A.

Introduction
Insurance is one of the major segments of financial market. The insurance business is unique in the sense that it
is rewarded for managing the risk of other parties. In India insurance sector is not only playing a role within the
financial system but also has a significant socio-economic function of providing risk cover to the poor population.
With the opening up of Indian insurance market, competition has become intense. Every company is trying to
woo customers to have large chunk of the market share but barring a few companies most of the new insurance
companies are struggling to survive in the market. In spite of the importance of insurance it is still in nascent
stage in India. Nearly 80 percent of Indian population is without Life insurance cover and the Health insurance,
the penetration rates of health and other non-life insurances in India is also well below the international level.
A.1 Conceptual Framework of Insurance Industry
Insurance may be described as a social device to reduce or eliminate risks to loss of life and property. Insurance
is defined as a cooperative device to spread the loss caused by a particular risk over a number of persons who
are exposed to it and who agree to ensure themselves against that risk. The risk cannot be averted but loss
occurring due to certain risk can be distributed amongst the agreed persons. They share the loss by payment of
premium, which is calculated on the probability of loss. Insurance is a system of protection against financial loss
in which risk is shifted to a professional risk bearer (an insurance company), in exchange for a certain sum of
money (the insurance premium). The insurer agrees to pay the insured if loss occurs.
The earliest references of insurance have been found in Babylonia. By the middle of 14th century, as evidenced
by the earliest known insurance contract (Geneva, 1347), marine insurance was practically universal among the
maritime nations of the Europe. In London, Lloyd's coffee House was a place where merchants, ship owners and
underwriters met to transact business. By the end of the 18th century, Lloyd's had progressed into one of the first
modern insurance companies (Rajesham and Rajender, 2006). In India, Manusmriti (200 BC) provides Indian
version of primitive marine insurance stipulating that "the trader should be made to pay (taxes or duties)" to the
state for providing Yogakshema (Risk and safety) taking into consideration the terms of purchase, sale, the length
of the journey, expenses and incidentals (Bodla et al, 2003). The insurance in its modern form came to India from
UK, with the establishment of the Oriental Life Insurance Corporation in 1818, which failed in 1834. However, the
success of Indian life insurance can be traced back roughly to the second decade of the nineteenth century when
the Madras Equitable began transacting life insurance business in the Madras Presidency in 1829. After that, it
was a rather dull phase with regard to the growth in life insurance enterprise. The Indian life insurance company
act 1912 was the first statutory body that started to regulate the life insurance business in India. By 1956 about
154 Indian, 16 foreign and 75 provident firms were established in India. Then the central government took over
these companies and as a result the LIC was formed.
The history of general Insurance dates back to the Industrial Revolution in the west and the consequent growth of
sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. The
General insurance business in India, can trace its roots to the Triton Insurance Company Ltd., the first general
insurance company established in the year 1850 in Calcutta by the British. In 1957 General Insurance Council, a
wing of the Insurance Association of India, framed a code of conduct for ensuring fair conduct and sound
business practices. In 1972 The General Insurance Business (Nationalisation) Act, 1972 nationalised the general
insurance business in India with effect from January 1, 1973 and General Insurance Corporation of India (GIC)
was formed in pursuance of the Act. The existing 107 insurers were amalgamated and grouped into four
companies viz. the National Insurance Company Ltd., the
New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance
Company Ltd. These companies were formed as the fully owned subsidiary companies of GIC. In 1999,
regulatory body for insurance sector was formed with the name of Insurance Regulatory and Development
Authority (IRDA) and the market was opened for private players. With the entry of private insurers, the GIC
subsidiaries were delinked from the holding company in 2000, and a separate body called General Insurers
(Public Sector) Association (GIPSA) was created to facilitate interaction among the four. The GIC was converted
to function as the National Reinsurer.
A.2 Concept of Customer Satisfaction
Customer satisfaction is a measure of how products and services supplied by a company meet or surpass
customer expectation. In a competitive marketplace where businesses compete for customers, customer
satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. The
concept of consumer satisfaction occupies a central position in marketing thought and practice. Satisfaction is a
major outcome of marketing activity and serves to link processes culminating in purchase and consumption with
post purchase phenomena such as attitude change, repeat purchase, and brand loyalty. Reichheld and Sasser
(1990) found that when a company retains just 5 percent more of its customers, profits increase by 25 percent to
125 percent (Bowen and Chen, 2001). The centrality of the concept is reflected by its inclusion in the marketing
concept that profits are generated through the satisfaction of consumer needs and wants. The need to translate
the philosophical statement of the marketing concept into pragmatic operational guidelines has directed attention

to the development and measurement of consumer satisfaction. In the early 1970s, consumer satisfaction began
to emerge as a legitimate field of inquiry. Satisfaction is a major outcome of marketing activity and serves to link
processes culminating in purchase and consumption with post purchase phenomena such as attitude change,
repeat purchase, and brand loyalty. It can broadly be characterised as a post purchase evaluation of product
quality given pre purchase expectations (Kotler, 2003).
To encourage actions, which will lead to an optimal level of satisfaction, it is necessary to understand the link
between the antecedents of satisfaction and satisfaction's behavioral and economic consequences. The vast
majority of studies hold that satisfaction is related to the size and direction of the disconfirmation experience,
where disconfirmation is related to the person's initial expectations. More specifically, an individual's expectations
are: confirmed when a product performs as expected; negatively disconfirmed when the product performs more
poorly than expected; and positively disconfirmed when the product performs better than expected.
Dissatisfaction results when a customer's expectations are negatively disconfirmed. The full disconfirmation
paradigm encompasses four constructs: expectations, performance, disconfirmation, and satisfaction. First,
buyers form expectations of the specific product or service prior to purchase. Second, consumption reveals a
perceived quality level, which is influenced by expectations if the difference between actual quality and
expectations is perceived as being small. Hence, perceived quality may increase or decrease directly with
expectations as indicated by the arrow drawn from expectations to perceived quality in Figure l. Third, perceived
quality may either confirm or disconfirm pre purchase expectations. The determination of the extent to which
perceived quality expectations are disconfirmed is depicted by arrows drawn from expectations and perceived
quality to disconfirmation. Fourth, as shown by the arrows in, satisfaction is positively affected by expectations
and the perceived level of disconfirmation. Expectations provide a baseline or anchor for level of satisfaction. If
disconfirmation is perceived to have occurred, then customer satisfaction increases or decreases from this
baseline level. Expectations are expected to have a direct positive effect on perceived quality. However,
expectations affect satisfaction only via perceived quality and disconfirmation.
[FIGURE 1 OMITTED]
A.3 Customer Satisfaction in Insurance
Insurance is not a commodity. It is a promise to perform in future in return for a present monetary consideration.
Such a promise is made in an environment when the customer is absolutely not sure whether the promise will be
fulfilled if and when the need arises. But then, if and when the need comes, it is already late for him to evaluate
the customer service standards in the insurer. Yet another unique feature of the industry is the peculiar rules of
the game such as uberrimae fidei (utmost good faith), indemnity etc, which underwriters are more aware of than
the customers. Insurance being an intangible product, the 'technical quality of the service' depends upon its
reliability.
Over the last few years, developments in the insurance sector have resulted in a paradigm shift in the way the
business is conducted. In a free market scenario, the customer has a choice from whom to buy. He exercises this
choice based on perceptions formed through his experiences. Customer servicing today has become the focal
point of insurance companies. It is an area where the new companies are clearly ramping up by bringing in their
best practices and operational efficiencies by appropriate use of technology. There is a greater sensitivity in
dealing with the customers. However, a lot needs to be done. Insurers need to fast gear up to the situation and
the real response and turn-around time in delivery of services needs to be reduced in specific areas like delivery
of first policy receipt, policy documents, premium notice, maturity payments, death claims etc.
There is absolutely no exaggeration in mentioning that the amount of customer grievances in the insurance
domain has gone up steeply. Grievances arise where there is a certain level of expectation by a customer and
the reality does not match up to it. This could be in terms of response time or quantum or the lack of response
itself. It is time that insurers took stock of the situation and wherever there is need for plugging the loopholes,
attend to that without any further loss of time. Instead of looking for reasons to explain the emergence of
customer related problems, it would be more desirable to ensure that there is a fall in their number. Redressal of
customers' grievances is just a reactive way of insurers providing the minimum expected customer service. The
need of the hour is a more proactive approach aimed at seeking what additional elements would delight the
customer more and more.
The shots for market changes would be called by the consumers and no longer by the insurers. Competition has
enabled more choices of services and products to consumers; and excellence in perceived service by insurers is
seen as a differentiator, instead of price; as the real value of the product. Customers want the best of all the
worlds; price reductions, wider product coverage and excellent claims settlement. Once that is available,
customers would ask, what next? That is the trend seen in all other sectors. Price reduction is a one-time
exercise. After collecting a large number of customers, how does one retain them? The obvious question to ask
is: how many customers are happy? How would insurers deal with the changing loyalties of consumers, who only
think of their interests to the exclusion of those of the insurers, annually seeking more value to be delivered at
lower costs? Sentiment to crush competition at any cost should not be the sole marketing guide; but excellence
in execution of assurances given to consumers and internal cost cutting should be the goals to pursue for

insurers to become more competitive. Insurers should know that in a competitive scenario, there would be only
one winner to emerge out of the market scene. And that is the 'customer'--the powerful change agent of the
market that would call the shots to shape the future of the insurance market.
B. Review of Literature
The review of the literature is divided under two heads i.e. Insurance and customer satisfaction.
B.1 Insurance
The insurance and the economic growth of the country mutually influence each other. As the economy grows, the
standard of living of people improves and demand for insurance products emerges. A well-developed insurance
market promotes economic growth by encouraging risk taking.
Pfeffer (1965) in this study makes an effort to measure the profit potential of the new life insurance companies.
The five types of strategies available to new companies are: grandfather strategy; hit and run; captive; brokerage;
and traditional strategy. Although the evaluation of profit potential in case of new companies is practically
impossible due to various reasons such as paucity of useful published data about the actual performance, it is
concluded that out of many entrants, only a few are capable of doing business in the long run.
Peterson et al (1972) study the effect of marketing innovations in life insurance sector. The results show that flow
of innovation is a two-step flow i.e. it flows from innovator firms to large firms in the industry and then to others.
The relative advantage of innovating firms is short lived when the offering in unprotectable. Therefore future
research on diffusion of competitive innovation among sellers must consider industry characteristics such as
"ability to protect innovations."
Meidan (1982) presents different marketing strategies for insurers, suggesting that the selection of an appropriate
strategy should be based on the internal conditions and external forces facing the firm. The two broad categories
of insurance marketing strategies exist: growth strategies; and competitive marketing strategies. Due attention
should be given to the marketing organisational structure and its departmental responsibilities.
Fitzgerald (1987) develops a utility maximising model of a married couple choosing the amount of life insurance it
wants on each of its earners. Social security survivor benefits are found to decrease the demand for life
insurance on an earner, while social security benefits that are conditional on the earner's survival increase the
demand. Husband and wife's future earnings are found to increase the demand for insurance on husband's life.
Browne and Kim (1993) identify the factors that lead to the variations in life insurance demand across nations.
Important factors found to be dependency ratio, national income, social security provided by government,
inflation, education level, average life expectancy, price of insurance and religion. The findings that life insurance
is positively correlated with national income and negatively correlated with inflationary expectations, suggests
that economic development and economic stability greatly increase life insurance consumption. Outreville (1996)
presents some empirical tests of the relationship between financial development and the development of the life
insurance sector and provides empirical evidence of the negative effects of a monopolistic market on life
insurance growth. Skilled human capital is a source of competitive advantage because industries in developing
countries suffer from a major handicap of shortage of skilled personnel.
Zimmerman (1999) in this study concentrates on the insurance industry and on insurance firms' actions designed
to cope with barriers to international trade. Thy find out that there are 26 barriers to insurance trade, which are
discriminatory against foreign insurers. Respondents feel that barriers can become a critical factor if they create
prohibitive costs or difficulties for the firm's entry. A new market entry decision model has been proposed based
on the findings. Saibaba et al (2002) study the perception and attitude of women towards life insurance policies.
Nowadays many insurance companies are trying hard to woo the female population. The study finds that women
feel that their lives are not as valuable as their husbands, they perceive insurance as a tool for risk coverage and
not as a tax saving device, there is also lack of knowledge about suitable insurance plans.
Reddy (2005), in this article studies the customer perception towards life insurance companies' policies. This
study is limited to Bangalore city only. The results are that, majority of respondents feel that policies offered by
private companies are up to their expectations but when compared with public companies' policies very few
policies are better alternatives. Sharma and Agarwal (2005) discuss the insurance sector in India in the prenationalisation era, post nationalisation era, post liberalisation era and emerging scenario. To be more
competitive and responsive to the needs of the societies, the insurance players would be required to concentrate
on the various strategies viz. environmental analysis, restructuring organisations, human resource development,
efficient marketing strategies, distribution channels and corporate governance.
Rajesham and Rajender (2006) also discuss the changing scenario of the Indian insurance sector. They point out
the challenges in the present scenario as increasing India's share in the global insurance market, having
qualified, skilled actuaries, penetration in rural markets, developing customised policy for clients etc.

Selecting the type of life insurance policy is a very complex decision. In this paper, Rajagopalan (2006) does a
comparative evaluation of the traditional insurance policies available in the Indian market from a consumer
perspective. He suggests that, it is better for an individual to buy the cheapest term insurance for the required
amount of death protection and term. In case of endowment policy, instead of buying non participating
endowment policy, it is better to invest the extra premium in a PPF account.
Barkur et al (2007) study the influence of five critical factors on service quality in the insurance sector and
attempt to obtain a generic solution to enhance the quality of service. The research is based on system dynamics
methodology, which involves sequential phases. The results of this research have indicated that the key
parameters, e.g. past experience, personal needs, external communication, word of mouth, and active clients
have significant influence on service quality of the insurance sector.
Outreville (2008) studies the international diversification of successful insurance companies. The results of this
study have important implications. First, the results indicate that location-specific advantages such as size,
education, regulatory barriers, competitiveness, and cultural distance do provide an explication of the
internationalisation of insurance firms in some locations. Second, they show that good governance has a strong
impact on the choice of countries by insurance firms.
Ma and Pope (2008) investigate the relationship shared by foreign market characteristics and the participation of
international life insurers in those markets. The analysis reveals that the characteristics that are found to be
statistically significant with respect to international participation include high levels of trade liberalisation and/or
low insurer market share concentration, high levels of national wealth, and high levels of government expenditure
on social security retirement benefits.
Zuasti (2008), in this article studies the interaction between insurance and dynamic financial markets. This is
demonstrated using a general equilibrium model, where agents not only buy insurance but can also invest in
shares of the companies that sell insurance. The central result shows that in equilibrium, risk-averse agents
purchase full insurance coverage, despite unfair insurance prices. The three conditions that explain this result,
are insurance contracts are priced competitively; financial prices include a risk premium only for undiversifiable
risk, and financial markets are effectively complete.
B.2 Customer Satisfaction
As the saying goes; make a customer happy, he would tell two of his friends about it, make a customer unhappy,
he would tell everyone he knows about it. A satisfied Customer is the best ambassador. Recognising the
importance of customer satisfaction, it is extensively studied by researcher in various fields; a few important ones
which are related with the subject of study are given here.
Swan and Combs (1976) feel that it is seldom clear which general dimensions of product performance are
important to the consumer and how these dimensions are related to satisfaction. This study examines one aspect
of the relationship between expectations, performance, and satisfaction. The main argument in this article is that
satisfaction involves the two processes: instrumental performance; and expressive performance. The authors
predict that instrumental performance is necessary, but not sufficient condition for satisfaction. Dissatisfactory
items will involve primarily failures of instrumental performance to meet expectations.
Muffatto and Panizzolo (1995), develop a framework for customer satisfaction and provide a detailed description
of the relationship structure between the different elements of the organisational structure. The authors propose a
framework for the analysis of the organisational processes related to customer satisfaction. The framework has
three sections; planning processes, design processes and monitoring processes. This means using an integrative
and holistic approach, which optimises the interaction of primary processes and activities. Hallowell (1996), in
this paper illustrate the relationship of profitability to intermediate, customer-related outcomes that managers can
influence directly. The findings support the theory that customer satisfaction is related to customer loyalty, which
in turn is related to profitability. This paper presents an empirical analysis of one retail bank. The author posits
that although customer satisfaction is related to profit, a bank should not endeavour to satisfy every customer.
Banks should target and serve only those customers whose needs it can meet better than its competitors in a
profitable manner.
Anderson et al (1997) examine the links between customer satisfaction and productivity. The authors present a
conceptual framework useful in resolving these contradictory viewpoints. The findings indicate that the
association between changes in customer satisfaction and changes in productivity is positive for goods, but
negative for services.
Krishnan et al (1999) study the drivers of customer satisfaction for financial services. The contributions of this
paper are both managerial and methodological. On the methodological front, this paper introduces a new
Bayesian approach for estimating customer satisfaction models. On the managerial front, the analysis indicates
that satisfaction with product offerings is a primary driver of overall customer satisfaction. Satisfaction with the
quality of financial reports, branch services, and the quality of automated telephone service through call centers

are also important, although their effects are substantially higher for specific types of customers. Smith et al
(1999), in this article develop a model of customer satisfaction with service failure/ recovery encounters. The
authors execute the research in the context of two different service settings, restaurants and hotels. The results
of this research provide organisations with guidelines for developing service recovery. These guidelines can be
used to implement service delivery systems that include provisions for appropriate recovery efforts, allocate
recovery resources to maximise returns in terms of satisfaction, and train employees to recognise failures and
reduce their effects on customers.
Kanji and Wallace (2000) recognise customer as economic assets. When a customer recognises quality, it is
reflected in customer satisfaction. Customer satisfaction in turn, can lead to increased revenue. But for a
business to be successful in the long run, it must satisfy customers at a profit. In this paper, the authors have
used a condensed version of Kanji's (1998) generic Business Excellence model to measure organisation with the
help of 10 interrelated latent variables. These are; leadership, delight the customer, customer focus,
management by fact, process performance, people-based management, people performance, continuous
improvement, improvement culture, business excellence.
Bowen and Chen (2001) develop and implement a method for hotels to identify attributes that will increase
customer loyalty. Based on surveys from hotel guests, the results verify that customer satisfaction does not equal
customer loyalty. Managers should realise that having satisfied customers is not good enough; they must have
extremely satisfied customers. The results of study also support the contentions that there is a positive
correlation between loyal customers and profitability.
Guo et al (2004) investigate the linkage between marketing metrics like customer satisfaction and sales and
financial metrics such as profitability and stock prices. However the authors propose that there is a lagged effect
between the two. In other words, past satisfaction has a positive effect on current profitability, and similarly, past
profitability affects current satisfaction. The results of the study confirm that satisfaction has a direct bearing on
the firm's financial well-being.
Bennett and Rundle-Thiele (2004), in this paper demonstrate that satisfaction is not the same as attitudinal
loyalty and that there are instances where satisfaction does not result in loyalty. The results indicate that
satisfaction and loyalty in a business services setting are different constructs, and while the relationship is
positive, high levels of satisfaction do not always yield high levels of loyalty. Customers with low satisfaction and
high attitudinal loyalty are potentially vulnerable to competitors' offers that appear more satisfying.
Das and Samanta (2005) consider customer satisfaction as a business survival requirement. The results identify
eight factors which could reflect the customer satisfaction level. These are productivity, quality of delivery,
meeting delivery schedule, technical support, communication, proactive or promptness in response, skill level
and domain knowledge. The authors propose a customer satisfaction index using principal component analysis.
Gilbert and Veloutsou (2006) write that satisfied customers are key to long term business success. The industries
included are banking and finance, retail, government, grocery stores, hospitality/sports, and restaurants. The
paper finds that customer satisfaction does differ across industries, and that both the banking/finance and
hospitality/sports industries seem to please their customers more than the other industries analysed in this
research undertaking. Cugini et al (2007) propose and test a framework to analyse and manage the relationship
between company costs and customer satisfaction in service industries. This study makes a contribution to the
understanding of strategic cost management in service industries, through the development of a model which
allows establishing a direct link between sources of efficiency in managing service costs and sources of
effectiveness in generating customer satisfaction.
Yu (2007), in this study examines the cross-sectional relation between customer satisfaction and individual
customers' purchase behavior as well economic contributions; and also investigates how customer satisfaction
affects future customer revenue, costs, and profits. This finding reveals that higher customer satisfaction leads to
higher customer revenue and higher customer costs at the same time, and thus customer profits remain
unaffected.
Meirovich and Bahnan (2008), study the links between quality and consumers' emotions and eventually with their
satisfaction. This study introduces two components of total quality structure; quality of design and quality of
conformance, for analysis of the link between quality and customer emotions. The results show that there is a
significant relationship between possible combinations of two quality dimensions and customers' affective
responses in terms of both their valence and intensity. An interesting finding of this study suggests that customers
value quality of conformance higher than quality of design.
Frank and Enkawa (2009), in this article purport to find out how economic processes influence customer
satisfaction. The study examines the separate impacts of economic growth and economic expectations on
perceived value, quality expectations and customer satisfaction. The analysis reveals that customer satisfaction
is positively influenced by economic growth and negatively by current economic expectations. The results show a
strong correlation between economic expectations and (overall and industry-specific) quality expectations.

C. Need and Significance of the Study

Review of literature reveals that very little research has been done on insurance industry in India. Considering
the fact that insurance is coming up in a big way in India, there is an emergent need for doing research on
various facets of insurance industry in India. The need and significance of the study can be summarised as:
* Insurance has a very long history but most of the studies are done from the finance point of view not from
marketing view point. Such studies are important because companies need to market themselves to increase
their market share. This research project is an effort to fill that gap.
* As revealed by the review of literature, customer satisfaction has been ignored in the field of insurance services.
* This project is restricted to life insurance only because insurance is primarily a device for social security and not
a tax saving device, as it is generally viewed as. Considering the social importance of life insurance in a poor
country like India, the companies in life insurance industry only constituted the domain of the study.
D. Objectives of the Study
The overall aim can be divided into two specific research objectives:
* To identify the factors affecting customer satisfaction in life insurance sector.
* To compare the satisfaction level of customers of public and private life insurance companies.
E. Scope of the Study
The scope of the study is restricted to the Life Insurance sector only. Although there are 23 life insurance
companies in the market Life Insurance Corporation (LIC) holds 64 percent of the market share.
As depicted in Table: 1, most of the private insurance companies have negligible market share. The sample
companies were selected on the basis of their market shares as on March 31, 2010. The top five life insurance
companies were selected as sample companies. To keep the scope of study limited, information was collected
from the customers of life insurance companies living in Chandigarh, Mohali and Panchkula only.
F. Research methodology
The following research methodology was used in this study:
F.1 Sampling Design:
All the customers of life insurance companies living in Chandigarh, Mohali and Panchkula constituted the
population of this study. The respondents were chosen through the convenience sampling method.
F.2 Sample Size:
The sample size consisted of 120 respondents, out of which 60 represented LIC India and 60 represented the
remaining 16 companies.
F.3 Collection of Data:
The data was collected by using both primary and secondary sources. As the study was concerned with
identifying customer satisfaction of policyholders, the content of primary data was more in it. Primary data was
collected through questionnaires, from the customers and secondary data was collected from sources such as
IRDA journals, other journals, books and published data.
F.4 Questionnaire Development
For developing the questionnaire regarding customer satisfaction, an extensive review of literature was done.
Customer satisfaction has become a fundamental construct in marketing practice given its importance and
established relationship with customer retention, customer repurchase behavior, and firm profitability. There is an
abundant literature concerning the determinants of customer satisfaction judgments. Churchill (1979) states that,
the search for ways to measure customer satisfaction would include product brochures, articles in trade
magazines and newspapers, or results of product tests such as those published by Consumer Reports. The
inputs were taken from the works of Crosby and Stephens (1987), Surprenant and Solomon (1987), Brown and
Swartz (1989), Oliver and DeSarbo (1988), Oliver and Swan (1989), Bitner et al (1990), Crosby et al (1990),
Oliver (1993); Ostrom and Iacobucci (1995), Goff et al (1997), Homburg and Rudolph (2001), Szymanski and

Henard (2001), Preis (2003), Wu et al (2006), and Dovaliene et al (2007).

F.5 Reliability
Prior to the analysis of the data, the research instrument was tested for its reliability. Cronbach alpha was
calculated, to test the reliability of the customer satisfaction scale. This coefficient varies from 0 to 1, and a value
of 0.6 or less generally indicates unsatisfactory internal consistency reliability (Malhotra, 2006). The scale
comprised of 17 variables. The number of respondents was 97. The reliability coefficient indicated that the scale
for measuring customer satisfaction was quite reliable as the alpha coefficient was 0.8674. In this case also, the
reliability of scale exceeded the recommended 0.6 threshold. Thus it was considered that the scale used is
reliable.
F. 6 Tools for analysis of data:
Factor analysis was used to identify the factors influencing customer satisfaction; multiple regression analysis
was used to study the influence of factors on customer satisfaction. Simple percentages were also calculated to
find the satisfaction level of respondents.
G. Data Analysis and Interpretation
A five point Likert scale was used ranging from strongly agree (5) to strongly disagree (1). A mid level score of (3)
indicated neutral evaluation by the customers. Other points on the scale were agree (4) and disagree (2). The
questionnaires were distributed to assess the satisfaction level of customers. Out of total questionnaires
distributed in Chandigarh and its satellite cities i.e. Mohali and Panchkula, 97 were returned to the researchers.
To identify the factors of customer satisfaction, factor analysis was used.
G.1 Application of Factor analysis
Factor analysis is a statistical tool primarily used for data reduction. It seeks to resolve a large set of measured
variables in terms of relatively few categories, known as factors. This technique allowed the researcher to group
variables into factors (based on correlation between variables). While this can be done in a number of ways, the
most frequently used approach is principal component analysis which has been used in this research paper. The
data was analysed using SPSS package. Factor analysis was performed on the 17 explanatory variables. The
Principal Components Method, using Varimax Rotation reduced the 17 variables 5 factors having eigen values
greater than 1.0. First of all, Kaiser Meyer Olkin (KMO) measure of sampling adequacy was calculated to
examine the appropriateness of factor analysis. High values (between 0.5 and 0.1) indicate that factor analysis is
appropriate. In Table: 2, KMO is 0.606 which shows the appropriateness of factor analysis here, in Bartlett's Test
of sphericity the chi square value is also large which also favours the same point. Eigen values represent total
variance explained by each factor. It is the sum of squared factor loadings relating to a factor.
The number of factors to be retained can be inferred from the Total Variance Explained. It is recommended that
factors extracted should account for at least 60 percent of the variance. From Table: 3, it is seen that first 4
factors account for 63.11 percent of the variance, so first 4 factors should be retained.
Table: 4 depicts Rotated Component Matrix. This is the central output for factor analysis. The factor loadings,
also called components are the correlation coefficients between the variables (rows) and factors (columns).
Five factors were extracted as a result of factor analysis. For the purpose of interpretation, only those variables
were selected whose loadings were 0.5 or higher. This means that each factor comprised of only those variables
that loaded 0.50 or higher on that factor. The rotation matrix has extracted 5 factors but Table: 3 shows that first
four factors account for 63% of variance, so only four factors were retained. Table: 5 lists the factors in the order
in which they are extracted. Negative value of loading interprets the variable in opposite way, e.g. price of policy
is important determinant has negative loading, therefore it would be read as price of policy is not an important
determinant. The factors influencing customer satisfaction identified through factor analysis were Customised and
timely service, Brand USP, Considerate employees and Price Immunity. Few astonishing results were found while
doing the analysis.
The first one is respondents do not consider price of policy (i.e. the price paid while buying policy) as important.
This may be because study was carried out in Chandigarh, Mohali and Panchkula where majority of population
comes in high income class bracket. Secondly they want high maturity returns from policies but do not rate
guarantee of returns as important.
G.2 Application of Multiple Regression Analysis
After review of literature few parameters of customer satisfaction were identified. These, when translated in terms
of insurance, were policy itself (including its features, price, maturity benefits and tax saving content); agent's
competence and after sale service. Multiple regression analysis was used to find out the association between

these variables and customer satisfaction.

Customer satisfaction was regarded as dependent variable; and policy, agent's competence and after sale
service were considered as independent variables.
Customer Satisfaction= f {Policy, Agent's Competence and After Sale Service}
Table: 6 shows the results of regression analysis. In model summary, R (0.712) is the multiple correlation
coefficient, it shows the correlation of independent variables with dependent variable. Larger values of R indicate
stronger relationships. R square shows the proportion of variation in the dependent variable explained by the
regression model. Small value indicates that the model does not fit the data well. R square is 0.507, meaning that
approximately 50 percent of the variability of customer satisfaction is accounted for by the variables in the model.
Adjusted R square indicates that about 49% of the variability of customer satisfaction is accounted for by the
model. The Anova table shows that for 3 numerator degrees of freedom and 96 denominator degrees of freedom,
3.95 (table values of F) is the upper limit of acceptance region for a significance level of 0.01. Calculated F value
31.836 is far above than this, so it is seen that the regression as a whole is highly significant. Same conclusion
can be drawn by looking at Sig. in Anova table. The value 0.000 is less than 0.01, so again it is concluded that
regression is significant.
The coefficients table helps us to see which among the three independent variables influences most of the
variance in customer satisfaction. The value of Beta under standardized coefficients is highest (0.682) for policy,
which is significant at 0.0001 level. It may be seen that this is the only independent variable which is significant.
The positive beta weight indicates that if overall customer satisfaction is to be increased, it is necessary to
enhance the satisfaction with policy.
H. Results of the study
The detailed results of the study are discussed below. One of the objectives of the study was to explore factors,
which are potential and important determinants of customer satisfaction in case of life insurance customers. The
factors identified through factor analysis are: Customised and timely service; Brand USP; Considerate
employees; and Price Immunity. Out of the factors identified through research articles, only satisfaction with the
policy (including its features, price, maturity benefits and tax saving content) was found to influence the overall
satisfaction level of customers.
Fig: 2 shows that out of the total respondents, 74 had life insurance policies, 20 had retirement policies and only
3 had health policies.
From this information, we can infer that health segment needs to be tapped. Although all the insurance
companies have attractive plans for health insurance and they are advertising heavily also, but still not many
people are buying these. Life insurance segment is the most sought after segment. Because of disintegration of
joint families, people nowadays want to secure their old age, therefore they are also buying retirement plans.
The Fig: 3 shows that very few policyholders are females, which strengthens the results of previous studies
(Fitzgerald, 1987; Saibaba, Prakash, Kalyani, 2002) which states that husband's life is considered more
important. Only 7 respondents were female out of 97, which is a very low figure.
While comparing the satisfaction level of customers of Public and Private insurance companies, the results
showed that 73.9 percent customers of private insurance companies were satisfied with their insurance
company; and 74.47 percent customers of LIC India were satisfied with their company while 92.59 percent of
respondents who were policyholders of both the companies were satisfied (Table: 7). So it can be said that there
is not much difference between the satisfaction levels of customers; private insurance companies are equally
satisfying their customers.
Private companies are putting vigorous efforts but still LIC has more clients (although market share of LIC is
declining constantly). People are biased towards it because of its government ownership. Another reason of it
may be because of many years of operation and being the oldest in the industry, it has more experience of
catering to the customers. Customers are not bothered about after sale service because they don't expect it in
case of insurance policies. The results indicate that satisfaction with product offerings is the primary driver of
overall customer satisfaction in case of insurance policies, even if the after sale service is not up to the
satisfaction level.
The results also showed that number of policies bought by the households is not dependent on the income level
of the family. Anova table (Table: 8) shows that for 1 degree of freedom for
numerator and 95 degrees of freedom for denominator; F value is not significant. The value of beta coefficient
(0.015) is also very less. Therefore, the results show that high family income may not necessarily mean that more
policies will be bought by the family.

The common grievances identified during interviews with the customers are as follows:
* Terms of insurance policies are not clear and most of the customers rely on what they are told by the agents.
* Agents are not competent enough to provide professional assistance.
* Non-issuance of renewal notices and also on the correctness of the contents of the policy is also a bone of
contention.
I. Recommendations
The results reveal that even though the customers are satisfied with the product, they were not satisfied with after
sale service and the quality of the agents. To improve the overall customer satisfaction, following suggestions can
be made on the basis of study.
1) Improve the quality of agents: Dissatisfaction with agents is not a positive sign for companies because he is
the vital link between customer and company. In the competitive market where product offerings are more or less
same, the companies can excel only if they provide better services through well trained agents. Outreville (1996)
also pointed out that skilled human capital is a source of competitive advantage because industries in developing
countries suffer from a major handicap of shortage of skilled personnel.
2) Target female segment: The number of female respondents is very less which reveals that this is an untapped
segment. Although companies like LIC and Bajaj Allianz have insurance policies specifically for women (LIC has
Jeevan Bharati, Bajaj Allianz issues policies specifically for house wives and working women), they need to be
marketed properly. Other companies should also think in the same direction. When there are so many players in
the market it would be better to increase the size of the pie, rather than sharing the same pie.
3) Novelty is needed: The insurance penetration is low both in rural, as well as urban area. Rural areas are given
special importance by IRDA, through the stipulation that every life insurer, which is in the insurance business
after commencement of the IRDA Act, 1999, has to allocate five percent of its business to the rural sector in the
first financial year, seven percent in the second financial year, 10 percent in the third financial year, 12 percent in
the fourth fiscal and 15 percent in the fifth fiscal. In spite of this, the insurance clientele is very less. Therefore,
innovative ideas are required to increase the penetration of insurance. In rural areas, insurance policies should
be sold through postmen, teachers, shopkeepers etc. In urban areas, the insurance companies should tie up with
more distribution channels and should design policies to fulfil the needs of urban customers.
4) Clarity in terms of policy: Most of the people do not have full understanding of their policy. Firstly, the insurance
contract is full of insurance jargon which is not understood by the laymen; and secondly agents do not give full
details of the policy. Although IRDA has already taken steps to simplify the language of insurance contracts, it is
suggested that agents should be strictly told to explain all the details of policies to clients.
5) Increase awareness: People are aware about presence of insurance companies but awareness about the
importance of insurance as risk avoidance tool is low. Companies advertises about the tax saving benefits,
maturity benefits etc. but they do not stress on the risk coverage aspect. Being the apex regulatory and
development body in insurance, IRDA should make efforts to create awareness about the social importance of
life insurance among the masses.
J. Directions for future research
This research was carried out in cities where average standard of living of people is fairly high. Similar research
can be undertaken in rural areas and compare the results. In insurance the relationship between the customer
and company begins when customer buys the policy and ends when the policy expires or matures. Therefore,
overall customer satisfaction would include the claim handling and settlement service. This project included only
those policyholders whose policies were still alive and who have not got through claim settlement process. Future
researchers may include ex-policyholders in their sample to know about their claim settlement experience,
because that would complete the overall customer satisfaction.
K. Conclusion
The insurance sector has come into sharp focus in India in the recent time due to the phenomenal changes
taking place in terms of number of companies offering insurance products, the variety of products in the market
and the proliferation of intermediaries selling them. In spite of the healthy growth witnessed in the insurance
sector in recent years, and the expansion of the market evidenced in part by the increasing market share of the
new players, the inroads that insurance has made into the market remains lower in India than in many parts of
the world. When a customer recognises quality, it is reflected in customer satisfaction. Customer satisfaction in
turn, can lead to increased revenue. Customers are economic asset but, it is not enough solely to satisfy

customers; for a business to be successful in the long run, it must satisfy customers at a profit. Although there
are many insurance companies in the life insurance industry, barring a few all the others are struggling for
survival. Agent attrition rate is also very high in the industry. Developing dedicated human force is the need of the
hour and also to think out of the box to design new policies which would be able to attract customers. Innovation
in every aspect is required to survive and to increase the penetration level of insurance, campaigns should be
launched to increase awareness about benefits and importance. Instead of pushing the policies to customers
through agents, demand should be created so that the customer pulls the policies.
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