Academic journal article Researchers World

Impact of Liberalization on Indian Life Insurance Industry an Exploratory Factor Analysis

Academic journal article Researchers World

Impact of Liberalization on Indian Life Insurance Industry an Exploratory Factor Analysis

Article excerpt

ABSTRACT

There is a substantial amount of debate regarding the impact of liberalization on Indian life insurance industry; huge literature available on the impact of liberalization on the key components in the world context. Few studies are available in context of Indian insurance industry that have examined varying aspects such as emerging strategic and regulatory issues, appraisal of industry development, deregulation of industry and economic growth nexus, changing trend structure and innovation in post liberalization phase. The main purpose of this paper is to examine the factors that influenced the development of the life insurance industry in India in post liberalization phase. To cater a central interest of this paper by using data of 552 respondent from various categories such as Intermediaries, Employees, and Customers across length and breadth of the country; empirically examined the impact of the liberalization on Indian life insurance industry, and extracted the factors by applying Exploratory Factor Analysis for identifying groups or clusters of variables that relate to each other. Based on the results obtained; it is concluded that significant impact of liberalization mainly be explained by the factors such as Marketing Mix, Service Quality and Insurance awareness. The research results undoubtedly confirm the significance of the relationship between liberalization trends and change factors in the insurance market of India, hence providing a background for further research in this area and description and illustration of brief and step by step overview of exploratory factor analysis (principal component analysis) by using SPSS.

Keywords: Insurance, Liberalization, IRDA, Factor Analysis

JEL Classification: G22, L51, C3

INTRODUCTION:

The term -Liberalization, Privatization and Globalization (LPG)" became a widely used buzzword in the name of economic reforms; Globalization or economic liberalization is not a new phenomenon; Frank argued that a form of globalization has been in existence since the rise of trade links between Sumer and the Indus Valley Civilization in the third millennium B.C. (http://en.wikipedia.org, 2013).Globalization deeply rooted in the ancient history and it has travelled through many facets.

In the early 1990s the economic reforms started, it leads to Liberalization, Globalization and Privatization (LPG). Sadhak argued that often the term liberalization and globalization are used simultaneously (Dr. H. Sadhak, 2005). Liberalization tempted global giants to enter in the Indian business and industry. They came with their values, culture, knowledge and technology that have posed great challenges to the protected market. In the changing scenario financial services liberalization have a great impact on economic growth;

With the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, The Government of India has liberalized the insurance sector in March 2000. Thus entry restrictions lifted and foreign players were allowed to enter in the Indian insurance industry with their domestic partners with FDI Cap of 26 per cent. Deregulation and liberalization has revolutionized insurance sector in India.

The economic reforms i.e. Liberalization has posed some challenges to Indian life insurance industry. More competition, rising customer expectation, aggressive marketing, new knowledge, technology, political environment, changing social values, use of marketing mix, recruitment and retention, alternative distribution channel, phenomenal business strategies, innovation and creativity, cost effectiveness, Life expectancy and many issues came in the front to address. In the post liberalization period life insurance business felt a drastic change. Indian Life Insurance industry felt a great impact of Liberalization, There is a huge literature in form of articles, books and reports that have looked in to the transition of Indian life insurance industry. …

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