TOPIC—“A study on factors affecting

customers preference toward life

insurance policies”
By- Yukta Batra
ABSTRACT-
As we all know, Human Life is the most important asset in this world,
which is the primary source of all the other assets. And to give this asset
a protective shield, many types of insurance policies and schemes are
hovering in the markets which are easily accessible and readily
available. But the most important one is *LIFE INSURANCE*.
Life Insurance provides financial protection to a person and his family
against any uncertain risks or damage. It also provides both Safety and
Protection to individuals and also encourages savings amongst people. 
The data collected will comprise of about 100 to 125 policyholders of
LIC company and various private life insurers. This sampling will be
done through a medium of dedicated Questionnaire, which will be
having 12-15 Questions of prime importance of Consumer needs like

• Need for evaluation of Consumer Needs in the business of Insurance, 

• Preference of consumers on type of Life Insurance, either Private or
Public, 
• Share of insurance companies in the rural and urban sector,
• Better use of latest, product innovation and distribution in the field of
Life Insurance.

KEY WORDS- Life Insurance, Customers, Investment, LIC,

IRDA, Policies.
INTRODUCTION-
Life Insurance is a must for each and everyone these days because of the
importance of life and how precious life is. Therefore, with a population
of over 1.4 billion, national and international life insurance agencies see
India as huge market place of opportunities and big business. It is
important to note that till 2000, the market of life insurance in India as
we know was under the monopoly of the LIFE INSURANCE
CORPORATION (LIC). But since then, privatization took place and it
witnessed a dynamic spurt of changes in this particular insurance
industry, who tried multiple tactics to capture potential consumers into
actual consumers. Here, customers are the main pillar of life insurance
business.
Every company tries to attract and retain existing customers to keep their
business on high scale. The proper understanding and need assessment
of the customers and their expectations help the insurance companies to
bring about necessary improvements in their product as well as services
offered by them. In today's world class market, it is essential and
necessary for the companies to provide better customer services, spread
more awareness, emphasis on need based innovative products and at
reasonable prices. All this, so that, each and every individual may avail
benefits of insurance policies and what are their preferred choices while
selecting and purchasing insurance policies.

LITERATURE REVIEW-
Narayan. H. Jai (2009), in an article has made an emphasis on
importance of customer in the business of insurance. He explained in
phase of growing market competition, there is an intense need to go
beyond mere efficiency in designing products. To understand the
customer’s needs and to convey what they have to offer would perhaps
bring in higher efficiencies in customer service. Insurance business
revolves around the customer and fair treatment to customers is need of
an hour to win their loyalty and trust. In a service based organizations,
customer service is the most dominating feature that differentiate and
gives good return to the insurers. Proper dealing with customer
complaints, effective customer grievances handling mechanism and fast
claim settlement procedure are some of the ways through which
satisfaction level of customers can be increased. Hence to serve the
customers promptly and effectively is the key success of a life insurance
business.

Girish Kumar and Eldhose (2008), published in insurance

chronicle ICFAI monthly magazine august 2008 in their paper titled
"customer perception on life insurance services: a comparative study of
public and private sectors", well explained the importance of quality
services and its significance in raising customer satisfaction level. A
comparative study of public and private sectors help in understanding
the customer perception, satisfaction and awareness on various life
insurance services.

Praveen Kumar Tripathi (2008), in his summer training project

report titled “customer buying behavior with a focus on market
segmentation” conduct a research based study on buying pattern in the
insurance industry with a special focus on HDFC standard life insurance.
The various segments of the markets divided in terms of insurance
needs, age groups, satisfaction levels etc were taken into account to
know the customer perception and expectation from private insurers.

Athma.P and Kumar. R (2007) in the research paper titled “an

explorative study of life insurance purchase decision making: influence
of product and non-product factors". The empirical based study
conducted on 200 sample size comprising of both rural and urban
market. The various product and non- product related factors have been
identified and their impact on life insurance purchase decision-making
has been analyzed. Based on the survey analysis; urban market is more
influenced with product based factors like risk coverage, tax benefits,
return etc. Whereas rural population is influenced with non- product
related factors such as: credibility of agent, company’s reputation, trust,
customer services. Company goodwill and money back guarantee
attracts many people for life insurance.

Jayakar (2003) in his study emphasized that new products innovation;

distribution and better use of technology are helping the new private life
insurers to take market share away from LIC, an only company before
liberalization of insurance industry. With the privatization of insurance
sector and with the entrance and cut throat competition with the private
sectors gaining an ever increasing edge over the public sector.

NEED OF THE STUDY-

The Insurance Industry has been one of the fastest budding industries in
the country all because people have understood the importance of
insurance policies in present times. It is known that almost 73% of the
population is still un-insured and are in need for proper guidance,
awareness and affordable insurance schemes from the existing big
players in the market. This study is particularly intended to discover and
examine the factors affecting consumers decision towards investment in
the life insurance policies.

PURPOSE OF THE STUDY-

1. To explore and learn the various factors influencing customer
investment decision in life insurance. 

2. To extract, study and analyze the impact of various demographic

related factors on consumers life insurance purchase decision making.

3. To evaluate preferences of the customers while taking life insurance

investment decisions.

4. To study and rank the preferences and factors responsible for the
selection of policies.

5. To offer targeted insights and suggestions for popularizing life

insurance among the public at large.

HYPOTHESIS-
1. Age and Income has no significant impact on the customer life
insurance investment decision as students at 21 years of age are planning
to purchase LIC policies.

2. Occupation and Gender are generally independent of the customer life

insurance investment decisions.

3. LIC is the most trusted and preferred brand among other life insurance
companies.

4. To expand this particular market, there is immense scope of product

differentiation and innovation.

RESEARCH METHODOLOGY-
This study is an exploratory and descriptive type of research study. The
study aims to find out the factors influencing customers life insurance
investment decision and their preferences at the time of policy buying
decisions. In order to conduct this research, 125 policyholders of Kanpur
and Bangalore have been surveyed for a period of 1 month and
Questionnaire method was used for Data collection.

Sources of data-
The data from the study has been collected from both primary and
secondary sources. The primary data has been collected through a well
drafted Questionnaire. The secondary data has been collected from
IRDA Annual Reports, Insurance Journals, Magazines and Insurance
Websites.

Research Plan-
Target Population- Kanpur and Bangalore cities
Sampling Unit- Life Insurance Policy Holders
Sampling Method- Convenience Sampling (Questionnaire)
Sample Size- 125.

IMPORTANT INSIGHTS
It is very important to know the difference of preferences of the Urban
and Rural population. Urban market is more influenced with product
based factors like Risk Coverage, Tax Benefits, Return, etc. 

Whereas Rural population is influenced with non-product factors like

Credibility and Trustworthiness of Agents, Company's Reputation,
Trust, Consumer Services and Value Added Services, Company
Goodwill, Money Back Guarantee and Security, etc. These factors often
attract more people and convert them from potential consumers to actual
consumers.
QUESTIONNAIRE-
1. Name-

2. Gender-

3. E-mail-

4. Mobile Number-

5. Occupation-

6. What is your annual income?

     Rs. 1,00,000 to Rs. 2,50,000
     Rs. 2,50,000 to Rs. 5,00,000
     Rs. 5,00,000 to Rs. 7,50,000
     Above Rs. 7,50,000

7. Do you have an insurance policy?

     Yes
     No

8. What type of insurance policy do you have?

        Public 
        Private

9. Who influenced you to get an insurance policy?

       Social Media
       Insurance Agency
       Government Of India
       Friends, Family, Colleagues
       Others.

10. How many insurance policies do you currently have?

    1
    2
    3
        More than 3

11. What kind of insurance policies do you have?

         Life Insurance Policy
         Motor Vehicle Insurance Policy
         Property Insurance Policy
         Pension Insurance Policy
         Endowment Policy
         Others

12. How regularly do you pay your premiums?

         Monthly
         Quarterly
         Half Yearly
         Annually

13. Has any of your policies ever lapsed due to non-payment of

premiums?
          Yes
          No

14. Have you received any incentives from your insurance company on
the insurance premiums?
              Yes
              No

15. Are you aware of any insurance bonuses of your policies?

             Yes
             No

16. Is your insurance company giving you any kind of tax benefit along
with the policy?
               Yes
               No

17. Will you ever recommend your friends, relatives or colleagues to

purchase an insurance policy?
              Highly Unlikely
              Unlikely
              Neutral
              Likely 
              Highly Likely

18. Feedback for insurance companies for betterment of insurance

policies and its accessibility.

DEMOGRAPHIC PROFILE OF THE

RESPONDENTS-
Socioeconomic factors such as age, income, occupation and gender are
some of the important parameters in the decision of life insurance. The
research is conducted with reference to the people and customers of
Kanpur and Bangalore. Below is the complete breakdown and analysis
of the profile of the respondents.
It is clearly visible that more than 50% of the
respondents out of 125 total, are in the age bracket
of 30-40 years and are aware of the importance of
purchasing life insurance policies at such a young
and critical age as well.
Again, the above pie chart shows that more than 75 respondents, that
constitute of about 61% of total, are male and rest are female.
Now, the above chart showcases that more than 88% people are above
the Rs. 2,50,000 bracket and are aware of the importance of insurance
policy.

Above chart says that 35% policy holders are Govt. Class Officials,
around 27% are Private Workers, 26% are Businesspersons and 12% are
random students who are mature enough to purchase a policy.
It is quite evident that quarterly and annually payment options are more
in fad and people prefer those only over monthly and half yearly
payment options.

Major reasons can be-

1. Easy payment time schedule.
2. Hassle free premium amounts.
3. Enough time to acquire funds for payment.

This survey reached a total of 157 respondents, out

of which 125, nearly 80% are insurance policy
holders and rest are not.
A huge 73 respondents out of 125 prefer LIC over other companies just
because of the brand value and trustworthy nature of the company.

As the data suggests, 57 respondents prefer to have just a life insurance

policy and nothing else apart from that.
It can been clearly seen that company’s reputation is the most important
factor along with money back guarantee for the people while deciding
the purchase decision for a policy.
Other factors are large risk cover, easy access to agents and low
premium facilities.
It can be clearly seen that nearly 63% of respondents still prefer public
companies like LIC, SBI and other players over the existing private
companies like BAJAJ, ICICI, and HDFC Prudential.
Major factors can be-
1. Trust Issues.
2. Company Reputation.
3. Company Legacy.
4. Government Control.
5. Better Premium Rates.
6. Safety and Security.

The company must have a trusted name to gain the customers trust and
validity, biggest example is LIC.
Good plans are second most trusted factor among companies and
consumers.

FINDINGS-
 1. It is clearly visible that more than 50% of the respondents out of
125 total, are in the age bracket of 30-40 years and are aware of
the importance of purchasing life insurance policies at such a
young and critical age as well.

2. Again, the above pie chart shows that more than 75 respondents
that constitute of about 61% of total, are male and rest are
female.

3. The company must have a trusted name to gain the customers

trust and validity, biggest example is LIC. Good plans are
second most trusted factor among companies and consumers.

4. It can been clearly seen that company’s reputation is the most

important factor along with money back guarantee for the
people while deciding the purchase decision for a policy.
Other factors are large risk cover, easy access to agents and low
premium facilities.

5. A huge 73 respondents out of 125 prefer LIC over other

companies just because of the brand value and trustworthy
nature of the company.

SUGGESTIONS-
1. In present competitive world, customer satisfaction has become an
important aspect to retain the customers, not only to grow but also
to survive. Customer service is the critical success factor and
private insurers through their best services would be able to
reposition and differentiate itself from LIC.
 2. Private insurers should emphasis more on advertising and building
brand awareness through different modes of communication. This
will help in spreading insurance awareness among the common
man.

3. To achieve greater insurance penetration, the healthier competition

has to be intensified by both the sectors and they should come up
with new innovative products to offer greater variety or choice to
the customers and also make improvement in the quality of
services and sell products through appropriate distribution channel
to win-win situation for both the parties. 

4. Insurance companies should devise policies that provide effective

risk coverage rather than focusing on the tax benefits and also
encourages them for long-term investment in insurance. 

5. Life insurance companies should come up with innovative tailor-

made products with high risk cover, more return and low insurance
premium to attract more number of consumers. 

CONCLUSION-
Life Insurance is an important form of insurance and essential
for every individual. Life insurance penetration in India is very
low as compare to developed nation where almost all the lives
are covered and stage of saturation has been reached. Customers
are the real pillar of the success of life insurance business and
thus its important for insurers to keep their policyholders
satisfied and retained as long as possible and also get new
business out of it by offering need based innovative products.
There are many factors which affect customers’ investment
decision inlife insurance and from the study it has been
concluded that demographic factors of the people play a major
and pivotal role in deciding the purchase of life insurance
policies.

REFRENCES AND SECONDARY DATA-

1. Athma, p. And kumar, r. (2007)) " an explorative study of life
insurance purchase decisionmaking: influence of product and non-
product factors ", icfai journal risk & insurance, vol.Iv, october
2007, pg. No 19-21.2.
 
2. Eldhose.v and kumar . G (2008), “customer perception on life
insurance services: a comparative study of public and private
sectors", insurance chronicle icfai monthly magazineaugust 2008,
pg. No 32-36.3.

 3. Jayakar. R (2003), “covering lives”, business today, june 8, pp.

68.
3. Imtiyaz.vasi do (2007), “retention of the customers is the essence
of insurance business”, insurance times, feb. 2007, pg. No 20.

4. Narayana. J (2009), “role of crm in life insurance business”, irda

journal, april 2009
 
 
5. Tripathi. P.k (2008), "customer buying behavior with a focus on
market segmentation”, summer training project, chandigarh
business school mohali, page no. 42-46. .7.
 
6. V.g.murugan (2012) “evaluation of investors behavior towards
mutual funds international journal of multidisciplinary
 management studies, vol.2 issue 1, january 2012, pg. No. 278-
2808.
 
7. IrDA annual reports.

THANK YOU