Study of Consumer Behaviour

of
Insurance Industry in India
Submitted to:
Dr. Gaurav Joshi
Submitted by:
Group 4
12/2015 Shubham Sharma
38/2015 Abhishek Lohani
54/2015 Deepanshu Gupta
74/2015 Vaibhav Sehgal
88/2015 Nitasha Nandan

LAL BAHADUR SHASTRI INSTITUTE OF

MANAGEMENT NEW DELHI
September 9, 2016

All rights reserved. No part of this report may be reproduced,

stored in retrieval system, or transmitted, in any form or by
means, without the prior permission from Group 6, Section B,
PGDM General, Lal Bahadur Shastri Institute of Management,
New Delhi.

LETTER OF TRANSMITTAL
November 25, 2015
To: Dr. Gaurav Joshi
From: Group 4

This is to present a report on the topic Study of Consumer

Behavior of Insurance Industry in India conducted as a project
research work for the course Consumer Behavior by us,
Group No. 4, for your kind perusal and necessary action.

Thanking You,
Group 4

PREFACE
Our group underwent a very unique and interesting journey
while making this report. There were lots of delegations to
each other due to trimester end pressures. With lots of delays,
we finally gathered together and came up with our
contributions and here we have our best combined effort.
As would be managers, we got an opportunity to understand
what are the factors that affect buying behaviour of consumer
with respect to General Insurance Category and impact of
psychological factors on the same. We got an opportunity to
conduct a primary research for the same and learn from the
outcome of the analysis. During this project, we did exhaustive
search on Ebsco host which was a bit tricky. We completed the
project work by researching more from a number of books as
well. Going through some interesting research papers,
newspaper clippings and interviews, we understood the
insurance industry as a whole.
We worked together as a group, enjoying evening coffees
together. Overall, it has been a nice experience.

ACKNOWLEDGEMENT

We are extremely grateful to LBSIM, Delhi for having

prescribed this project work to us as a part of the academic
requirement in the MBA course. The completion of this project
work has enabled us to gain invaluable knowledge.
We would like to express our gratitude towards Dr. Gaurav
Joshi, whose invaluable support and guidance has helped us to
gain knowledge of various aspects of consumer behavior
subject and has given us an opportunity to sharpen our skillsets .We are also very grateful to our family and our friends for
their enduring support.
At this juncture, we wish to appreciate the management and
staff of LBSIM for providing state of the art infrastructure and
resources, to enable us to complete and enrich our project.
This project has given us a chance to get in touch with the
practical aspects of working in a professional setup.

TABLE OF CONTENTS
Chapter
No.
i
1.
1.1
1.2
2.
2.1
2.2
2.3
2.3.1
2.3.2
2.3.3
2.3.4
3.

Topic

Executive Summary
Introduction
Objective
Research Methodology
Discussion

Pa
ge
No
1
2
2
2
3
3

Power and politics in organization

Positive Power and Politics
Examples:
New Zealand Suffrage Movement
The Arcelor-Mittal Deal
Apple-Steve Jobs vs. Tim Cook
Marvel Studios
Part-2- Naukri.com
Company Overview

4
5
5
6
6
7
9
10

Log Sheet
Interview Schedule
Important Transcripts

11
12
13

3.1
3.2
3.3
3.4
3.5
4.
5.

Insights and Learnings

References & Bibliography
Appendix

14
16
17

Executive Summary
The insurance industry of India consists of 53 insurance
companies of which 24 are in life insurance business and 29 are
non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from
that, among the non-life insurers there are six public sector
insurers. In addition to these, there is sole national re-insurer,
namely, General Insurance Corporation of India (GIC Re). Other
stakeholders in Indian Insurance market include agents
(individual and corporate), brokers, surveyors and third party
administrators servicing health insurance claims.
Out of 29 non-life insurance companies, five private sector
insurers are registered to underwrite policies exclusively in
health, personal accident and travel insurance segments. They
are Star Health and Allied Insurance Company Ltd, Apollo Munich
Health Insurance Company Ltd, Max Bupa Health Insurance
Company Ltd, Religare Health Insurance Company Ltd and Cigna
TTK Health Insurance Company Ltd. There are two more
specialized insurers belonging to public sector, namely, Export
Credit Guarantee Corporation of India for Credit Insurance and
Agriculture Insurance Company Ltd for crop insurance.

INTRODUCTION
During April 2015 to March 2016 period, the life insurance
industry recorded a new premium income of Rs 1.38 trillion (US$
20.54 billion), indicating a growth rate of 22.5 per cent. The
general insurance industry recorded a 12 per cent growth in
Gross Direct Premium underwritten in April 2016 at Rs 105.25
billion (US$ 1.55 billion).
Indias life insurance sector is the biggest in the world with about
360 million policies which are expected to increase at a
Compound Annual Growth Rate (CAGR) of 12-15 per cent over
the next five years. The insurance industry plans to hike
penetration levels to five per cent by 2020.
The countrys insurance market is expected to quadruple in size
over the next 10 years from its current size of US$ 60 billion.
During this period, the life insurance market is slated to cross
US$ 160 billion.
The general insurance business in India is currently at Rs 78,000
crore (US$ 11.44 billion) premium per annum industry and is
growing at a healthy rate of 17 per cent.
The Indian insurance market is a huge business opportunity
waiting to be harnessed. India currently accounts for less than
1.5 per cent of the worlds total insurance premiums and about 2
per cent of the worlds life insurance premiums despite being the
second most populous nation. The country is the fifteenth largest
insurance market in the world in terms of premium volume, and
has the potential to grow exponentially in the coming years.
India ranked 11th among 88 countries in the life insurance
business, with a share of 2.0 per cent during FY14. The country
ranked 21st in global non-life insurance market, with a share of
0.66 per cent in FY13. The life insurance premium market

expanded at a CAGR of 14 per cent, from USD14.5 billion in FY04

to USD61.78 billion in FY15.
The non-life insurance premium market rose at a CAGR of 16.3
per cent, from USD3.4 billion in FY04 to USD10.17 billion in
FY16*( Up to November 2015), registering a growth of 9.5 per
cent. The market share of private sector companies in the nonlife insurance premium market rose from 9.6 per cent in FY03 to
41 per cent in FY16*.In 2015, crop insurance market in India is
the largest in the world and covers around 32 million farmers;
which accounted for nearly 19 per cent of the total farmers in the
country. Strong growth in the automotive industry over the next
decade to be a key driver of motor insurance.

ADVANTAGE IN INDIA
STRONG DEMAND:
Growing interest in insurance among people; innovative
products and distribution channels aiding growth
Increasing demand for insurance offshoring
Growing use of internet has started increasing demand
ATTRACTIVE OPPORTUNITIES:
Life insurance in low-income urban areas
Health insurance, pension segment
Strong growth potential for micro insurance, especially from
rural areas
INCREASING INVESTMENTS:
As per the latest data, rising participation by private players
has increased their market share in the life insurance market
to 24.6 per cent in FY14 from 2 per cent in FY03
Increase in FDI limit to 49 per cent from 26 per cent, as
proposed in 2012, will further fuel investments

POLICY SUPPORT
Tax incentives on insurance products
Passing of Insurance Bill gives IRDA flexibility to frame
regulations
Clarity on rules for insurance IPOs would infuse liquidity in the
industry
Repeated attempts to make the sector more lucrative for
foreign participants

EVOLUTION OF THE INDIAN INSURANCE

SECTOR

GROWTH OF INSURANCE INDUSTRY IN INDIA

Growth of non-life insurance premium experienced a slowdown in

FY15 but premiums are expected to grow in emerging economies
by 10.7 per cent in 2016 and 2017. Global premium increased by
3.3 per cent in 2015.
The insurance industry is expected to rise and reach USD280
billion in 2020. In 2015, the industry comprised of 24 private
players while Life Insurance Corporation constituted 71 per cent
of the insurance market in the country.

 Insurance density in India increased from 3.57 in FY05 to

11.23 in FY15 at a CAGR of 12.1 per cent.
Insurance penetration reached 3.3 per cent in FY15

LIC CONTINUES TO DOMINATE LIFE INSURANCE

SEGMENT
In 2015, the life insurance sector has 29* private players
compared to only four in FY02
LIC is still the market leader, with 69 per cent share in FY15,
followed by ICICI Prudential, with 6.0 per cent share
LIC issued 20.1 million new policies in FY15

Market Share
LIC

ICICI

Others

HDFC

SBI

Max Life

Birla Sun Life

Reliance

5% 2% 2% 1%
5%

2%
8%
6%

69%

Bajaj Allianz

NOTABLE TRENDS IN THE INSURANCE SECTOR

Emergence of
new distribution
channels

Emergence of
new distribution
channels

Emergence of
new distribution
channels

Emergence of
new distribution
channels

New distribution channels like bancassurance,

online distribution and NBFCs have each and
reduced cost.
Firms have tied up with local NGOs to target
lucrative rural markets.

In the life insurance segment, private sector

share in total premiums increased to 27.1
percent in FY16* from 2.0 per cent in FY03
In the non-life insurance segment, share of
the private sector increased to 42.7 per cent
in FY16* from 14.5 per cent in FY04

The life insurance sector has witnessed the launch

of innovative products such as Unit
Linked Insurance Plans (ULIPs)
Other traditional products have also been
customized to meet specific needs of Indian
consumers

Large insurers continue to expand, focusing on cost

rationalization and aligning business models to
realize reported Embedded Value (EV), and
generate value from future business rather than
focus on present profits.

PORTERS FIVE FORCES ANALYSIS

STRATEGIES ADOPTED

DEMAND GROWTH FOR INSURANCE PRODUCTS

SET TO ACCELERATE
Indias robust economy is expected to sustain the growth in
insurance premiums written.
Higher personal disposable incomes would result in higher
household savings that will be channeled into different
financial savings instruments like insurance and pension
policies
Household savings are expected to grow to USD397.78
billion by 2016 from USD89 billion in 2000
Financial savings are expected to grow to USD202.36 billion
by 2016 from USD45 billion in 2000

Rising income; growing middle class

Per capita income and rural income

are increasing
The
number
of
middle
class
households
(earning
between
USD4,413.1 and USD22,065.3 per
annum) is estimated to increase more
than fourfold to 148 million by 2030
from 32 million in 2010
Rising per capita income leads to
increased spending on medical and
healthcare services

Higher incidence of chronic lifestyle

diseases

Lifestyle diseases are set to account

for a greater part of the healthcare
market

Lifestyle diseases such as cardiac

diseases, cancer and diabetes are
treated with the help of biotechnology
products, thereby boosting revenues of
biotech companies

SWOT ANALYSIS

Weakness

Strength
Patents
Premium rates are increasing
and so commissions
The variety
increasing

of

Business growth

products

are

Insurance companies are often

slow to respond to changing
needs
Buying insurance policy
cumbersome process
Less differentiation
Low Investment
Old tariff structure

is

Threats

Opportunities
Technology is improving paperless
transactions available
Rise in income and awareness
New Innovations in technology
Emerging middle income groups

New substitute product emerging

Increasing expenses and lower
profit margins
Government
regulations
on
issues like health care can
quickly change its direction
The dominance of entrenched
players make industry stagnate

PESTEL ANALYSIS
Political factors affecting insurance industry

Insurance business in rural/ social sector

Capital requirement
Renewal of registration
Requirement as to capital
Investment of funds outside India
Power to investigation or inspection
Tax policy and insurance sector

Economic factors affecting insurance industry

Adequacy of capital

 Increased economic activity

Interest rates
Inflation rate
Market related factors such as recession etc.

Socio-Cultural factors affecting insurance industry

Population
Life style
Educational level
Level of earning
Societal benefits

Technological factors affecting insurance industry

Maintaining the database
E-business insurance in India

Legal Policies affecting Insurance Industry

There is a provision that any international insurance company
has to tie up with an Indian company if they want to do
business in India
Life insurance companies are allowed to go public.
Approval for increment in FDI cap
Passed bill to allow FDI in Insurance

 Environmental Factors
Natural disasters
Rainfall dependency
Other non-recurring activities e.g. Car Accidents etc.

Objectives
1.Identification of the factors that affect the buying behavior of
consumer with respect to General Insurance category.
2. Impact of external factors like Firms marketing efforts &
sociocultural environment in consumer buying behavior.
3. Impact of psychological field (Motivation, Perception, Learning,
personality, Attitudes) in decision making process of consumer
with respect to General Insurance category.

Research Methodology

Reliability Test

Factor Analysis

Kaiser-Meyer-Olkin Test:
KMO measures sampling adequacy, i.e., appropriateness of
factor analysis. Its value should be greater than 0.5 to proceed.
Since, in this case value of KMO is 0.721 which is greater than
0.5. Thus, factor analysis is appropriate.
Bartletts Test:
It indicates the strength of relationship among variables. It tests
the null hypothesis stated above. Since, in this case, significance
value is 0.000 which is lower than 0.05. Thus, it is statistically
significant and thus, null hypothesis is rejected.

It shows that how much of the variance in a variable has been

accounted for by the extracted factors. Thus, it shows the
percentage of variance in a variable that is captured by the
common underlying factor.
In this case, the value is highest for variable 10 & 20 and is lowest for
variable 3 & 13.

Eigen values represents the percentage of total variance

explained by each factor. In this case, first five factors
cumulatively explain 92.674% of the total variance.

It reduces the number factors on which the variables have high

loadings. It does not actually change anything but makes the
interpretation easier.

It shows loading of sixteen variables on the 5 factors extracted.

The higher the absolute value of the loading, more the factor
contributes to variable. All the loadings that are greater than 0.5
are considered while suppresses all other loadings lesser than 0.5.

Customer Value
Satisfacti Added
on
Services

Proper
Convenie
Guidance nce
&
Informati
on

Fast and
efficient
counter
services

Cell phone
insurance
banking
facilities

Convenient
company
office
location

Company
opening /
Operating
hours

Use of
modern
equipment

Speed and
efficiency of
transactions

New scheme
information

Parking space

Connectivity
to banks

Wide range
of products
and services

Ease of
opening the
account

Professionali
sm and
credibility of
staff

Availability
of Premium
collection
centre
Interest
rates

Infrastructur
e of the
insurance
company
Secured
internet
banking

Grievan
ce
Redress
al
Proper
guidance
and
immediate
complain
handling
Lower
service
charge

Computerizat
ion and
online
transactions

Motivational Factors
Motivational Factors

12%

Retirement
Advertisement

43%

25%

Health Benefits
Gaining a new financial
dependent

20%

Consumers Perception Towards Various

Communication Channels

Channels

11%

Advertisements

28%

Speaking To an Agent
Marketing Materials
Online

17%

44%

Recommendations

Limitations

References