A Study on Factors Influencing the Purchase Intention of Insurance Products Amongst Urban Households of Gandhinagar City

Introduction

Service sector plays a dominant role in Indian economy for its potential for creating employment and its contribution to the national income along with manufacturing and agriculture sector. Insurance sector is an integral part of financial services and creates the base for sustainable economic growth. The insurance sector in India has witnessed dynamic growth historically. As per the Insurance Regulatory and Development Authority of India (IRDAI) annual report 2020-2021, insurance penetration in India grew by 11.7% (from 3.76% in 2019-20 to 4.20% in 2020-21). India is having the potential for becoming most prominent emerging insurance markets globally and is one of the fifth largest life Insurance market in the world. There are several growth drivers for insurance industry in India. In 2021, the FDI limit for India's insurance industry has been increased from 49% to 74% in 2021 by government of India. This move has opened up the doors for the foreign players in India's insurance industry. This will help us achieve product innovation and higher insurance penetration. As per the KPMG report, 2022, the insurance industry has evolved due to factors including the recent pandemic, advancements in the financial services space, digitalization, the advent of insure-techs etc. Apart from these, young working demographic, growth in the nuclear family structures and channelising the household savings into financial system have also added to the growth of insurance. The under penetration of insurance and the efforts of IRDAI for spreading the awareness and adoption of insurance are also largely responsible for the growth of the insurance sector in India. Further, India’s robust start-up ecosystem would facilitate the new-age start-ups in India's insurance industry, and this would further fuel the growth of Indian insurance market.

At the same time, with so many insurance products and options, the insurance industry has become saturated. As per the updated list of insurers of IRDAI August 2022, there are 24 life insurers and 31 non-life insurers operating in India. The insurance industry is experiencing aggressive competition. Despite the economic growth and that of insurance industry, this industry still faces many challenges for its inclusive development. With the COVID pandemic, insurance has transformed from being sold to being bought. With sophisticated customers and intensified competition, it has become the need of the hour for insurers to deliver superior service quality. Delivering quality service refers to fulfilling the expectations of the customers in an articulate manner and it is the result of consumer expectation with actual service performance (Paposa et al., 2019). In recent times, service quality for insurance providers has become the focal point for a sustained business and customer retention (Devi et al., 2018). As per the findings documented in the State of Connected Customer report (2019), out of 8000 customers surveyed across the world, 84% said that the experience a company provides is as important as its products or services. However, there is a considerable gap between the user expectations and the actual delivery. Further, the research insights from IBM Institute of Business Value (Elevating the insurance customer experience, 2020) highlighted that on the demand side, 42% of customers did not fully trust their insurer, and on the supply side, 60% of insurers agreed that there is a lack of customer experience strategy in their organizations. Thus, though many reforms have been introduced in the insurance industry resulting in better penetration, when it comes to providing quality services, the insurance providers lack behind. This results into customer dissatisfaction. Further, it has been observed that customer experience positively influences customer satisfaction (Pei et al., 2020). In fact, IRDAI mentions customer satisfaction as one of the keywords in its objective. In fact, customer satisfaction is a key to attract new customers and retain existing customers and thus creates a loyal customer base (Kotler et al., 2013). In today’s time, service providers attempt to retain the existing customers rather trying to find the new ones as it is more expensive for them (Chimedtseren & Safari, 2016). Ideally, to improve customer satisfaction, insurance providers should measure and improve the approaches to delivery of service (Siddiqui & Sharma, 2010).