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A PROJECT REPORT

2007-2008

Unit 4 A, Western Industrial Estate

Opp. SEEPZ, MIDC, Marol,

Andheri (E) 400 093

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Understanding Life Insurance Buying Behavior

Submitted to ICICI PRULIFE

Name of the Student : Mr. Kaustubh Vasant Gholap

Name of the Guide: Prof. Y. B. Bhide

Date: 31/03/2008

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Declaration

Date: - 31/03/2008

I am very glad that ICICIPrudential had given me the opportunity to do the survey about the buying behavior of the insurance according to Indian Consumers. I am also thankful to Mr. Y. B. Bhide, Associate Dean, Chennai Business School and Mr. Shrinivasan Sir and Miss. Pallavi Prabhu for their timely guidance for the completion of this project. Without their encouragement and appreciation it will not be possible to complete this project.

This Project is a new approach towards the Consumer buying behavior in India especially after the liberalization and in context with the rapid increase in the GDP of India. I am fortunate that I am learning in Mumbai where you can easily found a culture mix and various attitudes and instant reply about the market Trends. This study revealed the intrinsic point about the major influencing factors in buying behavior of the Life Insurance in India.

The data collected here is truly original and it is only used for the analysis and interpretation of this project.

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IndexSr. no. Particulars Page number

1 Introduction To Life Insurance Sector

5

2 ICICIPrudential 7

3 Executive Summery 8

4 The Study And Research Methodology

9

5Data Analysis

10

6Summery

18

7Recommendations

20

8Annexure

21

9Bibliography

25

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ife Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies

established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates.

L

Insurance is an Rs 450 billion industry in India. The value of the market is determined by gross premium incomes. The life insurance segment writes about 80% of the overall market value. Indian Insurance market was at its all time high in 2003 with a growth of about 17.4% over the pervious year. Since 2001 Insurance is growing at the rate of 15-20 % annually. The growth in the insurance industry is affected by volatility in real estate rates, GDP rates and long term interest rates. Fluctuations in exchange rates also affect the growth in this sector. The gross premium as a percentage of the GDP has gone up from 2.3 in the year 2000 to 4.8 in 2006. Together with banking services, it adds about 7% to the country’s GDP.Some of the important milestones in the life insurance business in India are:British-India Period:1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning.1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business.1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.1956: 245 Indian and foreign insurers and provident societies are 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 crores from the Government of India.

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Liberalization of Indian Insurance:

1994: Insurance sector invited private participation to induce a spirit of competition amongst the various insurers and to provide a choice to the consumers. 1997: Insurance regulator IRDA was set up as there felt the need:

To set up an independent regulatory body, that provides greater autonomy to insurance companies in order to improve their performance, In the first year of insurance market liberalization (2001) as much as 16 private sector companies including joint ventures with leading foreign insurance companies have entered the Indian insurance sector. Of this, 10 were under the life insurance category and six under general insurance. Thus in all there are 25 players (12-life insurance and 13-general insurance) in the Indian insurance industry till date.

Indian Insurance in 21st Century:

2000: IRDA starts giving licenses to private insurers: ICICI prudential and HDFC Standard Life insurance first private insurers to sell a policy

2002: Banks allowed selling insurance plans. As TPAs enter the scene, insurers start setting non-life claims in the cashless mode

2007: First Online Insurance portal, www.insurancemall.in set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt Ltd.

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ICICI PUDENTIAL LIFE INSURANCE:-

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and prudential plc, a leading international financial services group headquartered in the United Kingdom.ICICI Prudential is amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA).ICICI Prudential's equity base stands at Rs. 11.85 billion with ICICI Bank and Prudential plc holding 74% and 26% stake respectively.

Vision:-  

To be the dominant Life, Health and Pensions player built on trust by world-class people and service.

Values:-

Every member of the ICICI Prudential team is committed to 5 core values: Integrity, Customer First, Boundary less, Ownership, and Passion. These values shine forth in all we do, and have become the keystones of our success. 

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Executive Summery:-

Consumers of different commodities and age-groups coming from dif-ferent social backgrounds behave differently when making a purchase at the market.

Consumer behavior is the name given to the pattern of actions and de-cision-making that the consumers employ while making a purchase. It is determined by product, person, and situation at any given point of time. The paper examines the dynamics of consumer behavior.

The purchase decision in general is prompt by number of factors viz. Psycho graphical, Economical, Social, Politico legal and Demographical. The list is not exhaustive but it is sufficient to have the deep under-standing of the factors influencing the decision.

Psycho graphical Factors are those factors that include the behavioral aspect of the individual viz. lifestyle, living standard. Here purchase de-cision in influenced by those issues that affect the lifestyle of the con-sumer or in the other that reflects the status. For e.g.: purchase deci-sion related to buying of car and that to Mercedes Benz

Talking specifically to the insurance sector, here customer will buy only that policy that has got high premium or that type of policy which com-pany is promoting to limited high-income level group only. For e.g. "Life Time Super" policy of ICICIPrudential life insurance is meant for only those individual who can pay at least Rs. 20000/- per annum.

Economical factors affect the purchase decision by influencing the is-sues pertaining to money and income level of the individual. Consumer will buy only that product which will not have any negative effect on his pocket. For e.g. decision to buy an insurance policy is influenced by the deepness in the pocket.

Social factor affect the purchase decision by influencing the issues per-taining to social beliefs and morals.

Demographical factor is that factor which has got the maximum of its effect in the purchase decision of the product and specially if that prod-uct is life insurance product.

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The Study and Research Methodology:-

This study, which was conducted in the suburbs of Mumbai city, Dombivali, Nasik, Solapur, covered almost 28 individual of different background. The duration of the study was 1 month. The method which I used to collect the information was through questionnaire and personnel interview.

The data collection method was through random method and the sample size is moderate. I met around 40 people among them actual eligible were 28. These are the people who are having at least one or more than one insurance policies.

The collection of primary and secondary data was then restructured and reevaluated according to the need and the objective of the study. The data thus collected undergone the various round of editing, coding and decoding as the various interconnected links was their in the study.

The study covered 28 individuals, of whom 80 % were found were happy about their Insurer and rest 20 %, were ignorant about the Insurer. It was 78 % of the male who was there in the total insured and rest 22% were female. Occupation wise 50 % of the total insured were into service and 25 % into business. There was an immense rise in market awareness and the benefits from the competitor among the Individuals.

The target group for the study was the age group between 25-40 yrs. I have started searching for the potential consumers in the nearby area of my college and the around my residence. Then I got references through my friends and then the study spread across the city and some towns of Maharashtra.

Main Aim to conduct this study was to get the closer view of the consumers about life Insurance which was a little difficult as it’s a intangible product and consumers are not so willing to reveal their identity because of various reasons for that I made a declaration on the letterhead of college to convince them about the privacy of this report and their importance in contributing in this study.

Filling up questionnaire from the people was a great experience as they ask all the information about the insurance terminology and it was a satisfying survey also as more and more customers are aware about the presence of private life insurance players

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Changing customer trends:-As insurance sector is becoming more and more competitive the consumers are

changing the trends according to the situation. The survey reveals the main challenging trends in the consumer buying behavior.

The profile of the typical insurance customer is taking a new and definite shape and one thing is clear: the customer is increasingly aware about internet, comparative pricing and increased bargaining power. In short customers have become more self sufficient, price sensitive, and less loyal.

Let’s take a look about the changing trends in consumers:-

1. Priority Relationship:- Consumers want that insurers should give them a priority in every aspect. As insurers are already giving them priority they are more inclined towards increased attentiveness and less patient.

They don’t like to wait for the solution of their problem. So this will became a trend setting pattern in Insurance industry and ICICIPrudential al-ready have InstaInsure for the satisfaction of these less patient consumers.

85% consumers give preference to Priority relationship.

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2. Less Formality:- Consumers prefer those insurers who are having a quick processing of doc-uments and less formalities and practice approach.72% give priority to fewer formalities.

3. Agent relationship and Transparency:- Insurance is an intangible product and it is sold on sole trust on the agent (Advi-sor) of the companyAlso the total transparency in the transactions the trust of the customer and help in increasing the business.

Among 75% surveyed said that that they have purchased this product be-cause they believe in their advisor and they like the performance of the com-pany and they feel safe with this company.

4. Want improved ease of purchase and interaction:- Easy availability and more convenient interactions help in increasing the business. 75% of total surveyed give priority for this.

5. Knows information about insurance products:- With consumers becoming more and more interactive in using the technology they are well versed with the knowledge of completion in insurance industry. 57% were regularly evaluating their insurance with other products.

6. Price sensitive:- Quote of insurance premium is gaining a more importance in Insurance indus-try as people are more inclined towards more coverage at fewer premiums As it is in initial stage about 46% were aware about this.

Primary Factors Influencing Purchase Decisions:-

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Consumers of Insurance products are mainly influence by various social, psychological and demographical factors but here are some primary factors about the insurance purchasing decisions.

1. Brand: - The consumers give most preference to the popular brand who has achieved the highest safety in the insurance market. Consumers feel trust about the popular brands and more inclined towards them.Among the surveyed mostly people are brand aware and the most recalled brand was LIC after that ICICIPrudential, Birla Sun life, Bajajallianz were the few one.

2. Life Stage: - Life Stage plays an important part in the purchasing decision of the cus-tomer as youngsters are more inclined towards short term policies while middle age people are inclined towards family safety.

3. Service:-

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General image about the Service of the insurance companies plays an im-portant part in the decision making.Companies with higher customer satisfaction and hassle free claims get maximum market share.

4. Advice:- Mostly consumers don’t believe in the advisors but believe in their close friends and wife.In fact wife plays an important part in decision making.

5. Product:- After evaluating all these criteria people evaluate product feature.The product having most customer needs satisfying features sells the more.

6. Price :- Price plays an important role in purchasing behavior of consumers. Insurer with competitive price and more coverage with fewer premiums take the maximum market share.

Response to Channel:-

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With the evolution of insurance industry there is a greater need for the per-fect channel for the distribution of the insurance.Here is graphical representation of the consumer’s response to the channel

Among the surveyed consumers the most preferable channels for the buying insurance was Bancassuraance and the second is Agent.

Bancassurance is the innovative channel in insurance distribution channel as it includes the perfect blend of trust in bank and addi-tional service.

Agent who builds trust along the time period with the customer is the most important person in terms of insurance buying.

Most of the people buy only because of the agent. Financial advisors have a limited role in our developing market. Alternative channel such as Shopassurance in which insurance is

made available through retail outlets have a limited scope and is in nascent stage in India. E. g. Future Gererali Life Insurance, Bharati AXA etc.

Insurer Switching behavior:-

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In the very competitive market like India switching from the trusted one to the new one happens through the following reasons:-

Poor Claims Service / Experience:-Most people switch their insurer because of the default in the service. Customers need faster settlement of the claims and hassle free settlement of the claim. Agent:-People get influenced by the behavior of the Agent; if the agent is not fully prepared about the products of the company and having lack of knowledge about insurance companies then consumers are not wiling to buy insurance from them. Agent who is not quick responsive is also a major reason for switching. Competitive Product:-Consumers are more inclined towards the trend setting products than the traditional products e. g. Trend setter ULIP Policies of ICICIPrudential. Price:-After service customers are more inclined towards the competitive price and getting maximum coverage for minimum premium. Most Important customer influencing factors:-

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Here are the most influencing factors of the insurance buying behavior:-

Closer Braches:-Customers are wiling to purchase insurance from the insurer who is nearer to their house as a part for the convenience for future interactions. So having the maximum network of the branches favors the sells.Advisor Relationship:-Good trained and groomed advisor is the most influencing factor in buying behavior Most importantly the advisor speaking in the local language having a more touch towards purchasing decision Also having a female advisor have a significant impact in insurance selling. Simplicity of Information:-Information about the product in the simple language and in the local lan-guage impact more in consumers as Met life come up with regional infor-mation broacher abut insurance in Punjab .Right Specifications:- Right mixture of customer needs with the affordable price makes a great combination about the insurance Quick responsive:-

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Customers can’t wait especially when market is competitive and no. of competitor is more. Hence a quick resolving in customer query helps in customer satisfaction and word of mouth advertising also. Any time availability:-Trust of being heard at any time in the day gives the more inclination and loyalty to the Insurance. Quality of advice:-Getting a professional advice from an insurer feels a lot to the consumer as ICICIPrudential have made the Life Planner activity to act as a financial con-sultant.

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Summery:-

Price Focused / Service inclined :- Price focused customers are likely to relinquish advice for a cheaper price. In fact, they will actively pursue a better price, even though they recognize that product specifics might suffer. Beyond price they are more inclined to focus on service than product, i.e. they would rather improve their after sales service than attain precise product specifications.

Relationship focused/service Inclined:- For those customers advice from a trusted advisor is paramount, and they will use an advisor when purchasing any product, including very basic ones. Beyond the advisory relationship, these customers most appreciate for sales service, which they are likely to receive through their advisors.

Non-committals:- In this group, there is no overriding focus on price or relationship. EachCustomer makes each decision based on market circumstances. However, they all value after-sales service more than product specifics.

Product Focused/Relationship Inclined .Customers in this group focus on product firsthand foremost. Depending on the complexity of the product, they may use an advisor or conduct researchThemselves before buying.

Competitiveness :- To remain dominant I Business like insurance in which the product is mostly intangible more aggressive strategy is to be applied according to customer and more emphasis should be given to the customer re-lationship and loyalty building.

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In a Nutshell we can Say:-

The insurance customer has changed over the last five years, becom-ing more empowered and less loyal.

Customers’ primary insurance purchasing criteria–price, product specifications, and advice–vary based on region and insurance prod-uct type.

Increased complexity of customer channel usage necessitates multi-channel integration.

Customer satisfaction does not equal customer loyalty. Delivering a consistent, high-quality customer experience is essential

to future success.

Recommendations

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ICICIPrudential should look forward for more interactions with customers through arranging the annual meeting.

According to the key findings in the survey ICICIPrudential should see and emphasize more on the hassle free claims.

ICICIPrudential should illustrate the most successful prod-ucts through local news paper.

Importance of regional language is most important in giving personal touch so ICICIPrudential should print product de-tails with regional language.

Micro-Insurance where the risk of laps of policy is compara-tively less should be encourage with the help of Self Help Group (SHG) and Non Government Organizations. This may be one more trend setting activity by ICICIPrudential.

Encouraging the young people for the insurance particularly the 3 yr premium Products will be more beneficial for ICI-CIPrudential.

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Annexure I

Sample Questionnaire:-

Personal Details-1. Name-

Age-Sex-Income group (annual income in laky)-A) 0-1 B) 1-2 C) 2-3 D) 3-5 E) above Profession-Mob. No-E-mail-

2. Do you have any life insurance policy?

Yes/no ______________, if yes, name of company________________________________

3. Which type of policy?

A.ULIP B. ENDOWN MENT D. TERM. E .Health F . . . Do not know3. Which are the insurance Companies you are aware about?a)b)C)4. What parameters you consider while you go for insurance?A. Brand Name Rank-B. Returns Rank-C. Tax benefits Rank-D .Risk covers Rank-E. Services Rank-

5. from where you purchase policy? A. Agent B. Bank C. Direct marketing D. With house loan

6. Which service of your insurer you like most?

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7. Are you satisfied with current Company services?Yes/no if no, why?8. Have you purchase Insurance from any other insurer than your regular Insurer? Why?9. Whose advice you find most important in Purchasing Insurance?______________________________________________________10. Do you any suggestions/ recommendations?

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Annexure II

Name Postal Address Contact Nos.

Amit Jain Nasik 9960707012

Amit Potphode Pune 9960565731

Anupam BeedkarPune 9960171539

Shahid Sayyad Kharghar,Navi Mumabi 9820495869

Bhramhadev Mane Pune 9975474772

Chaitanya Katekar Mumbai 9890914841

Punam Gangurde Nasik 9850840770

Bapu Sonavane Mumbai 9867521201

Vikas Turakane Mumbai 986721209

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Pravin Jain Kalewadi, Pune 9970800846

Suyog Jain Pune 9881240677

Satish K. Cidco Nasik 9271652764

Sachin Hatge Kalamboli Navi Mumbai 9833066417

Rupali Umrotkar Mira Road, Mumbai 9920960912

Sanjiv Singh Ambernath, Mumbai 9766614560

Nandini Gurav Powai 9920071575

Ratna Gurav Powai 9867521212

Hareh Mehta Mulund 9820021600

Dr. Sameer Mulund 9322934902

Satish Tiwtane Thane 9867472160

Santosh Dalvi Thane 9867019048

Gopal Gupta Mulund 9820397849

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Ashish Bidve Dombivali 9960617371

Chakradhar Phasle Dombivali 9326796495

Jayashri Pachange Dadar 9890716263

Bhavana Pote Mulund 9323607046

Brinda Venkatra-mani

Srvoday nagar Mulund 9819022930

Ravikiran R Kandiwali 9870039737

Manjusha Devediga Powai 9940282212

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Bibliography:-

http://www.telegraphindia.com/1030616/asp/opinion/story_2065311.asp https://www.insurancemall.in/blog/category/Insurance-News-India.aspx http://digital.dnaindia.com/epapermain.aspx?queryed=9&eddate=3/27/2008 http://google.com