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1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with
the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies are taken over by
the central government and nationalized. LIC formed by an Act of Parliament, viz.
LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of
India.
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact
all classes of general insurance business.
The Triton General Insurance Co. ltd. was the first general insurance company to
be established in India in1850, which was wholly British owned company. The first
general insurance company to be set up by an Indian was Indian Mercantile
Insurance Co. ltd was established in 1907. There emerged many players on the
Indian scene thereafter.
Towards the end of 2000, the relation ceased to exist and the four companies are,
at present, operating as independent companies.
The Life Insurance Corporation (LIC) was established on 1.9.1956 and had been
the sole corporation to ride the Life Insurance business in India.
The insurance industry saw a new sun when the Insurance Regulatory &
Development Authority (IRDA) invited applications for registration as insurers in
August, 2000. With the liberalization and opening up of the Sectors to private
players, the industry has presented promising prospects for the coming future.
The transition has also resulted into introduction of ample opportunities for the
professionals including Chartered Accountants.
The industry formations need to keep vigil on these characteristics of the Indian
market and formulate the strategies to entail maximum contribution to the
output sector. In 1997, the Indian life and non-life insurance business accounted
for merely 0.42% of the world’s life and non-life business. The figures of basic
parameters of the industry’s performance viz. Insurance Density and Insurance
Penetration also are evident of the existing hitherto existing low-yield Indian
market conditions.
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.
BASIC FUNCTIONS OF THE INSURANCE INDUSTRY
5. MANAGEMENT OF PORTFOLIO:
The management of portfolio includes the assessment of requirements of funds,
identification of various sources of finance, the evaluation of the sources in the
light of their cost, availability, timing etc. reconciling the features of various
sources with needs of the company and he selection of appropriate conjunction
of sources. The insurer possesses huge amount of funds, which need proper
management. The management of portfolio of an insurance company requires
identification of investment avenues evaluation thereof and the selection of the
most appropriate mix of alternatives where the funds of the company can be
invested. The selection requires the knowledge of finance related functions and
techniques apart from the in-depth know of the patterns of requirement of funds
in the company as well as industry as a whole.
BASIC FUNCTIONS THAT INSURANCE PRODUCTS NEED TO FULFILL
The functions of insurance can be bifurcated into two parts:
1. Primary functions
2. Secondary functions
3. Other functions
RISK FREE TRADE: Insurance promotes export insurance, which makes the foreign
trade risk free with help of different types of policies under marine insurance
cover.
TYPES OF INSURANCES
Motor insurance: It is also known as an auto insurance and is the most
common form of insurance and may cover both legal liability claims against
the driver and loss of damage to the vehicle itself.
Property insurance: It provides protection against risk to property, such as
fire, theft or weather damage. This includes specialized forms of insurance
such as fire insurance, flood insurance, earthquake insurance, home
insurance and boiler insurance.
Health insurance: It covers medical bills incurred because of sickness or
accidents.
Life insurance: It provides benefit to descendant’s family or other
designated beneficiary, usually to make for their loss of income.
Accidents insurance: It provides a benefit to policy holder in case of an
accident.
Theft insurance: It provides benefits in the event of theft.
Mostly, life and non-life insurers are subject to different regulations, tax and
accounting rules. The main reason for distinction between the two types of
company is that life business is very long term in nature. By contrast, non-life
insurance cover usually covers shorter periods, such as one year. Companies may
sell both life and non-life insurance, in which case they are known as composite
insurance companies.
INDUSTRY SCENARIO
Out of 28 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.
Market Size
India's life insurance sector is the biggest in the world with about 36 crore 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, and could top the US$ 1 trillion mark
in the next seven years.
The total market size of India's insurance sector is projected to touch US$ 350-400
billion by 2020 from US$ 66.4 billion in FY13. The general insurance business in
India is currently at Rs 77,000 crore (US$ 12.41 billion) premium per annum
industry and is growing at a healthy rate of 17 per cent.
The Rs 12,606 crore (US$ 2.03 billion) domestic health insurance business
accounts for about a quarter of the total non-life insurance business in the
country.
OBJECTIVES
PILOT SURVEY:
Initially pilot survey was done and the questionnaire was prepared based on the
findings of the pilot survey.
METHODOLOGY:
1) Sampling method
Sample size: 100 correspondents
Target population
The research targeted 100 households.
The target population included professionals, people from service
sector, housewives, and businessmen with adequate family income.
2) Data collection
Tools used: Questionnaire
Medium: Face to Face.
3) Data analysis
The data analysis has been done using graph charts and pie charts.
QUESTIONNAIRE
BUYING BEHAVIOUR OF CONSUMERS IN INSURANCE SECTOR
1) Do you have a policy for any of the following?
☐LIFE INSURANCE ☐ ACCIDENTAL INSURANCE
☐MOTOR INSURANCE
If none, then why not?
2) At what age did you buy the following policies?
a) Life Insurance:
☐16-20 ☐21-30
☐31-40 ☐41-50
☐31-40 ☐41-50
c) Health insurance:
☐16-20 ☐21-30
☐31-40 ☐41-50
☐51-55 ☐55+ yrs.
d) Theft insurance:
☐16-20 ☐21-30
☐31-40 ☐41-50
☐51-55 ☐55+ yrs.
e) Motor insurance:
☐16-20 ☐21-30
☐31-40 ☐41-50
☐51-55 ☐55+ yrs.
☐ HDFC ☐ LIC
INSURANCE CO.
☐ MEDIA ☐ COMPANY
☐ FRIENDS ☐ FAMILY
INSTITUTION
☐ OTHERS
☐ OTHERS
☐ DISTRIBUTION
7) ARE YOU SATISFIED WITH YOUR INSURANCE SCHEME?
☐ YES ☐ NO
☐ GOVERNMENT ☐ PRIVATE
9) PERSONAL INFORMATION?
☐ MALE ☐ FEMALE
FINDINGS AND ANALYSIS
LIFE INSURANCE
25%
YES
75% NO
MOTOR INSURANCE
17%
YES
NO
83%
Life insurance and motor insurance are the most popular insurances among the
respondents. In case of life insurance, the first thing that comes to customers
mind is LIC. Thus, LIC is almost synonymous with life insurance. Also motor
insurance is famous because a vehicle owner does not need to take extra efforts
to get insurance as it is provided when a person buys a vehicle.
HEALTH INSURANCE
48%
52%
YES
NO
Although 52% of the respondents have health insurance policies, majority of them
have got it through the companies where they are employed. Very few
respondents have bought it directly through insurance companies. Thus, health
insurers need to make efforts to make health insurance products more popular
among the consumers at an individual level.
ACCIDENTAL INSURANCE
20%
YES
NO
80%
THEFT INSURANCE
10%
YES
NO
90%
Accident and Theft insurances are not very popular among consumers. Some
consumers do not even know about the existence or availability of such products
in the market.
AGE AT WHICH POLICIES WERE BOUGHT
Life insurance
45
40
40
35
30
25 22
20
20
14
15
10
5 3
1
0
16-20 21-30 31-40 41-50 51-55 55+
Majority of the insurance holders fall in the age group of 40-50 years followed by
the age group of 30-40 years. Probably as consumers approach old age, their
tendency to buy life insurance increases, so that they can ensure a secured life for
their dependents in the event of their death. However, the age group of 20-30 is
the one where consumers have lesser responsibilities and high disposable
income. In this segment there is scope for growth. Hence, insurance can tap this
segment for life products.
Whereas in the case of health insurance, 35% of health insurance holders fall in
the age bracket of 41-50 years. This is the age group where people are prone to
health issues. This is one of the reason for such statistics as described in the
graph.
Health Insurance
40
35
35
30
25
25
20
20
14
15
10
5
5 1
0
16-20 21-30 31-40 41-50 51-55 55+
Motor Insurance
45
39
40
35
35
30 28
25
20
15
10 6
5 1 2
0
16-20 21-30 31-40 41-50 51-55 55+
Majority of the motor insurance holders fall within the age bracket of 21-30 years.
Maximum motor owners today fall in this age bracket and the majority of motor
companies have tie-ups with insurance companies, thus supporting the increase
of policy holders within this age bracket. Also there is a considerable number of
insurance holders in the 31-50 years bracket.
COMPANY WISE MARKET SHARE
Motor Insurance
20 19 19 19
18
16 15
14
12
10
8 7
6
4 3
2
0
Bajaj Allianz New India Oriental National United India Any other
Assurance Insurance Insurance Assurance
There are three major players which share the market equally
Amongst the private insurance players, Bajaj Allianz holds a good percentage of
the market.
Health Insurance
100
90
80
70
60
50
40
30
20 14 14
10 7 5
3 1
0
HDFC IFCO TOKYO New India Max Oriental Met Life
Standard Assurance Newyork Life Insurance
Majority of people are not aware of the health insurance. When they say health
insurance, they relate it to life insurance. Therefore, not much importance is given
to health insurance in India. New India Assurance and Oriental insurance are the
major players in the health sector.
However, in case of both health and motor insurance, there is no clear-cut market
leader. In order to gain a strong hold in this market companies need to
differentiate themselves from other players.
LIFE INSURANCE
60
53
50
40
30
20
8
10
1 1 2 1
0
TATA AIG ICICI Max New Met Life Kotak LIC
Prudential York Life Mahindra
LIC is the market leader with maximum customer base. Reasons are as follows:
Trust
26%
Private
Government
74%
30
26
25
25
20
15
15 12
11
10
5
5
0
Investment Offered by Offered by Oblige a friend To protect Tax benefits
financial company against
institue damages
100
90
80
70
60
50
40
30 24 25
20 14 16
12
10 7
2
0
Media Financial Insurance Company Friends Family Others
Institutions agent
Also, family and friends play a vital role; i.e. Word of mouth publicity. However,
media is not proving as effective as it should be. This is one area on which the
insurance companies could focus.
FACTORS INFLUENCING THE PURCHASE OF A POLICY
25%
40%
Product variety
Distribution
7%
Premium
8% Brand name
20% Service
21%
Satisfied
Dissatisfied
79%
Level of satisfaction for the existing policies is very poor amongst the customers
because majority of the consumers have insurance policies provided by
government companies. These companies do not provide:
Prompt response.
Good customer service.
A policy holder has to take efforts to get his claim from the company.
HYPOTHESIS
IMPACT OF INCOME LEVEL ON PURPOSE OF POLICY PURCHASE
H0= The purpose to purchase an insurance policy is not affected by the income
level.
H1= The purpose to purchase an insurance policy is affected by the income level.
Between 5 3 2 2
25000-
50000
More than 5 2 2 2
50000
Total 26 25 6 5
Chi-Square Tests
N of valid cases 62
The hypothesis is accepted that the buying of the insurance policy is not effected
by the income level. Here the significant difference is more than 5 per cent and
we can say that monthly income level and the purpose of purchase of insurance
policy is independent i.e. monthly income does not matter for purpose of the
purchase. It means that the person having different monthly income level can opt
for public sector i.e. LIC or private sector.
LIMITATIONS OF THE PROJECT
One of the major limitations of this study is the sample size selected. A
sample size of 100 people may not reveal all the facets of consumer buying
behaviour.
Again, this survey was conducted in Navi Mumbai and has a geographical
limitation and may not be representative of India as a whole.
The research conducted may have missed out on certain points which could
have affected the final findings and conclusion.
FUTURE SUGGESTIONS
2. As survey suggest majority of the people taking health insurance usually get
it from the companies they work in very few customers buy it on individual
level. Hence companies need to make effort to make health insurance
more popular through appropriate promotions.
3. Product customization/variety is a very important factor in selecting an
insurance provider. In the context of formulating mix, it is essential that the
insurance organizations promote innovation and in the product portfolio
include even those services and schemes which are likely to get a positive
response in the future. Currently most marketers are primarily addressing
only the first two levels I.e. the core product and formal product levels.
However, with further expectations of the customer-again synchronised
with intense competition- insurance companies should also address the
augmented product level.
4. Insurance companies should not consider it as the end of the service once
the customer is provided the policy. Insurance company should include the
provision of the post-sales service to the customer. Among the services
rendered by the insurance company is the service of processing and release
of claims.