Abhinav

National Monthly Refereed Journal of Research In Commerce & Management

Volume III, January14

ISSN 2277-1166

A COMPARATIVE ANALYSIS OF BUYING BEHAVIOR

OF URBAN AND RURAL INVESTORS FOR
INSURANCE
Dhimen Jani1 and Dr. Rajeev Jain2
1

Research Scholar, Mewar University, Chittorgarh, Rajasthan, India

Email: jani.dhimen@gmail.com
2
Dean and Head, Dept. of Mgt., University of Kota, Rajasthan, India
Email: rajeevjain@uok.ac.in

ABSTRACT
This paper aims to examine the buying behavioral pattern of urban and rural investors for
the insurance. 900 investors (450 urban and 450 rural*) were taken as a sample from
Gujarat state. The study assesses the impact of various demographic factors like age,
gender, education, income and category etc. on the buying behavioral pattern of both
Investors. The survey was conducted during September/October/Nov. 2012. The study
revealed that Age Gender, Occupation, Educational Qualification, Income etc. have
significance impact on the buying behavioral pattern on rural and urban investors for
buying insurance and financial advisor plays crucial role in determining decision for
investors.

Keywords: Buying Behavior; Urban & Rural; Investors; Insurance

INTRODUCTION
The Investor behavior is the process by which Investor tends to satisfy his/her needs by
showing their choices. Behavioral economics and the related field, behavioral finance, study
the effects of social, cognitive, and emotional factors on the economic decisions of
individuals and institutions and the consequences for market prices, returns, and the resource
allocation. The fields are primarily concerned with the bounds of rationality of economic
agents.
The insurance sectors has undergone basic changes as a part of financial reforms in the
country. Up to 2000, the insurance market was not open for everyone, LIC had monopoly.
With enactment of IRDA Insurance Development Regulatory Act, private entity were
allowed to enter into Indian Insurance market, and Monopoly of LIC was abolished. In life
segment of insurance, Life Insurance Corporation of India (LIC) had a dominant role, while
in non-life business segment, New India, United India, National and Oriental General
Insurance Corporations were having monopoly. Since the inception of reforms in financial
sector, almost all financial sectors witnessed great vicissitudes, which had ultimately
increased competitive spirit and generated efficiency in the same sector.
The investor buying behavior affected by many factor i.e. social, demographical etc. i.e.
investor tend to invest in insurance according to his age, gender, educational qualification
and most important income. As many researches have been conducted to identify the buying
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Abhinav
National Monthly Refereed Journal of Research In Commerce & Management
ISSN 2277-1166

Volume III, January14

behavior of investor for the insurance, this paper would focus on the factors determining
selection, investment amount, premium paying pattern etc. of rural and urban investor.
REVIEW OF LITERATURE
The consumer selects the product that is judged to have the largest number of positive
attributes. This is a relatively simple rule used most often when motivation or ability is
limited (Alba and Marmorstein 1987).
An initial empirical study is conducted by Hsee and Kunreuther (2000), who investigate the
influence of effect on decisions regarding the purchase of insurance and regarding the
motivation of going through a claim in case of a damage. They show that the more affection
people feel towards an object, the more they are willing to purchase the insurance or file a
claim.
Krishnamoorthi.C (2006) bank deposits and followed insurance products which were known
to 81 percent of the sample investors.
Huber and Schlager (2011) developed casual model to identify the antecedent of consumer
buying behavior of long-term savings specifically ULIPS. The model was emphasizing on
two aspects risk as analysis and risk as feelings. They identified pivotal role risk avoidance
and uncertainty avoidance.
Wakker, Thaler, and Tversky 1997; Zimmer, Schade, and Grndl (2009) suggested that even
very small probability of insolvency, broadly affects that consumers choice and reduces the
customer willingness to pay.
URAK, DAJA and PEPUR (2013) made analysis of 95 respondents and found that the
Age, Education and Employment does have significant impact on the selection of insurance,
while gender, marital status and no. of family member do not have statistically significant
association in Croatia.
Truett & Truett (1990) found that there is positive relationship between age and life
insurance demand.
Gandolfi & Miners (1996) there is no influence of age on life insurance demand by wives,
while husbands age negatively affects life insurance consumption. It was believed that men
live shorter than women and that is why they ask for insurance more than women. Insurance
is mainly taken to cover financial loss if any unfavorable incident occurs generally called
risk. With the increasing level of risk, the demand of insurance also increases. Educated
individual seems to be much risk aware and managing Outreville (1996).
RESEARCH OBJECTIVES
Primary Objectives- Primary objective of the research to identify whether any demographical
factors does have impact on the decision making of urban and rural investors while
selecting-product of LIC and Private life insurance besides that, the paper also attempt to
identify is there any significant relationship between buying behavioral pattern of both urban
and rural investor
Secondary Objective- Secondary objective of the research is to find out the relative
importance of advice of insurance advisor while making selection of product of insurance.

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Abhinav
National Monthly Refereed Journal of Research In Commerce & Management
ISSN 2277-1166

Volume III, January14

SOURCE OF DATA
Primary data is collected with help of structured questionnaire. And secondary is collected
from IRDA web site and various research paper.
SIGNIFICANCE OF THE STUDY
The investment is a process by which an investor invests some amount in monetary
instruments for growth, but it is not always the case. Many times it happens that investor
incur loss. Improper financial planning, high rate of inflation and other factors influence the
buying decision of an individual.
Almost all investors believe that they have invested money at good rate of return financial
assets, but in actual manner they are not earning, but they are losing present value of money.
The inflation is absorbing all the benefits of investment, thus, there is strong need of study
investors buying behavior and suggest them appropriate path. By analysis of behavior of
investor we can suggest appropriate investment options to invest and investment company
will also get some sort of idea how investor react in different situation. In simple sense we
can say that Right Plan at Right Time. The focus of this study would be on, to suggest
financial assets to investors for investment with due consideration of risk, return and other
demographical factors.
HYPOTHESIS FOR THE STUDY
The broader Hypothesis for the research will be as under:

There is no significant difference between Urban and Rural investors buying

behavior for insurance.

There is no significant impact of demographical factors of investors for their

purchase and selling decision.

Research Type
Descriptive Research
Descriptive research refers to research that provides an accurate portrayal of characteristics
of a particular individual, descriptive research situation, or group. (en.wikipedia.org/wiki/
Descriptive_research)
Sampling Plan
Sampling method: Quota sampling method under Non probability sampling will be used to
elicit information.
Quota sampling is a method for selecting survey participants. In quota sampling, a
population is first segmented into mutually exclusive sub-groups, just as in stratified
sampling. Then judgment is used to select the subjects or units from each segment based on a
specified proportion. (en.wikipedia.org)
Determination of Urban or Rural region
For the Census of India 2011, the definition of urban area is as follows:
1. All places with a municipality, corporation, cantonment board or notified town area
committee, etc.
2. All other places which satisfied the following criteria:
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Abhinav
National Monthly Refereed Journal of Research In Commerce & Management
Volume III, January14

ISSN 2277-1166
3. A minimum population of 5,000;

4. At least 75% of the male main working population engaged in non-agricultural

pursuits; and
5. A density of population of at least 400 persons per sq. km.
Source: A PDF file named '1. Data Highlight' accessed on 11 April 2012 from Census of
India, 2011
Sampling unit: Gujarat
Table 1
Rural
Vapi
Visavadar
Una
Talaja
Sidhpur
Sarigam
Sanand
Pardi
Mandvi
Himatnagar

Quota %
10
10
10
10
10
10
10
10
10
10

Urban
Veraval
Valsad
Vadodara
Surat
Anand
Ahmedabad
Rajkot
Navsari
Jamnagar
Dwarka

Quota %
10
10
10
10
10
10
10
10
10
10

Sample size: sample size is was estimate to 1000 (500 urban+500 rural) but around 100 (50
urban + 50 rural) investors responses were not found up to the mark or was not properly
responded.
DATA COLLECTION
Primary data collection:-Primary data will be collected using structured questionnaire.
Secondary data collection:- Secondary data will be collected from Book, Magazines,
Research Papers, Articles, Newspapers, Internet etc.
Survey Method Employed: The survey shall be performed in brokerage houses, Insurance
Offices and One Stop financial services shops.
Research Instrument: Structured Questionnaire will be prepared with close ended
questions.
Data Analysis: Gathered data will be analyzed with the help of SPSS/Excel/Minitab/SAS to
get some meaningful result. The data collected will be analyzed through a series of tools and
procedures. The data will be interpreted with the help of various statistical tools like
Frequency analysis, Cross Tabulation for nominal scale data, Chi-Square test.
Statistical Tool Applied: For analytical purpose chi-square test would be applied. A chisquared test, also referred to as chi-square test or X2 test, is any statistical hypothesis test in
which the sampling distribution of the test statistic is a chi-squared distribution when the null
hypothesis is true. Also considered a chi-squared test is a test in which this is asymptotically
true, meaning that the sampling distribution (if the null hypothesis is true) can be made to
approximate a chi-squared distribution as closely as desired by making the sample size large
enough.
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Abhinav
National Monthly Refereed Journal of Research In Commerce & Management
Volume III, January14

ISSN 2277-1166

Table 2. Data Analysis and Interpretation

Age Group: In the urban area, 24.44% investor were in the age group of below 30 years,
28.89% investor were in the age group of 30 years to 50 years while 46.67%investor were in
the age group of above 50 years.
In rural Area, 21.78% investor were in the age group of below 30 years, 35.56% investor
were in the age group of 30 years to 50 years while 42.67%investor were in the age group of
above 50 years.
Gender: In the urban area, 62.22% of the investor were male while 37.78% of the investor
were female.
In the rural area, 66% of the investor were male while 34% of the investor were female.
Education Group: In the urban area, 26.67% of the investor were in the category of U.G.,
40% of the investors were in the category of Graduate and remaining 33.33% were having
education of PG & above.
In the rural area 21.33% of the investor were in the category of U.G., 34% of the investors
were in the category of Graduate and remaining 44.67% were having education of PG &
above.
Income Group: In the urban area, 26.67% of the investor were in the category of below 3
lakh PA, 35.56% of the investor were in the income category of 3 lakh 5 lakh, while
37.78% of the investor were in the category of above 5 lakh.
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Abhinav
National Monthly Refereed Journal of Research In Commerce & Management
Volume III, January14

ISSN 2277-1166

In the rural area, 16.89% of the investor were in the category of below 3 lakh PA, 36.67% of
the investor were in the income category of 3 lakh 5 lakh, while 46.44% of the investor
were in the category of above 5 lakh.
Category Group: In the urban area, 46.67% of the investor were in the category of
serviceman, 30% of the investor were in the category of business person, 6.89% of the
investors were in the category of retired person while 16.44% of the investor were in the
category of others consisting of household lady and other service professionals
In the rural area, 36.22% of the investor were in the category of serviceman, 31.11% of the
investor were in the category of business person, 11.33% of the investors were in the
category of retired person while 21.33% of the investor were in the category of others
consisting of household lady and other service professionals
As 900 (450 urban + 450 rural) investors were analyzed, the 253 out of 450 in urban and 272
out of 450 in rural, were investing in equity market.
Table 3. Explorative Analysis - A comparison between factors affecting investment decision
of investors in insurance sector

From the above table it can be seen that, in urban region 19.37% of the respondents
contacted are investing through broker advice, 54.94% of the investors are investing through
advice of financial advisor, and 18.97% investors are investing with word of mouth, while
6.72% in1vestors are investing according to market sentiment.
While in the rural region, 38.24% of the respondents contacted are investing through broker
advice, 34.56% of the investors are investing through advice of financial advisor, and
16.18% investors are investing with word of mouth, while 11.02% investors are investing
according to market sentiment.
Table 4. Chi-Square Analysis
Chi-square Analysis
Chi-Square df Assy. Signi.
31.586
3
0

H0
Reject

The above calculation suggest that, there is no significant difference between urban and rural
investors for factors affecting investment decision in insurance sector.
Table 5. Explorative Analysis A comparison between amounts of investment invested by
investors in insurance sector

Table no. 5 figure out that, in the urban region, 11.86% of the respondents contacted are
investing below Rs.15000 PA, 22.53%% of the investors are investing in the range of
Rs.15000-30000 PA while 65.61% investors are investing above Rs.30000 PA
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Abhinav
National Monthly Refereed Journal of Research In Commerce & Management
Volume III, January14

ISSN 2277-1166

While, in the case of rural area, 22.79% of the respondents contacted are investing below
Rs.15000 PA, 41.18% of the investors are investing in the range of Rs.15000-30000 PA
while 36.03% investors are investing above Rs.30000 PA.
Table 6
Chi-square Analysis
Chi-Square df Assy. Signi.
45.918
2
0

H0
Reject

The above calculation suggests that, there is significant difference between urban and rural
investors for investment amount (Premium) to be invested in insurance sector.
Table 7. Explorative Analysis A comparison between investment patterns of investors of
insurance sector.

The above table shows that, in the urban region 40.71% of the respondents contacted are
investing monthly, 11.46% of the investors are investing quarterly while 12.65% investors
are investing half yearly and 35.18% of the investors are investing yearly.
While in the case of rural region, 49.26% of the respondents contacted are investing
monthly, 11.76% of the investors are investing quarterly while 11.03% investors are
investing half yearly and 27.95% of the investors are investing yearly.
Table 8
Chi-square Analysis
Chi-Square Df Assy. Signi.
4.61
3
0.203

H0
Accept

The above calculation suggest that, there is no significant difference between urban and rural
investors for premium paying pattern in insurance sector.
Table 9. Explorative Analysis A comparative analysis of intension behind

Table 9 shows that in the urban region, 33.20% of the respondents contacted are investing
retirement purpose, 38.74% are investing for the purpose of future/present financial stability
(in case of physical disability or death etc.), 18.58% of the investors are investing for the
purpose of saving tax only while 9.48% investors used to invest in insurance for the all of the
above purpose.
In the case of rural region, 38.24% of the respondents contacted are investing retirement
purpose, 34.56% are investing for the purpose of future/present financial stability (in case of
physical disability or death etc.), 16.18% of the investors are investing for the purpose of
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32

Abhinav
National Monthly Refereed Journal of Research In Commerce & Management
Volume III, January14

ISSN 2277-1166

saving tax only while 11.02% investors used to invest in insurance for the all of the above
purpose.
Table 10.
Chi-square Analysis
Chi-Square Df Assy. Signi.
2.292
3
0.514

H0
Accept

In the chi-square calculation, it was found that both in urban and in rural, there was no
significant difference in the case of intension behind investment in insurance sector.
Table 11. Explorative Analysis A comparison between selections of service providing
company for investment

Table 11 provides insights that in the urban region, 40.01% of the respondents contacted are
investing through public limited firm i.e. LIC, While 20.95% investors used to take service
of private life insurance and 30.04% of the investors were found in both i.e. private as well
as public life insurance.
While in the case of rural region, 45.59% of the respondents contacted are investing through
public limited firm i.e. LIC, While 25.74% investors used to take service of private life
insurance and 28.67% of the investors were found in both i.e. private as well as public life
insurance.
Table 12
Chi-square Analysis
Chi-Square df Assy. Signi.
1.69
2
0.430

H0
Accept

The chi-square analysis suggest that, there is no significant difference between selections of
service providing company.
Table 13. Explorative Analysis A comparative analysis between believes of both investors
regarding following belief

The above table suggest that in the urban region, 49.80% of the respondents contacted do
believe that ULIPs are better than traditional plan, while 50.20% of the investors believed
that ULIPs are no better than traditional Plan.
While in the rural region, 49.26% of the respondents contacted do believe that ULIPs are
better than traditional plan, while 50.74% of the investors believed that ULIPs are no better
than traditional Plan.
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Abhinav
National Monthly Refereed Journal of Research In Commerce & Management
Volume III, January14

ISSN 2277-1166
Table 14.
Chi-square Analysis
Chi-Square Df Assy. Signi.
0.015
1
0.902

H0
Accept

In the chi-square calculation, it was found that, there is no significant difference in belief of
urban and rural investor for insurance sector.
CONCLUSION
In the insurance sector, it was found that all the demographical factors were having
significant impact on the factor that determine investment in insurance. From the study, it
was revealed that urban investor gives more priority to financial advisor while rural investors
used to invest with brokers advice. There was significant association between behavioral
pattern of both urban and rural investor when it comes to investment in insurance. Buying
behavioral pattern is not similar for urban and rural investors. In the investment amount,
urban investor used to invest Rs. 30,000 PA while rural investor used to invest between
Rs.15000-30000 PA. Mostly. There is significant difference in investment amount to be
invested in insurance sector, there is dissimilarities in behavioral pattern for investment
amount. In the premium paying pattern, it was observed that, all the demographical factor
have similar type of influence for the premium payment. There is insignificant difference
between premium paying pattern of urban and rural investors i.e. monthly
When investors were asked about, intension behind investing in insurance, majority of the
urban investors (38.74%) replied that they intend to invest in insurance for financial stability
and rural replied that they intend to invest in insurance for retirement planning, however, in
calculation of chi-square it was not found significant at 5%. Thus intension was more or less
similar for investment in insurance sector.
Selection between govt. and private sector is always been controversial issue. But in this
study both investor rural and urban clearly entrusted on govt. sector (LIC). Although, both
sectors have been regulated by IRDA, still due to imaginary differences investors cant trust
private sector companies. With introduction of ULIPS plans, insurance sector has witnessed
ultimate growth, both urban and rural investor used to believe that ULIPS are better than
traditional plan as far as return is concern in long term.
REFERENCES
1. Alba, J., Hutchinson, J. (1987): Dimensions of Consumer Expertise, Journal of
Consumer Research, 13: 411454.
2. C.Krishnamoorthi (2006), SMART journal of business management studies-A Study on
Investment Pattern and Awareness of the Salaried Class Investors In Nilgiris District,
Vol 3, No 2,December 2007, pp. 73-79.
3. Gandolfi, A. S. & Miners, L. (1996). Gender-Based Differences in Life Insurance
Ownership, The Journal of Risk and Insurance, 63, 4, 63-693.
4. Huber, C., Gatzert, N., Schmeiser, H. (2011): How Do Price Presentation Effects
Influence Consumer Choice? The Case of Life Insurance Products, Working Paper.
5. MARIJANI URAK, IVANA DAJA and SANDRA PEPUR (2013), The Effect of
Social and Demographic Factors on Life Insurance Demand in Croatia, International
Journal of Business and Social Science Vol. 4 No. 9; August 2013.

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National Monthly Refereed Journal of Research In Commerce & Management
ISSN 2277-1166

Volume III, January14

6. Outreville, J. F., (1996). Life Insurance Markets in Developing Countries, Journal of

Risk and Insurance, 63, 2, 263- 278.
7. Truett, D. B. &Truett, L. J. (1990). The Demand for Life Insurance in Mexico and the
United States: A Comparative Study, Journal of Risk and Insurance, 57, 2, 321-328.
8. Wakker, P., Thaler, R., Tversky, A. (1997): Probabilistic Insurance, Journal of Risk and
Uncertainty, 15: 728.
9. Zimmer, A., Schade, C., Grndl, H. (2009): Is Default Risk Acceptable when Purchasing
Insurance? Experimental Evidence for Different Probability Representations, Reasons
for Default, and Framings, Journal of Economic Psychology, 30: 1123.
10. Hsee, C., Kunreuther, H., (2000): The Affection Effect in Insurance Decisions, Journal
of Risk and Uncertainty, 20: 141159.
11. en.wikipedia.org/wiki/Descriptive_research

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