1

CHAPTER 1
INTRODUCTION
The insurance industry in India has come to a full circle from
being an open competitive market to nationalization and backed to
liberalization market again. The opening up of Indian Insurance
Industry as a part of economic reforms happened on October 24, 2000.
Due to this, a drastic change has happened in the insurance service of
India in the last 9 years. This has been aimed at increasing the
efficiency, by expanding the role of private sector which bought about
the inflow of investment and technology. Even though the public sector
insurance companies contributed much in providing awareness about
insurance and expanding the insurance market. It was recognized their
reach was still limited. This attracted many private players to the field
of insurance. They entered the market with wide variety of products
and services. This opening has paved the way for innovative products,
new distribution channels etc with ample job opportunities.
Introduction of new generation companies made the market
more competitive. To an extent, this increased the customer
satisfaction level also. In the level of the above said circumstance the
present study is considered to be very relevant. This study compares
2

the performance of public sector and new generation life insurance
companies with regards to the level of satisfaction of customers

DEFINITION
Customer
A person, company or other entity which buys goods and
services produced by another person, company or other entity.
Consumer
Consumer is a person who buys goods or services for his own
consumption for the satisfaction of his needs.
Customer Satisfaction
Consumer satisfaction is the key for the success of any business.
Marketers are finding ways to impress customers with various things
because they know the satisfied customers are the greatest asset of the
firm. A customer might experience various degrees of satisfaction. If
the products/services falls short of expectation, the consumer is
dissatisfied. The performance matches the expectations the consumer is
satisfied. If the performance exceeds the expectations, the consumer is
highly satisfied or delighted.
Customer satisfaction is a measure of how product and services
supplied by a company meet or satisfies customer satisfaction.
3

Organizations are increasingly interested in existing customers while
targeting non-customers, measuring customer satisfaction provides an
indication of how successful the organization is at providing products
and/or services to the market place.
As per Websters dictionary the term satisfaction means
fulfillment of a need or want. Accordingly consumers satisfaction
means a function of the products perceived performance and the
consumer expectation. It is the feeling that a product has met or
exceeded the customers expectation. It is the ability of product or
services to at least minimally meet a buyers needs and expectations. It
is the extent to which a products perceived performance matches a
buyers expectation. Most of the buyers from their expectation on the
basis of their previous experience or the options of friends, relatives
marketers and competitors for information and promises.
Customers satisfaction leads to increased corporate
profitability. It is less expensive to maintain existing customers.
Satisfied customers tend to purchase more frequently and in greater
volume than less satisfied ones. Customer satisfaction leads to word-
of-mouth publicity. In fact it can spread information faster than
advertisement. Further, satisfied customer can be important
ambassadors of positive brand image.
4

STATEMENT OF THE PROBLEM
The present study intended to compare the satisfaction level of
customer of public sector and new generation life insurance companies
in Wayanad. And also tries to find out the problems faced by customer
in both public sector and new generations companies life insurance
policies.

SCOPE OF THE PROBLEM
The present study aims at comparing satisfaction level of
customers of public sector and new generation life insurance
companies only. The geographical area limited to Wayanad.


5

OBJECTIVE OF THE STUDY
Primary objective:
To compare the satisfaction level of customers of both public
sector life insurance companies and new generation life
insurance companies.
Secondary objective:
1. To find out the problems faced by customers while investing in
both public sector and private sector insurance companies.
2. To find out types of policies provided by both public and
private sector insurance companies.
3. To find out how far the companies can become successful in
present condition.

RESEARCH METHODOLOGY
The present study is designed as an empirical one based on survey
method. Data was collected from both primary and secondary data.
Primary data
Primary data means first hand information collected from the
customers directly. Primary data required for the study was collected
from customers of both LIC&ICICI prudential, directly with a
questionnaire. Sample size is 50 for both companies.
6

Secondary data
Secondary data means data collected from secondary source.
These are second hand information. Secondary data for this study was
collected from book, news papers, magazines and publications of
IRDA, Articles reports and websites.
Tools of analysis
For analyzing the data statistical tool like simple percentage,
simple average, various types of graphs, charts etc. are used.
Scaling technique
Likerts 5 point sale was used to collect data from respondents.
LIMITATIONS
As limitations are common to almost all studies based on social
survey, the present study is also not an exception. Some of the
important limitations are
1. Survey is conducted only in Wayanad
2. Sampling size is too small.
3. Limited span of tome
4. Lack of corporation of respondents



7

CHAPTER II
INDIAN INSURANCE INDUSTRY- AN OVERVIEW
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 Indian insurance sector
reveals the 360 degree turn witnessed over a period of almost two
centuries. The present chapter evaluated the history and developments
of Indian insurance sector up to the opening up of insurance sector to
the private players. The present chapter is divided into different
sections like Theoretical aspects if Insurance, A brief history of the
insurance sector, Structure of Indian insurance industry, Insurance
sectors Regulation and the insurance reforms.

Theoretical aspects of Insurance
From the definitional angle, the term insurance can be best
understood by referring to the two important schools of thought on the
subject viz (i) Transfer school,(ii) Polling school. According to the
transfer school insurance is device for the reduction of uncertainty of
one party called the insured, through the transfer of particular risk to
another party called the insurer, who offers a restoration, at least in
part, of economics losses suffered by the insured, (Pfeffer Irving,
8

1956). On the other hand, according to the pooling school, the
essence of insurance lies in the elimination of the uncertain risk of loss
for the individual through the combination of large number of similarly
exposed individuals. (Manses Alfred. 1935). Thus, in the case of an
individual, insurance is a transfer mechanism through which he passes
on risk to the insurer. Where as, for the insurer. Insurance is a pooling
mechanism by which he reduces risk in the context of his business.
Insurance markets are generally characterized by asymmetric or
imperfect information. In such markets, there is uncertainty about the
actual behavior of the insured. In the insured possess better information
about himself or his risk type than the insurer. The high risk insures
have incentives to hide their true state and present themselves as low
risk types. The difficult problem faced by the insurance companies is
the exact evaluation of risk and to adjust the premium accordingly at
the time of signing of the insurance contract. In other words, the
insurer will have to fix up the price and the amount of insurance the
customer can buy at the price. Higher premium will attract a pool of
more risky insurance applicants and will lead to the problem of adverse
selection. While the applicant with small risk will drop out. Higher
insured values may lead to moral hazard problems, as it will create
and incentive for the insure to take increased risk than he would
9

otherwise take. The problem of moral hazard, though unimportant in
the case of life insurance (as no one would try to take his own life in
normal circumstances), can be severe in the area of on-life insurance. It
is therefore necessary for the insurance companies to strike a correct
balance between the premium and the extent of risk covered.

A Brief History Of the Development Of Insurance Sector
The business of life insurance in India in its existing from started
in India in the year 1818, when it was conceived as a mean to provide
for English widows. In those days a high premium was charged for
Indian lives than the non-Indian lives were considered more riskier for
coverage.
In the year 1970 the Bombay Mutual Life Insurance Society was
started and they changed same premium for both Indian and non-
Indian lives. The Oriented Assurance Company was established in
1880. The General Insurance Business in India can trace its roots to the
Triton (Tital) Insurance Company Limited, the first general insurance
company established in the year 1850 in Calcutta by the British. Till
the end of 19 century insurance business was almost entirely in the
hands of overseas companies.
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The insurance regulation formally began in India with the passing of
the Life Insurance Companies Act of 1912 and the provident fund act
of 1912. by the year 1938, there were 176 Insurance Companies in
India. The first comprehensive legislation was introduced with the
insurance act of 1938 that provided strict state control over insurance
business. The growth of this industry after independence is very fast.
But this growth concentrated only in urban areas.
In the year 1956, central government brought together over 240
private life insurers and provident societies under one nationalized
monopoly corporation and Life Insurance Corporation (LIC) was
formed. Nationalization was justified on the grounds what it would
create much needed funds for rapid industrialization. This was in
conformity with the Governments chosen path of state lead planning
and development.
The non-life insurance business continued to thrive with the
private sector till 1972. there operation were restricted to organized
trade and industry was nationalized in1972. with this, nearly 107
insurers were amalgamated and grouped into 4 companies viz, the
National Insurance Company Limited, the New India Assurance
Company limited, the Oriental Insurance Company Limited. GIC
incorporated as company.
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Only in 1999 private insurance companies were allowed back
into business of insurance with a maximum of 26% of foreign holding
(World Bank Economic Review 2000). The entry of State Bank of
India with its proposal of bank assurance brigs a new dynamic in the
game. The end of the year 2000 marks a significant change and growth
of Indian Insurance industry scenario. Monopoly of Public Sector
Insurance Company marks an end and private companies marked
inroad. Foreign companies, both life and general flocked, collaborated
and helped astronomical growth of insurance industry I India.
Structure of Indian Insurance Industry
One of the main features of the pre-nationalized insurance sector
was the utilization of the insurance sector as a back up or extension by
the well known industrial houses of India. There are mainly two forms
of insurance in India viz., life and non- life. Life insurance provides
protection to a household against the risk of premature death of its
income earning member. Non life insurance can be grouped under
three heads viz., fire, marine and miscellaneous Insurance. LIC carries
on life insurance business and the GIC and its four subsidiaries deal
with non-life insurance. After liberalization of the insurance sector in
1999, private players have entered both life and non-life business in
India. The insurance Regulatory and Development Authority (IRDA)
12

was constituted in April 2000 as an autonomous body to regulate and
develop the business of Insurance and re-insurance in the country in
terms of the IRDA act, 1999.
(A) Life insurance
The life insurance business was first introduced in India by a British
firm in 1818 initially; higher premiums were charged for insuring
Indian lives as against non-Indian lives. The Bombay mutual Life
Assurance Society, an Indian Insurer, set up in 1871 was the first to
change same premium for both Indian and Non- Indians. The decades
of 1920s and 1930s witnessed rapid growth of life insurance in India.
In order to regulate the life insurance business, the Indian Life
Assurance Companies Act, 1912 was enacted. The enactment of
Insurance Act, 1938 introduced effective state control over the
Insurance business in the country. After independence, Indian
companies came into their own. In 1956, the LIC of India was formed
when the Govt of India brought together the business of 245 Indian and
foreign insurers and provident societies, under one nationalized
monopoly corporate called Life Insurance corporation (LIC). Since
nationalization, LIC developed a vast network of branches and
expanded its business. LIC also extends pension cover to the insured
apart from life cover. Acting on the recommendation of the committee
13

on Reforms in the Insurance sector 1994, private players were allowed
into the life Insurance business in 2000. During 2000-2001, there were
six registered private companies engaged in the business of life
insurance.
Major life insurance companies in India are,
Aviva life insurance
Bajaj Alliance
Birla Sunlie insurance
HDFCstandared life Insurance
ICICIproduential
ICICI Lombard life insurance
INGvysya
Kodak Mahindra
LIC
Max new york life insurance
Metlife insurance
Reliance Life insurance
SBI life insurance
Shriram Life insurance
TATA AIG life insurance
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In addition to these there are more than of private general
insurance companies. Most of the private companies registered more
than 100% growth till then and still continuing with such monstrous
growth figures. Top rank private companies Life ICICI prudential, Tata
AIG life Insurance Bajaj Alliance etc, are aggressively reaching and
innovating products for huge untapped rural Indian insurance market
collaboration with micro finance companies, post office, rural banks
and village management authorities for selling insurance in doing
wonders.
On July 14
th
, 2000 Insurance Regulatory and Development
Authority bill was pass to protect the interest of the policyholders
from private and foreign players.
(B) General Insurance
The first general insurance company viz., Triton Insurance
Company Ltd. Was established in Calcutta in 1850. The shareholders
were mainly British. The first Indian company for General insurance
business was the Indian Mercantile Insurance Company Ltd., set up in
1907 in Mumbai. The General Insurance business in India was
nationalized with effect from January 1973 by the GIC Act, 1972. As a
result, 107 insurance(including both Indian and foreign companies)
15

were amalgamated and grouped in four companies viz., the National
Insurance Company Ltd., the New India Assurance Company Ltd., the
Oriental Company Ltd., and United India Insurance Company Ltd.
GIC was incorporated as a company in November 1972 and it
commenced business on January 01, 1973.GIC has been acting as the
Indian reinsures since then. GIC has also been accepting overseas
reinsurance business. For regulation of product pricing of General
Insurance, Tariff Advisory Committee, (TAC) started functioning since
1968 headed by the controller of insurance.
After the nationalization of GIC in 1972, the management of
TAC was delegated to GIC. Acting on the recommendation of the
committee on reforms in the insurance sector (1994), private players
were allowed into the non-life insurance also in 2000. During 2000-01
there were four registered private companies engaged in the business
of non-life insurance.
Insurance Sector Regulations
Insurance regulation in India started with the passage of Life
Insurance Companies Act, 1912 and the Provident Fund Act, 1912.
The first comprehensive legislation was introduced with the insurance
Act, 1938 which provided strict state control over Insurance business
in the country under the supervision of the Controller of Insurance.
16

Subsequently, in the Insurance Act, 1915 was enacted to
check malpractices in the business and also to exercise more control
over the corporations of the Insurance companies. With the
nationalization of the life insurance Industry in 1956 and then general
insurance Industry in 1972, the role of the Controller of insurance
diminished over a period of time. On account of the monopoly status of
the public sector units viz., LIC and GIC in the area of Insurance,
prior to liberalization of this sector, regulation was received to be of
less interest due to the inbuilt procedures in place.
The phased of globalization of the Indian economy that started
in the early 1990s began to have its impact on the monopolistic
structure of the Indian Insurance Industry. Further, the liberalization of
insurance markets was among the objectives the Uruguay round
negotiated conducted under the auspices of General Agreement on
Trade and Tariff (GATT). These negotiations include trade in services
and insurance in the context of financial services (UNCTAD report,
January 1993). In 1993, the Government appointed a committee
headed by Shri R. N Malhotra to examine the reforms required in the
insurance sector. The committee in its report submitted in 1994
recommended inter alias the opening up of the insurance sector to
players other than State-Owned ones. There recommendation were
17

accepted by the Government and the IRDA Act, 1999, consequent
amendments to the insurance Act, 1938, LIC Act, in 1956 and the
General insurance Business Act, 1972 were passed in the year 2000,
paving the way for opening up of the insurance sector.

The important function of the IRDA as per the IRDA Act 1999,
include the following:
I. Licensing and regulation the insurance sector by acting as an
independent and regulatory body.
II. Specifying requisite qualifications, code of conduct and
practical training for insurance intermediaries and agents.
III. Protecting in the interest of the policyholders in matters
concerning assigning of policy, settlement of insurance claim
etc
IV. Regulating investment of funds by insurance companies
V. Calling for information from, undertaking inspection of,
conduction enquiries and investigations including audit of the
insurers and other organizations connected with the insurance
business.
VI. Regulating maintenance of ,margin of solvency of the insurer
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VII. Adjudication of the disputed between insurer and
intermediaries of insurance intermediaries
VIII. Supervising the functioning of the Tariff Advisory
Committee
IX. Promoting efficiency in the conduct of insurance business

Efforts are underway to bring about internationalization of regulation
in the insurance sector on the lines of the banking sector so as to take
care development and health of the insurance sector. This concern had
resulted into the establishment of international association of Insurance
Supervisors (IAIS), head quartered at Basle in Switzerland. More than
100 regulators of insurance industries worldwide are members of this
associating and India is also one amongst team. The underlying
objective of the organization is to bring about a degree of
standardization in regulatory procedures adopted by different
countries.
The Insurance Sector Reforms
In 1993, Malhotra Committee headed by former finance secretary and
RBI Governor R. V Malhotra, was formed to evaluate Indian Insurance
Industry and recommend its future direction. The Malhotra Committee
19

was set up with the objective of complementing the reforms initiated in
the financial sector.
The reforms were aimed at creating a more efficient and competitive
financial system suitable for the requirements of the economy keeping
in mind the structural changes currently underway and recognizing that
insurance is an important part of the overall financial system where it
was necessary to address the need for similar reforms.

In 1994, the committee submitted the report and some of the key
recommendation included;
1. Structure
Government stake in the insurance Companies to be
brought down to 50%
Government should take over the holding of GIC and its
subsidiaries so that these subsidiaries can act as
independent corporations.
All the insurance companies should be given greater
freedom to operate.
2. Competition
Private companies with a minimum paid up capital of
Rs.1bn should be allowed to enter the industry.
20

No company should deal in both life and General
Insurance Through a single entity
Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies.
Postal life insurance should be allowed to operate in the
rural market
Only one State Level Life Insurance Company should be
allowed to operate in each state.
3. Regulatory Body
Insurance Act should be changed
An insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance
Ministry) should be made independent.
4. Investments
Mandatory investment of LIC life Fund in Government
securities to be reduced from 75% to 50%
GIC and its subsidiaries are not to hold more than 5% in
any company( there current holdings to be brought down
to this level over a period of time)

21

5. Customer Service
LIC should pay interest on delays in payments beyond 30
days
Insurance companies must be encouraged to set up until
linked pension plans.
Computerization of operations and updating of technology to
be carried out in the insurance industry. The committee
emphasized that in order to improve the customer services
and increases the coverage of insurance industry should be
opened up to competition. But at the same, the new players
could ruin the public confidence in the industry. Hence, it
was decided to allow competition in a limited way by
stipulating the minimum capital requirement of Rs.100
corers. The committee felt the need to provide their
performance and enable them to acts independent companies
with economic motives. For this purpose, it had proposed
setting up an independent regulatory body.
Reforms in the insurance sector were initiated with the passage of the
IRDA bill in the parliament in December 1999. Hence the Indian
Insurance Industry again opened it docks to the private sector players
too.
22

CHAPTER III
COMPANY PROFILE
The first two decades of the twentieth century saw lot of growth
in insurance business. From 44 companies with total business-in-force
as Rs.22.44crore, it rose to 176 companies with total business-in-force
as Rs.298crore in 1938. During the mushrooming of insurance
companies many financially unsound concerns were also floated which
failed miserably. The Insurance Act 1938 was the first legislation
governing not only life insurance but also non-life insurance to provide
strict state control over insurance business. The demand for
nationalization of life insurance industry was made repeatedly in the
past but it gathered momentum in 1944 when a bill to amend the Life
Insurance Act 1938 was introduced in the Legislative Assembly.
However, it was much later on the 19th of January, 1956, that life
insurance in India was nationalized. About 154 Indian insurance
companies, 16 non-Indian companies and 75 provident were operating
in India at the time of nationalization. Nationalization was
accomplished in two stages; initially the management of the companies
was taken over by means of an Ordinance, and later, the ownership too
by means of a comprehensive bill. The Parliament of India passed the
Life Insurance Corporation Act on the 19th of June 1956, and the Life
23

Insurance Corporation of India was created on 1st September, 1956,
with the objective of spreading life insurance much more widely and in
particular to the rural areas with a view to reach all insurable persons in
the country, providing them adequate financial cover at a reasonable
cost.
LIFE INSURANCE CORPORATION OF INDIA
LIC had 5 zonal offices, 33 divisional offices and 212 branch
offices, apart from its corporate office in the year 1956. Since life
insurance contracts are long term contracts and during the currency of
the policy it requires a variety of services need was felt in the later
years to expand the operations and place a branch office at each district
headquarter. Re-organization of LIC took place and large numbers of
new branch offices were opened. As a result of re-organisation
servicing functions were transferred to the branches, and branches
were made accounting units. It worked wonders with the performance
of the corporation. It may be seen that from about 200.00 crores of
New Business in 1957 the corporation crossed 1000.00 crores only in
the year 1969-70, and it took another 10 years for LIC to cross 2000.00
crore mark of new business. But with re-organisation happening in the
early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum
Assured on new policies.
24

Today LIC functions with 2048 fully computerized branch offices, 109
divisional offices, 8 zonal offices, 992 satallite offices and the
Corporate office. LICs Wide Area Network covers 109 divisional
offices and connects all the branches through a Metro Area Network.
LIC has tied up with some Banks and Service providers to offer on-line
premium collection facility in selected cities. LICsECS and ATM
premium payment facility is an addition to customer convenience.
Apart from on-line Kiosks and IVRS, Info Centres have been
commissioned at Mumbai, Ahmedabad, Bangalore, Chennai,
Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a
vision of providing easy access to its policyholders, LIC has launched
its SATELLITE SAMPARK offices. The satellite offices are smaller,
leaner and closer to the customer. The digitalized records of the
satellite offices will facilitate anywhere servicing and many other
conveniences in the future.
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."
25


Vision
"A trans-nationally competitive financial conglomerate of significance
to societies and Pride of India."
Objective
Spread Life Insurance widely and in particular to the rural areas
and to the socially and economically backward classes with a
view to reaching all insurable persons in the country and
providing them adequate financial cover against death at a
reasonable cost.
Maximize mobilization of people's savings by making
insurance-linked savings adequately attractive.
Bear in mind, in the investment of funds, the primary obligation
to its policyholders, whose money it holds in trust, without
losing sight of the interest of the community as a whole; the
funds to be deployed to the best advantage of the investors as
well as the community as a whole, keeping in view national
priorities and obligations of attractive return.
Conduct business with utmost economy and with the full
realization that the moneys belong to the policyholders.
26

Act as trustees of the insured public in their individual and
collective capacities.
Meet the various life insurance needs of the community that
would arise in the changing social and economic environment.
Involve all people working in the Corporation 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.

Different plans provide by LIC
1. Whole life plan
2. Endowment Assurance Plan
3. Endowment (+) whole life plan
4. Money back(+) whole life plan
5. Installment payment plan
6. Joint life plan
7. Housing plan
8. Children plan
27

9. Low income group plans
10. High risk plans
11. Fixed target plans
12. Investment oriented plans
13. Plans for handicapped persons
14. Team assurance plan
15. Annuity plan