Study of Consumer Behaviourof Insurance Industry in India Submitted to: Dr. Gaurav Joshi Submitted by: Group 4 12/2015 Shubham Sharma 38/2015 Abhishek Lohani 54/2015 Deepanshu Gupta 74/2015 Vaibhav Sehgal 88/2015 Nitasha Nandan LAL BAHADUR SHASTRI INSTITUTE OF MANAGEMENT NEW DELHI September 9, 2016 All rights reserved. No part of this report may be reproduced, stored in retrieval system, or transmitted, in any form or by means, without the prior permission from Group 6, Section B, PGDM General, Lal Bahadur Shastri Institute of Management, New Delhi. LETTER OF TRANSMITTAL November 25, 2015 To: Dr. Gaurav Joshi From: Group 4 This is to present a report on the topic “Study of Consumer Behavior of Insurance Industry in India” conducted as a project research work for the course “Consumer Behavior” by us, Group No. 4, for your kind perusal and necessary action. Thanking You, Group 4 PREFACE Our group underwent a very unique and interesting journey while making this report. There were lots of delegations to each other due to trimester end pressures. With lots of delays, we finally gathered together and came up with our contributions and here we have our best combined effort. As would be managers, we got an opportunity to understand what are the factors that affect buying behaviour of consumer with respect to General Insurance Category and impact of psychological factors on the same. We got an opportunity to conduct a primary research for the same and learn from the outcome of the analysis. During this project, we did exhaustive search on Ebsco host which was a bit tricky. We completed the project work by researching more from a number of books as well. Going through some interesting research papers, newspaper clippings and interviews, we understood the insurance industry as a whole. We worked together as a group, enjoying evening coffees together. Overall, it has been a nice experience. The completion of this project work has enabled us to gain invaluable knowledge. whose invaluable support and guidance has helped us to gain knowledge of various aspects of consumer behavior subject and has given us an opportunity to sharpen our skillsets . We would like to express our gratitude towards Dr. Gaurav Joshi. . Delhi for having prescribed this project work to us as a part of the academic requirement in the MBA course. This project has given us a chance to get in touch with the practical aspects of working in a professional setup. At this juncture. we wish to appreciate the management and staff of LBSIM for providing state of the art infrastructure and resources.We are also very grateful to our family and our friends for their enduring support. to enable us to complete and enrich our project.ACKNOWLEDGEMENT We are extremely grateful to LBSIM. Topic Executive Summary Introduction Objective Research Methodology Discussion Pa ge No 1 2 2 2 3 3 Power and politics in organization Positive Power and Politics Examples: New Zealand Suffrage Movement The Arcelor-Mittal Deal Apple-Steve Jobs vs. Tim Cook Marvel Studios Part-2.TABLE OF CONTENTS Chapter No.2 2.4 3. i 1.3.4 3.2 3.1 2.3.5 4. Insights and Learnings References & Bibliography Appendix 14 16 17 .3 2.com Company Overview 4 5 5 6 6 7 9 10 Log Sheet Interview Schedule Important Transcripts 11 12 13 3.3 3.1 3.3.Naukri.1 2.3 2.2 2. 2. 5.2 2.3. 1.1 1. among the non-life insurers there are six public sector insurers. . five private sector insurers are registered to underwrite policies exclusively in health. Out of 29 non-life insurance companies. Apart from that. They are Star Health and Allied Insurance Company Ltd. Religare Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. Life Insurance Corporation (LIC) is the sole public sector company.Executive Summary The insurance industry of India consists of 53 insurance companies of which 24 are in life insurance business and 29 are non-life insurers. brokers. Other stakeholders in Indian Insurance market include agents (individual and corporate). namely. There are two more specialized insurers belonging to public sector. Max Bupa Health Insurance Company Ltd. General Insurance Corporation of India (GIC Re). namely. personal accident and travel insurance segments. surveyors and third party administrators servicing health insurance claims. there is sole national re-insurer. Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for crop insurance. Among the life insurers. In addition to these. Apollo Munich Health Insurance Company Ltd. The Indian insurance market is a huge business opportunity waiting to be harnessed. indicating a growth rate of 22. with a share of 0.66 per cent in FY13. The general insurance business in India is currently at Rs 78.000 crore (US$ 11.44 billion) premium per annum industry and is growing at a healthy rate of 17 per cent. During this period. The country’s insurance market is expected to quadruple in size over the next 10 years from its current size of US$ 60 billion.25 billion (US$ 1. India currently accounts for less than 1. the life insurance industry recorded a new premium income of Rs 1.38 trillion (US$ 20.55 billion).INTRODUCTION During April 2015 to March 2016 period.5 per cent of the world’s total insurance premiums and about 2 per cent of the world’s life insurance premiums despite being the second most populous nation.5 per cent.54 billion). The life insurance premium market . The country is the fifteenth largest insurance market in the world in terms of premium volume. India ranked 11th among 88 countries in the life insurance business. with a share of 2.0 per cent during FY14. The insurance industry plans to hike penetration levels to five per cent by 2020. The country ranked 21st in global non-life insurance market. India’s life insurance sector is the biggest in the world with about 360 million policies which are expected to increase at a Compound Annual Growth Rate (CAGR) of 12-15 per cent over the next five years. The general insurance industry recorded a 12 per cent growth in Gross Direct Premium underwritten in April 2016 at Rs 105. and has the potential to grow exponentially in the coming years. the life insurance market is slated to cross US$ 160 billion. In 2015. Strong growth in the automotive industry over the next decade to be a key driver of motor insurance.3 per cent. registering a growth of 9. rising participation by private players has increased their market share in the life insurance market to 24. as proposed in 2012. from USD14. The market share of private sector companies in the nonlife insurance premium market rose from 9. ADVANTAGE IN INDIA STRONG DEMAND: Growing interest in insurance among people.78 billion in FY15. crop insurance market in India is the largest in the world and covers around 32 million farmers. The non-life insurance premium market rose at a CAGR of 16.17 billion in FY16*( Up to November 2015). pension segment Strong growth potential for micro insurance.4 billion in FY04 to USD10. will further fuel investments . innovative products and distribution channels aiding growth Increasing demand for insurance offshoring Growing use of internet has started increasing demand ATTRACTIVE OPPORTUNITIES: Life insurance in low-income urban areas Health insurance. from USD3.6 per cent in FY14 from 2 per cent in FY03 Increase in FDI limit to 49 per cent from 26 per cent.6 per cent in FY03 to 41 per cent in FY16*.expanded at a CAGR of 14 per cent.5 per cent.5 billion in FY04 to USD61. which accounted for nearly 19 per cent of the total farmers in the country. especially from rural areas INCREASING INVESTMENTS: As per the latest data. POLICY SUPPORT Tax incentives on insurance products Passing of Insurance Bill gives IRDA flexibility to frame regulations Clarity on rules for insurance IPOs would infuse liquidity in the industry Repeated attempts to make the sector more lucrative for foreign participants EVOLUTION OF THE INDIAN INSURANCE SECTOR GROWTH OF INSURANCE INDUSTRY IN INDIA . The insurance industry is expected to rise and reach USD280 billion in 2020.3 per cent in 2015. the industry comprised of 24 private players while Life Insurance Corporation constituted 71 per cent of the insurance market in the country.Growth of non-life insurance premium experienced a slowdown in FY15 but premiums are expected to grow in emerging economies by 10. In 2015. . Global premium increased by 3.7 per cent in 2016 and 2017. with 69 per cent share in FY15. Insurance penetration reached 3. Insurance density in India increased from 3. followed by ICICI Prudential.1 million new policies in FY15 Market Share LIC ICICI Others HDFC SBI Max Life Birla Sun Life Reliance 5% 2% 2% 1% 5% 2% 8% 6% 69% Bajaj Allianz .57 in FY05 to 11. the life insurance sector has 29* private players compared to only four in FY02 LIC is still the market leader.3 per cent in FY15 LIC CONTINUES TO DOMINATE LIFE INSURANCE SEGMENT In 2015.23 in FY15 at a CAGR of 12. with 6.0 per cent share LIC issued 20.1 per cent. and generate value from future business rather than focus on present profits. focusing on cost rationalization and aligning business models to realize reported Embedded Value (EV).5 per cent in FY04 The life insurance sector has witnessed the launch of innovative products such as Unit Linked Insurance Plans (ULIPs) Other traditional products have also been customized to meet specific needs of Indian consumers Large insurers continue to expand. share of the private sector increased to 42.0 per cent in FY03 In the non-life insurance segment. In the life insurance segment.NOTABLE TRENDS IN THE INSURANCE SECTOR Emergence of new distribution channels Emergence of new distribution channels Emergence of new distribution channels Emergence of new distribution channels New distribution channels like bancassurance. .1 percent in FY16* from 2. private sector share in total premiums increased to 27. online distribution and NBFCs have each and reduced cost. Firms have tied up with local NGOs to target lucrative rural markets.7 per cent in FY16* from 14. PORTERS FIVE FORCES ANALYSIS STRATEGIES ADOPTED . Higher personal disposable incomes would result in higher household savings that will be channeled into different financial savings instruments like insurance and pension policies Household savings are expected to grow to USD397.DEMAND GROWTH FOR INSURANCE PRODUCTS SET TO ACCELERATE India’s robust economy is expected to sustain the growth in insurance premiums written.36 billion by 2016 from USD45 billion in 2000 .78 billion by 2016 from USD89 billion in 2000 Financial savings are expected to grow to USD202. 413.065.1 and USD22. thereby boosting revenues of biotech companies .3 per annum) is estimated to increase more than fourfold to 148 million by 2030 from 32 million in 2010 Rising per capita income leads to increased spending on medical and healthcare services Higher incidence of chronic lifestyle diseases • Lifestyle diseases are set to account for a greater part of the healthcare market • Lifestyle diseases such as cardiac diseases.Rising income. growing middle class • • • Per capita income and rural income are increasing The number of middle class households (earning between USD4. cancer and diabetes are treated with the help of biotechnology products. SWOT ANALYSIS Weakness Strength •Patents •Premium rates are increasing and so commissions •The variety increasing of •Business growth products are •Insurance companies are often slow to respond to changing needs •Buying insurance policy cumbersome process •Less differentiation •Low Investment •Old tariff structure is a . Threats Opportunities •Technology is improving paperless transactions available •Rise in income and awareness •New Innovations in technology •Emerging middle income groups •New substitute product emerging •Increasing expenses and lower profit margins •Government regulations on issues like health care can quickly change its direction •The dominance of entrenched players make industry stagnate PESTEL ANALYSIS Political factors affecting insurance industry Insurance business in rural/ social sector Capital requirement Renewal of registration Requirement as to capital Investment of funds outside India Power to investigation or inspection Tax policy and insurance sector Economic factors affecting insurance industry Adequacy of capital . Increased economic activity Interest rates Inflation rate Market related factors such as recession etc. Socio-Cultural factors affecting insurance industry Population Life style Educational level Level of earning Societal benefits Technological factors affecting insurance industry Maintaining the database E-business insurance in India Legal Policies affecting Insurance Industry There is a provision that any international insurance company has to tie up with an Indian company if they want to do business in India Life insurance companies are allowed to go public. Approval for increment in FDI cap Passed bill to allow FDI in Insurance . Attitudes) in decision making process of consumer with respect to General Insurance category. Environmental Factors Natural disasters Rainfall dependency Other non-recurring activities e.g. 2. Objectives 1. personality. Car Accidents etc. 3. Impact of external factors like Firm’s marketing efforts &. Impact of psychological field (Motivation. sociocultural environment in consumer buying behavior.Identification of the factors that affect the buying behavior of consumer with respect to General Insurance category. . Perception. Learning. Research Methodology . Reliability Test Factor Analysis . Bartlett’s Test: It indicates the strength of relationship among variables. It tests the null hypothesis stated above. . Thus. i. in this case value of KMO is 0. Its value should be greater than 0.000 which is lower than 0.721 which is greater than 0. it is statistically significant and thus. factor analysis is appropriate. Thus.5 to proceed.Kaiser-Meyer-Olkin Test: KMO measures sampling adequacy. Since. in this case.05.. appropriateness of factor analysis.e. null hypothesis is rejected. significance value is 0.5. Since. It shows that how much of the variance in a variable has been accounted for by the extracted factors. In this case. the value is highest for variable 10 & 20 and is lowest for variable 3 & 13. . Thus. it shows the percentage of variance in a variable that is captured by the common underlying factor. first five factors cumulatively explain 92. . In this case.Eigen values represents the percentage of total variance explained by each factor.674% of the total variance. It does not actually change anything but makes the interpretation easier.It reduces the number factors on which the variables have high loadings. . It shows loading of sixteen variables on the 5 factors extracted. more the factor contributes to variable. All the loadings that are greater than 0. Customer Value Satisfacti Added on Services Proper Convenie Guidance nce & Informati on Fast and efficient counter services Cell phone insurance banking facilities Convenient company office location Company opening / Operating hours Use of modern equipment Speed and efficiency of transactions New scheme information Parking space Connectivity to banks Wide range of products and services Ease of opening the account Professionali sm and credibility of staff Availability of Premium collection centre Interest rates Infrastructur e of the insurance company Secured internet banking Grievan ce Redress al Proper guidance and immediate complain handling Lower service charge .5.5 are considered while suppresses all other loadings lesser than 0. The higher the absolute value of the loading. Computerizat ion and online transactions . Motivational Factors Motivational Factors 12% Retirement Advertisement 43% 25% Health Benefits Gaining a new financial dependent 20% Consumer’s Perception Towards Various Communication Channels . Channels 11% Advertisements 28% Speaking To an Agent Marketing Materials Online 17% 44% . Recommendations . Limitations . References .
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Report "Consumer Behaviour of Insurance Industry in India"