Investment Decisions In Different Insurance Policies

Investment Decisions In Different Insurance Policies There are three types of investors: conservative, moderate, and aggressive. The different types of investments also cater to the two levels of risk tolerance: high risk and low risk. Conservative investors often invest in cash. This means that they put their money in interest bearing savings accounts, money market accounts, mutual funds, US Treasury bills, and Certificates of Deposit. These are very safe investments that grow over a long period of time. These are also low risk investments. Moderate investors often invest in cash and bonds, and may dabble in the stock market. Moderate investing may be low or moderate risks. Moderate investors often also invest in real estate, providing that it is low risk real estate. Aggressive investor is an investor who is willing to accept a higher degree of investment risk in exchange for a chance to earn a higher rate of return. Investment risk is the volatility of investment returns. A basic investing principle states that a higher degree of investment risk is required to earn a potential higher rate of return. What is insurance Meaning of Insurance Insurance provides financial protection against a loss arising out of happening of an uncertain event. A person can avail this protection by paying premium to an insurance company. A pool is created through contributions made by persons seeking to protect themselves from common risk. Premium is collected by insurance companies which also act as trustee to the pool. Any loss to the insured in case of happening of an uncertain event is paid out of this pool. Insurance works on the basic principle of risk-sharing. A great advantage of insurance is that it spreads the risk of a few people over a large group of people exposed to risk of similar type. Definition Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance. The party bearing the risk is known as the insurer or assurer and the party whose risk is covered is known as the insured or assured. Definition A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest. Examples include car insurance, health insurance, disability insurance, life insurance, and business insurance. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed and known small loss to prevent a large, possibly devastating loss. An insurer is a company selling the insurance; an insured or policyholder is the person or entity buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Cultural factor; Culture is fundamental determinant of a persons needs and behavior. People acquire a set of value, perception and behaviors through his or her family and other institution. Indian people want achievement and success, comfortable efficiency and practicality, freedom and youthfulness. In other word there are multicultural environment in India. Indian loves their family and they want to secure their family from unnatural event. Indian give first preference to his family after than others. They do not want to take loan and they want to invest their money in long-term investment for child education and marriage. When we say about metropolitan city, dependency on old age on son is decreasing. People want to accumulate some fund for old age so ICICI Prudential should concentrate on gratuity or pension plan. Indian people also affected from sub culture. Urban people want to take more insurance comparison than rural (due to high per capita income, insurance awareness, social security, investment purpose, tax saving purpose). Religion also effect on insurance. ICICI Prudential is using this thing very well. They use sinduor and marriage in their advertisement and show that when you marriage from someone, her all liabilities is your liabilities and we will help you in this situation. We will make relation as like as sindur (here means long term stable relationship). In other word ICICI Prudential want to say that we will cover you at every step in life (sorrow or happiness). Consumer behavior is also affected from reference group. Firstly, people see that which insurance is bestseller after that they purchase. They also influence from agent. People do not concentrate on their need due to agents influence. Social class also affect on consumer behavior. Lower class does not want insurance. Up per lower class wants insurance for saving purpose. Working and middle class want insurance for protection and saving purpose and lastly, upper class want to purchase insurance for investment tax benefit and saving purpose. Social factor; Consumers are also influenced by social factor for example; reference group, family, and social role and status. Consumer behavior is firstly influenced from membership group such as family, neighbor and co-worker. Insurance is such type of product where people awareness is very low so people do not very much about insurance. They think, insurance is only tax saving instrument so they fully dependent on agent for taking insurance. When agent say about any product, that time they inquiry from neighbor and co-worker about that product. If any body suggests that, this product and I have also taken this product. Individual think that, this product also best for him. He does not concentrate on his need and requirement. Secondly, he is influenced by information influences. If he goes to purchase insurance, he makes enquiry about this product from his personal sources. He study newspaper and search on Internet and gather all information related product. If he is satisfied from that information, he decides to buy insurance. People also influence from opinion leader, this opinion leader may be Mukhiya, or Surpanch in rural area or this may be any leader, actor or cricket player in urban area. If opinion leader say or advertise about any product, people are influenced from opinion leader because opinion leader keep good position in society. Family and household pattern also influence consumer behavior. Due to less security of individual family, people want to purchase insurance, but in joint family people give less attention in buying insurance. If all family are well earning, there are given less attention on insurance in such family. But if earning member is less and dependent is more in such type of family insurance is very important. Women want more security so women are taking main role in purchase decision where, women influence consumer behavior. Personal factor; A consumer decision is also influenced by personal characteristics for example the buyer age and stage in life cycle, occupation and economics circumstances, personality, self-concept, life style and value. When we say about age and life, first is bachelor stage. They are generally young independent and they are in early stage of his carrier and earning. They mostly think that they have no need of insurance because in that time they have no dependent. However, some people have some dream and dependent also. They are in such stage where they can take more risk so they mostly prefer to invest in ULIP. Second stage is newly married. In that stage people need and buying decision is influenced from their future plan and earning capability. If they have to plan for purchase flat that time, they will need term insurance. There after stage is one or two children after marriage, they will be influenced from future need. They will accumulate fund for children marriage and education, they can be plan time-to-time vacation. In forth stage, they want to accumulate for retirement. People want to live alone after old age or in peaceful place so they are ready to start saving for old age. Attitude also affect consumer behavior positive attitude (about his life) person will take pension plan because people think that they will live more. But negative attitude person will take life insurance because they worry about their life. Review of Literature Mehr and Cammack (1976) agrees that Insurance is usually thought of as a product that spreads the risk of serious, but low-probability, losses among a group of individuals, thus providing some financial protection to each individual. Kunreuther, (1979) said that his product makes good sense, particularly when the protection is purchased against potential losses so large as to be catastrophic, such as total destruction of ones home, a large accident liability judgment, or death of primary family breadwinner. However, it has long been recognized that this sensible product is difficult to sell.v Kotler, (1973) considers insurance to be in the category of unsought goods, along with products such as preventive dental services and burial plots.He notes that unsought goods pose special challenges to the marketer. Slovic, Fischhoff, Lichtenstein, Corrigan, and Combs (1977) found that subjects were more likely to buy insurance against small, high-probability losses than insurance against large, lowprobability losses, Hershey and Schoemaker (1980) reported the opposite result. Kunreuther (1979) It is not the magnitude of a potential loss that inspires people to buy insurance voluntarily it is the frequency with which a loss is likely to occur. Kahneman Tversky, (1979) reported a risk-averse individual, therefore, should avoid nearly all types of risk. Empirical evidence, however, suggests most people are risk averse for gains and risk seeking for losses. Kahneman Tversky, (1984) stated indeed, repeated demonstrations have shown most people lack an adequate understanding of probability and risk concepts Dhar, (1997) Greenleaf and Lehmann, (1995) Tversky and Shafir, (1992) have shown that offering more options can generate decision conflict and preference uncertainty, leading to decision deferral. Michael L. Smith (1982) said that a typical life insurance contract provides a package of options or rights to the policy owner that is not precisely duplicated by any other combination of commonly available contracts. Viewed from this perspecti ve, life insurance enjoys a unique position in the field of investments and should be judged in this light. The paper shows that an options viewpoint provides a more complete explanation of policy owner behavior towards life insurance than the conventional savings-and-protection view. Michael L. Walden (1985) told that the options package view of the whole life insurance policy suggests that a whole life policy is a package of options, each of which has value and is expected to influence the price of the policy. This viewpoint implies the general hypothesis that price differences between whole life policies can be explained by differences in policy contract provisions and differences in selected company characteristics. The options package theory was empirically investigated using regression analysis on data from a sample of policies marketed in North Carolina. The results suggest support for the options package theory. Kirchler and Angela-Christian Hubert (1999) found that the present study aims at describing spouses relative dominance in decisions concerning different forms of investment. As determinants of spouses dominance, partnership characteristics, such as partnership role attitudes, marital satisfaction and individual expertise in relation to different investments, were considered. A questionnaire on spouses dominance in making decisions on various investments, on the characteristics of particular investments and on partnership characteristics was completed by 142 Austrian couples. Basically, wives appeared to adapt to the dominance exerted by their husbands in savings and investment decisions. Wives dominance was highest in egalitarian partnerships, where autonomic and wife dominated decisions were reported m ore frequently than in traditional partnerships. Additionally, spouses relative expertise in relation to the investments in question showed strong effects on dominance distribution: Spouses with higher expertise than their partners exerted more dominance in decision-making processes. Amy Wong, (2004) empirically examined the role of emotional satisfaction in service encounters. Specifically, this study seeks to: investigate the relationship between emotional satisfaction and key concepts, such as service quality, customer loyalty, and relationship quality, and clarify the role of emotional satisfaction in predicting customer loyalty and relationship quality. In doing so, this study used the relationship between emotional satisfaction, service quality, customer loyalty, and relationship quality as a context, as well as data from a sample survey of 1,261 Australian retail customers concerning their evaluation of their shopping experiences to address this issue. The results show that s ervice quality is positively associated with emotional satisfaction, which is positively associated with both customer loyalty and relationship quality. Further investigations showed that customers feelings of enjoyment serve as the best predictor of customer loyalty, while feelings of happiness serve as the best predictor of relationship quality. The findings imply the need for a service firm to strategically leverage on the key antecedents of customer loyalty and relationship quality in its pursuit of customer retention and longterm profitability. Stephen Diacon (2004) presents the results of a detailed comparison of the perceptions by individual consumers and expert financial advisers of the investment risk involved in various UK personal financial services products. Factor similarity tests show that there are significant differences between expert and lay investors in the way financial risks are perceived. Financial experts are likely to be less loss averse than lay investors, b ut are prone to affiliation bias (trusting providers and salesmen more than lay investors do), believe that the products are less complex, and are less cynical and distrustful about the protection provided by the regulators. The traditional response to the finding that experts and non-experts have different perceptions and understanding about risk is to institute risk communication programmes designed to re-educate consumers. However, this approach is unlikely to be successful in an environment where individual consumers distrust regulators and other experts. Helmut Grà ¼ndl, Thomas Post, Roman Schulze, (2005) found that demographic risk, i.e., the risk that life tables change in a nondeterministic way, is a serious threat to the financial stability of an insurance company having underwritten life insurance and annuity business. The inverse influence of changes in mortality laws on the market value of life insurance and annuity liabilities creates natural hedging opportunities. Eva n Mills, Ph.D.(1999) Studied the insurance industry is rarely thought of as having much concern about energy issues. However, the historical involvement by insurers and allied industries in the development and deployment of familiar technologies such as automobile air bags, fire prevention/suppression systems, and anti-theft devices, shows that this industry has a long history of utilizing technology to improve safety andotherwise reduce the likelihood of losses for which they would otherwise have to pay. We have identified nearly 80 examples of energy-efficient and renewable energy technologies that offer loss-prevention benefits, and have mapped these opportunities onto the appropriate segments of the very diverse insurance sector (life, health, property, liability, business interruption, etc.). Some insurers and risk managers are beginning to recognize these previously hidden benefits. Roger. A. Formisano (1981) examined, via consumer interviews, the impact of the National Associ ation of Insurance Commissioners Model Life Insurance Solicitation Regulation as implemented in New Jersey. A substantial portion of the insurance buyers sampled did not become aware of the provisions of the regulation aimed to improve their buying ability. Further, many life insurance buyers were not well informed concerning the nature and operation of life insurance contracts, and in particular, the life insurance policies that they had purchased. theory was empirically investigated using regression analysis on data from a sample of policies marketed in NorthCarolina. The results suggest support for the options package theory. Kirchler and Angela-Christian Hubert (1999) found that the present study aims at describing spouses relative dominance in decisions concerning different forms of investment. As determinants of spouses dominance, partnership characteristics, such as partnership role attitudes, marital satisfaction and individual expertise in relation to different investments, were considered. A questionnaire on spouses dominance in making decisions on various investments, on the characteristics of particular investments and on partnership characteristics was completed by 142 Austrian couples. Basically, wives appeared to adapt to the dominance exerted by their husbands in savings and investment decisions Wives dominance was highest in egalitarian partnerships, where autonomic and wife-dominated decisions were reported more frequently than in traditional partnerships. Additionally, spouses relative expertise in relation to the investments in question showed strong effects on dominance distribution: Spouses with higher expertise than their partners exerted more dominance in decision-making processes. Amy Wong, (2004) empirically examined the role of emotional satisfaction in service encounters. Specifically, this study seeks to: investigate the relationship between emotional satisfaction and key concepts, such as service quality, customer loyalty, and rel ationship quality, and clarify the role of emotional satisfaction in predicting customer loyalty and relationship quality. In doing so, this study used the relationship between emotional satisfaction, service quality, customer loyalty, and relationship quality as a context, as well as data from a sample survey of 1,261 Australian retail customers concerning their evaluation of their shopping experiences to address this issue. The results show that service quality is positively associated with emotional satisfaction, which is positively associated with both customer loyalty and relationship quality. Further investigations showed that customers feelings of enjoyment serve as the best predictor of customer loyalty, while feelings of happiness serve as the best predictor of relationship quality. The findings imply the need for a service firm to strategically leverage on the key antecedents of customer loyalty and relationship quality in its pursuit of customer retention and longterm pro fitability. Stephen Diacon (2004) presents the results of a detailed comparison of the perceptions by individual consumers and expert financial advisers of the investment risk involved in various UK personal financial services products. Factor similarity tests show that there are significant differences between expert and lay investors in the way financial risks are perceived. Financial experts are likely to be less loss averse than lay investors, but are prone to affiliation bias (trusting providers and salesmen more than lay investors do), believe that the products are less complex, and are less cynical and distrustful about the protection provided by the regulators. The traditional response to the finding that experts and non-experts have different perceptions and understandings 4 about risk is to institute risk communication programmes designed to re-educate consumers. However, this approach is unlikely to be successful in an environment where individual consumers distrust regul ators and other experts. Helmut Grà ¼ndl, Thomas Post, Roman Schulze, (2005) found that demographic risk, i.e., the risk that life tables change in a nondeterministic ay, is a serious threat to the financial stability of an insurance company having underwritten life insurance and annuity business. The inverse influence of changes in mortality laws on the market value of life insurance and annuity liabilities creates natural hedging opportunities. Evan Mills, Ph.D.(1999) Studied the insurance industry is rarely thought of as having much concern about energy issues. However, the historical involvement by insurers and allied industries in the development and deployment of familiar technologies such as automobile air bags, fire prevention/suppression systems, and anti-theft devices, shows that this industry has a long history of utilizing technology to improve safety and otherwise reduce the likelihood of losses for which they would otherwise have to pay. We have identified nearly 80 e xamples of energy-efficient and renewable energy technologies that offer loss-prevention benefits, and have mapped these opportunities onto the appropriate segments of the very diverse insurance sector (life, health, property, liability, business interruption, etc.). Some insurers and risk managers are beginning to recognize these previously hidden benefits. Roger. A. Formisano (1981) examined, via consumer interviews, the impact of the National Association of Insurance Commissioners Model Life Insurance Solicitation Regulation as implemented in New Jersey. A substantial portion of the insurance buyers sampled did not become aware of the provisions of the regulation aimed to improve their buying ability. Further, many life insurance buyers were not well informed concerning the nature and operation of life insurance contracts, and in particular, the life insurance policies that they had purchased. Description of factors 1. Company Loyalty This factor includes that this is the only company the consumer wants to associate himself with, in future .himself would purchase more policies from the same company , suggest friends and family to purchase policy from the same company , company able to fulfill expectation, , Policy benefits benchmarks . The highest Eigen value lies in this factor 35.213. So it is been considered as the highly contributing factor towards study. Therefore it is clear that company loyalty plays an important role in investment decisions of investors. 2. Services Quality This factor includes hassle free settlements , employees responsible towards customers agents respond promptly , investment in life insurance is more secure than stock market satisfy with relationship to company . . Ease of Procedures This factor includes the company provides claims on time cooperative and friendly agent , settlement of claims easy and timely , agent is well informed about policies. As we can see, that the Eigen value for factor ease of procedures is 5.830 , which is also a contributing factor towards the study, so it can also be considered as an important factor in the study. 4. Satisfaction Level This factor includes that the suggested benefits of Insurance Policy should be met to the investors, Company provides them satisfactory services , fulfill its promise about life insurance policy , Services should be provided on time, and awareness of terms and conditions of policies. As we can see, that the Eigen value for factor satisfaction level is 5.008 , which is also a contributing factor towards the study, so it can also be considered as an important factor in the study. 5. Company Image This factor includes that the insurance company should be well known in the industry , insurance provider should have goodwill in market (0.758),and company of high repute As we can see, that the Eigen value for factor company image is 4.878, which is also a contributing factor towards the study, so it can also be considered as an important factor in the study. 6. Company-Client Relationship This factor includes that the agent remind about premium installments. personal attention on every consumer and understand consumers financial needs . As we can see, that the Eigen value for factor company client relationship is 4.051, which is also a contributing factor towards the study, so it can also be considered as an important factor in the study. CONCLUSION In present Indian market, the investment habits of Indian consumers are changing very frequently. The individuals have their own perception towards various types of investment plans. The study of this research work was focused over consumers perception on investment towards Life Insurance Services. The consumers perception towards Life Insurance Policies is positive. It developed a positive mind sets for their investment pattern, in insurance policies. Still some actions are needed for developing insurance market. The major factors playing the role in developing consumers perception towards Life Insurance Policies are Consumer Loyalty, Service Quality, Ease of Procedures, Satisfaction Level, Company Image, and Company-Client Relationship. Insurance industry has to go ahead. A lot of opportunities are still waiting. This research will help in developing the market share, loyalty and further development in insurance sector. .