SIVA SIVANI INSTITUTE OF MANAGEMENT 1 CHAPTER - I 1.

1 - Introduction With
largest number of life insurance policies in force in the world, Insurance happens
to be a mega opportunity in India. Its a business growing at the rate of 15-20 %
annually and presently is of the order of Rs 450 billion. Together with banking
services, it adds about 7 % to the countrys GDP. Gross premium collection is
nearly 2 % of GDP and funds available with LIC for investments are 8 % of GDP.
Yet, nearly 80 % of Indian population is without life insurance cover while health
insurance and non-life insurance continues to be below international standards.
And this part of the population is also subject to weak social security and pension
systems with hardly any old age income security. This itself is an indicator that
growth potential for the insurance sector is immense. A well-developed and
evolved insurance sector is needed for economic development as it provides long
term funds for infrastructure development and at the same time strengthens the
risk taking ability. It is estimated that over the next ten years India would require
investments of the order of one trillion US dollar. The Insurance sector, to some
extent, can enable investments in infrastructure development to sustain
economic growth of the country. The growing number of wealthier as well as
aging Indian middle class is set to offer a strong business potential for the
countrys untapped life insurance market. Insurance is a federal subject in India.
There are two legislations that govern the sector- The Insurance Act- 1938 and
the IRDA Act- 1999. The insurance sector in India has come a full circle from
being an open competitive market to nationalization and back to a liberalized
market again. Tracing the developments in the Indian insurance sector reveals
the 360 degree turn witnessed over a period of almost two centuries. As the
twentieth century has come to a close and we have move into the third
millennium, we can see many developments and changes taking place around us
with all the industries and firms within each SIVA SIVANI INSTITUTE OF
MANAGEMENT 2 industry trying to keep pace with the changes and diverse
needs of the people. Though for decade together, marketers have regarded
customer as the king and evolved all activities to satisfy him or her, giving this
concept a momentum it is necessary to understand the Perception and
Expectations of the customer in respect various aspects & attributes so as to
design a successful and an acceptable product or service. This can largely be
attributed to the prevailing market situation. Not only has competition become
intense but over and above with the market being flooded with many me-too
products, the challenge before the marketer is to understand the diversity of
consumer expectations and offer goods/services accordingly. Today the company
image is built and made known by its customers. Thus the success of the firm
will be determined by how effective it has been in meeting the diverse consumer
needs and wants by treating each customer as unique and offering products and
services to suit his or her needs. Therefore today all the firms are engaged in a
process of creating a lifetime value and relationship with their customers, a step
towards developing knowledge regarding its customers needs is the utmost
important. The current study is an attempt to measure the various parameters as
perceived by the customers and to help the company in serving its customers in
a much better and efficient manner. 1.2 - Scope of the study The scope of the
study lies in finding out the perception of customers in Lucknow city through
responses taken by 300 customers during a period of 60 days and highlighting
the key areas which require some concern on part of LIC of India and improving
upon which the company may strengthen its customer base. The present study,
analysis, findings and suggestions proposed by the present researcher will be of
immense use for future researcher with similar studies in insurance market. SIVA
SIVANI INSTITUTE OF MANAGEMENT 3 1.3 Significance of the study : High quality
products with quality support services both in terms of international standards
and competitiveness have entered into our country. Customer satisfaction has
emerged as the key differentiator and defining attribute. The study is very much
significant because it brings out the differences in various parameters like
awareness, service quality, problems faced and rationale behind investment
between the products of LIC and private sector companies and these are the
main attributes which build up the customer perception and loyalty towards a
company. The study is significant also because it will help LIC to create a positive
impact on its customers by working on its lacking qualities. 1.4 Objectives of the
study : For every problem there is a research. As all the researches are based on
some and my study is also based upon some objective and these are as follows :
I ) To test the awareness of customers on various aspects of life insurance
policies offered by LIC and other private sector insurance companies and find
whether there is any relation between them. II ) To study the service quality
being offered by LIC and private sector insurance companies and test if any
relation exists. III ) To analyze various problems confronted by the policyholders
of LIC and private sector insurance companies and determine the relation
between the two. IV ) To clearly understand the rationale behind the investment
in policies of LIC and private sector insurance companies. V ) To analyze the
various aspects of LIC and do a complete SWOT analysis of the organization. SIVA
SIVANI INSTITUTE OF MANAGEMENT 4 1.5 Review of Literature : 1) Retention of
the Customers is the essence of Insurance business, Imtiyaz.H Ltd.VASI DO,
Insurance Times (Pg 20).Feb 2007-: Retaining a customer is four time cheaper
than acquiring a new one. The retention of the customers is of utmost
importance in the insurance industry in specification. Insurance business is of the
relationship building process. were one customer leads to the building of other
one. A satisfied customer is like a word of mouth advertisement for the company.
The needs of the existing customers should be identified and satisfied well rather
than only concentrating at the new accounts. All possible measures needs to
taken to retain the customers as it is lesser costlier as well as provides stability
to the business . 2) Trends in Life Insurance BusinessUnit Linked Insurance
Plans, IRDA annual report 2007-08, box item 1, page no. 15 -: It wasnt too long
back when the good old endowment plan was the preferred way to insure oneself
against an eventuality and to set aside some savings to meet ones financial
objectives. The traditional endowment policies were investing funds mainly in
fixed interest Government securities and other safe investments to ensure the
safety of capital. Thus the traditional emphasis was always on security of capital
rather than yield. However, with the inflationary trend witnessed all over the
world, it was observed that savings through life insurance were becoming
unattractive and not meeting the aspirations of the policyholders. The
policyholder found that the sum assured guaranteed on maturity had really
depreciated in real value because of the depreciation in the value of money. The
investor was no longer content with the so called security of capital provided
under a policy of life insurance and started showing a preference for higher rate
of return on his investments as also for capital appreciation. It was, therefore
found necessary for the insurance companies to think of a method whereby the
expectation of the policyholders could be satisfied. The object was to provide a
hedge against the inflation through a contract of insurance. Decline of assured
return endowment plans and opening of the insurance sector saw the advent of
ULIPs on the domestic insurance horizon. Today, the Indian life insurance market
is riding high on the unit linked insurance plans. SIVA SIVANI INSTITUTE OF
MANAGEMENT 5 3) Sampada kapse & D.G kodwani, Insurance as an investment
option, The Insurance Time, May 2003 At national as at individual level the
excess of income after consumption level savings as funds for investment.
Surplus funds can be invested in either real asset or in financial assets. Purpose
of investment is to protect ones wealth against erosion of value due to inflation
and to earn risk adjusted return. There are three motives which drive people to
purchase insurance products in India. _ Desire to cover risk _ Tax benefit _ Saving
motives It is argued that in this paper that in the changing scenario for the
insurance sector there is going to be a good opportunities for insurance sector to
expand its market base. For this purpose there is need to improve the features of
the insurance products to make them more liquid or short term schemes could
be increased. It is shown that although rewards implied by the insurance
products particularly by the tax benefits are quite close to those observed in
banks and small saving scheme of the governments. The performance of mutual
funds which come in many different types is found to be reasonable compared to
the risk involved. The survey indicates that it may not be very difficult to win
over the confidence of small investors towards insurance policies if good
marketing techniques are adopted to educate the targeted population about the
uses of insurance policies from investment point of view. 4) Samuel B Sekar,
Research associate, Academic wing, The ICFAI University, Customer driven
innovation in insurance products, Insurance Chronicle, page 33, July 2006-:
Insurance is one product which is not demanded by a customer, but supplied to
him by massive education and drive marketing. Insurance ought to be bought
not sold. The new concept of demand side innovation focuses more on
customers social and economic reality striving to deliver maximum value to the
customer at an affordable price. Therefore, when the customer becomes the
primary focus including him in the invention process becomes mandatory. But,
there are certain areas of insurance innovations where the customers cannot be
involved. A case in point is the recent insurance product invention called
Telematic Auto Insurance. Its a product by the Progressive Auto Insurance, which
monitors the driving behaviour of its auto insurance policyholder. The new
machine grabs information and automatically SIVA SIVANI INSTITUTE OF
MANAGEMENT 6 transmits it to the insurer. This information received is regularly
analyzed to judicially conclude the intensity of risk the person is exposed and the
corresponding premium he is eligible to pay. This is an example of supply side
innovation, where it is strictly not possible to include the customer in the
innovation process. Though, there are instances where the customer is involved
in the testing phase, his inclusion in the conception phase makes an innovation
demand-driven. SIVA SIVANI INSTITUTE OF MANAGEMENT 7 CHAPTER - II 2.1
Historical Perspective : Insurance in India The Britishers opened general
insurance in India around the year 1700. The first company, known as the Sun
Insurance Office Ltd. was set up in Calcutta in the year 1710. Insurance
companies like Bombay Insurance Company Ltd was established in 1793. In 1818
it was conceived as a means to provide for English Widows. The Bombay Mutual
Life Insurance Society started its business in 1870. It was the first company to
charge same premium for both Indian and non-Indian lives. The Oriental
Assurance Company was established in 1880. Till the end of nineteenth century
insurance business was almost entirely in the hands of overseas companies.
Insurance regulation formally began in India with the passing of the Life
Insurance Companies Act of 1912 and the provident fund Act of 1912. Several
frauds during 20's and 30's sullied insurance business in India. By 1938 there
were 176 insurance companies. The first comprehensive legislation was
introduced with the Insurance Act of 1938 that provided strict State Control over
insurance business. The insurance business grew at a faster pace after
independence. The Government of India in 1956, brought together over 240
private life insurers and provident societies under one nationalized monopoly
corporation and Life Insurance Corporation (LIC) was born. Nationalization was
justified on the grounds that it would create much needed funds for rapid
industrialization. SIVA SIVANI INSTITUTE OF MANAGEMENT 8 What Is Life
Insurance? Life insurance is a contract that pledges payment of an amount to the
person assured (or his nominee) on the happening of the event insured against.
The contract is valid for payment of the insured amount during: The date of
maturity, or Specified dates at periodic intervals, or Unfortunate death, if it
occurs earlier. Why We Need Insurance : Life insurance is a contact by which you
can protect yourself against specific uncertainties by paying a premium over a
period. Since each one of us during our lives are faced with numerous risks-
falling health, financial losses, accident and even fatalities. Protection You need
life insurance to be there and protect the people you love, making sure that your
family has a means to look after itself after you are gone. It is a thoughtful
business concept designed to protect the economic value of a human life for the
benefit of those financially dependent on him. Retirement Life insurance makes
sure that you have regular income after you retire and helps you maintain your
standard of living. It can ensure that your post-retirement years are spent in
peace and comfort. Savings and Investments Insurance is a means to Save and
Invest. Your periodic premiums are like Savings and you are assured of a lump
sum amount on maturity. A policy can come in handy at the time of your childs
education or marriage! Besides, it can be used as supplemental retirement
income. Tax Benefits Life insurance is one of the best tax saving options today.
Your tax can be saved twice on a life insurance policy-once when you pay your
premiums and once when you receive maturity benefits. Money saved is money
earned. Myths of Insurance : i) Insurance is just meant for saving tax. ii)
Insurance does not give good returns iii) Insurance products are not flexible SIVA
SIVANI INSTITUTE OF MANAGEMENT 9 2.2 Industry Profile : INDIAN INSURANCE
INDUSTRY Insurance is a big opportunity in a country like India with a large
population and untapped potential. The life insurance business (measured in the
context of first year premium) registered a growth of 23.88 % in 2007-08, (94.96
% achieved in 2006-07). The general insurance business (gross direct premium)
has registered a growth of 11.72 % in 2007-08 (3.52 % achieved in 2006-07).
This has resulted in increasing insurance penetration in the country. Insurance
penetration or premium volume as a ratio of GDP, for the year 2007 stood at
4.00 % for life insurance and 0.60 % for non-life insurance. The level of
penetration, particularly in life insurance, tends to rise as income levels increase.
India, with its huge middle class households, has exhibited growth potential for
the insurance industry. Saturation of markets in many developed economies has
made the Indian market even more attractive for global insurance majors. The
insurance market in India has witnessed dynamic changes including entry of a
number of global insurers in both life and non-life segment. Most of the private
insurance companies are joint ventures with recognized foreign players across
the globe. Over the last eight years, consumer awareness has improved.
Competition has brought more product innovation and better customer servicing.
This made a positive impact on the economy in income generation and creating
employment opportunities in this sector. At present there are a total of 21
companies in the life insurance business in India and only LIC is in the public
sector and rest all 20 companies are in the private sector. SIVA SIVANI INSTITUTE
OF MANAGEMENT 10 Table of Life Insurance Companies as on 31st March, 2009
SI No. INSURERS FOREIGN PARTNERS REGISTRATION NUMBER DATE OF
REGISTRATION YEAR OF OPERATION 1 HDFC Standard Life Insurance Co. Ltd.
Standard Life Assurance, UK 101 23.10.2000 2000-01 2 Max New York Life
Insurance Co. Ltd. New York Life, USA 104 15.11.2000 2000-01 3 PRIVATE
COMPANYPrudential Life Insurance Co. Ltd. Prudential, U.K. 105 24.11.2000
2000-01 4 Om Kotak Life Insurance Co. Ltd. Old Mutual, South Africa 107
10.01.2001 2001-02 5 Birla Sun Life Insurance Co. Ltd. Sun Life, Canada 109
31.01.2001 2000-01 6 Tata-AIG Life Insurance Co. Ltd. American International
Assurance Co., USA 110 12.02.2001 2000-01 7 SBI Life Insurance Co. Ltd. BNP
Paribas Assurance SA, France 111 29.03.2001 2001-02 8 ING Vysya Life
Insurance Co. Ltd. ING Insurance International B.V., Netherlands 114 02.08.2001
2001-02 9 Allianz Bajaj Life Insurance Co. Ltd. Allianz, Germany 116 03.08.2001
2001-02 10 Metlife India Insurance Co. Ltd. Metlife International Holdings Ltd.,
USA 117 06.08.2001 2001-02 11 Reliance Life Insurance Co. Ltd. (Earlier AMP
Sanmar Life Insurance Company from 3.1.02 to 29.9.05) 121 03.01.2002 2001-
02 12 AVIVA Aviva International Holdings Ltd., UK 122 14.05.2002 2002-03 SIVA
SIVANI INSTITUTE OF MANAGEMENT 11 13 Sahara Life Insurance Co. . 127
06.02.2004 2004-05 14 Shriram Life Insurance Co. Ltd. Sanlam, South Africa 128
17.11.2005 2005-06 15 Bharti AXA Life Insurance Co. Ltd. AXA Holdings, France
130 14.07.2006 2006-07 16 Future Generali India Life Insurance Company Ltd.
Pantaloon Retail Ltd.; Sain Marketing Network Pvt. Ltd. (SMNPL), Generali, Italy
133 04.09.2007 2007-08 17 IDBI Fortis Life Insurance Company Ltd. Fortis,
Netherlands 135 19.12.2007 2007-08 18 Canara HSBC OBC Life Insurance
Company Ltd. HSBC, UK 136 08.05.2008 2008-09 19 Aegon Religare Life
Insurance Company Ltd. Religare, Netherlands 138 27.06.2008 2008-09 20 DLF
Pramerica Life Insurance Co. Ltd. Prudential of America, USA 140 27.06.2008
2008-09 21 Life Insurance Corporation of India 512 Besides Life Insurance, all the
above-mentioned companies provide coverage in Medical Insurance, Automobile
Insurance, Accident Insurance, Home Insurance and many others. In short, the
future of insurance companies in India looks bright. Contribution to Indian
Economy Life Insurance is the only sector which garners long term savings.
Spread of financial services in rural areas and amongst socially less privileged.
Long term funds for infrastructure. Strong positive correlation between
development of capital markets and insurance/pension structure. Employment
generation. SIVA SIVANI INSTITUTE OF MANAGEMENT 12 International
Comparision of Life Insurance Penetration : The table below shows that India is
doing well in comparison to several countries but still the life insurance
penetration is still low and there is a huge scope for growth in the insurance
industry. Table 1 - Chart 1 - Insurance penetration is measured as ratio (in per
cent) of premium (in US Dollars) to GDP (in US Dollars) Interpretation The
above table shows that since the total premium collected is just 4% of Indias
GDP in 2007 as compared to France, Japan, England which have very high
penetration so there is a great scope for growth of life insurance in India . 2005
2006 2007 INDIA 2.53 4.1 4 USA 4.14 4 4.2 CHINA 1.78 1.7 1.8 GERMANY 3.06
3.1 3.1 FRANCE 7.08 7.9 7.3 JAPAN 8.32 8.3 7.5 ENGLAND 8.9 13.1 12.6 CANADA
3.05 3.1 3.2 ITALY 4.86 4.7 4 0 2 4 6 8 10 12 14 INDIA USA CHINA GERMANY
FRANCE JAPAN ENGLAND CANADA ITALY 2005 2006 2007 SIVA SIVANI INSTITUTE
OF MANAGEMENT 13 Number of Life Insurance Offices- Company wise (as on
2008-09) Table 2 - INSURER 2008 2007 2006 2005 2004 2003 2002 2001
PRIVATE SECTOR 6391 3072 1645 804 416 254 116 13 LIC 2522 2301 2220 2197
2196 2191 2190 2186 INDUSTRY TOTAL 8913 5373 3865 3001 2612 2445 2306
2199 Expansion of Offices The number of offices of the life insurers has increased
dramatically in the year 2007-08 from 5373 at the beginning of the year to 8913
by the end of the year, showing a growth of over 65 %. A major portion of this
expansion was in the private sector whose offices more than doubled from 3072
to 6391. LICs offices increased at a more modest 10 % from 2301 offices to
2522. New Policies issued : Life Insurers (as on 2008-09) : Table 3 - INSURER
2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 LIC 37612599 (-1.61)
38229292 (21.01) 31590707 (31.75) 23978123 (-11.09) 26968069 (9.87)
24545580 (96.75) PRIVATE SECTOR 13261558 (67.40) 7922274 (104.64)
3871410 (73.37) 2233075 (34.62) 1658847 (101.05) 825094 (3.25) INDUSTRY
TOTAL 50874157 46151566 35462117 26211198 28626916 25370674 Figure in
bracket indicates the growth over the previous year in percent. SIVA SIVANI
INSTITUTE OF MANAGEMENT 14 Chart 2 - New policies underwritten by the
industry were 508.74 lakhs in 2007-08 as against 461.52 lakhs during 2006-07
showing an increase of 10.23 %. While the private insurers exhibited a growth of
67.40 %, (previous year 104.64 %), LIC showed a decline of 1.61 % as against a
growth of 21.01 % in 2006-07. The market shares of private insurers and LIC, in
terms of number of policies underwritten, were 26.07% and 73.93% as against
17.17% and 82.83% respectively in 2006-07. We can clearly see that private
companies are catching up as they are registering a continuously high growth
rate as compared to LIC which is a matter of concern. Total Life Insurance
Premium( as according to IRDA handbook 2007-08 ) Life insurance industry
recorded a premium income of Rs.201351.41 crore during 2007-08 as against
Rs.156075.85 crore in the previous financial year, recording a growth of 29.01
per cent. Regular premium, single premium and renewal premium in 2007-08
were Rs.54888.16 crore (27.26 per cent); Rs.38824.36 crore (19.28 per cent);
and Rs.107638.89 crore (53.46 per cent), respectively. The table below shows
the trend followed during past seven years in terms of total life premium
collected. Growth Rate over past years -20 0 20 40 60 80 100 120 2007-08 2006-
07 2005-06 2004-05 2003-04 2002-03 LIC Private Companies SIVA SIVANI
INSTITUTE OF MANAGEMENT 15 Table 4 - INSURER 2007-08 2006-07 2005-06
2004-05 2003-04 2002-03 LIC 149789.99 (17.19) 127822.84 (40.79) 90792.22
(20.85) 75127.29 (18.25) 63533.43 (16.30) 54628.49 (9.65) PRIVATE SECTOR
51561.42 (82.50) 28253.00 (87.08) 15083.54 (95.19) 7727.51 (147.65) 3120.33
(178.83) 1119.06 (310.59) INDUSTRY TOTAL 201351.41 (29.01) 156075.84
(47.38) 105875.76 (27.78) 82854.80 (24.31) 66653.75 (19.56) 55747.55 (11.28)
Figure in the bracket represent the growth over the previous year in percent.
Chart 3 - Interpretation -From the above table 4 and chart 3 we can clearly see
that private companies are registering encouraging growth rates in terms of total
premium collection over the past few years as compared to LICs normal and
ordinary growth. Growth Rate over past years 17.19 40.79 20.85 18.25 16.3 9.65
82.5 87.08 95.19 147.65 178.83 310.59 0 50 100 150 200 250 300 350 2007-08
2006-07 2005-06 2004-05 2003-04 2002-03 LIC Private companies SIVA SIVANI
INSTITUTE OF MANAGEMENT 16 New Business Premium (Individual and Group) of
Life Insurers for 2007-08 Channel wise : Table 5 - Life Insurer Individual Agents
Corporate Agents Brokers Direct Selling Total New Business( Individual and
group) Referrals PRIVATE TOTAL 53.46 28.12 1.61 16.81 100.00 6.96 LIC 82.98
1.32 0.05 15.85 100.00 - INDUSTRY TOTAL 72.17 11.02 0.61 16.20 100.00 2.51
Chart 4 - The share of corporate agents which was 8.42 % in 2006-07 has
increased to 12.33 % in 2007-08. Within the corporate agency channel, while the
banks share grew from 5.46 % in 2006-07 to 7.97 % in 2007-08, the others grew
from 2.96 % to 4.36 % in the corresponding years. The share of corporate agents
in the new business premium procured by the private life insurers was significant
at 29.92 % in 2007-08 as SIVA SIVANI INSTITUTE OF MANAGEMENT 17 compared
to 24.99 % in 2006-07, while for LIC the share fell to 1.59 % in 2007-08 from 2.14
% in the previous year. Performance in the first quarter of 2008-09 (i) Life
insurance: The life insurers underwrote a premium of Rs.14320.20 crores during
the first quarter in the current financial year as against Rs.12511.80 crores in the
comparable period of last year recording a growth of 14.45 %. Of the total
premium underwritten, LIC accounted for Rs.7524.56 crores and the private
insurers accounted for Rs. 6795.64 crores. The premium underwritten by LIC
declined by 12.31 % while, that of private insurers increased by 72.88 %, over
the corresponding period in the previous year. The number of policies written at
the industry level declined by 7.78 %. While the number of policies written by LIC
declined by 23.36 %, in the case of private insurers they grew by 44.00 %. Of the
total premium underwritten, individual business accounted for Rs.10995.90
crores and group business for Rs. 3324.30 crores. In respect of LIC, individual
business was Rs. 5275.71 crores and group business was Rs.2248.85 crores. In
the case of private insurers, they were Rs.5720.19 crores and Rs.1075.45 crores
respectively. The market share of LIC was 52.55 % in the total premium collection
and 63.88 % in number of polices underwritten, lower than 68.58 % and 76.87 %
respectively reported in the previous year. Under the group scheme 56.13 lakhs
lives were covered recording a growth of 8.51 % over the previous period. Of the
total lives covered under the group scheme, LIC accounted for 38.96 lakhs and
private insurers 12.77 lakhs. The life insurers covered 12.50 lakhs lives in the
social sector with a premium of Rs.17.10 crores and underwrote 13.53 lakhs
policies with a premium of Rs.1275.78 crores in the rural sector. The total capital
of the life insurers at end March 2008 stood at Rs.12296.42 crores. The
additional capital brought in by the existing private insurers during 2007-08 was
Rs.3787.01 crores and the two new entrants, brought in equity of Rs.385 crores
making the total additional capital brought in 2007-08 by the private insurers to
Rs. 4172.01 crores. Of this, the domestic and the foreign joint venture partners
added Rs.3160.12 crores and Rs.1011.88 crores respectively. SIVA SIVANI
INSTITUTE OF MANAGEMENT 18 The private insurers also seem to be scoring big
in other ways- they are persuading people to take out bigger policies. For
instance, the average size of a life insurance policy before privatization was
around Rs 50,000. That has risen to about Rs 80,000. But the private insurers are
ahead in this game and the average size of their policies is around Rs 1.1 lakhs
to Rs 1.2 lakhs- way bigger than the industry average. Buoyed by their quicker
than expected success, nearly all private insurers are fast- forwarding the second
phase of their expansion plans. No doubt the aggressive stance of private
insurers is already paying rich dividends. But a rejuvenated LIC is also trying to
fight back to woo new customers. 2.3 COMPANY PROFILE : Life Insurance
Corporation of India The Life Insurance Corporation of India popularly known as
LIC of India was incorporated on September 1, 1956 by nationalizing 245
Indian as well as foreign companies . It was established 52 years ago with a view
to provide an insurance cover against various risk in life.the luminaries who
spearheaded this move at that time visualised an entity that will provide life
insurance to Indians, especially the vast rural masses, at an economical cost and
channel the savings for the betterment of the nation. It is the largest life
insurance company in India and also the countries largest investor. It is fully
owned by the Government of India and headquartered in Mumbai. The subsidiary
companies under LIC are: LIC of India, International A joint venture offshore
company promoted by LIC, commenced its operation in july1989. The primary
objective is to the US-dollar denominated policies which cater to the insurance
needs of non-resident in Indians. It provides insurance services to policyholders
who residing in Gulf. The LIC International operates in all Gulf Cooperation
Council (GCC) countries. LIC Nepal A joint venture company formed in September
2001 with the Vishal Group of Industries with a capital base of Rs.250mn. It is
one of the largest capitalized insurance companies of Nepal. It has joint share
between LIC of India (55%) Vishal Group (25%) and has a public participation to
the extent o 20%. SIVA SIVANI INSTITUTE OF MANAGEMENT 19 Life Insurance
Corporation Lanka Limited (LICL) A joint venture company formed in 2003 with
the Bartleet Group of Companies, it is one of the oldest and reliable institutions
in Sri Lanka. The combined strengths of these two formidable companies has
enabled LICL to emerge as the premier provider of Life Insurance in Sri Lanka.
The Indian-based blue-chip also has offices in UK, Mauritius, Fiji, and in all Middle
East countries. LIC Housing Finance Incorporated on june 19, 1989; its main
objective is to provide long term finance for construction or purchase of houses
or apartments. The company provides long terms finance to individuals for
purchase, construction, repair and renovation of new \ existing flats\houses. It
also provides finance on existing property for business, personal needs and gives
loans to professionals for purchase or construction of clinics\ nursing homes\
diagnostic centers\office space and also for purchase of equipments. It has set
up a representative office in Dubai and Kuwait to cater to the non- resident
Indians in countries covering Bahrain, Dubai, Kuwait, Qatar and Saudi Arabia. It
has client group of over 9,40, 000prudent house owners who enjoy the
companys financial assistance. LIC Housing Finance Limited Care Homes It is a
Wholly-owned subsidiary of LIC Housing Finance. It builds and operates Assisted
Community Living Center for senior citizens. It operates a network of
approximately 6 regional offices, 13 back offices, and 127marketing offices.
Vision To emerge as a transnationally competitive financial conglomerate of
significance to societies and be the pride of India . Mission Explore and enhance
the quality of life of people through financial security by providing products and
services of aspired attributes with competitive returns and by rendering
resources for economic development. SIVA SIVANI INSTITUTE OF MANAGEMENT
20 Objective of LIC Spread life insurance widely in particular to the rural areas
and socially and economically backward classes. This is done with a view to
reach all the insurable persons in the country and provide them adequate
financial cover against death at a reasonable cost. To maximize mobilization of
peoples savings by making insurance linked savings adequately attractive.
Bearing in mind, the primary obligation to its policyholders, whose money it
holds in trust, the investible funds to be deployed to the best advantage of the
investors as well as the national priorities and the obligations of attractive
returns. To conduct business with utmost economy and keeping gin mind that
the money belongs to the policyholders. It acts as a trustee of the insured
public in its individual and collective capacities. To meet the various life
insurance need of the community that would arise in the changing social and
economic environment. It ensures that all people working in the corporation are
involved to the best of their capability in furthering the interests of the insured
public by providing efficient service with courtesy. Promote amongst all agents
and employees of the corporation a sense of participation, pride and job
satisfaction through discharge of their duties with dedication towards
achievement of corporate objective. Board of Directors Chairman TS Vijayan
Managing Director D.K. Mehrotra, Thomas Mathew T, A.K. Dasgupta Finance
Secretary and secretary( financial services) Department of Financial Services,
Ministry of finance, Govt. of India Arun Ramanathan Addl. Secretary, Dept. of
Economic Affairs, Ministry of Finance Sindhushree Khullar SIVA SIVANI INSTITUTE
OF MANAGEMENT 21 Chairman cum Managing Director GIC of India Yogesh
Lohiya Chairman and Managing Director, Export Import, Bank of India T.C. Venkat
Subramaniam Products and Services LIC has eight zonal offices and 105
divisional offices located in different parts of India. It compromises of 2,048
branches and employs over 10, 02, 149 agents for soliciting life insurance
business from public. LIC has extended its activities in 12 countries from outside
India, primarily to cater to the insurance needs of non-resident Indians. LIC aims
at strengthening it relationship with its vast customer base by providing value-
added service such as credit cards and offering premium payment facility to the
policyholders. It is the largest insurance player in India and its objective is to
channelize its funds for the benefit of the community at large. It enjoys a near
monopoly power in the solicitation and sale of life insurance policies in India. The
corporation has major business houses as clients, under the group business of
India. It has more than 1,18,000 corporate clients covering more than
3,15,00,000 members. Apart from the corporate group insurance business the
pension& group schemes is responsible for Aam Aadmi Bima Yojna,a social
security schemes for the rural landless households under the aegis of the
Government of India.LIC has been investing a major portion of its funds in
socially-oriented sectors with a view to reach every insurable person in the
country and provide adequate financial cover against death at a reasonable cost.
Another goal is to mobilize peoples savings adequately attractive.LIC has
recently tied up with Policybazaar.com an insurance portal that enables the
consumers to get detailed information on the policy. It is one of the leading
online non-life and life insurance aggregator to sell its policy Jeevan Aastha on
the internet. SIVA SIVANI INSTITUTE OF MANAGEMENT 22 Insurance Plans The
following insurance plans are on offer. They provide the most suitable options
that can fit customers requirement. LIC Product Portfolio Children Plans
Jeeevan Anurag CDA Endowment Vesting at 21 CDA Endowment Vesting at 18
Jeevan Kishore Child Career Plan Child Fortune Plus Marriage Endowment
or Educational Annuity Plan Jeevan Chhaya Child future Plan Plans for
Handicapped Dependents Jeevan Aadhar Jeevan Vishwas Endowment
AssurancePlans The Endowment Assurance Policy The Endowment Assurance
Policy-Limited Payment Jeevan Mitra (Double Cover Endowment Plan) Jeevan
Mitra (Triple Cover Endowment Plan) Jeevan Anand New Janraksha Plan
Jeevan Amrit Money Back Plans Jeevan Varsha The Money Back Policy-20
years The Money Back Policy-25 years Jeevan Surabhi-15 Years Jeevan
Surabhi-20 Years Jeevan Surabhi-25 Years Bima Bachat Special Money Back
Plan for women Jeevan Bharti-1 Whole Life Plans The Whole Life Policy The
Whole Life Policy Limited Payment The Whole Life Policy Single Premium
Jeevan Anand Jeevan Tarang Term Assurance Plans Two year Temporary
Assurance Plan The Convertible Term Assurance Policy Anmol Jeevan- 1
Amulya Jeevan -1 SIVA SIVANI INSTITUTE OF MANAGEMENT 23 Joint Life Plan
Jeevan Sathi Decreasing Term Assurance To Cover Home Loan Payment
Mortgage Redemption Pension Plans Jeevan Nidhi Jeevan Akshay-VI New
Jeevan Dhara-I New Jeevan Suraksha-I Group Scheme Group Term Insurance
Schemes Group Term Insurance Scheme in Lieu of EDLI Group Leave
Encashment Scheme Group Mortgage Redemption Assurance Scheme
Gratuity Plus Group critical Illness Rider Plans for High Worth Individuals
Jeevan Shree-1 Jeevan Pramukh Unit Linked Plans Market Plus I Profit Plus
Fortune Plus Money Plus-I Child Fortune Plus Special Plans Golden Jubilee Plan
New Bima Gold Special Plan Bima Nivesh 2005 Jeevan Saral Jeevan Madhur
Health Plus Social Security Scheme Janashree Bima Yojna (JBY) Siksha
Sahayog Yojana Aam Admi Bima Yojana Unit linked insurance plans (ULIPs) are
insurance plans that combine the benefit of investment with insurance. They
give the investor an option to put a part of their premium in various investment
portfolios and derive the benefits depending upon the performance of the funds
chosen by them. ULIPs were launched at an opportune time when stock markets
had just taken off. Being market- linked, they were major beneficiaries of the
secular rise in stock markets. ULIPs have gained high acceptance due to the
attractive features they offer. These include: SIVA SIVANI INSTITUTE OF
MANAGEMENT 24 1. Flexibility Flexibility to choose Sum Assured. Flexibility to
choose premium amount. Option to change level of Premium even after the
plan has started (Top up facility). Flexibility to change asset allocation by
switching between funds. 2. Transparency Changes in the plan & net amount
invested are known to the customer. Convenience of tracking ones investment
performance on a daily basis. 3. Liquidity Option to withdraw money after few
years (comfort required in case of exigency). Low minimum tenure. Partial /
Systematic withdrawal allowed 4. Fund Options A choice of funds (ranging from
equity, debt, cash or a combination). Option to choose fund mix based on
desired asset allocation. Traditionally, endowment plans have invested in
government securities, corporate bonds and the money market. ULIPs however,
have a broader choice. They invest across the board in stocks, government
securities, corporate bonds and money market instruments. Of course, within a
ULIP there are options wherein equity investments are capped.The common
types of funds available in ULIPs are Bond Fund, Protector Fund, Secure Fund,
Balanced Fund, Growth Fund, Index Fund, and Enhancer Fund. Depending on
ones risk appetite one can choose the fund. However the investment risk is
borne by the investor. The common type of charges, fees and deductions in ULIPs
are Premium allocation charges, Mortality charges, Fund management charges,
Policy/administration charges, Surrender charges, Fund switching charges and
Service tax. Insurance companies are required to declare the NAV of various
ULIPs on a daily basis. The movement of NAV enables the policy holder to assess
the performance of his investment and accordingly make intervention in the form
of switches, withdrawal and top-ups. After opening up of the insurance sector,
Unit-linked insurance policies (ULIPs) have become increasingly popular. SIVA
SIVANI INSTITUTE OF MANAGEMENT 25 Analysis of figures for the last three years
indicates the growth pattern of unit linked business. Table 6 - TRENDS IN LIFE
INSURANCE BUSINESSUNIT LINKED INSURANCE PLANS Unit Linked Business (%)
Non-linked Business (%) 2005-06 2006-07 2007-08 2005-06 2006-07 2007-08
Private 82.30 88.75 90.33 17.70 11.25 9.67 LIC 29.76 46.31 62.31 70.24 53.69
37.69 Industry 41.77 56.91 70.30 58.23 43.09 29.70 Chart 5 - Interpretation
The above graph shows that during the past few years ULIP plans have become
more and more popular among the investors because of the returns they provide
in addition to the insurance cover. SIVA SIVANI INSTITUTE OF MANAGEMENT 26
Performance of LIC of India The number of new policies marketed grew from
14.69 lakhss in 1961 to 2.18 croress in 2004-05 and the sum assured under this
business rose to high of Rs. 1,79,886.66 cr in 2004-05 from Rs.336.67 cr in 1957.
The total funds of the corporation also grew from Rs. 702.80 cr in 1961 to Rs.
4,16,910.36 cr in 2004-05. Investments , which were Rs. 329.74 cr in 1957 rose
to a high of Rs.4,13,800.95 cr in 2004-05 ,allof which gets deployed for the
development of the nation.The LIC has huge investible funds and the main
source comes from the premiums collected from the policy holders. The
Corporation invests these funds in various states, industries and also in various
other countries. The LIC, while investing its funds, has to consider various factors
and forces such as safety, liquidity and productivity of funds plus various other
regulatory bindings in terms of investment norms, asset- liability management
etc. In short, the LIC has to make its investments within the ambit of these
bindings as a result, the corporation is not in apposition to pursue a prudent
investment policy due to which its investment income may come under pressure.
Adding fuel to the fire, the falling interest rate would also adversely affect the
investment performance of the Corporation. Still at present LIC continues to be
the dominant life insurer even in the post-liberalization phase of the Indian
insurance industry. It is on new growth trajectory surpassing its own past records.
The average premium growth so far has been 20%. With the targeted
Rs.1,75,000 crores total premium by the end of current fiscal, The life insurance
giant is looking a market share about 75%. The corporation has crossed many
milestones and has set unprecedented performance records in various aspects of
life insurance business. The state- owned corporation is targeting a business of
over Rs.3,00,000 crores by2011-12. The life insurance major expects its assets
size to grow about Rs.6,00,000cr or 75% in the next three years. In the current
fiscal year, the company has recruited about two lakhs insurance agent across
the country, which is more than double of the 90,000 agents hired in the
previous fiscal. It has also hired 4,500 development officers in the current fiscal
year and 5,000 new officers could be hired in the next fiscal. It has bagged
various awards which include Loyalty Award 2009, Golden Peacock Innovative
Product/Service Award 2009, Readers Digest Trusted Brand Award 2008 in the
Platinum Category, CNBC Awaaz Consumer Awards 2008 and NDTV Profit
Business Leadership Award 2008.The SIVA SIVANI INSTITUTE OF MANAGEMENT
27 Economic Times Brand Equity Survey rated LIC as the No.1 service brand of
the country for the 5th consecutive year. In the chart below is shown the market
share of LIC and private in terms of total premium collected. ( refer table 4 for
data ) Chart 6 - The bar graph clearly indicates that market share is continuously
declining for LIC over the past few years. Investment Portfolio of LIC of India The
Life Insurance Corporation of India has been a nation builder since its formation
in 1956. True to the objective of nationalization, the LIC has mobilized the funds
invested by the people in the life insurance for the benefit of the community at
large. The corporation has deployed the funds to the best advantage of the
policyholders as well as the community as a whole, true to the spirit of
nationalization. National priorities and obligation of reasonable returns to the
policyholders are its main criteria for the investment. The total funds, so invested
for the benefit of the community at large accumulated to Rs 751129 crores
(provisional) as on 31st march 2008. The investment of the corporations funds is
governed by Section 27A of the insurance act, 1938 subsequent
guidelines/instructions issued there under by the Government of India from time
to time and the IRDA by way of regulations. As per the prescribed investment
pattern approved by IRDA, the controlled funds are invested as follows : Not
less than 50% is invested in Government securities or other approved
investments. Not less than 15% is invested in infrastructural and social sector
investments. Not less than 35% in other investments, to be governed by
exposure prudential norms Market Share in % 74 82 86 91 95 98 99 26 18 14 9 5
2 1 0 20 40 60 80 100 120 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03
2001-02 LIC Private companies SIVA SIVANI INSTITUTE OF MANAGEMENT 28
Investment in Government and social sector : Type of investment As on 31-3-
2006 31-3-2007 31-3-2008 Central Government securities 236959 272498
297943 State Government & other Govt. guaranteed marketable secrities 58928
64285 89234 Infrastructure & social sector investment Housing 19807 22451
24325 Power 29740 37881 41120 Irrigation/ water supply & sewage 8288 7500
6649 Roads, ports and bridges 725 1516 1154 Others including railways 3954
4398 8774 Total 358401 410529 469191 Total funds of LIC Year Total funds
Growth trend Annual growth(%) 1999-00 1,61,002.22 100.00 - 2000-01
1,93,621.69 120.26 20.26 2001-02 2,45,039.82 152.20 26.56 2002-03
2,77,160.34 172.15 13.11 2003-04 3,46,022.54 214.92 24.85 2004-05
4,16,910.36 258.95 20.49 Compiled from the annual reports of LIC of India SIVA
SIVANI INSTITUTE OF MANAGEMENT 29 Awards and achievements of LIC : Golden
Peacock Innovative Product / Service Award 2009 Loyalty Award 2009 Readers
Digest Trusted Brand Award 2008 in the Platinum category CNBC Awaaz
Consumer Awards 2008 SIVA SIVANI INSTITUTE OF MANAGEMENT 30 The SWOT
analysis involves an in depth study of the strength and weakness of the provided
organization and it also provides information to the promoter, consultant, other
agencies and helps in long term viability of the project. Strength : It is the
oldest and most well experienced player having a Pan India presence. LIC has a
strong and very well developed distribution network. It is having a huge
consumer base and is evolved as one of the most powerful brands of the country.
It has a large product portfolio and claim settlement is easier to get. It has the
advantage of government guarantee is accompanied with it. Weakness : Its
employees and other staff are lethargic and least motivated to render prompt
and sincere customer service. After sales customer grievance redressal
mechanism is inefficient. Agents not taking into account the needs of people
and promote policies having high commissions only. Very slow decision making
process and internal problems between top management and lower cadre staff.
The top management or bosses are mediocre and there is large scale corruption
in main office. The development officers and agents who are the foundation
pillars of LIC are not provided with extra funds and powers to promote its
products aggressively. Opportunity : Emergence of a huge middle income
consumer market in the country People becoming more aware and demanding
so there is scope for a whole lot of innovative products. Pension markets, health
insurance and large real estate portfolio. Threats : There is too much internal
discord. Entry of new private players in industry. Red-tapism is very much
persistent. SIVA SIVANI INSTITUTE OF MANAGEMENT 31 2.4 Departmental
details : The organization having a such a huge size has to have a well defined
hierarchical structure and LIC is not an exception to this fact. A well defined
proper organization structure with officials with exact knowledge of their duties is
a must for an organization to prosper. LIC has a vast network of offices across the
length and breadth of our country and abroad so it has defined and maintained
its organizational structure in the following way. LIC has its main central head
office at Yogaakshema Jeevan bima marg at Mumbai. Then it is followed by
eight zonal offices namely central zone, eastern zone, east central zone,
northern zone, north central zone, southern zone, south central zone, western
zone respectively. After these eight zonal offices there are several divisional
offices under each zonal office and these divisional offices are mostly in each big
city. At last comes the branch office and there are several branch offices under
each divisional office. At all the branch offices there is a branch manager and
several departments and the major function of these branch offices is sales and
servicing of the policies. In a branch office the top most is a branch manager and
under his control are seven different departments with each of these
departments functioning independently to each other. These seven departments
are as follows : 1. Sales Department This department is mainly concerned with
the sale of new policies and is headed by Assistant Branch Manager
Sales(ABMS). The internal agent of LIC is the Development Officer who has the
job of communicating and training the Free Lancing agents. It is the development
officer who continuously encourages the agents to get new business and the
income, performance and commission through policy selling comes under the
jurisdiction of this department. 2.New Business Department This department
performance the very important function of underwriting new policies which are
sent to it for authentication. It checks that all the information provided by the
customer is true and the proposal form and all other details and proofs are legal.
After scrutinizing the new policy it issues the first premium receipts(FPR) and
then issues the policy bond. If anything is found insufficient the proposal form is
sent back to the sales department to correct the mistake and again submit it.
SIVA SIVANI INSTITUTE OF MANAGEMENT 32 3.Policy Service Department After
the policy bond is issued, the case is passed on to this department to take care
of after sales service of the policy. It takes care of the premium dates and if the
policy is lapsed then its revival is done by this department. Also if any loan is
required by the customer against his/her policy then its approval has to be given
from the policy service department only. 4. Accounts Department It is
responsible for processing of all the cheques and loans which come to it. The
details regarding financial aspects are covered under this department . 5.Claims
Department All types of claims i.e. survival benefit claim, maturity claim and
death claim are settled by this department. In case of death claim if death occurs
after three years then no investigation is involved in the settlement process and
if it occurs before three years then proper investigation is done and the claim is
considered to be an early claim case. 6. Micro Department This department has
the all important function of co-ordinating with each department. Each days
business is collected and its four copies are made and one copy is sent to the
divisional office, second is submitted to the branch manager, third remains with
the incharge of micro department and fourth in the branch office. 7. Office
Service Department This department takes care of all miscellaneous tasks of
office and dispatch of cheques, loans etc come under the responsibility of this
department. SIVA SIVANI INSTITUTE OF MANAGEMENT 33 Sales Dept. New
Business Dept. Accounts Dept. Policy Service Dept. Micro Dept. Office Service
Dept. Claims Dept. Central Head Office Zonal Office Divisional Office Branch
Office SIVA SIVANI INSTITUTE OF MANAGEMENT 34 CHAPTER - III 3.1 Research
Methodology : Introduction : Being a comparative study of public and private
sectors, the researcher selected LIC of India from the public sector and the
private sector insurance companies. The study is mainly based on primary data
collected from field source. The primary data is collected through a
comprehensive interviews, schedules and discussions with the customers of LIC
and customers of private companies. Secondary data is collected from various
bibliographical sources such as journals, novels, magazines, publications and
various websites including the official website of IRDA, LIC and various other
company websites. The published research reports and market studies also
helped the researcher to guage into the problem. Research design : The research
is divided into two parts. The first part helps us to understand the level of
awareness, service quality, problems faced and the investors motive of
investment, the second part deals with extracting important findings from this
information and analyzing the measures required to correct problems if any.
Research sample : A sample of 300 respondents, 151 from LIC and 149 from
private sector were identified randomly for detailed study and analysis. The
researcher used stratified random sampling technique for collecting the primary
data. The population of Lucknow city is divided into three stratums such as old,
new and cantt area and an equal number of samples are drawn from each
stratum. Statistical tools used : Statistical tools like weighted averages,
percentages, Chi-square test, mean and standard deviation etc are used for the
analysis of data. For the purpose of analyzing the awareness level a two point
rating scale is used. A two point and a three point scale is used to test the
various aspects covering the awareness level, service quality and problems faced
by the consumers. SIVA SIVANI INSTITUTE OF MANAGEMENT 35 3.2 Statement of
the Problem : Customer satisfaction is the true differentiator for the success of
any business and is more so in insurance where the products are perceived to be
intangible. Referring to the Tables 3 and 4 and also chart 2, 3 and 6 it has been
found that growth rate as well as the market share of LIC is constantly
decreasing in comparison to the private companies so to improve on the
correctional areas, the four main aspects i.e. awareness level, service quality,
problems faced and rationale behind investment has to be known. 3.3
Formulation of Hypothesis : Keeping the above mentioned objectives in mind and
to have a disciplined direction to the enquiry, the following hypotheses have
been formulated: I) Ho : There exists a relation between the awareness level and
the type of company customers choose for taking up an insurance policy. II) Ho :
There exists a relation between the level of satisfaction by the service quality
and the type of company customers choose for taking up an insurance policy. III)
Ho : There exists a relation between the grievance redressal mechanism and the
type of company customers choose for taking up an insurance policy. IV) Ho :
There exists a relation between the claim settlement process and the type of
company customers choose for taking up an insurance policy. Date Processing
and Analysis: Data are process with the help of computer software and Statistical
analysis are made with the help of Excel sheet and SPSS (statistical package for
social sciences).Firstly, the answers ticked by the respondents were recoded
while assigning the numerical values. These values were entered into a master
sheet and later with the help of a code book these numerical values were further
entered into the spreadsheet format on the computer. These raw data were
processed with the help of the statistical pack as stated. In order to present the
results and analyze them, percentage tables, cross-tabulations were made. SIVA
SIVANI INSTITUTE OF MANAGEMENT 36 Limitations of the study : In spite of every
care taken on the part of the researcher there were certain limitations which
could not be overcome and are as follows : Some of the persons were not so
responsive. Possibility of error in data collection because many of investors
may have not given the actual answers of my questionnaire. Sample size is
limited to 300 people only. The sample size may not adequately represent the
whole market. Some respondents were reluctant to divulge personal
information which can hinder the validity of all responses. The research study
was confined to Lucknow city only. The above are some of the aspects which
posed real problems in the way of completion of the research work but the
majority of respondents were cooperative and my gratitude are due to them.
SIVA SIVANI INSTITUTE OF MANAGEMENT 37 CHAPTER - IV 4.1 Data analysis and
interpretation : Analysis of Data : The demographic profile of the respondents is
analyzed on the basis of age, gender, occupation, educational qualification and
annual income. The age distribution of sample respondents is shown in Table 7
below : Table 7 Age Group Distribution Chart 7 - Interpretation It is clear from
Table 7; a vast majority of respondents (85%) fall in the age band of 20-60 years.
Out of 300 respondents around 50% are between 20-40 years and 38% are
between 40-60 years of age. Age Group Below 20 20-40 40-60 Above 60 Total
Number of Respondents 13 151 116 20 300 Percentages 4.3 50.3 38.7 6.7 100 0
20 40 60 80 100 120 140 160 Below 20 20-40 40-60 Above 60 Age Distribution
of Respondents Number of Respondents SIVA SIVANI INSTITUTE OF MANAGEMENT
38 Table 8 Gender of respondents Chart 8 - Interpretation Out of the 300
samples drawn 205 (68%) are male and it depicts the domination men in the life
insurance sector. Only 95 (32%) of them are females. Gender Number of
Respondents Percentage Male 205 68.3 Female 95 31.7 Total 300 100 Sex of
respondents Male 68% Female 32% SIVA SIVANI INSTITUTE OF MANAGEMENT 39
Table 9 Occupation Distribution Chart 9 - Interpretation Occupation wise,
around 46% of respondents are employees and the rest are equally represented
by professionals, businessmen and agriculturists. Occupation Number of
Respondents Percentages Professional 49 16.3 Employee 140 46.7 Business 48
19.3 Agriculture 53 17.7 Total 300 100 Occupational Distribution 0 20 40 60 80
100 120 140 160 Professional Employee Business Agriculture Number of
Respondents SIVA SIVANI INSTITUTE OF MANAGEMENT 40 Table 10 Educational
Qualification of Respondents Chart 10 - Interpretation It is also revealed from
Table I, that more than 60% of the respondents are graduates or technically
qualified. Remaining 22% are intermediate and only 16% are high school passed.
Educational Qualification Number of Respondents Percentages Upto High School
48 16 Intermediate 67 22.3 Degree & above 143 47.7 Technical 42 14 Total 300
100 Educational Qualification of Respondents 0 20 40 60 80 100 120 140 160
Upto High School Intermediate Degree & above Technical Number of
Respondents SIVA SIVANI INSTITUTE OF MANAGEMENT 41 Table 11 Annual
Income of Respondents Chart 11 - Interpretation Around 60% of the respondents
have an annual income below 1,20,000 and only 17% have income in the range
of 1,20,000-1,80,000. Also 11% have income above Rs 2,40,000. Annual Income
Number of Respondents Percentages Below 60,000 60 20 60,000- 1,20,000 119
39.7 1,20,000- 1,80,000 51 17 1,80,000- 2,40,000 37 12.3 Above 2,40,000 33 11
Total 300 100 Annual Income of Respondents 0 20 40 60 80 100 120 140 Below
60,000 60,000-1,20,000 1,20,000-1,80,000 1,80,000-2,40,000 Above 2,40,000
Number of Respondents SIVA SIVANI INSTITUTE OF MANAGEMENT 42 Table 12-
Type of the policy Chart 12 - Interpretation Out of the total population more than
50% of the respondents have unit linked insurance plans (ULIP) and only 18%
have money back policies and endowment plans are with only14% of customers.
Type of Policy Number of Respondents Percentages Whole Life 13 4.3 Endowment
42 14 Money Back 55 18.3 Pension Fund 24 8 ULIP 155 51.7 Others 11 3.7 Total
300 100 Type of Policy 0 20 40 60 80 100 120 140 160 180 Whole Life
Endowment Money Back Pension Fund ULIP Others Number of Respondents SIVA
SIVANI INSTITUTE OF MANAGEMENT 43 Table 13- Periodicity of the Policy Chart
13 - Interpretation The table spells that around 80% of the respondents have
policies with a maturity period of 5 to 25 years and only 12% have policies with a
maturity period of more than 25 years. Periodicity of Policy Number of
Respondents Percentages 5 years 22 7.3 5-15 years 125 41.7 15-25 years 116
38.7 Above 25 years 37 12.3 Total 300 100 Periodicity of Policy 0 20 40 60 80
100 120 140 5 years 5-15 years 15-25 years Above 25 years Number of
Respondents SIVA SIVANI INSTITUTE OF MANAGEMENT 44 Awareness level of
Respondents : As a contractual relationship exists between the insurer and the
insured, it is the duty of the insurance company to disclose of the policy details.
The policy holders are not excused with any ignorance to the contract and it is
the policyholders to get acquainted with the rules and regulations of the policy.
So the study about awareness level of customers assumes paramount
significance. Table 14 - Chart 14 - Awareness Level 103 48 66 83 0 50 100 150
200 Yes No LIC Private Company Interpretation From the graph it is clear that
68.2% of respondents of LIC are aware of all details of their policy where as only
44.3% of private company policyholders know about all their policy terms and
conditions. Hence it is gratifying to note that LIC is more transparent and divulge
concrete details about policy and empower its policy holders in a much better
way. Yes No Number of Respondents LIC 103 48 151 Private Company 66 83 149
Total 169 131 300 SIVA SIVANI INSTITUTE OF MANAGEMENT 45 Testing
hypothesis I : Chi-Square Tests Value df Asymp. Sig. (2- sided) Exact Sig. (2-
sided) Exact Sig. (1- sided) Pearson Chi-Square 17.439a 1 .000 Continuity
Correctionb 16.480 1 .000 Likelihood Ratio 17.619 1 .000 Fisher's Exact Test .
000 .000 Linear-by-Linear Association 17.381 1 .000 N of Valid Casesb 300 a. 0
cells (.0%) have expected count less than 5. The minimum expected count is
65.06. b. Computed only for a 2x2 table Here since the Chi-square value is 0.000
which is less than 0.05 so there exists a relation between the awareness level
and type of company one chooses for investing his money. Hence the null
hypothesis is proved. Satisfaction Level about service qualities : Like any other
service sector, the insurance sector is also evaluated by its ability to provide
quality services to its customers. In the modern market, the products are
designed exclusively for the customers and the quality is the leading criterion for
the selection of particular product. Hence, the insurance providers should realize
the changes in the market and adopt new weapons in the form of high quality
services. Table 15 - LIC Private Company Total Fully Satisfied 85 50 135 Partially
Satisfied 43 57 100 Not Satisfied 23 42 65 Total 151 149 300 SIVA SIVANI
INSTITUTE OF MANAGEMENT 46 Chart 15 - Private Company 34% 38% 28% Fully
Satisfied Partially Satisfied Not Satisfied LIC 57% 28% 15% Fully Satisfied
Partially Satisfied Not Satisfied Interpretation From the above tables it shows
that 57% customers are fully satisfied with LICs service quality and
comparatively only 34% are satisfied by private companies. Also 38% in private
and 28% in LIC are only partially satisfied and remaining are not satisfied. It is
evident that customers, in general, are satisfied with the quality of services
provided by LIC and there is significant difference in the service quality across
both sectors. Testing hypothesis II : Chi-Square Tests Value df Asymp. Sig. (2-
sided) Pearson Chi-Square 16.575a 2 .000 Likelihood Ratio 16.767 2 .000 Linear-
by-Linear Association 15.552 1 .000 N of Valid Cases 300 Here also the Chi-
square value is 0.000 which is less than 0.05 so the null hypothesis that relation
exists between the level of satisfaction and type of the company one chooses for
buying a policy is proved. SIVA SIVANI INSTITUTE OF MANAGEMENT 47 Problems
faced by the Customers : The problems faced by policyholders are many and
varied. It is the duty of any insurance company to make an amicable settlement
of these problems. Some important problems faced by policyholders analyzed
are complex formalities for opening a policy, levy hidden charges, excessive
penalties for non payment of premium, undue delay in settlement of claims, lack
of timely communication, lack of cooperation by officials/agents, inefficient
grievance redressal mechanism, misleading information by the agents and lack
of technical knowledge or training. A few of them have been taken into account
here. Table 16 Accessibility of the employee/agents Chart 16 LIC 68% 32% Yes
No Private Company 79% 21% Yes No Interpretation LIC clearly lags behind
from private companies as only 68% customers against 79% of private company
customers say that employees of the company are always accessible. Yes No
Total LIC 102 49 151 Private Company 117 32 149 Total 219 81 300 SIVA SIVANI
INSTITUTE OF MANAGEMENT 48 Table 17 Complex formalities Chart 17 LIC
61% 39% Yes No Private Company 53% 47% Yes No Interpretation In LIC 61%
customers feel that the formalities for opening a policy are too complex and the
documentation is time taking but only 53% feel this in case of private sector.
Hence in all there is more or less the same response about the complex
formalities in both the sectors. Yes No Total LIC 92 59 151 Private Company 79 70
149 Total 171 129 300 SIVA SIVANI INSTITUTE OF MANAGEMENT 49 Table 18
Grievance redressal mechanism Chart 18 LIC 42% 28% 30% Fully Satisfied
Partially Satisfied Not Satisfied Private Company 26% 41% 33% Fully Satisfied
Partially Satisfied Not Satisfied Interpretation From the above figure it is clear
that 42% and 26% customers are fully satisfied with the grievance redress
mechanism of LIC and Private company respectively. But also an alarmingly high
% of customers of LIC and Private company i.e. 30% and 33% respectively are
not satisfied with their process. Testing hypothesis III : Chi-Square Tests Value df
Asymp. Sig. (2- sided) Pearson Chi-Square 9.234a 2 .010 Likelihood Ratio 9.307 2
.010 Linear-by-Linear Association 3.679 1 .055 N of Valid Cases 300 a. 0 cells
(.0%) have expected count less than 5. The minimum expected count is 47.18.
Here the null hypoth

s is proved since Chi-square value 0.01 is less than 0.05 and so there exists a
relation between the grievance redress mechanism and type of company. LIC
Private Company Total Fully Satisfied 63 39 102 Partially Satisfied 42 61 103 Not
Satisfied 46 49 95 Total 151 149 300 SIVA SIVANI INSTITUTE OF MANAGEMENT 50
Table 19 Claim Settlement Process Chart 19 LIC 83% 17% Yes No Private
Company 70% 30% Yes No Interpretation It is a matter of concern for LIC that
around 83% say that it makes undue delay in claim settlement where as for
private companies this % is 70%. Testing hypothesis IV : Chi-Square Tests Value
df Asymp. Sig. (2- sided) Exact Sig. (2- sided) Exact Sig. (1- sided) Pearson Chi-
Square 6.355a 1 .012 Continuity Correctionb 5.685 1 .017 Likelihood Ratio 6.409
1 .011 Fisher's Exact Test .014 .008 Linear-by-Linear Association 6.333 1 .012 N
of Valid Casesb 300 a. 0 cells (.0%) have expected count less than 5. The
minimum expected count is 34.77. b. Computed only for a 2x2 table Since the
Chi-square value is 0.012 which is less than 0.05 so null hypothesis is proved and
there exists a relation between claim settlement process and the type of the
company. Therefore null hypothesis is proved. Yes No Total LIC 125 26 151
Private Company 105 44 149 Total 230 70 300 SIVA SIVANI INSTITUTE OF
MANAGEMENT 51 Table 20 Information by the agent Chart 20 LIC 69% 31%
Yes No Private Company 83% 17% Yes No Interpretation According to the figure
we can infer that where 83% customers of private company the agent provides
them with correct information only 69% say this in case of LIC. Yes No Total LIC
104 47 151 Private Company 124 25 149 Total 228 72 300 SIVA SIVANI INSTITUTE
OF MANAGEMENT 52 Rationale behind the investment Table 21 - Table 21 shows
that the most important drive for taking an insurance policy by a customer is the
individual risk coverage irrespective of the sectors. The rationale behind taking
an insurance policy is almost same in both the sectors. The most proximate
reasons are risk coverage, tax benefits, childrens welfare and growth and return
of investment. Advertising of the company, classes or seminars conducted by
various organizations and influence of the peer group do not play a major role in
the investment decision of the customer. Factors LIC Private Company Individual
Risk Coverage 1 1 Tax Benefits 3 4 Growth and return on investment 4 2 Risk
Coverage of Family 2 3 Child Welfare 5 5 SIVA SIVANI INSTITUTE OF
MANAGEMENT 53 CHAPTER - V 5.1 Findings and Recommendations : Every study
is completed only if it has certain outcomes in the form of findings and certain
recommendations for the correction of faulty areas that have been found during
the course of the study. Findings from the data : Following are the important
findings of the study : 1) Refering table 7 and chart 7 it is clear that the majority
i.e. more than half of investors investing in insurance are the young people in
the age group of 20-40. 2) Refering table 8 and chart 8 it can be said that males
dominate in having life insurance policies. 3) Referring table 9 and chart 9 it can
be said that majority of people having life insurance are employed. 4) The most
preferred plan among the investors is unit linked plans because of its high
returns.(refer table 12 and chart 12) 5) Almost 80% of the policies sold have the
periodicity of 5-25 years.(refer table 13 and chart 13) 6) It is very much clear
that the awareness level of the customers of LIC is much higher than that of the
private sector.(refer table 14 and chart 14) 7) A greater number of customers of
LIC are either fully or partially satisfied but there is not much significant
difference across sectors in terms of service quality satisfaction level.(refer table
15 and chart 15) 8) Employees or agents of LIC are not easily accessible when
compared to private sector and customers have to try several times in order to
meet LIC employees etc.(refer table 16 and chart 16) 9) Most of the respondents
of LIC feel that formalities for opening a policy are too complex and take longer
time.(refer table 17 and chart 17) SIVA SIVANI INSTITUTE OF MANAGEMENT 54
10) Two fifth of the customers of LIC are fully satisfied with its grievance redress
mechanism while only one fourth are fully satisfied in case of private sector.(refer
table 18) 11) It is a threat for LIC that more than four fifth of the customers of LIC
feel that it unduly delays in claim settlement.(refer table 19 and chart 19) 12)
Also a lesser number of customers of LIC feel that their agent provides them with
the correct and relevant information in comparison to customers of private
company.(refer table 20 and chart 20) 13) From table 21 it is evident that
individual risk coverage is the most preferred criteria among the investors
irrespective of both the sectors. Hence the rationale behind investment is more
or less same. Recommendations : To increase the level of insurance penetration
LIC may focus on bringing products that suit to the rural customers.( refer table 1
and chart 1) The company if possible should invest in advertising, conduct road
shows, and spend money on hoardings, so that it can better propogate
awareness about its various lesser known products. LIC should also tie up with
several other banks apart from the existing ones to sell its products i.e. through
bancassurance ( refer chart 4) The company has the option of tying up with
local NGOs for selling its rural insurance products. Customer friendly
documentation i.e. it should be made easier and faster( refer finding 9). LIC
should keep a check that its agents equally promote all its products( refer finding
14). LIC may provide additional funds to its development officers and
agents( refer finding 14). All the hidden charges should clearly be stated in the
form and explained by the agent and LIC should provide better training to its
agents. (refer finding 12). Claim settlement process should be made fast and
must not involve lengthy decision making process( refer finding 11). Some
special focus should be laid on individual risk coverage while designing the
products.(refer table 21). SIVA SIVANI INSTITUTE OF MANAGEMENT 55 Learning
This project has given me a good opportunity to learn a lot about the insurance
sector in general and LIC in particular and especially about the basic
technicalities involved right from selling to servicing and lastly the claim
settlement process. I also had a chance to see how closing takes place in
insurance companies. While dealing with retail customers I had a really enriching
experience. I learnt how to judge a customer and offer him/her a product which
would interest him. Also working in a real office environment provided me an
enriching experience. Conclusion : The entry of private sector insurance
companies into the Indian insurance sector triggered off a series of changes in
the industry. Even with the stiff competition in the market place, it is evident
from the study that the public sector giant LIC dominates the Indian insurance
industry. In todays competitive world, customer satisfaction has become an
important aspect to retain the customers, not only to grow but also to serve.
Increased competition, wide range of product offerings and multiple distribution
channels cause companies to value satisfied and highly profitable customers.
Customer service is the critical success factor in a company and providing top
notch customer service differentiates great customer service from indifferent
customer service.