How To Find Out If Information Technology In Life Insurance Is Related To The Entry Of Private Insurance Companies In The Life Insurance Market In India

Transcription

1 1 SIT Journal of Management Introduction Of Information Technology In Life Insurance Corporation Of India Vis-À-Vis Entry Of Private Insurers In Indian Life Insurance Market Partha Sarathi Choudhuri* Abstract Like any other financial sector, life insurance sector also has a significant impact in the country s economy. After liberalization, Indian insurance market has undergone a dramatic change and also influenced the financial sector as a whole. Along with one and only public life insurance company namely Life Insurance Corporation of India (LICI), a number of private life insurance companies are presently operating in the Indian life insurance market and providing varieties of services and products to their current and prospective customers in order to offer competitive advantage, increase market share and to enhance profit in the growing insurance market where customers have lot of choices to select a particular life insurance company and its offer(s) for their own interest. In the age of Information Technology, customers are fully aware of their needs and requirements, expectations and Information Technology Enabled Services. The service industries are now trying to get competitive advantage over their competitors through the use of Information Technology. In this paper, researcher wanted to study the significant interrelationship between the implementation of advance technology namely information technology in LIC and the entry of the private insurance companies in the life insurance market in the context of Burdwan district. Keywords: Information Technology (IT), Liberalization, Life Insurance Corporation (LIC), Private Insurers. *Partha Sarathi Choudhuri, Research Scholar, Department of Business Administration, The University of Burdwan, West Bengal, India, partha.choudhuri@gmail.com; M:

2 2 SIT Journal of Management Introduction In the age of twenty first century, Information Technology has become as the backbone of every industry especially for the service industries spread all over the world. Human life has significantly changed with the emergence of Information Technology (IT) as the data processing system to every organization. Indian insurance sector is one of the rapid developing insurance sectors in the present world and now established itself as an integral part of the Indian economic development. India's expanding population, robust economic growth, lucrative tax benefits, rising disposable income levels, and increased awareness of the need for insurance, especially among younger people are the important factors for the significant growth of the life insurance market ( Though in 1956 the life insurance business was nationalized and Life Insurance Corporation of India (LICI) was the sole provider in India (Sinha, 2005) but the liberalization process was started in insurance sector through the Act of Insurance Regulatory and Development Authority (IRDA) in 1999 which allows private players to enter the insurance sector in India besides a maximum foreign equity of 26% in a private insurance company having operations in India (source: Wikipedia) and according to IRDA Annual report, by the end of September 2012, there are 23 private life insurance companies operating in India. It is needless to mention that FDI in Indian insurance sector stood at USD 1.36 Bn of which life insurance comprised USD 1.1 Bn (CEDAR & USIBC, 2012) and IRDA serving as 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 (source: Wikipedia). Confederation of Indian Industry (CII) said Raising the foreign direct investment cap will enable expertise (skills) and know-how transfer in the Indian insurance industry (like actuarial, underwriting and claims management) (Business Monitor International, 2012). From the very early age of the business, the largest public life insurance company in India namely LIC has not only implemented information technology in their operations and providing various Information Technology Enabled Services to their customers but also adopted various strategies to modernize their present IT infrastructure. In order to survive in the future and to achieve maximum growth in the present competitive insurance market, life insurance companies are now dedicatedly involved in the development of new strategies for the purpose of the customer satisfaction through the proper improvement of service quality with the help of

3 3 SIT Journal of Management information technology in the efficient manner. To study the significant interrelation between the implementation of information technology in LIC and the entry of the private insurance companies in the life insurance market, the present study has been conduct on the life insurance customers of all the 17 branches of the LIC having information technology driven services located in Burdwan district. REVIEW OF LITERATURE In life insurance industry high quality service (defined as exceeding customers expectations ) is rare but increasingly demanded by the customers (Sherden, 1987). Arora and Stoner (1996) asserted that in obtaining insurance perceived service quality has a significant effect on the attitude as well as on the customer satisfaction (Durvasula et al., 2005). In insurance industry the study on service recovery analysis identified that for the survival of insurers the quality of service and customer satisfaction and loyalty are fundamental (Taylor, 2001). Most of the companies have equivalent offerings and the only way of differentiating itself from the others may be establishing the better service quality in the life insurance sector (Siddiqui and Sharma, 2010). Zeithaml et al. (1993) revealed that customers are likely to place a high value on their agent s integrity and advise. Chow-Chua and Lim (2000) mentioned that the decisions of purchasing life insurance policies are significantly affected by the factors of the company and agent s service quality as well as the recommendations of friends. So, quality should be the basis of all the activities which are going in the insurance industry (Toran, 1993) and Joseph et al. (2003) pointed out that insurance agents should constantly monitor the level of satisfaction among his / her customers to keep themselves close to the customers for fulfilling their needs. According to Pointek (1992) customer want more responsive agents with better contact, personalized communications from the insurer, accurate transactions, and quickly solved problems which were identified in customer surveys by Prudential. Luarn et al. (2003) stated that in life insurance industry the degree of success in the implementation of enterprise mobilization is positively correlated to the management performance of external aspects like providing increased customer satisfaction. In the insurance industry the widespread customer dissatisfaction stemming from poor service design and delivery have confirmed by the studies of Wells and Stafford (1995); Cooper and Frank s (2001) the Chartered Property Casualty Underwriters (CPCU) longitudinal studies and Friedman s (2001a, 2001b) the Quality Insurance

4 4 SIT Journal of Management Congress (QIC) as well as the Risk and Insurance Management Society (RIMS). In life insurance industry the organizational performance in the office operation of systems technology leaders was linked to the level of information technology investment intensity (Harris and Katz, 1991). According to Hoffman (1994) information technology can be explained as an all-inclusive term that encompasses computers and telecommunication in all their forms, whatever their use (Stewart and Kleiner, 1996). Anonymous (2004) affirmed that technology has become an important factor in agent operations in the field including other functions such as distribution, claim costs and administration. In the year of 2007, one of the major IT-initiatives taken up by LIC is the implementation of EDMS (Enterprise Document Management System) including Workflow and Record Management Solution (RMS) to manage office records (Policy files, Agency files, and select administrative files) in all its Offices across the country in a phased manner (Sridhar, 2007) and LIC has gone in for relevant and appropriate technology over the years. ( Charles (1993) revealed that service industries have been identified as the biggest buyers of new information technology. That s why Jen-Her and Yu-Min (2006); Leslie and Richard (2006) asserted that managers of the insurance companies are able to process work quickly as well as response to their customers has been faster and prompt using the latest information technology system. METHODOLOGY The current study was carried out based on the literature survey and the available secondary data sources. After carefully reviewing the literature, researcher has developed the following null hypothesis for the purpose of the study: H 0 : Introduction of information technology by LICI is not related with the entry of private players in the market. And the alternative hypothesis is : H а : Introduction of information technology by LICI is very much related with the entry of private players in the market. The questionnaire was developed as a survey instrument. To study the significant interrelation between the implementation of advance technology namely information technology in LIC and

5 5 SIT Journal of Management the entry of the private insurance companies in the life insurance market, along with the other items the data about the importance of having Information Technology in the LIC and the improvement of quality of services offered by the LIC after the entry of the private players were collected from the life insurance customers of all the 17 LIC branches of Burdwan district. The structure of the questionnaire is both open-ended and close ended and seven point Likert scale ranging from 1-strongly disagree to 7-strongly agree. After proper formation of survey instrument, pilot study was conducted in the district town Burdwan where researcher randomly selected 30 customers (10 customers from each branch) for this study. After explaining objectives and purpose of the study researcher tried to get valuable feedback from these customers. The preliminary analysis of the pilot study data signifies the internal consistency of the items in the questionnaire. So, no modification was needed for the survey instrument. After successful completion of the pilot study, using random sampling technique total 350 questionnaires were distributed among the customers where 289 customers were agreed to give response and finally obtained 221 usable responses which were considered as the sample size for this study. Here, statistical package SPSS 16 was used to perform the analyses. RESULTS AND DISCUSSIONS In order to obtain the data for the purpose of the present study a cross-sectional survey was conducted in Burdwan district among the customers of the Life Insurance Corporation of India where researcher carefully considered the different demographic profile such as gender, age, income status, occupation, educational qualification, locality of living and modern aids accessed by the customers. From the available data researcher tried to measure the central tendency of the various demographic profile of the customers. The summarized demographic profile of the customers of the study is now given below : Demographic Variable Gender Table 1 : Demographic profile of the customers Demographic Characteristics Male 192 ( 86.9 ) Female 29 ( 13.1 ) Frequency Mean Median Mode Std. Deviation Age 30 years 51 ( 23.1 )

6 6 SIT Journal of Management Income Occupation Educational Qualifications Locality of Living Modern Aids years 66 ( 29.9 ) years 38 ( 17.2 ) years 49 ( 22.2 ) 60 years 17 ( 7.7 ) Rs ( 13.6 ) Rs Rs Rs Rs ( 46.2 ) 70 ( 31.7 ) Rs ( 8.6 ) Salaried 174 ( 78.7 ) Business 15 ( 6.8 ) Professional 11 ( 5.0 ) Retired 18 ( 8.1 ) Housewife 3 ( 1.4 ) High school 14 ( 6.3 ) Graduate 56 ( 25.3 ) Post-graduate 38 ( 17.2 ) Professional 98 ( 44.3 ) Any other 15 ( 6.8 ) Center of the town 144 ( 65.2 ) Outskirts of the town Rural areas adjoining town 30 ( 13.6 ) 47 ( 21.3 ) Mobile Phone 64 ( 29.0 ) Combination of mobile & internet * Percentage (%) in parenthesis 157 ( 71.0 ) To test the hypothesis, researcher has used the Bivariate Correlation analysis and measured the Pearson s Correlation Coefficient. Here, the researcher examined the association between

7 7 SIT Journal of Management introduction of advance technology i.e. information technology in LICI and entry of private players in insurance sector. The result of Bivariate Correlation analysis is given below : Table 2 : Bivariate Correlation result of Information Technology and Private Players INFORMATION TECHNOLOGY PRIVATE PLAYERS * Correlation is significant at the 0.05 level (2-tailed). INFORMATION TECHNOLOGY PRIVATE PLAYERS Pearson Correlation 1.141* Sig. (2-tailed)..036 N Pearson Correlation.141* 1 Sig. (2-tailed).036. N From the above table it is clear to understand that Pearson Correlation Coefficient was statistically significant [* Correlation is significant at the 0.05 level (2-tailed)]. So, there exist strong positive relationship in between IT implementation in LIC and entry of Private Players / Insurance companies [0.141*, Sig (significant at the 0.05 level (2-tailed))] in Indian insurance market. That s why the null hypothesis has rejected and alternative hypothesis Introduction of information technology by LICI is very much related with the entry of private players in the market has accepted at here. CONCLUSIONS To observe the significant interrelation between the implementation of advance technology namely information technology in LIC and the entry of the private insurance companies in the life insurance market was the basic objective of the current study and for this purpose through questionnaire data were collected from the Burdwan district s LIC customers. The acceptance of the alternative hypothesis indicates the perfect positive linear relationship between the introduction of information technology by LICI and the entry of private players in the insurance market. The review of literature revealed that before the liberalization, LIC was the one and only life insurance company in Indian insurance market. After the liberalization, at present along with only one public insurance company named LIC there exist a number of private life insurance

8 8 SIT Journal of Management companies in the insurance market and these private insurance companies adopting several market strategies in order to grow their market share through satisfying the customers. Current market scenario has dramatically changed after the introduction of several advance technologies like information technology. Realizing the alarming situation of the market, LIC decided to implement the most advance information technology not only to regain its lost market share that was declined due to the entry of private insurance companies but also to satisfy its own customers by providing better services through information technology enabled convenient services. There exists huge market competition in Indian life insurance sector. Under the circumstances, information technology may be the key driver for the LIC to compete with the private insurance companies for maintaining its own existence as well as to grow in the future. Thus, the significant relationship of introduction of information technology by LICI and the entry of private players in the Indian insurance market has a positive role in the current study in respect of customer satisfaction in the area of Burdwan district. REFERENCES Anonymous (2004). Seizing the initiative. Life Insurance International, April, Arora, R. & Stoner, C. (1996). The effect of perceived service quality and name familiarity on the service selection decision. Journal of Services Marketing 10 (1): Business Monitor International (2012). India Insurance Report Includes BMI s Forecasts, Q2, February. CEDAR & USIBC (2012). India Foreign Direct Investment Trends: India continues to provide opportunities in a challenging environment, April. Charles, S. (1993). "Conceptualizing services sector productivity", Social and Economic Studies, Vol. 42 No. 4, pp Chow-Chua, C. & Lim, G. (2000). A demand audit of the insurance market in Singapore. Managerial Auditing Journal 15 (7): Confederation of Indian Industry (2013). (Online) accessed on 05 April 2013.

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