CHAPTER IV UTILISATION OF LIC BY POLICYHOLDERS

CHAPTER IV UTILISATION OF LIC BY POLICYHOLDERS 4.1 Introduction 4.2 Utilisation of Products and Services of LIC of India 4.3 Componentwise Utilisation 4.4 Factors Responsible for the Utilisation of LIC of India 4.5 Summary

4.1 Introduction The LIC is offering numerous types of policies to satisfy the needs of varied types of customers. Savings, security, risk coverage, loan facility and tax relief are the basic features of all the LIC policies. All types of insurance policies have both insurance element and endowment element in different proportions. The life insurance policies may be without profit (non participating) and with profit (participating). The plans generally available in the LIC include term life insurance, whole life insurance, endowment type, combination of annuity and whole life type, children's assurance and pension plans. Having different elements in different policies, the policyholders are free to choose the best policies according to their requirements. It is known that no single policy can be the best policy for all the policyholders, because different types of insurance policies have different features due to variance in cost, elements of investment and protection, requirements of the policyholders and benefits of the policy. Hence, the level of utilization of the LIC policies differs from person to person. In this chapter, an attempt has been made to study the extent of utilization of products and services of the LIC of India by the policyholders in Kanyakumari District. 4.2 Utilisation of Products and Services of LIC of India Different policyholders have been utilising the LIC in different ways. The services offered by the LIC have been manifold which include different types of policies with different assured sums, provision of loans against policies and the like. The services cited above are not of comparable nature. Each differs from the other in a way or other. Different policyholders utilise these services at different levels. It is not right to generalise the utilization of all these services under a single name. Hence, the

utilisation of the above mentioned services by the policy holders has been evaluated individually. 4.2.1 Purposes of Utilisation of Life Policies in LIC The researcher has identified ten factors which are responsible for the utilization of life policies by the policyholders in Kanyakumari District. They include savings, security, education of the ward, marriage of the ward, to meet medical expenses, to reduce income tax burden, to avail pension benefits, to avail loan facilities, dependants' welfare and to oblige the agent. Every policyholder utilises the services of the LIC for any one of the above said purposes. The purposes of utilising the LIC policies have been analysed with the help of Garrett's Ranking Technique. The percentage position is determined with the help of the following formula. Percentage position = 100 (R 0.5),Where, N R = Rank assigned for the statements by the respondents N = Number of statements ranked by the respondents The mean scores and percentile ranks obtained for the identified purposes of utilization based on Garrett's Ranking Technique are shown in the table 4.1 105

106 Table 4.1 Percentile Ranks for the Factors Responsible for taking up Life Policies Score Percentage S. Mean Factors Rank Position No. Score (Table 49) PRs 1. Savings 8.91 1 5.00 83 95.00 2. Security 8.46 2 15.00 70 85.00 3. Dependant's welfare 6.25 3 25.00 63 75.00 4. Education of ward 5.25 4 35.00 63 65.00 5. Avail loan facilities 4.91 5 45.00 63 55.00 6. Reduce income tax 4.77 6 55.00 63 45.00 burden 7. Oblige the agent 4.61 7 65.00 63 35.00 8. Marriage of ward 4.45 8 75.00 37 25.00 9. Avail pension facilities 3.88 9 85.00 30 15.00 10. Meet medical Expenses 3.51 10 95.00 19 5.00 PRs - Percentile Ranks It could be inferred from the table 4.1 that the most important factor for taking life insurance policies in the LIC by the policyholders in Kanyakumari District among the ten factors identified is 'Savings' with 95 percentile ranks. The second and third factors are 'Security' and 'Dependants' Welfare' with 85 and 75 percentile ranks respectively. 4.3 Component-wise Utilisation There is no standard yardstick available to measure the utilization of the LIC by the policyholders. Hence, it has been attempted to evaluate the utilization of the LIC

107 with the help of the following identified components which incidentally happen to be the services of the LIC. i. Types of policies taken ii. iii. iv. Number of policies taken Sum assured Amount of housing loan availed V. Amount of policy loan availed vi. vii. Purposes of utilization of LIC Bond Amount of annual premium paid 4.3.1 Types of Policies Taken The LIC of India is offering many varieties of life policies rather than those offered by the other private life insurers in India. Therefore, the policyholders are free to choose the best policy suited to their requirements in the LIC. The extent of utilization depends on the types of policy, which they prefer and choose. It has been observed that the majority of the policyholders prefer to take the popular endowment and money back policies in the LIC. The extent of utilization of various types of the LIC policies by the sample respondents in Kanyakumari District is shown in the table 4.2.

108 Table 4.2 Types of Policies Taken by the Respondents S.No. Type of Policy Number ofpercentage Respondents 1. Endowment 474 76.45 2. Money Back 268 43.23 3. New Jana Raksha 42 6.77 4. New Jeevan Dhara / Suraksha 48 7.74 5. Jeevan Kishore 18 2.90 6. Jeevan Surabhi 48 7.74 7. JeevanShree 10 1.61 8. BimaKiran 30 4.84 9. Children's Money Back 14 2.26 10. Jeevan Mitra 20 3.23 11. JeevanAnand 15 2.42 12. Others 23 3.71 It could be seen from the table 4.2 that out of 620 respondents, the majority of 474 respondents (76.45 per cent) have purchased the popular Endowment Policies and the second largest number of 268 (43.23 per cent) respondents have purchased Money Back Policies. The other policies like New Jana Raksha, New Jeevan DharalSuraksha, Jeevan Kishore, Bima Kiran, Jeevan Mitra and the like are purchased by the less number of respondents. The basic reason for the largest purchase of Endowment policy by the policyholders is the indirect influence from the agents for their higher rate of commission on this policy. On the contrary, the major reason for the purchase of

109 Money Back Policy in large numbers by the policyholders is the advantage of getting interim payments for this policy at fixed time intervals even before the maturity of the policy and it is more profitable to the policyholders when compared to the Endowment Policies. The other policies are purchased by a very limited number of respondents for the reason that many of the agents do not properly explain the policyholders about the values and specialised benefits of such policies. Hence, the Development Officers of the LIC should take initiative steps in this regard and educate and motivate the agents to concentrate on the less sold LIC products. 4.3.2. Number of Policies Taken The extent of utilisation of the services of the LIC can also be assessed from the angle of number of policies purchased by the respondents in Kanyakumari District. The policyholders will have repeated buying of life policies in the LIC only when they are satisfied with the benefits accruing from such policies either through the advertisements of the LIC or through the convincing talents of the LIC agents. It is observed that the respondents have purchased a larger number of Endowment and Money Back types. The table 4.3 shows the particulars about the number of policies taken in each type by the respondents.

110 Table 4.3 Number of Policies Taken by Respondents in Kanyakumari District Number of S.No. Types of Policy Policies Percentage Purchased 1. Endowment 712 54.43 2. Money Back 328 25.08 3. New Jana Raksha 42 3.21 4. New Jeevan Dharal Suraksha 48 3.67 5. Jeevan Kishore 18 1.48 6. Jeevan Surabhi 48 3.67 7. JeevanShree 10 0.76 8. Bima Kiran 30 2.29 9. Children's Money Back 14 1.07 10. Jeevan Mitra 20 1.53 11. JeevanAnand 15 1.15 12. Others 23 1.76 Total 1308 100.00 As seen from the table 4.3, it is clear that of the total number of policies (1308) purchased by the sample respondents, 712 (54.43 per cent) policies are of Endowment type, 328 (25.08 per cent) are of Money Back Policy, 42 (3.21 per cent) are of New Jãna Raksha, 48 (3.67 per cent) each are of New Jeevan Dhara or Jeevan Surabhi and less than 2 per cent of the respondents purchased other types of polices. It implies that

III ie Endowment and Money Back types are the most popular policies among the ol icyholders in Kanyakumari District. The extent of utilization of the LIC can further be assessed from the viewpoint f the number of policies taken by the respondents in Kanyakumari District by omparing with the selected variables such as area of residence, age and nature of )ccupation by the use of Chi - Square Test. i. Area of Residence The area of residence is considered as an important variable for assessing the extent of utilization of the LIC products in terms of the number of policies taken by the policyholders in Kanyakumari District. The observation is that the urban and semi - urban people are preferring to invest in various attractive plans offered by the LIC. Since the rural people are not aware of the benefits of varied types of the LIC plans, they are not expected to invest in varieties of policies. The table 4.4 shows the relationship between the area of residence of the respondents and the number of policies taken by them in the study area. Table 4.4 Area of Residence and Number of Policies Taken

112 it could be realised from the table 4.4 that out of 288 respondents who have ±ased only one policy from the LIC, the majority of respondents 156 (54.17 per t) belong to the rural areas. But in case of respondents who have purchased two or e policies, out of 241 respondents, 131 (54.36 per cent) are from urban and semian areas. Similarly, out of 91 respondents who have purchased four or more [icies, 53(58.24 per cent) belong to urban and semi - urban areas. It indicates that )st of the respondents belonging to urban and semi - urban areas preferred to buy rieties of policies when compared to the rural respondents. Age Young people have no family commitments and hence, they spend lavishly ithout even looking for the safety and security of their future. But the middle age and Ld age people do always think of the safety and security of their families. It has been oticed that the middle age and old age people have varieties of policies when ompared to the young people. Thus, the age factor of the respondents has been onsidered as an important variable for assessing the extent of utilization of the LIC in erms of the number of policies. The table 4.5 shows the relationship between the age Level of the respondents and the number of the LIC policies taken.

113 Table 4.5 Age Group and Number of Policies Taken S. No Number of Age Group of Respondents Policies Below 20 20-30 30-40 40-50 Above Total 1. 1 8 86 88 70 36 288 (2.78) (29.86) (30.56) (24.30) (12.50) (100) 2. 2 and 3 20 85 94 42 241 - (8.30) (35.27) (39) (17.43) (100) 3. 4 and above 2 15 60 14 91 (2.20) - (16.48) (65.93) (15.39) (100) 10 106 188 224 92 620 Total (1.61) (17.10) (30.32) (36.13) (14.84) (100) It is assessed from the table 4.5 that the respondents who are in the age group of 30 to 50, have purchased a large number of policies when compared to the respondents of the other age group. Out of 241 respondents who have taken 2 or 3 policies, 85 (35.27 per cent) are in the age group of 30 to 40 years and 94 (39 per cent) are in the age group of 40 to 50 years. Similarly, out of 91 respondents who have taken 4 and more policies, the majority of 60 (65.93 per cent) are in the age group of 40 to 50 years. iii. Nature of Occupation Nature of occupation is considered as an important criterion for deciding the extent of utilization of the LIC in terms of the number of policies purchased by the respondents in Kanyakumari District. Generally, persons with better education have occupied better positions in their jobs. They are easily able to grasp the best features of various types of policies. Hence, they are interested in buying different types of

114 policies from the LIC. But, the people with less qualification do not realise the existence of various polices in the LIC. Consequently they utilise the LIC only to a limited extent only by buying less number of policies. The table 4.6 gives the relationship between the nature of occupation and the number of policies taken in the LIC. Table 4.6 Nature of Occupation and Number of Policies Taken Number of Respondents Based on Nature of Occupation S. No. of I No Policies Execu- Cleri- Teach- Assis- Techni- Busi- Agri- Others Total tive cal ing tant cal ness culture 1. 1 4 23 82 9 22 22 36 90 288 (1.38) (7.99) (28.47) (3.13) (7.64) (7.64) (12.5) (31.25) (100) 2. 2 and 3 6 8 163 4 20 14 6 20 241 (2.49) (3.32) (67.63) (1.66) (8.30) (5.81) (2.49) (8.30) (100) 3.4and - 4 77 - - 4 2 4 91 above (439) (84.61) (4.40) (2.20) (4.40) (100) Total 10 35 322 13 42 40 44 114 620 (1.61) (5.65) (51.94) (2.10) (6.77) (6.45) (7.10) (18.39) (100) It could be assessed from the table 4.6 that the teacher respondents have purchased a large number of LIC policies when compared to the other respondents engaged in various occupations. Out of 241 respondents who have purchased two or three life insurance policies, the majority of the respondents numbering 163 (68.20 per cent) are teachers. Similarly, out of 91 respondents who have purchased four and more policies, 84.61 per cent, i.e., 77 respondents are teachers. In case of other categories of occupation, only a very limited number of respondents have purchased life policies more than one.

115 Test of Significance Analysis is made with the help of Chi Square Test for ascertaining the significant relationship between the identified variables and the extent of utilisation of the LIC in terms of various utilisation components with the use of the following formula. x2 = (0 - E) 2 /E with (r - 1) (c - 1) degrees of freedom where, 0 = Observed frequency E = Expected frequency r = Number of rows in the contingency table C = Number of columns in the contingency table Significant relationship is traced when the calculated Chi Square Value is more than the table value for the given degree of freedom at one per cent or five per cent level Chi-Square Test has been adopted to examine whether there is any influence of the variables such as area of residence, age level and nature of occupation of the respondents on the extent of utilization of the LIC in terms of the number of policies. The table 4.7 shows the result of the consolidated Chi-Square Test results for these identified variables. S. Table 4.7 Result of the Chi-Square Test for the Identified Variables and Extent of Variables Utilisation in Terms of Number of Policies Chi-Square Table Level of D.F Value Value Significance Remarks 1. Area of 30.9844 13.277 4 1% Significant residence 2. Age 104.3543 20.090 8 1% Significant 3. Nature of 147.4419 29.141 14 1% Significant occupation

116 Since the Chi-Square Values with regard to the variables such as area of residence, age, and nature of occupation are greater than the corresponding table values for the given degree of freedom at one per cent level of significance as exhibited in the table 4.7, it can be concluded that these identified variables highly influence the extent of utilization of the LIC by the policyholders in Kanyakumari District in terms of the number of the LIC policies. 4.3.3. Sum Assured The extent of utilization of the products in the LIC can be assessed from the angle of the sum assured in each type of policies by the respondents in Kanyakumari District. It has been observed during the survey that the lower and middle income groups prefer to buy Endowment and Money Back types with less sum assured and the other types of policies with higher sum assured are purchased by the higher income group. The table 4.8 shows the total and average sum assured in each type of policies by the respondents in Kanyakumari District.

117 Table 4.8 Total and Average Sum Assured in Each Type S. No Total Sum Average Sum No. of Type of Policy Assured (Rs. in Assured per Policy Policies lakhs) (Rs. in Iakhs) 1. Endowment 626.66 712 0.88014 2. Money Back 239.41 328 0.72991 3. New Jana Raksha 15.64 42 0.37238 4. New Jeevan Dharal 49.61 48 1.03352 Suraksha 5. JeevanKishore 12.70 18 0.70556 6. Jeevan Surabhi 56.46 48 1.17625 7. Jeevan Shree 60.00 10 6.00000 8. BimaKiran 31.00 30 1.03333 Jeevans Money Back 18.02 14 1.28714 10.itra 9.E 24.40 20 1.22000 11. JeevanAnand 23.55 15 1.57000 12. Others 33.45 25 1.45434 F-F--- Total 1190.90 1308 It could be assessed from the table 4.8 that the total sum assured is greater in case of Endowment Policies (Rs. 626.66 lakhs) as they are purchased in large numbers by the respondents in Kanyakumari District and it is very lower in case of Jeevan Kishore type which is meant for children (Rs. 12.70 Iakhs). But the average sum assured per policy is greater in case of Jeevan Shree type - VIP policy (Rs. 6 lakhs) and lower in case of New Jana Raksha Policy (Rs. 0.37238 lakh). This policy is best suited for people with irregular income and age proof of the policy holder is not insisted upon.

118 The average sum assured per policy in case of Endowment type is Rs. 0.88014 lakh and in case of Money Back policy is Rs. 0.72991 lakh. The average sum assured per policy in case of all other types is more than one lakh rupees. The lower and middle income groups prefer Endowment, Money Back, New Jana Raksha and Jeevan Kishore Policies. But the higher income group prefers all types of policies without any discrimination only for the benefit of tax relief. The extent of utilization of the LIC in terms of the sum assured by the policyholders in Kanyakumari District could be examined by relating the selected variables such as status of tax assessee, education, annual income, employment and marital status with the help of Chi-Square Test. i. Status of Tax Assessee It has been observed that the income tax assessees take more life insurance policies in terms of the sum assured in order to get tax exemption as permitted by the Income Tax Act 1961, when compared to the non-assessees. Savings and security are the basic considerations for taking life insurance policies. In addition to these considerations, tax assessees are entitled to get tax relief in making investments in the LIC. So an attempt has been made to study the extent of utilization of the LIC by the tax assessees. Out of 620 respondents, 296 respondents (47.74 per cent) are tax assessecs. The table 4.9 shows the relationship between sum assured in the LIC and tax assessee status of the respondents.

119 Table 4.9 Status of Tax Assessee and Sum Assured Number of Respondents S. Sum Assured No. (Rs.) Tax Ass es Non - Assessees Total 1. Up to 50,000 22 (9.73) 204 (90.27) 226 (100) 2. 50,000 to 1,00,000 48(41.38) 68 (58.62) 116 (100) 3. 1 1,00,000 to 2,00,000 75(68.81) 34(31.19) 109 (100) 4. 12,00,000 and above 151 (89.35) 18(10.65) 169 (100) Total 296 (47.74) 324 (52.26) 620 It is evident from the table 4.9 that income tax assessees have taken more amount of policies in terms of the sum assured. But most of the non-assessees have taken less sum assured policies. In case of respondents pertaining to the sum assured up to Rs. 50,000, out of 226, 204 (90.27 per cent) are the non-assessees. But in case of respondents with the sum assured between Rs. 1,00,000 and Rs. 2,00,000, out of 109 respondents, the majority of the respondents numbering 75 (68.81 per cent) are the income tax assessees. Similarly, with regard to the respondents with the sum assured above Rs. 2,00,000, out of 169 respondents, 151 (89.35 per cent) are the income tax assessees. ii. Education Well educated persons can very easily grasp the advantage of making investment in various types of life insurance policies. But, the less educated and illiterate persons cannot be easily approached and convinced even by the thrive from the LIC agents. As the education increases, the level of utilization of the LIC in terms of the sum assured also increases. Thus, it has been observed that the respondents with

120 higher educational qualification have purchased policies of higher sum assured and the respondents with lower educational qualification have purchased policies of less sum assured. Hence, level of education is considered as a factor having relationship with the extent of utilization of the LIC in terms of the sum assured. The table 4.10 depicts the relationship between the level of education of the respondents and the quantum of sum assured in the LIC of India. Table 4.10 Level of Education and Sum Assured No. Level of Education (No. of Respondents) Sum AssuredTotal Post Rs. School Diploma i Graduation graduation 138(61.06) 16(7.08) 42(18.58) 30(13.27) 226(100) 2. 50,000 to 33(28.45) - 49(42.24) 34(29.31) 116(100) 1,00,000 3. 1,00,000 to 12(11.01) 20(18.35) 48(44.04) 29(26.60) 109(100) 2,00,000 and above 12(7.10) 8(4.73) 72(42.60) 77(45.56) 169(100) Total 195(31.45) 44(7.10) 211(30.03) 170(27.42) 620(100) It is seen from the table 4.10 that out of 226 respondents who have taken life policies up to Rs. 50,000, the majority of 138 (61.06 per cent) have school education. In case of respondents from the sum assured group between Rs. 1,00,000 and Rs. 2,00,000, out of 109 respondents, 77 of them (70.64 per cent) are graduates or post graduates. Similarly, out of 169 respondents from the group of the sum assured for

121 more than Rs. 2,00,000, 72 (42.60 per cent) are graduates. Thus, it can be concluded that the level of education and the quantum of sum assured in the LIC are intimately interrelated. iii. Annual Income Annual income of the respondents is considered as an important criterion having relationship with the extent of utilization of the LIC in terms of sum assured by the policyholders in Kanyakumari District. Income is the deciding factor for the quantum of any investment plan. When the annual income of the respondent is higher, the disposable surplus income will also be higher and he/she is free to choose the best from innumerable investment opportunities. Similarly, when they have surplus disposable income, they purchase the LIC policies with very high sum assured. On that line, it has been observed that the higher the income of the respondent, the higher will be the sum assured in the LIC and vice versa. The table 4.11 shows the relationship between the annual income of the respondents and the quantum of sum assured in the LIC of India.

122 Table 4.11 Annual Income and Sum Assured S. No. Number of Respondents Based on Income (Rs.) Sum Assured 50,000 1,00,000 1,50,000 Up to 2,00,000 (Rs.) to to to 50,000 and above 1,00,000 1,50,000 2,00,000 Total 1. Up to 94 78 28 10 16 226 50,000 (41.59) (34.51) (12.39) (4.42) (7.08) (100) 2. 50,000 10 30 22 20 116 to 34(29.31) 1,00,000 (8.62) (25.86) (18.97) (17.24) (100) 3. 1,00,000 6 26 28 16 33 109 to 2,00,000 (5.50) (23.85) (25.69) (14.68) (30.28) (100) 4. 2,00,000 12 12 26 119 169 and - (7.10) (7.10) (15.39) (70.41) (100) above Total 110 146 90 72 202 620 (17.74) (23.55) (14.52) (11.61) (32.58) (100) It is evident from the table 4.11 that the respondents with higher annual income have utilised the LIC more by taking higher sum assured policies. On the contrary, the respondents from the lower income group have utilised the LIC by taking less sum assured policies. Out of 226 respondents of the income group of below Rs. 1,00,000 per annum, 172 of them (76.10 per cent) have taken life policies in the LIC with the sum assured up to Rs 50,000. But with regard to the respondents with a higher annual income of above Rs. 2,00,000, out of 169, 119 of them (70.41 per cent) have purchased the life insurance policies with a higher sum assured for more than Rs. 2,00,000.

123 iv. Employment Generally, employed persons have fixed and regular income and therefore, they are supposed to make use of the best savings and investment opportunities effectively on a large scale. But the unemployed persons cannot have an effective planning with regard to their investments because of their irregular income. It has been observed that the employed persons utilised the LIC to their maximum possible extent by purchasing a higher sum assured policies than that of the unemployed persons. Hence, employment of the respondents is considered as an important variable having relationship with the extent of utilization of the LIC in terms of sum assured. The table 4.12 shows the relationship between employment of the respondents and the sum assured in the LIC. T Table 4.12 Employment and Sum Assured Sum No of Respondents Based on Employment Nured ST o.ass (Rs.) Private Government Unemployed Total 1. Up to 50,000 40(17.70) 58(25.66) 128 (56.64) 226 (100) 2. 50,000 to 34(29.31) 52 (44.83) 30 (25.86) 116 (100) 1,00,000 3. 1,00,000 to 22(20.18) 77(70.64) 10(9.17) 109 (100) 2,00,000 4. 2,00,000 and 38(22.49) 117 (69.23) 14(8.28) 169 (100) above Total 134 (21.61) 304 (49.03) 182(29.36) 620 (100) It is evident from the table 4.12 that the employed persons both in Private and Government services have utilised the LIC to the maximum extent by purchasing higher sum assured policies. But the unemployed persons have utilised the LIC by

124 purchasing lower sum assured policies Out of 226 respondents who have purchased the life policies up to the sum assured of Rs. 50,000, 128 of them (56.64 per cent) are unemployed. But out of 109 respondents who have purchased life policies for an amount between Rs. 1,00,000 and Rs. 2,00,000, 99 of them (90.82 per cent) are employees. Similarly, in case of respondents who have purchased life policies for Rs. 2,00,000 and above, out of 169, 155 of this category (91.72 per cent) are employees both in private and Government sectors. Thus, it can be inferred that there is a close link between employment of the respondents and the extent of sum assured in the LIC policies. V. Marital Status Marriage is the turning point in the life of every one. In the Indian paternal system of living, attachment and responsibility towards the family will arise only after marriage. The safety and security of his/her family becomes the prime consideration. Further, it has been observed that the married people utilise the LIC to their maximum possible extent when compared to the unmarried people. Hence, the marital status is also identified as an important variable having relationship with the extent of utilization of the LIC in terms of the sum assured. The relationship between marital status and sum assured is exhibited through the table 4.13.

125 Table 4.13 Marital Status and Sum Assured S.No. Sum Assured (Rs.) Number of Respondents Married Unmarried Total 1. Upto 50,000 160(70.80) 66(29.20) 226(100) 2. 50,000 to 1,00,000 87(75) 29(25) 116(100) 3. 1,00,000 to 2,00, 000 103(94.50) 6(5.50) 109(100) 4. 2,00,000 and above 159(94.08) 10(5.92) 169(100) Total 509(82.10) 111(17.90) 620(100) It is evident from the table 4.13 that the married people have utilised the LIC more by purchasing all categories of sum assured policies on a large scale when compared to the unmarried people. In case of respondents who have purchased the life policies with sum assured between Rs. 1,00,000 and Rs. 2,00,000, out of 109 respondents, the majority of 103 (94.50 per cent) are married. Similarly, with regard to the respondents who have purchased life policies for sum assured of Rs. 2,00,000 and above, out of 169, 159 of them (94.08 per cent) are married. Test of Significance In order to determine whether there is any significant influence of the selected variables such as status of tax assessee, education, annual income, employment and marital status with the extent of utilization of the LIC in terms of the sum assured, Chi Square Test has been employed. The table 4.14 exhibits the consolidated results of Chi Square Test for these selected variables.

126 Table 4.14 Result of the Chi Square Test for Selected Variables and Extent of Utilization of LIC in Terms of Sum Assured S.No. I Variable Chi- Square Table Level of Value Value DX Remarks 1. I Status of tax assessee 2. Education 269.3902 I 11.341 1 3 200.6426 I 21.666 1 9 1% Significant 1% Significant 3. Annual Income 4. Employment 5.i Marital Status 302.4569 26.217 1 12 I 1% Significant 153.4457 51.5292 16.812 11.341 1% 1% Significant Significant It is evident from the table 4.14 that the calculated Chi Square Values for all the selected variables are more than the table values at one per cent level of significance for the given degrees of freedom. Hence, it can be concluded that the variables such as status of tax assessee, education, annual income, employment and marital status of the respondents highly influence the extent of utilization of the LIC in terms of the sum assured. 4.3.4 Housing Loan The extent of utilization of the services of the LIC could be realised from the angle of making use of the housing loan facility offered to the policyholders by the LIC Housing Finance Ltd. (LICHFL), a subsidiary of the Life Insurance Corporation of India. Loan schemes offered by the LICHFL are usually backed up with the life insurance cover as a collateral security. Griha Prakash, Griha Tara, Griha Jyothi, Griha Shobha (for NRIs), Griha Lakshmi and Griha Sudar are the six different types of

127 housing loan schemes available in the LICHFL. The minimum amount of loan sanctioned by the LICHFL is Rs.25,000 (for rural areas Rs.10,000) and the maximum amount is rupees one crore. Loans are available for the purchase of vacant plots, new or old house I flat construction, renovation, repairs and extension. The loan amount is 75 per cent to 85 per cent of cost of the property. Normally, the LICHFL takes about 40 per cent to 45 per cent of the net income per annum of the applicant. Housing loan schemes are also encouraged by the Government of India by giving tax exemption on housing loan interest up to Rs. 1,50,000 under section 24(2) and on the principal amount repaid, a rebate at the rate of 20 per cent not exceeding Rs. 20,000 under section 80C of the Income Tax Act 1961. Thus many more organizations have entered into the field of housing loan business. Hence, an attempt has been made to study the extent of utilization of the LIC housing loan by the policyholders in Kanyakumari District. Out of 620 respondents, 100 respondents (16.13 per cent) alone have availed housing loan offered by the LIC Housing Finance Ltd. The table 4.15 shows the classification of respondents based on the level of utilization of housing loan from the LICHFL. Table 4.15 Classification Based on Utilization of Housing Loan S.No. Amount of Housing Loan Number of (Rs.) Respondents Percentage 1. Up to 1,00,000 15 15.00 2. 1,00,000 to 2,00,000 24 24.00 3. 2,00,000 to 5,00,000 43 43.00 4. 5,00,000 and above 18 18.00 Total 100 100.00

128 It could be assessed from the table 4.15 that out of the 100 respondents who have utilized the housing loan from the LICHFL, 15 per cent of the policyholders have availed the housing loan upto Rs.1,00,000, 24 per cent have availed the loan between Rs. 1,00,000 and Rs.2,00,000, 43 per cent have availed between Rs.2,00,000 and Rs. 5,00,000 and the remaining 18 per cent of the respondents have availed above Rs.5,00,000. The limited participation in the loan facility of the LICHFL is due to the fact that many other housing financial institutions including commercial banks are actively competing in this field. It has been observed that in one occasion, many of the LIC respondents have switched over from LIC housing loan to other housing loan providers who offered more attractive schemes than those offered by the LICHFL. Factors Responsible for Utilization of Housing Loan The utilisation of the LICHFL loan has been influenced by many variables. In observation it has been identified that 15 variables are having their role in the utilisation of housing loan from the LICHFL. They are, 1. Shorter period of sanction and disbursement. 2. Sufficient amount of loan granted. 3. Liberal legal formalities. 4. Easy repayment of instalments. 5. Less rate of interest on housing loan. 6. Encouragement to early settlement of loan. 7. Sanctioning of loan in instalments. 8. Strict adherence to procedures in sanctioning loan. 9. Income tax exemption. 10. Simple and easy security.

129 11. Absence of bribing. 12. Publishing the names and photos of defaulters in the dailies. 13. Less penalty for delay in repayment of instalment. 14. Reasonable monthly instalment. 15. Agents' assistance in getting the loan. In order to evaluate the factors responsible for the utilization of the housing loan offered by the LICHFL and to identify whether they are positively or negatively influencing the policyholders to the utilization, Factor Analysis is employed. In Factor Analysis, each variable is assigned with a factor loading. The correlation co- efficient between a variable and the underlying factor is known as factor loading. The rotated factor matrix of the identified 15 variables is calculated to show the inter - relationship among the variables and their influence on the housing loan. The factor analysis model in matrix notation is given as: X = Af+e Where X = [x,+x2+x- ---------------- x] f = [f1+f2+f- ------------------- fm] e [e1+e2+e- ---------------- e] m = Number of factors p = Number of variables. On applying the rotated factor matrix, the identified 15 variables fall under the following five headings known to be factors. Fl- Liberal System i) Shorter period of sanction and disbursement. ii) Sufficient amount of loan granted. iii) Liberal legal formalities.

130 iv) Easy repayment of instalments. v) Less rate of interest on housing loan. F2 - Effective Utilization i) Encouragement to early settlement of loan. ii) Sanctioning of Loan in instalments. iii) Strict adherence to procedures in sanctioning loan. iv) Income tax exemption. F3 - Easy Accessibility i) Simple and easy security for the loan. ii) Absence of bribing. iii) Publishing the names and photos of defaulters in the dailies. F4 - Reasonability in Repayments i) Less penalty for delay in repayment of instalment. ii) Reasonable monthly instalment. F5 - Agent's Assistance Agents' assistance in getting the loan. The table 4.16 portrays the rotated factor matrix for the 15 selected variables with regard to the utilization of the housing loan by the policyholders in Kanyakumari District.

131 Table 4.16 Rotated Factor Matrix - Variables of Housing Loan 0.806-0.112 0.309 0.044 0.058 0.762 S. Variable Fl F2 F3 F4 F5 112 0.712 0.145 0.130-0.344-0.102 0.673 1. The period for sanction and disbursement is shorter 0.711 2. The amount of loan granted is quite sufficient 0.698-0.133 0.221 0.0114 0.098-0.204 0.064-0.056 0.344 0.588 0.646 3. Liberal legal formalities 0.606 0.391-0.056 0.290-0.234 0.662 4. Easy repayment of instalments 5. The rate of interest on 0.230 0.769 0.120-0.139-0.058 0.681 housing loan is comparatively less -0.154 0.729 0.096 0.341-0.167 0.709 6. Early settlement of loan is encouraged -0.263 0.558 0.525 0.080-0.239 0.720 7. Loan is sanctioned in instalments 8. Each instalment is 0.369 0.526-0.087 0.287 0.091 0.511 sanctioned after adhering to strict procedures 9. It is beneficial for income 0.235 0.006 0.812 0.031 0.009 0.715 tax exemption 0.226 10. Security demanded for the FO.403 loan is not burdensome 0.059-0.099 0.550-0.547 0.778 11. Absence of bribing 12. Publishing the names and 0.043 0.135-0.059 0.865 0.066 0.778 photos of defaulters in the dailies is not advisable -0.316 0.133 0.113 0.610-0.349 0.625 13. Less penalty for delay in repayment of instalment 0.013-0.181 0.157 0.004 0.875 0.824 14. EMI is reasonable in LIC HFL _ 20.067 14.009 13.039 11.762 10.346 69.223 15. Agents are assisting much in getting the loan 20.067 34.076 47.115 58.877 69.223 69.223 Percentage of explained variance Cumulative percentage of --explained variance 0.240 0.722 0.278 0.714

132 The table 4.16 reveals that the first factor Fl-Liberal system accounts for a variation of 20.07 per cent in the total variable set. It includes shorter period of sanction and disbursement, sufficient amount of loan granted, liberal legal formalities, easy repayment of instalments and low rate of interest on housing loan. There is a positive correlation between these five variables and the utilization of housing loan. It gives the result that these five variables influence the policyholders positively towards the utilization of housing loan of the LIC. The second factor F2-Encouraging Effective Utilization, accounts for a variation of 14.01 per cent in the total variable set. This factor includes encouragement to early settlement of loan, sanctioning of loan in instalments, sanctioning of each instalment of the loan after adhering to strict procedures and the benefits due to income tax exemption. All the four factors are showing a positive correlation with the utilization of housing loan. Thus, these factors also influence the policyholders towards the utilization of the LIC housing loan. Similarly, the third factor 173- Easy Accessibility accounts for a variation of 13.04 per cent in the total variable set. It includes the variables such as easy and simple security for the loan, absence of bribing and publishing the names and photos of defaulters in the dailies which is not advisable. There is a positive correlation between these three variables and the utilization of the LIC housing loan. Today, almost all the lending agencies are having the practice of publishing the names of the defaulters through the press media after exhausting all other means of collecting the instalments. Hence, this variable has been loaded with a small value (0.550). The result of positive correlation implies that these three variables influence the policyholders for the utilization of the housing loan from the LICHFL.

133 The fourth factor F4 - Reasonability in Repayment, accounts for a variation of 11.06 per cent in the total variable set. This factor contains the variables such as less penalty for delay in repayment of instalment and reasonable equated monthly instalment (EM!) in LICHFL. There is a positive correlation between these two variables and the utilization of housing loan from the LICHFL. It implies that these two variables influence the policyholders positively in the utilization of the LIC housing loan. The last factor F5 - Agent's Assistance, shows a variation of 10.35 per cent in the total variable set. It includes only one variable, that is, the agents are assisting much in getting the loan which is loaded with a higher positive value of 0.875. It shows that there is a positive correlation between this variable and the utilization of housing loan. The result implies that this factor also influences the policyholders in Kanyakumari District for the utilization of housing loan from the LICHFL. 4.3.5 Policy Loan The extent of utilization of the LIC could also be assessed from the point of view of making use of the policy loan facility offered by the LIC of India by the policyholders in Kanyakumari District. The policy loan has been offered by the LIC in order to satisfy the urgent financial needs of the policyholders. They are eligible to take loan to the extent of 85 per cent of the surrender value of their policies by pledging the policy bond. At present, the LIC is charging 9 per cent rate of interest on policy loan, payable half yearly. A policyholder can repay the loan amount either in part or in full any time during the term of the policy. If loan is not repaid during the tenure of the policy or early claim, the amount of loan plus interest calculated on compound rate basis are deducted from the claim amount and the balance is repaid. Out of 620

134 respondents, only 158 respondents (25.48 per cent) have availed of policy loan facility. The table 4.17 depicts how far the policy loan in LIC has been utilised by the policyholders in Kanyakumari District. Table 4.17 Utilization of Policy Loan by Policyholders S. No. Amount of Policy Loan (Rs.) Number of Respondents Percentage 1. Upto 10,000 43 27.22 2. 10,000 to 25,000 60 37.97 3. 25,000 to 50,000 38 24.05 4. 50,000 to 75,000 3 1.90 5. 75,000 and above 14 8.86 Total 158 100.00 The table 4.17 reveals that out of 158 respondents who have availed the policy loan from the LIC, 43 of them (27.22 per cent) have availed the loan up to Rs. 10,000, 60 of them (37.97 per cent) have availed the loan between Rs. 10,000 and Rs. 25,000, 38 of them (24.05 per cent) have availed of the loan between Rs. 25,000 and Rs. 50,000 and 17 of them (10.76 per cent) have availed the loan above Rs. 50,000. It indicates that the policyholders are seeking policy loan from the LIC for meeting out their emergency needs of smaller amounts. The reasons for such utilization are many. Some of the factors, which influence the utilization of policy loan, are: i) Liberal procedures ii) iii) iv) Reasonable rate of interest Quick sanctioning of loan Assistance of the agent in getting the loan

135 v) Encouragement to settle the loan vi) vii) viii) ix) Periodical information about the outstanding balance Compulsion free repayment Absence of bribing Easy clearance of loan x) Better branch office service Garrett's Ranking Technique has been employed to assess the important factors responsible for the utilization of policy loan by the policyholders in Kanyakumari District. Factors Responsible for the Utilization of Policy Loan The identified ten factors have been put to testing under Garrett's Ranking Technique for assessing the important factors responsible for the utilization of policy loan in the LIC by the sample policyholders in Kanyakumari District. The mean scores and the percentile ranks obtained for the responses from the sample policyholders towards the factors responsible for the utilization of policy loan in the LIC are depicted in the table 4.18.

136 Table 4.18 Percentile Ranks for the Responses on the Policy Loan S. No. Score Percentage Factors Rank Position (Table 49) PRs 1. Liberal procedures 1 5.00 83 95.00 2. Quick sanctioning 2 15.00 70 85.00 3. Absence of bribing 3 25.00 63 75.00 4. Branch office service is better 4 35.00 63 65.00 5. Agent's prompt and quick 5 45.00 63 55.00 assistance 6. Reasonable rate of interest 6 55.00 63 45.00 7. No compulsion to repay the 7 65.00 63 35.00 loan 8. Encouraging to settle the loan 8 75.00 37 25 at the earliest 9. Informing about the out- 9 85.00 30 15.00 standing balance periodically 10. Loan is sanctioned on all 10 95.00 19 5.00 types of policies The table 4.18 vividly reveals that 'liberal procedures' being practiced by the LIC of India in sanctioning the policy loan is ranking first in the opinion of the sample policyholders in Kanyakumari District with 95 percentile ranks. Quick sanctioning and absence of bribing are the second and third ranking factors with 85 and 75 percentile ranks respectively with regard to the utilization of policy loan in the LIC as perceived by the sample policyholders in Kanyakumari District. All the other factors are comparatively ranked to be the least important ones.

137 4.3.6 Utilization of LIC Bond The LIC bond is an authentic document justifying the originality of the policy taken by the policyholder, which is being used by him for various purposes in addition to make the claim from the LIC. Out of 620 respondents, only 402 respondents (64.84 per cent) used the LIC bonds for various purposes. The table 4.19 shows the classification of the respondents on the basis of the purposes for which the bond has been used. Table 4.19 Purpose of Using LIC Bond S.No. Purpose Number of Respondents Percentage 1. Security for education loan 50 12.44 2. Evidence for age proof 42 10.45 3. Security for housing loan 100 24.88 Set for loan from banks 32 7.96 K4Seccuurriftyy for policy loan from LIC 158 39.30 6. As address evidence 6 1.49 7. Any other 14 3.48 Total 402 100.00 The table 4.19 exhibits that out of 402 respondents who have utilised the LIC bond for various purposes, 50 (12.44 per cent) have used it as a security for education loan, 42 (10.45 per cent) as evidence for age proof, 100 (24.88 per cent) as security for housing loan from LICHFL, 32 (7.96 per cent) as security for loan from banks, 158 (39.30 per cent) as security for policy loan from LIC, only 6 (1.49 per cent) as address evidence and the remaining 14 (3.48 per cent) have used the bond for some other purposes.

138 4.3.7 Utilisation of LIC in Terms of Annual Premium The assessment with regard to the extent of utilization of the LIC by the policyholders in Kanyakumari District is also made by relating the annual income of the respondents with the amount of life insurance premium paid. It has been observed that the higher the annual income of the respondent, the higher is the annual life insurance premium paid and vice versa. Hence, annual income of the respondents is considered as the most important variable having relationship with the extent of utilization of LIC by the respondents in Kanyakumari District in terms of the amount of annual premium paid. The table 4.20 exhibits the relationship between the annual income of the respondents and the annual premium paid for the utilization of LIC products. Table 4.20 Annual Income and Annual Premium Paid No of Respondents Based on Annual Income (Rs.) Annual S 1,00,000 No. Premium 1,50,000 2,00,000 (Rs.) Up to 50,000 to to to and 50,000 1,00,000 1,50,000 2,00,000 Above Total 1. 56 42 16 4 10 128 Up to 2000 (43.75) (32.81) (12.5) (3.13) (7.81) (100) 2. 2000 to 42 50 28 10 14 144 5000 (29.17) (34.72) (19.44) (6.95) (9.72) (100) 3. 5000 to 10 36 24 28 42 140 10,000 (7.15) (25.71) (17.14) (20) (30) (100) 4. 10,000 and 2 18 22 30 136 208 above (0.96) (8.65) (10.58) (14.42) (65.39) (100) Total 110 146 90 72 202 620 (17.74) (23.55) (14.52) (11.61) (32.58) (100)

139 It could be seen from the table 4.20 that the respondents with higher annual income paid more amount of premium and utilised the LIC products to the maximum extent possible. Out of 208 respondents who paid annual premium to LIC of Rs. 10,000 and more, the majority of 136 (65.39 per cent) had animal income of more than Rs. 2,00,000. But in the case of respondents who paid annual premium up to Rs.2,000, out of 128, the majority of 98 (76.56 per cent) had annual income up to Rs.1,00,000 only. Test of Significance The Chi Square Test has been employed to evaluate whether there is any significant relationship between the annual income of the respondents and the amount of premium paid for the utilization of LIC products. The table 4.21 exhibits the consolidated result from the Chi Square Test. Table 4.21 Result of the Chi- Square Test for Annual Income and Amount of Premium Paid Chi - Table Level of Variable Square D.F Value Significance Value Remarks Annual Income 275.8211 26.217 12 1% Significant Since the Chi Square Value (275.8211) is more than the table value (26.217) for the degree of freedom of 12 at one per cent level of significance, as exhibited in table 4.2 1, it can be concluded that there is a significant relationship between the annual income of the respondents and the amount of premium paid for the utilization of the LIC products.

I 4Q 4.4 Factors Responsible for the Utilization of LIC of India This part deals with the various factors which are responsible for the inclination of the policyholders for buying the products and utilising the varied services of the LIC of India. It is observed that there are five groups of factors comprising of 35 individual variables responsible for differing utilization of the LIC services. Since each variable has influenced the utilization of the LIC at different levels, each respondent is expected to give his rank to each variable. In such cases of ranking, Garrett's Ranking Principle is the most fitting tool for further analysis. Hence, it has been used. Ranking of Variables Responsible for Utilisation of LIC Garrett's Ranking Principle has been applied to rank the variables, which have greater impact on the utilization of the LIC of India. The variables responsible for the utilization of the LIC of India have been ranked in the order of merit. The most influencing variable is being marked 1 and the least influential variable being ranked last in each group. By means of percentage position formula, [I00(R-0.5)/N] and Garrett's Ranking Table, it is possible to convert any set of ranks into 'scores', if data are assumed of normal distribution. The variables responsible for the utilization of the LIC of India by the policyholders are identified and their responses are obtained for thirty five statements. The statements with reference to the variables responsible for the utilization of the LIC of India are listed. The scores (Garrett's scores) obtained by the respondents for each statement are averaged. The average score obtained for each statement is shown in the table 4.22.

Table 4.22 Average Score for the Factors Responsible for the Utilization of LIC of India S.No. Statement Mean Score 1. Annual surplus income of the policyholders from main 0.78 occupation 2. Annual surplus income of other family members 0.35 3. Additional income from secondary occupation 0.21 4. Annual income from investment 0.20 5. Remedy for income tax 0.58 6. Amount of family expenditure 0.57 7. Amount of assets and liabilities 0.61 8. Size of the family 0.74 9. Better educational qualification 0.80 10. Nearness to agents 0.69 11. Age of the policyholders 0.71 12. Number of male children 0.25 13. Number of female children 0.22 14. Annual savings 0.76 15. Annual medical expenses 0.27 16. Period of service in employment/business 0.73 17. Need for housing loan 0.29 18. Need for policy loan 0.50 19. Number of accidents faced 0.15 20. Number of educated family members 0.48 21. Amount of initial premium paid by the agent 0.27 22. Number of instalments of premium paid by the agent 0.10 23. Amount spent on charitable activities 0.25 24. Aim for educating the ward 0.59 25. To meet out the marriage expenses of the ward 0.51 26. Planning to meet out old age problems 0.86 27. Generation of assets in future 0.75 28. Service from LIC agents 0.58 29. Life security 0.95 30. LIC being a Government undertaking 0.96 31. Greater choice as variety of the LIC policies 0.85 32. Popularity of LIC 0.91 33. Liquidity character of the investment 0.61 34. Non-Compulsion to repay the policy loan 0.51 35. Safer investment 0.98 141