review of literature of life insurance, Thesis of Insurance Economics

Download review of literature of life insurance and more Thesis Insurance Economics in PDF only on Docsity!

Chapter – IV

Review of Related Literature on

Life Insurance

REVIEW OF RELATED LITERATURE ON LIFE INSURANCE

This chapter presents the review of literature to identify and understand the implications of different issues related to consumer behaviour and life insurances in India. A comprehensive review of related past studies helps the researcher to adopt, modify and improve the conceptualisation of framework and provide a link with past approaches. The findings and recommendation of the past literature relating to consumer behaviour towards life insurance services are not many. Only few comprehensive studies exclusively towards consumer behaviour on endowment policy are carried out in India. Based on the review of literature the researcher has enable to identify her source for the present study. The available studies are collected from research articles, committee reports, projects and surveys conducted. Khan, M.K. (1978)^1 attempts to know the opportunities and prospects in the career of a life insurance sector. He explains about what a good career is and how a good career should be for selling of life insurance products. There is no age barrier and it requires no previous occupational experience but one must be a professional and capable of creating opportunities in building personality. The relationship of life Insurance agent with clients is not temporary and the service rendered has no substitutes. He also observes that life insurance agent remains, in a sense, permanent server to the clients. Ramesh Jain (1980)^2 conducts a case study at Sagar branch, Calcutta, of Life Insurance Company view the spread of life insurance in a particular area and to

(^1) Khan, M.K., “Prospects of a Career in Life Insurance Business in India - An Analysis, Indian 2 Journal of Marketing, Volume 7, No. 6, Feb 1978, P. 23-31.Ramesh Jain, A Project on “The Organization and Working of Life Insurance Corporation of India: A Case Study of Sagar Branch, Jabalpur”, Jan-June 1980, P. 45-48.

Rajan Saxena (1986)^5 in his article entitled “Life Insurance Services” discusses various issues relating to life insurance. The author insists on the importance of life insurance and discusses on various strategies of life insurance. Mishra, M.N. (1987)^6 made a study to appraise the strategies of Life Insurance Company. While reviewing the strategies, the author felt that before 1960 Life Insurance Company did not give much attention to the objective of customer satisfaction, but from 1980 onwards the corporation has taken several remedial measures to provide better customer service and improve the customer satisfaction. Ashis Deb Roy (1987)^7 in his article entitled “We Care for our Customers” has examined the nature and importance of better customer services to policyholders and has emphasized the need for quality in service. He has given a detailed note on the various steps to be taken by Life Insurance Company to improve the customer service such as training programmes conducted by Company to its agents and employees, opening new branches and introduction of computers in insurance branch offices. Venkatesh, N.C. (1987)^8 in his article entitled “On the Trail of Better Service” has discussed the importance of better and personal servicing to the customers and has emphasized the importance of satisfying the policyholders. The Planning Wing of the LIC Divisional Office, Thanjavur (1987)^9 has conducted a sample survey on “Customer Satisfaction”. The objectives of the study found the level of consumer satisfaction regarding the services, particularly on the

(^56) Rajan Saxena, “Marketing of Life Insurance Services”, Yogakshema, December 1986, P.15. Mishra, M.N., “Appraisal of Marketing Strategies of the Life Insurance Corporation of India”,Indian Journal of Marketing, Vol. Xvii, No. 6, Feb 1987, P. 25-31. (^78) Ashis Deb Roy, “We Care for our Customers”, Yogakshema, April 1987, P. 4. 9 Venkatesh, N.C., “On the Trail Of Better Service”, Yogakshema, November 1987, P. 28.Planning Wing of LIC Divisional Office, Thanjavur Division, “Customer Satisfaction with Particular Reference to Maturity Claims” Special Study No. 1, 1987.

aspects such as timely dispatch of discharge forms, reminders, the cooperation given by agents or development officers, courtesy and sympathy of Company officials, receipt of the policy amount within the due date etc. The results of the study revealed the following points. They are:

• Discharge forms are received before the due date by seventy nine per cent of the policyholders.
• Eleven per cent of the policyholders approached the agent or development officer for help in the submission of the requirement and they are happy with the services rendered by them.
• Twenty one per cent of the policyholders submitted the requirements after receiving a reminder from the branch office.
• Six per cent of the policyholders approached the branch office for discharge forms.
• Ninety per cent of the policyholders were satisfied with the prompt service rendered by the branch office.
• Some policyholders stated that the corporation should insist the agents and development officers render all possible help to their clients at the time of claim and survival benefits settlement. The overall conclusion from the above study were:
• There is an imperative need for keeping up the tempo of maturity claims settlement operations at the present level.
• It is desirable to verify the policy ledgers every fortnight for omissions in the computer list so that the delays can be reduced and all the claims can be settled before the due date.

The National Council of Applied Economic Research, New Delhi conducted two surveys in 1988 and 1989^13 on “Appraisal of Quality Service in Service Organizations” and “Quality Services in Life Insurance Company” respectively. These two studies were sponsored by the Life Insurance Company. The policyholders’ general feeling is that the demand notice must be sent in time. Some policyholders rated the quality of services was excellent. Hence, by providing prompt services, the customer relationship is maintained for a long period of time. Patki, V.V. (1989)^14 in his article “Rural Marketing” discussed the problems of selling the life insurance in the rural areas and gave many suggestions to penetrate into the rural market. The suggestions are participation in village fairs, using audio- visual methods and explaining the merits of the life insurance to the villagers etc. Shejwalker, P.C. (1989)^15 in his article “Training in life Insurance” discussed the importance of trained agent force to develop the life insurance business. He stressed that present selection pattern of the agent should be changed. He expressed his opinion that private or independent institute should be invited to impart training to the agents. Krirubashni, B. (1991)^16 in her study attempts to know the level of awareness, preference and influencing factor pertaining to policy holdings and to test the relationship between the influencing factors and policy holdings. The study reveals that the majority of the respondents aware of the endowment assurance policy and considered to rank it as number one. The study also revealed that there was a significant relationship between personal factors and policy holdings. (^13) The National Council of Applied Economic Research, New Delhi, “Appraisal of Quality Service in 14 Service Organizations” and “Quality Services in LIC”, 1988 and 1989.Patki, V.V., “Rural Marketing”, Yogakshema, May 1988, P. 38. (^1516) Shejwalker, P.C., “Training in Life Insurance Marketing”, Yogakshema, August 1989, P. 27. Kirubashini, B., “Life Insurance Policy Holdings-A Study on Influencing Factors”, PublishedThesis, December 1991.

Appi Reddy and Narasimha Murthy, G. (1992)^17 have attempted to examine true marketing practices followed by Life Insurance Company in rural areas and problems involved in providing the services. The organization appoints development officers with responsibility in a specified territory (Trust with Trust) and special promotional efforts like field publicity vans, film shows, exhibitions etc are insisted. The study found that only 4.55 crores people have been insured against the insurable population of 21 crores, in spite of consistent efforts. Seetaramaiah, M. (1992)^18 in his article entitled “Fluctuations in New Business” identified the reasons for heavy work load on new business during the year ending period. He suggested some steps to overcome them. They are closing the half yearly accounts in September, giving heavy discount for the premium received in the first quarter, giving a special rebate of premium in the lean months, and completing the promotion and posting of officials by the first week of April. Gidwani, S.J. (1996)^19 tries to find probable solution as to why human life is valued after death in monetary terms and to what extent the life insurance is needed for an individual. He adopts three methods to study the situation. (i) Ability to look into one’s pocket to decide how much one can save fixed sum of money so that maximum life insurance can be purchased. (ii) Calculate individual average earning from future personal effort over the remaining year of productive life time, and (iii) Total expenditure met during lifetime represents cost of acquisition of human asset which is productive in subsequent year.

(^17) Appi Reddy and Narasimha Murthy, G., “Marketing of Life Insurance Services in Rural Areas”, 18 Management Researcher, Vol. 11, No 3 & 4, Jan-Jun 1996, P. 23-28.Seetaramaiah, M., “Fluctuations in New Business”, Yogakshema, December 1992, P. 24. (^19) Gidwani, S.J., “How Much Life Insurance does a Man Need”, Chartered Secretary, Jan 1996, P.31-32.

increase at 12.83% in the year 1975-76. 17.7% the net lapse ratio was due to the misguidance of agents and development officers but targets were fixed realistically to bring down it. Shekar Chandra (1998)^23 in his article “Future strategies for Life insurance” discussed various issues relating to life Insurance. He has given a detailed note about new kinds of products and intimacy with the constant technology adoption for survival as well as for consistent growth. Pamela L. Alreck and Robert B. Settle (1999)^24 felt that the central objective of the marketer’s is not simply to have a relationship with buyer but also to build the relationship with buyer in the form of linking the brand to a particular need, associating it with a pleasant mood, appealing to sub conscious motives: conditioning buyers to prefer the brand through reward; penetrating perceptual and cognitive barriers to create preferences and providing attractive models for buyers. Ajit Ranode and Rajeev Abuja (1999)^25 present an overview of the operation of Life Insurance Company in India and identify the strategic issues in liberalization and the entry of private players in insurance. The author brings out the need of private players, enhances efficiently in operation, achieving a greater density and penetration of life Insurance, mobilize long term savings for infrastructure and to bring freedom in investment in order to survive and adapt to the liberalized scenario.

(^2324) Shekar Chandra, “Future Strategies for Life Insurance”, The Indian Journal, December 1998, P.81. Pamela L. Alreck and Robert B. Settle, “Strategies for Building Consumer Brand Preference”,Journal of Product and Brand Management”, P. 130-144. (^31) Ajit Ranode and Rajeev Abuja, “Life Insurance in India - Emerging Issues”, Economic and Political Weekly, Jan 1999, P. 16-23.

Raghu Gulati (1999)^26 in his survey attempts to observe the Life insurance market in relation to products and customers. A basic understanding of life insurance business, product portfolio, strategy the company adopts, demographic analysis, the customer strategy that the organization repeatedly follows when launching insurance etc. is studied. The study also reveals that the company has deep penetration in urban areas, but the people are under insured, yet there exist potential to increase the coverage of insurance. 50% of Life Insurance Company business comes from rural areas and agents seem to be the most effective channels regarding sales. In product strategy, if the customer is in need of basis insurance product, the company should come forward to launch term profit that is to be matched with risk; a unit link product is to be launched etc. Shesha Ayyer, V. (1999)^27 in his article entitled “New Insurance Products in the Next Century” expressed his views about new products. The possibility of the aged living too long has become real because of advancement in medical facilities. Pension schemes have thus become popular though at a slow pace. Divorce rates are increasing and the insurer can look into the problem and introduce new schemes to fit them. Vijayavani, J. (1999)^28 in her prize winning technical paper entitled “Cost Effective Distribution Channels of Life Insurance Products” discussed the various methods to improve the channels of distribution. The concept of floating rebate schemes to the customer not only spreads insurance coverage but also attracts extra

(^26) Raghu Gulati, “Study of Life Insurance Market: Products and Customers”, (GE Capital, India), 27 1999.Shesha Ayyer, V., “New Insurance Products in the Next Century”, Journal, Jan- June 1999, P. 47. (^28) Vijayavani, J., “Cost Effective Distribution Channels of Life Insurance Products”, The Indian Journal, July-Dec 1999, P. 57.

Ramakrishna Reddy and Raghunadha Reddy (2000)^32 attempt to study the issues and relate conclusion on certain matters like whether premium rates reflect the life expectancy or the policy designed only for government employees or semi - government employees or reputed commercial firms etc. The spirit of the policyholders to know about the working, drawbacks and short comings of the Life Insurance Company is discussed. The study reveals that the rates of premium charged under postal life insurance are less and cheaper compared to the rates of premium of Life Insurance Company. As it is covered for a confined class of selective masses, it is felt necessary to concentrate on uncovered areas and non-salaried class as potential Market segments. The foremost change required is to provide transparency of information to the community, as they have the freedom to access any information about the working of Company. Malliga, R. (2000)^33 in her study examines the association between Socio Economic Status, Personality Traits of the Agents and the Performance in Tirunelveli, Tuticorin and kanyakumari districts. Further, the impact of marketing strategies and attitude of the agents towards the organization and their performance is studied with a sample of 100 respondents using stratified random sampling. The results of the data show that performance of the agents in terms of number of policies, the Sum Assured and the total commission received was found to be dependent on the Socio-economic status. There is a significant correlation between the marketing strategies of the agents and their performance.

(^32) Ramakrishna Reddy and Raghunadha Reddy, “Life Insurance Corporation of India: Need for New 33 Lessons”, Prestige Journal of Management and Research, Vol. 4, No.2, October 2000, P.206-214.Malliga, R., “Marketing of LIC Policies - A Study on Agents of Tirunelveli Division”, Indian Journal of Marketing, Vol. XXX, No. 8-10, August-October 2000, P. 6-9.

Achamma Samuel (2000)^34 has made an attempt to make an overview of the insurance system in India. As the insurance sector facilitates for economic development, the author tries to evaluate the insurance penetration and makes a comparison with the world standards. The study reveals that India’s insurance penetration was only 2.3% as against the world’s average of 7.8% in the year 2000. The low insurance penetration reflects on the vast potential for the development of insurance markets in India. The share of insurance as a percentage of real Gross Domestic Product during the period 1981-82 to 2000-01 was below 1%. The insurance sector has been only a marginal contributor to the country’s Gross Domestic Product. One of the reasons attributable to this could be the lack of effective competition (due to the monopoly position enjoyed) by the public sector. Opening up of the insurance sector may argue well for the growth in income from this sector. Vijay Srinivas (2000)^35 in his article entitled, “How Returns Linked Insurance Products can be Popularized?” emphasized that the insurers should link insurance products with other benefits. Low incomes, social structure, lack of understanding among the public, lack of availability of new schemes are the main reasons for low productivity for insurance in India. Kotler, P. (2000)^36 in his book, mentioned that a company practicing market segmentation realizes that buyers differ in their needs and wants, purchasing behaviour, demographic characteristics, product service usage patterns, geographic locations, buying habits and other characteristics.

(^34) Achamma Samuel, “Insurance: The Indian Experience”, RBI, Occasional Papers, Vol. 21, No.2, 3, 35 Monsoon and Winter 2000, P.349-373.Vijay Srinivas, “How Returns Linked Insurance Products can be Popularized”, The Indian Journal, 36 July-Kotler, P., Marketing Management, Tenth Edition, Saddle River, NJ: Prentice Hall, 2000.^ Dec 2000, P. 67.

Sankariah, Rudra Saibaba and Pervaram Sreenath (2001)^39 attempt to articulate the objectives like marketing strategies, progress in Life Insurance Company, different facilities to meet risk coverage and highlights of the new policies offered by the insurance companies in the context of privatization, liberalization and globalization. On comparing with private firms, the study elicited that different varieties of policies offered by Life Insurance Company are not available with other insurance companies as they offered only endowment and money back policies. The progress of Company is highly remarkable which recorded only 9.32 Lakhs. New policies in the year 1956 as against 148.43 Lakhs new policies in the year 2000. There is every possibility in the growth of insurance business as 57.6% of the insurable population is still uncovered. LIC intends shifting from mass - marketing to target marketing of individuals and extends reaching out to customer in the most cost effective way with target offers. Mahesh Chandra Garg (2001)^40 brings out the new paradigm in the insurance industry by imposing the increase in life expectancy of individuals and disintegration of joint family system. According to his view, the rate of insured which was around 7 per cent of the population in 1999 has to grow very fast because private sector operator in collaboration with their overseas partners are likely to bring in more professional and focused approach. Once competition grows, lower premium may also become a reality and the regulatory body has to ensure a balance in the enactment of the regulation in the overall development and maturity of the insurance industry.

(^39) Sankariah, Rudra Saibaba and Pervaram Sreenath, “Life Insurance in India-A Retrospection 40 Management Researcher”, Vol. VIII, No.1, 2 July-Dec 2001, P. 2-21.Mahesh Chandra Garg, “New Paradigms in Indian Insurance Industry”, April 2001, Vol. 45, P.27.

Agarwal, R.F. (2001)^41 has attempted to study the importance of information technology in the insurance industry and brings out the efficient need of providing improved services when there is competition due to private entry. In an insurance company, the service of it may be utilized in many areas like customer service, claim management, human resources etc. It is assumed that to have an overall increase in the size of the insurance market, information technology must be used on a much vigorous basis for more extensive penetration. Paresh Parasnis (2001)^42 in an article briefly discusses the various channels of distribution in the life insurance industry in India and new avenue cues being explored by the new player. The greater importance is given to the customer not only for meeting his requirements but also the impact in times of fulfillment, quality of service rendered, complexity of products etc is given priority. To conclude, the life insurance industry in transition presents - opportunities, but is also fraught with challenges of an - unknown magnitude. Therefore, only the best will survive in the long-term which enables to spot the emerging trends and helps to capitalize the benefits of its customers. Nikhil Gupta (2001)^43 in his article views that among the strategies that Indian insurers adopt, best opportunity lies in the product’s core function that is in providing a safety net. Though insurance is pooling of resources to help a few in distress, it certainly requires retaining the notion of responsibility. The author brings out the highlights in rising proportional aspects, penetration level and other projected

(^41) Agarwal, R.F., “Role of Information Technology in the Insurance Industry”, Chartered Secretary, 42 Aug 2001, P. 235-237.Paresh Parasnis, “Distribution of Life Insurance - An Industry in Transition”, Chartered Secretary, 43 Aug 2001, P. 232-234.Nikhil Gupta, “Responsible Reassurance”, September 2001, P. 27-33.

Vasanthi Srinivasan, Prakash and Sithramu (2001)^46 explore the changes taking place in management of agents in liberalized economy. The objectives of the study were to identify the competencies required and methodology adopted for selecting the effective agents. A sample of 15 agents ranging between 28-47 years, representatives, customers of agents were taken for qualitative solution. The findings indicated that a professional competency is necessary for successful insurance agents. The study also highlights the analysis of industry, how to manage agents to develop competencies and domain experts in the selection of agents. Michael Theil (2001)^47 analyses the demographic variables and the appraisal of insurance with a case analysis, pertaining to assistance products. Additional features to traditional products are referred to as assistance products. A consumer survey was conducted to find the demographic characteristics and the related assistance products. It also analyses the consumer’s judgment towards new class of insurance products. The study reveals that variables used in the survey are different and there is a weak relationship between consumer’s judgment and class of products. As demographic Variables are not performing as expected it seems advisable to focus on alternative factors. Kishore, R.B. (2001)^48 in his article “A Holistic View of Insurance Reforms and a Blue Print for Strengthening Life Insurance Company” stated that there is an enormous scope for a big breakthrough and an accelerated growth with keen healthy competition. He forecast that the Industry would generate 8 to 10 lakhs jobs in the next 5 to 7 years. (^46) Vasanthi Srinivasan, Prakash and Sithramu, “Management of Agents in Liberalized Economy”, 47 Journal of Risk Management and Insurance.Michael Theil, “Demographic Variable and the Appraisal of Insurance: The Case of Assistance 48 Products”, Journal of Risk Management and Insurance, Vol. 6, 2001, P. 16-25.Kishore, R.B., “A Holistic View of Insurance Reforms and a Blue Print for Strengthening LIC”, The Indian Journal, Jan-June 2001, P. 35.

Rajat Shuvro Bakshi (2002)^49 in his study attempts to know the theoretical concepts and examines the post liberalization Scenario in the existence of Insurance Regulatory and Development Authority and the strategies for the future must be based on customers, as the customers are the major driving force for the private players and is not easy to achieve especially when insurers are preparing themselves up for a competition. Insurance premium in India accounts for mere 2-3% of Gross Domestic Product and percentage of savings is barely 5.95% in India. The factors discussed in the study is to retain the customers, in spite of private entry are strong distribution network, strategic selection of segments, reputation, creditability and financial stability. As per Financial Times, May 14, 2002, Company records to the extent of 23 million numbers of Policies sold, compared to other private companies. Arunajatesan (2002)^50 in his study attempts to find the reason for poor penetration of insurance and influencing factors like awareness of Life Insurance Products, preferred mode of saving, insurable population, reasons for buying etc. The findings of the study were that 70% of the population is aware of insurance through Television, Newspapers and agents and among them only 24% are insured. Regarding the knowledge of schemes, less than 15% are known and reasons for buying insurance is only for tax planning and risk cover only. Ashok Thampy and Sitharama, S. (2002)^51 studies the highlights of rural insurance research, an Economic Approach. Two representative districts were selected from each area in the whole of rural India, affluent areas of western Uttar Pradesh are Andhra Pradesh. The study shows that the rural sector offers huge (^49) Rajat Shuvro Bakshi, “Strategies for Indian Insurance Companies-Post Liberalization Vision”, 50 Journal of Business Perspective, July-Dec. 2002, P. 41-52.Arunajatesan, “Insurance in India and Future Prospects”, Management Matter, Sept.2002, P-53-55. (^51) Ashok Thampy and Sitharama, S., “Life Insurance Potential in India-An Economic Approach”, Vision: The Journal of Business Perspective, July-Dec. 2002, P.11-18.