Magazine 2014
International Peer-Reviewed Journal
RESEARCH HORIZONS, VOL. 4 JULY 2014
COMMERCE
A COMPARATIVE STUDY ON THE BUYING BEHAVIOUR OF POLICY HOLDER’S
OF LIC AND OTHER PRIVATE COMPANIES IN MUMBAI
Ganga Susheel
Khushboo Kesarwani
ABSTRACT
Security is the universal phenomenon which is desired by all creatures especially human being who
wants to secure him from all types of risk. Insurance is mainly defined as risk in terms of uncertainty.
Financial risk is the risk which is faced by the dependents of any family during the uncertainty of income
in case of death of earner. Insurance is the product which provides security against financial risk in the
event of death of bread earner of the family. Insurance is a specialized service meant for long term
probably for more than 20 years. The study of consumer behavior for insurance product is complicated
because the need of insurance is not identified by the customers in proper way. This paper highlights
the consumer behavior of policy holders of LIC and other private companies and has found the factors
responsible for selecting an insurance policy. It is found that majority i.e. 56 percent of the respondents
have opted for private insurance companies and Age is not a dependent factor on selection of the type
of insurance companies, but age definitely matters with respect to holding of insurance policies.
Respondents who are above 31 years of age constitute 60 percent of policy holders. 35 percent of
policy holders opt for insurance for seeking old age benefits (financial security). It is also found that
people who don’t opt for insurance are anxious about their future financial job security and are increasingly
tired of frequent changes in the work environment.
Keywords : Insurance, Consumer behaviour, Risk and Security
Introduction
“
There is nothing certain in the world except death and tax: yet death and tax are uncertain as no
body knows when he will die or when the tax will change”
-
Benjamin Franklin.
We all are facing risk in our life. The level of risk is different in day to day activity and life time activity be
it a simple loss of money or death. Security is the universal phenomenon which is desired by all
creatures. Human being wants to secure himself from all types of risk. Financial risk is the risk which is
faced by the dependents of any family during the uncertainty of income in case of death of earner.
Insurance is the product which provides security against financial risk in the event of death of bread
earner of the family. Life insurance plays an important role in the financial planning of any family but
unfortunately it is not as popular as it should be.
Insurance is mainly defined as risk in terms of uncertainty. So accordingly Sanjay Chaudhary in his
book Risk Management and insurance planning has defined risk as “Uncertainty concerning the
occurrence of a loss. Risk is an outcome of uncertainty. It is measured in terms of likelihood of it
happening and the consequences that will arise if it does happen. It is calculated as the ratio of the
number of expected losses to a total number of actual losses that actually occur.
All of us are consumers. For consumption we buy the goods from market. Consumer behavior is
study which deals with the various stages a consumer goes through before purchasing a product or
service for his end use. An individual goes to the market to buy a product because of his need, social
status or any gifting purpose. They buy the product according to their taste, habit and budget.
Purchasing a product for daily use and purchasing a product a service for long term need different
factors. Insurance is a specialized service for long term some times more than 20 years. The study of
consumer behavior for insurance product is complicated because the need of insurance is not identified
by the customers in desired way. They find it difficult to recognize their investment pattern and insurance
requirement. In this complicated situation the impact of family, friends, relatives and most importantly
agent act as an influencing factor towards policy purchases. Here the researcher has studied the
consumer behavior of policy holders of LIC and other private companies and has found the important
factors responsible for selecting an insurance policy.
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International Peer-Reviewed Journal
RESEARCH HORIZONS, VOL. 4 JULY 2014
Objectives of the study
1
.
To study buying behavior of policy holders.
2
.
To study the factors responsible for the selection of the insurance policy.
Limitations of the study
The data is collected from the city of Mumbai, so this research will be applicable to Mumbai city only.
Methodology
Questionnaire method was applied to collect information and a sample of 50 respondents was selected
on convenience basis to conduct this study.
Hypothesis
The selection of the ownership of the insurance company is independent of the policy holder’s
a. Age
b. Income
c. Occupation
d. Gender
Analysis and Interpretation
From the study it is found that among the respondents 90.8 percent holds the insurance policies and
only 9.2 percent constitute the non policy holders. Graph 1 depicts that majority of the people prefers
to save their money for future.
Graph 1
Also it is found that male and females are equally willing to invest their money in insurance policies as
policy holders constitutes 50 percent of male and 50 percent of female respondents. Among the non
holders of insurance policy the reasons for not holding policies are mainly either not affordability or
they didn’t found returns to be lucrative enough.
It is found that majority of the insurance holders buy insurance policies with a motive to have a financial
security. Table 1 and Graph 2 states that 34.8 percent of the insurance holders buy the policy with a
motive to have financial security, 30.4 percent has it with a motive to have regular savings, 15.2 percent
of the respondents buy insurance with a motive to enjoy old age benefit, 10.9 percent to obtain tax
benefit and rest to cover specific expenses like education of the child, marriage of the child, etc.
Table 1
Objective Behind Purchasing the Policy
Particulars
to cover
specific exps
financial
security
to get tax
benefit
regular
saving
old age
benefit
Total
Percent of
8.7%
34.8%
10.9%
30.4%
15.2% 100.0%
insurance holders
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International Peer-Reviewed Journal
RESEARCH HORIZONS, VOL. 4 JULY 2014
Graph 2
Below Graph 3 depicts that 52.20 percent of females prefers to opt for LIC whereas majority i.e. 65.20
percent of males prefers to hold insurance of private companies.
Graph 3
Hypothesis Testing
It is observed that insurance policy holders among the age group 31-50 years are almost double with
respect to insurance holders amongst less than 30 years. To understand the relationship between the
age of the insurance holder and the selection of the insurance policy the chi-square test was applied
and the result is as below.
Table 2
Selection of Insurance Policy on the Basis of Age in Percentage
Age
LIC
Other Pvt Companies
Total
3
1-50 years
53.3
25
46.7
75
100
100
Less than 30 Years
Table 2 depicts that majority of the policy holders amongst age group 31-50 years prefer to select LIC
policies i.e. 53.3 percent where as 75 percent of insurance holders amongst less than 30 years of age
group prefers to hold the policies of private companies.
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International Peer-Reviewed Journal
RESEARCH HORIZONS, VOL. 4 JULY 2014
Table 3
Chi-Square Test for determining the relationship between age and type of insurance policy
selected.
Value
df
Asymp. Sig. (2-sided)
a
Pearson Chi-Square
Likelihood Ratio
14.750
9
9
1
.098
.039
.024
17.695
5.109
46
Linear-by-Linear Association
N of Valid Cases
From the Table 3 at 5 percent level of significance the value of significance i.e. 0.098 which is greater
than 0.05 therefore we accept the hypothesis that selection of the policy is independent of age of the
insurance holder.
It is found that amongst the sample respondents 23.9 percent belong to income group 450001 and
above, 32.6 percent represent the income group of 300001-450000, 37 percent is from income group
1
50001-300000 and 6.5 percent belongs to Less than 150000.
To understand the relationship between the income of the policy holder and the selection of the insurance
policy chi square test was applied and the following was observed:
Table 4
Relationship between income of insurance holder and selection of the company in percentage
Income in Rs.
LIC
Other Pvt Companies
Total
4
3
1
50001 and above
00001-450000
50001-300000
18.2
53.3
47.1
66.7
81.8
46.7
52.9
33.3
100
100
100
100
Less than 150000
Majority of all the insurance holders from all the income groups prefers to opt for private insurance
policy except for income group less than Rs. 150000 wherein majority of the insurance holders i.e.
6
6.7 percent prefers to hold LIC policies.
Table 5
Chi-Square Tests to find the relationship between income of insurance holder
and selection of the company
Value
df
Asymp. Sig. (2-sided)
a
Pearson Chi-Square
Likelihood Ratio
29.751
27
27
1
.325
.279
.463
30.799
.539
46
Linear-by-Linear Association
N of Valid Cases
From the Table 5 at 5 percent level of significance the value of significance i.e. 0.325 which is greater
than 0.05 therefore we accept the hypothesis that selection of the policy is independent of income of
the insurance holder.
To find out the relationship between the selection of the company and the gender of the policy holder
chi square test was applied and the findings were as under:
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International Peer-Reviewed Journal
RESEARCH HORIZONS, VOL. 4 JULY 2014
Table 6
Relationship between gender of insurance holder and selection
of the company in percentage
Gender
Company selected
Total
LIC
52.2
34.8
Pvt Ins
47.8
Female
Male
100
100
65.2
Table 7
Chi-Square Test to determine relationship between gender of insurance
holder and selection of the insurance company in percentage
Value
df
Asymp. Sig. (2-sided)
a
Pearson Chi-Square
Likelihood Ratio
7.133
8.756
.181
46
9
9
1
.623
.460
.671
Linear-by-Linear Association
N of Valid Cases
The significance value is 0.623 which is greater the 0.05 and hence the hypothesis that selection of the
policy is independent of gender of the insurance holder stands to be accepted.
The table 8 depicts the relationship between the occupation of the policy holder and the type of
insurance company selected.
Table 8
Chi-Square Tests to determine the relationship between the occupation of
insurance holder and selection of insurance company
Value
df
Asymp. Sig. (2-sided)
a
Pearson Chi-Square
Likelihood Ratio
20.484
9
9
1
.015
.179
.851
12.645
.035
46
Linear-by-Linear Association
N of Valid Cases
It is found that significance value is .015 which is less than 0.05 so our hypothesis that selection of the
insurance companies is independent of the occupation of the policy holders stands rejected.
Findings of the study are as follows
1
2
3
.
.
.
90 percent of the respondents are policy holders.
Men and women equally prefer to hold insurance policies.
Age is not a dependent factor on selection of the type of insurance companies, but age definitely
matters with respect to holding of insurance policies. Respondents who are above 31 years of
age constitute 60 percent of policy holders.
4
5
6
.
.
.
Its found that majority of females prefers to hold LIC policies where as majority of males prefer to
hold insurance of private insurance companies.
Out of the policy holder 56 percent has opted for private insurance companies and 44 percent has
opted for LIC insurance.
35 percent of the respondents have selected the pension plan and 33 percent has preferred for
mediclaim.
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International Peer-Reviewed Journal
RESEARCH HORIZONS, VOL. 4 JULY 2014
7
.
.
More than one third of the policy holders have a policy for amount between rupees 50001-90000.
8
While purchasing the policy the most influential sources are agents i.e. 50 percent and next influential
factor contributes 20 percent i.e. friends.
9
.
Factors based on which policies are selected constitutes
a. Brand image – 34 percent
b. Less premium – 22 percent and
c. Personal references – 20 percent
1
1
0. Mode of payment of premium is annually for 61 percent of respondents and half yearly for 29
percent of respondents.
1. It is found that objective behind buying is a policy are
a. Financial security – 35 percent
b. Regular saving – 30 percent
c. Old age benefit – 15 percent
1
2. Among the respondent 78 percent of the policy holders are satisfied with the premium amount
paid by them, 74 percent are satisfied with the services of the agent and 91 percent are satisfied
with the performance of the policy.
1
1
3. Salaried class respondents constitute 95 percent of the respondents.
4. Educational qualification of the respondents includes PG 59 percent, professionals 16 percent
and graduates 26 percent.
1
5. Forty percent of the respondents belong to the annual income group of rupees 150000-300000.
Reasons for not opting for Insurance Policies
Job security is one of the main reason for being insurance not famous among Indian as it should be.
Job security has emerged as the top driver for Indian employees over and above career advancement
and attractive remuneration. People are willing to set aside a bigger slice of their pay cheque each
month to ensure that they will be financially secure when they reach retirement. Moreover, only 50
percent of them are confident that they could continue with their premiums because of lack of stability
in job. It is found that people who don’t opt for insurance are anxious about their future financial job
security and are increasingly tired of frequent changes in the work environment.
Suggestions
Inflation affects every one and its impact on the budget is widely understood. Very of us understand
the impact of inflation on their investments. Inflation should especially be considered while planning
for long term goals like retirement and child education. Also another factor to be considered is down
the years your expenses pattern will change when you are single education and health inflation do not
impact you much where as after entering into family, education expenses shoots up and as you grow
older health care expenses accounts for larger portion of your expenses.
References
Motihar, M., ‘Insurance Principles, Practice, Management & Salesmanship’ Sharda Pustak Bhawan
(
2004), P.47
Khan, Arif M., ‘Theory And Practice Of Insurance’, Educational Book House. (2001) P. 336
Panda, G.S., ‘Principles And Practice Of Insurance’, Kalyani Publishers. (2003) P. 193
U. Jawaharlal, ‘Insurance Industry: The Current Scenario’, ICFAI University Press’, (2009), p. 43
Kinnaer, T. and Bernhardt, K., Principles Of Marketing, Scott Foresman & Co., (1990), p 687.
Ms. Ganga Susheel : Assistant Professor, Dept. of Commerce, KES Shroff College, Mumbai
Dr. Khushboo Kesarwani : Assistant Professor, Dept. of Commerce, Dr. Babasaheb Ambedkar College
of Commerce & Management, Thane.
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