“The future lies with those companies who see the poor as their customers.”
Prof. C.K. Prahalad
Introduction
In every economy, insurance plays a crucial role in the life of their citizens. It does not only protect the value of their life but also contributes in the socio-economic development of the country. So far as life insurance sector in India is concerned, it is lagging behind as the seventy five percent of the total population is still without any insurance coverage. The majority of the total population i.e. approx sixty nine percent live in the rural areas and their main occupation is agriculture that generates low income and low savings. To bring such a segment under the umbrella of insurance, life micro insurance is one of the effective financial security tools. In order to grab such an opportunity several life insurance companies are endeavouring by offering life micro insurance product. But the policies of such companies are still not rural centric catering to the specific needs of the people. The various programmes of the government promoting agriculture and tiny industries, the scientific agricultural practices, the agrarian reforms, the empowerment of village panchayats and such other activities have created reasonable disposable incomes in the hands of the rural folk. At the same time, we find the rural economy dependent on vagaries of monsoons. The existence of Below Poverty Line (BPL) families, the stark illiteracy, and the low levels of awareness are the major stumbling blocks to protect themselves against risks. The life insurance penetration rate (ratio to GDP) is around 4 percent in the year 2016 which shows the under-exploited market.
Literature Review
Barik and Patra (2014) in their paper entitled on “Emerging Trends in Insurance- A Study in Indian Life Insurance Industry” find new trends such as hybrid distribution channel, regulatory trend, difficulty in designing marketing mix, online policy, claim management, customer servicing and FDI and growth. Shahi, Prarthana (2013) in her paper on “Recent Trends in the Marketing Strategies of LIC of India” reveals that the contribution of LIC to total industry in terms of life insurance offices has dipped down from 99.41 percent in the year 2001 to 30.94 percent in the year 2012. She further states regarding the marketing strategies adopted by LIC such as facilities to their existing employees, increasing the number of individual agents, introduced Life-Plus offices, increase in women employees, bancassurance and alternate channels, corporate communication and international joint venture. Bengal Chamber of Commerce and KPMG (2013) address the present context of insurance in regard to dynamics of external environment which changed the whole industry. Profitability, growth and risks are to be considered pertaining to shareholders view. Singh and Lall (2011) in their paper on “An Empirical Study of Life Insurance Products and Services in Rural Areas” lay stress on the examination of opportunities for insurers in rural market and what would be new strategies to tap the highly underinsured rural area. He finds that insurance companies are fulfilling many purposes of investments and savings at a time but maximum respondents buy insurance policies for tax rebate and family safety. He suggests that micro insurance product should be developed for under privileged people and rural areas population and products should be designed as per their needs and income. Sahu (2010) concentrates on current discussion and debate on micro insurance in India with focus on its outreach and efficacy and participation of the target groups in his paper on “Micro Insurance in India: Outreach and Efficacy”. He founds that existing micro insurance products are not demand driven in both high and low outreach areas. He further observes that there is lack of understanding, awareness, extension services and development of insurance market that grossly impact wider use of insurance products and its uptake particularly among low income groups.
Objectives of the Study
The main objective of the present study is to elicit the views of rural folks on life micro insurance in general and in particular to know their preferences, trusts and opinions regarding life micro insurance and concerned firms.
Hypotheses
- Ho = Rural consumers prefer equally public and private life insurance sector in buying the life micro insurance policy.
- Ho = Rural consumers trust equally public and private life insurance firms.
- Ho = Public and private life insurance companies provide equal facilities to rural consumers.
Scope and Period of the Study
Though the life insurance entails both individual and group plans the present study is confined to individual life micro insurance plans. The period of the present study for primary data collection ranges from 02nd July, 2017 to 21th July, 2017.
Methodology
The present study is exploratory cum descriptive in nature. The study is mainly based on primary data collected through an interview schedule. A sample of 140 respondents from selected rural areas such as Bankat, Chandpur, and Kashipur of Soraon Block, Allahabad District, Uttar Pradesh has been identified purposively for detailed study and analysis. Convenience sampling technique has been used for collecting primary data. The appropriate statistical tools like percentage and Z-test have been applied for the purpose of analysing the data.
Analysis and Findings of the Study
The demographic profile of the respondents has been analysed on the basis of age, gender, marital status, occupation, educational qualification and annual income. The distribution of sample respondents is shown in Table 1.
Table 1: Demographic Profile of the Respondents
| Aspects | Items | Number | Percentage |
| Age | Below 20 years
21-40 years 41-60 years Total |
18
95 27 140 |
12.86
67.85 19.29 100.00 |
| Gender | Male
Female Total |
121
19 140 |
86.43
13.57 100.00 |
| Marital Status | Single
Married Total |
77
63 140 |
55.00
45.00 100.00 |
| Occupation | Agriculture
Employee Business Professional Total |
55
31 33 21 140 |
39.29
22.14 23.57 15.00 100.00 |
| Educational Qualification | Up to High School
Intermediate Graduation and above Non-educated Total |
63
22 12 43 140 |
45.00
15.72 08.57 30.71 100.00 |
| Annual Income | Below Rs. 25,000
Rs. 25,001-50,000 Rs. 50,001-75,000 Rs. 75001- 1,00,000 Above 1,00,000 Total |
32
58 30 12 08 140 |
22.86
41.43 21.43 08.57 05.71 100.00 |
Source: Interview Schedule
Table 1 contains information about the age-group of the sample units. It is evident that a vast majority i.e. 67.85 percent of the sample units belong to the age-group of 20-40 years. On the contrary, 19.29 percent of the sample units fall within the category of 41-60 years of age. The rest of the sample units i.e. 12.86 percent are below than 20 years. It further shows the distribution of respondents in the sample units according to gender. The table makes it clear that the 86.43 percent are male while 13.57 percent are female. In the sequence of demographic profile analysis, the majority of the sample units i.e. 55 percent are unmarried. Occupation wise 39.29 percent belong to agriculture, 22.14 percent are employees whereas 23.57 percent and 15 percent earn through business and profession respectively. In the context of education, the table depicts the distribution of sample units according to the educational background of the respondents. An analysis of the table reveals that 45 percent fall under the category of up to high-school and 15.72 percent are intermediate whereas 08.57 percent are graduates but 30.71 percent are non-educated. Last but not least the table reveals about the annual income that 41.43 percent earn between Rs. 25,001-40,000 p.a. while 22.86 percent earn less than Rs. 25,000 p.a. and between Rs. 50,001-75,000 p.a. is 21.43 percent and rest of the sample units have 08.57 percent and 05.71 percent to Rs. 75,001-100,000 and above Rs.100,000 p.a. respectively.
Table 2: Respondents’ Views on Life Micro Insurance Product
| Aspects | Items | Numbers | Percentage |
| Insured | Yes
No Total |
33
107 140 |
23.57
76.43 100.00 |
| Sector Preference | Public
Private Total |
116
24 140 |
82.86
17.14 100.00 |
| Trust on Sector | Public
Private Total |
128
12 140 |
91.43
08.57 100.00 |
| Facilities by Sector | Private
Public Total |
86
54 140 |
61.43
38.57 100.00 |
| Type of the policy | Whole life
Endowment Term Policy Money Back Total |
26
23 17 74 140 |
18.57
16.43 12.14 52.86 100.00 |
| Sum Assured Value | Up to Rs. 1,00,000
Rs. 1,00,001-2,00,000 Rs. 2,00,001-3,00,000 Rs. 3,00,001-4,00,000 Total |
–
26 44 70 140 |
–
18.57 31.43 50.00 100.00 |
| More premium to more Sum Assured | Yes
No Total |
59
81 140 |
42.14
57.86 100.00 |
| Periodicity of the Policy | 0-5 years
6-10 years 11-15 years 16-20 years Total |
45
27 46 22 140 |
32.14
19.29 32.86 15.71 100.00 |
| Periodicity of the Premium | Weekly
Fortnightly Monthly Quarterly Total |
17
13 67 43 140 |
12.14
09.29 47.86 30.71 100.00 |
| Periodicity of Surrender Value | One year
Two year Three year Four year Total |
48
25 29 38 140 |
34.29
17.86 20.71 27.14 100.00 |
| Accidental Benefit | Yes
No Total |
140
– 140 |
100.00
– 100 |
| Free Look Period | 10 days
20 days 30 days Above 30 days Total |
55
31 54 – 140 |
39.29
22.14 38.57 – 100.00 |
| Loan Facility | Yes
No Total |
118
22 140 |
84.29
15.71 100.00 |
| Automatic Risk Cover | Yes
No Total |
140
– 140 |
100
– 100.00 |
| Periodicity of Automatic Risk Cover | 3 months
6 months 12 months Above 12 months Total |
–
29 41 70 140 |
–
20.71 29.29 50.00 100.00 |
| Automatic Risk Cover Benefit | Survival Benefit
Death Benefit Both Total |
–
– 140 140 |
–
– 100 100.00 |
Source: Interview Schedule
The respondents’ views have been presented in Table 2. It is visible that about three-fourths of the sample size does not have insurance coverage while one-fourth is insured. Majority of the sample size i.e. 82.86 percent prefer public sector (LIC) in buying the life insurance and 91.43 percent population of the sample size have trust on LIC whereas 08.57 percent have trust on private sector. In the context of facilities rendered, 61.43 percent support LIC while 38.57 percent go with private insurers. Currently, the insurers are providing term assurance with premium return but the 52.86 percent respondents prefer money-back plans while whole life policy is preferred by 18.57 percent, endowment and term policy constitute the 18.57 percent and 12.14 percent respectively. In case of sum assured value, less than one-fifth respondents seek Rs. 1 lakh-2 lakhs. On the other hand, about one-third want the category of Rs. 2 lakhs-3 lakhs and half of the respondents would prefer more than 3 lakhs. The 42.14 percent (59 respondents) are not agree to pay more premium and rest 57.86 percent (81 respondents) are agree to pay more premium to more sum assured. In the context of periodicity of the policy the approx 32 percent considered the policy terms of 0-5 years and 10-15 years and in contrast to it 19.29 percent prefer 5-10 years and remaining 15.71 percent prefer 15-20 years.
The table also depicts the periodicity of the premium that 47.86 percent prefer monthly while 30.71 percent prefer quarterly. The table also spells that the 34.29 percent want to take surrender value after one year and 27.14 percent want after four year. The total number of sample size i.e. 140 wants the accidental benefit rider. The table further shows that approx two-fifth want the free look period of 10 days and 30 days. The vast majority of the respondents i.e. 84.29 percent want the loan facility. The cent percent want the automatic risk cover and half of them want this facility for more than 12 months. Lastly, the total sample units prefer both viz. survival benefit and death benefit during the ARC.
Testing of Hypotheses:
In order to meet the objectives concerning the hypothesis, the Z-test has been used as it checks the significant level between parameter and sample distribution.
For the purpose of testing the hypothesis, the Null hypothesis and alternative hypothesis have been formulated:
First-
Ho = Rural consumer prefer equally public and private life insurance sector in buying the life insurance policy.
H1 = Rural consumers do not prefer equally public and private life insurance sector in buying the life insurance policy.
The calculated value 7.14 of Z-test is higher than the table value i.e. 1.96 at 5% level of significance. Therefore, the null hypothesis of indifference in the preference across public and private sector is rejected. On the contrary, alternate hypothesis is accepted. It means that the sample data are consistent with hypothesis and life micro insurance products are not preferred equally by the rural consumers. The result further implies that the respondents prefer more public sector in regard to buying of life micro insurance products.
Second-
Ho = Rural consumers trust equally public and private life insurance sector.
H1 = Rural consumers do not trust equally public and private life insurance sector.
The second hypothesis portrays about the trust level of the rural consumers for the public and private life insurers. The calculated value 9.52 of Z-test is higher than the table value 1.96 at 5% level of significance level. Thus, the null hypothesis is rejected whereas the alternate hypothesis is accepted. It is to mention here that respondents trust more on public sector.
Third-
Ho = Public and private life insurance companies provide equal facilities to rural consumers.
H1 = Public and private life insurance companies do not provide equal facilities to the rural consumers.
Here, the calculated value .879 of Z-test is less than the table value i.e. 1.96 at 5% of significance level. Therefore, the null hypothesis is not rejected. Consequently, it reveals that both sectors are equal in providing facilities in reference to life micro insurance products.
Concluding Remarks
There is large untapped rural potential in the life insurance market. This is yet to be discovered and explored. Though most of the life insurance companies endeavored to achieve the rural targets but still they are lagging behind. The awareness level of life insurance in rural areas is low. As a matter of fact, life insurance falls under the purview of unsought category of product. Consumers, usually, procrastinate the buying of life insurance particularly in rural areas. Life insurance exists in the form of dormant needs among the majority of the population. Life insurers are not too much rural focused as they believe the profitability could be earned from urban and affluent classes. They are under assuming the potentialities of Indian vast rural market. It seems as the life micro insurance plans having less features are offered to the deprived segment. Rural consumers are not keenly interested in buying the life insurance policy. They demand life insurance as a complete financial product. In the name of life insurance, they are only receiving basic benefits accrue to the plan and not the additional benefits. Apart from these, they have less alternative choices among the life micro insurance plans in compare to life insurance plans available at urban areas. For the smooth functioning of the life insurance business in the rural areas, the following suggestions may help the public and private life insurance companies.
- Providing the need based products by analyzing the market with reference to socio-economic profile of the target audience.
- Companies should increase the number of products in their product portfolio as per the target market in rural areas. They should launch money back life insurance plans.
- The premium should not be high as they have the irregular and low income.
- Awareness and distribution levels are low in the rural markets. Therefore, the localized way of promotion and distribution should be adopted by life insurers.
- Life insurers should provide the Free Look Period facility for 30 days.
- Life insurers should also provide the automatic risk coverage (ARC), loan facilities, accidental benefits, etc.
- The Insurance Regulatory and Development Authority of India (IRDAI) should enhance the limit of Sum Assured from Rs. 2, 00,000 for the life micro insurance policy.
- IRDAI should also provide some relaxations in reference to Surrender Value.
References:
- Malhotra, Naresh K., and Dash, S.(2011). Marketing Research: An Applied Orientation, Pearson Education, New Delhi
- Palande, P.S & Shah R.S. and Lunawat, M.L.(2007). Insurance in India: Changing Policies and Emerging Opportunities, Response Books, Sage publications ltd., New Delhi
- Avadhani, V.A. (2004). Marketing of Financial Services, Himalaya Publications, New Delhi
- Zeithaml, V. & Bitner, M. (2003). Services Marketing, Third Edition, Tata Mc Graw-Hill Publishing Company Limited, New Delhi
- Singh, Harnam and Lal, Dr. Madhurima (2011).“An Empirical Study of Life Insurance Products and Services in Rural Areas”, Zenith International Journal of Multidisciplinary Research, 1 8 290-305
- KPMG (2013). “Insurance Industry-Road Ahead, Path for Sustainable Growth Momentum and Increasing Profitability; Available from: www.kpmg.com/in Accessed on 19.05.2015
- Barik, Bhagabat and Patra, Rakesh (2014). “Emerging Trends in Insurance- A Study in Indian Life Insurance Industry”, Abhinav National Monthly Refereed Journal of Research in Commerce and Management, Abhinav Publication, 3 6
- Sahu, Basant K.(2010). “Micro Insurance in India: Outreach and Efficacy” Centre for Microfinance Research, Main Centre Lucknow
- Shahi, Prarthana (2013). “Recent Trends in the Marketing Strategies of LIC of India”, International Journal of Application or Innovation in Engineering and Management, 2 10 311-317
- www.irda.gov.in
- www.licofindia.gov.in
About the Author
Dr. Furquan Uddin
Post-Doctoral Fellow
Department of Commerce
Aligarh Muslim University, Aligarh
Contact No. 9889096025
Email: furquanbhu@gmail.com
