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A study on Consumers Behavioural Attitudes towards Life Insurance Products A Case Study of Guntur Dist.

Seminar Paper submitted in partial fulfilment of requirement for Pre-Ph.D. of

DOCTOR OF PHILOSOPHY In the Department of Commerce &Business Administration Acharya Nagarjuna University, By

Prasadarao Yenugula Regd.No: Y14COMR110

Research Supervisor

Dr. T. Sreekrishna, M.B.A., Ph.D., Acharya Nagarjuna University

Department of Commerce and Business Administration ACHARYANAGARJUNAUNIVERSITY NAGARJUNA NAGAR, GUNTUR - Dt. ANDHRA PRADESH February 2015 0

A Study on Consumers Behavioural Attitudes towards Life Insurance Product A Case Study Of Guntur Dist. Abstract The   present   research   is   an   attempt   to   illustrate   the   attitudes   of   Guntur consumers   towards  the   Life  Insurance   services.   The  study  has  to  be   done   by collecting the responses of consumers through structured questionnaire on five point Likert scale. A meaningful total of responses has to be collected to assess the level of awareness about the insurance services and their attitude towards insurance services. Research basis is to find the socio demographic and economic variables   that   have   significant   impact   on   consumers’   attitudes   towards insurance services. 

Keywords: Consumers, attitude, demography, insurance services, marketing  activities

1. INTRODUCTION Attitudes are generally considered as judgments and these are results of either direct experience of the social environment or through observations. So attitude can be considered as a hypothetical construct, which represents degree of liking or disliking of an individual towards a particular object. Winning and losing are two opposite  sides  of  a   same  coin  and  that  coin  is  attitude.  Attitude is composed of beliefs about the consequences of performing the behaviour and an evaluation of how the consumer will feel about those consequences.  Attitude may be defined as an enduring organization of motivational, emotional, perceptual, and cognitive process with respect to some aspect of our environment (Best et.al, 2003). Whereas in the context of consumer behaviour, attitude is a learned   predisposition  to   behave   in   a   consistently   favourable   or   unfavourable way   with   respect   to   a   given   object   (Kanuk   and   Schiffman,   2000).   As   learned predispositions, attitudes have a motivational quality; that is they might propel 1

a consumer toward a particular behaviour or repel the consumer away from a particular behaviour. Various attributes and benefits of the product brands affect the attitudes of the consumers towards these product brands. On this basis it can be argued that what are the benefits, which can be perceived by the consumers from the insurance services for themselves, and also they can enquire about the way to get those benefits from insurance services. These types of queries want attention   as   consumers   are   very   less   aware   about   the   benefits   of   insurance services in their lives. Reason for this type of problem may be poor information provided by the insurance companies. The problem occurs when the consumers face authentication about quality of the insurance services. Therefore it is very well understood that those consumers who do not have knowledge of these types of insurance services will fall into troubles in the course of evaluation of relative offerings by different competitive insurance companies. Various demographical factors   play   vital   role   in   the   development   of   relationships   among   different insurance   service   providers   and   consumers.   Consumers   come   from   different cultural backgrounds. They may have different needs and demands according to their   social   and   cultural   life.   As   India   is   a   vast   diverse   country   in   terms   of cultural and other aspects, so various insurance service providers need different strategies  to cater  the needs  of different   consumers  in  the insurance  market. Insurance penetration in developing country like India, where social and cultural diversity exists varies from rural to urban areas. In case of poor people who are living below poverty line, there insurance penetration is supposed to be low. The foregoing therefore suggests that there will be difference between the common behaviour   response   to   insurance   services   and   strategies   and   what   obtains   in Indian   business   environment.   So,   by   taking   into   consideration   basic demographical   variables,   the   present   study   will   investigate   the   consumers’ behavioural attitudes towards Life Insurance Services. 2. STATEMENT OF THE PROBLEM The study of consumer’s behavioural attitude towards a professional service like life insurance in the post liberalization period is considered to be one of the most 2

challenging problems in the insurance sector. The main problem of the study is to examine the factors that influences consumer’s attitude  To solve this problem, it is imperative for the insurance companies to keep a track of the customers through continuous feedback mechanism to understand customers’ changing expectations to develop strategies for the future.   Hence, this study is undertaken to examine how the differential patterns of behavioural attitude of consumers influence the marketing of insurance services 3. NEED FOR THE STUDY   In the current scenario with the liberalization of the life insurance industry the customer  will   be  the  single   most   important  factor  driving   changes   in  the life insurance business.  Fuelled by competition, increased awareness will bring the customers on to centre stage.  For insurers, therefore, the critical success factor would   be   managing   the   customer.     In   the   Indian   context,   with   the   onset   of financial deregulation, monoliths of the insurance industry are changing.   It is witnessing   a   redefining  of  its   role  by  exhibiting  a   paradigm   shift  from   brick­ mortar strategy to click­and­mortar strategy. Thus, an insurance company’s ability to attract and retain the customers is a function of not only what it offers but also how it serves its existing customers. A large number of studies have been carried out in US and other Western countries to identify the important factors that guide the consumers while selecting life insurance products.   While most seek a combination of financial protection as well   as   investment   needs   to   achieve   long­term   goals   like   child’s   education, buying a house etc., the need for buying an insurance not only differs among individuals,  but   also varies  with  the person’s   age. The  insurance  needs  of  an unmarried   working   executive   when   he   is   in   his   early   days   of   employment   is different from his needs when he is middle aged and married with children.  It is thus important that the individual evaluates his insurance need, considering his age, following which he can arrive at a suitable protection and investment mix and tenure. Life insurance companies have to understand the requirements of 3

the customers.  For this purpose lots of surveys and studies have to be conducted periodically   to   explore   and   identify   their   expectations   in   the   existing environment. 4. OBJECTIVES OF THE STUDY Main   objective   of   the   present   study   is   to   probe   into   the   attitudes   of   Indian consumers   towards   insurance   services   by   using   basic   socio   demographic   and economic variables 1. To observe the current scenario of the Life insurance Industry in India.  2. To identify and compare the attributes relating to customer preference and their influence on the purchase of Life insurance products.

5. HYPOTHESES  For the present research work nine hypotheses have been developed: i.

There   is   no   effect   of   age   on   consumers’   behavioural   attitude   towards

ii.

insurance services There is no effect of gender on consumers’ behavioural attitude towards

iii.

insurance services There   is   no   effect   of  marital   status   on   consumers’   behavioural   attitude

iv.

towards insurance services There is no effect of level of education on consumers’ behavioural attitude

v.

towards insurance services There   is   no   effect   of   mode   of   employment   on   consumers’   behavioural

vi.

attitude towards insurance services There   is   no  effect   of  professional   inclination  on   consumers’  behavioural

vii.

attitude towards insurance services There is no effect of level of household income on consumers’ behavioural

viii.

attitude towards insurance services There   is   no   effect   of   mortgage   property   ownership   on   consumers’ behavioural attitude  towards  insurance services

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ix.

There is no effect of owning insurance policies on consumers’ behavioural attitude towards insurance services.

6. REVIEW OF LITERATURE Quality of life  consists  of various  factors including  health, community life, gender   equality,   political   freedom,   political   stability  and   security,   material wellbeing, family life, and job security. In addition to it, insurance against illness or death is also considered as indicator for quality of life in developing countries. Being an indicator of quality of life, insurance has significance in human   life.   The   literature   of   attitude   and   perception   of   life   insurance policyholders   have   largely   focused   on   factors   predicting   these   attitudes (Skinner   and Dubinsky,  1984;   Kruse  and  Ozdemir,   2004).  Factors   such  as consumers’ perceived value (Smith, 2006) satisfaction (Kuhlemeyer and Allen, 1999) and purchase decision­making responsibility (Barron and Staten, 1995) have been considered as most important them of the literature on attitude and perception of life insurance policyholders. For example, in a survey of 1,462 families, Skinner and Dubinsky found out that employment status of the wife and education of the husband discriminate mostly between which family   member(s)   is   responsible   for   insurance   purchasing   decision.   Other significant variables include wife‘s educational level, husband‘s employment status, family income, and husband‘s occupation. Kruse and Ozdemir (2004) explore   the   relationship   between   individual‘s   risk   perceptions   and   their willingness­to­pay for increased safety in a low­probability, high­consequence event.

A study conducted by Patil  (2003) revealed that the insurance  coverage  of agricultural groups and agricultural labour is very low. The performance of children­related policies such as Jeevan Kishore, Jeevan Balya, etc., is very 5

poor   except   the   children   money   back   policy,   which   has   also   not   been contributing   significantly.   The   demonstration   of   product   features   by   the agents   is   not   satisfactory.   Raman   and   Gayatri   (2004)   have   observed   the customers’   awareness   towards   new   insurance   companies.   They   found   that 53% of the respondents belong to the age group below 30, 24% to the age group   31­40,   2%   belong   to   the   age   group   of   41­50   and   the   rest   of   the respondents belong to the group of ‘above 50’. They also observed that a large percentage of the insured respondents (32%) are professional, and 56% of the respondents are married. It is also found that 52% of the respondents have taken a policy to cover risk and 44% of them to avoid tax and the remaining to invest their surplus amount.

In the areas of marketing research, customer satisfaction has been considered as   one   of   the   most   discussed   subject   in   past   times,   as   for   the   service providers, measuring customer satisfaction is of utmost requirement.  

Mushtaq   (2005)   concluded   in   their   empirical   study   that   Indian   banks   fall much below the perceptions of their customers on all the five dimensions of service quality, where as in case of foreign banks, these banks are exceeding the   perceptions   of   their   customers   on   two   dimensions   of   service   quality namely;   tangibility   and   reliability.   This   finding   revealed   the   notion   that Indian banks in terms of service quality do not meet the expectations of their customers.   In   case   of   foreign   banks   perceptions   and   expectations   of   the customers about service quality offered by the banks do not have a big gap. 

Najjar and Ram (2006) study on the US banking sector using a non­difference score  of  SERVQUAL  scale  focused on   the importance  of  improving   service quality in the banking sector. The study used statistical tools like ANOVA, Factor Analysis, and Regression to analyse the data. The final results of the service quality analysis showed that reliability and responsiveness were the 6

two most critical dimensions of service quality and they are directly related to overall service quality. The findings of the study substantiated the findings of Berry et al. where reliability and responsiveness were shown to be important factors of service quality.  

It has been proved in marketing literature that retention of customers is less costly as compared to acquisition of new customers. Keeping this fact in mind various organizations focus on relationship marketing. Customer relationship management   has   come  out   as   one  of  major  strategies   of companies   in  the modern context of business. Now companies are focusing on framing customer specific strategies so that all the customers of the company should be served effectively and efficiently according to their needs and demands. 7. SCOPE OF THE STUDY The   study   focuses   on   the   consumer   behaviour   relating   to   the   areas   of customer preference, loyalty, purchase decision and complaining behaviour of customers in the purchase of life insurance products. In the current scenario the life insurance business has become liberalized and competitive. It is found that   exploring   the   behaviour   of   the   customers   will   give   an   insight   to   life insurance companies to maximize their customers.   8. RESEARCH METHODOLOGY Pilot Study The pilot study has to conduct to check the reliability and feasibility of the questions as well as the statements included in the questionnaire.   The   Cronbach’s   Alpha   method   (co­efficient   of   Reliability)   and   Hoteling’s   t 2 test are to be used to check the normality as well as the reliability of the statements in Likert’s Five Point Scale. Main Study

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This study is based on both primary data as well as secondary data.   The primary data is collected from the consumers of life insurance through a well  Framed questionnaire.  The questions are to be constructed in optional type as   well   as   in   Likert’s   Five   Point   Scale.     The   optional   type   is   aimed   at ascertaining Demographic details of the customers.  The Likert’s Five Point Scale is applied to seek the opinion of the customers  Regarding expectations, perceptions.   Besides these, the customer’s opinion on   the   level   of   agreement   on   different   characteristic   features,   purchase decision and emotional factors affecting purchase of life insurance policies, are also obtained.  

Scaling Techniques The Likert’s Five Point Scale is a unique technique exploited in the study in the   various   context,   based   on   the   measures   of   opinion.     In   ascertaining expectations and perceptions, the Five Point Scale is allowed to range over Very Low to Very High with mediocre value representing medium expectation or perception.  On other parts of the questionnaire the Five Point Scale works out   to  express   the   opinion   of   customers   from   Strong   Agreement   to   Strong Disagreement.  The middle value 3 represents neutral opinion of customers of life insurance policies.  Explicitly, the two different Likert’s Five Point Scales are expressed below:         5          VERY HIGH           4           HIGH            3           MEDIUM          2           LOW           1          VERY LOW 

 5         STRONGLY AGREE  4        AGREE  3         NEUTRAL  2         DISAGREE   1         STRONGLY DISAGREE.

Data Collection The   primary   data   is   collected   from   the   policy   holders   of   the   selected companies.   The   secondary   data   is   collected   from   reports,   journals, newspapers, magazines and websites.   The primary data is collected through the questionnaire with suitable scales as mentioned above from the customers of life insurance policies in Guntur. Sample Size. 8

Since the population is unknown, a Simple Random Sampling procedure is to be   adopted   to   obtain   better   statistical   results   to   reflect   the   characteristic features of the population.  Data Analysis. The primary data collected in the form of responses from the customers are systematically analysed by identifying the independent as well as dependent variables. All the responses of the customers obtained through Likert’s Five Point Scale forms   the   domain   of   dependent   variables   and   the   questions   about   life insurance   policies,   information   search   and   demographic   background   are taken   up   as   independent   variables.     Based   on   these   two   categories   of variables, the following statistical tools are to be applied to obtain the results desired in the objectives of the study. Statistical Tools Used a. One   sample   t­test   is   used   to   ascertain   the   nature   of   opinion   of respondents regarding the various consumer behavioural aspects of life insurance policies.  b. Factor   analysis   is   exploited   to   identify   the   predominant   factors   of customer’s expectations, perceptions, and characteristic features of the product and purchase decision. c. One­way   analysis   of   variance   is   used   to   know   the   influence   of independent variables on the various factors of dependent variables. d. Discriminant   analysis,   Multiple   Regression   are   sequentially   used   to identify   a   correlation   between   clusters   and   factors   of   consumer behaviour regarding life insurance policies.  9. LIMITATIONS OF THE STUDY The study suffers from certain limitations  1. The data for the purpose of the study is collected from respondents in Guntur only. 2. The   study   concentrates   only   on   certain   factors   relating   to   customer purchase behaviour. There may be other influencing factors too, which have not been considered due to time and data constraints.  9

3. The primary data for the study is collected through questionnaires and the   results   of   the   study   may   suffer   from   the   inherent   drawbacks   of such instrument. 4. The study compares the perceptions and expectations of the customers of the life insurance service.  Perceptions are subjective in nature and are likely to change with the changing times and market conditions. This study cannot be generalized for the customers of life insurance products in the whole of India. The results obtained in this study or suggestions offered are based on the study conducted on the consumers in a small geographical base viz., the Guntur District.

REFERENCES Cronbach, L.J. (1951). Coefficient  Alpha  and Internal Consistency of tests. Psychometrika. 16, pp. 297­334. Kuhlemeyer, G.A. and Allen, G.H. (1999). Consumer Satisfaction with Life Insurance:   A   Benchmarking     Survey,   Financial   Counseling   and   Planning, 10(2), pp. 35­44. Mushtaq, A.B. (2005). Service Quality Perceptions in Banks: A comparative analysis. Journal of Business Perspective, 9(1), pp. 11­20. Najjar, L. and Ram, R.B. (2006). Service Quality: A Case Study of a Bank. The Quality Management Journal, 5(3), pp. 35­44. Patil, K.S. (2003). Life Insurance Corporation of India, Its Products and Their Performance Evaluation: A Special Reference to Gulbarga District, Finance India, (17) 3, pp. 1037­1040. Skinner, S.J. and Dubinsky, A.J. (1984). Purchasing Insurance: Predictors of Family Decision­Making Responsibility, Journal of Risk and Insurance, 51(3), pp. 513­523.

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Smith, S. (2006). Persistency in Pension Contributions in the UK: Evidence from   Aggregate   and   Micro­Data   Retrieved   February   24,   2007,   from http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp139.pdf.

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