Awareness About Product Innovations In Life Insurance Business Essay

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Deregulation of Indian life insurance industry in 2001 has opened floodgates to many private and internationally renowned life insurers to operate in Indian life insurance space. It has successfully paved way for product innovations in terms of transparency, flexibility and liquidity in the products sold. Customized solutions on the basis of the needs of the insurance buyers are the order of the day. Hence, there is a need to study whether these product innovations have successfully been brought to the notice of Indian insurance buyers or not.

The present study attempts to understand the level of awareness about the various product innovations that have taken place since deregulation. Various statistical analyses are carried out using tools such as Descriptive statistics, ANOVA, Levene's Test for Equality of Variances, Tukey-HSD Multiple Comparisons to arrive at concrete findings and based on which suggestions are offered.

KEY WORDS: Product Innovations, Deregulation, Demographic Variable, Economic Variable, Tukey-HSD Multiple post hoc test, ANOVA, Life Insurance

1: INTRODUCTION

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Delivering world-class insurance products to the clientele has been one of the priorities for the policymakers at the time of liberalizing the insurance market in India. So it is left to the innovative ability of a life insurance company to bring out any possible cutting edge value that would catch the imagination of the buyer. Under these circumstances, insurers have deployed their valuable resources in getting feedback from the market as to what types of products are likely to catch the attention of the clientele. Imaginative combination of riders with the base products have led to several customized solutions.

2: LITERATURE REVIEW

Christiansen and Niels (1988) in their study focused on the consumer perception of products, services and companies of the U.S. life insurance industry. They found that life insurance companies shared a common theme of negative consumer perceptions; but found a positive change in the consumer's view of life insurance policies for funding college education for their children; and concluded that the role of insurance agents in affecting consumer perception is highly significant.

Moller (2000) emphasized on the analysis of insurance contracts, which combine traditional actuarial risk and financial risk. A simple example is a unit-linked pure endowment contract with guarantee. With this, life insurance contract, the sum insured payable to the policy-holder at the term of the contract is contingent upon survival and not fixed a priori, but linked to the development of some stock index and guaranteed against falling below some amount. The actuarial risk in this contract stems from the uncertainty of not knowing whether or not the policyholder will survive until the term of the contract, and the financial risk is related to the performance of the underlying index.

Jawaharlal and Kumar (2004), in their article, examine that prime features of the insurance products are lack of difference among the products (policies) and the negligible time gap between the innovation of a product and imitation of the same by the competitors. Under such a situation, branding would ensure securing and retaining customers in the competitive market place. Once the product has been successful in establishing the symmetry between its verbal assurances (vision, mission, culture, product advertisement) and the physical features (the premiums, returns on expiry, riders, assurances in the event of death, agents and employees support services etc.), there it gives birth to a brand among consumers.

Fulbag and Chawla (2007) in their research article conclude that an investor takes into account various key attributes attached to the insurance product instead of evaluating all possible product attributes while making a choice. These variables have been derived from various earlier studies conducted both in India and abroad. From the findings, they conclude that premium amount is given the maximum importance by the respondents, who purchased policy before as well as after liberalization. The respondents who purchased policy after liberalization considered variables 'corporate image/brand name' and 'transparent and fair dealings' the most important.

Kanwal Garg, et al (2009) revealed the behavior pattern of investor towards investment in life insurance sector. The ruling of this study confirmed that family protection, risk coverage, retirement benefits, child care and tax benefit are the key reasons for buying the life insurance policies. The study also revealed that another important factor which affects the purchase decision is the satisfaction level of the customers with the life insurance product they already own.

3: NEED FOR THE STUDY

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The studies conducted so far in insurance industry have been predominantly on the perceptions of Indian insurance buyers towards life insurance services offered by LIC. After liberalization, many product innovations have taken place in India life insurance sector. This has changed the insurance scenario. No study has been undertaken to understand and analyze this in detail. The present study attempts to bridge this gap by analyzing awareness levels of Indian insurance buyers towards product innovations in life insurance post liberalization.

4: OBJECTIVES OF THE STUDY

The following are the objectives of the present study:

To measure the significant perceptions of life insurance buyers towards awareness about product innovations in life insurance;

To measure the significant perceptions of life insurance buyers towards awareness about product innovations in life insurance on the basis of demographic variables;

To measure the significant perceptions of life insurance buyers towards awareness about product innovations in life insurance on the basis of economic variables;

To offer suggestions based on the findings.

5. MAIN HYPOTHESIS OF THE STUDY

The following is the main hypothesis for the present research study:

H0: Majority of the life insurance buyers are not aware of product innovations in life insurance

H1: Majority of the life insurance buyers are aware of product innovations in life insurance

5.1: SUB HYPOTHESES:

H0: There is no significant difference among life insurance buyers in their awareness towards product innovations in life insurance on the basis of demographic variables.

H1: There is significant difference among life insurance buyers in their awareness towards product innovations in life insurance on the basis of demographic variables.

H0: There is no significant difference among life insurance buyers in their awareness towards product innovations in life insurance on the basis of economic variables.

H1: There is significant difference among life insurance buyers in their awareness towards product innovations in life insurance on the basis of economic variables.

6: SCOPE OF THE STUDY

The study attempts to analyze the Indian insurance buyers' perception towards product innovations in life insurance after India embarked on the journey of deregulation of life insurance industry since 2001. Variables such as age, gender, occupation, income, marital status, number of dependents, qualification, location etc., have been analyzed thoroughly in this study. The present study covers the insurance buyers of 5 major areas in Karnataka viz., Bangalore, Mysore, Mangalore-Udupi, Hubli-Dharwar and Shimoga.

7: METHODOLOGY OF THE STUDY

A combination of exploratory and descriptive research design is used for conducting this study. This study required primary data. Primary data on perceptions of the insurance buyers was collected through a structured questionnaire. It was administered to the targeted respondents in selected places in Karnataka. The population of the study consists of all current insurance buyers of life insurance in Karnataka. To investigate the significant perceptions of insurance buyers, respondents have been selected on convenience sampling basis which is a non-probability sampling technique. 500 questionnaires were administered but 394 respondents responded. These variables are measured using 5 point Likert scale with responses ranging from "Strongly Agree"=1, "Agree" = 2, "Cannot Say" = 3, "Disagree" =4 and "Strongly Disagree" =5. For data analysis, mean and standard deviation are used for descriptive statistics. Cronbach's alpha (Table-1) is used for determining the predictive validity and reliability of the variables used in the study. The hypotheses are tested using One Sample T-test, ANOVA, Levene's Test for equality of variances, Tukey-HSD Multiple post hoc test. The data collected from respondents is analyzed with the help of SPSS.

8: DATA ANALYSIS:

Indian life insurance market thus traveled from loosely regulated non-standardized product based market to a well-regulated competitive market with virtually standardized life insurance products. This part of the study attempts to understand the significant perceptions of life insurance buyers with respect to life insurance after deregulation of insurance sector, through various statistical analyses.

Table-2 reveals that the mean scores for the statements range between 2.558 to 3.0685. And the aggregate standard deviation for all the statements being less than 1 indicates that though there is consistency in the opinions, there are significant differences among the insurance buyers in their awareness about product innovations in life insurance since deregulation.

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Of all the statements, 'The range of life insurance products confuses me' has the least mean score 2.558 indicating that respondents are confused with the range. Their awareness that they are allowed to withdraw their policies after three years is second with a mean score of 2.7411. They disagree to the fact their existing policy's sum assured can be enhanced or reduced according variations in my income since the mean is 3.0685. Awareness about riders or customized solutions is also minimum with a mean score of 2.9492. Their awareness about Unit linked Insurance Policies is also relatively low. This shows a mixed response towards awareness about product innovations in life insurance since deregulation. Even though the respondents do have basic awareness about product innovations, it appears that they do not know the details of such innovative products.

8.1 TESTING OF MAIN HYPOTHESIS:

To test the hypothesis that whether Majority of the life insurance buyers are aware of product innovations in life insurance or not, one sample T test was conducted with assumed mean 3. The calculated mean value of 'awareness about product innovations in life insurance' is less than the assumed mean 3 i.e., 2.814 and the observed P value 0.000 is less than 0.05. This result indicates that the null hypothesis 'Majority of the life insurance buyers are not aware of product innovations in life insurance' is rejected and the alternative hypothesis 'Majority of the life insurance buyers are aware of product innovations in life insurance' is accepted.

8.2 TESTING OF SUB-HYPOTHESES:

Further, the above statements are tested on the basis of various demographic variables such as age, gender, qualification, occupation, marital status, number of dependents, location and economic variables such as monthly income and savings to analyze the variances among these variables with respect to the statements using ANOVA, Levene's Test for Equality of Variance and multiple HSD post hoc tests.

After analyzing the results of ANOVA (Table-4) and Levene's Test for Equality of Variance (Table-6) it is found that there is a significant difference in the opinions of life insurance buyers on the basis demographic variables such as age, gender, marital status, number of dependents, educational qualification, occupation and location with respect to their perception towards life insurance post deregulation since the observed p value (0.000) is less than 0.05 on all demographic variables. Thus, the decision is to reject the null hypothesis: "There is no significant difference among life insurance buyers in their awareness towards product innovations in life insurance on the basis of demographic variables in post deregulation" and accept the alternative hypothesis "There is significant difference among life insurance buyers in their awareness towards product innovations in life insurance on the basis of demographic variables in post deregulation".

After analyzing the results of ANOVA (Table-7) it is found that there is a significant difference in the opinions of life insurance buyers on the basis of economic variables such as monthly income and monthly savings with respect to their perception towards life insurance post deregulation since the observed p value (0.000) is less than 0.05 on all economic variables. Thus, the decision is to reject the null hypothesis: "There is no significant difference among life insurance buyers in their awareness towards product innovations in life insurance on the basis of economic variables in post deregulation" and accept the alternative hypothesis "There is significant difference among life insurance buyers in their awareness towards product innovations in life insurance on the basis of economic variables in post deregulation.

9: SUMMARY OF FINDINGS:

9.1: Overall Findings

The Table (4.81) shows that of the respondents agree for the statement that the range of life insurance products confuses me' has the least mean score 2.558 indicating that respondents are confused with the range. Their awareness that they are allowed to withdraw their policies after three years is second with a mean score of 2.7411. They disagree to the fact their existing policy's sum assured can be enhanced or reduced according variations in my income since the mean is 3.0685. Awareness about riders or customized solutions is also less with a mean score of 2.9492. Their awareness about Unit linked Insurance Policies is also relatively low. This shows a mixed response towards awareness about product innovations in life insurance since deregulation. Even though the respondents do have basic awareness about product innovations, it appears that they do not know the details of such innovative products.

9.2: FINDINGS BY DEMOGRAPHIC AND ECONOMIC VARIABLES:

a) Age:

After analyzing the results of ANOVA (Table 4.83) , it is found that there is a significant difference in the awareness towards product innovations in life insurance buyers in the age group of 18-30, 31-45, 46-60 and 61 and above as the observed significance value is less than 0.05.

The results of Tukey-HSD Multiple Comparisons (Table 4.84) indicate that there is no significant difference between the perception of insurance buyers in the age group 18-30 and 46-60 (0.351>0.05), with age group 18-30 and +61 (0.914>0.05), with age group 31-45 and 46-60 (0.110>0.05), with age group 46-60 and +61 (0.219>0.05).

It can be concluded from the above analysis that age groups 18-30 and 46-60 share the same opinions in the sense that they are not aware of product innovations but respondents belonging to 31-45 and a portion of 46-60 are aware of product innovations.

b) Gender:

The results from independent samples t-test (Table 4.86) indicate that the observed P value is less than set P value of 0.05, and therefore, it can be inferred that there is a highly significant difference between the awareness towards product innovations in life insurance.

The mean scores and standard deviation (Table 4.85) for male respondents are 2.8181 and 0.8874 respectively whereas for female respondents the mean and the standard deviation are 2.8069 and 0.5913 respectively.

This suggests that both male and female respondents are moderately aware of the product innovations that have taken place in the life insurance industry since deregulation. But female respondents are relatively more consistent with their opinions compared to male respondents.

c) Qualification:

As revealed in the ANOVA table (4.87), the F value and P value are 16.033 and 0.000(P<0.05) respectively. The results indicate that there is a significant difference in the life insurance buyers in their awareness towards product innovations in life insurance based on their qualifications like matriculation, graduation, post graduation and others.

The Tukey HSD test results (Table 4.88) indicate that there is no significant difference between the awareness of insurance buyers whose qualification is matriculation and others (0.858>0.05), and also graduates and matriculation share same perceptions (0.084>0.05).

As far as qualification are concerned, respondents belonging to matriculation, graduation and others are not aware of the product innovations, whereas only post graduates differ in their opinions with other groups indicating that they are mostly aware of the product innovations that exist in life insurance industry now.

d) Occupation:

The results of ANOVA (Table 4.89) indicate that there is a significant difference in the life insurance buyers in their awareness towards product innovations in life insurance in various occupations.

The Tukey HSD test results (Table 4.90) indicate that there is no significant difference between the perception of insurance buyers in the occupations government service and professionals (0.839>0.05) and with retired (0.147>0.05), businessmen share same perceptions with private services (0.158>0.05) and with students (0.279>0.05); private sector share the same perception with retired (0.813>0.05), with students (1.000>0.05) and students fall in line with retired (0.769>0.05).

As per the above analysis, respondents belonging to government service, professionals and retirees are more aware of product innovations whereas businessmen, private service and students are less aware of product innovations as the opinions of these two groups go together.

e) Marital Status:

The results from independent samples t-test (Table 4.92) indicate that the observed P value is less than set P value of 0.05, and therefore, it can be inferred that there is a highly significant difference between the perception of single and married respondents with respect awareness about product innovations in life insurance.

The mean scores and standard deviation (Table 4.91) for single respondents are 2.7274 and 0.75932 respectively whereas for married respondents the mean and the standard deviation are 2.8519 and 0.80235 respectively. This show the single respondents are relatively more aware of product innovations than married respondents and also single respondents are relatively more consistent with their opinions compared to married respondents.

f) Number of Dependents:

From the results of ANOVA (Table 4.93), it is found that there is a significant difference in the life insurance buyers in their awareness towards product innovations in life insurance based on the number of dependents ranging from nil, one, two, three and four and above like as the observed significance value is less than 0.05.

The Tukey HSD test (Table 4.94) results indicate that there is no significant difference between the awareness of insurance buyers with nil dependents and buyers with one dependent (0.175>0.05), with two dependents (0.111>0.05); one dependent with two dependents (0.940>0.05), and three dependents with four and above (0.921>0.05).

The above result illustrates the fact that respondents with no dependents, with one and two dependents polarize their views together whereas respondents with three and four and above perceive alike. It is evident that life insurance buyers with fewer dependents are marginally more aware about product innovations in life insurance than those buyers with three and more than three dependents.

g) Location:

The results of ANOVA (Table 4.95) indicate that there is a significant difference in the life insurance buyers in their awareness towards product innovations in life insurance based on location which is categorized as urban, semi-urban & rural as the observed significance value is less than 0.05.

The Tukey HSD test (Table 4.96) results indicate that there is no significant difference between the awareness of insurance buyers from urban area and buyers from the semi-urban area (0.223>0.05), insurance buyers from urban area and buyers from the rural area (0.844>0.05), insurance buyers from semi-urban area and buyers from the rural area (0.114>0.05)

From the above table results, it can be inferred that though significant differences exist among the urban, semi-urban and rural respondents, there appears a commonality among these groups with respect to awareness about product innovations in life insurance since the P value between the three possible combinations of location is more than 0.05.

h) Household monthly income:

On the basis of the results of ANOVA (Table 4.97), indicate that there is a significant difference in the life insurance buyers in their awareness towards product innovations in life insurance based on monthly income.

The Tukey HSD test (Table 4.98) results indicate that there is no significant difference between the perception of insurance buyers in the monthly income group of Rs. 10000-30000 & Rs. 30000-50000 (0.435>0.05).

It is can interpreted from the above analysis that awareness about product innovations in life insurance have been able to appeal to income group with a monthly income of Rs. 10000-30000 & Rs. 30000-50000. All other groups of income category are more consistent in their opinion with respect to the awareness about product innovations in life insurance.

i) Household monthly savings:

As shown in the ANOVA table (4.99), there is a significant difference in the life insurance buyers in their awareness towards product innovations in life insurance based on monthly savings.

The Tukey HSD test (Table 4.100) results indicate that there is no significant difference between the perceptions of insurance buyers in the monthly saving group of Rs.1000-3000 & Rs. 3000-5000 (0.141>0.05), with Rs. 5000-10000 (0.671>0.05), with Rs. 10000 and above (0.943>0.05), group with Rs. 3000-5000 & Rs. 5000-10000 (0.994>0.05), with Rs. 10000 and above (0.750>0.05), group with Rs. 5000-10000 & Rs. 10000 and above (0.986>0.05).

The five levels of savings groups actually integrates into two levels of savings with similar opinions, one with monthly savings less than Rs.1,000 are not aware about product innovations in life insurance and the other with monthly savings more than Rs.1,000 are aware about the product innovations in life insurance.

10: CONCLUSION AND SUGGESTIONS:

10.1 Conclusion:

The impetus which is required for the stagnant Indian insurance carriers is already in place now. Indian life insurance market is moving much faster than any other life insurance market in the world which means more and more Indians have now access to insurance products through different distribution channels. Having a large number of products is not an end in itself; product diversification should be the ultimate value addition to the Indian customers in terms the three pillars of product innovation, namely, flexibility, transparency and liquidity.

10.2 Suggestions:

This study reveals that the majority of insurance buyers, particularly young affluent buyers are not aware of the product innovations and benefits of the products are not well informed to them. Now the onus is on the insurers to see that the innovative insurance products are sold by making them understand the schemes, benefits clearly and precisely by insurance advisors.

As per the analysis conducted in this study, the contours and nuances of life insurance is not effective placed across rural buyers and buyers with qualification below post graduation. Hence measures should be taken to fill this lacuna by taking up promotional campaigns at the rural and semi urban levels so that the awareness can be enhanced about product innovations in life insurance.

The customized solutions through riders eliminate the necessity of having multiple policies for different needs. As per the results of this study, this concept is not known to majority of insurance buyers cutting across education, location, profession and age. Hence, it is high time that all life insurers in India need to promote need based customized solutions to the largely uninformed Indian insurance buyers.

Life insurance companies have to create awareness into other income group category in order to improve their business in the life insurance market in India since India has the largest middle class population.

The product innovations have brought in flexibility in terms of withdrawal of returns before maturity, or enhancing and reducing the policy premium depending upon variations in income which avoids policy lapsations; thus buyers get tangible returns at various points of policy being active, instead of getting benefits only at the end. These benefits should be effectively presented across the insurance buyers by all life insurers.

Meeting needs of customer and struggle for existence alone cannot equip insurer to design new products. The much required 'data', tackling the organizational resistance for change and innovation; the ever advancing technology; and global insurance trends and practices all have their role in catalyzing the insurer to get ready for the new challenges. Indian insurers have to look globally and act locally. Insurers who welcome change and possess agility can only survive in the present as well in the future market.