Customer retention and expansion strategy for bharti axa life insurance company

A RESEARCH REPORT ON

CUSTOMER RETENTION AND

EXPANTION STRATEGY OF BHARTI

AXA LIFE INSURANCE COMPANY

LTD

Submitted in partial fulfillment for the award of the degree

Master of Business Administration

SUBMITTED BY:SHAILIKA CHAUHAN

MBA (2008-2010)

INDUSTRY GUIDE FACULTY GUIDEMr. Sachin Shekhar Mrs. Meenakshi Saxena

SHOBHIT UNIVERSITYSCHOOL OF BUSINESS STUDIES

MODIPURAM

DECLARAION

I Shailika Chauhan, a student of MBA , at School of Business studies, Shobhit

university hereby declare that this Project Report under the title “Customer

retention and expansion strategy of Bharti axa life insurance company Ltd.” is

the record of my original work under the guidance of Mrs. Meenakshi Saxena. This

report has never been submitted to anywhere else for award of any degree/diploma.

Place: Meerut SHAILIKA CHAUHAN

Date: MBA (Marketing)

ACKNOWLEDGEMENT

I take this opportunity to thank Mr. Sachin Shekhar, my project guide, who helped, inspired and mentored me and without whose support this project report would not have taken its current shape.

I would like to thank my Project Guide Mrs. Meenakshi Saxena, at SBS, Shobhit University, Meerut who helped me in making this project and for his constant support and inspiration.

Finally I thank all my friends who gave me the important information about the literature related to this project and also helped with websites that provided me with adequate topics.

I once again express my heartfelt indebtness to all-aforesaid. Any omission or error in acknowledgement is inadvertent. For such oversights and lapses, I tender unconditional apology.

SHAILIKA CHAUHAN

TABLE OF CONTENTS SUBJECT PAGE No.

EXECUTIVE SUMMARY-----------------------------------1

CHAPTER 1. INDUSTRY PROFILE---------------------------------------3

1) Background of insurance industry-----------------------4

2) Major players--------------------------------------------------5

3) Principles of insurance---------------------------------------6

CHAPTER 2. COMPANY PROFILE-------------------------------------10

1) AXA Group--------------------------------------------------10

2) Bharti enterprise---------------------------------------------10

3) Bharti AXA life insurance Ltd.-------------------------12

4) Products of Bharti AXA----------------------------------14

5) SWOT analysis----------------------------------------------15

CHAPTER 3. RESEARCH OBJECTIVE--------------------------------17

1) Research methodology-------------------------------------17

2) Research design---------------------------------------------17

3) Data collection----------------------------------------------18

CHAPTER 4. SCOPE OF STUDY---------------------------------------19

1) Limitations----------------------------------------------------19

CHAPTER 5. DATA ANALYSIS & INTERPRETATION------------20

CHAPTER 6. FINDINGS & ANALYSIS---------------------------------28

CHAPTER 7. SUGGESTIONS----------------------------------------------32

CHAPTER 8 . APPENDIX---------------------------------------------------33

1) Annxture------------------------------------------------------34

EXECUTIVE SUMMARY

The service industry is one of the fastest growing sectors in India today. The upcoming

sectors which are really showing the graph towards upwards are - Telecom, Banking,

and Insurance. These sectors really have a lot of responsibility towards the economy.

Amongst the above-mentioned areas insurance is one sector, which took a lot of time

in positioning itself. The insurance business of non-life companies was not much in

problems but the major problem was with life insurance.

The Life Insurance Companies Act 1912 made it necessary that the premium rate

tables and periodical valuations of companies should be certified by an actuary. But

the Act discriminated between foreign and Indian companies on many accounts,

putting the

Indian companies at a disadvantage. The formation of IRDA, entrance of private life

insurance companies into India with one foreign partner, compulsory training of

Insurance agents etc. developments started to take place. And this was the time when

these companies started searching for proper channel partners who can help the

organization in expanding its network and business in India.

This study is carried out to understand the behavioral dynamics of consumers and to

develop rapid stage segmentation strategies for customer retention and expansion

An exploratory research was carried out through questionnaire for which a stratified

sampling technique was adopted and a sample size of 80 individuals was taken. A

questionnaire was drafted to analyze the dependence of type of insurance policy

required, on the life cycle stage of the individual. It will also clearly show the

customers perception towards insurance compared with the other investment options

and financial instruments, and as to how we can make it better.

Both qualitative and quantitative techniques were applied but this study heavily relied

on qualitative technique and it was proven that the life cycle stage of an individual is

an important determinant for deciding the type insurance policy required by the

individual.

After the completion of the study the recommendations are 1) Life time customer

strategy, 2) Introduce innovative policies, 3) Increase dependent features in policy,

4) Maintain a database of customers, which has been more clearly explained in the

later stage of the report.

The implication of this research study for Bharti Axa can be developing customer

retention and expansion strategies by creating a bouquet of offerings to meet and

surpass expectations and add value in the business system and recrafting the offerings

at various points in the product life cycle to provide a total brand value experience.

CHAPTER 1

INSURANCE INDUSTRY

Insurance, in law and economics, is a form of risk management primarily used to

hedge against the risk of a contingent loss. Insurance is defined as the equitable

transfer of the risk of a loss, from one entity to another, in exchange for a premium,

and can be thought of as a guaranteed and known small loss to prevent a large,

possibly devastating loss. An insurer is a company selling the insurance; an insured or

policyholder is the person or entity buying the insurance. The insurance rate is a factor

used to determine the amount to be charged for a certain amount of insurance

coverage, called the premium. Risk management, the practice of appraising and

controlling risk, has evolved as a discrete field of study and practice.

The Insurance Regulatory and Development Authority (IRDA)

The Insurance Act, 1938 had provided for setting up of the Controller of Insurance to

act as a strong and powerful supervisory and regulatory authority for insurance. Post

nationalization, the role of Controller of Insurance diminished considerably in

significance since the Government owned the insurance companies.

But the scenario changed with the private and foreign companies foraying in to the

insurance sector. This necessitated the need for a strong, independent and autonomous

Insurance Regulatory Authority was felt. The Insurance Regulatory and Development

Authority Act, 1999 is an act to provide for the establishment of an Authority to

protect the interests of holders of insurance policies, to regulate, promote and ensure

orderly growth of the insurance industry and for matters connected therewith or

incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance

Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972

to end the monopoly of the Life Insurance Corporation of India (for life insurance

business) and General Insurance Corporation and its subsidiaries The act extends to

the whole of India and will come into force on such date as the Central Government

may, by notification in the Official Gazette specify. Different dates may be appointed

for different provisions of this Act. 

BACKGROUND OF INSURANCE INDUSTRY

Insurance in India has its history dating back till 1818, when Oriental Life Insurance

Company started was started by Europeans in Kolkata to cater to the needs of

European community. Pre-independent era in India saw discrimination among the life

of foreigners and Indians with higher premiums being charged for the latter. It was

only in the year 1870, Bombay Mutual Life Assurance Society, the first Indian

insurance company covered Indian lives at normal rates.

At the dawn of the twentieth century, insurance companies started mushrooming up. In

the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were

passed to regulate the insurance business. The Life Insurance Companies Act, 1912

made it necessary that the premium rate tables and periodical valuations of companies

should be certified by an actuary. However, the disparage still existed as

discrimination between Indian and foreign companies.

Life Insurance Corporation Act, 1956

Even though the first legislation was enacted in 1938, it was only in 19th of January,

1956, that life insurance in India was completely nationalized, through the Life

Insurance Corporation Act, 1956. There were 245 insurance companies of both Indian

and foreign origin in 1956. Nationalization was accomplished by the govt. acquisition

of the management of the companies. The Life Insurance Corporation of India

was created on 1st September, 1956, as a result and has grown to be the largest

insurance company in India as of 2006.

General Insurance Business (Nationalization) Act, 1972

The General Insurance Business (Nationalization) Act, 1972 was enacted to

nationalize the 100 odd general insurance companies and subsequently merging them

into four companies. All the companies were amalgamated into National Insurance,

New India Assurance, Oriental Insurance, and United India Insurance which were

headquartered in each of the four metropolitan cities.

Insurance Regulatory and Development Authority (IRDA) Act, 1999

Till 1999, there were not any private insurance companies in Indian insurance sector.

The Govt. of India then introduced the Insurance Regulatory and Development

Authority Act in 1999, thereby de-regulating the insurance sector and allowing private

companies into the insurance. Further, foreign investment was also allowed and

capped at 26% holding in the Indian insurance companies.

Major Players in Indian Insurance

Life Insurance

Public

Life Insurance Corporation of India

Private

HDFC Standard Life Insurance

Max New York Life Insurance

ICICI Prudential Life Insurance

Om Kotak Mahindra Life Insurance

Birla Sun-Life Insurance

TATA AIG Life Insurance

SBI Life Insurance

ING Vysya Life Insurance

Bajaj Allianz Life Insurance

MetLife Insurance

Reliance Life Insurance Company Limited

Bharti AXA

Aviva Life Insurance

Sahara India Insurance

Shriram Life Insurance

NUMBER OF REGISTERED INSURERS IN INDIA

Type of business Public Sector Private Sector

Total

Life Insurance 1 15*

16

General Insurance 6 9

15

Re-insurance 1 0

1

Total 8 24

32

PRINCIPLES OF INSURANCE

A large number of homogeneous exposure units. The vast majority of

insurance policies are provided for individual members of very large classes.

Automobile insurance, for example, covered about 175 million automobiles in the

United States in 2004.[2] The existence of a large number of homogeneous exposure

units allows insurers to benefit from the so-called “law of large numbers,” which in

effect states that as the number of exposure units increases, the actual results are

increasingly likely to become close to expected results. There are exceptions to this

criterion. Lloyd's of London is famous for insuring the life or health of actors,

actresses and sports figures. Satellite Launch insurance covers events that are

infrequent. Large commercial property policies may insure exceptional properties for

which there are no ‘homogeneous’ exposure units. Despite failing on this criterion,

many exposures like these are generally considered to be insurable.

Definite Loss. The event that gives rise to the loss that is subject to the insured, at

least in principle, take place at a known time, in a known place, and from a known

cause. The classic example is death of an insured person on a life insurance policy.

Fire, automobile accidents, and worker injuries may all easily meet this criterion.

Other types of losses may only be definite in theory. Occupational disease, for

instance, may involve prolonged exposure to injurious conditions where no specific

time, place or cause is identifiable. Ideally, the time, place and cause of a loss should

be clear enough that a reasonable person, with sufficient information, could objectively

verify all three elements.

Accidental Loss. The event that constitutes the trigger of a claim should be

fortuitous, or at least outside the control of the beneficiary of the insurance. The loss

should be ‘pure,’ in the sense that it results from an event for which there is only the

opportunity for cost. Events that contain speculative elements, such as ordinary

business risks, are generally not considered insurable.

Large Loss. The size of the loss must be meaningful from the perspective of the

insured. Insurance premiums need to cover both the expected cost of losses, plus the

cost of issuing and administering the policy, adjusting losses, and supplying the capital

needed to reasonably assure that the insurer will be able to pay claims. For small losses

these latter costs may be several times the size of the expected cost of losses. There is

little point in paying such costs unless the protection offered has real value to a buyer.

Affordable Premium. If the likelihood of an insured event is so high, or the cost

of the event so large, that the resulting premium is large relative to the amount of

protection offered, it is not likely that anyone will buy insurance, even if on offer.

Further, as the accounting profession formally recognizes in financial accounting

standards, the premium cannot be so large that there is not a reasonable chance of a

significant loss to the insurer. If there is no such chance of loss, the transaction may

have the form of insurance, but not the substance. (See the U.S. Financial Accounting

Standards Board standard number 113)

Calculable Loss. There are two elements that must be at least estimable, if not

formally calculable: the probability of loss, and the attendant cost. Probability of loss

is generally an empirical exercise, while cost has more to do with the ability of a

reasonable person in possession of a copy of the insurance policy and a proof of loss

associated with a claim presented under that policy to make a reasonably definite and

objective evaluation of the amount of the loss recoverable as a result of the claim.

Limited risk of catastrophically large losses. The essential risk is often

aggregation. If the same event can cause losses to numerous policyholders of the same

insurer, the ability of that insurer to issue policies becomes constrained, not by factors

surrounding the individual characteristics of a given policyholder, but by the factors

surrounding the sum of all policyholders so exposed. Typically, insurers prefer to

limit their exposure to a loss from a single event to some small portion of their capital

base, on the order of 5 percent. Where the loss can be aggregated, or an individual

policy could produce exceptionally large claims, the capital constraint will restrict an

insurer's appetite for additional policyholders. The classic example is earthquake

insurance, where the ability of an underwriter to issue a new policy depends on the

number and size of the policies that it has already underwritten. Wind insurance in

hurricane zones, particularly along coast lines, is another example of this

phenomenon. In extreme cases, the aggregation can affect the entire industry, since

the combined capital of insurers and reinsurers can be small compared to the needs of

potential policyholders in areas exposed to aggregation risk. In commercial fire

insurance it is possible to find single properties whose total exposed value is well in

excess of any individual insurer’s capital constraint. Such properties are generally

shared among several insurers, or are insured by a single insurer who syndicates the

risk into the reinsurance market.

APPRAISAL OF INSURANCE MARKET

The contours of insurance business have been changing across the globe and the

rippling effects of the same can be observed in the domestic markets also. Insurers are

increasingly introducing innovative products to meet the specific needs of the

prospective policyholders. An evolving insurance sector is of vital importance for

economic growth. While encouraging savings habit it also provides a safety net to both

enterprises and individuals. With an average annual growth of 37 per cent in the first

year premium in the life segment and 15.72 per cent growth in the non life segment,

together with the largest number of life insurance policies in force, the potential of the

Indian insurance industry is still large. Life insurance penetration in India was less

than 1 per cent till 1990-91. During the 1990s, it was between 1 and 2 per cent and

from 2001 it was over 2 per cent. In 2005 it had increased to 2.53 per cent. The

impetus for growth has come from both the public and private insurers. In addition, the

insurance companies in general and private insurance companies in particular, are

reaching out to untapped semi-urban and rural areas through advertisement campaigns

and by offering products suitable to meet the specific needs of the people in these

segments. Innovative products, imaginative marketing, and aggressive distribution

have enabled fledgling private insurance companies to sign up Indian customers faster

than anyone expected. While at the time of opening up of the sector, life insurance was

viewed as a tax saving device, policyholders’ perspective is slowly changing and they

are taking insurance cover irrespective of tax incentives. The insurable populace is

looking for avenues which are offering products which suit their specific requirements,

and plenty of choices are available in the market today.

The changes perceived in consumer attitude towards insurance over

the past Two years

Traditionally the sale of insurance had been driven by the imperative to save tax. The

changes in tax deductibility norms in the budget before the last one have helped

reinforce the idea that investing in insurance for tax saving is great, but buying

insurance to fulfill a financial need is even better.

CHAPTER 2

COMPANY PROFILE

The AXA Group

AXA is a world leader in financial protection and wealth management, with major

operations in Western Europe, North America and the Asia/ Pacific area. AXA

services 50 million customers throughout the world. In total the AXA group has

approximately 110,000 employees and distributors, working in around 50 countries.

The AXA group reported total revenue for the first half of 2006 of 41 billion and

underlying earnings of 2,090 million and had 1,091 billion assets under management

as of june 30, 2006. AXA’s ordinary shares are listed and trade under the symbol AXA

on the paris stock exchange. AXA group has a strong, long standing history. The

group can trace its roots right back to the 18 th century. After a successions of mergers,

acquisitions and name changes involving some of the leading insurance companies in

the UK and around the world, the name AXA was first introduced in 1985.

Today, 52 million clients in the world trust AXA and the AXA name. In 2003, to

provide a clearer vision of the transformation of its core business from traditional

insurance to the broader concept of financial protection, the AXA group added the

words financial protection as a base line to its logo.

Bharti Enterprises

Bharti Enterprises is a pioneer in telecom sector and the group is widening its horizons

by entering new business areas such as insurance and retail. Bharti Enterprises has

created a vantage position for itself in the global telecommunications sector. Bharti

Airtel Limited occupies numero uno status in mobile telephony in India while its brand

'Beetel' is the largest manufacturer and exporter of world class telecom terminals.

Founder of Bharti Group is Sunil Mittal. In 1983, Sunil Mittal entered into an

agreement with Germany's Siemens to manufacture the company's push-button

telephone models for the Indian market. In 1986, Sunil Bharti Mittal incorporated

Bharti Telecom Limited (BTL) and his company became the first in India to offer

push-button telephones, establishing the basis of Bharti Enterprises. This first-mover

advantage allowed Sunil Mittal to expand his manufacturing capacity elsewhere in the

telecommunications market. By the early 1990s, Sunil Mittal had also launched the

country's first fax machines and its first cordless telephones. In 1992, Sunil Mittal won

a bid to build a cellular phone network in Delhi. In 1995, Sunil Mittal incorporated the

cellular operations as Bharti Tele-Ventures and launched service in Delhi. In 1996,

cellular service was extended to Himachal Pradesh. In 1999, Bharti Enterprises

acquired control of JT Holdings, and extended cellular operations to Karnataka and

Andhra Pradesh. In 2000, Bharti acquired control of Skycell Communications, in

Chennai. In 2001, the company acquired control of Spice Cell in Calcutta. Bharti

Enterprises went public in 2002, and the company was listed on Mumbai Stock

Exchange and National Stock Exchange of India. In 2003, the cellular phone

operations were rebranded under the single AirTel brand.

COMPANIES OF BHARTI ENTERPRISE

Bharti Airtel: Bharti Airtel is India's leading provider of telecommunications

services. The company has 3 distinct business divisions – Mobile, broadband &

telephone services and enterprice services.

Bharti Teletech Ltd.: Bharti TeleTech manufactures and exports world-class

telecom equipment under the brand Beetel'. It is the only Indian telephone company to

be present in 30 countries mapping 5 continents. The company's product range include

Basic Telephones, Caller ID Phones, Caller ID Boxes, Cordless Phones, 2.4 GHz

Digital Cordless Phones, DECT 1.8 GHz Phones.

Telecom Seychelles Ltd: Telecom Seychelles Ltd provides comprehensive

telecom services including GSM Cellular, PSTN (Fixed Lines), Fax and Data,

International Roaming, connectivity to Internet Services, Maritime Telecom Services

(INMARSAT) and International Collect and Credit Card calling, in Seychelles under

the brand of “ AIRTEL”.

Bharti Telesoft Ltd: Bharti Telesoft Ltd provides value added services and

solutions to wireless and wireline carriers worldwide. Bharti Telesoft Ltd. has

deployed products and solutions in 25 countries to over 100 network, and has a

customer base of 150 million across 5 continents.

TeleTech Services (India) Ltd: TeleTech Services (India) Ltd is a joint venture

between TeleTech Holdings, Inc., world's leading full-service provider of business

process outsourcing and Bharti TeleTech Ltd. The company offers offer the entire

spectrum of front-to-back-office business processes ranging from voice and non-voice

customer support, back office administration (including credit and collections, account

maintenance, application processing, claims processing, asset management, document

management etc.), sales and marketing (including database marketing, marketing

support, web sales).

FieldFresh Foods Pvt Ltd: FieldFresh Foods (P) Ltd is an equal partnership

venture between Bharti Enterprises and ELRo Holdings India Ltd, an investment

company of the Rothschild family. The company provides premium quality fresh

produce to the markets worldwide and promotes world class standards for agricultural

practices, progressive farming techniques & identification and adoption of appropriate

technologies.

Bharti Retail Pvt Ltd: Bharti Retail Pvt Ltd. is a 100% subsidiary of Bharti

Enterprises. Bharti Retail is planning to launch its retail outlets in multiple consumer

friendly formats in several cities across India.

BHARTI AXA LIFE INSURANCE LTD.

Bharti AXA Life Insurance is a joint venture between Bharti, India's leading private

telecom company and AXA, world leader in financial protection and wealth

management. Their philosophy is to build around the promise of making people "Life

Confident"...

Bharti Enterprises and AXA Asia Pacific Holdings Limited (AXA) signed an

agreement to establish a joint venture named Bharti AXA Life Insurance Company

Limited to carry on life insurance business in India.

August 26, 2005, New Delhi : Bharti Enterprises and AXA Asia Pacific Holdings

Limited (AXA) signed an agreement to establish a joint venture named Bharti AXA

Life Insurance Company Limited to carry on life insurance business in India.

Under the agreement AXA has a 26% equity interest in the joint venture, while Bharti

holds the balance. AXA, a global leader in insurance business, enabled the company to

have access to AXA’s global life insurance and asset management expertise. Bharti

brought its strong local market knowledge, reputation and India-wide retail presence.

“The insurance sector in India provides a mega opportunity for private players like

Bharti Axa Despite the strong growth witnessed by the sector in the recent years,

nearly 80% of the Indian population is without life insurance coverage. As one of

India’s leading business conglomerates having an established brand and a significant

presence in the retail space, Bharti has inherent advantages in being a part of this

growth story. In AXA, Bharti has a global leader as its partner, one that is known for

its expertise and best practice across the world. More importantly, this new venture

also fits into our strategy of taking on projects that make a difference to the society at

large.

This joint venture is an opportunity for AXA to enter the Indian life insurance market,

one of the most attractive emerging insurance markets. India is a fast growing

economy and a huge market with more than 1.1 billion people. This coupled with a

large middle class and increasing income levels will drive growth in the insurance

market. Bharti is a well-established and financially strong group whose capabilities

and network will be of significant value to the joint venture.

The joint venture invested in the region of Rs. 500 crores (115 Million USD) over the

first three to four years of operations, reflecting both partners’ commitment to quickly

establish a strong foothold in the Indian market.

The joint venture commenced business in the first half of 2006, subject to IRDA, FIPB

and other statutory approvals.

Vision

To be a leader and the preferred company for financial protection and

wealth management in India

Strategy

To achieve a top 5 market position in India through a multi-distribution, multi-product

platform. To adapt AXA's best practice blueprints as a sound platform for profitable

growth. To leverage Bharti's local knowledge, infrastructure and customer base. To

deliver high levels of shareholder return. To build long term value with our business

partners by enhancing the proposition to their customers. To be the employer of choice

to attract and retain the best talent in India. To be recognized as being close and

qualified by our customers

Strategic differentiators

Strong partner Bharti - provides access to customer base of more than 20 million

Multi channel execution capability

Current Asia product range which is a strong match to products sold to the mass

and mass affluent

Global scale providing cost effective and speedy re-use of systems, products and

business capability

Strong AXA and Bharti brands which can be leveraged to attract and retain a high

quality management team.

PRODUCTS OF BHARTI AXA

SECURE CONFIDENT : It ensures that the dreams you aspired for your family in

your lifetime, don’t remain unfulfilled by the financial void which might get created

due to the unfortunate event of death.

SAVE CONFIDENT: A traditional money back insurance product, offers you a

perfect combination of liquidity, long term saving and life insurance benefit.

FUTURE CONFIDENT: A complete financial solution that helps you to built

wealth for your long term needs, while providing comprehensive financial

protection for your loved ones, against all odds.

FUTURE CONFIDENT II : It serves you in building wealth for your long term

needs, but most importantly, provides the extra financial protection to your loved

ones.

WEALTH CONFIDENT : A unit- linked investment cum protection policy, with

premium payment flexibility, higher allocation of your premium for investment and

unique special additions, which not only makes your money grow but also provides

your investment the special treatment that it deserves.

INVEST CONFIDENT : It not only strives to maximize your investment returns

but also gives you an enhanced flexibility to suit your protection needs.

SWOT ANALYSIS OF BHARTI AXA

Strengths

Use of brand affinity of Airtel to promote insurance sales.

Bharti brought its strong local market knowledge, reputation and India.

Associated with AXA world leader in financial protection and wealth management,

ranked No 13 in the Fortune 500 list of global companies and has enabled the

company to have access to AXA’s global life insurance and asset management

expertise.

Strong partner Bharti - provides access to customer base of more than 20 million

Weakness

Late entrant in the insurance sector

Thin distribution network all over the nation

Very less number of product offering in comparison to its competitors

Lack of confidence among the customers as parent company does not have a

financial background.

Opportunities

Strong growth of unit linked market at the mass affluent end.

Potentially with 20% insurance cross sale only to new telecom customers, this

network can yield 48 lac policies per year with sum assured of nearly Rs 58000

crores.

Threats

Many more companies are lining up to enter into Indian Insurance Industry.

Consumer’s preference is still more towards public sector insurance companies.

CHAPTER 3RESEARCH OBJECTIVE

To understand the behavior dynamics and need state.

To develop value-based offerings and services to re design their own product.

To determine the strategies for customer retention and expansion.

RESEARCH METHODOLOGY

Research methodology is the way to systematically solve the problem. In it we study

the various steps that are generally adopted by a researcher in studying his research

problem along with the logic behind them. Thus, When we talk about research

methodology we not only talk of the research methods but also consider the logic

behind the methods we used in the context of our research study and explain why we

are using a particular method or technique and why we are not using others so that

research results are capable of being evaluated either by the researcher himself or by

others.

Methodology:

An exploratory research was carried out to understand the behavior dynamics and need

states and also understands the messages and experience the consumer is exposed to

both from within the product/service category as well as across categories. Both

qualitative and quantitative techniques are applicable although exploration relies more

heavily qualitative techniques. Correlation is used to find out the relation between

various variables.

RESEARCH DESIGN

Sample size:

As the research is based on study to exhibit relation between life cycle stage of an

individual and the type of insurance policy required at different stages, a stratified

sampling technique was adopted and a sample size of 80 individuals were taken.

The survey has been conducted within the geographic area of Meerut. The time

period for which survey has been undertaken is June- July 2009.

Sampling techniques:

A stratified sampling technique was adopted because of the nature of the study and

for higher statistical efficiency requirement to come to an analysis. The sample was

carefully drafted. A lot of care was taken and 20 samples from each age group were

taken. There are total 80 Questionnaire.

The age groups discussed in the study are 21-30, 31-40, 41-50 and 51-60. The

sample was designed in the above stated manner to make the analysis easier. Open

ended and close ended questions are used in the questionnaire.

DATA COLLECTION

Primary data:

A questionnaire was drafted which included sample rating scales like simple

category scale, multiple- choice single-response scale, multiple- choice multiple-

response scale , multiple- rating list scale, and constant sum scale, and open ended

questions.

The questionnaire contains 12 questions which helps us to analyze the dependence

of type of insurance policy required on the life cycle stage of the individual.

It will also clearly show the customers perception towards insurance compared

with the other investment options and financial instruments, and as to how we can

make it better.

Secondary data:

The secondary data was collected through the web sites of different organizations,

news papers. The secondary data is collected through the Websites related to

insurance sectors, Journals & Books on Research Methodology.

CHAPTER 4

SCOPE OF STUDY

Geographic area: This research has been conducted in Meerut region.

Duration: It took two months to complete.

Characteristics of respondent: People between the age of 21 to 61, both male

and female.

LIMITATIONS

Project was undertaken in the Meerut region only .So it might not be a true

Representation of the views of the insured of other places.

The project is based on survey of population related to Bharti Axa only.

The time factor; I have limited time to conduct our survey and to meet the people

according to the sample size.

All the responses taken are personal opinions & perception of the respondents that

are subjective.

The area covered was too large in a time of 8 weeks.

CHAPTER 5

DATA ANALYSIS & INTERPRETATION

Table-1

Why would you take a life insurance policy

Cover futu

re ca

sh needs

Tax benefit

Investment i

nstrument

Angle of mercy

As a hedge against

old02468

1012141618

21-30

31-40

41-50

51-60

21-30 31-40 41-50 51-60Cover future cash needs 12 17 6 2

Tax benefit 8 12 14 7Investment instrument 3 10 6 3

Angle of mercy 10 15 15 7As a hedge against old 2 5 14 17

Table-2

Need at different stages while taking a policy

21-30 31-40 41-50 51-600

2

4

6

8

10

12

14

16

18

asset building needs

old age need

children need

family need

Table-3

Attitude towards investment instruments at

different life stages

21-30 31-40 41-50 51-60

asset building

needs

4 10 13 7

old age need 2 5 12 17

children need 8 15 7 3

family need 7 16 15 15

Insurance policy Mutual funds Shares0

2

4

6

8

10

12

20-30

30-40

40-50

50-60

21-30 31-40 41-50 51-60

Insurance

policy

2 7 9 7

Mutual

funds

7 6 7 10

Shares 11 7 4 3

Table-4

Numbers of policies hold by different life stages

0 Policies

0-3 Policies

3-5 Policies

5 and above

0 2 4 6 8 10 12 14

51-60

41-50

31-40

21-30

21-30 31-40 41-50 51-60

0 Policies 12 6 2 0

0-3 Policies 5 5 8 2

3-5 Policies 1 3 7 9

5 and

above

2 3 5 10

Table-5

Flexil

ityib

Diversi

fication

Secu

rity

Return

on inve

stment

Requirement o

f funds

Transp

arency

Liquidity

Control o

ver fi

nancia

l futu

re0

10

20

30

40

50

60

1 2

3 4

5

1 2 3 4 5

Flexibility 32 48 20 0 0

Diversification 53 34 13 0 0

Security 0 0 26 43 31

Return on

investment

16 22 28 19 15

Requirement of

funds

21 27 33 13 6

Transparency 7 18 21 35 14

Liquidity 42 32 13 7 4

Control over

financial future

0 8 23 37 32

TABLE- 6

Suitable medium to gain knowledge of different financial

instrument

Personal referance

Financial advisor

Telephonic

Advertising (T.V., Newspaper

0 2 4 6 8 10 12 14 16 18

51-60

41-50

31-40

21-30

21-30 31-40 41-50 51-60

Personal reference 17 10 7 15

Financial advisor 0 10 10 5

Telephonic 0 0 0 0

Advertising (T.V.,

Newspaper 3 0 3 0

RELATIONSHIP BETWEEN THE VARIABLES

In table- 5, Correlation is applied to find out the level of correlation between

different variables. The various variables are as follows:

a) Flexibility

b) Diversification

c) Security

d) Return on investment

e) Requirements of funds

f) Transparency

g) Liquidity

h) Control over financial future

Correlations are shown in the Graph below:-

-1

-0.6

-0.2

0.2

0.6

1

Correlation

Correlation

Highly Correlated variables are:

Flexibility & Diversification

Flexibility & Return on investment

Security & Transparency

Return on investment & Requirement of funds

Less Correlated variables are:

Flexibility & security

Diversification & Security

Transparency & liquidity

Liquidity & Control over financial future

Control over financial future & Diversification

On the basis of correlation between various variables, interpretation

can be done that:

1) The highly correlated variables are dependent on each other. They have a direct

effect on each other. If one variable will increase another variable will also

automatically increase.

2) The less correlated variables have an inverse effect on each other. If one variable

will increase then another will automatically decrease.

CHAPTER 6

FINDINGS AND ANALYSIS

On age group 21-30

After analyzing the findings derived from the questionnaire we come across to

some interesting facts.

60% of the respondents from the age group 21-30 do not hold any life insurance

policy at all and also none of them hold more than 5 policies. (Table-4)

This age group is more attracted towards share market with 55% and mutual funds

with 35%. (Table-3)

The various needs at this age group are very low. (Table-2)

This may be due to various reasons.

The primary reason being maximum percentage of this age group are not married

and do not have children so do not have any kind of a responsibility towards family.

Secondly most of them are still parasites and dependent on their parents for living.

A small extent is working but do not have sufficient fund to take a life insurance

policy.

They have high risk takers and want to earn quick money so are more interested in

the share market.

They have a notion that they will live long and no unavoidable circumstances can

hamper their life.

On age group 31-40

Again moving towards the age group 31-40 we can observe that 40% of the

respondents hold 3-5 policies and 25% have 0-3 policies and 10% have more than 5

policies. (Table-4)

From table-3 we can analyze that the number of people favoring insurance over

other investment instruments have increased.

Table-2 exhibits that the various needs have also increased to a great extent. The

major needs in this age group have been children need and family need. Asset

building need has also shown a tremendous increase.

There has been a growth of about 100% in each need in this age group.

The reasons for these shifts may be:

The mass populations in this age group are married and even have a child or two.

They now being the bread earners for their family have a sense of responsibility

towards them.

People at this stage generally start earning a good living and can afford to invest in

policies

Since they are earning well so they can invest in policies to save tax to some extent.

On age group 41-50

Now in age group 41-50, 45% have over 5 policies and 35% have 3-5 policies.

(Table-4)

Table-3 clearly shows that there has been a shift of interest from other financial

instrument to insurance. About 45% believe investing in insurance.

There has been a 140% increase in the old age policy need as compared to age

group 31-40.

( table-2)

About 50% fall in the children need policies can be observed.(Table-2)

This may be for the following reason:

The offspring’s are already grown up and investment for their benefit has already

been made in the previous stage.

They start thinking about their old age and after retirement financial solution.

On age group 51-60

In the age group 51-60, 50% of them hold more than 5 policies. (Table-4)

The primary needs being old age and family need and critical illness.

Children need has fallen by 80%.(table-2)

The asset building need has fallen by 50% from the previous age group

This age group least wants to invest into shares

The various reasons may be:

He wants to secure his financial future when he retires from his job or takes leave

from his business so that he is self dependent.

Their children are already grown up and self dependent with their own family.

They want to secure themselves towards any kind of critical illness.

The risk taking ability decreases and want safe and secure returns

SUMMARY

The age group 41-50 takes most of the insurance policies

Requirement of Old age need policies increase in number with the increasing age.

The age groups 31-40 and 41-50 are most interested in asset building needs and

family needs.

The age group 31-40 is most interested in children need and family need and

maximum in covering future cash needs.

The age groups 31-40 and 41-50 also take insurance to take the benefit of tax

relaxation.

Comparing the amount of investment different age groups would like to make in

different financial instruments i.e. mutual funds insurance policy and shares, given

100000/-. The mean value of all the respondents in different age group were taken

21-30 31-40 41-50 51-60

Insurance 10000 35000 45000 35000

Mutual funds 35000 30000 35000 50000

Shares 55000 35000 20000 15000

47% of the respondents like to take decision on various financial instruments by

consulting a financial advisor.

37% of the respondents feel personal reference most reliable source to take an

investment decision

A very large proportion of the respondents perceive insurance to be less flexible

compared to mutual funds and shares.

They also feel it gives the least scope to diversify.

They are also not satisfied with the liquidity aspect of insurance.

Insurance scores high on attributes like security and control over financial future

and scores average on attributes like requirement of fund, rate of return and

transparency.

CHAPTER 7

SUGGESTIONS

To retain customer, company should design such insurance policies that contain the

composition of the features having high correlation. Due to this, customer will

attract more towards insurance rather than other investment.

A few of the innovations should be based on specific needs at certain life stages.

Consumers are often migrated to these newer policies. The Critical Illness Plan

should be introduced as a response to a stated need of consumers. The differentiator

here is clearly different in the number of illnesses it includes

Unlike other categories, customer retention in the insurance business has not yet

been under serious consideration. Insurance as an industry till date has adopted a

strategy of “one time customer”, and is the same with Bharti Axa, but the concept

should be revised and “life time customer” Strategy should be adopted for long

term sustainability and growth of the company.

The company has to begin a huge database monitoring exercise with annual

statements / mailers to the customers and updating their databases. This can also be

used for cross selling of different policies at different life stage of the customer

CHAPTER 8APPENDIX

BIBLIOGRAPHY

Times of India

Skees, J., Hazell, P., Miranda, M.. 1999. New Approaches to Crop Yield Insurance in

Developing Countries.

Business Research Methods, Cooper & Schindler

S. Balchandran, IRDA, IC-33 LIFE INSURANCE

Financial Express

Business Today

WEBSITE REFERENCE

http://www.irdaindia.org/

http://www.licindia.com/

http://www.bharti-axalife.com/

http://www.lifeinscouncil.org/

www.iinvestor.com

www.google.com

www.insure.com

www.financialexpress.com

ANNEXURE

SHOBHIT UNIVERSITYSCHOOL OF BUSINESS STUDIES

Name: __________________________________Occupation:____________________

Address: _______________________________

Age: 21-30 31-40 41-50 51-60

Gender: Male Female

Income: 1.5-3 3-5 5-10 10 above

1) Do you hold a life insurance policy? Yes No

2) If no, why have you not taken any life insurance policy? Not aware I don’t require it Have other investment options Lack of fund Planning in near future

3) Now being aware of life insurance why would you take a life insurance policy? (Can give multiple choices) To cover Future cash needs Tax benefit As an investment instrument As an angel of mercy As a hedge against old age

4) If yes how many life insurance policies do you hold at present? ___________

5) If yes what was your main concern for taking a life insurance policy? Investment Tax benefit Purely insurance

6) What were your needs when you had taken life insurance policies? (Can tick multiple choices)

Family need Children need Old age need Asset building need

Assuming that life insurance policy is purely an investment option please answer the following questions

7) If you hold a policy please rate the benefits in insurance policy compared to investing in shares market and mutual funds on scale of 1-5 (where 1 being the least and 5 being the most?)

Flexibility 1 2 3 4 5 Diversification 1 2 3 4 5 Security 1 2 3 4 5 Return on investment 1 2 3 4 5 Requirement of funds 1 2 3 4 5

Transparency 1 2 3 4 5 Liquidity 1 2 3 4 5 Control over financial future 1 2 3 4 5

8) Given a certain amt of money where would you invest, assuming that insurance is purely an investment option?

Life insurance Mutual funds Share market

9) Suppose you have 100000/- of rupees in spare, how much would you invest in the investment options state below?

Life insurance __________ Mutual funds __________ Share market __________

10) What would be the reason for above decision? (30 Words Max)

11) Which medium do you find more suitable to gain knowledge about different financial instruments?

Personal reference Financial advisors Telephonic Advertisement (T.V, newspaper)

12) Please give a few suggestions as to how we can make life insurance a better investment option compared to mutual funds and share market?________________________________________________________________________________________________________________________________________