a comparative study on customer perception towards LIC of India in view of increased competition by private companies a research done in 2009

CHAPTER - I 1.1 - Introduction 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 % annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7 % to the country’s GDP. Gross premium collection is nearly 2 % of GDP and funds available with LIC for investments are 8 % of GDP. Yet, nearly 80 % 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 itself is an indicator that growth potential for the insurance sector is immense. A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and at the same time strengthens the risk taking ability. It is estimated that over the next ten years India would require investments of the order of one trillion US dollar. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain economic growth of the country. The growing number of wealthier as well as aging Indian middle class is set to offer a strong business potential for the country’s untapped life insurance market. Insurance is a federal subject in India. There are two legislations that govern the sector- The Insurance Act- 1938 and the IRDA Act- 1999. The insurance sector in India has come a full circle 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. As the twentieth century has come to a close and we have move into the third millennium, we can see many developments and changes taking place around us with all the industries and firms within each SIVA SIVANI INSTITUTE OF MANAGEMENT

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industry trying to keep pace with the changes and diverse needs of the people. Though for decade together, marketers have regarded ‘customer’ as the king and evolved all activities to satisfy him or her, giving this concept a momentum it is necessary to understand the Perception and Expectations of the customer in respect various aspects & attributes so as to design a successful and an acceptable product or service. This can largely be attributed to the prevailing market situation. Not only has competition become intense but over and above with the market being flooded with many me-too products, the challenge before the marketer is to understand the diversity of consumer expectations and offer goods/services accordingly. Today the company image is built and made known by its customers. Thus the success of the firm will be determined by how effective it has been in meeting the diverse consumer needs and wants by treating each customer as unique and offering products and services to suit his or her needs. Therefore today all the firms are engaged in a process of creating a lifetime value and relationship with their customers, a step towards developing knowledge regarding its customers needs is the utmost important. The current study is an attempt to measure the various parameters as perceived by the customers and to help the company in serving its customers in a much better and efficient manner.

1.2 - Scope of the study The scope of the study lies in finding out the perception of customers in Lucknow city through responses taken by 300 customers during a period of 60 days and highlighting the key areas which require some concern on part of LIC of India and improving upon which the company may strengthen its customer base. The present study, analysis, findings and suggestions proposed by the present researcher will be of immense use for future researcher with similar studies in insurance market.

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1.3 Significance of the study : High quality products with quality support services both in terms of international standards and competitiveness have entered into our country. Customer satisfaction has emerged as the key differentiator and defining attribute. The study is very much significant because it brings out the differences in various parameters like awareness, service quality, problems faced and rationale behind investment between the products of LIC and private sector companies and these are the main attributes which build up the customer perception and loyalty towards a company. The study is significant also because it will help LIC to create a positive impact on its customers by working on its lacking qualities.

1.4 Objectives of the study : For every problem there is a research. As all the researches are based on some and my study is also based upon some objective and these are as follows : I ) To test the awareness of customers on various aspects of life insurance policies offered by LIC and other private sector insurance companies and find whether there is any relation between them. II ) To study the service quality being offered by LIC and private sector insurance companies and test if any relation exists. III ) To analyze various problems confronted by the policyholders of LIC and private sector insurance companies and determine the relation between the two. IV ) To clearly understand the rationale behind the investment in policies of LIC and private sector insurance companies. V ) To analyze the various aspects of LIC and do a complete SWOT analysis of the organization.


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1.5 Review of Literature : 1) Retention of the Customers is the essence of Insurance business, Imtiyaz.H Ltd.VASI DO, Insurance Times (Pg 20).Feb 2007-: Retaining a customer is four time cheaper than acquiring a new one. The retention of the customers is of utmost importance in the insurance industry in specification. Insurance business is of the relationship building process. were one customer leads to the building of other one. A satisfied customer is like a word of mouth advertisement for the company. The needs of the existing customers should be identified and satisfied well rather than only concentrating at the new accounts. All possible measures needs to taken to retain the customers as it is lesser costlier as well as provides stability to the business .

2) Trends in Life Insurance Business—Unit Linked Insurance Plans, IRDA annual report 2007-08, box item 1, page no. 15 -: It wasn’t too long back when the good old endowment plan was the preferred way to insure oneself against an eventuality and to set aside some savings to meet one’s financial objectives. The traditional endowment policies were investing funds mainly in fixed interest Government securities and other safe investments to ensure the safety of capital. Thus the traditional emphasis was always on security of capital rather than yield. However, with the inflationary trend witnessed all over the world, it was observed that savings through life insurance were becoming unattractive and not meeting the aspirations of the policyholders. The policyholder found that the sum assured guaranteed on maturity had really depreciated in real value because of the depreciation in the value of money. The investor was no longer content with the so called security of capital provided under a policy of life insurance and started showing a preference for higher rate of return on his investments as also for capital appreciation. It was, therefore found necessary for the insurance companies to think of a method whereby the expectation of the policyholders could be satisfied. The object was to provide a hedge against the inflation through a contract of insurance. Decline of assured return endowment plans and opening of the insurance sector saw the advent of ULIPs on the domestic insurance horizon. Today, the Indian life insurance market is riding high on the unit linked insurance plans.


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3) Sampada kapse & D.G kodwani, Insurance as an investment option, The Insurance Time, May 2003 At national as at individual level the excess of income after consumption level savings as funds for investment. Surplus funds can be invested in either real asset or in financial assets. Purpose of investment is to protect one’s wealth against erosion of value due to inflation and to earn risk adjusted return. There are three motives which drive people to purchase insurance products in India. _ Desire to cover risk _ Tax benefit _ Saving motives It is argued that in this paper that in the changing scenario for the insurance sector there is going to be a good opportunities for insurance sector to expand its market base. For this purpose there is need to improve the features of the insurance products to make them more liquid or short term schemes could be increased. It is shown that although rewards implied by the insurance products particularly by the tax benefits are quite close to those observed in banks and small saving scheme of the governments. The performance of mutual funds which come in many different types is found to be reasonable compared to the risk involved. The survey indicates that it may not be very difficult to win over the confidence of small investors towards insurance policies if good marketing techniques are adopted to educate the targeted population about the uses of insurance policies from investment point of view.

4) Samuel B Sekar, Research associate, Academic wing, The ICFAI University, Customer – driven innovation in insurance products, Insurance Chronicle, page 33, July 2006-: Insurance is one product which is not demanded by a customer, but supplied to him by massive education and drive marketing. Insurance ought to be bought not sold. The new concept of demand side innovation focuses more on customer’s social and economic reality striving to deliver maximum value to the customer at an affordable price. Therefore, when the customer becomes the primary focus including him in the invention process becomes mandatory. But, there are certain areas of insurance innovations where the customers cannot be involved. A case in point is the recent insurance product invention called Telematic Auto Insurance. It’s a product by the Progressive Auto Insurance, which monitors the driving behaviour of its auto insurance policyholder. The new machine grabs information and automatically SIVA SIVANI INSTITUTE OF MANAGEMENT

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transmits it to the insurer. This information received is regularly analyzed to judicially conclude the intensity of risk the person is exposed and the corresponding premium he is eligible to pay. This is an example of supply side innovation, where it is strictly not possible to include the customer in the innovation process. Though, there are instances where the customer is involved in the testing phase, his inclusion in the conception phase makes an innovation demand-driven.


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CHAPTER - II 2.1 Historical Perspective : Insurance in India The Britishers opened general insurance in India around the year 1700. The first company, known as the Sun Insurance Office Ltd. was set up in Calcutta in the year 1710. Insurance companies like Bombay Insurance Company Ltd was established in 1793. In 1818 it was conceived as a means to provide for English Widows. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create much needed funds for rapid industrialization. SIVA SIVANI INSTITUTE OF MANAGEMENT

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What Is Life Insurance? Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. The contract is valid for payment of the insured amount during: 

The date of maturity, or



Specified dates at periodic intervals, or



Unfortunate death, if it occurs earlier.

Why We Need Insurance : Life insurance is a contact by which you can protect yourself against specific uncertainties by paying a premium over a period. Since each one of us during our lives are faced with numerous risks-falling health, financial losses, accident and even fatalities.



Protection

You need life insurance to be there and protect the people you love, making sure that your family has a means to look after itself after you are gone. It is a thoughtful business concept designed to protect the economic value of a human life for the benefit of those financially dependent on him.

 Retirement Life insurance makes sure that you have regular income after you retire and helps you maintain your standard of living. It can ensure that your post-retirement years are spent in peace and comfort.

 Savings and Investments Insurance is a means to Save and Invest. Your periodic premiums are like Savings and you are assured of a lump sum amount on maturity. A policy can come in handy at the time of your child’s education or marriage! Besides, it can be used as supplemental retirement income.

 Tax Benefits Life insurance is one of the best tax saving options today. Your tax can be saved twice on a life insurance policy-once when you pay your premiums and once when you receive maturity benefits. Money saved is money earned.

 Myths of Insurance : i) Insurance is just meant for saving tax. ii) Insurance does not give good returns iii) Insurance products are not flexible


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2.2 Industry Profile : INDIAN INSURANCE INDUSTRY Insurance is a big opportunity in a country like India with a large population and untapped potential. The life insurance business (measured in the context of first year premium) registered a growth of 23.88 % in 2007-08, (94.96 % achieved in 2006-07). The general insurance business (gross direct premium) has registered a growth of 11.72 % in 2007-08 (3.52 % achieved in 2006-07). This has resulted in increasing insurance penetration in the country. Insurance penetration or premium volume as a ratio of GDP, for the year 2007 stood at 4.00 % for life insurance and 0.60 % for non-life insurance. The level of penetration, particularly in life insurance, tends to rise as income levels increase. India, with its huge middle class households, has exhibited growth potential for the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. The insurance market in India has witnessed dynamic changes including entry of a number of global insurers in both life and non-life segment. Most of the private insurance companies are joint ventures with recognized foreign players across the globe. Over the last eight years, consumer awareness has improved. Competition has brought more product innovation and better customer servicing. This made a positive impact on the economy in income generation and creating employment opportunities in this sector. At present there are a total of 21 companies in the life insurance business in India and only LIC is in the public sector and rest all 20 companies are in the private sector.


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Table of Life Insurance Companies as on 31st March, 2009 SI No. 1 2 3 4 5

INSURERS

FOREIGN

REGISTRATION

PARTNERS

NUMBER

HDFC Standard Life Insurance Co. Ltd.

Standard Life

Max New York Life Insurance Co. Ltd.

New York Life,

PRIVATE COMPANYPrudential Life Insurance Co. Ltd.

Prudential, U.K.

Om Kotak Life Insurance

Old Mutual,

Co. Ltd.

South Africa

Birla Sun Life Insurance Co.

Sun Life, Canada

Assurance, UK

USA

Ltd.

6

Ltd.

American International Assurance Co.,

SBI Life Insurance Co. Ltd.

BNP Paribas Assurance SA, France

8

ING Vysya Life Insurance Co. Ltd.

9

Allianz Bajaj Life Insurance

ING Insurance International B.V., Netherlands

2000-01

104

15.11.2000

2000-01

105

24.11.2000

2000-01

107

10.01.2001

2001-02

31.01.2001

2000-01

12.02.2001

2000-01

111

29.03.2001

2001-02

114

02.08.2001

2001-02

116

03.08.2001

2001-02

06.08.2001

2001-02

03.01.2002

2001-02

14.05.2002

2002-03

110

Allianz, Germany

Co. Ltd.

10

Metlife India Insurance Co. Ltd.

Metlife International Holdings Ltd.,

117

USA

11

12

Reliance Life Insurance Co. Ltd. (Earlier AMP Sanmar Life Insurance Company from 3.1.02 to 29.9.05) AVIVA

REGISTRATION OPERATION 23.10.2000

USA

7

YEAR OF

101

109

Tata-AIG Life Insurance Co.

DATE OF

121 Aviva International Holdings Ltd., UK

122


10

13

Sahara Life Insurance Co. .

14

Shriram Life Insurance Co.

Sanlam, South

Ltd.

Africa

Bharti AXA Life Insurance

AXA Holdings,

Co. Ltd.

France

Future Generali India Life

Pantaloon Retail Ltd.; Sain Marketing Network Pvt. Ltd. (SMNPL), Generali, Italy

15 16

Insurance Company Ltd.

17 18 19 20 21

IDBI Fortis Life Insurance Company Ltd.

Fortis,

Canara HSBC OBC Life Insurance Company Ltd.

HSBC, UK

Aegon Religare Life Insurance Company Ltd.

Religare,

DLF Pramerica Life

Prudential of

Insurance Co. Ltd.

America, USA

127

06.02.2004

2004-05

128

17.11.2005

2005-06

130

14.07.2006

2006-07

04.09.2007

2007-08

19.12.2007

2007-08

08.05.2008

2008-09

27.06.2008

2008-09

27.06.2008

2008-09

133

135

Netherlands

136 Netherlands

138 140

Life Insurance Corporation of India

512

Besides Life Insurance, all the above-mentioned companies provide coverage in Medical Insurance, Automobile Insurance, Accident Insurance, Home Insurance and many others. In short, the future of insurance companies in India looks bright.

Contribution to Indian Economy  Life Insurance is the only sector which garners long term savings.  Spread of financial services in rural areas and amongst socially less privileged.  Long term funds for infrastructure.  Strong positive correlation between development of capital markets and insurance/pension structure.  Employment generation.


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International Comparision of Life Insurance Penetration : The table below shows that India is doing well in comparison to several countries but still the life insurance penetration is still low and there is a huge scope for growth in the insurance industry.

Table 1 2005 2.53 4.14 1.78 3.06 7.08 8.32 8.9 3.05 4.86

INDIA USA CHINA GERMANY FRANCE JAPAN ENGLAND CANADA ITALY

2006 4.1 4 1.7 3.1 7.9 8.3 13.1 3.1 4.7

2007 4 4.2 1.8 3.1 7.3 7.5 12.6 3.2 4

Chart 1 14 12 10 2005

8

2006

6

2007

4 2

IT AL Y

N EN G LA N D CA NA D A

JA PA

E FR AN C

AN Y

A IN

ER M G

CH

US A

IN DI A

0

Insurance penetration is measured as ratio (in per cent) of premium (in US Dollars) to GDP (in US Dollars)

Interpretation – The above table shows that since the total premium collected is just 4% of India’s GDP in 2007 as compared to France, Japan, England which have very high penetration so there is a great scope for growth of life insurance in India .


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Number of Life Insurance Offices- Company wise (as on 2008-09) Table 2 INSURER

2008

2007

2006

2005

2004

2003

2002

2001

6391

3072

1645

804

416

254

116

13

2522

2301

2220

2197

2196

2191

2190

2186

INDUSTRY 8913

5373

3865

3001

2612

2445

2306

2199

PRIVATE SECTOR LIC

TOTAL

Expansion of Offices The number of offices of the life insurers has increased dramatically in the year 2007-08 from 5373 at the beginning of the year to 8913 by the end of the year, showing a growth of over 65 %. A major portion of this expansion was in the private sector whose offices more than doubled from 3072 to 6391. LIC’s offices increased at a more modest 10 % from 2301 offices to 2522.

New Policies issued : Life Insurers (as on 2008-09) : Table 3 INSURER

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

LIC

37612599

38229292

31590707

23978123

26968069

24545580

(21.01)

(31.75)

(-11.09)

(9.87)

(96.75)

7922274

3871410

2233075

1658847

825094

(104.64)

(73.37)

(34.62)

(101.05)

(3.25)

46151566

35462117

26211198

28626916

25370674

(-1.61)

PRIVATE SECTOR INDUSTRY

13261558 (67.40) 50874157

TOTAL Figure in bracket indicates the growth over the previous year in percent.


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Chart 2 -

Growth Rate over past years 120 100 80 60

LIC

40

Private Companies

20 0 -20

2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

New policies underwritten by the industry were 508.74 lakhs in 2007-08 as against 461.52 lakhs during 2006-07 showing an increase of 10.23 %. While the private insurers exhibited a growth of 67.40 %, (previous year 104.64 %), LIC showed a decline of 1.61 % as against a growth of 21.01 % in 2006-07. The market shares of private insurers and LIC, in terms of number of policies underwritten, were 26.07% and 73.93% as against 17.17% and 82.83% respectively in 2006-07. We can clearly see that private companies are catching up as they are registering a continuously high growth rate as compared to LIC which is a matter of concern.

Total Life Insurance Premium( as according to IRDA handbook 2007-08 ) Life insurance industry recorded a premium income of Rs.201351.41 crore during 2007-08 as against Rs.156075.85 crore in the previous financial year, recording a growth of 29.01 per cent. Regular premium, single premium and renewal premium in 2007-08 were Rs.54888.16 crore (27.26 per cent); Rs.38824.36 crore (19.28 per cent); and Rs.107638.89 crore (53.46 per cent), respectively. The table below shows the trend followed during past seven years in terms of total life premium collected.


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Table 4 INSURER LIC

2007-08

2006-07

2005-06

2004-05

2003-04

2002-03

149789.99

127822.84

90792.22

75127.29

63533.43

54628.49

(17.19)

PRIVATE SECTOR

51561.42 (82.50)

INDUSTRY 201351.41 TOTAL

(29.01)

(40.79)

28253.00

(20.85)

(18.25)

15083.54

7727.51

(87.08)

(95.19)

156075.84

105875.76

(47.38)

(27.78)

(147.65)

(16.30)

3120.33 (178.83)

(9.65)

1119.06 (310.59)

82854.80

66653.75

55747.55

(24.31)

(19.56)

(11.28)

Figure in the bracket represent the growth over the previous year in percent.

Chart 3 -

Growth Rate over past years 350

310.59

300 250 178.83

200 150 100

LIC

147.65 82.5

50 17.19

87.08 40.79

Private companies

95.19 20.85

18.25

16.3

9.65

0 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

Interpretation -From the above table 4 and chart 3 we can clearly see that private companies are registering encouraging growth rates in terms of total premium collection over the past few years as compared to LIC’s normal and ordinary growth.


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New Business Premium (Individual and Group) of Life Insurers for 2007-08 Channel wise : Table 5 Life Insurer

Individual

Corporate

Agents

Agents

Brokers

Direct

Total New

Selling

Business(

Referrals

Individual and group)

53.46

28.12

1.61

16.81

100.00

6.96

LIC

82.98

1.32

0.05

15.85

100.00

-

INDUSTRY

72.17

11.02

0.61

16.20

100.00

2.51

PRIVATE TOTAL

TOTAL

Chart 4 -

The share of corporate agents which was 8.42 % in 2006-07 has increased to 12.33 % in 2007-08. Within the corporate agency channel, while the banks’ share grew from 5.46 % in 2006-07 to 7.97 % in 2007-08, the others grew from 2.96 % to 4.36 % in the corresponding years. The share of corporate agents in the new business premium procured by the private life insurers was significant at 29.92 % in 2007-08 as SIVA SIVANI INSTITUTE OF MANAGEMENT

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compared to 24.99 % in 2006-07, while for LIC the share fell to 1.59 % in 2007-08 from 2.14 % in the previous year.

Performance in the first quarter of 2008-09 (i) Life insurance: The life insurers underwrote a premium of Rs.14320.20 crores during the first quarter in the current financial year as against Rs.12511.80 crores in the comparable period of last year recording a growth of 14.45 %. Of the total premium underwritten, LIC accounted for Rs.7524.56 crores and the private insurers accounted for Rs. 6795.64 crores. The premium underwritten by LIC declined by 12.31 % while, that of private insurers increased by 72.88 %, over the corresponding period in the previous year. The number of policies written at the industry level declined by 7.78 %. While the number of policies written by LIC declined by 23.36 %, in the case of private insurers they grew by 44.00 %. Of the total premium underwritten, individual business accounted for Rs.10995.90 crores and group business for Rs. 3324.30 crores. In respect of LIC, individual business was Rs. 5275.71 crores and group business was Rs.2248.85 crores. In the case of private insurers, they were Rs.5720.19 crores and Rs.1075.45 crores respectively. The market share of LIC was 52.55 % in the total premium collection and 63.88 % in number of polices underwritten, lower than 68.58 % and 76.87 % respectively reported in the previous year. Under the group scheme 56.13 lakhs lives were covered recording a growth of 8.51 % over the previous period. Of the total lives covered under the group scheme, LIC accounted for 38.96 lakhs and private insurers 12.77 lakhs. The life insurers covered 12.50 lakhs lives in the social sector with a premium of Rs.17.10 crores and underwrote 13.53 lakhs policies with a premium of Rs.1275.78 crores in the rural sector. The total capital of the life insurers at end March 2008 stood at Rs.12296.42 crores. The additional capital brought in by the existing private insurers during 2007-08 was Rs.3787.01 crores and the two new entrants, brought in equity of Rs.385 crores making the total additional capital brought in 2007-08 by the private insurers to Rs. 4172.01 crores. Of this, the domestic and the foreign joint venture partners added Rs.3160.12 crores and Rs.1011.88 crores respectively.


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The private insurers also seem to be scoring big in other ways- they are persuading people to take out bigger policies. For instance, the average size of a life insurance policy before privatization was around Rs 50,000. That has risen to about Rs 80,000. But the private insurers are ahead in this game and the average size of their policies is around Rs 1.1 lakhs to Rs 1.2 lakhs- way bigger than the industry average. Buoyed by their quicker than expected success, nearly all private insurers are fast- forwarding the second phase of their expansion plans. No doubt the aggressive stance of private insurers is already paying rich dividends. But a rejuvenated LIC is also trying to fight back to woo new customers.

2.3 COMPANY PROFILE :

Life Insurance Corporation of India The Life Insurance Corporation of India popularly known as “LIC of India” was incorporated on September 1, 1956 by nationalizing 245 Indian as well as foreign companies . It was established 52 years ago with a view to provide an insurance cover against various risk in life.the luminaries who spearheaded this move at that time visualised an entity that will provide life insurance to Indians, especially the vast rural masses, at an economical cost and channel the savings for the betterment of the nation. It is the largest life insurance company in India and also the countries largest investor. It is fully owned by the Government of India and headquartered in Mumbai. The subsidiary companies under LIC are:

LIC of India, International A joint venture offshore company promoted by LIC, commenced its operation in july1989. The primary objective is to the US-dollar denominated policies which cater to the insurance needs of non-resident in Indians. It provides insurance services to policyholders who residing in Gulf. The LIC International operates in all Gulf Cooperation Council (GCC) countries.

LIC Nepal A joint venture company formed in September 2001 with the Vishal Group of Industries with a capital base of Rs.250mn. It is one of the largest capitalized insurance companies of Nepal. It has joint share between LIC of India (55%) Vishal Group (25%) and has a public participation to the extent o 20%. SIVA SIVANI INSTITUTE OF MANAGEMENT

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Life Insurance Corporation Lanka Limited (LICL) A joint venture company formed in 2003 with the Bartleet Group of Companies, it is one of the oldest and reliable institutions in Sri Lanka. The combined strengths of these two formidable companies has enabled LICL to emerge as the premier provider of Life Insurance in Sri Lanka. The Indian-based blue-chip also has offices in UK, Mauritius, Fiji, and in all Middle East countries.

LIC Housing Finance Incorporated on june 19, 1989; its main objective is to provide long term finance for construction or purchase of houses or apartments. The company provides long terms finance to individuals for purchase, construction, repair and renovation of new \ existing flats\houses. It also provides finance on existing property for business, personal needs and gives loans to professionals for purchase or construction of clinics\ nursing homes\ diagnostic centers\office space and also for purchase of equipments. It has set up a representative office in Dubai and Kuwait to cater to the non- resident Indians in countries covering Bahrain, Dubai, Kuwait, Qatar and Saudi Arabia. It has client group of over 9,40, 000prudent house owners who enjoy the company’s financial assistance.

LIC Housing Finance Limited Care Homes It is a Wholly-owned subsidiary of LIC Housing Finance. It builds and operates “Assisted Community Living Center” for senior citizens. It operates a network of approximately 6 regional offices, 13 back offices, and 127marketing offices.

Vision “To emerge as a transnationally competitive financial conglomerate of significance to societies and be the pride of India “ .

Mission Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns and by rendering resources for economic development. SIVA SIVANI INSTITUTE OF MANAGEMENT

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Objective of LIC 

Spread life insurance widely in particular to the rural areas and socially and economically backward classes. This is done with a view to reach all the insurable persons in the country and provide them adequate financial cover against death at a reasonable cost.



To maximize mobilization of people’s savings by making insurance linked savings adequately attractive.



Bearing in mind, the primary obligation to its policyholders, whose money it holds in trust, the investible funds to be deployed to the best advantage of the investors as well as the national priorities and the obligations of attractive returns.



To conduct business with utmost economy and keeping gin mind that the money belongs to the policyholders.



It acts as a trustee of the insured public in its individual and collective capacities.



To meet the various life insurance need of the community that would arise in the changing social and economic environment.



It ensures that all people working in the corporation are involved to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy.



Promote amongst all agents and employees of the corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards achievement of corporate objective.

Board of Directors Chairman

TS Vijayan

Managing Director

D.K. Mehrotra, Thomas Mathew T, A.K. Dasgupta

Finance Secretary and secretary( financial services) Department of Financial Services, Ministry of finance, Govt. of India Addl. Secretary, Dept. of Economic Affairs, Ministry of Finance

Arun Ramanathan

Sindhushree Khullar


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Chairman cum Managing Director GIC of India Chairman and Managing Director, Export Import, Bank of India

Yogesh Lohiya

T.C. Venkat Subramaniam

Products and Services LIC has eight zonal offices and 105 divisional offices located in different parts of India. It compromises of 2,048 branches and employs over 10, 02, 149 agents for soliciting life insurance business from public. LIC has extended its activities in 12 countries from outside India, primarily to cater to the insurance needs of non-resident Indians. LIC aims at strengthening it relationship with its vast customer base by providing value-added service such as credit cards and offering premium payment facility to the policyholders. It is the largest insurance player in India and its objective is to channelize its funds for the benefit of the community at large. It enjoys a near monopoly power in the solicitation and sale of life insurance policies in India. The corporation has major business houses as clients, under the group business of India. It has more than 1,18,000 corporate clients covering more than 3,15,00,000 members. Apart from the corporate group insurance business the pension& group schemes is responsible for ‘Aam Aadmi Bima Yojna’,a social security schemes for the rural landless households under the aegis of the Government of India.LIC has been investing a major portion of its funds in socially-oriented sectors with a view to reach every insurable person in the country and provide adequate financial cover against death at a reasonable cost. Another goal is to mobilize people’s savings adequately attractive.LIC has recently tied up with Policybazaar.com an insurance portal that enables the consumers to get detailed information on the policy. It is one of the leading online non-life and life insurance aggregator to sell its policy Jeevan Aastha on the internet.


21

Insurance Plans The following insurance plans are on offer. They provide the most suitable options that can fit customer’s requirement.

LIC Product Portfolio Children Plans

Money Back Plans



Jeeevan Anurag



Jeevan Varsha



CDA Endowment Vesting at 21



The Money Back Policy-20 years



CDA Endowment Vesting at 18



The Money Back Policy-25 years



Jeevan Kishore



Jeevan Surabhi-15 Years



Child Career Plan






Child Fortune Plus






Marriage Endowment or Educational



Bima Bachat

Annuity Plan 

Jeevan Chhaya

Special Money Back Plan for women

 Child future Plan



Jeevan Bharti-1

Plans for Handicapped Dependents 

Jeevan Aadhar



Jeevan Vishwas

Whole Life Plans

Endowment AssurancePlans



The Whole Life Policy



The Endowment Assurance Policy



The Whole Life Policy –Limited Payment



The Endowment Assurance Policy-Limited



The Whole Life Policy – Single Premium

Payment



Jeevan Anand

Jeevan Mitra (Double Cover Endowment

 Jeevan Tarang



Plan) 

Jeevan Mitra (Triple Cover Endowment Plan)



Jeevan Anand



New Janraksha Plan



Jeevan Amrit

Term Assurance Plans 

Two year Temporary Assurance Plan



The Convertible Term Assurance Policy



Anmol Jeevan- 1



Amulya Jeevan -1


22

Joint Life Plan

Plans for High Worth Individuals



Jeevan Sathi





Decreasing Term Assurance To Cover

 Jeevan Pramukh

Home Loan Payment 

Jeevan Shree-1

Unit Linked Plans

Mortgage Redemption

Pension Plans



Market Plus –I



Profit Plus



Jeevan Nidhi



Fortune Plus



Jeevan Akshay-VI



Money Plus-I



New Jeevan Dhara-I



Child Fortune Plus



New Jeevan Suraksha-I

Group Scheme

Special Plans Golden Jubilee Plan



Group Term Insurance Schemes



New Bima Gold Special Plan



Group Term Insurance Scheme in Lieu of



Bima Nivesh 2005

EDLI



Jeevan Saral



Group Leave Encashment Scheme



Jeevan Madhur



Group Mortgage Redemption Assurance



Health Plus

Social Security Scheme

Scheme 

Gratuity Plus



Group critical Illness Rider



Janashree Bima Yojna (JBY)



Siksha Sahayog Yojana



Aam Admi Bima Yojana

Unit linked insurance plans (ULIPs) are insurance plans that combine the benefit of investment with insurance. They give the investor an option to put a part of their premium in various investment portfolios and derive the benefits depending upon the performance of the funds chosen by them. ULIPs were launched at an opportune time when stock markets had just taken off. Being market- linked, they were major beneficiaries of the secular rise in stock markets. ULIPs have gained high acceptance due to the attractive features they offer. These include:


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1. Flexibility 

Flexibility to choose Sum Assured.



Flexibility to choose premium amount.



Option to change level of Premium even after the plan has started (Top up facility).



Flexibility to change asset allocation by switching between funds.

2. Transparency 

Changes in the plan & net amount invested are known to the customer.



Convenience of tracking one’s investment performance on a daily basis.

3. Liquidity 

Option to withdraw money after few years (comfort required in case of exigency).



Low minimum tenure.



Partial / Systematic withdrawal allowed

4. Fund Options 

A choice of funds (ranging from equity, debt, cash or a combination).



Option to choose fund mix based on desired asset allocation.

Traditionally, endowment plans have invested in government securities, corporate bonds and the money market. ULIPs however, have a broader choice. They invest across the board in stocks, government securities, corporate bonds and money market instruments. Of course, within a ULIP there are options wherein equity investments are capped.The common types of funds available in ULIPs are Bond Fund, Protector Fund, Secure Fund, Balanced Fund, Growth Fund, Index Fund, and Enhancer Fund. Depending on one’s risk appetite one can choose the fund. However the investment risk is borne by the investor. The common type of charges, fees and deductions in ULIPs are Premium allocation charges, Mortality charges, Fund management charges, Policy/administration charges, Surrender charges, Fund switching charges and Service tax. Insurance companies are required to declare the NAV of various ULIPs on a daily basis. The movement of NAV enables the policy holder to assess the performance of his investment and accordingly make intervention in the form of switches, withdrawal and top-ups. After opening up of the insurance sector, Unit-linked insurance policies (ULIPs) have become increasingly popular.


24

Analysis of figures for the last three years indicates the growth pattern of unit linked business.

Table 6 TRENDS IN LIFE INSURANCE BUSINESS—UNIT LINKED INSURANCE PLANS Unit Linked Business (%)

Non-linked Business (%)

2005-06

2006-07

2007-08

2005-06

2006-07

2007-08

Private

82.30

88.75

90.33

17.70

11.25

9.67

LIC

29.76

46.31

62.31

70.24

53.69

37.69

Industry

41.77

56.91

70.30

58.23

43.09

29.70

Chart 5 -

Interpretation – The above graph shows that during the past few years ULIP plans have become more and more popular among the investors because of the returns they provide in addition to the insurance cover.


25

Performance of LIC of India The number of new policies marketed grew from 14.69 lakhss in 1961 to 2.18 croress in 2004-05 and the sum assured under this business rose to high of Rs. 1,79,886.66 cr in 2004-05 from Rs.336.67 cr in 1957. The total funds of the corporation also grew from Rs. 702.80 cr in 1961 to Rs. 4,16,910.36 cr in 2004-05. Investments , which were Rs. 329.74 cr in 1957 rose to a high of Rs.4,13,800.95 cr in 2004-05 ,allof which gets deployed for the development of the nation.The LIC has huge investible funds and the main source comes from the premiums collected from the policy holders. The Corporation invests these funds in various states, industries and also in various other countries. The LIC, while investing its funds, has to consider various factors and forces such as safety, liquidity and productivity of funds plus various other regulatory bindings in terms of investment norms, asset- liability management etc. In short, the LIC has to make its investments within the ambit of these bindings as a result, the corporation is not in apposition to pursue a prudent investment policy due to which its investment income may come under pressure. Adding fuel to the fire, the falling interest rate would also adversely affect the investment performance of the Corporation. Still at present LIC continues to be the dominant life insurer even in the post-liberalization phase of the Indian insurance industry. It is on new growth trajectory surpassing its own past records. The average premium growth so far has been 20%. With the targeted Rs.1,75,000 crores total premium by the end of current fiscal, The life insurance giant is looking a market share about 75%. The corporation has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business. The state- owned corporation is targeting a business of over Rs.3,00,000 crores by2011-12. The life insurance major expects its assets size to grow about Rs.6,00,000cr or 75% in the next three years. In the current fiscal year, the company has recruited about two lakhs insurance agent across the country, which is more than double of the 90,000 agents hired in the previous fiscal. It has also hired 4,500 development officers in the current fiscal year and 5,000 new officers could be hired in the next fiscal. It has bagged various awards which include Loyalty Award 2009, Golden Peacock Innovative Product/Service Award 2009, Readers Digest Trusted Brand Award 2008 in the Platinum Category, CNBC ‘Awaaz’ Consumer Awards 2008 and NDTV Profit Business Leadership Award 2008.The SIVA SIVANI INSTITUTE OF MANAGEMENT

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Economic Times Brand Equity Survey rated LIC as the No.1 service brand of the country for the 5th consecutive year. In the chart below is shown the market share of LIC and private in terms of total premium collected. ( refer table 4 for data ) Market Share in %

Chart 6 2001-02

99

1

2002-03

98

2

2003-04

95

2004-05

5

91

2005-06

86

2006-07

18

74 0

20

40

Private companies

14

82

2007-08

LIC

9

26 60

80

100

120

The bar graph clearly indicates that market share is continuously declining for LIC over the past few years.

Investment Portfolio of LIC of India The Life Insurance Corporation of India has been a nation builder since its formation in 1956. True to the objective of nationalization, the LIC has mobilized the funds invested by the people in the life insurance for the benefit of the community at large. The corporation has deployed the funds to the best advantage of the policyholders as well as the community as a whole, true to the spirit of nationalization. National priorities and obligation of reasonable returns to the policyholders are its main criteria for the investment. The total funds, so invested for the benefit of the community at large accumulated to Rs 751129 crores (provisional) as on 31st march 2008. The investment of the corporation’s funds is governed by Section 27A of the insurance act, 1938 subsequent guidelines/instructions issued there under by the Government of India from time to time and the IRDA by way of regulations. As per the prescribed investment pattern approved by IRDA, the controlled funds are invested as follows : 

Not less than 50% is invested in Government securities or other approved investments.



Not less than 15% is invested in infrastructural and social sector investments.



Not less than 35% in other investments, to be governed by exposure prudential norms SIVA SIVANI INSTITUTE OF MANAGEMENT

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Total funds of LIC Year

Total funds

Growth trend

Annual growth(%)

1999-00

1,61,002.22

100.00

-

2000-01

1,93,621.69

120.26

20.26

2001-02

2,45,039.82

152.20

26.56

2002-03

2,77,160.34

172.15

13.11

2003-04

3,46,022.54

214.92

24.85

2004-05

4,16,910.36

258.95

20.49

Compiled from the annual reports of LIC of India

Investment in Government and social sector : As on Type of investment Central

31-3-2006

Government

236959

31-3-2007

31-3-2008

272498

297943

64285

89234

securities State

Government

& 58928

other Govt. guaranteed marketable secrities Infrastructure & social sector investment Housing

19807

22451

24325

Power

29740

37881

41120

7500

6649

1516

1154

4398

8774

410529

469191

Irrigation/ water supply 8288 & sewage Roads, ports and bridges Others

725

including 3954

railways Total

358401


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Awards and achievements of LIC :

Golden Peacock Innovative Product / Service Award – 2009

Loyalty Award 2009

Readers Digest Trusted Brand Award 2008 in the Platinum category

CNBC Awaaz Consumer Awards 2008


29

The SWOT analysis involves an in depth study of the strength and weakness of the provided organization and it also provides information to the promoter, consultant, other agencies and helps in long term viability of the project.

Strength :  It is the oldest and most well experienced player having a Pan India presence.  LIC has a strong and very well developed distribution network.  It is having a huge consumer base and is evolved as one of the most powerful

brands of the

country.

 

It has a large product portfolio and claim settlement is easier to get. It has the advantage of government guarantee is accompanied with it.

Weakness :  Its employees

and other staff are lethargic and least motivated to render prompt and sincere customer service.

 

After sales customer grievance redressal mechanism is inefficient.



Very slow decision making process and internal problems between top management and lower cadre staff.

 

The top management or bosses are mediocre and there is large scale corruption in main office.

Agents not taking into account the needs of people and promote policies having high commissions only.

The development officers and agents who are the foundation pillars of LIC are not provided with extra funds and powers to promote its products aggressively.

Opportunity :  Emergence of a huge middle income consumer market in the country  People becoming more aware and demanding so there is scope for

a whole lot of innovative

products.



Pension markets, health insurance and large real estate portfolio.

Threats :  There is too much internal discord.  Entry of new private players in industry.  Red-tapism is very much persistent.


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2.4 Departmental details : The organization having a such a huge size has to have a well defined hierarchical structure and LIC is not an exception to this fact. A well defined proper organization structure with officials with exact knowledge of their duties is a must for an organization to prosper. LIC has a vast network of offices across the length and breadth of our country and abroad so it has defined and maintained its organizational structure in the following way. LIC has its main central head office at ‘Yogaakshema’ Jeevan bima marg at Mumbai. Then it is followed by eight zonal offices namely central zone, eastern zone, east central zone, northern zone, north central zone, southern zone, south central zone, western zone respectively. After these eight zonal offices there are several divisional offices under each zonal office and these divisional offices are mostly in each big city. At last comes the branch office and there are several branch offices under each divisional office. At all the branch offices there is a branch manager and several departments and the major function of these branch offices is sales and servicing of the policies. In a branch office the top most is a branch manager and under his control are seven different departments with each of these departments functioning independently to each other. These seven departments are as follows : 1. Sales Department – This department is mainly concerned with the sale of new policies and is headed by Assistant Branch Manager Sales(ABMS). The internal agent of LIC is the Development Officer who has the job of communicating and training the Free Lancing agents. It is the development officer who continuously encourages the agents to get new business and the income, performance and commission through policy selling comes under the jurisdiction of this department. 2.New Business Department – This department performance the very important function of underwriting new policies which are sent to it for authentication. It checks that all the information provided by the customer is true and the proposal form and all other details and proofs are legal. After scrutinizing the new policy it issues the first premium receipts(FPR) and then issues the policy bond. If anything is found insufficient the proposal form is sent back to the sales department to correct the mistake and again submit it. SIVA SIVANI INSTITUTE OF MANAGEMENT

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3.Policy Service Department – After the policy bond is issued, the case is passed on to this department to take care of after sales service of the policy. It takes care of the premium dates and if the policy is lapsed then its revival is done by this department. Also if any loan is required by the customer against his/her policy then its approval has to be given from the policy service department only. 4. Accounts Department – It is responsible for processing of all the cheques and loans which come to it. The details regarding financial aspects are covered under this department . 5.Claims Department – All types of claims i.e. survival benefit claim, maturity claim and death claim are settled by this department. In case of death claim if death occurs after three years then no investigation is involved in the settlement process and if it occurs before three years then proper investigation is done and the claim is considered to be an early claim case. 6. Micro Department – This department has the all important function of co-ordinating with each department. Each day’s business is collected and its four copies are made and one copy is sent to the divisional office, second is submitted to the branch manager, third remains with the incharge of micro department and fourth in the branch office. 7. Office Service Department – This department takes care of all miscellaneous tasks of office and dispatch of cheques, loans etc come under the responsibility of this department.


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Central Head Office

Zonal Office

Divisional Office

Branch Office

Sales Dept.

Claims Dept.

New Business Dept.

Accounts Dept.

Office Service Dept.

Policy Service Dept. SIVA SIVANI INSTITUTE OF MANAGEMENT

Micro Dept.

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CHAPTER - III 3.1 Research Methodology : Introduction : Being a comparative study of public and private sectors, the researcher selected LIC of India from the public sector and the private sector insurance companies. The study is mainly based on primary data collected from field source. The primary data is collected through a comprehensive interviews, schedules and discussions with the customers of LIC and customers of private companies. Secondary data is collected from various bibliographical sources such as journals, novels, magazines, publications and various websites including the official website of IRDA, LIC and various other company websites. The published research reports and market studies also helped the researcher to guage into the problem.

Research design : The research is divided into two parts. The first part helps us to understand the level of awareness, service quality, problems faced and the investor’s motive of investment, the second part deals with extracting important findings from this information and analyzing the measures required to correct problems if any.

Research sample : A sample of 300 respondents, 151 from LIC and 149 from private sector were identified randomly for detailed study and analysis. The researcher used stratified random sampling technique for collecting the primary data. The population of Lucknow city is divided into three stratums such as old, new and cantt area and an equal number of samples are drawn from each stratum.

Statistical tools used : Statistical tools like weighted averages, percentages, Chi-square test, mean and standard deviation etc are used for the analysis of data. For the purpose of analyzing the awareness level a two point rating scale is used. A two point and a three point scale is used to test the various aspects covering the awareness level, service quality and problems faced by the consumers. SIVA SIVANI INSTITUTE OF MANAGEMENT

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3.2

Statement of the Problem :

Customer satisfaction is the true differentiator for the success of any business and is more so in insurance where the products are perceived to be intangible. Referring to the Tables 3 and 4 and also chart 2, 3 and 6 it has been found that growth rate as well as the market share of LIC is constantly decreasing in comparison to the private companies so to improve on the correctional areas, the four main aspects i.e. awareness level, service quality, problems faced and rationale behind investment has to be known.

3.3 Formulation of Hypothesis : Keeping the above mentioned objectives in mind and to have a disciplined direction to the enquiry, the following hypotheses have been formulated: I) Ho : There exists a relation between the awareness level and the type of company customers choose for taking up an insurance policy. II) Ho : There exists a relation between the level of satisfaction by the service quality and the type of company customers choose for taking up an insurance policy. III) Ho : There exists a relation between the grievance redressal mechanism and the type of company customers choose for taking up an insurance policy. IV) Ho : There exists a relation between the claim settlement process and the type of company customers choose for taking up an insurance policy.

Date Processing and Analysis: Data are process with the help of computer software and Statistical analysis are made with the help of Excel sheet and SPSS (statistical package for social sciences).Firstly, the answers ticked by the respondents were recoded while assigning the numerical values. These values were entered into a master sheet and later with the help of a code book these numerical values were further entered into the spreadsheet format on the computer. These raw data were processed with the help of the statistical pack as stated. In order to present the results and analyze them, percentage tables, cross-tabulations were made. SIVA SIVANI INSTITUTE OF MANAGEMENT

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Limitations of the study : In spite of every care taken on the part of the researcher there were certain limitations which could not be overcome and are as follows : 

Some of the persons were not so responsive.



Possibility of error in data collection because many of investors may have not given the actual answers of my questionnaire.



Sample size is limited to 300 people only. The sample size may not adequately represent the whole market.



Some respondents were reluctant to divulge personal information which can hinder the validity of all responses.



The research study was confined to Lucknow city only.

The above are some of the aspects which posed real problems in the way of completion of the research work but the majority of respondents were cooperative and my gratitude are due to them.


36

CHAPTER - IV 4.1 Data analysis and interpretation : Analysis of Data : The demographic profile of the respondents is analyzed on the basis of age, gender, occupation, educational qualification and annual income. The age distribution of sample respondents is shown in Table 7 below :

Table 7 – Age Group Distribution Age Group

Below 20 13

Number of Respondents Percentages

4.3

20-40

40-60

151

116

Above 60 20

50.3

38.7

6.7

Total 300 100

Chart 7 Age Distribution of Respondents 160 140 120 100 80

Number of Respondents

60 40 20 0

Below 20

20-40

40-60

Above 60

Interpretation It is clear from Table 7; a vast majority of respondents (85%) fall in the age band of 20-60 years. Out of 300 respondents around 50% are between 20-40 years and 38% are between 40-60 years of age.


37

Table 8 – Gender of respondents Gender Male Female Total

Number of Respondents 205 95 300

Percentage 68.3 31.7 100

Chart 8 -

Sex of respondents

Female 32% Male 68%

Interpretation Out of the 300 samples drawn 205 (68%) are male and it depicts the domination men in the life insurance sector. Only 95 (32%) of them are females.


38

Table 9 – Occupation Distribution

Occupation Professional Employee Business Agriculture Total

Number of Respondents 49 140 48 53 300

Percentages 16.3 46.7 19.3 17.7 100

Chart 9 Occupational Distribution 160 140 120 100 80 60 40 20 0 re ul tu Ag ric

es s Bu sin

pl oy ee Em

Pr of es sio na l


Interpretation Occupation wise, around 46% of respondents are employees and the rest are equally represented by professionals, businessmen and agriculturists.


39

Table 10 – Educational Qualification of Respondents

Educational Qualification Upto High School Intermediate Degree & above Technical Total

Number of Respondents 48

Percentages

67 143

22.3 47.7

42 300

14 100

16

Chart 10 Educational Qualification of Respondents 160 140 120 100 80 60 40 20 0

&

al Te ch ni c

ab ov e

te ed ia In te rm

De gr ee

Up to

H

ig h

Sc ho ol


Interpretation It is also revealed from Table I, that more than 60% of the respondents are graduates or technically qualified. Remaining 22% are intermediate and only 16% are high school passed.


40

Table 11 – Annual Income of Respondents

Annual Income Below 60,000 60,0001,20,000 1,20,0001,80,000 1,80,0002,40,000 Above 2,40,000 Total

Number of Respondents 60 119

Percentages

51

17

37

12.3

33 300

11 100

20 39.7

Chart 11 Annual Income of Respondents 140 120 100 80 60 40 20 0

Be lo w

60 ,0 60 00 ,0 00 -1 ,2 0, 1, 00 20 0 ,0 00 -1 ,8 0, 1, 00 80 0 ,0 00 -2 ,4 0, 00 Ab 0 ov e 2, 40 ,0 00


Interpretation Around 60% of the respondents have an annual income below 1,20,000 and only 17% have income in the range of 1,20,000-1,80,000. Also 11% have income above Rs 2,40,000.


41

Table 12- Type of the policy Type of Policy Whole Life Endowment Money Back Pension Fund ULIP Others Total

Number of Respondents 13 42 55

Percentages

24

8

155 11 300

51.7 3.7 100

4.3 14 18.3

Chart 12 -

Type of Policy 180 160 140 120 100 80 60 40 20 0 th er s O

UL IP

Fu nd on

Ba ck Pe ns i

en t

on ey

m M

En do w

W ho le

Li fe


Interpretation Out of the total population more than 50% of the respondents have unit linked insurance plans (ULIP) and only 18% have money back policies and endowment plans are with only14% of customers.


42

Table 13- Periodicity of the Policy Periodicity of Policy 5 years 5-15 years 15-25 years Above 25 years Total

Number of Respondents 22 125 116 37

Percentages

300

100

7.3 41.7 38.7 12.3

Chart 13 Periodicity of Policy 140 120 100 80


60 40 20 0 5 years

5-15 years 15-25 years Above 25 years

Interpretation The table spells that around 80% of the respondents have policies with a maturity period of 5 to 25 years and only 12% have policies with a maturity period of more than 25 years.


43

Awareness level of Respondents : As a contractual relationship exists between the insurer and the insured, it is the duty of the insurance company to disclose of the policy details. The policy holders are not excused with any ignorance to the contract and it is the policyholders to get acquainted with the rules and regulations of the policy. So the study about awareness level of customers assumes paramount significance.

Table 14 Yes

No

LIC Private Company Total

103 66

48 83

Number of Respondents 151 149

169

131

300

Chart 14 Awareness Level

No

48

83 LIC Private Company

Yes

103

0

50

66

100

150

200

Interpretation – From the graph it is clear that 68.2% of respondents of LIC are aware of all details of their policy where as only 44.3% of private company policyholders know about all their policy terms and conditions. Hence it is gratifying to note that LIC is more transparent and divulge concrete details about policy and empower its policy holders in a much better way.


44

Testing hypothesis I : Chi-Square Tests

Value Pearson Chi-Square Continuity Correction Likelihood Ratio

Exact Sig. (2-

Exact Sig. (1-

sided)

sided)

sided)

a

1

.000

16.480

1

.000

17.619

1

.000

17.439 b

df

Asymp. Sig. (2-

Fisher's Exact Test

.000

Linear-by-Linear Association N of Valid Cases

17.381

b

1

.000

.000

300

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 65.06. b. Computed only for a 2x2 table

Here since the Chi-square value is 0.000 which is less than 0.05 so there exists a relation between the awareness level and type of company one chooses for investing his money. Hence the null hypothesis is proved.

Satisfaction Level about service qualities : Like any other service sector, the insurance sector is also evaluated by its ability to provide quality services to its customers. In the modern market, the products are designed exclusively for the customers and the quality is the leading criterion for the selection of particular product. Hence, the insurance providers should realize the changes in the market and adopt new weapons in the form of high quality services.

Table 15 LIC Fully Satisfied Partially Satisfied Not Satisfied Total

85 43

Private Company 50 57

23 151

42 149

Total 135 100 65 300


45

Chart 15 Private Company

LIC

15% 28%

34% Fully Satisfied

Fully Satisfied

Partially Satisfied

28%

Not Satisfied

57%

Partially Satisfied Not Satisfied

38%

Interpretation – From the above tables it shows that 57% customers are fully satisfied with LIC’s service quality and comparatively only 34% are satisfied by private companies. Also 38% in private and 28% in LIC are only partially satisfied and remaining are not satisfied. It is evident that customers, in general, are satisfied with the quality of services provided by LIC and there is significant difference in the service quality across both sectors.

Testing hypothesis II : Chi-Square Tests Asymp. Sig. (2Value

df

sided)

a

2

.000

Likelihood Ratio

16.767

2

.000

Linear-by-Linear Association

15.552

1

.000

Pearson Chi-Square

N of Valid Cases

16.575

300

Here also the Chi-square value is 0.000 which is less than 0.05 so the null hypothesis that relation exists between the level of satisfaction and type of the company one chooses for buying a policy is proved.


46

Problems faced by the Customers : The problems faced by policyholders are many and varied. It is the duty of any insurance company to make an amicable settlement of these problems. Some important problems faced by policyholders analyzed are complex formalities for opening a policy, levy hidden charges, excessive penalties for non payment of premium, undue delay in settlement of claims, lack of timely communication, lack of cooperation by officials/agents, inefficient grievance redressal mechanism, misleading information by the agents and lack of technical knowledge or training. A few of them have been taken into account here.

Table 16 – Accessibility of the employee/agents Yes LIC Private Company Total

102 117

No 49 32

Total 151 149

219

81

300

Chart 16 – Private Company

LIC

21% 32% Yes

Yes

No

No

68%

79%

Interpretation – LIC clearly lags behind from private companies as only 68% customers against 79% of private company customers say that employees of the company are always accessible.


47

Table 17 – Complex formalities Yes LIC Private Company Total

No 92 79

59 70

Total 151 149

171

129

300

Chart 17 – LIC

Private Company

39% Yes

Yes

47%

No

53%

No

61%

Interpretation – In LIC 61% customers feel that the formalities for opening a policy are too complex and the documentation is time taking but only 53% feel this in case of private sector. Hence in all there is more or less the same response about the complex formalities in both the sectors.


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Table 18 – Grievance redressal mechanism LIC Fully Satisfied Partially Satisfied Not Satisfied Total

63 42

Private Company 39 61

46 151

49 149

Total 102 103 95 300

Chart 18 – LIC

Privat e Company

26%

30%

33%

42%

Fully Satisfied

Fully Sat isf ied

Partially Satisfied

Part ially Sat isf ied Not Sat isfied

Not Satisfied

28%

41%

Interpretation – From the above figure it is clear that 42% and 26% customers are fully satisfied with the grievance redress mechanism of LIC and Private company respectively. But also an alarmingly high % of customers of LIC and Private company i.e. 30% and 33% respectively are not satisfied with their process.

Testing hypothesis III : Chi-Square Tests Asymp. Sig. (2Value

df

sided)

a

2

.010

Likelihood Ratio

9.307

2

.010

Linear-by-Linear Association

3.679

1

.055

Pearson Chi-Square

N of Valid Cases

9.234

300

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 47.18.

Here the null hypothesis is proved since Chi-square value 0.01 is less than 0.05 and so there exists a relation between the grievance redress mechanism and type of company. SIVA SIVANI INSTITUTE OF MANAGEMENT

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Table 19 – Claim Settlement Process Yes

No

LIC Private Company Total

125 105

26 44

Total 151 149

230

70

300


LIC

17% 30% Yes

Yes

No

No 70%

83%

Interpretation – It is a matter of concern for LIC that around 83% say that it makes undue delay in claim settlement where as for private companies this % is 70%.

Testing hypothesis IV : Chi-Square Tests

Value Pearson Chi-Square Continuity Correction Likelihood Ratio

Exact Sig. (2-

Exact Sig. (1-

sided)

sided)

sided)

a

1

.012

5.685

1

.017

6.409

1

.011

6.355 b

df

Asymp. Sig. (2-

Fisher's Exact Test Linear-by-Linear Association N of Valid Cases

b

.014 6.333

1

.008

.012

300

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 34.77. b. Computed only for a 2x2 table

Since the Chi-square value is 0.012 which is less than 0.05 so null hypothesis is proved and there exists a relation between claim settlement process and the type of the company. Therefore null hypothesis is proved. SIVA SIVANI INSTITUTE OF MANAGEMENT

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Table 20 – Information by the agent Yes LIC Private Company Total

104 124

No 47 25

Total 151 149

228

72

300


LIC

17%

31%

Yes

Yes

No

No

69% 83%

Interpretation – According to the figure we can infer that where 83% customers of private company the agent provides them with correct information only 69% say this in case of LIC.


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Rationale behind the investment Table 21 Factors

LIC

Private Company

Individual Risk Coverage

1

1

Tax Benefits

3

4

Growth and return on investment

4

2

Risk Coverage of Family

2

3

Child Welfare

5

5

Table 21 shows that the most important drive for taking an insurance policy by a customer is the individual risk coverage irrespective of the sectors. The rationale behind taking an insurance policy is almost same in both the sectors. The most proximate reasons are risk coverage, tax benefits, children’s welfare and growth and return of investment. Advertising of the company, classes or seminars conducted by various organizations and influence of the peer group do not play a major role in the investment decision of the customer.


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CHAPTER - V 5.1 Findings and Recommendations : Every study is completed only if it has certain outcomes in the form of findings and certain recommendations for the correction of faulty areas that have been found during the course of the study.

Findings from the data : Following are the important findings of the study : 1) Refering table 7 and chart 7 it is clear that the majority i.e. more than half of investor’s investing in insurance are the young people in the age group of 20-40. 2) Refering table 8 and chart 8 it can be said that males dominate in having life insurance policies. 3) Referring table 9 and chart 9 it can be said that majority of people having life insurance are employed. 4) The most preferred plan among the investor’s is unit linked plans because of its high returns.(refer table 12 and chart 12) 5) Almost 80% of the policies sold have the periodicity of 5-25 years.(refer table 13 and chart 13) 6) It is very much clear that the awareness level of the customers of LIC is much higher than that of the private sector.(refer table 14 and chart 14) 7) A greater number of customers of LIC are either fully or partially satisfied but there is not much significant difference across sectors in terms of service quality satisfaction level.(refer table 15 and chart 15) 8) Employees or agents of LIC are not easily accessible when compared to private sector and customers have to try several times in order to meet LIC employees etc.(refer table 16 and chart 16) 9) Most of the respondents of LIC feel that formalities for opening a policy are too complex and take longer time.(refer table 17 and chart 17) SIVA SIVANI INSTITUTE OF MANAGEMENT

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10) Two fifth of the customers of LIC are fully satisfied with its grievance redress mechanism while only one fourth are fully satisfied in case of private sector.(refer table 18) 11) It is a threat for LIC that more than four fifth of the customers of LIC feel that it unduly delays in claim settlement.(refer table 19 and chart 19) 12) Also a lesser number of customers of LIC feel that their agent provides them with the correct and relevant information in comparison to customers of private company.(refer table 20 and chart 20) 13) From table 21 it is evident that individual risk coverage is the most preferred criteria among the investors irrespective of both the sectors. Hence the rationale behind investment is more or less same.

Recommendations : 

To increase the level of insurance penetration LIC may focus on bringing products that suit to the rural customers.( refer table 1 and chart 1)



The company if possible should invest in advertising, conduct road shows, and spend money on hoardings, so that it can better propogate awareness about its various lesser known products.



LIC should also tie up with several other banks apart from the existing ones to sell its products i.e. through bancassurance ( refer chart 4)



The company has the option of tying up with local NGO’s for selling its rural insurance products.



Customer friendly documentation i.e. it should be made easier and faster( refer finding 9).



LIC should keep a check that its agents equally promote all its products( refer finding 14).



LIC may provide additional funds to its development officers and agents( refer finding 14).



All the hidden charges should clearly be stated in the form and explained by the agent and LIC should provide better training to its agents. (refer finding 12).



Claim settlement process should be made fast and must not involve lengthy decision making process( refer finding 11).



Some special focus should be laid on individual risk coverage while designing the products.(refer table 21).


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Learning This project has given me a good opportunity to learn a lot about the insurance sector in general and LIC in particular and especially about the basic technicalities involved right from selling to servicing and lastly the claim settlement process. I also had a chance to see how closing takes place in insurance companies. While dealing with retail customers I had a really enriching experience. I learnt how to judge a customer and offer him/her a product which would interest him. Also working in a real office environment provided me an enriching experience.

Conclusion : The entry of private sector insurance companies into the Indian insurance sector triggered off a series of changes in the industry. Even with the stiff competition in the market place, it is evident from the study that the public sector giant LIC dominates the Indian insurance industry. In today’s competitive world, customer satisfaction has become an important aspect to retain the customers, not only to grow but also to serve. Increased competition, wide range of product offerings and multiple distribution channels cause companies to value satisfied and highly profitable customers. Customer service is the critical success factor in a company and providing top notch customer service differentiates great customer service from indifferent customer service.


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a comparative study on customer perception towards LIC of India in view of increased competition by private companies a research done in 2009

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