0 Synopsis - MMJ

1.
Introduction
The life insurance business in India used to be tightly regulated and monopolized by
government. The Government of India liberalized the insurance sector in March 2000, with the
passage of the Insurance regulatory and Development Authority (IRDA) Bill. This act aims at
lifting all entry barriers for private companies and allows foreign companies to enter the market
with limitations on direct foreign ownership. It mainly follows two legislations, which governs
this sector, are: - The Insurance Act- 1938 and the IRDA Act- 1999. At the time of opening of
the sector, the penetration of life insurance product was 19 per cent of the 400 million insurable
population (Kaundal, 2005). An underinsured Indian Life Insurance market opened with ample
of opportunities and innovative practices in marketing of Life insurance product. This enormous
competition has compelled the players to develop innovative practices in the field of marketing
of Life Insurance services. Opening of market has made new born and adoptions of some
innovative practices in the field of distribution of Life Insurance Products in India.
After liberalization the firms in the life insurance industry varies along many dimensions,
including product distribution systems. A wide variety of distribution methods are used in the
Indian Life Insurance Industry. Life Insurance distribution systems span the spectrum from the
use of independent sales representatives, to a professional employee sales force, to direct
response methods such as mail and telephone solicitation. The ongoing competitive and
technological revolution in the financial services industries has resulted in greater segmentation
of distribution by product market, and to greater use of multiple distribution methods by firms,
including the establishment of marketing relationships and alliances with non-insurance
concerns.
The purpose of this thesis is to detail the use of life insurance distribution systems in practice, to
understand service quality of various types of channel and to understand the perception of
channel members for internet channel and training initiatives.
2. The Distribution Dilemma

In Liberalized Indian market, competition has evoked two main challenges before the life
insurer. First is to design the customized products which are not only expected to compete with
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products of other players but also be able to fight with far substitutes like mutual funds and other
saving instruments. And the second challenge is to use right distribution channel to reach a huge
uncovered and under-covered Indian market. As before liberalization, the market had observed
the dominations of only one channel and that is through individual agents.
In this introductory phase of opening of Indian life insurance market, it is observed that the
companies have been quite successful in dealing with the first of these challenges by using the
existing product features and leveraging the technical know-how of their partners (Lakshmikutty
& Bhaskar, 2006), but most of them are still grappling with the right channel mix for reaching
potential customers. In Indian market, the players are struggling with the suitability of their
respective channel and socio cultural ethos: which are diverse, vibrant and tricky to change.
Because of this, huge proportion of business is still coming through the traditional channel that is
through agents and most of the alternative channels are struggling.
Channel Wise New Business Performance (2011-2012)1
LIC
Private
Industry
Individual
Agents
96.56
44.05
78.69
Corporate Agents
Banks
Others
2.57
0.22
39.01
7.52
14.96
2.70
Brokers
0.04
5.07
1.75
Direct
Selling
0.61
4.35
1.90
Total
Referrals
100.00
100.00
100.00
0.00
0.16
0.05
Source: The table extracted from IRDA Annual Report 2011-12, pp 82
As indicated in above table, a large portion of the business (seventy eight point sixty nine per
cent) is coming from the traditional channel and the market leader (LIC) is still getting its ninety
six point fifty six per cent business from agents. Popular distribution channels in many countries
(Banks, Brokers and Direct Marketing) are still not accepted well by LIC. The credit for
development of alternate channels goes to private players who brought this innovation to static
distribution system of Indian Market. The four point thirty five per cent share of direct selling
channel in private insurers new business not only indicates the acceptance of new channel but
also reveals the increasing consumer consciousness towards the alternate channel cost.
Banks have been utilized well by the private players to enter in the Indian market. More than one
third business for private players is coming through banks and fourteen point ninety six percent
of the business of the industry is coming through banks. All the figures of change are positive
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The leads obtained through referral arrangements have been included in the respective channels.
and showing the most acceptable upcoming channel for Indian market is bancassurance. It is
quite surprising that the market leader having an era of forty four years monopoly before entry of
private players has never taken this channel seriously. The most unfortunate part is between
seventies to nineteen ninety two, when life insurance and banks both were nationalized, still
nobody could fully exploit an idea to be complimentary to each other.
Increasing awareness of internet would be the reason behind share of direct distribution. The
consumers are getting more aware that by buying through direct selling, they can reduce the
distribution cost, up to some extent. In urban market, it has been preferred to buy plain products
like term assurance by online. Another reason for increase is development of salaried sales force
by the players. The loose hold of LIC in this distribution channel is surprising. The overall share
of this channel is shrinking because through online normally, term plans are preferred to buy and
term plans have less amount of premium compared to other plans.
3. Problem Statement & Research Questions

The current avenues for distribution of life insurance in India are not equally adopted by
government & private players, and there is a huge difference in their adoptability, so it is
required to study the service quality of existing distribution channel, to assess its strengths and
weaknesses.
As it is an introductory phase of liberalization of Life Insurance Industry in India, very little
research work has been found out in the area of service quality of intermediaries, and training
and development method priorities of intermediaries, which is an important contributor to
service quality. This situation impels to do a thorough study on these areas.
The research questions for this study are:
I.
Does service quality of different types of intermediaries contributors to their respective

business performance?
II.
How do demographic features of an intermediary and type of company (private or LIC)

influence the business performance of a channel?
III.
Is there any difference between percived cannibalization of internet channel among the
agents and bancassuarnce employees, as internet channel is considred cost effective for
clients?
IV.
Is there any difference between various types of intermediaries about their perceived
importance for different sources of training and information?
4. Review of Literature
4.1 Distribution of Insurance Services
The literature found about distribution of life insurance majorly falls in two categories. First is
the specific literature about life insurance which discussed is in latter sections while second is
about insurance distribution without any specification about life or general, this literature is
discussed in this section. So this section contains the literature about insurance as a common
entity or specific life insurance which originally abstracted from non specified publications.
In US, most of the firms do have a primary distribution system; it is relatively rare for a life
insurance firm to use a single distribution method for all products and markets (Carr, 1997).
Some industry analysts predict that the tied agency system will be the ultimate loser in this shift,
as it has neither the advantages of independent advice and service provided by brokers, nor the
low costs of the direct selling alternatives (Nuttney, 1995). Carr, Cummins, and Regan (1999)
present a transaction cost analysis of distribution system choice in life insurance. Consistet with
traditional transaction cost reasoning; they find that tied agency is more prevalent among life
insurance firms that sell complex products. Further, after controlling for product specialization
and other firm characteristics, the authors find no significant differences in overall cost
efficiency across life insurance distribution systems.
Mayers and Smith (1981) examine the insurers distribution channel choice (independent agency
or direct writer) and they suggest that more complex products require higher levels of service
and that high value/high price types of insurance products will be best distributed by an
independent agency channel. Conversely, insurance products that are more standardized may
require lower levels of service. These types of products would be best suited for a direct writer
type of channel (Mayers & Clifford, 1981). Some trade publications (e.g., Eberhart, 2000;
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Friedman, 1998) during that time period included articles suggesting that insurance agents were
faced with the strong possibility of being replaced with a more efficient and less-costly Internetled distribution channel. The same was true for travel agents during that time period (e.g., Gilbert
and Bacheldor, 2000). Consumers have not shown a marked preference for purchasing insurance
product via internet (Trembly & Ara, 2001). The Internet was expected to have a major negative
impact on the traditional agent-led distribution channel. However, consumers have not shown a
marked preference for purchasing insurance product via the Internet (Trembly & Ara, 2001).
Indicating the eleven per cent agent retention ratio and twenty nine per cent orphan policies in
US market, Levison (2005) suggested a well-crafted direct marketing program to address this
issue. Life and pensions are the most common types of products for which IT systems are used.
There is a significant role for independent software suppliers in the provision of product
comparison systems in field outlets (Watkins, 2007).
4.2 Direct Vs indirect distribution system

According to Lilien (1979) recognition is growing about the complexity and lack of
standardization of life assurance products, as well as the infrequency of purchase, that direct
distribution was crucial. Retzloff et al. (2006) says that this dynamic will be reinforced by the
increasing importance of direct channels of product distribution, such as call centers, direct mail,
e-mail marketing, and the internet. Currently, over ten per cent of U.S. households own life
insurance purchased through direct channels and over one-third of individuals who made a
purchase after shopping for life insurance bought through a direct means. In addition, over onehalf of direct buyers own only term insurance. While growth in on-line purchases may continue
to lag other channels, information gathering (product and company information, price
comparisons, and needs calculations) via internet is becoming more important. Thirty-seven per
cent of middle market insurance buyers used the internet for information gathering purposes
during their most recent purchase (Art 2007b). At the same time, approximately twenty per cent
of Generation Y and younger members of Generation X would like to purchase life insurance
online, as well as seventeen per cent of the older members of Generation X (Art and Ahmed
2008). Twenty-three per cent of online consumers who may buy term life insurance in the future
say they are most likely to do so online (Art 2007a). From the secondary data of German Life
Insurance Industy, Gamarra (2007) conclude that the direct insurers do not show the expected
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cost advantage compared to multi-channel insurers. He also conclude that compared to multichannel insurers, independent agency insurers are not able to recoup their higher costs by
corresponding higher revenues which would lead to similar profit efficiency levels between
either groups or even higher profit efficiency levels of independent agency insurers.
According to Muth (1993) the increased price competition is supposed to lead to a rise of direct
distribution channels, which are expected to incur lower costs compared to agent-based
distribution systems. This development is backed by technological progress which permits to sell
insurance products via internet (Cattani et al., 2004). Pure-protection products are consistent
with a world where people do it themselves through direct channels such as the internet. A
distribution model with commissions based strictly on sales followed by insignificant renewals
does not fit investment-related life products that become more valuable and managementintensive over time2. Using micro data on individual life insurance policies, Brown & Goolsbee
(2000) conclude that, controlling for individual and policy characteristics, a ten per cent increase
in the share of individuals in a group using the Internet reduces average insurance prices for the
group by as much as five per cent. Further evidence indicates that prices did not fall with rising
Internet usage for insurance types that were not covered by the comparison websites, nor did
they in the period before the insurance sites came online. The results suggest that growth of the
Internet has reduced term life prices by eight to fifteen per cent. Chandarashekahar & Das (2003)
too maintained that the technology not only creates new business opportunities, but also
improves the business profitability and efficiency. LIC can have a competitive advantage over
private players, as they have a large amount of past data generated over the years though their
problem could be that they are data rich but information-poor. According to Walawalkar and
Ashwin (Product Manager- Insurance Distribution System; Product Marketing ManagerInsurance; both are from Mastek, 2010) Technology is helping to create a better environment for
insurance, especially where the insurance distribution landscape is concerned.
4.3 Indian Scenario
Gosh (2005) says that the intermediaries in insurance business and the distribution channels used
by carriers will perhaps be the strongest drivers of growth in the sector. Multi-channel
Report in TIAA-CREF Institutes, Trends & Issues, December 2008 titled Product and Distribution Evolution in
the Life Insurance Industry.
distribution and marketing of insurance products will be the smart strategy for the Indian market.
Taking about earlier liberalized German market Gamarra (2007) says that until its liberalisation
in 1994 exclusive agents dominated the distribution of products in the German life insurance
industry. Since then, their importance has been declining for the benefit of both distribution via
direct distribution channel and independent agents. However, the market shares of specialized
direct and independent agent insurers have remained small, while multi-channel insurers
increasingly incorporate direct and independent distribution channels, and represent the
dominant distribution strategy. This may be followed by Indian market. In india, two distinct
forms of distribution systems may be recognised viz. personal distribution systems and direct
response systems. Personal distribution systems include channels like agencies, bancassurance
and work site marketing. Direct response distribution systems are methods whereby the client
purchases the insurance directly. This segment, which utilizes various media such as the internet,
telemarketing, direct mail, call centres etc., is just beginning to grow (Gulati et al.).
4.4 Agents
An agency relationship is defined as: a contract under which one or more persons (the
principal(s)) engage another person (the agent) to perform some service on their behalf which
involves delegating some decision making authority to the agent (Jensen and Meckling, 1976).
Emphassing the importance of further bifarcation on this traditional meaning Lowry, Avila, &
Baird (1999) says that with increasing competition among agencies for the same clients, the need
for a strategy to differentiate one agency from another is critical. By focusing efforts on a niche
market, an agency can benefit by being the one of choice for consumers in the niche. Further
adding to marketing system Machiraju (2004) says that the job of marketing life insurance has
always been of a hybrid nature. The fact-finding and advice-giving phase at the contact level
may be considered as the work of counselor; the persuading phase as the work of a salesman.
Adding to this Cummins & Doherty (2005) specify the duty of an agent by saying that in
addition to placement of insurance, insurance intermediaries also help their clients understand
and measure their risk, advice them on how insurance can alleviate the costs of risk, help design
insurance coverage programs, and assist with claims settlement.
Emphasizing on latest change in insurance market article titled Change Agents (2008) mention
that the onset of competition also means that the role of the ubiquitous life insurance agent is
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evolving, expanding and, in some cases, witnessing a complete turnaround. Increased

competition and proliferation of products are compelling agents to innovate and spend greater
amount of time understanding competing products. With new products from mutual funds and
insurance companies hitting the market every other day, the new-age agent is armed with
knowledge not just about his own portfolio, but also about financial products from competing
firms. Adding to this about Indian life insurance agents, Singhvi & Bhatt (2008) says that the
greater relationship and more face to face contact, consumers are used to the channel, experience
and greater knowledge of industry and cross selling ability are the strength of the agents while
higher cost for insurer and consumer because of higher commission rates, not as convenient as
other channels, old fashioned channel, not fully updated with latest technologies are the
weakness of the agent system. Not only emphasizing the role of agent in customer loyalty a
study finds evidnces that headquarters contribution to customer loyalty is significantly stronger
through the image path than through the delivery path (Andreassen & Lanseng, 1997).
4.4.1 Agents Demography
Talking about demographic features of agents, through an analysis of two highly reutilized
interactive service jobs, fast food service and insurances ales, Leidner (1991) explore the
interrelationship of work, gender, and identity. While notions of proper gender behavior are quite
flexible, gender-segregated service jobs reinforce the conception of gender differences as natural.
The illusion that gender-typed interaction is an expression of workers' inherent natures is
sustained, even in situations in which workers' appearances, attitudes, and demeanors are closely
controlled by their employers. Gender-typed work has different meanings for women and men,
however, because of differences in the cultural valuation of behavior considered appropriate to
each gender. In Indian context, Arulsuresh & Rajamohan (2010) says that the Gender of the
agent is yet another relevant feature in the rural context that makes a difference especially for the
female population. Women to whom the customers can relatenurses, gram sevikas can target
the female segment of the population more effectively.
Radhakrishnan, Sivasubramanian, & Ravanan (2010) concluded that the agent in the age group
of more than 30 years earn more commission implying they generate more business and possess
better business potential. A very young agent who is a typical sales man may not appeal to a
large segment of middle class, which is looking for a solid trustworthy person from whom they
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can buy insurance. An agent selling other products in addition to life insurance products has
higher probability of success as he has more opportunity to be in constant touch with the
customer. Other factors like sex of the agent, education qualification, number of years of
experience as an agent, nature of life insurance agency have no association with agents
commision indicating that these factors are not significantly influence the performance of an
agent.
4.4.2 Shrinking Business by Agents
While World wide more than ninty per cent of premium was procured by the individual agents
and brokers (Naga Raja Rao, 2004), evidence is found in the decrease of life insurers operating
in the U.S., industry demutualization, and the decreased number of affiliated agents combined
with the emergence and growth of direct and independent advisor distribution channels. Such
trends signal a fundamental restructuring of how life products are structured and delivered 3 .
According to Verma (2004) the life insurance players need to develop alternative distribution
channels, as the traditional channels alone are not financially viable. India Infoline article,
(August 2004) maintains that insurance agents are still the main vehicles through which
insurance products are sold but in a huge country like India, one can never be too sure about the
levels of penetration of a product. Insurers in a top-down product development approach create
products with features attractive to agents. Fleming, John D; President Fleming Advisor
International (2008) Observes a disturbing trend in North American Life insurance industry that
the number of people providing face to face advice to consumer is shrinking. More important, he
notes that new blood is being infused at an alarmingly slow rate. He also added that the company
leaders are aware of this situation; there are few concrete signs of companies doing something to
address this problem. In India nearly three fourth of the agents are about to go out from business
because of change in policy about Unit link Life insurance in September 2010 (New ULIP norms
may throw 1.2 million agents out of work, 2010).
Using primary data from two hundred fifty five insurance agent-insurance provider dyads Ross,
Anderson, & Weitz (1995) conclude that the Perceivers rate their performance outcomes from
the dyad (i.e. harmony and profit) highest when they believe they are less committed than their
Report in TIAA-CREF Institutes, Trends & Issues, December 2008 titled Product and Distribution Evolution In
the Life Insurance Industry.
counterpart. Conversely, they rate their own performance outcomes lowest when they believe
they are more committed than the other party.
4.5 Bancassurance
Leach (1993) defines bancassurance as the involvement of banks, savings banks and building
societies in the manufacturing, marketing or distribution of insurance products. Making this
definition sample, it can be defined as the sale of insurance products through banks distribution
channels4. According to IRDA, bancassurance refers to banks acting as corporate agents for
insurers to distribute insurance products (Karunagaran, 2006).
Mentioning the rational for success Brahmam, Lokanandha, & Pulugundla (2004) mentioned that
all intermediaries can't sell all lines of business profitably in all markets. There should be clear
demarcation in the marketing strategies of the insurance company / banker from this perspective,
choosing a right model may prove essential in bancassurance set up. Indian bancassurers would
probably have to take a leaf out of the French bancassurance book and confine themselves
initially to simple products, often savings-related, before graduating to more complex ones.
Parihar (2004) have the same opinion that the Insurance products with low complexity can be
sold through this channel but products with high complexity will have a lot of difficulty in terms
of time, effort and cost to train bank employees. On commenting about Indian market, Low
(2004), says that the changing mindset is cascading through the banking sector in India and this
would be a right time for banks to resorting to bancassurance, especially in the context of
proactive policy environment of regulatory authorities and the Government. Sinha (2005) says
that the regulatory changes made by the Reserve Bank of India and the Insurance Regulatory and
Development Authority have been favorable to bancassurance development5 and it is growing
rapidly in India, while contradicting to them Anand & Murugaiah (2006) says that the Indian
insurance industry is highly regulated and bancassurance as a concept is still in the evolution
stage. Supporting and adding to this Neelamegam & Pushpa Veni (2008) mentioned that the
research shows that social and cultural factors, as well as regulatory considerations and product
complexity, play a significant role in determining how successful bancassurance is in a particular
4
Published in the article titled Bancassurance across the globe Meets with very mixed response SCOR Technical
Newsletter (2003), February, France.
5
The term favorable is relative. For example, in comparison with other countries in the region, Sigma (7/2002,
Table 6) has termed the posture of the IRDA as neutral only, regulatory bodies of two City States of Hong Kong
and Singapore get favorable qualifications.
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market. Adding to this (Sethi, n.d.) says success of a bancassurance venture requires change in
approach, thinking and work culture on the part of everybody involved. Indian work force at
every level are so well entrenched in their classical way of working that there is a definite threat
of resistance to any change that bancassurance may set in. Any relocation to a new company or
subsidiary or change from one work to a different kind of work will be presented with
vehemence. Associating it with globalization Singhal & Singh (2010) mention that the concept
of universal banking, where banks have initiated to become more diverse in nature, has also shot
into prominence, so as to create a wider impact on the minds of the consumer by coming with
new innovative products and services.
Rao (2004) expresses his views that the number of policies sold through bancassurance model is
modest as of now. Those in charge of sales should be trained adequately to avoid any
miscommunication 6 . Mishra (2004) tracked the feedback obtained from some existing
bancassurance customers and discovered that thirteen per cent customers did not know the
details of policy they have purchased and its future usage or benefits, nineteen per cent
customers felt they have not got sufficient cover for insurance needs of their family, ninety six
per cent of customers rated LIC as the best financially stable insurance company and seventeen
per cent of customers felt private insurers can better service the claims than PSU insurers but rest
eighty three per cent considered PSU insures as better in claim paying ability and systems. On
the bases of the survey of employees of bancassurance in western India, Sadri (2009) concluded
that commission is more important than telling the truth while selling life insurance. Ethical
considerations were lost.
In India, the banking and insurance sectors are regulated by two different entries. Banking is
fully governed by Reserve Bank of India while the insurance sector is regulated by Insurance
Regulatory Development Authority. Bancassurance, being combination of two sectors, comes
under the purview of both the regulators with each of the regulators giving out detailed guideline
for banks getting into insurance sector. The major regulations are about recruitment of chief
Insurance Executive, Training of staff, mode of agency (bank can be corporate agent but not
Rao CS (2004) Emergence of bancassurance in India, Address at the Banking Technology Excellence Awards
(2003-2004) & Launch of National Financial Switch on 27th August, 2004 at IDRBT.
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broker) and dealing with number of insurers (Kumar, Jagendra; Corporate Head-Training,
Shriram General Insurance Co Ltd, 2010).
4.6 Policy Lapsation & Intermediary Service Quality
A life insurance policy lapses when the subscriber does not pay the premium within the grace
period. When a policy lapses, the holder forfeits the premium paid and the insurance cover. The
agent loses the renewal commission. It also impacts the growth of the insurance business and
solvency margins of the insurer. Lapsation of a life insurance policy is discontinuation of
premium payment by the policyholder during the period of operation of the policy, due to any
reason other than the death of the policyholder. The length of life of a lapsed policy can be
defined as the period between the month when the last premium installment was paid and the
month the policy was issued. According to Gummarra (2008) a cancelation of insurance contract
during the first year demonstrates the probable customer dissatisfaction and is an indicator of
lower level services by intermediary. Policyholders who had repeated unpleasant experience with
the services of an insurance company or the advisor, most typically, would prefer to end their
relationship with the company (Mallela at al. 2008). Reasons for lapsation are wrong selling,
forced selling, over selling, bogus selling, effect of competition, introduction of new plans, bad
service, awareness levels of customers, non-receipt of notices, no follow-up by agents,
requirement of medical check-ups, change of address, inadequate explanation of the product
riders, repayment of house finance, malpractice of agents an field force (Subramanian, 2008).
From search theory a number of factors that affect the service quality provided by insurance
intermediaries can be identified (Posey/ Yavas 1995; Posey/ Tennyson 1998; Seog 1999, 2005;
Eckardt 2007). On the demand side, consumers preferences in regard to insurance related
information and other transaction services and their transaction costs influence their make-or-buy
decision. Besides, many information services depend on privately held information by
consumers. Thus intermediation service quality depends also on the collaboration between
consumers and intermediaries. On the supply side, the distribution of the relevant information as
well as the search technology used are important factors that affect the search costs which have
to be incurred for producing information and other services of a certain quality level (Rose 1999;
Eckardt 2007). Most important inputs are the time spent for searching, processing and evaluating
information and investment in specific insurance-related human capital (knowledge and skills).
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Since consumers act either under a free price-illusion or simply do not know about what
percentage of the premiums they pay go to insurance intermediaries, price competition is quasi
not existent in the market for insurance intermediation (Cummins and Doherty 2006). Thus,
insurance intermediary markets are characterized by monopolistic competition (Cummins and
Doherty 2006; Eckardt 2007). Insurance intermediaries compete for customers both by
horizontal and vertical product differentiation. In the former case they offer different kinds of
services, while in the latter they offer different quality levels.
4.7 Literature Gap
The literature about distribution of life insurance clearly indicated that in most of liberalized
economy, the use of more than one channel is common and evidences suggests that the
multichannel strategy needs to be adopted, where both the agents and other channels, like
brokers, banks, corporate agents and advisors play a greater role in carrying out the smooth
network flow. This would help to create sustainable competitive advantage for this synergy
(Ranade and Ahuja, 1999). Evidences like an article by Arnold (2000) contain a survey of 750
executives, which found that the distribution effectiveness and technological preparedness are
the big concern for the life insurance CEOs in Europe and North America. In lately liberalized
Indian market where alternate channels are having combine share of twenty one per cent of new
premium it is need to study the reasons for lower adoption rate of alternate channels.
A clearly flowing literature indicating the superiority in service quality by various modes of
distribution is also not found. Authors like Etgar, Cummins and Weisbart, Eckardt & RathkeDoppner are not able to get any conclusion in this regards. Etgar (1976) did not found evidences
to support the hypothesis that independent agents provides batter overall service quality than
exclusive agents. Cummins and Weisbart (1977) obtained similar result in a study on insurance
intermediary that operates in three different states of US in personal insurance line, finding that
independent agents provide batter claims settlement service and review coverage more often,
while they provide less service quality than exclusive agents in other dimensions. Another study
reveals that the independent agents and insurance brokers provide better service quality when
information service and their contract conclusion rates are used as proxies, while exclusive
agents provide significantly more additional services. When taken together then there are no
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significance differences to be found between these various distribution channels in regards to the
total service quality provided (Eckardt & Rathke-Doppner, 2010).
While the key success factors for distribution are Productivity, Control, Turn Over and Customer
relationship (Shelton ,1995), the literature indicates that, In India the focus has been finding out
on getting new business only. Most of the problems and issues confronting the Indian life
insurance business in todays situation are of because of more marketing orientation. In the
issues like recruitment and selection of intermediaries, retention of agents, education and
training, agent productivity and morale, market conduct issues and research (Machiraju, 2003).
The marketing orientation is not only limited to insurer but also associated with intermediary.
Like rebating in the insurance industry has remained a bone of contention right from the colonial
era. If this menace has to be curbed it could be done only through stringent legislative measures
(Sithapathi, 2004). So it is required to study the life insurance intermediarys service quality ib
Indian context and fulfill this literature gap up to some extent.
5. Objectives of the study

A. To identify the factors contributing in the pre and post purchase service qualities of life
insurance intermediaries
B. To study the impact of pre and post purchase service quality of dominating life insurance
intermediaries (Agents & Bancassuarnce) on business generation and lapsation rate
respectively
C. To study the perceived cannibalization from internet channel among various types of life
insurance intermediaries
D. To study the perceived importance for information sources and training programmes,
among various types of life insurance intermediaries
E. To study the impact of demographic variables on business generation and lapsation rate
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6. Hypothesis for the study7

H1
(1.1)
: There is a significant relationship between security option and conversion by pre
selling talk of agents

H1 (1.2) : There is a significant relationship between policy design and conversion by pre selling
talk of agents
H1 (1.3) : There is a significant relationship between contract execution and conversion by pre
H1 (1.4) : There is a significant relationship between contract modification and conversion by pre
H1 (1.5) : There is a significant relationship between general aspects and conversion by pre
H1 (1.6) : There is a significant relationship between age of agents and conversion by pre selling
talk of agents
H1 (1.7) : There is a significant relationship between gender of agents and conversion by pre
H1
(1.8)
: There is a significant relationship between No. of years agents in the business and
conversion by pre selling talk of agents

H1 (1.9) : There is a significant relationship between education level of agents and conversion by
pre selling talk of agents
H1 (1.10) : There is a significant relationship between marital status of agents and conversion by
pre selling talk of agents
H1
(1.11)
: There is a significant relationship between type of company agents associated and
conversion by pre selling talk of agents

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Here only the alternate hypotheses for agents are mentioned. In the same line the hypothesis for bancassurance
are also developed stating 2 & 4 numbers.
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H1 (3.1) : Exceptional services, Revival Services, Routine Services, Age, Gender, Marital Status,
No. of Years in Business, Education, Type of Company associated of Agents not have significant
effect on first year lapsation of agents.
H1 (3.2) :The model is not a good fitting model
H1 (3.3) : There is a significant relationship between Exceptional services by agents and first year
policy lapsation rate of agents
H1 (3.4) : There is a significant relationship between Revival services by agents and first year
H1 (3.5) : There is a significant relationship between Routine services by agents and first year
H1 (3.6) : There is a significant relationship between Age of agents and first year policy lapsation
rate of agents
H1
(3.7)
: There is a significant relationship between Gender of agents and first year policy
lapsation rate of agents

H1 (3.8) : There is a significant relationship between Marital Status of agents and first year policy
H1 (3.9) : There is a significant relationship between No. of years in the business of agents and first
year policy lapsation rate of agents
H1 (3.10) : There is a significant relationship between Education of agents and first year policy
H1 (3.11) : There is a significant relationship between Type of company agent associated and first
year policy lapsation rate of agents
H1 (5.0) : There is a significant difference in perceived cannibalization through internet channel
among different types of intermediaries
16
H1
(6.1)
: There is a significant difference in perceived importance that different types of
intermediaries assign to development officer or team leader as a source of information.

H1
(6.2)
intermediaries assign to Branch (Company) officials as a source of information.

H1
(6.3)
intermediaries assign to Ready Recknoers as a source of information.

H1
(6.4)
intermediaries assign to Training Sessions as a source of information.

H1
(6.5)
intermediaries assign to Product Literature as a source of information.

H1
(6.6)
intermediaries assign to Company Website as a source of information.

H1
(6.7)
intermediaries assign to Web Search Engines as a source of information.

H1 (7.0): Type of life insurance distribution channel is significant on various types of training
programme for intermediary
H1
(7.1):
Type of life insurance distribution channel is significant on training by reporting
officer
H1 (7.2): Type of life insurance distribution channel is significant on training in branch
H1
(7.3):
Type of life insurance distribution channel is significant on training by private
institute
H1
(7.4):
Type of life insurance distribution channel is significant on training by freelance
trainer
H1 (7.5): Type of life insurance distribution channel is significant on training at special training
center
H1 (7.6): Type of life insurance distribution channel is significant on online training
17
7. Research Methodology
7.1 The element
An insurance market is characterized by incomplete and asymmetric information between
insurance companies and consumers (Cummins & Doherty 2006; Eckardt 2007). Insurance
intermediary market is also characterized by incomplete and asymmetric information.
Information and counseling services are complex and long-term insurance purchase decisions
having experience and credence goods (Nelson 1970; Darby & Karni 1973; Hirshleifer 1973).
According to principal-agent theory this information asymmetry leads to low quality provision
due to differing objectives between principals and agents. Consumers as principals have only
incomplete information about an intermediarys characteristics, knowledge and experience
before contract conclusion as well as about the intermediarys proper intentions and actions after
contract conclusion. Therefore the performance of the intermediary can be only incompletely
assessed by the principal. So the service quality of life insurance intermediary can better assess
through survey of intermediaries than customers.
7.2 Research design
A research design is a master plan that specifies the method and procedure for collecting and
analyzing the needed information; it is a framework for the research plan of action (Zikmund,
2003, pp 58).This research begins with exploratory research design as its immediate purpose is to
develop hypothesis and questions for further research (Cooper & Schindler, 2007, pp 139-140).
The formal study begins after the exploration leaves off.
For making the study conclusive after exploratory research, descriptive research design is used.
It uses set of scientific methods and procedures to collect raw data and create data structure that
describe the existing characteristics like attitude, intention, preference, purchase behavior,
evaluation of current marketing strategy etc (Hair, Bush, & Ortinau, 2000, pp 38). Under
descriptive research, Cross sectional design is used, means information from the sample of
population element is collected only once (Malhotra & Dash, 2007, pp 84).
7.3 Data Source
The secondary data in the form of previous research work, industry reports and articles are
collected from the library of National Insurance Academy (NIA), Pune and Indian Institute of
18
Management (IIM), Ahmedabad. E Journals packages like Emerald Management Extra,

Proquest, Ebsco has widely used for collecting the information about previous research. Leading
industry journals like IRDA Journal and Journal of Insurance Institute of India has been referred
along with IRDA annual reports for better understanding of Indian Scenario.
Primary data is collected through scientifically designed interviewer administered questionnaire
having close-ended questions. It is observed that most of the time intermediaries would like to
fill the questionnaire by them self instead of getting asked by the researcher.
7.4 Research instrument
Insurance intermediary pre services comprehend mainly information services which provided by
the intermediary to the client before execution of contract. On the bases of interviews with
experts on consumer protection in personal insurance, Eckardt & Doppner (2008) has dveloped a
scale named information index. It is a proxy for the information quality provided by insurance
intermediaries. It is a summary indicator that captures the weight that an insurance intermediary
attaches to twenty seven subjects about a customers need for insurance protection, insurance
products and coverage, policy design and contract terms. For each item the interviewee is asked
how much importance (with 1 = totally unimportant to 5 = very important) he gives to it in his
counseling interviews. On the bases of factor analysis, the contributing authors had divided the
scale in to seven factors. Out of which, variables for six factors (total twenty four variables) are
considered for this study purpose8
Post purchase services include number of activities carried out by the intermediary after
conclusion of the contract. The activities includes: collection of premium, revival / reinstatement
of paid up / lapsed policies, nomination and assignment, grant of loan, payment of survival
benefits, settlement of surrender value, alteration and finally the settlement of claims (death or
maturity) under a policy
(Das, Sankar; LIC of India, Kolkata, 2004), change in personal
Information. For this purpose a final list of post purchase services is prepared on the bases of
interaction with insurance professionals.
The dropped factor is titled Private Old age Insurance Products. It includes variables namely Capital sum life vs.
Reester Policy, Cost calculation by change of policy and Specific rest life insurance vs. capital sum life insurance.
These variables are not fond relevant with Indian context.
19
In this era of internet, the study on insurance distribution is incomplete without considering the
Internet channel. It is not possible to survey any intermediary as it is a non personal. It is
possible to check the perceived cannibalization among existing intermediaries from this channel.
Sharma & Gassenheimer (2009) has developed a scale on the bases of the survey of 511
insurance sales agents. The variables are measured on five point likert scale (Strongly agree to
strongly disagree).
7.5 Sampling
In this case the list of intermediaries is not available, so it is decided to go with non probability
sampling method. It is believed that the carefully controlled non probability sample often seems
to give acceptable results (Cooper & Schindler, 2007, pp 423). To improve the representation,
the controlling dimensions considered are type of intermediary, intermediary gender and type of
company with respondent is associated. Total 405 intermediaries were chosen from bank
employees, direct marketing persons and agents by convenient sampling method.
8. Data Analysis
The analysis was mentioned here in three parts. In the first part, for analyzing pre & post
selling service quality of life insurance intermediaries, one by one, for all variables of both the
scales exploratory factor analysis was employed. In the second part, for testing the validity the
construct and model fitting first order confirmatory factor analysis (CFA) was performed using
AMOS 16.0 based on the factor extracted by exploratory factor analysis. In the third part, factors
excreted are used for Binary logistics and Multinomial logic for all life insurance intermediaries
for analyzing their pre selling service quality and post selling service quality. For comparing the
pre selling services provided by various types of intermediary and their perceived canalization
for internet channel, MANOVA and ANOVA has been used.
8.1 Exploratory Factor Analysis: Pre Selling Service Quality Variables
After performing twelve iterations the final exploratory factor analysis of Pre Selling Service
Quality Variables is as under.
20
KMO and Bartletts Test (Revised)

KMO, Bartletts test of Sphericity and significant level
Kaiser-Meyer-Olkin Measure of Sampling Adequacy
Bartlett's Test of Sphericity
Approx. Chi-Square
Df
Sig.
*significant at 0.001 level
0.689
713.519
78
0.000*
Bartletts test of Sphericity value 713.519 with significance level of 0.000 satisfies the necessary
condition. It can be also observed that the MSA value is 0.689 which is greater than necessary
condition value 0.5. Hence, further analysis can be applied on it.
Eigenvalues
From the Total Variance explained in table, 5 factors are extracted where variance of Factor1 is
13.67 per cent, Factor2 is 12.87 per cent, Factor3 is 12.68 per cent, Factor4 is 12.54 per cent and
Factor5 is 12.50 per cent. The cumulative percentage variance explained is 64.26 per cent.
Composition of each factor identified in factor analysis
Factor
Security Option
Policy Design
Contract Execution
General Aspect
Contract
Modification
Items
Factor
loadings
Type and coverage of the insured risks (V16)
.791
Insurance and product types (V18)
.700
Contract period (V13)
.633
Disadvantage of different security option (V19)
.742
Premium design (V20)
.687
Occupational pension vs. private old age insurance (V2)
.639
Conflict Settlement (V24)
.846
Claim Settlement (V23)
.831
Investments Fund (V5)
.830
Disadvantage of Zillmering (V6)
.766
Costs of contract modification (V15)
.829
Procedure of contract modification (V14)
.789
21
The first factor contributed to 13.67 per cent of variance and made up of three variables.
All the three variables measure the various security options available with the insurer.
Thus, this factor was named as Security Option.
The second factor explained 12.87 per cent of variance in common core with three
variables. These three variables measure the aspect of premium and benefit comparison.
Thus, this factor was named as Policy Design.
The third factor contributed to 12.68 per cent of variance and made up of two variables.
These two variables were measure the services pertaining to execution of contract of the
policy holders. Thus, this factor was named as Contract Execution.
The fourth factor explained 12.54 per cent of variance in common core with two
variables. These two variables measure the basic information about the policy. Thus, this
factor was named as General Aspect.
The fifth factor contributed to 12.50 per cent of variance and made up of two variables.
These two variables measure the aspect of contract modification of the policyholders.
Thus, this factor was named as Contract Modification.
Reliability of the scales
In reliability analysis, internal consistency was computed by calculating Cronbach alpha
coefficient (). It was found to be 0.685 (Nunnally, 1978.) Indicating good internal reliability of
constructs.
8.2 Data Pruning and Confirmatory Factor Analysis: Pre Selling Service Quality Variables
Confirmatory Factor Analysis tests were run to test the convergent validity used in the study.
Convergent validity can be assessed by examining the factor loading of the measures on their
respective constructs (Anderson & Gerbing, 1998). Here in this study, the factor loading are
quite high (above 0.5, Hair et al., 2003) and significant at 0.05. Two items of the construct
Insurance and product types and Occupational pension vs. private old age insurance has
factor loading of 0.47 &0.47 respectively. These items are deleted from further analysis. After
deleting this low factor loading item, CFA was performed again. The final results of the
confirmatory factor analysis are reported in table.
22
Final Factor loadings and t values of items on respective constructs

Constructs
Factor 1: Security Option
Preinsrisk16
Precontpred13
Factor 2:Policy Design
Presecopt19
Prepremdesig20
Factor 3:Contract Execution
Preconfli24
Preclaim23
Factor 4:General Aspect
Preinvfun5
Prezill6
Factor 5:Contract
Modification
Precostmodif15
Precontmodif14
Factor Loading
Value of CR (t Values)
0.53
0.69
5.033
0.53
0.58
5.006
0.77
0.64
3.913
0.56
0.72
4.575
0.58
0.70
4.754
Convergent validity is also evaluated through an examination of the significance of the t values
(also known as critical ratio). Items which have a t value greater than 1.96 can be considered
significant based on the level of p = 0.05 (Anderson & Gerbing, 1988). In relation to this study,
all of the measurement items represented their factors significantly, as the t value of every item
exceeded the 1.96 value; hence, all of the measurement items satisfied the convergent validity
test.
After conducting the validity and reliability tests for all of the factors in the study, it is also
necessary to demonstrate the overall fit of the measurement model. The loading of the first order
confirmatory factor analysis is as under and the model is found fit.
23
Loading of the first order confirmatory analysis for preselling service quality
Standard first order loading a
Variables
Preinsrisk16
Precontpred13
Security Option b
Presecopt19
Prepremdesig20
Policy Design c
Preconfli24
Preclaim23
Contract
Execution c
Preinvfun5
Prezill6
General Aspect c
Precostmodif15
Precontmodif14
Contract
Modification c
R2
0.283
0.478
0.283
0.338
Security Option
.532 c
.691
--
Policy Design
Contract
Execution
General Aspect
Contract
Modification
(5.033)
0.544
0.532 c
0.581
--
0.588
0.403
0.172
0.370
0.424
0.347
0.767 c
0.635
0.411
0.379
0.237
0.215
(5.006)
-0.316
0.517
(3.913)
c
0.562
0.719
--
0.340
0.489
(4.575)
0.342
0.583 c
0.699
(4.754)
--
Notes: Standard first order loading is the standard regression weight of the individual variables loading on to one of the component factors.
Figures in parentheses are critical ratios from the unstandardized solution; b Standard first order loading for component factors (i.e. Security option,
Policy Design, Contract Execution, General Aspects and Contract Modification) is the covariance between any two of these component factors; c
The critical ratio is not available, because the regression weight of the first variable of each component factor is fixed at 1; x2 = 49.289, x2 /df=
1.972, df = 25, GFI = 0.976, RMSEA = 0.050, PCLOSE = 0.472, NFI = 0.905, CFI = 0.948, RMR = 0.038, AGFI = 0.947.
8.3 Exploratory Factor Analysis: Post Selling Service Quality Variables

By doing the four iterations final exploratory factor analysis has been did and then it followed by
confirmatory factor analysis. The final output of both the techniques is as under.
From the Total Variance explained, 3 factors are extracted where variance of Factor1 is 25.05
per cent, Factor2 is 20.58 per cent and Factor3 is 18.94 per cent. The cumulative percentage
variance explained is 64.57 per cent.
24
Composition of each factor identified in factor analysis

Factor
Factor
Items
Exceptional Services
Collection of premium (V2)
0.735
Policy delivery (V1)
0.708
Change in personal information (V12)
0.695
Settlement of claims (V11)
0.628
Revival / reinstatement of paid up policies (V3)
0.892
Revival / reinstatement of lapsed policies (V4)
0.875
Grant of loan (V7)
0.863
Assignment (V6)
0.779
Revival Services
Routine Services
loadings
The first factor contributed to 25.05 per cent of variance and made up of four variables.
All the four variables measure the Services which are used by very few clients. Thus, this
factor was named as Exceptional Services.
The second factor explained 20.58 per cent of variance in common core with two
variables. These two variables measure the services related to non-commitment by
clients. Thus, this factor was named as Revival Services.
The third factor contributed to 18.94 per cent of variance and made up of two variables.
These two variables were measure the services which are used by more number of
clients. Thus, this factor was named as Routine Services.
Reliability of the scales

In reliability analysis, internal consistency was computed by calculating Cronbach alpha
coefficient (). It was found to be 0.731 (Nunnally, 1978.) indicating good internal reliability
of constructs.
8.4 Data Pruning and Confirmatory Factor Analysis: Post Selling Service Variables
Confirmatory factor analysis (CFA) seeks to determine if the number of factors and the loadings
of measured (indicators) variables on them conform to what is expected on the basis of pre
25
established theory. Indicator variables are selected on the basis of prior theory and factor analysis
is used to see if they load as predicated on the expected number of factors.
Confirmatory Factor Analysis tests were run to test the convergent validity used in the study.
Convergent validity can be assessed by examining the factor loading of the measures on their
respective constructs (Anderson &Gerbing, 1998). Here in this study, the factor loading are quite
high (above 0.5, Hair et al., 2003) and significant at 0.05.The final results of the confirmatory
factor analysis are reported in table.
Final Factor loadings and t values of items on respective constructs
Constructs
Factor Loading
Value of CR
(t Values)
Factor 1: Exceptional Services

Poscollprem2
Pospoldel1
Posperinf12
Posclaim11
0.551
0.554
0.615
0.623
7.248
7.644
7.683
0.809
0.797
8.376
0.595
0.751
5.798
Factor 2:Revival Services

Posrevpupo3
Posrevlppo4
Factor 3:Routine Services

Posgrnloan7
Posassig6
Convergent validity is also evaluated through an examination of the significance of the t values
(also known as critical ratio). Items which have a t value greater than 1.96 can be considered
significant based on the level of p = 0.05 (Anderson &Gerbing, 1988). In relation to this study,
all of the measurement items represented their factors significantly, as the t value of every item
exceeded the 1.96 value (refer table); hence, all of the measurement items satisfied the
convergent validity test.
The table represents a summary of goodness of fit measures for the confirmatory factor
analysis.
26
Loading of the first order confirmatory analysis for post selling service quality
Variables
Standard first order loading a

Exceptional
Revival Services
Routine Services
Services
0.551 c
0.554
(7.248)
0.615
(7.644)
0.623
(7.683)
poscollprem2
0.304
pospoldel1
0.306
posperinf12
0.378
posclaim11
0.388
Exceptional
-0.475
0.499
Servicesb
c
posrevPUpo3
0.655
0.809
posrevLPpo4
0.635
0.797
(8.376)
-0.410
Revival Servicesc
posgrnloan7
0.354
0.595 c
posassig6
0.564
0.751 (5.798)
-Routine Servicesc
Notes: aStandard first order loading is the standard regression weight of the individual
variables loading on to one of the component factors. Figures in parentheses are critical ratios
from the unstandardized solution; b Standard first order loading for component factors (i.e.
Routine & Alteration Services, Exceptional Services, Revival Services) is the covariance
between any two of these component factors; c The critical ratio is not available, because the
regression weight of the first variable of each component factor is fixed at 1; x2 = 66.78, x2
/df= 3.928, df = 17, GFI = 0.960, RMSEA = 0.08, PCLOSE = 0.003, NFI = 0.903, CFI =
0.925, RMR = 0.034, AGFI = 0.914.
8.5 Relationship between Pre selling service quality factors, demographics and conversion
after pre selling talk among agents
For dependent variable conversion after pre selling talk among agents the responses are divided
in three categorical variables and the independent variables includes metric and non metric data.
Instances where the independent variables are categorical, or a mix of continuous and
categorical, and the dependent variables are categorical, logistic regression is necessary. So here
Multinomial logistic regression is used. Here, the dependent variable has three categories
wherein 19.5 per cent respondents having 0 to 10 per cent conversion by pre selling talk, 34.9
per cent respondents having 11 to 20 per cent conversion by pre selling talk and rest 45.6
per
cent having conversion more than 20 per cent conversion. Of which, the last category is
considered as the reference category. For this model Nagelkerkes R2 value was 0.217 indicating
moderate level of per cent variance explained by the independent variable. For this model null
hypothesis H0 (1.9) was rejected. While H0 (1.1), H0 (1.2), H0 (1.3), H0 (1.4), H0 (1.5), H0 (1.6), H0 (1.7), H0
(1.8),
H0 (1.10) and H0 (1.11) were accepted. The respective models are as under.
Logit (0 to 10 per cent conversion by pre selling talk) = -1.135 + (0.280) * security option +
(0.347) * policy design + (-0.324) * contract execution + (0.298) * contract modification + (-
27
0.207) * general aspects + (0.360) * age between 21 to 35 years + (0.419) * age between 36 to 50
years + (-0.077) * male + (0.420) * experience of less than a year + (0.273) * experience from 1
to 3 years + (0.311) * experience more than 3 to 6 years + (-0.163) * experience more than 6 to
10 years + (-0.090) * SSC + (0.670) * HSC + (-1.319) * Above HSC less than Graduation + (0.970) * Graduation + (-0.895) * married +(0.014) * Private
Logit (11 to 20 per cent conversion by pre selling talk) = -0.317+ (0.132) * security option +
(0.281) * policy design + (0.040) * contract execution + (0.136) * contract modification + (0.161) * general aspects + (-0.123) * age between 21 to 35 years + (-0.341) * age between 36 to
50 years + (-0.201) * male + (-0.861) * married +(1.454) * experience of less than a year +
(1.257) * experience from 1 to 3 years + (1.513) * experience more than 3 to 6 years + (1.039) *
experience more than 6 to 10 years + (-0.473) * SSC + (-0.606) * HSC + (-0.416)* Above HSC
less than Graduation + (-1.218) * Graduation + (-0.214) * Private
8.6 Relationship between Pre selling service quality factors, demographics and conversion
after pre selling talk among bancassurance
Here, the dependent variable has three categories wherein 32.3 per cent respondents having 0 to
10 per cent conversion by pre selling talk, 40.0 per cent respondents having 11 to 20 per cent
conversion by pre selling talk and rest 27.7 per cent having conversion more than 20 per cent
conversion . Of which, the last category is considered as the reference category. For this model
Nagelkerkes R2 value was 0.596 indicating moderately strong level of per cent variance
explained by the independent variable. For this model the null hypothesis H0(2.2), H0 (2.5), H0 (2.7)
and H0(2.8)was rejected. While H0 (2.1), H0 (2.3), H0 (2.4), H0 (2.6), H0 (2.9), H0 (2.10) and H0 (2.11) were
accepted.
Logit (0 to 10 per cent conversion by pre selling talk) = -11.945+ (-0.239) * security option +
(2.557) * policy design + (-0.748) * contract execution + (0.472) * contract modification +
(1.119) * general aspects + (-0.787) * age between 21 to 35 years + (3.441) * male + (2.055) *
married +(23.637) * experience of less than a year + (4.485) * experience from 1 to 3 years + (0.514) * Graduation + (0.505) * Private
Logit (11 to 20 per cent conversion by pre selling talk) = -7.099+ (0.226) * security option +
(1.094) * policy design + (-0.453) * contract execution + (0.472) * contract modification + (28
0.197) * general aspects + (0.693) * age between 21 to 35 years + (2.653) * male + (0.878) *
married +(22.301) * experience of less than a year + (3.279) * experience from 1 to 3 years +
(0.360) * Graduation + (0.719) * Private
8.7 Relationship between Post selling service quality factors, demographics and first year
policy lapsation rate among agents
For dependent variable first year lapsation rate the responses are divided in two categorical
variables (81.3 per cent agents having 0 to 20 per cent first year lapsation rate and 18.7 per cent
agents having more than 20 per cent first year lapsation rate) and the independent variables
includes metric and non metric data. Instances where the independent variables are categorical,
or a mix of continuous and categorical, and the dependent variables are categorical, logistic
regression is necessary. So here Ordinal logistic regression is used. For this model Nagelkerkes
R2 value was 0.149, indicating a moderate relationship of 14.9per cent between the predictors
and the prediction. For this model, null hypothesis H0(3.4), H0 (3.5) andH0 (3.11) was rejected. While
H0 (3.3), H0 (3.6), H0 (3.7), H0 (3.8), H0 (3.9), H0 (3.10) and H0 (3.11) were accepted.
Logit (Agents first year of lapsation rate) = -0.253 + (0.028) * Exceptional services + (0.514) *
Revival services + (-0.721) * Routine services + (0.383) * age between 21 to 35 years + (-0.031)
* age between 36 to 50 years + (-0.073) * male + (0.465) * married + (0.481) * experience of
less than a year + (1.154) * experience from 1 to 3 years + (0.864) * experience more than 3 to 6
years + (1.118) * experience more than 6 to 10 years + (0.333) * SSC + (-0.883) * HSC + (0.621) * Above HSC less than Graduation + (-0.232) * Graduation + (0.663) * Private
8.8 Relationship between Post selling service quality factors, demographics and first year
policy lapsation rate among bancassurance
Here 81.5 per cent bancassurance respondents having 0 to 20 per cent first year lapsation rate
and 18.5 per cent bancassurance respondents having more than 20 per cent first year lapsation
rate. For this model Nagelkerkes R2 value was 0.439, indicating a moderate relationship of
43.9per cent between the predictors and the prediction. For this model the null hypothesis H0 (4.5),
H0 (4.6)and H0 (4.7)was rejected. While H0 (4.3),H0 (4.4), H0 (4.8), H0 (4.9), H0 (4.10), and H0 (4.11) were
accepted.
29
Logit (Bancassurances first year of lapsation rate) = -3.488 + (0.978) * Exceptional services +
(1.011) * Revival services + (-1.096) * Routine services + (2.386) * age between 21 to 35 years
+ (-2.375) * male + (-0.290) * married + (-1.428) * experience of less than a year + (-0.596) *
experience from 1 to 3 years + (1.294) * Graduation + (0.957) * Private
8.9 Relating distribution channels of Life Insurance to cannibalization through internet

In order to relate various distribution channels of Life Insurance to perceived cannibalization
through internet, various types of life insurance intermediaries were taken as independent
variable while perceived cannibalization through internet was taken as a dependent variable. For
this, ANNOVA is administered because ANNOVA is a statistical method for determining the
existence of difference among several population means. To measure the significant difference
related to the independent variables, One Way Analysis of Variance (ANNOVA) was conducted.
The univariate F-ration is significant different for the independent variables i.e. Agents,
Bancassuarnce and Direct Marketing (F=5.653, Sig. = 0.04). In addition to this, the means score
of all three distribution channel of Life Insurance were checked and it was found that all the
three distribution channel have different level of perceived cannibalization about internet.
Henceforth, the overall results suggest that H1 (5.0) was supported i.e. there is difference about
perceived cannibalization through internet channel among different types of intermediaries. A
Tukey post-hoc test revealed that the level of perceived cannibalization from internet channel is
higher after taking Agents (Mean Score =3.15, SD = 0.83, Sig. = 0.002) and Bancassurance
(Mean Score =3.15, SD = 0.83, Sig. = 0.039) compare to Direct Marketing (Mean Score =2.72,
SD = 0.65). There was no statically significant difference between Agents & Bancassurance
about their perceived cannibalization for Internet Channel (Sig. = 0.891).
8.10 Relating Type of Intermediary to perceived importance for various sources of

information
A Kruskal-Wallis test was conducted to evaluate differences among the three avenues for
distribution of life insurance products (agents, bancassurance and direct marketing) on
importance they like to assign development officer or team leader as a source of information.
The test was significant X2 (2, N = 405) = 11.823, p = 0.003 and H1 (6.1) is supported. Mann30
Whitney U tests were conducted to evaluate pair wise differences among the three groups. The
results of these tests indicated a significant difference between Bancassurance & Direct
Marketing (U = 1029, p = 0.007) and Agents & Direct Marketing (U = 4604, p = 0.001).
importance they like to assign ready reckons as a source of information. The test was significant
X2 (2, N = 405) = 5.432, p = 0.066 9 and H1 (6.3) is supported. Mann- Whitney U tests were
conducted to evaluate pair wise differences among the three groups. The results of these tests
indicated a significant difference between Agents & Bancassurance (U = 7847, p = 0.020).
importance they like to assign ready company website as a source of information. The test was
significant X2 (2, N = 405) = 13.83, p = 0.001 and H1 (6.6) is supported. Mann- Whitney U tests
were conducted to evaluate pair wise differences among the three groups. The results of these
tests indicated a significant difference between Bancassurance & Direct Marketing (U =
1056, p = 0.011) and Agents & Direct Marketing (U = 4460, p = 0.000).
For the other sources of information Company Officials, Training Sessions, Product Literature
and Web search engine the result is found insignificant. So H1 (6.2), H1 (6.4), H1 (6.5), and H1 (6.7) is not
supported.
8.11 Relating Type of Intermediary to perceived importance for various types of training
programme
One of the objectives of this research is to establish the relationship between Type of
intermediary and intermediaries perceived importance for various training programmes.
Considering this, Type of intermediary is taken as independent variable while various training
programmes offered to intermediaries is dependent variable. For this, MANOVA is administered
because MANOVA is a multivariate extension of the univariate techniques used for measuring
9
Significant at alpha 0.10.
31
the differences between group means. As stated by Hair et al. (1998, p.14), MANOVA is a
statistical technique that can be used to simultaneously explore the relationship between several
categorical independent variables (usually referred to as treatments) and two or more metric
variables.
To measure significant difference related to the independent variables, one Multivariate Analysis
of Variance (MANOVA) test with repeated measures were conducted. The MANOVA and
subsequent ANOVA results are shown in Table 106, and it was found that there is statistically
significant difference between Type of intermediary (i.e. Agent, Bancassurance and Direct
marketing) for the six dependent variables of types of training programme i.e. By Reporting
Officer, In Branch, By Private Institute, By Free Lance Trainer, At Special Training Center and
Online (Wilks Lamda = 0.907; Significance: p =0.000< 0.05).
As indicated in Table 106, the univariate F-ration were also significant for the three dependent
variables i.e. By Reporting Officer (F=7.796, Sign. = 0.000), By Private Institute (F=3.814, Sign.
=0.023), By Free Lance Trainer (F=3.953, Sign. =0.020) but statistically type of intermediary
was non significant on In Branch (F=1.020, Sign. =0.361), At Special Training Center
(F=1.982, Sign. =0.139) and Online (F=2.602, Sign. =0.075). In addition to this, the means score
for perceived importance of all the six types of training programme were checked and it was
found that the Training by Reporting Officer is preferred by direct marketing employees
followed by agents and bancassurance subsequently. While the Training by Private Institute is
preferred by bancassurance employees followed by direct marketing employees and agents
subsequently. The training by Free Lance Trainer is preferred by direct marketing employees
followed by bancassurance employees and agents subsequently. Henceforth, overall results
support H1 (7.0) , H1 (7.1) , H1 (7.3) and H1 (7.4) but H1 (7.2), H1 (7.5), and H1 (7.6) were not supported
(Refer the Table).
32
MANOVA results for type of distribution channel to perceived importance for

various types of training programme
Value
Significan
ce
0.096
0.907
0.101
0.064
3.327
3.324
3.321
4.207
0.000*
0.000*
0.000*
0.000*
-------------
7.796
1.020
3.814
0.000*
0.361
0.023*
-----
3.953
0.020*
-----
1.982
0.139
-----
2.602
0.075
Effect
Multivariate tests
Type of Distribution
Channel
Pillais Trace
Wilks Lambda
Hotellings Trace
Roys Largest Root
ANOVA tests
Training.
By Reporting Officer
In Branch
By Private Institute
By Free Lance
Trainer
At Special Training
Center
Online
Type of Distribution
Channel / Training
Agent (n=295)
Bancassurance
(n=65)
Direct Marketing
(n=45)
By
Reporting
Officer
1.75
1.57
2.00
1.64
In Branch
2.65
By Free
Lance
Trainer
2.68
At Special
Training
Center
1.89
2.26
2.47
1.93
By Private Institute
Online
3.20
2.72
2.68
1.42
1.73
2.46
2.20
1.60
Note: * p < 0.05
9. Discussion of the results

This study has produced a wealth of important results that will be discussed in some detail in this
chapter, which is divided into five sections. The first section deals with the intermediary service
quality scale that is further divided in two parts; pre and post-service quality scales. Section two
discusses about the association between pre service quality of intermediary and sales conversion
ratio, in the light of demographic variables for both insurance agents and bancassurance
33
employees. The third section discusses about the association between post-service quality of
intermediary and first year lapsation rate in the light of demographic variables for both insurance
agents and bancassurance employees. The fourth section compares the perceived cannibalization
for internet channel among the member of other distribution channels and the last section
mentions about the preference of intermediaries about industrys training and development
initiatives.
9.1 The Service Quality Scales
The presence of incomplete and asymmetric information flow between insurance companies and
consumers (Cummins & Doherty 2006; Eckardt 2007) and high credence quality (Nelson 1970;
Darby & Karni 1973; Hirshleifer 1973) compel the researcher to do the primary study about the
service quality with the survey of intermediaries only. On the basis of interviews with experts on
consumer protection in personal insurance, Eckardt & Doppner (2008) have dveloped a scale
named information index. It is a proxy for the information quality provided by insurance
intermediaries. This scale has been adopted for the measurement of pre-selling service quality of
the intermediary and purified after discussion with the industry experts. The total items have
been reduced to twenty four, from twenty six, on five point scale, totally unimportant to very
important. The scale is found reliable. After thirteen iterations during the exploratory factor
analysis, the scale is found fit for confirmatory factor analysis and finally results in five factors
and twelve variables. The validity of the scale is also measured.
For measuring the post-selling service quality, no scale was available. A list of different postselling activities of intermediary is prepared on the basis of interaction with insurance
professionals and published articles (Das, Sankar; LIC of India, Kolkata, 2004). This is finalized
into twelve variables measured on five point scale from totally unimportant to very important.
The scale is found reliable. After five iterations during the exploratory factor analysis, the scale
is found fit for confirmatory factor analysis and finally results in three factors and eight
variables.
Both these scales are significant contributions of this study to the field of insurance research in
India, as no attempt has been found earlier to study the service quality of life insurance
34
intermediaries. These scales can be used in further studies and it can be the base, for future
development of constructs for measuring service quality of life insurance intermediaries.
Moving to the next section, it has been found that the recruitment of the agents is unsystematic
compared to the recruitment of bancassurance employees. This fact is reflected from the strength
of the model where Nagelkerkes R2 value is moderate for Agents (0.21 for pre-selling & 0.14
for post-selling), while it is good for bancassurance (0.59 for pre-selling & 0.43 for post-selling).
Revealing that, it is very difficult to obtain the predictors for agents.
9.2 Relationship between Preselling service quality factors, demographics and conversion
after preselling
Turner (2008) has concluded in his study that formal education, professional education, and
training showed no effect on production. Contraditcing to this, Graduate Agents are found to be
significantly related to the conversion by preselling talk with coefficient value of -0.970 and
negative relationship is displayed also from other measure i.e. value of exponential coefficient
(0.379) is less than one. This indicates that Graduate Agents are 0.379 times more likely to prefer
more than 20 per cent conversions (compared to 0 to 10 per cent) by preselling talk than the
Post Graduate Agents. For the category 11 to 20 per cent conversion, Graduate Agents are 0.296
times more likely to prefer more than 20 per cent conversions by preselling talk than the Post
Graduate Agents. This is because; most of the graduates have adopted the agency as their main
business. While compared to graduates, less number of post graduate intermediaries adopt
agency as their main business. Due to higher education, the post graduates are also engaged in
some other vocations, parallel to the agency business. This scattered focus creates hindrance in
the efficiency of post graduate agents.
Married Agents are found to be significant with coefficient value of (-0.861). This indicates that
married agents are 0.423 times more likely to prefer more than 20 per cent conversions
(compared to 11 to 20 per cent) by preselling talk than the unmarried agents. Thus, married
agents are considered more sincere in doing the business. That is due to two reasons; one is the
family responsibility and another is the maturity in doing business due to experience, because
married agents are elder than unmarried one.
35
This study supports the conclusion of an earlier study by Radhakrishnan, Sivasubramanian, &
Ravanan (2010). The experienced agents performe, better in terms of generating the business.
Considering the variable number of years in business and taking conversion more than 20 years
as a reference category, the variable number of years in business from less than one year, is
significant with coefficient value of 1.454 indicating that an agent being in business for less than
one year is 4.280 times more likely to do conversion between 11 to 20 per cent as compared to
an agent having more than ten years of experience in business. The variable, number of year in
business from one to three years, is also found significant with coefficient value of 1.257. This
indicates that agents from one to three years of experience in business are 3.516 times more
likely to do conversion between 11 to 20 per cent as compared to more than ten years
experienced agents. In addition to this, the variable number of years in business from three to
six years is also found significant with coefficient value of 1.513 that indicating agents having
experience of more than three years to six years are 4.539 times more likely to do conversion
between 11 to 20 per cent as compared to more than ten years experienced agents. This denotes
that more years of experience leads to better performance of agents in terms of conversion in
business after pre selling talk.
For bancassurance, the coefficient of factor Policy Design is positive and positive relationship
is displayed also from other measure i.e. value of exponential coefficient (12.897), which is
greater than one. This indicates that higher the value for policy design (more focus on policy
design in pre selling talk), predicted probability of more than 20 per cent (compared to 0 to 10
per cent) conversion after preselling talk is likely to increase among bancassurance. This is due
to policy design, which includes two important variables; namely premium design and different
security options. Both have a significant impact on monetary cost to customer about which he is
worried the most. Life insurance buying involves the monetary commitment for present and
future both. There are two classes of customers; one who buy insurance from saving and another
who needs to save for fulfilling the premium commitment. The latter portion is larger and more
concern about the cost benefit combinations. So if, during the pre-selling talk, the prospective
customer is convinced about the cost, then the conversion ratio after pre selling talk will
increase.
36
For bancassurance, the variable Male is found to be significant with coefficient value of 3.441
and 2.653 subsequently. This indicates that male bancassurance employees are 31.23 times more
likely to prefer 0 to 10 per cent conversions (compared to more than 20 per cent), and
subsequently 14.196 times more likely to prefer 11 to 20 per cent conversions (compared to
more than 20 per cent) by preselling talk than the female bancassurance employee. It means that
females perform better in bancassurance in terms of conversion after pre-selling talk. In the
similar line about the agents in Indian context, Arulsuresh & Rajamohan (2010) says that the
Gender of an agent is yet another relevant feature in the rural context that makes a difference
especially for the female population. Women to whom the customers can relatenurses, gram
sevikas etc. can target the female segment of the population more effectively. Normally life
insurance buying decision is taken by male members of the family, and female executive gets
cross gender advantages in their sales pitch. Sales problems like resistance to listen by client and
heavy cross arguments are observed less when females are pitching to male.
For bancassurance, the variable experience less than three years is significant with coefficient
value 23.637 indicating that the probability of converting 0 to 10 per cent by pre-selling talk of
less than one year experienced bancassurance employees is more than three to six years
experienced bancassurance employees. For one to three years experienced bancassurance
employees, it is significant with coefficient value of 4.485 and 3.279 subsequently. This
indicates that bancassurance employees with experience of one to three years are 88.716 times
more likely to prefer 0 to 10 per cent conversions (compared to more than 20 per cent), and
subsequently 26.562 times more likely to prefer 11 to 20 per cent conversions (compared to more
than 20 per cent) by preselling talk than more than three to six years experienced bancassurance
employee. This denotes that the higher experience leads to better performance of bancassurance
employees in terms of conversion after pre selling talk. In the similar line about the agents, it is
concluded that the experienced agents perform better in terms of generating the business
(Radhakrishnan, Sivasubramanian, & Ravanan, 2010.)
9.3 Relationship between postselling service quality factors, demographics and first year
policy lapsation rate
For post selling services of agents, the coefficient of revival services is positive (0.514) and
positive relationship is displayed also from other measure i.e. value of exponential coefficient
37
(1.672) is more than one. This indicates that, higher the value of revival services, predicted
probability of having first year lapsation rate of 0 to 20 per cent among agents is likely to
increase than first year lapsation rate of more than 20 per cent. This means by more emphasizing
the revival services in post selling services of agents, the first year lapsation rate can be reduced.
A revival service includes two services namely reinstatement of paid up policies and
reinstatement of lapsed policies. After selling the life insurance policy, if the intermediary
focuses on these two services then the customer may prefer to go for either option, instead of
lapsation and lose the full amount that he/she had paid. The lapsation rate is a key operating
parameter that reflects both consumer behavior and insurer managerial decisions involving life
policies. Supporting to this outcome, Kumar, Jagendra (2009) said that, one of the major causes
for the growing lapsation ratio is forced selling by agents to achieve their targets. Agents also
sell policies without taking customers needs into account. After ensuring that the customer paid
premium for the first year, insurance agents would not remind policyholders to pay their
subsequent premiums as the commission was not attractive (ShriNivas, 2008).
Subsequently, the coefficient of routine services is negative for both agents and bancassurance
employees (-0.721 & -1.096) and negative relationship is displayed also from other measure i.e.
value of exponential coefficient (0.486 & 0.334), which is less than one. This indicates that
lower the value of routine services, predicted probability of having first year lapsation rate of 0
to 20 percent among agents and bancassurance employees is likely to decrease or the probability
of first year lapsation rate of more than 20 per cent is likely to increase. The routine services
include the variables namely granting of loan and assignment of policy. Both have similar
purposes to pledge the policy as an asset for obtaining the finance. One of the reasons behind the
lapsation is inability to pay the premium due to financial constrain. If the financial constraint is
for short term then it can be reduced by obtaining the finance on policy and the probable
lapsation of life insurance can be avoided. Supporting to this outcome, on the basis of survey of
agents, development officers and branch managers of Life Insurance Corporation of India,
ShriNivas (2008) mentioned that revival of lapsed policies and sanction of loans within surrender
value are also essential services to the policy holder during the entire period of the policy
contract to discourage lapsation.
38
The conversion of odds to probabilities indicated that the first year lapsation ratio for private life
insurance companies is almost double to that of Life Insurance Corporation of India. This fact is
matching with IRDA reports10 and Kumar, Jagendra (2009), indicating the reason that private
companies agents are more focusing on selling approach instead of highly desirable marketing
approach.
The conversion of odds to probabilities indicated that the more experienced bancassurance
employees are performing better in terms of first year lapsation rate. Their lapsation ratio is very
less and it can be concluded that the experienced persons can better understand the need of the
client. With this, the conversion of odd to probabilities also indicates that the male bancassurance
employees have lesser lapsation ratio than females.
9.4 Relating distribution channels of life insurance to cannibalization through internet
The level of perceived cannibalization for internet channel is higher to the agents and
bancassurance employees compared to direct marketing channel members. Both agents and
bancassurance employees feel that there is loss of business in future due to the online buying,
because it is significantly cost effective to buy a life insurance by internet channel. Infect, the
key success factor for the concept of online buying of life insurance is the elimination of the
commission expenses that are been passed to agents or banks in case of a sale other than online
way. Confirming this output, Eastman et al. (2002) found that insurance agents experiencing the
addition of an internet channel felt insecure about their job. While the direct marketing channel
members are employees of insurers and their income is majorly based on salary not the
commission, some time they take internet as a complimentary channel rather than substitute as
business inquiries generated through internet are transferred to them for further process.
9.5 Importance of source for Information & Training
The three avenues for distribution of life insurance products namely agents, bancassurance and
direct marketing are different on the basis of the importance they like to assign to development
officer or team leader, ready reckoners and company website as a source of information. Direct
Marketing channel members assign more importance to their team leader as a source of
information, as being a full time worker exclusively working for life insurance selling they are
10
IRDA Annual Report 2011-2012, pp 174.
39
more in touch with their team leader, who is their immediate boss too. Compared to
Bancassuarnce employees, agents give more significance to ready reckoners because of their
long run habit to use it. Compared to agents, Direct Marketing people are relying more on the
company website as a source of information because it is a new channel and containing most of
the young staff members, who are more comfortable with information technology. Because of
the multitasking, bancassurance employees are little reluctant to search on the website.
It is proved that the importance assigned by various types of intermediaries to different types of
training programmes is different. It was found that the Training by Reporting Officer is preferred
by direct marketing employees followed by agents and bancassurance subsequently. It is
because, the direct marketing employees are supposed to report daily about their performance
and experiences. Normally, these meetings are held personally and the employees are
immediately updated by the reporting officer. Being regular employees and having exclusive
duty of life insurance selling, more in-house training programmes can be conducted by the
reporting officer. As the trainer (reporting officer) is also their immediate boss, she/he can better
understand expectations of his/her subordinates from the training programme, and that leads
higher satisfaction of trainees.
While Training by Private Institute is preferred by bancassurance employees followed by direct
marketing employees and agents subsequently. The bank employees are supposed to handle
banking services with insurance and they are considering Insurance as a cross selling product.
Normally in a bank branch, only one person is handling bancassurance and their superiors are
from core banking, (not from insurance). So banks normally prefer to outsource the training to
private institutes. The training by Freelance Trainer is preferred by direct marketing employees
followed by bancassurance employees and agents subsequently.
10 Benficiaries of the Research

Insurance Institute of India (III): This research work is considered for research grant by
Insurance Institute of India, Bombay. The author is invited to present the progress in 58th Annual
General Meeting of III on 24th August, 2013 at Kolkata.
40
National Insurance Academy, Pune (NIA): The author had obtained the membership of
National Insurance Academy, Punes library and during his visit; he has been invited to submit
his thesis at NIAs library.
Insurance Regulatory Development Authority (IRDA): After submission of the thesis,
Insurance Regulatory Development Authority will be contacted and research work will be shared
with IRDA.
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1.

2. The Distribution Dilemma

Source: The table extracted from IRDA Annual Report 2011-12, pp 82

3. Problem Statement & Research Questions

Does service quality of different types of intermediaries contributors to their respective

How do demographic features of an intermediary and type of company (private or LIC)

4.2 Direct Vs indirect distribution system

evolving, expanding and, in some cases, witnessing a complete turnaround. Increased

5. Objectives of the study

6. Hypothesis for the study7

: There is a significant relationship between security option and conversion by pre

selling talk of agents

conversion by pre selling talk of agents

: There is a significant relationship between type of company agents associated and

conversion by pre selling talk of agents

lapsation rate of agents

: There is a significant difference in perceived importance that different types of

intermediaries assign to development officer or team leader as a source of information.

: There is a significant difference in perceived importance that different types of

intermediaries assign to Branch (Company) officials as a source of information.

: There is a significant difference in perceived importance that different types of

intermediaries assign to Ready Recknoers as a source of information.

: There is a significant difference in perceived importance that different types of

intermediaries assign to Training Sessions as a source of information.

: There is a significant difference in perceived importance that different types of

intermediaries assign to Product Literature as a source of information.

: There is a significant difference in perceived importance that different types of

intermediaries assign to Company Website as a source of information.

: There is a significant difference in perceived importance that different types of

intermediaries assign to Web Search Engines as a source of information.

Type of life insurance distribution channel is significant on training by reporting

Type of life insurance distribution channel is significant on training by private

Type of life insurance distribution channel is significant on training by freelance

Management (IIM), Ahmedabad. E Journals packages like Emerald Management Extra,

(Das, Sankar; LIC of India, Kolkata, 2004), change in personal

KMO and Bartletts Test (Revised)

Type and coverage of the insured risks (V16)

Insurance and product types (V18)

Contract period (V13)

Disadvantage of different security option (V19)

Premium design (V20)

Occupational pension vs. private old age insurance (V2)

Conflict Settlement (V24)

Claim Settlement (V23)

Investments Fund (V5)

Disadvantage of Zillmering (V6)

Costs of contract modification (V15)

Procedure of contract modification (V14)

Final Factor loadings and t values of items on respective constructs

8.3 Exploratory Factor Analysis: Post Selling Service Quality Variables

Composition of each factor identified in factor analysis

Collection of premium (V2)

Policy delivery (V1)

Change in personal information (V12)

Settlement of claims (V11)

Revival / reinstatement of paid up policies (V3)

Revival / reinstatement of lapsed policies (V4)

Grant of loan (V7)

Reliability of the scales

Factor 1: Exceptional Services

Factor 2:Revival Services

Factor 3:Routine Services

Standard first order loading a

8.9 Relating distribution channels of Life Insurance to cannibalization through internet