Research Journal of Recent Sciences _________________________________________________ ISSN 2277-2502

Vol. 3(ISC-2013), 87-94 (2014) Res. J. Recent. Sci.

A Study on the Behaviour of Micro (Life) Insurance Policy Holders’ with

Reference to Coimbatore, India
D. Geetha and S. Vijayalakshmi
Department of Commerce, Avinashilingam Institute of home science and higher education for women, Coimbatore, Tamilnadu, INDIA
Available online at: www.isca.in, www.isca.me
Received 30th December 2013, revised 7th January 2014, accepted 5th February 2014

Abstract
Insurance Regulatory and Development Authority (IRDA) has created a special category of insurance policies called micro-
insurance(MI) policies to promote insurance coverage among economically vulnerable sections of society. Micro insurance
contributes significantly to alleviate poverty and to raise the living standard of the people of the country. Hence it is
imperative to conduct a research study on the performance of MI and find out the relevant problems. The research study was
conducted in Coimbatore during 2013 with a sample of 100 MI(life) Policy holders. The objectives are i. To identify socio-
economic determinants of MI(life) demand in Coimbatore. ii. To ensure the level of satisfaction of MI(life) holders. iii. To
identify specific problems relating to MI(life). To achieve these objectives a research methodology was framed. The research
design is both descriptive and analytical. Both primary (questionnaire) and secondary data were used. The data collected
was analyzed with relevant statistical tools like percentage, mean score, Kruskal Wallis H-Test, factor analysis and Likert
scale technique. From the analyzed data results were derived. Findings were summarized and presented in the research
study. The study shows the growing popularity of MI(life) policy and the awareness among the public. Micro Insurance can
play a crucial role as a comprehensive tool to reduce poverty, inequality and vulnerability, particularly where public social
protection measures are inadequate and unevenly distributed.

Keywords: Poverty, risk, social security, micro-insurance policy, policy holder behavior.

Introduction as a comprehensive tool to reduce poverty, inequality and

vulnerability, particularly where public social protection measures
Micro insurance is a form of life, health or property insurance are inadequate and unevenly distributed. More than fifty
which offers protection to the policy holder at a low contribution percentages of the poor around the globe do not benefit by any
(hence called premium). It is aimed at low income population and kind of social security measure. Among the total workforce in
designed to help them cover themselves collectively against risk most of the developing countries like India, informal labour is
(hence insurance). It is a tool for increasing economic growth and substantial. The casual nature of labour force shows considerably
development by providing small scale, low premium insurance raising trend.
policies to members of the poorest strata of society in the
developing world1. In India, it is often assumed that a Micro Indian informal sector labour force is very poor and they
Insurance policy is simply a low-premium insurance policy. essentially require a common social protection measure. Social
security measures prevailing at present in India covers disability,
The micro insurance regulation of 2005 was a pioneering health, old age and economic risks. The implementation of the
approach by the Insurance Regulatory Development Authority schemes and its working procedures are cumbersome.
(IRDA). India is among the few countries to draft and implement
specific micro insurance regulations. In 2002 IRDA developed In Indian federal finance system, social security measure is a
rural and social sector obligation norms that mandated every concurrent subject and has its own political economy. Micro
insurance company to achieve certain percentage of polices to be Insurance is an inevitable poverty alleviation measure due to lack
sold in rural areas and number of lives to be covered in the social of any other social protection measure.
sector. MI is generally for individuals who are ignored by
traditional commercial and social insurance schemes. Those Need and Importance of the study: Micro insurance is
individuals have typically low-income, work in the informal specifically designed for the protection of low income people,
economy and have irregular cash flows2. with affordable insurance products to help them cope with and
recover from common risks. It is a market based mechanism that
Social Security through Micro Insurance: Social protection promises to support sustainable livelihoods by empowering
measure is often related with Micro Insurance for the poor and people to adapt and withstand stress. An attempt to analyze the
low income groups. Micro Insurance can play an important role growth and performance of micro insurance to achieve long-term

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Research Journal of Recent Sciences ______________________________________________________________ ISSN 2277-2502
Vol. 3(ISC-2013), 87-94 (2014) Res. J. Recent. Sci.

economic goals was made. Micro Insurance is an excellent to Area of Study: The study covers the area within the
alleviate poverty and to raise the living standard of the people. Coimbatore corporation limits such as Singanallur, Ondipudur,
Hence it is imperative to conduct a research study on the Peelamedu and Ramanathapuram.
performance of micro insurance and find out the relevant
problems. Tools Used: The following statistical tools were applied to
analyze and interpret the data. Simple Percentage Analysis,
Review of Literature: A Study and Fostering Rural Growth Mean Score Analysis, H-Test, Factor analysis and Likert scale
Through Micro Insurance. The study was conducted in India, technique
Tamilnadu state at Vellore district. This study made an attempt to
understand the policyholder’s interest in the Micro insurance Results and Discussion
product and its contribution to rural women development.
Insurance companies have to offer commercially viable Micro Analysis: The data collected was analyzed and presented in four
insurance products foster the needs of clients through proper sections: i. Socio Economic profile I and II, ii. Determinants of
delivery channels3. Micro insurance demand in Coimbatore: a. Family type, size
and earning capacity, b. Source and level of awareness –
Thankom Arun, Mirko Bendig, and Shoba Arun4, this three Institution, types of policies, c. Type of policy preference, sum
authors studied the thesis under the topic of “Bequest Motives assured, pattern, mode and assurance of payment, d. Factors
And Determinants Of Micro life Insurance In Srilanka” . This influencing the potential demand for Micro(life) Insurance,
paper emphasizes bequest motives by evaluating participation preference for Micro(life) Insurance and knowledge of the
patterns in micro life insurance against insurance demand and policy holders on the policy features. iii. Level of satisfaction of
supply side factors. Based on household survey data from Sri policy holders. iv. Problems and suggestions
Lanka, it presents evidence on the determinants of micro life
insurance participation of low-income households, using probit Table-1
and tobit models. The results provide evidence that micro life Socio Economic Profile-I
insurance is positively correlated with measures of bequest S.No Criteria No. of Percentage
motives such as the number of children or dependents. Better off Respondents of
households are also included like their poorer counterparts in respondents
micro (life) insurance markets. The study finds a convincing need I GENDER
for the micro insurance sector to be more responsive to the needs Male 20 20
of the poor, with a key role in providing financial education to Female 80 80
understand the need for micro insurance. II AGE
18-30 years 11 11
Objectives of the Study: i. To identify socio-economic
31-40 years 48 48
determinants of Micro (life) Insurance demand in Coimbatore. ii.
40-50 years 16 16
To ensure the level of satisfaction of Micro (life) Insurance policy
holders. iii. To identify specific problems relating to Micro (life) 50-60 years 24 24
Insurance. Above 60 years 1 1
III EDUCATION
Research Methodology Illiterate 9 9
Primary 20 20
To achieve these objectives a research methodology was framed. Secondary 12 12
Research Design: In this study both descriptive and analytical Graduate 46 46
research design has been used and the period of the study is,
Post graduate 8 8
2012-13
Professional 5 5
Sources of Data: Both primary (through questionnaire) and IV Marital status
secondary data were used. Married 71 71
Unmarried 29 29
Size of Sample: The Sample Size is 100 Micro insurance policy Total 100 100
holders of self help group members through NGO’s located in Source: field survey, 2013.
Coimbatore.
The majority of the policy holders are women. They (48%) hails
Secondary data : Theoretical back ground of the present study from the age group 31-40, they are graduates (46%) and married
was collected from various sources which include books, (71%).
Magazines, Journals website and other related research work.

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Table-2
Socio Economic Profile-II
S.No Criteria No. of Respondents Percentage of respondents
I OCCUPATION
Agriculture 11 11
Business 13 13
Professional 05 05
Government service 18 18
Private sector 53 53
II ANNUAL FAMILY INCOME
Upto Rs.50,000 14 14
Rs.50,000 - Rs.1,00,000 42 42
Rs.1,00,000 - Rs.1,50,000 24 24
Rs.1,50,000 - Rs.2,00,000 10 10
Rs.2,00,000 - Rs.5,00,000 08 08
Above Rs.5,00,000 02 02
Total 100 100
Source: field survey, 2013.

Figure-1
b. Determinants of micro (life) insurance demand in coimbatore: i. Family type, size and earning capacity

Table-3
Type of Family, Size and Earning Capacity
S. No Criteria No. of Respondents Percentage of respondents
I Type of family: Joint 39 39
Nuclear 61 61
II Family size: 2 13 13
3 40 40
4 and above 47 47
III Earning members: 1 18 18
2 28 28
3 34 34
4 and above 20 20
Total 100 100
Source: field survey, 2013.

In table 2 shows that 42% of the sample live in a meagre income In table 3 shows that 61% of the sample are from nuclear family
between Rs.50,000 – Rs.1,50,000 per annum. They are the system, their family size of 4 and above with three earning
important target group live in poverty to be covered by micro members.
insurance and they get the benefit of micro insurance.

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Vol. 3(ISC-2013), 87-94 (2014) Res. J. Recent. Sci.

It shows in table 4, micro insurance authorities have to spread plans’, as all these statements have mean score 3.8 and above
the message of micro insurance through Self Help Group agents 3.8.
and Micro insurance Institutions. More efforts must be taken to
do effective advertisements and to motivate Non Governmental This result shows (table 6), major players in life insurance
Organisation. sector are LIC, SBI, Bajaj Allianz life insurance, Birla sun life
insurance, ICICI prudential life insurance Co Limited, Kotak
The levels of awareness of varieties of policies by the Mahindra old mutual life insurance Limited, ING Vysya life
respondents are determined on the basis of mean score of all the insurance Co Limited and Met life insurance Co Private
statements of respondents, which came out to be 3.8., The Limited. More than 50% of the insuring sample population has
results indicate (table 5) that, the respondents are fully aware of knowledge of these institutions.
‘endowment policy’, ‘group insurance’, ‘joint life’ and special
Table-4
Source of Awareness and Joining Reason
S.No Criteria No. of Respondents Percentage of respondents
I Mode of Awareness
Self help group 32 32
Micro insurance agent 08 08
Non government organization 33 33
Micro finance institutions 26 26
Advertisement 01 01
II Reason
Compulsory product 16 16
Benefit me in future 49 49
Benefit someone 35 35
Total 100 100
Source: field survey, 2013.
Table-5
Level of Awareness of Policies by the Respondents-Mean Score
S.No Policies Fully not aware Not aware Neutral Aware Fully aware Score
1 Term insurance 20 25 - 25 30 3.2
2 Endowment 8 17 - 37 38 3.8
3 Group insurance 3 10 - 36 50 4.2
4 Joint life 6 12 - 31 50 4.1
5 Special plans 8 15 - 45 33 3.8
Mean score 3.8
Source: field survey, 2013.
Table-6
Awareness of Micro Insurance Companies
S. No Micro insurance companies No. of respondents Percentage of respondents
1 Bajaj Allianz life insurance 93 93
2 Birla sun life insurance 88 88
3 HDFC standard life insurance Co Limited 54 54
4 ICICI prudential life insurance Co Limited 87 87
5 ING Vysya life insurance Co Limited 68 68
6 Kotak Mahindra old mutual life insurance 73 73
7 Life insurance corporation of India 100 100
8 Met life insurance Co Private Limited 55 55
9 Royal sundaram alliance insurance 45 45
10 SBI life insurance 99 99
11 Tata AIG life insurance Co Limited 54 54
Source: field survey, 2013.

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Table-7 Table-10
Type of Policies Taken by the Respondents Pattern and mode of Payment of Premium
S. Policies Micro insurance products S.No Criteria No. of Percentage of
No No. of Percentage of Respondents respondents
respondents respondents I PAYMENT
1 Term 34 34 Lump sum 42 42
insurance Quarterly 13 13
2 Endowment 07 07 Half yearly 45 45
3 Group 55 55 II MODE
insurance NGOs 45 45
4 Others 04 04 SHGs 42 42
Total 100 100 Others 13 13
Source: field survey, 2013. 100 100
Most of the sample respondents (55%) taken group insurance Source: field survey, 2013.
policy, 34% percent had term insurance, 7 percent had Popular pattern of payment is lump sum or half yearly. The
endowment policies. Only 4 percent have taken other popular mode of payment preferred is NGO’s and SHG’s.
micro(life) policy. This shows group, Term policies are popular
among the micro (life) insurance respondents. Factors influencing the potential demand, preference and
knowledge of the policy holders about the policy features:
Table-8 The major influential factor for selection of micro insurance
Sum Assured Amount in Micro (LIFE) of the Respondents were maturity tenure (47) percent and its premium amount (27)
S.No Sum assured No. of Percentage of percent.
Amount respondents respondents
1 < Rs.10,000 38 38 Table-11
2 Rs. 10,000 to Rs. 30 30 Factors influencing the selection of micro insurance
20,000 S.No Payment No. of Percentage of
3 Rs. 20,001 to Rs. 23 23 respondents respondents
30,000 1 Premium amount 24 24
2 Mode of payment 12 12
4 >Rs. 30,001 09 09 3 Returns offered at the 17 17
Total 100 100 time of maturity
4 Maturity tenure 47 47
Source: field survey, 2013.
For majority of the policy holders (38%) sum assured comes Total 100 100
under less than Rs.10,000 category. Source: field survey, 2013,

Policy holders’ occupation and sum assured: Ho: There was

no significant difference in the sum assured by the respondents
in different occupations. Ha: There were significant differences.
The calculated H values are given in the following table.

Table-9
Kruskal Wallis H-Test – Sum Assured Amount of
Respondents
Variable H Degrees of χ20.05 Inference
values freedom
Sum assured 10.428 1 3.84 Reject Ho
amount
Source: Estimation based on field survey, 2013.
The calculated χ2 value being greater than the theoretical value
of χ20.05 implies that there was significant difference in the sum
assured amount of the respondents in different occupations.
Different occupation has influence over the sum assured by the
policy holders.
Figure-3

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Table-12
Preference for Micro (Life) Insurance in Future
S.No Micro insurance No. of Percentage
companies respondents of
respondents
1 Bajaj Allianz life 2 2
insurance
2 Birla sun life -- --
insurance
3 HDFC standard life 3 3
insurance Co
4 ICICI prudential life 11 11
insurance Co
5 ING Vysya life 5 5
insurance Co
6 Kotak Mahindra old - - Figure-4
mutual life insurance
7 Life insurance 74 74 Table-13
corporation of India Knowledge of the policy holders about the policy features
8 Met life insurance Co - - S. Features No. of Percentage
Private no respondents
9 Royal sundaram - - 1 Premium Rate 82 82
alliance insurance 2 Bonus 74 74
10 SBI life insurance 4 4 Percentage
11 Tata AIG life 1 1 3 Loan Facility 80 80
insurance Co 4 Maturity Value 65 65
Total 100 100 5 Accident 68 68
Source: field survey, 2013. Benefits
6 Mode of 73 73
Majority of the respondents (74) percent prefer Life Insurance Payment
Corporation of India for investment in future. Source: field survey, 2013.

The results show that majority (65%) of the respondents are

aware of all important policy features.

Table-14
Level of satisfaction of policy holders towards services provided by micro insurance providers- mean score
S.No Particulars HS S N DS HDS Score
1 Availability of written material receipts, manuals etc 1 30 4 40 25 2.41
2 Benefits offered under policy 13 23 6 33 25 2.67
3 Risk coverage 24 27 7 17 25 3.06
4 Customer service: calls and queries 21 24 8 37 10 3.09
5 Processing speed the issue of policy 18 24 7 26 25 2.84
6 Premium amount 26 25 9 15 25 3.12
7 Willing to pay extra premium for extra benefit and coverage 10 16 6 43 25 2.43
8 Variety of policies/ products and its benefits 16 18 5 25 36 2.51
9 After sales service 16 19 5 30 30 2.62
10 Intermediaries response 6 8 5 50 31 2.09
11 Revival of policy 15 13 5 37 30 2.45
12 Prompt communication 18 10 5 37 30 2.48
Mean score 2.65
Source: estimates based on field survey, HS- Highly satisfied, S – Satisfied, N – Neutral, DS – Dissatisfied, HDS – Highly
dissatisfied.

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The level of satisfaction towards various service provider of KMO statistics for organised sector and unorganised sector were
micro insurance products are determined on the basis of mean 0.563 and 0.592 signifying higher than acceptable adequacy of
score of all the statements of respondents, which came out to be sampling. The Bartlett’s tests of sphericity was also found to be
2.65 for the sample respondents. The respondents were highly significant at 1 percent level providing evidence of the presence
satisfied with premium amount, customer service calls and of relationship between variables to apply factor analysis.
queries, risk coverage, processing speed in the issue of policy
and benefits offered under policy as all their variables had mean Table-15
score exceeding 2.65 Kruskal Wallis H test- Variability in the Level of
Satisfaction
However their perception regarding variables such as after sales S. Variable H Degrees χ20.05 Inference
service, variety of policies / products and its benefits, prompt No values of
communication, revival of policy, willing to pay extra premium freedom
for extra benefit and coverage and availability of written material 1 level of 15.783 1 3.84 Reject
receipts, manual etc had the mean score less than 2.65, which satisfaction Ho
concludes that the satisfaction level of the respondents was less as towards
compared to the previous factors. various
services
To find out whether there exist any significant difference in the provided by
level of satisfaction towards various services provided by micro micro
insurance providers among the respondents in different insurance
occupations; Kruskal Wallis H test was applied. The null providers
hypothesis tested was Source: Estimation based on field survey, 2013.

Ho: There was no significant difference in the level of satisfaction The table shows that there was significant difference in the level
towards various services provided by micro insurance providers of satisfaction towards various services provided by micro
among respondents in different occupations. Ha: Level of insurance providers among respondents in different occupations.
satisfaction differed. Hence null hypothesis is rejected.

The calculated H value is given in the table 9 Table-16

KMO and Bartlett’s Test Measures
Factor analysis: Factor analysis was used in the present study to Occupation Organised Unorganised
identify the level of satisfaction towards various services provided Measure sector sector
by micro insurance providers. To determine the appropriateness KMO Measure 0.563 0.592
of applying factor analysis the KMO and Bartlett’s test measures Bartlett’s test of Sphericity
were computed and the results are presented in table 11. i Approx. Chi-square 522.679 793.613
ii Degrees of Freedom 66 66
The KMO statistics varies between 0 and 1. A value close to one iii Significance .000 .000
indicates the patterns of correlations as relatively compact and
hence factor analysis should yield distinct and reliable factors.

Table-17
Type of problems faced by policy holders
S.No Reason for not taking Policy Next Year No. of respondents Percentage of respondents
I Administrative problems
1 Delayed response due to change of address 22 51
2 Delay in the revival of the lapsed policy 21 49
3 Delay in the lengthy process to avail insurance policy 19 44
4 Ambiguity in the terms and conditions of the policy 20 46
5 Benefits of insurance policy is not clear 22 52
6 Inadequate publicity and advertisement 22 51
II Problems in claim process
1 Delay in Preliminary claim process 22 50
2 Delay in settlement of claim account 23 53
3 Slow Final claim formalities 24 57
4 Lack of poor claim facilitators 21 50
Source: field survey, 2013,

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Out of a sample of 100 respondents, 43 faced some Corporation of India for investment in future. The results show
administrative problems and problems in their claim process. that majority 65% of the respondents are aware of all important
Other 57% did not put up any complaint. Even though there are policy features.
some administrative and claim process problems that can be
solved properly with intelligent efforts. Even though there are some administrative and claim process
problems that can be solved properly with intelligent efforts.
Findings: The majority of the policy holders 48% hail from the This shows that insurance companies are receptive in receiving
age group 31-40, 46% are graduates and 71% are married. It the complaints of policy holders and are interested in solving
shows that 42% of the sample live in a meagre income between problems of policy holders.
Rs.50,000 – Rs.1,50,000 per annum. They are the important
target group live in poverty to be covered by micro insurance Conclusion
and they get the benefit of micro insurance. It shows that 61%
of the sample are from nuclear family system, their family size This study concludes with some important issues relating to
of 4 and above with three earning members. micro (life) insurance policy holder’s perspectives. Major
findings of the study reveal that the usage of micro (life)
It shows micro insurance authorities have to spread the message insurance is due to micro credits sanctioned by Micro Finance
of micro insurance through Self Help Group agents and Micro Institutions. They are playing a significant role in improving the
insurance Institutions. More efforts must be taken to do lives of poor households. Linking micro(life) insurance with
effective advertisements and to motivate Non Governmental micro finance makes better sense as it helps in bringing down
Organisation. The results indicate that, the respondents are fully the cost of lending. From the analysis it is find out that there is a
aware of ‘endowment policy’, ‘group insurance’, ‘joint life’ and desirable increasing trend in demand for micro (life) insurance.
special plans’, as all these statement have mean score 3.8 and Micro Insurance can play a crucial role as a comprehensive tool
above 3.8. the result shows major players in Micro (life) to reduce poverty, inequality and vulnerability, particularly
insurance sector are LIC, SBI, Bajaj Allianz life insurance. where public social protection measures are inadequate and
More than 50% of the insuring sample population has unevenly distributed.
knowledge of these institutions. Other players are also known to
45% to 54% of the respondents. This shows group, Term Reference
policies are popular among the micro (life) insurance
respondents. 1. Siegel, Paul B., Jeffery Alwang and Sundharshan
Canagarajah, Viewing Micro insurance as a social risk
The majority of respondents 38% sum assured comes under less management instrument, World Bank Social protection
than Rs.10,000 category. Kruskal wallis H-Test – sum assured discussion paper, 116, (2001)
amount of respondents: There was significant difference in the 2. Churchill, protecting the poor, A micro insurance
sum assured amount of the respondents in different occupations. compendium. International Labour office, Geneva, (2006)
Popular pattern of payment is lump sum or half yearly. The
3. Tinsy Rose and V. Selvam, Global Management Review;
popular mode of payment preferred is NGO’s and SHG’s.
4(2), 7-13, 7, 11 Charts, 3 Graphs)
Influential factors for selection of micro insurance were 4. Thankom Arun, Mirko Bendig and Shoba Arun, World
maturity tenure 47 percent and its premium amount 27 percent. Development; 40(8), 1700-1711, 12 (2012)
Majority of the respondents 74 percent prefer Life Insurance 5. websites visited: www.irda.gov.in (2013)

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