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POST PURCHASE BEHAVIOUR OF CONSUMER OF LIC

B.M. COLLEGE OF BUSINESS ADMINISTRATION

1

INTRODUCTION TO INSURANCE

BRIEF HISTORY OF INSURANCE

IMPORTANT MILESTONE IN THE LIFE INSURANCE

BUSINESS IN INDIA

BASIC FUNCTIONS OF THE INSURANCE INDUSTRY MISSION, VISION,OBJECTIVES AND COMMITMENT

NEED FOR STUDY

INDUSTRIAL PROFILE

LIST OF INSURANCE COMPANY IN INDIA

SWOT ANALYSIS

ETOP ANALYSIS OF THE INDIAN RETAIL INDUSTRY PEST ANALYSIS OF INSURANCE INDUSTRY


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INTRODUCTION TO INSURANCEInsurance industry has always been a growth-oriented industry globally. On the Indian scene too,

the insurance industry has always recorded noticeable growth vis--vis other Indian industries.

The Triton General Insurance Co. Ltd. was the first general insurance company to be established

in India in 1850, which was a wholly British-owned company. The first general insurance

company to be set up by an Indian was Indian Mercantile Insurance Co. Ltd., which was

established in 1907. There emerged many a player on the Indian scene thereafter.

The general insurance business was nationalised after the promulgation of General Insurance

Business (Nationalisation) Act, 1972. The post-nationalisation general insurance business was

undertaken by the General Insurance Corporation of India (GIC) and its 4 subsidiaries:

1. Oriental Insurance Company Limited;

2. New India Assurance Company Limited;

3. National Insurance Company Limited;

4. United India Insurance Company Limited.

The Life Insurance Corporation (LIC) was established on 01.09.1956 and had been the sole

corporation to write the life insurance business in India.

The Indian insurance industry saw a new sun when the Insurance Regulatory & Development

Authority (IRDA) invited the applications for registration as insurers in August, 2000. With the

liberalisation and opening up of the sector 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.


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THE INDIAN INSURANCE INDUSTRY IS FEATURED BY THE

FOLLOWING ATTRIBUTES:

i Low market penetration;

i Ever-growing middle class component in population.i Growth of consumer movement with an increasing demand for better insurance products;

i inadequate application of information technology for business.

i Adequate fill up from the Government in the form of tax incentives to the insured, etc.

BRIEF HISTORY OF INSURANCE:

The story of insurance is probably as old as the story of mankind. The same instinct that prompts

modern businessmen today to secure themselves against loss and disaster existed in primitive

men also. They too sought to avert the evil consequences of fire and flood and loss of life and

were willing to make some sort of sacrifice in order to achieve security. Though the concept of

insurance is largely a development of the recent past, particularly after the industrial era past

few centuries yet its beginnings date back almost 6000 years.

Life Insurance in its modern form came to India from England in the year 1818. Oriental LifeInsurance Company started by Europeans in Calcutta was the first life insurance company onIndian Soil. All the insurance companies established during that period were brought up with thepurpose of looking after the needs of European community and Indian natives were not beinginsured by these companies. However, later with the efforts of eminent people like Babu

Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian liveswere being treated as sub-standard lives and heavy extra premiums were being charged on them.Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance companyin the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise withhighly patriotic motives, insurance companies came into existence to carry the message ofinsurance and social security through insurance to various sectors of society. Bharat InsuranceCompany (1896) was also one of such companies inspired by nationalism. The Swadeshimovement of 1905-1907 gave rise to more insurance companies. The United India in Madras,National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahorewere established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth inone of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The

Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of thecompanies established during the same period. Prior to 1912 India had no legislation to regulateinsurance business. In the year 1912, the Life Insurance Companies Act, and the Provident FundAct were passed. The Life Insurance Companies Act, 1912 made it necessary that the premiumrate tables and periodical valuations of companies should be certified by an actuary.


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The first two decades of the twentieth century saw lot of growth in insurance business. From 44companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with total business-in-force as Rs.298 crore in 1938. During the mushrooming of insurance companiesmany financially unsound concerns were also floated which failed miserably. The Insurance Act

1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business. The demand for nationalization of lifeinsurance industry was made repeatedly in the past but it gathered momentum in 1944 when abill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However,it was much later on the 19th of January, 1956, that life insurance in India was nationalized.About 154 Indian insurance companies, 16 non-Indian companies and 75 provident wereoperating in India at the time of nationalization. Nationalization was accomplished in two stages;initially the management of the companies was taken over by means of an Ordinance, and later,the ownership too by means of a comprehensive bill. The Parliament of India passed the LifeInsurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of Indiawas created on 1st September, 1956, with the objective of spreading life insurance much more

widely and in particular to the rural areas with a view to reach all insurable persons in thecountry, providing them adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporateoffice in the year 1956. Since life insurance contracts are long term contracts and during thecurrency of the policy it requires a variety of services need was felt in the later years to expandthe operations and place a branch office at each district headquarter. Re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-organisationservicing functions were transferred to the branches, and branches were made accounting units.It worked wonders with the performance of the corporation. It may be seen that from about200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year

1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business. Butwith re-organisation happening in the early eighties, by 1985-86 LIC had already crossed7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices, 7zonal offices and the Corporate office. LICs Wide Area Network covers 100 divisional officesand connects all the branches through a Metro Area Network. LIC has tied up with some Banksand Service providers to offer on-line premium collection facility in selected cities. LICs ECSand ATM premium payment facility is an addition to customer convenience. Apart from on-lineKiosks and IVRS, Info Centres have been commissioned at Mumbai, Ahemdabad, Bangalore,Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of

providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARKoffices. The satellite offices are smaller, leaner and closer to the customer. The digitalizedrecords of the satellite offices will facilitate anywhere servicing and many other conveniences inthe future.


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LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insuranceand is moving fast on a new growth trajectory surpassing its own past records. LIC has issuedover one crore policies during the current year. It has crossed the milestone of issuing1,01,32,955 new policies by 15th Oct, 2009, posting a healthy growth rate of 16.67% over thecorresponding period of the previous year.

From then to now, LIC has crossed many milestones and has set unprecedented performancerecords in various aspects of life insurance business. The same motives which inspired ourforefathers to bring insurance into existence in this country inspire us at LIC to take this messageof protection to light the lamps of security in as many homes as possible and to help the peoplein providing security to their families.

SOME OF THE IMPORTANT MILESTONE IN THE LIFEINSURANCE BUSINESS IN INDIA ARE:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil startedfunctioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started itsbusiness.

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the lifeinsurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collectstatistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective ofprotecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the central

government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a

capital contribution of Rs. 5 crore from the Government of India.


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Growth Of Indian Life Insurance Sector:

The life insurance sector of India has added up to 4.1% of the GDP in 2009, a considerablegrowth was recorded since the time the sector was opened for the private companies. The

contribution in FDI by the life insurance segment was recorded at US $ 1.3 billion, even though

the government is likely to increase the FDI cap limit from 26% to 49%.

The year 2009-10 also saw private sector insurance company, Aviva Life Insurance establishing

nine unit-linked plans; in line with the recent IRDA guidelines featuring enhanced and higher

IRR.

As per the data provided by the IRDA, the businesses of the life insurance companies had agrowth of 22% at US$ 12 billion in April-November 2009-10, in comparison to the US$ 9.8

billion during the same period last year. Such a huge sale of single premium policies led the

industry to record a raise of 53.25% in November 2009 alone.

With the registration of India First Life Insurance Company Limited, a joint stake life insurance

company encouraged by Bank of Baroda and Andhra Bank of India and Legal & General Middle

East Limited, UK, the total number of life insurers registration with the IRDA has increased to

23.

According to industry body, Life Insurance Council, The life insurance industry had earlier been

anticipated to grow by 15% in the year 2009 - 10 and surpass the US$ 54.1 billion mark in total

premium income by March-end. This growth in premium income includes new business as well

as renewals, driven by increasing awareness on the value of getting insured.

The US$ 41-billion Indian insurance industry made a grand return with better performances in

the April-November 2009 period. Life insurance in India recorded the first year premium

(inclusive of Single Premium) segment accounting to US$ 24 billion.


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BASIC FUNCTIONS OF THE INSURANCE INDUSTRY:

1.Risk Perception and Evaluation:

The fundamental function of an insurer is to provide a cover against the detriment caused to the

insured due to the happening of certain specified and agreed events. Thus, prior to providing

such umbrella through a product, the insurer has to assess the risk involved in the transaction.

The insurer has to identify the element of risk prevalent in the concerned industry or a particular

unit. The perception of risk requires the study of variables through various methods including the

application of scientific and statistical techniques and correlation thereof with the industry or unit

under study in light of their basic environmental and infra-structural characteristics. After the

identification and categorisation of the risks perceived, the probability of happening of the loss-causing events and the severity of the loss has to be assessed.

2. Designing the Insurance Product:

On the basis of the risks perceived, the insurer develops a product to cover the stipulated risks.

While designing an insurance product, an insurer decides its cost to be charged from the insured

in the form of premium, reduction thereof in certain cases like not lodging any claim during the

previous covered period(s), suggesting the implementation of risk-mitigating measures, etc. The

features of a product should be flexible enough to provide for the determination of premiums,

rebates, additional premiums, etc. depending upon the risk benchmarks as determined.

3. Marketing of the Product:

The core function of the marketing force of an insurance company is to generate awareness about

the insurance products among the target market. But in the Indian scenario, where the insurance

penetration is too low as compared to the other nations, the marketing force needs to perform the

pro-active role in developing an insurance culture. It is through the efficiency of the sales force

of an insurance company that the desirability and the success of a product are determined.

In Indian insurance market, the function is, basically performed by the agents. The persons


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desiring to function as insurance agents have to obtain license to act as such from the IRDA or an

officer authorised by the Authority in this behalf. The agents approach the prospective buyers

and apprise them of the basic features of the products. In order to dispense with the functions, the

agents need to possess adequate knowledge of the insurance industry, products and the

modalities attached therewith.

4. Selling of the Products:

The term selling in the context of insurance industry connotes the issuance of policies to the

applicant proposer. The non-life insurance policy basically embodies the covenant between the

insurer and the insured wherein the former agrees to indemnify the latter for the loss caused to

him on the happening of the certain agreed events up to a specified limit. The life insurance

policy generally contains the agreement whereby the insurer agrees to pay to the insured or the

beneficiary of the policy an agreed amount on the expiry of the term of the policy or in the event

of the death of the insured respectively. The additional benefits in the shape of Riders viz.

Accidental Death Benefit, Double Sum Assured, Critical Illness benefits, Waiver of Premiums,

etc. can also be appended with the policy on the payment of an additional premium.

In Indian industry, the function is, generally performed by the insurer. In addition, the insurance

companies depute their Direct Selling Representatives to look after the function. They receive

the proposal documents, vet them and issue policies to the proposers.

5. Management of Portfolio:

The management of the portfolio includes the assessment of requirement 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 the needs of the company and the

selection of appropriate conjunction of sources. The insurer possesses huge amount of funds,

which need proper management. The management of the portfolio of an insurance company

requires the 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 selectionrequires 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 in the industry as a whole.


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MISSION, VISION,OBJECTIVES AND COMMITMENT

y Mission:

"Explore and enhance the quality of life of people through financial security byproviding products and services of aspired attributes with competitive returns,

and by rendering resources for economic development."

y Vision:

"A trans-nationally competitive financial conglomerate of significance to

societies and Pride of India."

y Objectives:

1. Spread Life Insurance widely and in particular to the rural areas and to the sociallyand economically backward classes with a view to reaching all insurable persons in

the country and providing them adequate financial cover against death at a

reasonable cost.

2. Maximize mobilization of people's savings by making insurance-linked savingsadequately attractive.

3. Bear in mind, in the investment of funds, the primary obligation to its policyholders,whose money it holds in trust, without losing sight of the interest of the community

as a whole; the funds to be deployed to the best advantage of the investors as well as

the community as a whole, keeping in view national priorities and obligations ofattractive return.

4. Conduct business with utmost economy and with the full realization that the moneysbelong to the policyholders.

5. Act as trustees of the insured public in their individual and collective capacities .

6. Meet the various life insurance needs of the community that would arise in thechanging social and economic environment.

7. Involve all people working in the Corporation to the best of their capability infurthering the interests of the insured public by providing efficient service withcourtesy.

Promote amongst all agents and employees of the Corporation a sense of


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participation, pride and job satisfaction through discharge of their duties with

dedication towards achievement of Corporate Objective.

y COMMITMENT TO CLIENTS - SETTLEMENT OF CLAIMS :

1. NO. 1 INSURANCE COMPANY IN THE WORLD in terms of settlement ofclaims. PER SECOND LIC settles more than 2 claims!!!

2. LIC settled 149 lacs claims during the year 2008/2009. 3. Prompt settlement of claims - 97% maturity claims settled on or before

due date. 93.22% Non-early death claims settled within 20 days ofintimation.

4. Lowest outstanding claim ratio in the world (Maturity+SB = 0.26%)(Death Claim = 2.21%).

ADVANCED TECHNOLOGY - FORBETTER CUSTOMER SERVICES..

1. Computerized and networked 2048 Branch Offices and 810 Satellite Officesthroughout the country.

2. LIC is the SECOND largest PC user in the country.3. Premium payment facility extended through network of 2048 Branches

and 810 Satellite Offices, 9500 Empowered Agents and 510 Senior BusinessAssociates , ECS, ATM of Corp. & Axis Banks, through internet, online

portals, Collecting Bank (Axis Bank), AP online, MP online, Through SMS.

Need For Study:

The topic of the study Post Purchase Behaviour resembles the customers

behaviour after the product what is there attitude towards it and it is helpful to the Life Insurance

Corporation Of India to get the exact reason for the lapsation of the policy and cases of

surrendering the policy, which is day by day increasing.

So to identify the basic problem why the insured is closing and ending the

contracted policy. I have done the study of post purchase behaviour of the customer of LIC.


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INDUSTRY PROFILE

LIFE INSURERS IN INDIA

1. Bajaj Allianz Life Insurance Company Limited2. Birla Sun Life Insurance Co. Ltd3. HDFC Standard Life Insurance Co. Ltd4. ICICI Prudential Life Insurance Co. Ltd5. India First Life Insurance Company Ltd6. ING Vysya Life Insurance Company Ltd.7. Life Insurance Corporation of India8. Max New York Life Insurance Co. Ltd9. Met Life India Insurance Company Ltd.10. Kotak Mahindra Old Mutual Life Insurance Limited11. SBI Life Insurance Co. Ltd12. Tata AIG Life Insurance Company Limited13. Reliance Life Insurance Company Limited.14. Aviva Life Insurance Company India Limited


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15. Sahara India Life Insurance Co, Ltd.16. Shriram Life Insurance Co, Ltd.17. Bharti AXA Life Insurance Company Ltd.18. Future Generali India Life Insurance Company Limited19. IDBI Fortis Life Insurance Company Ltd.20. Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd.21. Aegon Religare Life Insurance Company Limited22. DLF Pramerica Life Insurance Company Limited23. Star Union Dai-Ichi Life Insurance Company Limited

The above is the list of the life insurance players till December 2009,

according to the IRDA (Insurance Regulatory Development Authority of India).

INTRODUCTION OF SOME LIFE INSURERS.

ALLIANZ BAJAJ LIFE INSURANCE COMPANY LTD:Allianz Bajaj life insurance company ltd with a capital base of RS.1.5

billions is a joint venture between ALLIANZ AG and BAJAJ AUTO LTD. The company wasincorporated on MARCH 12, 2001 and received the IRDA certificate of registration on august 3,2001 to conduct life insurance business in India. Bajaj auto ltd. The flagship company of Bajajgroup is one of the largest two and three- wheeler manufactures, and forth-largest manufacturer

of two- wheelers inthe world, with annual turnover of RS. 42.16 billion. The company enjoys a very strong brandimage in this industry. Founded in 1890, the Allianz Group is one of the worlds leadinginsurance companies with over a 100 years experience in insurance and related services. With apresence in over 70 countries, it is also the largest insurer in Europe. The key business areas ofAllianz group include General Insurance (property, engineering, marine, motor, casualty and


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miscellaneous), reinsurance, risk management, life and health insurance, asset management andpension funds management. Rated AAA by Standard & Poor, it has assets over 670 billion DM(Rs 17,160 billion) under its management.

AVIVA LIFE INSURANCE COMPANY LTD:

The Aviva Life Insurance Company, a joint venture between Dabur Indiaand CGU, a wholly owned subsidiary of Aviva Plc., is capitalized at Rs 1 billion. Established in1884, Dabur India Limited is one of Indias oldest groups of companies, with interests inayerdedic specialties, pharmaceuticals, personal care and health-care products, the annual salesturnover of the group is over Rs 12 billion. Aviva plc. Is the largest life and general insurancegroup of the UK, and the worlds seventh largest insurer with world-wide premium income andretail investment sales of 28 billion and more than 200 billion in assets under management.Aviva plc. is the holding company of the Aviva group of companies which is involved in the lifeassurance business, log-term savings, all classes of general insurance business and fundmanagement.

BIRLA SUN LIFE INSURANCE COMPANY LTD:The Birla Sun Life Insurance Company, is a 74.26 joint venture between

the Aditya Birla Group and Sun Life Financial Services of Canada, and has an equity capital ofRs 1.5 billion. The Aditya Birla Group is one of Indias largest business houses, with a turnoverof over $4.75 billion and an asset base of $3.8 billion. The Group is a well diversifiedconglomerate spanning 40 companies spread across 17 countries. Sun Life Assurance Co., ofCanada, established in 1871, has a strong presence in Canada, the USA, the Philippines, HongKong, and the UK. Its major lines of business are life insurance, annuities and mutual fund andinvestment services. In Canada, the company is especially strong in the corporate life and healthinsurance and savings markets.

HDFC STANDARD LIFE INSURANCE COMPANY LTD:HDFC Standard Life Insurance Company Ltd. was incorporated o August

14,2000. HDFC is the majority stakeholder with an 81.4 per cent stake. Standard Life holds astake of 18.6 per cent. Incorporated in 1977 with a share capital of Rs 100 million, HDFC hassince emerged as the largest residential mortgage finance institution in the country, raising itscapital to Rs 1.19 billion and an asset base of Rs 150 billion. It operates through 75 locationsthroughout India, and has an international office in Dubai, UAE, with service associates inKuwait, Oman and Qatar. Standard Life, which has been in the life insurance business for thepast 175 years, is Europes largest mutual life assurance company. With an asset base of Rs 6000billion, it has the distinction of being accorded the AAA rating by Standard & Poor for the pastsix years.

ICICI-PRUDENTIAL LIFE INSURANCE COMPANY LTD:

The ICICI-Prudential Life Insurance Company ltd, with ICICI s share at74 per cent and Prudential plc. UKs share of 26 per cent was incorporated o July 20, 2000, withan authorized capital of Rs 2.3 billion. The paid up capital is Rs 1.9 billion. It commenced


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commercial operations on December 19, 2000, becoming one of the first few private sectorplayers to enter the liberalized arena. The World Bank, the Government of India and the IndianIndustry, to promote industrial development in India by providing project and corporate financeto the Indian industry, established ICICI LTD., in 1944. Since its inception, it has grown from adevelopment band to a financial conglomerate and has become one of the largest public financial

conglomerates and has become one of the largest public financial institutions in India, financingall the major sectors of the economy. Founded in 1848, Prudential plc. has grown to become oneof the largest providers of a wide range of savings products for the individual, including lifeinsurance, pensions, annuities, unit trusts and personal banking. It has a presence in over 15countries, and manages assets of over US $259 billion (approximately Rs 11, 3956 billion) as ofDecember 31, 1999. in fact, Prudentials first overseas operation was in India, way back in 1923,to establish life and general insurance branch agencies.

ING-VYSYA LIFE INSURANCE COMPANY PVT. LTD:

As per the joint venture agreement, Vysya Bank holds 49 per cent, ING 26 per cent, and the GMR Group, which has wide ranging interests in fields which as power

generation, infrastructure, manufacturing, software and banking, holds 25 per cent. This jointventure is expected to be the first Banc assurance venture in the country. The Vysya Bank,which has equity participation from Bank Brussels Lamberts, is one of the largest private banksin India with 480 retail outlets, the bank, given its significant branch penetration, has a highdegree of retail focus. The ING Group, with an asset base of over Rs 284.2 billion is a globalfinancial institution of Dutch origin, which is active in the field of banking, insurance and assetmanagement in over 60 countries. ING Insurance is the worlds second largest life insurancecompany as per the latest Fortune rankings. It is the third largest financial services company inEurope, and the tenth largest financial services company in the world.

MAX NEW YORKLIFE INSURANCE COMPANY LTD :

Max New York Life is a partnership between Max India Limited, one ofIndias leading multi-business corporations and New York Life. The paid-up capital of the jointventure is Rs 2.5 billion. Max India has significant presence in the most vital and fast growingsectors of the Indian economy, viz., telecommunication services, Electronic componentsdistribution, specialty plastic films and bulk pharmaceuticals. It is also active in the emergingknowledge-based areas of health care, financial services and IT. In 1998, New York LifeInternational Inc., had total revenues amounting to almost US $20 billion, and was rated thenumber one provider of new life insurance policies in the USA. In the same year, New York Lifewas also the leader in insurance sales to the growing Indian community in the USA.

MET LIFE INDIA INSURANCE COMPANY LTD:

The Met Life India Insurance Company, joint venture between the USinsurance major Metropolitan Life Insurance Co., the Jammu and Kashmir Bank Ltd the PallonjiGroup and some high net worth individuals, was incorporated in India on April 11, 2001. Thecompany started its operation with an initial capital of Rs 1.25 billion. The Metropolitan LifeInsurance Co., established in 1867a, is a member of the Metropolitan Life Group and is licenses


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in the USA, Canada and a few other countries. Its major lines of business are individual andgroup life insurance. Pallonji & Co. Pvt. Ltd., is primarily engaged in contracting and has undertaken major contract for power generating situation, chemical and fertilizer factories petroleumrefineries and gas platform. Ti has also diversified outside in their main life of business in to thefield of non- convention energy source.

OM KOTAKMAHINDRA LIFE INSURANCE COMPANY LTD.The joint venture OM KOTAK MAHINDRA life insurance started off

with an initial capital of Rs. 1.5 billions, with a 74:26 stake between Kotak Mahindra lifeinsurance and old mutual plc. Kotak Mahindra finance ltd is one of the Indias premier financialgroups, with a range of highly specialized products and services, and a very large client base ofIndian and international firms. Starting as are non-product company in the mid eighties, it hasevolved into a full service financial conglomerate, covering auto and consumer finance, assetsmanagement, investment banking, securities trading and equity research. It operates across 30centers in India and in Dubai, London, New York and Mauritius. Old mutual plc. is a leadingglobal financial services provider, providing a broad range of financial services in the area of

insurance, assets management and banking. It is a leading life insurer in South Africa, with morethan 30% market share.

SBI LIFE INSURANCE COMPANY LIMITED:

This joint venture has 74% capital participation from the state bank ofIndia (SBI), with Cardiff contributing 26% in the paid capital of Rs. 2.5 billion. The SBI is thelargest bank in the country with more than 9000 branches. It has seven associate banks andtogether they have 30% of the Indian market share. It net worth as on March 2000 stood at Rs.121.46 billion, with a deposit base of Rs. 196.803 billion. The insurance venture, SBI life, is astep aimed at being a universal bank as the SBI already as subsidiary for housing finance,merchant banking, mutual fund and primary dealership in government papers and factoring

businesses.BNP paribus, which is one among the three largest banks in Europe, is the holdingcompany of Cardiff, its insurance arm. It was set up in 1973 and specialized in long termsavings, protection products and creditors insurance. In 1999, its premium income stood at US $4 billion, with assets worth over US $ 23 billion under its management. Based in France, it hasthe expertise for selling insurance products through bank and as operation in over 20 countries.

TATA AIG LIFE INSURANCE COMPANY LIMITED:-

Tata AIG life insurance company ltd, is capitalized at Rs. 1.85 billion ofwhich 74% has been brought in by Tata sons and 26% by the American partner. Tata enterprisewith 82 companies, spread over 7 sectors, have an annual turnover exceeding US $ 8.8 billion.The Tata group has made pioneering contribution in various fields including insurance, aviation,

iron and steel. The group has had a long association with Indias insurance sector, having set upthe largest insurance company viz. new Indian assurance company ltd. (1919), prior to thenationalization of this sector. The American insurance group (AIG) is the leading US basedinternational insurance and financial services organization and the largest underwriter ofcommercial and industrial insurance in the USA. Its member companies write a wide range of


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commercial and personal insurance products in over 130 countries and jurisdiction throughoutthe world.

SWOT ANALYSIS

STRENGHTS

1. The ONE & ONLY - Government owned Life Insurance Company in India.The most trusted & oldest insurance company in India since 1956.

2. Largest insurance company in the world on Customer Base (25 Crore customers).3. Only 4 countries in the World have more population than LIC's policy holders!!!4. No. I Insurance Company in the world in terms of agency force (13 lacs agents).

And No. I Insurance Company in the world on selling of policies 3.59 crore pols.5. 2nd Biggest Rent Estate Owner next to Indian Railways.6. LIC is one of the Highest Income Tax paying Organization.

7. LIC has highest number of Club Member Agents.

WEAKNESS

1. Due to heavy customer base the management of it is not up to that level

2. It is over employed and so expenses are high

3. The infrastructure is not as advanced as other rivals

4. It is under the influence of government and mobilize their fund accordingly

OPPORTUNITY

1. It can make use of its hefty funds properly in profitable area rather than following the

traditional way

2. With the heavy team force and personnel can attain the new venture development

3. LIC has a good amount of funds which should be used for the development of the

country.

4. It can start its subsidiaries in other companies and can expand the scope of development

THREATS

1. New Private companies are emerging with a qualitative approach and customer oriented


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so LIC can now dont have monopoly.

2. Due availableness of newer product the lapsation of policies can be a major problem

3. Private companies are attracting the LIC employees and get through the strategy.

ETOP Analysis of the Indian Retail Industry

Environmental threat and opportunity profile also known as environmental impact matrix

is a summarized depiction of the environmental factors and their likely impact on organization.

ETOP is the most useful way of structuring the result of environmental analysis. It can be

prepared in the following way:

Environmental Factors Environmental Analysis Degree of

Importance

Degree of

Impact


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Economic (+) The Insurance Industry module is

changing with more and more foreign

players interested to feature in Indian

market for e.g. AIG, PRUDENTIAL.

(+) The Insurance industry is growing at

the rate of 40 per cent per annum.

(-) The global downturn has affected

the Insurance industry in a very bad

manner.

(-) They face growing and newcompetition from domestic and potential international players that mayadversely affect the competitiveposition and the profitability.

2

2

3

2

2

3

3

2

Technological (+) With the passage of time the

Insurance industry is expanding

through even technological aspects likeOnline Premium & Selling of Insurance

Online.

(+) Private players score over the LIC,

giving both cost and service

advantages.

3

3

2


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Political & Legal (-) The political scenario of India is

looking forward to Foreign Direct

Investment in Insurance sector but with

strict rules.

3 2

Social (+) Change in life style pattern with

the availability of all Private Players.

(+) Multinational Insurance Companies

are now looking to enter into India and

trying to share their culture with us.

3

3

2

2

Degree of Importance is rated on 3-point scale with 1 -Representing Low,

2 -Representing Medium &

3 - Representing High Importance.

Degree of Impactis rated on 3-point scale where 3 - Represents High,

(+)Opportunity 2 - Represents Medium &

(-) Threat 1 - Represents Low Impact.

PEST ANALYSIS

POLITICAL FACTORS AFFECTING LIFE INSURANCE INDUSTRY:

Within India political ambitions and rise of communalism, fissiparous tendencies are onthe rise and may well continue for quite some time to time. Therefore, it expected that theinsurance companies might consider offering political risk coverage also. The only area whereIndian insurers consider giving cover is with regard to customs duty change under certain

conditions. Certain type of political risk at the international level has serious implications forexporters. The term political risk has a wider connotation than commonly understood orassumed. It covers events arising not just from politics, but risks in the course of internationaltransactions. In this connection, it may be noted that export credit insurance has evolved out ofuncertainties relating to international trade, particularly due to problems arising out of foreign


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legal jurisdiction, political changes and currency exchange difficulties faced by many developingcountries.

Prohibition for Investment:The funds of policyholders are prohibited from being directly / indirectly invested

outside India as per section 27 C.

Manner and conditions of investment:Subject to the above provisions contained in Section 27 -/ 27- A / 27 B, the IRDA

may, In the interest of the policyholders, specify the time, manner and other conditions of investmentby insurer. Give specific directions applicable to all insurers for the time, manner and other conditionssubject to which the policyholders funds should be invested in the infrastructure and socialsectors.After taking into account the nature of business and to protect the interest of the policyholders,

issue directions to insurers relating to time, manner and other conditions of the investmentsprovided the latter are given a reasonable opportunity of being heard.

Insurance business in rural / social sector:All insurers are required to undertake such percentage of their insurance business,

including insurance for crops, in the rural social sector as specified by the IRDA. They shoulddischarge their obligations to providing life insurance policies to persons residing in the ruralsector, workers in the unorganized sector or to economically vulnerable classes of society andother categories of persons as specified by the IRDA.

Capital requirement:The paid up equity of an insurance company applying for registration to carry on lifeinsurance business should be Rs 100 Crores.

Renewal of registration:An insurer, who has been granted a certificate of registration, should have the

registration renewed annually with each year ending on March 31 after the commencement of theIRDA Act. The application for renewal should be accompanied by a fee as determined by IRDAregulations, not exceeding one forth of one percent of the total gross premium income in India inthe preceding year or Rs 5 Crores or whichever is less, but not less than Rs 50000 for each classas per the section 3-A.

Requirements as to Capital:The minimum paid up equity capital, excluding required deposits with the RBI and

any preliminary expenses in the formation of the country, requirement of an insurer would be Rs100 crore to carry on life insurance business and Rs 200 crore to exclusively do reinsurance


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business as per Section 6.

Investment of funds outside India:Insurers outside India as per Section 27-C cannot invest the funds of policyholders.

Power to investigation or inspection:The IRDA may, at any time; order in writing a person as investigating authority to

investigate the affairs of any insurer and report to it. Government has power to change the taxpolicy against life insurance industry.

Health insurance rebate,

Pension saving rebate,

Mediclaim premium rebate,

P.P.F., E.P.F., NSC all are tax exempted saving,

All life insurance policy are tax exempted saving , Agricultural income is tax exempted,

House rent allowances,

Post office saving,

Expenses on dreaded diseases are tax exempted.

Recently there is issue to increase FDI level from 26% to 49%.

Role of the government:As insurance is an important service sector, hence it is highly regulated by

government. Since 1956 insurance sector was highly regulated by government of India. On

March 16, 1999, the Indian cabinet approved on Insurance Regulatory Authority Bills that wasdesigned to liberalize the insurance sector.

Consequences of non-compliance:A company failing to comply with the act shall be liable for panel action.

Further, IRDA is empowered to investigate into the affairs of the company. Failure to complywith the directions may lead to cancellation of the license for the company. Also, if the IRDAhas reason to believe that a company is doing business in a manner likely to be prejudicial to theinterest of policyholders, it is required to report to the central government.

The central government may base on the report, appoint an administrator tomanage the affairs of the company. This would act as a further assurance to the consumers, as

their interests would at all times be a priority and that in the event that the company acts in themanner prejudicial to their interests, than an administrator would be appointed to serve theirneeds.

The court may also wind up the company if it fails to deposit or keep deposits asper the requirements of the act or if the continuance of the company is prejudicial to the interest


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of the policyholders or public interest. But an insurance company cannot be wound upvoluntarily or on the grounds that by reasons o its liabilities it cannot continue its business,except for the purpose of affecting an amalgamation or are construction of the company.Therefore, a company after issuing a policy cannot escape liability by seeking voluntary windingup.

ECONOMICAL FACTORS AFFECTING LIFEINSURANCE INDUSTRY

Interest rate at bank and interest rate of P.F variation very much affect to lifeinsurance industry, because people always attract by higher return. Therefore, they do not preferlower return policy. Unemployment also affects insurance industry, because the unemploymentpeople will not have earning, so saving also affect to life insurance sector Life insurance industrywill directly affected by Earthquake, Monsoon, and Natural calamity. Because of these eventsturns into lots of death, so the life insurance companies have to pay claim against policy. Infant

mortality rate and maternity mortality rate are also affecting to life insurance. Typical Indianwant luxurious product against low income, so that they prefer installment or annuity (EMI), sothat they may not have extra saving to invest in life insurance.

Adequacy of capital:Capital adequacy is a matter of attention in view of the nature of the life

insurance business, where in the case a contingency arises, the insurers should be in a position tomeet its long-term contractual obligations and pay up the dues or claims. In that sense, lifeinsurance is a capital-intensive business and must be backed by an adequate capital base on the part of the owners and the companies should not be running their business purely on other peoples money. So minimum start up amounts and long running capital adequacy norms are

absolutely essential, in consideration of this, the Malhotra committee suggested and subsequentlythe IRDA stipulated a minimum capital base of Rs 1 bn for any entity wanting to enter the lifeinsurance business.

Increased Economical Activity:Although economic activity has slowed down since 1996, sooner or later

there will be an upswing. The increase in the growth rate in various sectors accompanied by thegrowth in trade in the context of fulfilling of commitments to the WTO will signal a growth inthe demand for insurance covers of new types. For example, aviation insurance cover will be onan increasing scale in view of the need for more frequent air travel for men and for transportingmaterials. This would necessitate substantial property, liability and personal insurance.

Interest Rates:During the last years the government has rationalized interest rate

creates better business opportunities for the life insurance sector because the substitute productsare graded lower by the customers. On the other hand the value of the holdings of the insurance


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companies will increase.

Inflation rate:Inflation can also be one of the causes to change the scenario of the

insurance sector. High inflation for instance, would tend to reduce the insurance business,

particularly life, because the real value of the money paid back to the policyholder on maturity ofthe policy would go down and would, therefore, lose its attraction for the investor. At the most,the insuring public may prefer pure risk plans (terms insurance), which have a low premiumoutlay.

SOCIO-CULTURAL FACTORS AFFECTING LIFEINSURANCE INDUSTRY:

The basic social factors that affect the life insurance sector are as under: -

Population Life style Educational level Level of earning Societal benefits

TECNOLOGICAL FACTORS AFFECTING LIFEINSURANCE INDUSTRY:

Internet as an intermediary in the current Indian market customer is not awareabout the intrinsic value of insurance. He thinks of insurance only in the mount of March as a taxsaving measure. The security provide by an insurance cover is rarely thought about. In such ascenario Internet can be an effective medium for educating the consumers about insurance. Itserves as a single window for disseminating product, process and procedural information to theconsumers. Product development and target marketing through the Internet: with increase in thenumber of insurance companies there will be a need for market segmentation and subsequently product designed for each of them. In such a scenario Internet can be a effective channel forpushing product specific information to a particular market segment. Consumer feedback about a particular product as well as suggestions for different types or covers can also be generated

through the Internet.Retail marketing is a commonly expected concept and the providers of the retailproducts and service will try out for larger market and market share. There would be cut throughcompetition and the real benefit would be to the customers in terms of better products,distribution, pricing, post transaction service and technology. Technology will perhaps be thesingle largest driver of the retail thrust. The entire strategy will evolve around the absolute ability


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of the organization. The customer will demand for greater convenience of excess to the product/service and all at low cost of delivery. There fore the use of technology and specifically theInternet with realigned strategies would be one of the key factors to success. Constraints oflocations, timing and accessibility would not be a hurdle for either customers or businesses.

Maintaining the databaseThe most important facto that is affecting the insurance industry is the

marinating the database of the customers. The insurance industry having a huge list of thecustomers.

Impact on distribution channels:Distribution channels are the most important part of the insurance

industry. The scenario is continuously changing in this industry. In future the customers areexpected to be more technology oriented, better informed, more knowledgeable and moredemanding. The insurers will have to offer all types of channel to customer and it is the customerwho will have the right to choose the channel suiting him/ her. Dual income families with young

children, singles with long working days and flexi-timers all demand high level of sophisticationand ease when it comes to service. Hence the companies have to be very careful and cautious incatering to the needs of these customers who provides a good amount of business to the insurers.


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Objectives of Study:

There are mainly two Objectives:

y Primary Objective

y Secondary objective

Primary Objectives:

The primary objective of my study is to find out the post purchase behaviour of the customer and

their activity after purchasing the policy.

Secondary Objectives:

The secondary objective of my study was to get the practical reasons for the problems faced by

the customer after their acquisition of the policy. This will help to serve the customer well.

Hypothesis:


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Steps of Study:

The study conducted in fol lowing dist inguished steps:

y Research Design : Exploratory

y Research Approach : Survey

y Research Instrument : Questionnai re

y Information Need : Primary Datay Area of the survey : Surat .

y Sample Size : 100 Respondents

Objectives

of Study

Research

Design

Collection

of Data

Analysis of

Data

Preparation

of Pro ect


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y Sampling unit : Customer of LIC

y Interview method : Personal Telephone Interview

Research Design:

Research Design constitutes the blueprint for the

collection, measurement, and analysis of data. It also express both structure of

research problem- the framework, organisation, or configuration of the

relationships among variables of the study- and plan of investigation used to

obtain empirical evidence on those relationships.

Research Design is classified into main 3 types, out of them Exploratory Study

is used. The purpose of choosing this method is to develop the hypothesis or

question for further research and use of the data which is first hand for

appropriate use.

a) Exploratory Stage: The first stage in research design is the exploration of current situation. In this

stage clarification of the specific problem is defined. Exploratory stage gives

the answer of question that how it came to know about the problem statement.

b) Descriptive Studies:In the second stage, descriptive research design has been used because it

described the phenomena under the study and recommendation / findings were

specific under this study.


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Descriptive studies are undertaken in many circumstances. When the researcher

is interested in knowing the characteristics of certain groups such as age, sex,

educational level, occupation, a descriptive study may be necessary.

Data Collection tools:

Sources of Data Collection:

There are 2 types of data collection techniques,

which are as follows:

Primary data Primary data are collected through direct contact with people in

different areas of Surat city through PERSONAL&TELEPHONIC

INTERVIEW method.

Secondary data: Since Secondary Data is not available of particular Topic, No

secondary data studied. Though some of the data is collected through the

Internet medium and from the companys brochures and Articles.

Research Instrument

Questionnaire was used for the purpose of the data collection as the instrument.

Questionnaire consisted of both close ended and open ended questions. Here use

of the Dichotomous questions was in secondary to the other two type.

Sampling Design

Defining the target population:


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Sampling element Sampling Units are Customers of Life Insurance

Corporation Of India.

Sampling size The size of the sample is 100 respondents. (To study the

behaviour of the respondent clearly and is appropriate to know the exact

findings and facts)

.

Duration of data collection Time duration from 19 February to 15

March 2010.

Limitation of study:

Some of the major limitations of study are

mentioned below.

The survey work was conducted in Surat and nearby areas only so, it cannot

cover preference of other region.

The sample size taken for the survey work was 100 because of the limited

time period there is Chances o f error in Data Analysis.

There is a chance of mistake in the answer because of the limited knowledge

of the respondent.


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Probability sampling was not used due to time and cost constraints and

therefore the results cannot be generalized to the population.

There is also possibility of giving wrong answer by respondents because of

mood of Customers and due to the familiarity they cannot express their views

correctly.


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Theoretical Aspects

Post-Purchase Consumer Behavior

Post-purchase Dissonance:

Doubt or anxiety experienced after taking a difficult purchase decision.

Factors Affecting Post-Purchase Dissonance:

No. of alternatives being considered

Difficulty in choosing one of the alternatives


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Substitutability near equal alternatives to choose from

Attractiveness of foregone alternatives

Degree of familiarity with the product

Information available at the time of purchase

Time and comfort with which the purchase was made Expected negative reactions from others

Consumers may regret the purchase made due to:

Product/brand purchased fails to live up to expectations

Positive post-purchase information about foregone alternatives (upward

comparison)

Negative post-purchase information about alternative chosen consumers may

actively look for information

Consumption guilt for using products that may be potentially unhealthy or

harmful in some way

Product usage/non-usage influences post-purchase dissonance May use product incorrectly or in a new way

May buy a product without much thought and may not use it or discontinue using

it after a short period a product purchased is not necessarily a product consumed

Approaches to reduce dissonance:

Increase desirability of the brand purchased

Decrease desirability of rejected brand

Decrease importance of the purchase

Reverse purchase decision (return before use)


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Disposal Alternatives:


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Expectations, Performance & Satisfaction:

Perceived Performance Relative toExpectation

Consumer Reaction

Better Satisfaction

Same Non-satisfaction (neutral)

Worse Dissatisfaction

Satisfaction is a function of expectation hence manage expectations; do not make false

promises

Satisfaction is not to be confused with repurchase intention & customer loyalty. Satisfied

customers too switch brands in search of better alternatives

Dissatisfied customers may make repeat purchases due to lack of better alternatives or

resistance to /cost of switching

Therefore focus on total customer satisfaction and not on immediate repurchase intention

Service Quality - Expectation & Satisfaction:

Zone of tolerance or zone of accommodation is the difference between desired and

acceptable service levels

If service falls below acceptable level, consumers are likely to switch

Common reasons for switching to other brands in service industries:


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POST PURCHASE BEHAVIOUR OF CONSUMER OF LIC Failure of main service, including service delay

Service counter failure impolite behavior

Deceptive pricing or unfair price increase

Inappropriate employee response to service failure

Better service/pricing by competitors

Ethical issues unsafe & unhealthy services, etc.

Dissatisfaction Response Customer Complaint Behavior:

Documents

Yatin Lic Rough