CHAPTER IINTRODUCTION AND DESIGN OF THE STUDY1.1 INTRODUCTION Only when we are no longer afraid do we begin to live- Dorothy ThompsonThe Indian economy is expected to grow at an annual rate of 7.4% in 2018. The economy of India is a developing mixed economy. It is the world’s sixth largest economy by nominal GDP and the third largest by Purchasing Power Parity (PPP).1 India’s economic development had been awesome during the immediate past years both in terms of Gross Domestic Product and in terms of Per Capita Income.
Globalization and liberalization were said to be the triggering forces for the scenario. Owing to this thriving economic scenario, there were satisfactory levels of growth in employment opportunities in the economy, leading to many people to enjoy improved standards of living. Disbursable income of households was more, that provided them leverage to think about financial planning. Financial planning does not only include distribution of savings amongst different avenues of investment, but also include the methods of facing contingencies i.
e., opting for Life Insurance cover. The Insurance industry of India consists of 57 insurance companies of which 24 are in the life insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company.2 State owned Life Insurance Corporation of India’s dominance in insurance sector was put into test when gates of insurance industry were thrown open for the entry of private players, during the same period. This step, in line with globalization and liberalization, provided opportunity for the global private insurance players to enter in offering variety of insurance products to people.
The entry of private players changed the erstwhile scenario which prevailed in insurance sector.Today there are 24 Life Insurance Companies operating in India against lone LIC of India in the past. As per the general rule, in a healthy market competition, the customers are the beneficiaries. This is applicable to insurance sector also.Due to competition, different private players offered policies at competitive prices. This forced the Life Insurance Corporation of India to draw new strategies to deliver goods. Besides conventional policies, new bread Unit Link Insurance Policies (ULIPs) and closed ended fixed term maturity single premium policies, etc., are also being offered to people. Despite, against an expected premium growth rate of 17%, life insurance cover of Indian people is considered to be low. This is mainly due to lack of awareness regarding need for insurance and availability of different kinds of policies. Understanding the perception and attitude of policy holders will give us an idea for charting strategies to bring more and more people under insurance cover net, as insurance is the backbone of a country’s risk management system. It is rightly observed that the success of the insurance industry depends upon meeting the rising expectations of the Policyholders, who are the real kings in the liberalized insurance market.ROLE OF INSURANCE IN ECONOMIC DEVELOPMENT OF INDIAInsurance is one of the major entities of financial market. The insurance business is unique in the sense that it is rewarded for managing the risk of other parties. Indian insurance sector is not only playing a role within the financial system, but also has significant socio-economic functions of providing risk cover to the poor.[1] The insurance industry as a financial service is considered as one of the most important segments in an economy for its growth and development, particularly in a developing economy like India. Considering the huge population and growing per capita income besides several other driving factors, a huge opportunity is in store for the insurance companies in India. Even to this date, Life Insurance Corporation of India dominates Indian insurance and significantly contributes to income generation and employment. The key to insurance growth is through an integrated approach, which includes creating awareness about insurance. During the 19th century, [2] Indians were generally becoming aware of the benefits and utility of life insurance, though there was widespread apprehension that insuring one`s life was encountering death. Efficient awareness strategy enables the insurer to provide right product, to right person at the right time. [3] Human life is the most important asset and life insurance is the proper type of insurance, which provides financial protection to a person and his family at the time of uncertain risk or damage.[4] Life insurance provides both safety and protection to individuals and also encourages saving among people.The insurance sector, along with other elements of marketing and financial infrastructure, has influenced the market by the process of liberalization and globalization in India.[5] Every company is trying to implement new creations and innovative product to attract people. With the entry of private players, the competition is becoming intense. Today numerous public and private insurance companies are providing Life Insurance Services to a large number of clientele and the growth of insurance companies is mushrooming in their number and size in India. There is a transition from sellers market to buyers market. [6] The efficiency of insurance sector depends upon how best it can deliver services to its target customers and how far expectations of customers are met. Due to growing competition, the task of providing and maintaining customer satisfaction has become one of the most important challenges for companies and policy makers. Policyholder’s satisfaction is equivalent to meeting policyholders’ expectation in product and service performance. [7] Today’s companies are facing tough competition due to liberalization and globalization. Therefore, the companies can go about winning customers by satisfying policyholders’ needs. FEATURES OF LIFE INSURANCE Insurance is an instrument covering certain specific risks under certain terms and conditions. Insurance is a boon to trade, industry and commerce providing smooth flow of economic activities absorbing the shocks of risks, providing insulation in adverse situations. While the general insurance purely covers the likely risks which may or may not arise at all, the life insurance is a special product satisfying a spectrum of needs. Life Insurance basically covers life risk. If a youth on the threshold of commencing his career takes a life insurance policy, it fairly covers the following purposes:a) Savings: A habit of thrift and savings is introduced to him right from the onset of his earning. A small portion of his income grows to the extent of the sum assured to mature after a long term say, ten, fifteen, twenty or twenty five years. He will get the sum assured along with near like amount as bonus, at the hours of need in the mid or eve of his life. He can even plan a policy tenor to match the specific need, that is going to arise in future say, children’s education or marriage etc. b) Tax Plan: Policyholders enjoy income tax concessions to the extent of the premium paid on their annual income during the currency of the policy.
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