Life In­surance Pol­icy Hold­ings: A Study on Mo­ti­va­tional Fac­tors of LIC

Economic Challenger - - CONTENTS - −Dr. M. Vid­hya


In the In­dian eco­nomic sce­nario, there were sat­is­fac­tory lev­els of growth in em­ploy­ment op­por­tu­ni­ties in the econ­omy, lead­ing many peo­ple to en­joy im­proved stan­dard of liv­ing. Dis­bursable in­come of house­holds was more and this pro­vided them lever­age to think about fi­nan­cial plan­ning. Fi­nan­cial plan­ning in­cludes not only distri­bu­tion of sav­ings amongst dif­fer­ent av­enues of in­vest­ment, but also in­cludes the meth­ods of fac­ing con­tin­gen­cies e.g. opt­ing for Life In­surance cover. The dom­i­nance of the state−owned Life In­surance Cor­po­ra­tion of In­dia in in­surance sec­tor was put into test when its gates were thrown open for the en­try of pri­vate play­ers. Due to com­pe­ti­tion, dif­fer­ent Pri­vate play­ers of­fered poli­cies at com­pet­i­tive prices. This forces the Life In­surance Cor­po­ra­tion of In­dia to draw new strate­gies to de­liver goods. In hu­man life, wher­ever there is un­cer­tainty there is an involvement of risk. Un­cer­tainty is the truth of life. The in­stinct and need for se­cu­rity against such a risk is a mo­ti­vat­ing force for hu­man be­hav­ior and ac­tion. In­surance is uni­ver­sally ac­knowl­edged as it elim­i­nates risk and pro­vides timely aid to the fam­ily af­ter the un­for­tu­nate oc­ca­sion. The need for life in­surance dif­fers, ac­cord­ing to age, fam­ily size, etc. Each plan of life in­surance pro­vides a kind of need. Thus, the success of a life in­surance com­pany de­pends on the ef­fi­ciency of the com­pany ful­fill­ing the ex­pec­ta­tions of the pol­i­cy­hold­ers. The pa­per fo­cuses on the aware­ness and level of sat­is­fac­tion of the pol­i­cy­holder in the study area.

Key words: In­surance, pol­i­cy­holder, LIC, sat­is­fac­tion, aware­ness, prod­uct, ser­vice.


To­day, only one busi­ness, which af­fects all walks of life, is in­surance busi­ness. That’s why in­surance in­dus­try oc­cu­pies a very im­por­tant place among fi­nan­cial ser­vices op­er­a­tive in the world. Ow­ing to grow­ing com­plex­ity of life, trade and com­merce, in­di­vid­u­als as well as busi­ness firms are turn­ing to in­surance to man­age var­i­ous risks. There­fore a proper knowl­edge of what in­surance is and what pur­pose does it serve to an in­di­vid­ual or an or­gan­i­sa­tion is there­fore nec­es­sary.

In­surance is a mech­a­nism that en­sures an in­di­vid­ual to thrive on ad­verse con­se­quences by com­pen­sat­ing the in­di­vid­ual his/her loss fi­nan­cially. Ev­ery in­di­vid­ual in this world is sub­ject to un­fore­seen and un­called for haz­ards or dan­gers, which may make him and his fam­ily vul­ner­a­ble. At this place, only in­surance helps him not only to sur­vive but also to re­cover his loss and con­tinue his life in a nor­mal man­ner, which would oth­er­wise be un­think­able.

In­surance in­dus­try has al­ways been a growth−ori­ented in­dus­try glob­ally. On the In­dian scene too, the in­surance in­dus­try has al­ways recorded no­tice­able growth vis−a−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; and 4. United In­dia In­surance Com­pany Lim­ited

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 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. The In­dian In­surance in­dus­try is fea­tured by the at­tributes: Low mar­ket pen­e­tra­tion; Ever−grow­ing mid­dle class com­po­nent in pop­u­la­tion. Growth of con­sumer move­ment with an in­creas­ing de­mand for bet­ter in­surance prod­ucts; In­ad­e­quate ap­pli­ca­tion of in­for­ma­tion tech­nol­ogy for busi­ness. Ad­e­quate fil­lip from the Government in the form of tax in­cen­tives to the in­sured, etc. The in­dus­try for­ma­tions need to keep vigil on th­ese char­ac­ter­is­tics of the In­dian mar­ket and for­mu­late their strate­gies to en­tail max­i­mum con­tri­bu­tion to the out­put of the sec­tor.

The In­dian life and non−life in­surance busi­ness ac­counted for merely 0.42 per­cent of the world’s life and non−life busi­ness in 1997. The fig­ures of the ba­sic pa­ram­e­ters of the in­dus­try’s per­for­mance viz. In­surance Den­sity and In­surance Pen­e­tra­tion also are ev­i­dent of the hith­erto ex­ist­ing low−yield In­dian mar­ket con­di­tions.

The term "In­surance Pen­e­tra­tion" broadly mea­sures the con­tri­bu­tion of the in­surance in­dus­try in re­la­tion to a na­tion’s en­tire eco­nomic pro­duc­tiv­ity. The fig­ure of pre­mium vis−à−vis the GDP of 1999 stood at 0.54 per­cent for non−life in­surance busi­ness and 1.39 per­cent for the life in­surance busi­ness. The term " In­surance Den­sity" re­flects the In­surance pur­chas­ing power. The pre­mium per cap­i­tal in In­dia amounted to US $ 2.40 for non−life in­surance and US $ 6.10 for life in­surance in 1999 but with the dereg­u­la­tion of the sec­tor, a sea change in the scene is most likely.

The in­surance sec­tor in In­dia has come a full cir­cle from be­ing an open com­pet­i­tive mar­ket to na­tion­al­i­sa­tion and back to a lib­er­al­ized mar­ket again. Trac­ing the de­vel­op­ments the In­dian in­surance sec­tor re­veals the 360−de­gree turn wit­nessed over a pe­riod of al­most two cen­turies.

Life in­surance has come a long way from the ear­lier days when it was orig­i­nally con­ceived as a risk cov­er­ing medium for short pe­ri­ods of time, cov­er­ing tem­po­rary risk sit­u­a­tions, such as sea voy­ages. As life in­surance be­came more es­tab­lished, it was re­al­ized what a use­ful tool it is for a num­ber of sit­u­a­tions that in­cludes tem­po­rary needs/threats, sav­ings, in­vest­ment, re­tire­ment etc.


The util­i­sa­tion of LIC is in­creas­ing day by day. How­ever, since there are other cheaper modes of schemes like chil­dren scheme, etc, the level of util­i­sa­tion of LIC fa­cil­i­ties is still to be im­proved. In this con­text, it is ap­pro­pri­ate to iden­tify the fac­tors in­flu­enc­ing the util­i­sa­tion of LIC and also the sat­is­fac­tion of pol­i­cy­hold­ers. More­over, the LIC pol­i­cy­hold­ers suf­fer from a lot of prob­lems with the money, tim­ing, etc. Hence, the present study is un­der­taken with the fol­low­ing ob­jec­tives.


To present a brief pro­file to the pol­i­cy­hold­ers. To as­cer­tain the fac­tors which in­flu­enced the pol­i­cy­hold­ers to se­lect a pol­icy? To mea­sure the sat­is­fac­tion of pol­i­cy­hold­ers con­cern­ing LIC ser­vices. To of­fer valu­able sug­ges­tion to im­prove the per­for­mance of LIC.


To give spe­cific fo­cus to the ob­jec­tives, a hy­poth­e­sis has been formed to be tested by us­ing ap­pro­pri­ate sta­tis­ti­cal tools. The level of sat­is­fac­tion of pol­i­cy­hold­ers is in­de­pen­dent of age, sex, ed­u­ca­tion, mar­i­tal sta­tus, fam­ily size and oc­cu­pa­tion.


The pri­mary data were col­lected from pol­i­cy­hold­ers who took life in­surance poli­cies in Ko­mara­palayam town. For the pur­pose of col­lect­ing the pri­mary data, an in­ter­view sched­ule was used by the Re­searcher. The present study has fol­lowed the con­ve­nient sam­pling method for the re­search work. A sam­ple of 100 re­spon­dents was se­lected for the study.


Af­ter col­lect­ing the pri­mary data with the help of in­ter­view sched­ule, a thor­ough ver­i­fi­ca­tion of data was made. Then edit­ing work was un­der­taken. Fur­ther, in or­der to process the re­sponses of pol­i­cy­hold­ers, a master ta­ble was pre­pared and a code was given to in­di­cate each of the in­for­ma­tion to be used for anal­y­sis. Af­ter pre­par­ing the master ta­ble, the in­for­ma­tion was tran­scribed into tally sheet and with the help of th­ese tally sheets, clas­si­fi­ca­tion ta­bles were pre­pared for fur­ther anal­y­sis.


To an­a­lyse the re­la­tion­ship be­tween per­sonal fac­tors and level of sat­is­fac­tion of the pol­i­cy­hold­ers, sim­ple per­cent­age anal­y­sis and a Chi−square test were used.

In or­der to mea­sure the sat­is­fac­tion, the pol­i­cy­hold­ers were clas­si­fied into three groups, namely high, medium and low level sat­is­fac­tion.


The present study has been un­der­taken fac­ing the fol­low­ing lim­i­ta­tions. The study is mainly based on the in­for­ma­tion given by the re­spon­dents, and the facts given by them are sub­ject to their be­liefs, at­ti­tudes, etc. Due to the time and eco­nomic con­straints of the re­searcher, the num­ber of re­spon­dents has been lim­ited to 100 only. Since the study has been un­der­taken in Ko­mara­palayam town only, the find­ings can­not be gen­er­alised as a whole.

Since the data col­lected from the re­spon­dents are sub­ject to their tastes, per­cep­tion, etc, the find­ings of the study may not be suit­able if there is a change in the tastes, be­lief of pol­i­cy­hold­ers etc in fu­ture.


In or­der to test the re­la­tion­ship be­tween the Per­sonal char­ac­ter­is­tics of the re­spon­dents and their level of aware­ness re­gard­ing the LIC ser­vice, the Chi−square test was ap­plied. Per­sonal char­ac­ter­is­tics con­sid­ered were Age, Gen­der, Ed­u­ca­tional Qual­i­fi­ca­tion, Oc­cu­pa­tion, Mar­i­tal Sta­tus, In­come per month and Num­ber of Fam­ily mem­bers and Num­ber of earn­ing mem­bers in the fam­ily. Chi−square test re­vealed that the Per­sonal char­ac­ter­is­tic viz.., Gen­der, Ed­u­ca­tional Qual­i­fi­ca­tion, etc are as­so­ci­ated with the level of aware­ness. Age, Mar­tial sta­tus, Earn­ing per month, Num­ber of fam­ily mem­bers and Num­ber of Earn­ing Mem­bers in the fam­ily are not as­so­ci­ated with the level of aware­ness. The anal­y­sis, through the test­ing of null hy­poth­e­sis, re­vealed that the fol­low­ing fac­tors in­flu­ence the level of sat­is­fac­tion to­wards the ser­vices of LIC of In­dia Ed­u­ca­tion Oc­cu­pa­tion Again, the anal­y­sis showed that the fol­low­ing fac­tors do not in­flu­ence the level of sat­is­fac­tion. Age Gen­der Fam­ily monthly in­come Mar­i­tal sta­tus Size of the fam­ily Num­ber of earn­ing mem­ber The study among the cor­re­la­tion be­tween the ex­pe­ri­ence and av­er­age against sold prod­ucts and the re­la­tion­ship be­tween ex­pe­ri­ence of LIC agent and av­er­age of tak­ing prod­uct in the field is pos­i­tively cor­re­lated. The study among the cor­re­la­tion be­tween the num­bers of fam­ily mem­bers and num­ber of prod­uct in the fam­ily in the field are neg­a­tively cor­re­lated.

Ac­cord­ingly the fac­tors which in­flu­ence se­lect LIC pol­icy are tested through rank­ing. The anal­y­sis re­vealed that Agent rec­om­men­da­tion is ranked as first with the to­tal score of 860, ad­ver­tise­ment is ranked as sec­ond with the to­tal score of 777, sug­ges­tion from friends and rel­a­tives is ranked as third with the to­tal score of 620, tax ben­e­fits is ranked as fourth with the to­tal score of 597, pre­mium amount is ranked as fifth with the to­tal score of 571, as­sured re­turn is ranked as sixth with the to­tal score of 523, risk is ranked as sev­enth with the to­tal score of 434, bonus is ranked as eighth with the to­tal score of 414, con­ve­nience is ranked as ninth with the to­tal score of 404, reg­u­lar in­come is ranked as tenth with the to­tal score of 391. It is con­cluded that most of the re­spon­dents have been in­flu­enced by the fac­tor of agent´s rec­om­men­da­tion. On the ba­sis of the anal­y­sis done with the data from all the in­di­vid­ual con­sumers as well as from the record of LIC prod­uct re­lated to its agents a de­tailed anal­y­sis is made on the ba­sis of which the fi­nal re­sult is achieved. In that branch money back prod­uct is sold more in num­ber and the LIC de­pends upon the features of the prod­uct. In the same prod­uct the one−time users of money back prod­uct are more. The en­dow­ment prod­uct is the highly sold prod­uct by the agents. The prod­ucts of the LIC are reached only through the agents. In this branch mostly the de­gree hold­ers are work­ing as full time agents. The full time agents in­crease the vol­ume of busi­ness. From the anal­y­sis it is con­cluded that the agents in­crease the vol­ume of busi­ness. From the anal­y­sis it is also con­cluded that the agents’ ser­vice and branch ser­vice are up to the sat­is­fac­tion of the con­sumers.


The fol­low­ing sug­ges­tions, based on the find­ings of the study, are given for the growth of LIC. It was sur­pris­ing to note that there were many pol­i­cy­hold­ers who had taken only one life in­surance pol­icy. Hold­ing of more than one poli­cies helps one to get greater ser­vice from the cor­po­ra­tion. Hence it is sug­gested that the cor­po­ra­tion can in­tro­duce prize schemes and give it ex­ten­sive pub­lic­ity in or­der to per­suade peo­ple to take more poli­cies. Pub­lished lit­er­a­ture, con­tain­ing de­tails of all types of poli­cies must be made eas­ily avail­able to the prospec­tive pol­i­cy­hold­ers. At present, each di­vi­sion in­cludes many dis­tricts un­der its op­er­a­tional area. For the pur­pose of pro­vid­ing qual­ity ser­vice, each district must have a di­vi­sional of­fice.


Thus it may be con­cluded from the anal­y­sis that the study was of great help to the pol­i­cy­hold­ers, as it was aimed at find­ing the aware­ness and sat­is­fac­tion to­wards the ser­vices of LIC pol­i­cy­hold­ers. Hence the prospec­tive cus­tomers, who pro­pose to buy the in­surance prod­ucts and avail of the ser­vices of an in­surance com­pany for the first time, can get ben­e­fited if they se­lect the best ser­vice provider that can pro­vide all th­ese fac­tors in the most com­pre­hen­sive way. (Var­i­ous data sheets avail­able with the Au­thor)


1. Mishra, K.C. and C. S. Ku­mar, Life in­surance: Prin­ci­ples and Prac­tice, Cen­gage Learn­ing In­dia (P) Ltd, New Delhi, 2009, pp. 30−41. 2. Mishra, M.N. and Mishra.S.B, In­surance: Prin­ci­ples and Prac­tice, S.Chand and Com­pany Ltd., New Delhi, 2007, p. 16. 3. Tri­pa­thy Nalini Prava and Prabir pal, In­surance The­ory and Prac­tice, Pren­tice− Hall of In­dia (P) Ltd, New Delhi, 2007, pp. 72−81. 4. Banu­mathy and Subasini, "At­ti­tude of LIC Pol­i­cy­hold­ers to­wards Life In­surance Busi­ness in Virud­hu­na­gar District", In­dian Man­age­ment Stud­ies jour­nal, 2006, pp10. 5. Dhan­ab­hakyam.M and Vi­jaysan­thi.K.R, "Cus­tomer Aware­ness to­wards LIC Poli­cies in Coim­bat­ore City", Jour­nal of In­surance and Risk Man­age­ment, Vol­ume 5, No.10, June 2007. 6. www.licin­ 7. 8.­maon­

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