Insurance
Industry can be regarded as an industry with strategic importance as it not
only contributes to the GDP but also minimizes risk and optimizes savings. The
most important functional activity of an insurance policy is to protect the
consumer against financial or other loss arising from a specified set of risks
at some cost. It thus decreases anxiety and improves financial stability and much
needed social security, especially in times of crisis of nuclear households in developing
countries. The role of life insurance is undergoing significant changes today
as is evident from the service alternatives and the product advertisements. The
focus lies on insuring oneself and one’s close family members for self-reliance
because nuclear families are the emerging trend in modern India. To meet the diversifying
needs of various individuals, the life insurance players have a vast array of
products and services in offer. Besides this, almost all companies offer the
flexibility to customers to choose the most suitable product for themselves by
combining features of a number of products and services together. Thus life
insurance companies have to customize the services to improve the quality of
service to suit the customer as per their needs. They also need to provide
error free services with almost zero response time. The current objective aims
to explore various factors of life insurance service impacting perceived
satisfaction and how it impacts loyalty.

 

1.1 Current Challenges faced by
Insurance Companies

Development of Insurance industry in any country is
measured by two parameters. Insurance Penetration level and Insurance Density
Ratio. The rate of insurance penetration level in India is 3.42% which is much
lower than the world average of 6.2%. India comprises of about 17% of the world
population. But it occupies only 1.2% of the world’s total premium. This shows
that India is not only under penetrated but inadequately penetrated. The
regulatory body failed to effectively promote penetration in the country,
whereas the mission of central government is to make our country 100%
penetrated. Industry report says that 1% increase in insurance penetration
translates 13% reduction in uninsurable losses, 2% increase in investment
equivalent of GDP and 22% tax payers’ contribution. This shows the significance
of insurance industry on Indian economy. With the policy of  liberalization and privatization insurance
industry is facing market driven competition. Though the future looks promising
with growing young insurable population and high disposable income levels but
still certain disadvantages cannot be ruled out. High operating cost, High
claim ratio and need for innovative distribution channel are some challenges to
be fought out.

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