Research

Enhancing the Sales

Pitch of ULIPS: A Study
of Perception towards ULIP
Investments in India
by Pratibha Wasan

Abstract
The paper explores perception about ULIP products in Indian markets. It attempts to determine the factors affecting the
perception and purchase of ULIP products in order to make suggestions for improved market penetration by ULIP sellers. It
finds age, number of dependents in the family and income to be highly correlated with ULIP purchase whereas gender and
qualification were not found to be affecting the purchase decision for ULIPs. The study suggests the ULIP providers to position
ULIPs as income instruments for people in the mid income bracket. It also recommends for greater innovation in terms of risk
mitigating features of the ULIP products and a larger focus on the risk management and risk mitigating features in the sales
pitch of ULIP products for the prospective investors.

Keywords
Unit Linked Insurance Plans, Risk, Return, Investments

Introduction
ULIP (Unit Linked Insurance Plan) provides dual benefits of insurance and investment return. Under ULIPs, policy
holders have the option to invest in various types of qualified investments such as equity, midcap, bonds and mutual
funds. Availability of various investment options provide the investors the flexibility to manage investment returns and
risk according to their specific requirements. Amongst multiple investment options such as mutual funds, equity/share
markets, bonds, PPF (Public Provident Fund), real estate, gold etc., insurance is evolving as one of the booming sector in
India which contributed to 3.9% of GDP in FY 2015-16. Within the insurance sector, ULIP products are expected to grow
at a faster pace in India due to its dual benefits which theoretically, should be appealing to any rational investor. This got
validated with the release of performance figures of insurance sector in India by Insurance Regulatory and Development
Authority of India (IRDAI). As per annual report released by IRDAI in the year 2015, insurance sector grew at 4.39% in the
FY 2014-15 and ULIP products grew at 10.58%. ULIP’s share of premium to total premium of the insurance sector reached
to 12.68% from 11.95% in the previous year.
Sustaining this growth would be in the interest of investors, insurance companies as well as the economy as a
whole. The ULIP providers should therefore, make efforts in their sales pitch for these products, so as to attract more
investors. An apt product design along with a complementing marketing & sales program can help secure higher sales.
An understanding of investor’s perception of the ULIP products and the factors affecting their perception would
enable these companies in two ways. One, it will help them to design their products which can score positive in the perception
of different investors and two, it will also enable them to build a sales program that builds upon the factors valued by the
investors while, addressing the challenges perceived by them. Such study can also help these companies in profiling their
potential investor.

FIIB Business Review, Volume 5, Issue 4, October - December 2016 36


The study findings can also offer insights for
the regulators in terms of laying down of disclosure
requirements for the ULIP providers. A detailed disclosure
on all the factors perceived negative by the investors
would help allaying of those of their apprehensions
which are unreasonable and may give investors comfort
in their concern areas.
Literature Review
Many researchers have done research on
the Indian insurance sector. Most of these studies are
pertaining to life insurance. Alinvi and Babri (2007)
attempted to study preferences of insurance in young
customers. They reported price of the insurance offering
to be the deciding factor for purchase decision. They
documented investor’s lack of trust in the intentions of
insurance companies. Apart from suggesting for more
transparency, they also suggested for more flexibility to
be built into the offerings of the insurance companies.
Increased transparency was also suggested by Bharathi
(2008) in order to safeguard the policyholders’ interests.
It was advocated that the initial charges should be spread
out over the policy period evenly. Some studies (Vyas
& Tamilmaran, 2007) on awareness and perception
of insurance products in India concluded that though
people were aware about life insurance and several
other insurance products, awareness about ULIPs was
significantly low. Also, the basic use of insurance was
seen as tax benefit. Some of the researchers (Prakash, Jha
& Kallurkar, 2011) found that demographic factors like
personality, gender, education, age and income affect the
customer’ attitude towards insurance service quality.
Akula and Kanchu (2011), compared traditional
insurance policies with ULIPs. They concluded that
there is phenomenal growth in ULIPs compared to
the traditional insurance policies. They reasoned that
the growth was also due to the fact that new private
insurance companies were using ULIPs to penetrate
into the Indian markets. Contrary to this, Gaikwad &
Vibhute (2013), found that customers prefer traditional
insurance products over ULIPs. They also documented
the importance of company’s brand image and service
quality for choosing between different insurance
companies. Sisodiya and Gupta (2007) attributed the
popularity of ULIPs to the various benefits that it offers
like, tax benefits and market linked returns along with
insurance cover. Serenmadevi, Saravanaraj and Natajan
(2011), studied customers’ satisfaction levels with ULIP
products. It was found that the majority of customers
were satisfied with the products. Kabra, Mishra and
Dash (2010) concluded that age and gender were
important determinants of an investor’s risk bearing
FIIB Business Review, Volume 5, Issue 4, October - December 2016
Research
capacity and hence, they influenced the perception and
purchase of insurance products by an investor. Sumathy
and Kumar (2011), documented that the qualification
of investors was an important factor in ULIP purchase
decision. Bahekar and Sudame (2015), found significant
association between demographic variables of age,
education and occupation with ULIP purchase decision.
Some of the studies highlighted the role of
insurance companies in promoting insurance products
by helping customers in their decision process. They
suggested for adoption of effective communication and
promotional strategies along with employing competent
agents. Merimadi (2008) analysed the promotional
strategies adopted by insurance companies in India and
Iran. He concluded that insurance companies in both the
countries were relying on publicity, customer relations
and sales promotion for securing greater customers. He
found significant association between customer gender
and advertising recall and suggested for gender specific
advertisements for insurance products. Radhakrishnan
(2008) surveyed insurance customers and insurance
agents to conclude that customers need assistance in
deciding on the purchase of insurance products.
Most of these studies research on customers’
satisfaction level and preferred criteria for investing in
specific insurance products. Studies on assessment of
factors affecting investor’s perception of ULIPs in general
are limited. Such study is important as it can guide the
ULIP providers in designing of the product features and
promotional programs for their ULIP products enabling
better growth. Growth in ULIP’s is beneficial not only
for the investors and insurance companies but for the
country’s economy too.
In view of this the present study was carried
out to investigate the various factors affecting investor’s
perception and purchase decision for ULIP products.
Research Objectives
The research objectives were twofold:
yy Explore factors affecting ULIP purchase by
customers
yy Study the customers’ perception for ULIP products
Research Methodology
The primary data was collected using a
survey based on questionnaire. The questionnaire
was formulated on the basis of information gathered
on customer profiles and perceptions for Unit Linked
Insurance Plans (ULIPs). The information was obtained
through interviews conducted on 20 sales professionals
from insurance sector and some of the general public.
37
 Research
A 17 item scale was obtained for measuring perception Table 1. Summarized Exploratory Factor Analysis
of respondents. Two questions were drafted to measure Results for Investors’ Perception of ULIP
the overall perception and purchase decision of the
respondents. These formed the dependent variables in Kaiser-Meyer-Olkin Measure of .677
the study. The questions were measured on a 5-point Sampling Adequacy.
likert scale. Finally, questions on demographic variables Bartlett’s Test of Sphericity Approx.. chi-square = 135.548,
were included in the survey instrument to explore their sig. = .000
role in the perception and purchase of ULIP products. Factor loadings
The questionnaire was structured. The questions Item Factor1 Factor2 Factor-3
were listed in a prearranged order and respondents were Returns Risk Benefits
informed about the purpose of collecting information. q17: ULIPs earn higher returns .75 .18
than MF, bonds and fixed
The population for the study constituted of those deposits.
individuals who had awareness about various insurance
q16: It is wise to invest ULIPs .73 .27
companies and ULIP policies. The research was carried than in life insurance plans only
out in Delhi & NCR Region. The questionnaire was
q9: high Returns in ULIPs make .65 .10 .19
administered by e-mail in the form of google forms as up for the risk
well as in person through field administration. Out of
q6: ULIPs add to my income. .61 .21 .15
80 people who the researcher tried to meet in person,
19 expressed unwillingness to participate due to lack of q11: gives opportunity to .52 .12
earn equity like earning with
adequate knowledge on ULIPS. Of the 183 people who manageable risk
were sent online questionnaires, only 59 responded.
The sample size for the study was therefore, 120. While, q3: Charges on ULIPs are small .50 .15
random sampling was used for field based survey, online given the return potential
survey was based on convenient sampling. q12: ULIPS are an effective .46 .19 .10
alternative source of income.
The chronbach alpha for the survey instrument
q4: tax benefit in ULIPs is a great .10 .14 .71
was 0 .71 which depicts the reliability of the instrument.
motivation
The instrument was also face validated in a pilot test
q5: I value the feature of .68
conducted on 15 respondents.
switching from one fund to
Results another
q8: Lock in period in ULIP is set .65
The following statistic obtained for KMO and too high
Bartlett’s test of sphericity indicated the absence of
q7: I like to track my fund .34 .59
significant correlations between the questionnaire items performance on daily basis
and hence, factor analysis could be suitability conducted.
q14: ULIPs are riskier than MF, .22 .68 .02
Exploratory Factor Analysis (EFA) using bond and fixed deposits.
principle component method with varimax rotation was Q15: high returns in ULIPs come .65
performed. Table1 presents results of EFA. Three distinct at high risk.
factors were obtained for a 17 item scale measuring q13: I can lose money by .32 .57
perception of ULIP. These items on each factor were investing in ULIPs.
decided on the criterion of factor loading >.45. Factor q10: It requires lot of time & .26 .51 .22
one had seven items with high loadings and consisted of knowledge of stock markets to
statements pertaining to asessing return perception of earn high returns on ULIPs
ULIP products. The factor was hence named as Return. q1: I would prefer safer .15 .50 .12
The second factor had six items with significant loadings. investments
These items were statements assessing risk perception of q:2: Risk cannot be eliminated in .24 .46 .23
ULIPS. The third factor extracted in the result was named ULIPs
as Benefits as it was found to have four items (statements) Eigen Values 9.93 8.75 1.53
pertaining to Benefits perception of ULIP products. The % of Variance 40.23 17.67 12.62
eigen value for all the factors were significantly greater % of Cumulative variance 40.23 57.9 70.42
than 1 and the factors together explained 70.4% of the
Note: items with factor loading >.45 are considered for analysis.
variance.

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 Research
Since data was collected on an ordinal scale, perception of ULIP’s, chi-square tests were performed
Spearman Correlations were conducted to test the between different demographic variables and three
associations between independent variables and the factors measuring Perception.
dependent variables of perception of ULIP and purchase
Hypothesis 1: Perception of ULIP as a high
of ULIP. The results of the tests are presented in Table 2.
return investment is significantly related to age, income,
Table 2. Summarized Results for Spearman qualification, gender & number of dependents
Correlation Tests (1-tailed) Table 3. Summarized Chi-Square Test Results
Purchase of Perception of F Sig.
ULIP ULIP Age 9.076 0.00*
rho Sig. rho Sig. Income 43.39 0.00*
Age .62** .00 .68** .00 Qualification 0.24 0.63
Gender 0.21 0.66
Income .51* .02 .62** .00
No. of dependents 13.45 0.00*
Qualification .32 .05 .21 .09
*p< .05
Gender .29 .06 .15 .13
It was found that gender and qualification
No. of dependents -.67** .00 -.84** .00 are not related with the return perception of ULIPS.
Returns .79** .00 .91** .00 This implies that return perception of ULIPs is not
very different for investors with different qualification
Risk -.81** .00 - .80** .00 background. It reflects that awareness and knowledge of
Benefits .68** .00 .65** .00 earning potential of investment products like ULIPs do
not essentially require higher education or qualification.
Perception of ULIP .89** .00 1.00
Hypothesis 2: Perception of ULIP as risky
Purchase of ULIP 1.00 .89** .00 investment is significantly related to age, income,
* Significant at 0.05 level
qualification, gender & number of dependents
** Significant at 0.01 level
Table 4. Summarized Chi-Square Test Results
It was found that age, income, number of
dependents in family, returns perception, risk perception F Sig.
and benefits perception were significantly correlated Age 0.27 0.65
with both the dependent variables. However, of these,
Income 9.07 0.00*
two of the variables namely, number of dependents and
risk perception were found to be inversely related to Qualification 0.917 .344
perception of ULIPs and purchase of ULIPs. Also, gender Gender 0.048 .828
and qualification were not found to be significantly No. of dependents 8.34 .00*
related with any of the two dependent variables. Risk
*p< .05
averse individuals are less likely to purchase ULIP as they
perceive ULIP products too risky to invest in. It also seems The results presented in Table 4 shows that
from the results that with the increase in the number there are differences in perception of ULIPs as a risky
of dependents in the family, chances of investments in investment across income and number of dependents.
ULIPs are low. Perception of ULIP was anticipated to be However, the risk perception for ULIPs is similar for
positively related to purchase of ULIP and the same has investors across different age, qualification and gender.
been found in the results which show that the chances of It may be inferred that investors with lesser number
purchasing ULIPs is higher for an investor who perceives of dependents in the family are perceiving riskiness of
ULIPs positively and vice versa. ULIPs differently from those who have greater number
In order to pursue the research objective of of dependents. Likewise a low income investor perceives
exploring the impact of demographic variables on ULIP’s riskiness differently than a high income investor.

FIIB Business Review, Volume 5, Issue 4, October - December 2016 39

 Research
Hypothesis 3: Perception of ULIP as liquid coefficients of risk was largely anticipated. Investors
investment is significantly related to age, income, who considered ULIPs as highly risky were less likely to
qualification, gender & number of dependents purchase ULIPs as they are less likely to overall perceive
it positively. It was interesting to discover that investors
Table 5. Summarized Chi-Square Test Results with high number of dependents in the family were also
less likely to purchase ULIPs as its regression coefficient
F Sig. had a negative sign too. Probably large number of
Age 15.99 0.00* dependents in the family adds to the tendency of avoiding
Income 9.07 0.00* risk by not investing in ULIPs which are perceived as
risky investments. It shows that risk factor dominates the
Qualification 9.12 0.00*
overall perception and purchase decision of ULIPS. This
Gender 0.048 0.828 is also evident from the regression result in which risk
No. of dependents 0.235 0.063 has a higher coefficient than any other factor including
return.
*p< .05
Among the demographic variables, apart from
Statistically significant relation was found number of dependents in the family, income is another
between age, income and qualification of the investors significant variable. The results show that people in
and the perception of ULIPs as a liquid investment. Also, higher income category are more likely to perceive ULIPs
the benefits of ULIPs was considered similarly across positively and invest in them. The adjusted r square of the
gender and number of dependents. model is 67.4%. This shows that the model predictability
The chi-square tests could only be used to test is good.
the existence of statistically significant association
between two variables (dependent and independent). Conclusion
The test however, offers no insight on the direction and It was found in the study that the perception
magnitude of this association. A regression analysis was and purchase decision of ULIP is broadly governed by
performed to establish the role of different independent demographic variables of age, number of dependents in
variables in predicting the purchase of ULIP products. the family and income. Also, gender and qualification are
The regression results are depicted in Table 6. not significant in forming a perception of ULIP products
or in the purchase decision of ULIP. It is also seen that
Table 6. Regression Results overall perception of ULIP products is broadly driven from
perceptions about its risk, return and benefits. Further,
Unstandardized Standardized
Coefficients Coefficients of these three, return and risk perceptions dominate the
t Sig. decisions on ULIPs. Benefit features of ULIPs seem to
Std. act as hygiene factors i.e. the presence of benefit aspects
B Beta
Error like tax savings, do not lead to purchase of ULIPs on
(Constant) 45.527 1.147 39.70 .000 their own but lack of these features will certainly affect
Risk -3.702 .154 -.808* -24.04 .000 sales of ULIPs negatively. ULIPs are majorly being used
Return 2.286 .101 .518* 22.73 .000 to secure higher returns while acknowledging the higher
risks embedded in it. Apart from risk, another deterrent
Dependents -1.647 .053 -.362* -.6.86 .000 in ULIP investments is the number of dependents in the
Age .109 .091 .041 1.197 .232 family. It is found in the study that families with larger
Benefits .815 .436 .112 1.869 .062 number of dependents in the family perceive ULIPs as
a highly risky investments and chose to stay away from
Income 1.22 .098 .802* 12.498 .000 investing in them. A typical investor of ULIP would be
Adjusted R = .674
2
one who is in high income bracket, has lesser number
S.E of estimate = 64.153
of dependents and who perceives ULIPs as a high return
Multiple regression analysis was conducted generating instrument with a manageable risk content.
to establish the significant predictors of purchase of
ULIP. Regression results yielded risk, return, number Implications of the Study
of dependents in the family and income as statistically The study encourages the ULIP providers to
significant predictors of purchase of ULIPs. The negative position their products as a means to increase income

FIIB Business Review, Volume 5, Issue 4, October - December 2016 40


for people in the mid income bracket. The positioning
should target to establish ULIP’s return potential more
prominently while, downplaying the risk through
developing and promoting risk management features
in ULIPs. Growth in ULIP sales would contribute to
the economy’s growth. For a sustained growth, ULIP
providers must innovate in the risk mitigating features of
the ULIP products. Also, the ULIP sales agents should be
well trained on the risk management and risk mitigating
features of ULIP so that, they can overcome the safety
concerns of the prospective investors while making a
sales pitch. This is important since perceived risk has
emerged as the major hurdle for ULIP investments. The
study findings also suggest that disclosure on risk factors
should continue to top the agenda of regulators and they
should continuously strive to achieve stringency and
comprehensiveness in disclosure requirements for ULIP
products particularly, on those product elements which
add to the risk of the product.
References
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Author Profile
Dr. Pratibha Wasan did her Ph.D from FMS, University of Delhi. She is NET qualified and is currently working as Associate Professor at
Jaipuria Institute of Management, Noida. She has contributed a chapter in a book on e-commerce and has published several papers in
national and international journals. She has presented papers in international and national conferences and is currently working on a
research project granted by Institute of Rail Transport, Ministry of Railways. She has published two cases with ISB-Ivey. She started her
career with corporate and for the last 13 years, is into academics. While working with HCL Infosystems, she was awarded with ‘Excellence
in Performance” in the year 2003. She can be reached at pratibha.wasan@jaipuria.ac.in.
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