Indian Life Insurance Research Articles

Evaluating the Efficiency of Indian Life Insurance Sector

ABSTRACT The purpose of study was to investigate the technical efficiency of Indian life insurance companies using data envelopment analysis (DEA) to find the reasons for inefficiency. It aimed to analyze the efficiency of all the 24 life insurance companies operating in India for the period 2013-2017 using DEA based on secondary data collected from the Insurance Regulatory and Development Authority Annual Reports. Findings indicated that the state life insurer, that is, Life Insurance Corporation (LIC) was efficient throughout the entire study period. The private life insurance companies exhibited variations in their performance levels as they were comparatively new in the life insurance sector and of different sizes. Some private life insurers operated efficiently, while some private life insurers were less productive using excessive capital; on the other hand, few life insurers grew fast using technology. The methodology employed in this study estimates relative efficiencies without assuming any functional form; as a result, the proper comparison of input utilized with the output produced was not possible. The study brought into light the operating characteristics and efficiencies of all the Indian life insurance companies during the period 2013-2017 and therefore holds important insights for policy makers and practitioners as well as for the decision makers.

Editorial: Corporate and business strategy research in the epoch of pandemic

The four articles and a book review comprising this, the first issue of Corporate and Business Strategy Review each considers an aspect of a pre-virus, business-as-usual business, and investment that will have to re-emerge largely intact if the world is to return to anything like business as usual once the virus has been debilitated or finally defeated. Looking respectively at the engagement duties of institutional investors in Italy, how the ‘corporate veil’ is able to be pierced using the South African Companies Act, magical banking and non-endogenous money, and e-commerce and portfolio allocations by Indian life insurance customers, the four articles together are a sort of rear vision mirror enabling us to look back at what the business world was like not long before the pandemic struck. They also ask us to consider what needs to be maintained, what should be altered holistically or piecemeal, and what has to be jettisoned altogether as we look forward and start imagining what the post-virus business world and a new-normal business, as usual, will look like

E-commerce and portfolio allocations: A study on the Indian life insurance customers

The paper attempts to find the impact of technology on the purchase behavior of consumers for insurance products. With the use of technology and e-commerce the adoption of insurance products had undergone a transformation. With the entry of private players the insurance sector has become very competitive (Jampala & Rao, 2005). With increased competition the life insurance industry is adopting innovative marketing practices to tap a larger market; the companies therefore are developing their capabilities of access-based penetration, distribution and sale to customers. The advances in technology have changed the way insurance products were marketed in India. Apart from the traditional agency channel, the companies are also exploring alternative channels like brokers, rural channels, online marketing, and e-commerce, etc. The personal selling based channels are the new innovative methods offering an effective reach at a minimum cost. To analyze the consumer purchase behavior the study used two-way ANOVA to determine the effect of two nominal predictor variables on a continuous outcome variable. The results of the study will assist the life insurance companies in improving their operations and efficiency

Macro-Economic Determinants of Life Insurance Business – Empirical Evidence during 2000-01 to 2015-16

There is a strong link between an institutional framework of insurance sector and sustainable economic growth. Insurance business has a positive impact on economic development and vice versa. As a developed insurance market stimulates economic growth of a country, the level of its economic growth affects insurance business development in return. In India, regulatory changes commenced since mid-nineties for opening up of insurance markets to private and foreign insurers. After more than one and half decade execution of insurance sector reforms, Indian life insurance business have been witnessed the better growth. In this juncture, the present study focuses on an examination of the role of a macroeconomic environment in the development of life insurance industry in India by using time series data with regression analysis. The study finds that the savings to GDP ratio, banking sector development, expenditure on social security to GDP, gross enrolment ratio and life expectancy are most significant and positive factors in driving the life insurance business during the study period.

Customer Perception of Service based on Servqual Dimensions:A Study of Indian Life Insurance Companies

The research paper studies the difference between public sector LIC and four banks led listed private life insurance companies i.e. HDFC Standard Life, SBI Life, ICICI Pru Life and Max Life Insurance based on the quality dimensions as provided by Indian customers. It also compares private life insurance companies on the given parameters. The sample consist current customer of various Life Insurance companies (both public sector and 4 banks led listed private sector) named LIC, HDFC Standard Life, SBI Life, ICICI PRU Life and Max Life insurance from different parts of Mumbai and New Delhi (the capital of India). The researchers considered respondents who have relation with more than one of the Life insurance companies for the present study. This helped to understand how a customer perceives the service quality of one of the studied life insurance companies vis-a-vis another life insurance company. The results suggest that the public sector LIC is perceived to provide better service quality as compared to the private life insurance companies, In addition, even within private sector life insurance companies, customer perception on overall service quality varied to some extent. LIC showed signif icantly higher scores on three of the f ive dimensions of SERQUAL (Reliability, Tangibility and Assurance), an important research tool to measure quality. The empirical results brought forth the fact that HDFC Standard Life signif icantly differed on the perceived service quality dimensions from SBI Life. It is a pioneering work on service quality connecting perceived service quality and brand equity among various leading life insurance companies.

The effect of relational selling on life insurance decision making in India

Purpose The biggest challenge in the Indian life insurance industry is mis-selling and unfair business practices. The purpose of this paper is to explore the effect of relational selling behaviour on investor decision making in life insurance market in India. This study also aims to elucidate the mediating role of trust in predicting the purchase of life insurance policies by investors. Design/methodology/approach A cross-sectional survey was carried out to collect quantitative data using a validated structured questionnaire. A total of 813 policyholders of life insurance companies operating in Karnataka, South India, were chosen. The data were analysed using the partial least square method of structural equation modeling. Findings The process of investors’ life insurance buying decision is directly influenced by interaction intensity, co-operative intentions of agents, sharing of overt and covert policy information, and indirectly through the partial mediation of trust. Also, trust fully mediates the effect of agent disclosure and personal rapport on decision making by investors. The importance‒performance map analysis highlights the pivotal role of overt policy information in investors’ decision making. Practical implications The financial mis-selling in India can be curtailed significantly if the insurance companies insist on responsible and relational selling by their sales agents. The companies would also strategically gain by investing in trust-building programs that enhance quality interactions and honest disclosure of overt and covert policy information, unpretentious intention to co-operate in the policy selection, and emphasize emotional connection and personal rapport with customers. These genuine actions and behavioural manifestations would certainly facilitate appropriate decision making by the investors. Originality/value There is a paucity of research in India which explicates the role of relational selling behaviour in insurers’ decision making. As such, this article expands the scope of relational marketing research in insurance by assessing the relational determinants of investor decisions as well as the role of trust as the mediator in influencing insurance decision making.

Financial performance assessment using Grey relational analysis (GRA)

PurposeTraditional statistical methods to study the financial performance of any industry have many barriers and limitations in terms of the statistical distribution of the financial ratios, and, in particular, it considers only its positive values of it. The purpose of this paper is to estimate the financial performance of 24 Indian life insurance companies for the period from 2013 to 2016 using Grey relational analysis (GRA) proposed by Deng (1982) that accommodates the negative values in the analysis.Design/methodology/approachFinancial performance of 24 Indian life insurance companies for the years from 2013–2014 to 2015–2016 is examined using a total of 14 indicators from capital adequacy ratios, liquidity ratios, operating ratios and profitability ratios (PR). The methodology used is GRA to obtain the Grey grades to rank the performance indicators, where higher relational grade shows better financial performance, and a lower score depicts the scope for improving the performance.FindingsThe results rank the insurance companies according to their financial performance in which Shriram insurance stands first with higher relational grade score, followed by the companies like IDBI Insurance, Sahara Insurance and Life Insurance Corporation of India. The main finding is that PR which have negative values are playing a crucial role in determining the financial performance of Indian life insurance companies.Practical implicationsThis study has far-reaching practical implications in twofold: first, for the Indian life insurance industry, they have to concentrate more on PR for better financial health and, second, for any financial performance analysis, ignoring negative value ratios produce biased inference and GRA can be used for better inference.Originality/valueThis study is the first attempt to evaluate the financial performance of Indian life insurance using the GRA methodology. The advantage of GRA is that there is no restrictions on the statistical distribution of the data and it also accommodates the negative values, whereas all the other traditional methods insist on the statistical distribution of data, and, more importantly, they cannot handle negative values in the performance analysis.

Factors Influencing Service Quality Perception in Indian Life Insurance Sector

The Indian insurance industry has gone through major transformations over the past two decades and life insurance sector has been no exception to it. With the introduction of privatization and the increase in number of insurance providers, the competition has risen unprecedentedly. To survive this immense competition, the companies have come up with numerous products and solutions to lure the customers. Other factors like increased coverage of lives/property, diverse customer-friendly products and rapid growth of multiple channels, like agency, bancassurance, etc., are gradually gaining momentum to intensify the level of competitiveness in the market. But unfortunately, this has somehow compromised the quality of service that is being delivered to the customers, and no attempt has been made to measure and ensure the service quality of this industry. This research aims to identify the determinant factors that contribute a substantial role in sculpting customers’ perception of service quality in Indian life insurance sector. Six factors were identified after the whole data mining process (using factor analysis) which were considered to be as the ‘Factors Influencing of Service Quality Perception in Indian Life Insurance Sector’.

Analysis of Cost Efficiency of Indian Life Insurers: A comparison of Quantity vs Value based DEA Approach

Abstract In the context of measuring economic performance, efficiency and productivity of Indian life insurance firms, there are studies using the Data Envelopment Analysis (DEA) methodology. In this paper, the difference between the quantity based approach and value based approach is highlighted and elaborated using data of Indian life insurers operational over the period 2005–06 to 2015–16. There are both advantages and disadvantages of using DEA, as highlighted in the theoretical literature. In particular, the efficiency estimates are heavily influenced by the selection of inputs and outputs. This study provides an insight on technical efficiency and innovates in terms of data use and is the first study on the Indian insurance industry to compute cost and allocative efficiencies. Four hypotheses were tested in the study. First, there were initially improvements in efficiency but in recent years, clearly there is stagnation. Second, the results support views of Tone and Sahoo (2005) and Sen (2010), that the public life insurer, the Life Insurance Corporation of India is cost inefficient. The private life insurers need to reallocate resources to improve overall efficiency. LICI was found to be technically efficient but remained cost inefficient. Third, the traditional Farrell based cost efficiency estimates are significantly different from Tone (2002) alternative approach. Therefore, choice of estimation method is important. Fourth, non-discretionary factors such as age, premium growth and size of the insurers along with regulations pertaining to solvency affect cost efficiency. Key financial ratios such as expense ratio, commission ratio, conservation ratio and persistency ratio, and retention ratio are used to statistically establish their relationship with the different efficiency estimates. Results also show that entry of a new insurer may negatively affect cost efficiency of an existing insurer but foreign equity could positively improve cost efficiency.

Impact of liberalisation on Indian life insurance industry: A truly multivariate approach

This study examines the impact of liberalisation on the Indian insurance industry by examining it in terms of its efficiency characterised by functional performance. Data of 552 respondents from Indian life insurers was used for the empirical examination. Multivariate analysis of variance (MANOVA) was conducted to test the hypotheses that the linear combinations of impact of liberalisation on the Indian life insurance industry characterised by marketing mix, service quality and insurance awareness might differentiate between groups characterised by gender, place of residence, types of relationship with Life Insurance Corporation (LIC), types of employee positions in LIC, and types of relationship with private players. The results reveal a positive impact of liberalisation on the Indian life insurance industry.

Efficiency Decomposition in two-stage Data Envelopment Analysis: An application to Life Insurance companies in India

This paper evaluates the efficiency of Indian Life Insurance Industry by employing two-stage Relational data envelopment analysis (DEA) methodology to derive system and divisional efficiency scores. The main advantage of two-stage relational DEA is that it identifies the inefficient stage of the process, where multiple stages are involved and help the firm/decision-making unit (DMU) to concentrate in that stage to improve efficiency. Also, this paper analyses the leader–follower among the stages in two-stage DEA using a non-cooperative approach combined with the Pareto solution to identify the dominant decision stage. The empirical results from the data on 17 life insurance companies for the year 2013–2014 clearly show that the companies that are dominant in investment stage are maintaining relatively higher overall efficiency than the companies that are dominant in the premium stage. This key inference has far-reaching managerial implications for the insurance companies towards improving the overall efficiency.

Attrition of Agents in Indian Life Insurance Companies

Attrition of Agents in Indian Life Insurance Companies

Modelling Customer's Vision towards Distribution Channels of Indian Life Insurance Industry

Modelling Customer's Vision towards Distribution Channels of Indian Life Insurance Industry

Impact of Foreign Direct Investment in India on Insurance Industry

The study concluded that increase in foreign direct investment (F.D.I.) is optimistic move for the future of Indian Life Insurance Sector, since this sector need huge amount of capital investment which can be done effectively only through increase in FDI and it enhance overall performance of insurance sector. Parliament has passed Insurance Laws (Amendment) Bill, 2015. It was first passed in LokSabha on 4 March 2015 and later in RajyaSabha on 12 March 2015, which will become an Act when the President signs it. The bill aims to bring improvements in the existing laws relating to insurance business in India. The bill also seeks to remove archaic provisions in previous laws and incorporate modern day practices of insurance business that are emerging in a changing dynamic environment, which also includes private participation. The insurance sector in India has a great potential even during the downtrend and FDI flow is expected to rise in the mere future.

Modelling Customer's Vision towards Distribution Channels of Indian Life Insurance Industry

Modelling Customer's Vision towards Distribution Channels of Indian Life Insurance Industry

Evolution of Indian Life Insurance Industry Post Sectors Liberalisation

It’s been nearly 2 decades that the Insurance sector in India was opened up for foreign investment. When the sector was opened up only 26% FDI was permitted in the sector. Currently the limit is increased to 49% (from 2014). The article ‘Evolution of Indian Life Insurance Industry Post Sectors Liberalisation’ reflects on how post the sectors liberalisation, Life Insurance Industry has grown at a steady pace despite the global financial crisis and regulatory overhaul. The editorial is divided into two phases i.e. from 1999-2008 (when the Global Financial Crisis occurred) and post 2008 where the industry underwent slew of regulatory changes. The editorial has tried to encompass how despite various challenging external and internal factors, a sector has blossomed in India. The article also highlights the demographic advantage India has over other countries and how the same will act as a booster for the Life Insurance Industry to grow in the decades to come.

Cost Efficiency of Indian Life Insurance Service Providers using Data Envelopment Analysis

This study examines the cost efficiency of Indian life insurance service providers using Data Envelopment Analysis. The study was performed for a sample of fifteen of the major life insurance companies in India, accounting for 94.77% of the total market for life insurance in India, over the period of 2010-17. The study extends the scope of cost efficiency by disaggregating the premium collection into components. Also, to provide more detailed insights, the efficiency of the life insurance companies is also analysed with respect to each input and output individually.The results of the study show that the most efficient Indian life insurance companies are Life Insurance Corporation, which has been consistently 100% efficient throughout the research period, followed by SBI Life and ICICI Prudential Life, which have also shown consistently high efficiency over the research period. On the other hand, the least efficient life insurance companies are Max New York Life, followed by PNB Met Life, Reliance Life, and Bharati AXA Life. The results of the study also indicate the strengths and weaknesses of the Indian life insurance providers.

Assessing the Technical Efficiency of Traditional and Corporate Agents in Indian Life Insurance Industry: Slack-based Data Envelopment Analysis Approach

The distribution channels play an imperative role in the life insurance industry. In India, traditional and corporate agency are contributing immensely to the profitability of the insurance companies. The challenges faced by the distributional channels such as high attrition, soaring expense ratio and sales inefficiency have created the need to probe into the efficiency aspects of the channel players. In the absence of such studies in India, this article evaluates the technical efficiency of distribution channels in life insurance industry by analysing the data collected from 12 insurance companies for the period 2012 to 2016. The efficiency scores were obtained by applying data envelopment analysis that considered two inputs (number of agents and commission expenses) and two outputs (average business premium and total policies sold). The findings reveal no significant difference in the efficiency scores of bancassurance and traditional agents. Quiet life hypothesis that market share (ratio of premium contribution to total premium) of distributional channels and their efficiency scores are negatively correlated is not supported. Moreover, the slack analysis shows excess inputs per output generated for both the channels. If the companies that scored low in efficiency do not plug the leakages regarding commission as well a number of agents, adverse performance in the long-term and consequent financial crisis are inevitable.

Determination of factors affecting profitability: An investigation into the Indian life insurance industry

The present research aims to identify the key determinants that influence the financial performance of Indian insurers operating in the life insurance space. The empirical study that covers the period from 2007 to 2016 uses data collected on top ten private life insurers (chosen on the basis of average of last three years’ premium collection). The performance analysis aims to identify the key factors that have an effect on return on asset, the dependent variable. The application of panel regression gives interesting results. The results show the significant influence of operating ratio, claims ratio and tangibility ratio. While the effect of the first and third ratio is negative, the operating ratio shows a positive effect. The detailed explanation is there in the main text. The other variables like liquidity ratio, size and age have an insignificant effect on the insurers’ performance.

Financial Soundness of Indian Life Insurance Firms : An Investigation Based on the CARAMELS Framework

Liberalization of the Indian life insurance sector has brought about a lot of opportunities and challenges. The enactment of the IRDAI Act in 1999 brought in a lot of opportunities with the rising presence of private and foreign players in the country's life insurance sector. On the flip side, the Indian life insurance sector experienced severe setbacks in terms of low profits and negative investment yield post 2007-08 owing to the contagion effects of the global financial crisis that erupted in U.S. during the year 2007-08. At the same time, the liberalization of the country's life insurance sector has further raised concerns for the life insurers in ensuring financial soundness for timely payment of assured returns to the policyholders' besides protection of the policyholders' interests. The present study provided an assessment of the financial soundness of 18 life insurance firms in India during the post-deregulation study-period from 2008-09 to 2014-15 in the backdrop of the U.S. financial crisis. In this regard, the ratio-based CARAMELS framework was used in line with the financial soundness indicators (FSIs), as proposed by the researchers of the World Bank and International Monetary Fund (IMF). The present study pointed out the impressive performances of the private life insurers in overpowering the dominance of the state-owned LICI, besides highlighting the contagion effects of the global financial crisis on the country's life insurance sector.