The insurance sector in india

INTRODUCTION

INSURANCE SECTOR IN INDIA

The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts.

With such a large population and the untapped market area of this population Insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the country’s GDP

.In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India.

It was due to this immense growth that the regulations were introduced in the insurance sector and in continuation “Malhotra Committee” was constituted by the government in 1993 to examine the various aspects of the industry. The key element of the reform process was Participation of overseas insurance companies with 26% capital. Creating a more efficient and competitive financial system suitable for the requirements of the economy was the main idea behind this reform.

Since then the insurance industry has gone through many sea changes .The competition LIC started facing from these companies were threatening to the existence of LIC .since the liberalization of the industry the insurance industry has never looked back and today stand as the one of the most competitive and exploring industry in India. The entry of the private players and the increased use of the new distribution are in the limelight today. The use of new distribution techniques and the IT tools has increased the scope of the industry in the longer run.

PRESENT SCENARIO OF INSURANCE INDUSTRY

• India with about 200 million middle class household shows a huge untapped potential for players in the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. The insurance sector in India has come to a position of very high potential and competitiveness in the market. Indians, have always seen life insurance as a tax saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice.
• Consumers remain the most important centre of the insurance sector. After the entry of the foreign players the industry is seeing a lot of competition and thus improvement of the customer service in the industry. Computerization of operations and updating of technology has become imperative in the current scenario. Foreign players are bringing in international best practices in service through use of latest technologies
• The insurance agents still remain the main source through which insurance products are sold. The concept is very well established in the country like India but still the increasing use of other sources is imperative. At present the distribution channels that are available in the market are listed below.

Direct selling ·

Corporate agents ·

Group selling ·

Brokers and cooperative societies ·

Banc assurance ·

• Customers have tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investment products. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. More customers are buying products and services based on their true needs and not just traditional money back policies, which is not considered very appropriate for long-term protection and savings. There is lots of saving and investment plans in the market. However, there are still some key new products yet to be introduced – e.g. health products.
• The rural consumer is now exhibiting an increasing propensity for insurance products. A research conducted exhibited that the rural consumers are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium each year. In the insurance, the awareness level for life insurance is the highest in rural India, but the consumers are also aware about motor, accidents and cattle insurance.

PLAYERS OF INSURANCE COMPANIES IN INDIAN MARKET

LIFE INSURANCE COORPORATION OF INDIA

ICICI PRUDENTIAL

BIRLA SUN LIFE

BAJAJ ALLIANZ

SBI LIFE INSURANCE

HDFC STANDARD

TATA AIG

MAX NEW YORK

AVIVA

OM KOTAK MAHINDRA

ING VYSYA

MET LIFE

MEANING OF QUALITY SERVICE:

(Quality of Service) Consistent performance. Certain network services need to be delivered at a certain minimum performance level to be useable — for example, a video or audio clip will stutter and break up if the bandwidth is inadequate. QoS refers to a network system’s ability to sustain a given service at or above its required minimum performance level.

Short for Quality of Service, a networking term that specifies a guaranteed throughput level. One of the biggest advantages of ATM over competing technologies such as Frame Relay and Fast Ethernet, is that it supports QoS levels. This allows ATM providers to guarantee to their customers that end-to-end latency will not exceed a specified level.

REVIEW OF LITERATURE

Studies on life insurance consumption dates back to Heubner (1942) who postulated that human life value has certain qualitative aspects that gives rise to its economic value. But his idea was normative in nature as it suggested ‘how much’ life insurance to be purchased and not ‘what’ will be purchased.

There were no guidelines regarding the kind of life policies to be selected depending upon the consumers capacity and the amount of risk to be carried in the product.The ongoing discussion also reveals that individuals’ current income and future anticipated consumption expenditure plays a crucial role in determining the amount of insurance purchased (we are, for a while ignoring the form in which insurance is purchased).

The importance of rate of interest or the impatience factor is also worth considering. Preferences over different consumption pattern vary from person to person and there are ‘qualitative’ factors which affects such preferences.

Using the expected utility framework in a continuous time model, Yaari (1965) studied the problem of uncertain lifetime and life insurance. Including the risk of dying in life cycle model, he showed conceptually that an individual increases expected lifetime utility by purchasing fair annuities.

Simple models of insurance demand were proposed by Pratt (1964), Mossin (1969), Smith (1968) and others; considering a risk adverse decision maker with an initial wealth.

The results indicate that demand for life insurance varies inversely with the wealth of the individuals. Hakansson (1969) used a discrete-time model of demand for financial assets and life insurance purchase in particular to examine bequest motive in considerable detail.

Headen and Lee (1974) studied the effects of short run financial market behavior and consumer expectations on purchase of ordinary life insurance and developed structural determinants of life insurance demand.

They considered three different sets of variables: first, variables stimulating demand as a result of insurer efforts (e.g. industry advertising expenditure, size of the sales force, new products and policies, etc.); second, variables affecting household saving decision (e.g. disposable, permanent and transitory income, expenditure expectation, number of births, marriages, etc.) and lastly, variables determining ability to pay and size of potential markets (e.g. net savings by households, financial assets, and consumer expectation regarding future economic condition). They concluded that life insurance demand is inelastic and positively affected by change in consumer sentiments; interest rates playing a role in the short run as well as in the long run.

Pissarides (1980) further extending Yaari’s work proved that life insurance was theoretically capable of absorbing all fluctuations in lifetime income. Lewis (1989) found out that the number of dependents as an influence on the demand for life insurance.

To sum up, the theoretical review yields macroeconomic variables like income, rate of interest, and accumulated savings in wealth form; along with a set of demographic or social variables having potential impact on an individuals’ decision to opt for or not to demand insurance. Life insurance consumption increases with the breadwinner’s probability of death, the present level of family’s consumption and the degree of risk aversion.

OBJECTIVES OF RESEARCH

1. To find that which factors people keep in their mind sat the time of getting any insurance policy.
2. TO know the service quality of insurance companies in Jalandhar city
3. To know the perception of customers regarding insurance service in Jalandhar city.

RESEARCH METHODOLGY

Research is the systematic and objective identification, collection, analysis, dissemination and use of information for the purpose of improving decision making related to the identification and solution of problems and opportunities in making.

RESEARCH DESIGN- DESCRIPTIVE RESEARCH

FOR my study I have choose descriptive research design because in my study I have to know the effect of motivational forces. In this I have describe the effect of motivational forces.

DATA SMPLING

1. Data extent- Jalandhar (Punjab)
2. Sample size-60
3. Sampling technique-Stratified sampling

DATA COLLECTION

1. PRIMARY DATA- Questionnaire
2. SECONDARY DATA- Journals, magazine, newspaper.

• For my project, I have decided on primary data collection method by filling up the questionnaire from customers residing in jalandhar city
• I also followed secondary data collection method using various websites, journals and magazines for collecting information under my term paper project.

LIMITATIONS

1. Research was limited to Jalandhar city only.
2. Some of the respondents were not ready to give proper response feeling risky to feel the questionnaire. Some of them were feeling unsecured by filling up the questionnaire.
3. Most of the people were not aware of the importance of life insurance service in their life.
4. They are not aware how useful life insurance can be for their family members if something happens to them.
5. They are of the view that Insurance policies do not give good results
6. They are not aware of modern unit linked insurance plans .they are still under the perception that if they take insurance they will get only 5-6%returns which in not true now days.
7. People are still today not aware of the earning opportunity that an insurance service provides.

FINDINGS

1. LIC is the best service provider as compared to other insurance companies.
2. Maximum of the respondents are not aware of benefits provided by insurance policies.
3. Most of the people give more importance to life insurance policies as compared to other insurance policies.
4. People think public insurance companies provide more security than private ones now days.
5. Most of the people are also of the view that services provide by public insurance companies are better than private companies that is why most of them get insured their self and their family in public insurance company now days.