Summary A Contemporary Study of Factors Influencing Urban and Rural Consumers for Buying Different Life Insurance Policies in Haryana.

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1 Summary The topic of research was A Contemporary Study of Factors Influencing Urban and Rural Consumers for Buying Different Life Insurance Policies in Haryana. Summary of the thesis presents an overview of the research findings. The research work has been completed in the light of predefined objectives for understanding nature and scope of the independent variable. The components of decisions making process have been reviewed and variables were identified in association with decision making process in service segment. On the basis of research the influence of factors and outcomes were identified with the help of regression and confirmatory factor analysis. The thesis is divided in seven chapters and necessary appendices including; Life insurance in India, Consumer behaviour, Review of literature, Research methodology, Data analysis, Findings and suggestions, Conclusion etc. The decisive research components, identified variables, research instrument, sampling, methodology, statistical techniques, findings and conclusion of the research are presented below in a summarized form: MAJOR OBJECTIVE The present study was an in-depth study of micro variables/determinants of consumer behaviour. The main purpose of the study was to investigate major determinants of consumer behaviour for selecting and buying insurance policy in Haryana. The main objective of the study was to understand the various external and internal influences on buyer decision making. For achieving this main objective several sub-objectives have been framed: 1. To study the impact of demographic, psychographic and social characteristics of the sample policyholders on buying decision for purchasing life insurance policy in Haryana. 2. To identify various needs, motives and stimuli forcing sample policyholders to buy life insurance policy in Haryana. 1

2 3. To identify the gap between policyholder s perceived benefits and actual benefits derived from a life insurance policy in Haryana. 4. To find out the dominance of specific determinants on purchase decisions of sample policyholders for buying life insurance policies in Haryana. 5. To observe the information search process of sample policyholders for buying an insurance plan in Haryana. 6. To evaluate the factors underlying consumer perception of rural and urban buyers towards the life insurance policies in Haryana. 7. To open new vistas for further researches in Haryana. HYPOTHESIS The hypotheses used in this research are described briefly: 1. There is a significant association between selection of policies and demographic, psychographic and social profile of the policyholders. 2. The source of information has a significant influence on selection of policy and post-purchase behavior among rural and urban policyholders. 3. The purpose of buying insurance policy is different among rural and urban policyholders. 4. The buying experience of insurance policy is different among rural and urban policyholders. 5. The qualities of the agent have a significant impact on the selection of policies and buying behaviour of rural and urban policyholders. 6. The product attributes have a significant impact on the selection of policies and buying behavior of rural and urban policyholders. 7. The service attributes have a significant impact on the selection of policies and buying behavior of rural and urban policyholders. RESEARCH METHODOLOGY The adopted research was descriptive in nature as it describes the determinants of consumer behavior in general and buyer behaviour more particular. The research was an in-depth research of decision making process and study of factor(s) influencing a 2

3 purchase decision. This ex post facto research includes survey and fact finding enquiries. DATA COLLECTION: The research was exploratory cum descriptive in nature. So both primary and secondary data were used. Primary data was collected from selected policyholders through questionnaire, while the secondary data was collected from books, magazines, news papers, journals, annual reports, statistical abstract of Haryana and so on. DATA REQUIRED: Primary data was required to know the level of knowledge of sample policyholders, about different schemes being offered by various insurance corporations to know the impact of knowledge on selection of a policy to make this study qualitative. Secondary data was used in order to understand the nature, scope and various types of insurance policies being opted by the holders, development of insurance sectors in India and to make this study quantitative. SAMPLE SIZE: Districts covered for the proposed study were Rohtak, Sonipat, Jhajjar, Faridabad and Gurgaon. SAMPLING TECHNIQUE: Convenient and judgment sampling were used to obtain the responses from the policyholders. Sample size for the study was 1000 policyholders in all policyholders from urban by selecting 100 policyholder from each district policyholders from rural by selecting 100 policyholder from each district. INSTRUMENT/ TOOLS USED The research instrument used in this research was self designed statistically tested schedule/ questionnaire. The primary data was collected by personally interviewing executives with the help of a structured schedule consisting 33 questions. Where interviewing personally was not possible or allowed, these questionnaires were distributed to the agents and policyholders in Haryana and collected lately. The questionnaire consists of open or closed ended questions. DATA ANALYSIS The data collected was edited, tabulated and then presented in an appropriate manner. The statistical tools were also used to simplify the raw data like percentages, averages, correlations and regression analysis to find out the crux of the study. 3

4 This part of the thesis deals with the description of the sample of 1000 policyholders focused on demographic factors (gender, age, religion, residence), statistical tests and relevant interpretation. The section 5.1 of the thesis provides the details of descriptive statistics, demographic profile of the policyholders, and frequency distribution. The section 5.2 of thesis deals with designing of the constructs with respect to predecided objective and hypotheses of the study, analyzing the validity of various constructs related to the study. The construct validity includes convergent, discriminant as well as face validity. After analyzing the constructs validity the structural model was also tested and explained in this section. Section 5.3 of thesis provides associations with the variables with respect to various responses of the policyholders with respect to the decision making. In this section comparison of mean values, p-values, z-statistics and t-statistics is also provided for the purpose of testing various hypotheses. STATISTICAL TECHNIQUES The data was collected, processed, edited, tabulated and then interpreted for the purpose of summarizing the results and findings. The statistical tools were also used to simplify the raw data like percentages, averages, frequency distribution, mean scores, correlations, regression, t-tests, chi-square tests and confirmatory factor analysis to find the crux of the study. OBSERVATIONS AND FINDINGS The policyholders were holding different life insurance policies from different companies and there were many policyholders who had more than one policy from the same or different companies. The majority of policyholders bought LIC policy and they preferred to continue the association with the company. SBI life, Tata AIG and ICICI are also holding good position in the minds of policyholder. The results of correlations indicated that Endowment Scheme, Periodic Money Back Plan, Medical Benefits Linked Insurance, ULIPS, Social Security, Pension Plan are closely linked with the urban region as there is a significant correlation between urban region and above plans. Therefore because of information search and awareness of urban respondents these plans were popular among urban policyholders. Periodic Plan, 4

5 Medical Benefits Linked Insurance, ULIPS, Growth Plan and Money back plans shows negative correlation with rural region due to poor awareness of rural policyholders. The age is also associated with type of Insurance plans. Endowment schemes and ULIPs had a positive correlation with age whereas Whole life, Money back, Children and Capital market linked plans had negative correlation with age of the policyholders. Education is also linked with type of insurance plan selected by the policyholders. Education level have negative correlation with different types of insurance plans such as Systematic investment plan, Capital market plan, Whole life and periodic money back plans in both the region. Education is positively correlated with Endowment and Growth plans in both the regions. Mean values of the factors related to selection criteria used by the sample policyholders for buying insurance plan. Insurance agent plays crucial role while suggesting insurance policy to the policyholders. In case of mean values of the basic purpose of buying insurance plan it was observed that the policyholders buy insurance to provide death protection for family. The quality of services offered was the most influential parameter followed hassle free paper work and documentation, clarity of contract, reputation and ambience. Insurance was considered as a product now becomes essential for every common man irrespective of their different demographic, psychographic and geographic profiles. In the study the responses of different buyers/policyholders from different regions were collected through personal contact method with the help of self-designed questionnaire. The background of the policyholder in terms of region (urban and rural) was supposed to be influences the buying behavior of the policyholder. In order to analyze the difference in the buying pattern and decision making process of the policyholder in case of insurance policy independent sample t-tests were applied. The inferences were drawn between urban and rural policyholders with respect to their buying pattern and decision process in different aspects of selection of insurance policies and buying experience. Various constructs were framed of identify their respective influence of variables of purchase decision. The independent sample t-test was applied in order to test the significance of difference between policyholders from different regional background (Rural and Urban) in terms of various aspects of their 5

6 attitude, information search and buying behavior with respect to insurance policies offered by different companies. The results of independent sample t-test are provided below: Hypothesis-1 H O : There is no significant difference between urban and rural policyholders in terms of suggestions received by policyholders for buying Insurance policies. H A : There is a significant difference between urban and rural policyholders in terms of suggestions received by policyholders for buying Insurance policies. The results of independent sample t-test to analyze the difference between rural and urban policyholder in terms of different factors influencing their decision for selecting the insurance policy is presented. The result indicates that there was a significant difference in the behavior of rural and urban policyholders since the p-value in most of the cases was less than 0.05 (except in case of employer suggestion and recommendation by the family members). The results also indicate that rural policyholders take their decisions at their own consciousness followed by the suggestion received from the insurances agents. Whereas in case of urban policyholders the most influential source of information were suggestions received from the agents, spouse, family members and the friends. Hypothesis-2 H O : The source of information has a significant influence on selection of policy and post-purchase behavior among rural and urban policyholders. H A : The source of information has a significance influence on selection of policy and post-purchase behavior among rural and urban policyholders. The above mentioned hypothesis was tested and chi-square test was applied for understanding association between variables. An independent sample t-test was applied to draw the inferences between rural and urban policyholders. The results of independent sample t-test to analyze the difference between rural and urban policyholder in terms of different factors influencing their decision of selecting the insurance policy is presented and result indicates that there was a significant difference in the behavior of rural and urban policyholders since the p-value in most of the cases was less than

7 The results indicated that there was significant difference between urban and rural policyholders in terms of the role of different sources of information except in case of insurance agents and insurance experts and advisor. Hence the null hypothesis is rejected in the favour of alternate hypothesis. However in case of the role of insurance experts and advisors is found to be same for both urban and rural policyholders. The results indicated that the mean score of urban policyholders was significantly higher than rural policyholders and the most influencing sources of information for urban policyholders was insurance agents, experts and advisor. In case of rural policyholders the major sources of information were insurance agent and advisors. Hypothesis-3 H O : The purpose of buying insurance policy is not different among rural and urban policyholders. H A: The purpose of buying insurance policy is different among rural and urban policyholders. The above mentioned hypothesis was tested and chi-square test was applied for understanding association between variables. Every product or a service has a purpose of satisfying some need or want of the policyholder. If a policyholder buys the insurance policy, this is because he wants to fulfill his need or some requirement. It is also possible that the purposes of buying insurance policy for different policyholders are different. The efforts were made in the study to analyze the importance of various identified purpose of buying insurance policy for rural and urban policyholders. The independent sample t-test was applied to test the null hypothesis of no difference between rural and urban policyholders in terms of their purpose of buying the insurance policy. The results indicates that there was a significant difference between rural and urban policyholder except in case of providing extra money at the time of their retirement (p-value = 0.462). In case of rural policyholders the basic purpose of buying insurance policy is to provide death protection to their family members, availability of extra money in case of emergency and to have financial support to family members in future whereas in case of urban policyholders the purpose is slightly different. The urban policyholders buy insurance policy to save tax, to provide extra money against unwanted happenings and to provide financial support to 7

8 family members in future. Hypothesis-4 H O : The buying experience of insurance policy is not different among rural and urban policyholders. H A: The buying experience of insurance policy is different among rural and urban policyholders. After buying the insurance policy different policyholders have different buying experiences from their insurance policies. The independent sample t-test was applied to test the null hypothesis between rural and urban and policyholders in term of their buying experience after buying their insurance policies. Alternate hypothesis is rejected in the favour of null hypothesis. The results also indicates that there was a significant difference between rural and urban policyholders in terms of their perceptions of insurance policies as an investment, receiving guaranteed fund values, loan facility available with insurance policy and the comparison of insurance policies with other investment plans. The urban policyholder feel adequately secured after buying insurance policy and consider insurance policy better than other investment plans whereas the rural policyholder is not aware of other investments plans and consider it much safer and feel adequately safe with affordable premium installments. Hypothesis-5 H O : The service attributes influencing selection of insurance policy are not different among rural and urban policyholders. H A: The service attributes influencing selection of insurance policy are different among rural and urban policyholders. The service attributes of insurance agent, insurance company also play very important role in selection process of insurance product by the policyholder in order to analyze the relative importance of these service attributes with respect to the rural and urban policyholders. The result indicates there was a significant difference between rural and urban policyholders in term of their perception about various service attributes between rural and urban policyholders the results indicate that for a rural policyholder the most influencing service attributes are the quality of service offered, clarity of 8

9 contract and term in documents, hassle free paper work and proper documentation, reputation and loyalty and ambience and experience whereas urban policyholders is more concerned about the quality of services offered, reputation and loyalty and ambience and experience. Hence the null hypothesis is rejected in the favour of alternate hypothesis. Hypothesis-6 H O : The products attributes influencing selection of insurance policy are not different among rural and urban policyholders. H A: The products attributes influencing selection of insurance policy are different among rural and urban policyholders. The product attributes of types of insurance policy, benefits provided by insurance company also play very important role in selection process of insurance product by the policyholder in order to analyse the relative importance of these product attributes with respect to the rural and urban policyholders. The results indicate that the product attributes play most important role in selection of insurance policy for both rural and urban policyholders as the mean score of different aspect of product attribute is more than 4 in the scale of 1-5.No statistical difference is found in between rural and urban policyholders in case of type of insurance plan, premium, product flexibility, grace period since these factors are same for both the type of policyholders, whereas significant difference between rural and urban policyholder is found in case of risk coverage, variety in the products, tax benefits, payment options and growth and benefits. Hence the alternate hypothesis is rejected in the favour of null hypothesis. The result indicates that the behavior of rural and urban is different in case of the qualitative parameters associated with the insurance policies such as risk coverage, variety of products and growth and benefits from insurance policy in case of tax benefits there is also significant difference is found between rural and urban policyholders. For a rural policyholder the most influencing product attribute is found to be flexibility in the product, risk coverage, payment option and cost of payment whereas for urban policyholders the most important policyholder attributes is found to be product flexibility, premium payment option and tax benefits. 9

10 Hypothesis-6 H O : The agent s attributes influencing selection of insurance policy are not different among rural and urban policyholders. H A: The agent s attributes influencing selection of insurance policy are different among rural and urban policyholders. The result indicates that there was a significant difference in the perception of rural and urban policyholders in terms of various attributes of insurance agents. For a rural policyholder the most influencing attribute of the agent is error free services from the agent, awareness about terms and conditions about the policy, behavior of the agent, friendly nature of the agent and commitment of agent to fulfill the promises. For urban policyholders in addition to error free services by the agent which is the most influencing attribute of insurance agent are satisfactory services, friendly behavior, responsiveness to the queries and explanation about the police are the most influencing attributes. Hence the null hypothesis is rejected in the favour of alternate hypothesis. CONCLUSION The research findings revealed that the policyholders were selected from the different regions and different districts as decided at the time of finalizing sample frame. The research was conducted for understanding influence of external and internal factors on policyholder s decision making. The research findings suggested that insurance agent was most influential factors for selecting life insurance policy among rural and urban policyholders. The other crucial determinants of buying behaviour were also identified such as income, economic status, product attributes, agent attributes and price. The findings also suggested that insurance companies must reframe their marketing strategies and necessary remedied were also provided. In this research various hypothesis have been tested with appropriate statistical tools to understand the significant difference between buying process of rural and urban policyholders. The result indicates that there was a significant difference in the behavior of rural and urban policyholders. The results also indicate that rural policyholders take their decisions at their own consciousness followed by the suggestion from the insurances agents. Whereas in case of urban policyholders the most influential source of information were suggestions received from the agents, 10

11 suggestion from spouse, family members and the friends. The results also indicated that two most important purpose of buying insurance policy was to provide death protection for family members in case of any untoward incident and the saving of the income tax. Examiners Internal examiner External examiner 11