Taiwan, and Thailand. In 2009, the company reported total
revenues of $14.4 billion. Insurance sales were almost $2.7 billion. The company
had total assets of $286.7 billion under management in 2009.
7. Aviva plc.is engaged in the provision of financial products and services, fund
management and general insurance and health, focused on long-term insurance
and savings business. The Company's business is managed on a geographic basis
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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through a regional management structure based on four regions: Europe, United
Kingdom, North America and Asia Pacific. The four regions function as six
operating segments as both the United Kingdom and Europe regions are split into
two operating segments. United Kingdom region it is split into the UK Life and
UK General Insurance segments, which undertake long-term insurance and
savings business and general insurance respectively. In Europe, Delta Lloyd is
managed separately from the other European businesses; therefore the region is
split into Aviva Europe and Delta Lloyd operating segments. General insurance
and health insurance together accounted for 20% of its total sales during the year
ended December 31, 2009.
8. Lombard Canada Ltd. (LCL) is responsible for the insurance management
services for all of the Lombard group's commercial and personal insurance
companies. LCL also provides insurance management services for external clients
including the Tokyo Marine & Nichido Fire Insurance Co., Ltd. LCL and the
member entities of the Lombard companies that it manages, are wholly owned
subsidiaries of Northbridge Financial Corporation. Lombard General Insurance
Company (Canada) is an underwriter of commercial lines business through select
brokers across the country. Lombard General brokers have access to one of the
industry's most powerful underwriting tools: Business Choice ®, a specialized
point of sale software developed by Lombard Canada. Beyond providing small
and medium sized businesses with the specialized insurance coverage they
require, Lombard General also offers custom marketing services and specialized
coverage designed to meet the needs of businesses across the country. Lombard
Insurance Company is an underwriting insurance provider of personal lines
committed to providing Canadians with the most innovative personal lines
insurance solutions. Lombard Insurance was well ahead of the competition when
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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it introduced its packaged homeowner and automobile product Personal Choice ®
- a package that remains popular today.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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COMPANY PROFILE
IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, India‘s
premier development and commercial bank, Federal Bank, one of India‘s leading
private sector banks and AGEAS, a multinational insurance giant based out of
Europe. In this venture, IDBI Bank owns 48% equity while Federal Bank and Ageas
own 26% equity each. At IDBI Federal, we endeavor to deliver products that provide
value and convenience to the customer. Through a continuous process of innovation
in product and service delivery we intend to deliver world-class wealth management,
protection and retirement solutions to Indian customers. Having started in March
2008, in just five months of inception we became one of the fastest growing new
insurance companies to garner Rs 100 Cr in premiums. The company offers its
services through a vast nationwide network across the branches of IDBI Bank and
Federal Bank in addition to a sizeable network of advisors and partners. As on
January 31st 2011, the company has issued over 2.68 lakh policies with over Rs 14,
230 Cr in Sum Assured.
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SPONSORS OF IDBI LIFE INSURANCE CO. LTD
IDBI Bank Ltd. continues to be, since its inception, India‘s premier industrial
development bank. Created in 1956 to support India‘s industrial backbone, IDBI Bank
has since evolved into a powerhouse of industrial and retail finance. Today, it is
amongst India‘s foremost commercial banks, with a wide range of innovative
products and services, serving retail and corporate customers in all corners of the
country from over 700 branches and more than 1180 ATMs. The Bank offers its
customers an extensive range of diversified services including project financing, term
lending, working capital facilities, lease finance, venture capital, loan syndication,
corporate advisory services and legal and technical advisory services to its corporate
clients as well as mortgages and personal loans to its retail clients. As part of its
development activities, IDBI Bank has been instrumental in sponsoring the
development of key institutions involved in India‘s financial sector – such as the
Securities and Exchange Board of India (SEBI), National Stock Exchange of India
Limited (NSE) and National Securities Depository Ltd.
Federal Bank is one of India‘s leading private sector banks, with a dominant
presence in the state of Kerala. It has a strong network of over 660 branches and 690
ATMs spread across India. The bank provides over four million retail customers with
a wide variety of financial products. Federal Bank is one of the first large Indian
banks to have an entirely automated and interconnected branch network. In addition
to interconnected branches and ATMs, the Bank has a wide range of services like
Internet Banking, Mobile Banking, Tele Banking, Anywhere Banking, debit cards,
online bill payment and call centre facilities to offer round the clock banking
convenience to its customers. The Bank has been a pioneer in providing innovative
technological solutions to its customers and the Bank has won several awards and
recommendations.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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AGEAS is an international insurance company with a heritage spanning more than
180 years. Ranked among the top 20 insurance companies in Europe, Ageas has
chosen to concentrate its business activities in Europe and Asia, which together make
up the largest share of the global insurance market. These are grouped around four
segments: Belgium, United Kingdom, Continental Europe and Asia and served
through a combination of wholly owned subsidiaries and partnerships with strong
financial institutions and key distributors around the world. Ageas operates successful
partnerships in Belgium, UK, Luxembourg, Italy, Portugal, China, Malaysia, India
and Thailand and has subsidiaries in France, Germany, Hong Kong and UK. It is the
market leader in Belgium for individual life and employee benefits, as well as a
leading non-life player, through AG Insurance, and in the UK, it has a strong presence
as the second largest player in private car insurance and the over 50‘s market. It
employs more than 13,000 people.
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PRODUCT PROFILE
WEALTHSURANCE: The Wealthsurance Milestone Plan enables the
policyholder to save and build wealth to meet their financial goals. This Plan
comes with a wide range of 13 investment options and 7 insurance benefits - all
packaged with a low charge structure and unmatched flexibility.
HOMESURANCE: IDBI Federal Homesurance Protection Plan provides full
insurance cover for properties even under construction, thus ensuring that the
beneficiary gets the full sanctioned amount in case of any unfortunate event. It
also has an innovative fixed period cover for those who would aim to prepay their
loans early.
BONDSURANCE: Bondsurance is designed for customers looking for
guaranteed returns which will not get affected by financial market conditions.
It offers guaranteed return on investment along with life insurance cover.
MICROSURANCE: IDBI Federal Microsurance Plan is a one of its kind
insurance plan which can be very useful for various Micro Financial
Institutions and NGOs, wherein not only the members but even the member‘s
family gets an insurance cover.
TERMSURANCE: IDBI Federal Termsurance Protection Plan offers the
unique Increasing Cover option that automatically increases the cover every
year without increasing the premium.
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INCOMESURANCE: Knowing the customer helped us to combine the
Endowment & Money Back plans into a single plan. It linked the returns to the
G-Sec rates, transparently declared by the government. Also, the Guaranteed
Annual Payout and other benefits upon death are tax-free under Sec 10(10D).
HEALTHSURANCE: This new insurance plan offers a host of features and
benefits that are designed to help manage the extra financial burden that comes
with hospitalization.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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Vision and VALUES
We maintain integrity through our values.
Our Vision
To be the leading provider of wealth management, protection and retirement solutions
that meets the needs of our customers and adds value to their lives.
Our Mission
―To continually strive to enhance customer experience through innovative product
offerings, dedicated relationship management and superior service delivery while
striving to interact with our customers in the most convenient and cost effective
manner.‖
―To be transparent in the way we deal with our customers and to act with integrity.‖
―To invest in quality human capital and build it in order to achieve our mission.‖
Our Values
Transparency: Crystal Clear communication to our partners and stakeholders.
Value to Customers: A product and service offering in which
customers perceive value.
Rock Solid and Delivery on Promise: This translates into being financially
strong, operationally robust and having clarity in claims.
Customer-friendly: Advice and support in working with customers and
partners.
Profit to Stakeholders: Balance the interests of customers, partners,
employees, shareholders and the community at large.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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SWOT ANALYSIS
STRENGTH
· Superior customer service vs. competitors.
· Products have required accreditations.
· Good place to work.
· Lower response time with efficient and effective service.
· Dedicated workforce aiming at making a long term career in the field.
· Large pool of technically skilled manpower with in depth knowledge and under
· Standing of the market.
WEAKNESSES
· Customer service staff needs training.
· Some gaps in range for certain sectors.
· Sectorial growth is constrained by low unemployment levels and competition
for Staff.
· Low customer confidence on the private players.
OPPORTUNITIES
· Insurable population: According to IRDA only 10% of the population is insured
which represent around 30% of the insurable population. This suggests more than
300m people, with the potential to buy insurance, remain uninsured.
· International companies will help in building world class expertise in local
market by introducing the best global practice.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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· An applied research center to create opportunities for developing techniques to
provide value-added services.
· Fast-track career development opportunities on an industry-wide basis.
THREATS
· Big public sector insurance companies like Life Insurance Corporation (LIC) of
India, National Insurance Company Limited, Oriental Insurance Limited, New India
Assurance Company Limited and United India Insurance Company Limited. People
trust and go to them more.
· Very high competition prevailing in the industry.
· Vulnerable to reactive attack by major competitors.
· Lack of infrastructure in rural areas could constrain investment.
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IDBI FEDERAL LIFE INSURANCE LIMITED
ORGANIZATIONAL CHART
CHIEF EXECUTIVE
OFFICER
Mr. Nageshwara Rao
COUNTRY HEAD
Mr. Murali
HUMAN RESOURCES
HEAD
Mrs. RadhikaVenkatraman
MARKETING HEAD
Mr. AmitTripathi
TRAINING HEAD
Mrs. Vaishali
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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ZONAL-WISE ORGANIZATIONAL STRUCTURE
COUNTRY HEAD
Mr.Murali
NORTH
ZONAL
HEAD
EAST ZONAL
HEAD WEST ZONAL
HEAD
SOUTH
ZONAL
HEAD
Mr.Balaji
MUMBAI
LUCKNOW
COIMBATORE
AREA HEAD
Mr. Vijay
Kumar
BENGALURU
AREA
HEAD
HYDERABAD
AREA HEAD
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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AREA – WISE ORGANIZATIONAL STRUCTURE
Source: IDBI Federal Life Insurance Co Ltd
COIMBATORE AREA HEAD
Mr. Vijay Kumar
BRANCH HEAD
CHIEF MANAGER
Mrs.ShanthiYagyanath
DEPUTY MANAGER SENIOR
EXECUTIVE
BAND
1
BAND 2 BAND
3
BAND
1 BAND 2 BAND 3 BAND 1 BA
ND
2
BA
ND
3
AGENCY
BANKS
DISTRIBUTION CENTER
MANAGEMENT TRAINEES
CORPORATE
CHANNELS
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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PROJECT PROFILE
OBJECTIVES OF THE STUDY:
Primary Objective
To identify the key factors which influence consumers the most when they
purchase a life insurance product.
Secondary Objectives
To understand the most common purpose behind taking a life insurance
policy.
To find out the best option of people when it comes to making an investment.
To spread awareness of IDBI Federal and its Incomesurance product.
METHODOLOGY:
Research Design: Causal Research
Data sources: Primary data and Secondary data.
Research instrument: Questionnaire. (Close Ended)
Analysis has been done using SPSS by Factor Analysis.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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Data collection:
Primary Data:
Responses collected in the survey by the use of questionnaire.
Secondary Data:
Newspapers.
Articles.
Product Brochures.
Internet.
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ANALYSIS
AGE DISTRIBUTION OF THE SAMPLE:
44% of the sample is between the age group of 18-30 years.
31% of the sample is between the age group of 30-40 years.
17% of the sample is between the age group of 40-50 years.
8% of the sample is between the age group of 50+.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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OCCUPATION DISTRIBUTION:
37% of the sample is doing service.
17% of the sample does business.
27% of the sample consists of professionals.
19% of the sample is self-employed.
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INCOME DISTRIBUTUON:
7% of the sample has income up to 1.8 lakhs per annum.
52% of the sample has income between 1.8 and 5 lakhs per annum.
22% of the sample has income between 5 and 8 lakhs per annum.
19% of the sample has income above 8 lakhs.
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BEST INVESTMENT OPTION ACCORDING TO THE SAMPLE.
21% of the sample chose Shares as the best option for investment.
9% of the sample chose Bank deposits as the best option for investment.
16% of the sample chose Mutual funds as the best option for investment.
20% of the sample chose Real estate as the best option for investment.
5% of the sample chose Post office savings as the best option for investment.
22% of the sample chose Gold as the best option for investment.
7% of the sample chose Insurance as the best option for investment.
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PURPOSE FOR HAVE TAKEN OR FOR TAKING AN LIFE INSURANCE
PRODUCT:
25% of the sample said Future Security.
18% of the sample said Childs marriage.
6% of the sample said Childs education.
30% of the sample said Tax benefits.
21% of the sample said Savings tool.
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FACTOR ANALYSIS
The analysis regarding the project was done using SPSS, where FACTOR
ANALYSIS was used to find out the degree of correlation between the variables and
reduce them into factors. The 11 factors in the analysis are Rate of return, Company
goodwill, Advertising effectiveness, Flexible Premium payment options, Flexible
payout option, Approval and conviction of the insurance agent, After sale reminders
and updates, Tax benefits, Simplicity of insurance plan, Friend/Relative referral,
Government stake,
KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .501
Bartlett's Test of Sphericity
Approx. Chi-Square 128.421
df 55
Sig. .000
The KMO and Bartletts Test measures the sampling Adequacy.
KMO value is .501 which means that the data is appropriate for factor analysis.
Bartlett's Test of Sphericity – it is significant as the value is .000 which is less than
.005.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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Communalities
Initial Extraction
Rate of return 1.000 .733
comp goodwill 1.000 .751
adv_effectiveness 1.000 .707
flexible_premium_paymnt_opt 1.000 .481
flexible_payout_opt 1.000 .709
appr_conviction_of_ins_agnt 1.000 .572
after_sale_remndrs_updates 1.000 .716
tax_benefits 1.000 .531
simplicity_of_ins_plan 1.000 .660
frnds_rlativ_referral 1.000 .697
govt_stake 1.000 .788
Extraction Method: Principal Component Analysis.
The table of communalities depicts how much of the variance in the variables has
been accounted for by the extracted factors. For example 73.3% of variance in RATE
OF RETURN has been accounted for by the extracted factors.
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Total Variance Explained
Component
Initial Eigenvalues Extraction Sums of Squared Loadings
Total % of Variance Cumulative % Total % of Variance Cumulative %
1 1.858 16.895 16.895 1.858 16.895 16.895
2 1.586 14.422 31.317 1.586 14.422 31.317
3 1.464 13.308 44.625 1.464 13.308 44.625
4 1.351 12.286 56.911 1.351 12.286 56.911
5 1.084 9.855 66.766 1.084 9.855 66.766
6 .885 8.048 74.815
7 .786 7.145 81.959
8 .574 5.219 87.179
9 .550 5.003 92.182
10 .439 3.991 96.173
11 .421 3.827 100.000
Extraction Method: Principal Component Analysis.
The total variance table shows the factor extractable from the analysis along with their
Eigen values and % of variance attributed to each factor.
Based on the Eigen values 5 factors have been identified.
Theses 5 factors have been identified as their Eigen values are above 1.
In this case the first factor accounts for 16.89% of variance, the second factor
accounts for 14.42% of variance and the 3rd
4th
and 5th
factor account for 13.3%
12.28% and 9.8% respectively.
These 5 factors together explain 66.76 % of total variance.
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Component Matrix
Component
1 2 3 4 5
after_sale_remndrs_updates -.751
appr_conviction_of_ins_agnt -.697
flexible_payout_opt .605 -.404 .403
flexible_premium_paymnt_opt .562
frnds_rlativ_referral .411 .531 .311
Rateofreturn .435 -.529 .408
tax_benefits -.425 .344 .363
comp_goodwill .663 -.478
adv_effectiveness .600 .572
simplicity_of_ins_plan .469 -.497 .415
govt_stake .522 .641
Extraction Method: Principal Component Analysis. 5 components extracted.
The above table shows the loading of the variables on 5 factors extracted. The higher
the absolute value of loading, the more the factor contributes to the variable.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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Rotated Component Matrix
Component
1 2 3 4 5
after_sale_remndrs_updates .831
Rateofreturn -.751 -.348
appr_conviction_of_ins_agnt .616 -.430
flexible_payout_opt .801
flexible_premium_paymnt_opt .684
tax_benefits -.521 -.333 .366
frnds_rlativ_referral .771
simplicity_of_ins_plan .755
comp_goodwill .854
adv_effectiveness .622 .547
govt_stake .877
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Rotation converged in 7 iterations.
The values in this panel of the table represent the distribution of the variance after the
Varimax rotation. Varimax rotation tries to maximize the variance of each of the
factors, so the total amount of variance accounted for is redistributed over the
extracted factors. A varimax solution yields results which make it as easy as possible
to identify each variable with a single factor. This is the most common rotation
option. The rotated component matrix clearly shows the five factors which influence
consumers most when comes to purchasing an insurance product.
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COMPONENT MATRIX
COMPONENT 1 COMPONENT 2 COMPONENT 3 COMPONENT 4 COMPONENT 5
AFTER SALES
REMINDERS AND
UPDATES
FLEXIBLE PAYOUT
OPTION
FRIENDS/RELATIVE
REFERRAL
COMPANYS
GOODWILL
GOVERNMENT
STAKE
APPROACH AND
CONVICTION OF
AGENT
FLEXIBLE
PREMIUM
PAYMENT
OPTIONS
SIMPLICITY OF THE
INSURANCE PLAN
ADVERTISING
EFFECTIVENESS
FACTORS CUSTOMER SERVICE TRANSACTIONS
OPTIONS
FAVOURABLE
COMPATIBILITY
CORPORATE
IMAGE
SAFETY
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FINDINGS
5 factors have been found to influence a prospective life insurance customer when
they are to buy product:
1. Customer service
2. Transactions options
3. Favorable compatibility
4. Corporate image
5. Safety
These factors have their respective variables inside them.
Customer service includes Approach and conviction of insurance agent and after sales
reminders and updates.
Transaction options include Flexible payout option and Flexible premium payment
options.
Favorable compatibility includes Simplicity of the insurance plan and Friends/relative
referral.
Corporate image includes Company goodwill and Advertising effectiveness.
Safety includes government stake.
With regard to the reports Secondary objectives, following are the findings.
Regarding best investment option, findings were:
21% of the sample chose Shares as the best option for investment.
9% of the sample chose Bank deposits as the best option for investment.
16% of the sample chose Mutual funds as the best option for investment.
20% of the sample chose Real estate as the best option for investment.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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5% of the sample chose Post office savings as the best option for investment.
22% of the sample chose Gold as the best option for investment.
7% of the sample chose Insurance as the best option for investment.
Thus we see that Shares, Gold and Real estate were considered best my majority, best
being Shares.
Purpose for taking a life insurance policy, findings were:
25% of the sample said Future Security.
18% of the sample said Childs marriage.
6% of the sample said Childs education.
30% of the sample said Tax benefits.
21% of the sample said Savings tool.
Tax benefits and Future security were found to be the major purpose.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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RECOMMENDATIONS
Approach and conviction of insurance agents is very important and so the
best effort should be made to recruit and train agents to handle their clients.
After sales reminders and updates are very important when it comes to
insurance products. It should be kept in mind to make these reminders helpful
and not annoying.
The transaction options should be flexible. There should be easy and
various ways to make premium payment and to withdraw or take payouts for
the customer.
Simplicity of the insurance plan is very important. In the race to provide
more benefits, simplicity of the plan should not be compromised.
Since friends/relative referral is considered as an influencing and important
factor for a prospective life insurance customer, every step to keep existing
customers fully satisfied must be taken.
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Since advertising effectiveness is a key for insurance companies, one type
of Low-Involvement Marketing Strategy is to design advertising to trigger
strong emotions related to personal values or ego-defense. This can be
observed in the insurance industry as most advertisements are designed in
order to trigger feelings of uncertainty which can be quelled by purchase of an
insurance product. So continuous effort to make them more effective should
always be in practice.
Since life insurance is taken keeping in mind uncertainties and as we have
seen that future security was chosen to be main purpose of taking life
insurance, investing customer premiums in government securities make
customers feel secure and feel positive.
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CONCLUSION
The life insurance industry in India has immense potential with nearly 80 per cent of
Indian population without life insurance cover. Life insurance is a sector which is
largely driven by propensity of people to save, and unlike the west, Indians have a
higher propensity to save than to spend.
Consumer behavior is the study of how individuals, groups, and organizations select,
buy, use and dispose of goods, services, ideas, or experiences to satisfy their needs
and wants.
Historically the factors affecting consumer behavior have been broadly classified as:
· Cultural Factors
· Social Factors
· Personal Factors
For financial products however we can‘t use this framework, we can say that buying
of insurance can be attributed to Personal Factors, but these also include the concepts
of PERSONALITY and SELF-CONCEPT which do not explain the buying behavior
of insurance.
The two ways which we can see that actually makes difference to a prospective life
insurance consumer are
1. Elaboration Likelihood Model
They describe the Central Route where attitude formation is based on diligent,
rational consideration of the most important product information; and the Peripheral
Route where attitude formation is due to association with some positive or negative
peripheral cues which include celebrity endorsement as well as insurance agents. This
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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particular model gives a basic idea as to how people may develop attitudes towards
insurance products. The central route will not differ as the products offered in this
industry are tailored to suit the needs of the consumer. The peripheral cues are the
most important as the brand name; advertisements, agents etc. play an important role
in attitude formation for the consumer.
2. Low-Involvement Marketing Strategies
One type of Low-Involvement Marketing Strategy is to design advertising to trigger
strong emotions related to personal values or ego-defense. This can be observed in the
insurance industry as most advertisements are designed in order to trigger feelings of
uncertainty which can be quelled by purchase of an insurance product.
From the study and analysis done is this report, we can conclude that there are 5
major factors which influence a consumer of life insurance. They are Customer
service, Transactions options, Favorable compatibility, corporate image and Safety.
With special care to make these factors present in a product of life insurance, that is
by showing them in advertisements and then actually delivering them will make IDBI
Federal Life Insurance develop their market and increase sales.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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LEARNING OUTCOME
I worked for 14 weeks with IDBI Federal and my profile was of Marketing
Research and Sales. I got acclimatized to the corporate culture. How things
work in an organization? What kind of hierarchy is followed in an
organization? Such an understanding is very essential because it would make
us Industry ready and would serve as a platform when we join an organization
Full-time after completion of MBA.
As I was carrying out my sales part I realized how tough it was to approach,
explain and convince a consumer. Time management is a very important tool.
To achieve sales targets one should be clear as to how many customers to meet
and how much time to spend with each customer. Selling of Life Insurance
indeed in a very difficult art and there are no short cuts is what I have learnt.
One can, only by experience and meeting maximum numbers of clients
achieve success.
I got valuable knowledge about Insurance sector. I got to know about the
different Insurance plans available in the market, the different companies
dealing in this industry.
Another important learning is that a consumer is not interested in what you
think about your product, the consumer has to be told how the product will
meet his/her needs better than other similar products in the market.
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LIMITATIONS
LIMITATIONS OF THE STUDY
· People refrain from giving personal details.
· People feel hesitant and hence sometimes misrepresent data.
· It is difficult to extract all required information from people.
· The study is confined only to a small segment of the entire population.
· The scope of the project is limited as there much more that can be analyzed
under buying behavior but since buying behavior of financial products especially
insurance products is very tough to study and because of my hectic sales target I hope
I have done justice.
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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ANNEXURE
QUESTIONNAIRE
I am Vaibhav Joshi pursuing my MBA from Alliance University.
This research, titled “FACTORS DETERMINING BUYING
BEHAVIOUR OF CONSUMERS WHILE PURCHASING
INSURANCE” is part of my internship program. Your feedback will
be strictly confidential. This information will be used only for
academic purpose and will be very important for my project.
1. NAME -
________________________________________________
2. AGE – 18 – 30 ____
30 – 40 ____
40 – 50 ____
50 + ____
3. GENDER - _____________
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4. OCCUPATION -
a) Service ____
b) Business ____
c) Professional ____
d) Self employed ____
5. INCOME –
a) Up to 1,80,000 P.A _____
b) 1,80,000 – 5,00,000 P.A _____
c) 5,00,000 – 8,00,000 P.A _____
d) Above 8,00,000 P.A _____
6. E MAIL -
______________________________________________________
_____
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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7. DO YOU HAVE AN INSURANCE POLICY? IF YES, ARE
YOU THE PERSON INSURED OR YOUR DEPENDANT?
YES - _____ SELF - _____
NO - _____ DEPENDANT - _____
8. DOES THE POLICY GIVE YOU – A LUMP SUM AT
MATURITY ______ OR
GAURANTEED ANNUAL PAYOUTS
_______
9. WHICH IS THE BEST INVESTMENT OPTION TO YOU?
a) Shares ______
b) Bank deposits ______
c) Mutual funds ______
d) Real estate ______
e) Post office savings ______
f) Gold ______
g) Insurance ______
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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10. YOUR PURPOSE OF TAKING A POLICY –
a) Future security ______
b) Childs marriage ______
c) Childs education ______
d) Tax benefit ______
e) Savings tool ______
11. RATE EACH FACTOR FROM 1 – 5 GIVEN BELOW
ACCORDING TO HOW MUCH IT INFLUENCES YOU
WHEN CONSIDERING THE PURCHASE OF A LIFE
INSURANCE PRODUCT.
(1 - No difference / 2 - least influential / 3 – influences a little / 4 –
influences a lot / 5 - influences the most)
a) Rate of return - ____
b) Companies name (goodwill) - ____
c) Advertisement effectiveness - ____
d) Flexible premium payment options - ____
e) Flexible pay-outs (withdrawal) options - ____
f) Approach and conviction of the insurance agent - ____
g) After sale reminders and updates - ____
h) Tax benefits - ____
i) Simplicity of the insurance plan - ____
j) Friends/relative referral - ____
Factors Determining Buying Behavior of Consumers While Purchasing Life Insurance
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k) Government stake in the company - ____
12. DO YOU KNOW ABOUT THE “INCOMESURANCE”
PRODUCT OF IDBI? CAN I EXPLAIN IT TO YOU IF YOU
HAVE NOT?
I DO - _____
I DON‘T AND NO - _____
I DON‘T AND YES - _____
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REFERENCES
www.idbifederal.com
www.licindia.co.in
http://www.acadjournal.com/2008/V22/part7/p2/
http://en.wikipedia.org/wiki/IDBI_Federal_Life_Insurance
http://www.eindiainsurance.com/insurance/insurance-articles.asp
http://articles.timesofindia.indiatimes.com/2011-04-30/mumbai/29490561_1_public-
sector-insurance-insurance-companies-insurance-firms
www.economictimes.com
www.businesstoday.com
www.businessworld.com
BOOK REFERENCE
Dr.C.R.kothari, ―Research Methodology‖, New Age International Publishers,
second revised edition, 2006. Pg.191.
Kotler Philip, ―Marketing Management‖, 8 th edition, June, 1995, Pg.142-165.
Robert A. Krueger, ―Business Forecasting: A Practical, Comprehensive Resource
for Managers and Practitioners.‖ BookSurge Publishing, 2008. Pg. 130.