IMPACT OF PERCEIVED ORGANIZATIONAL …...CERTIFICATE This is to certify that the thesis titled...

IMPACT OF PERCEIVED ORGANIZATIONAL CLIMATE ON

EMPLOYEE/AGENT PERFORMANCE IN INDIAN INSURANCE

SECTOR WITH REFERENCE TO RETENTION, CUSTOMER

SERVICE AND PRODUCTIVITY

Thesis submitted to the Padmashree Dr.D.Y. Patil University,

Department of Business Management

in partial fulfillment of the requirements for the award of the Degree of

DOCTOR OF PHILOSOPHY

IN

BUSINESS MANAGEMENT

Submitted by

ANITA JACOB

ENROLLMENT NO DYP- Ph.D-09008

Research Guide DR. RAJINDER.S.AURORA

PADMASHREE DR.D.Y PATIL UNIVERSITY DEPARMENT OF BUSINESS MANAGEMENT

SECTOR 4, PLOT NO: 10 CBD BELAPUR, NAVI MUMBAI- 400614

October 2012

IMPACT OF PERCEIVED ORGANIZATIONAL CLIMATE

ON EMPLOYEE/AGENT PERFORMANCE

IN INDIAN INSURANCE SECTOR,

WITH REFERENCE TO RETENTION,

CUSTOMER SERVICE AND PRODUCTIVITY.

This thesis is dedicated to my Lord and Saviour Jesus Christ.

DECLARATION

I hereby declare that the thesis titled ‘Impact of Perceived Organizational Climate on

Employee/Agent Performance in Indian Insurance Sector, with reference to Retention,

Customer Service and Productivity’ submitted for the award of Doctor of Philosophy in

Business Management at the Padmashree Dr. D.Y Patil University Department of

Business Management is my original work and the thesis has not formed the basis for the

award of any degree, associate ship, fellowship or any other similar titles.

Place :

Date:

Dr.R.Gopal Dr.Rajinder.S.Aurora Ms. Anita Jacob

(Head of the Department) (Research Guide) (Research Scholar)

CERTIFICATE

This is to certify that the thesis titled ‘Impact of Perceived Organizational Climate on

Employee/Agent Performance in Indian Insurance Sector, with reference to Retention,

Customer Service and Productivity’ submitted by Mrs. Anita Jacob is a bonafide research

work for the award of the Doctor of Philosophy in Business Management at Padmashree

Dr.D.Y. Patil University’s Department of Business Management in partial fulfillment of

the requirements for the award of the Degree of Doctor of Philosophy in Business

Management and that the thesis has not formed the basis for the award previously of any

degree, diploma, associate ship, fellowship or any other similar title in any university or

Institution.Also certified that the thesis represents an independent work on the part of the

candidate.

Place: Navi Mumbai

Date:

Dr.R.Gopal Dr. Rajinder .S. Aurora

Head of the Department Research Guide

ACKNOWLEDGEMENT

To begin with, I am deeply indebted to the Padmashree Dr. D.Y Patil University’s

Department of Business Management, which has accepted me for the Doctorate program

and provided me with an excellent opportunity to carry out the present research project. I

sincerely thank my guide, Dr. Rajinder.S.Aurora, firstly for encouraging me to pursue

this study and giving me his valuable time and guidance for this project. It was his

encouragement, support and guidance that helped me pursue this goal.

It will not be justified on my part if I fail to offer my heart filled thanks to Dr. R. Gopal,

Director & Dean, Department of Business Management, Padmashree Dr. D.Y. Patil

University, Mumbai for his assistance, encouragement during this research study. His

guidance has played a very important role in helping me keep my focus and I am deeply

indebted to him. I would like to express my sincere thanks to Dr. Pradip Manjrekar and

Dr.G.S Monga for their valuable inputs during the research study.

I would specially like to thank the Branch and Training managers of the various

insurance companies who participated in this study for their support in helping me

interact with their employees and agents to make this research project possible.

Finally I would like to thank my Lord and Saviour Jesus Christ through whom all things

are possible. I would also like to thank my husband Jacob and my son Paul and daughter

Shalom and my parents, my extended family and my friends and colleagues for their

immense support, sacrifice and love without which this thesis would not have been

completed.

Place : Navi Mumbai

Date : Ms Anita Jacob

I

TABLE OF CONTENTS

Chapter No Subsection Title Page No

Cover Page Title Declaration Certificate Acknowledgement Table of Contents I List of Tables VI List of Figures IX List of Abbreviations X Executive Summary XI

Chapter 1 INTRODUCTION 01 1.1 Indian Insurance Industry 02

1.2 History of Insurance 03

1.3 Present Scenario of Insurance Industry 07

1.4 Government Initiatives 09

1.5 Indian Life Insurance in the Post LPG Era 13

1.6 Evolution of Life Insurance in India 17

1.7 Evolution of Life Insurance Industry in the Last Decade 17

1.8 IRDA- A Unique Role Model 20

1.9 Spreading Insurance through Rural, Social Sector and Micro Insurance 21

1.10 Product Innovation during the Last Decade 23

1.11 Underlying Growth Drivers

24

II

1.12 Organizational Climate and Employee/Agent Performance 26

Chapter 2 REVIEW OF LITERATURE 29 2.1 Definitions 30

2.2 History of Organizational Climate 34

2.3 Evolution of the Concept 37

2.4 Formation of Organizational Climate 39

2.5 Measurement of Climate 40

2.6 Dimensions of Organizational Climate 42

2.7 Concept of Employee /Agent Performance 51

2.8 Concept of Employee Retention 53

2.9 Concept of Customer Service 58

2.10 Concept of Productivity 66

2.11 Research Gap 69

Chapter 3 OBJECTIVE OF THE STUDY AND RESEARCH METHODOLOGY

71

3.1 Statement of the Problem 72

3.2 Importance of the Study 72

3.3 Purpose of the Study 74

3.4 Scope of Research 74

3.5 Research Objectives 74

3.6 Research Hypotheses 75

3.7 Sample Design 78

3.8 Data Sources 80

3.9 Tabulation and Statistical Analysis of Data 81

3.10 Limitation of the Research 82

III

Chapter 4 STUDY ON ORGANIZATIONAL CLIMATE 83

4.1 Concept of Organization 84

4.2 Concept of Climate 86

4.3 Concept of Organizational Climate 91

4.4 Levels of Climate 102

4.5 Organizational Climate Dimensions 106

Chapter 5 EMPLOYEE AGENT PERFORMANCE 112

5.1 Insurance Agents 113

5.2 Maximizing Employee And Agent Performance 121

5.3 Measures To Increase Insurance Selling 126

5.4 Challenges Faced By Employees And Agents 130

5.5 Possible Ways To Attract And Retain Agents 131

Chapter 6 INSURANCE SECTOR OVERVIEW 135

6.1 Introduction 136

6.2 New initiatives in the Insurance sector 139

6.3 Dynamic Regulatory Structure 143

6.4 Insurance sector reforms 144

6.5 Role of IRDA 147

6.5.1 Mission of IRDA 147

6.5.2 Recent Regulatory Initiatives 148

6.5.3 Favourable Government and Regulatory Initiatives 150

IV

6.5.4 Insurance Awareness and Market Conduct 151

6.5.5 Registration of Insurers 152

6.5.6 Financial Reporting 152

6.5.7 Investment 153

6.6 SWOT Analysis 153

Chapter 7 CHALLENGES AND OPPORTUNITIES IN THE INDIAN INSURANCE SECTOR

156

7.1 Introduction 157

7.2 Critical Issues And Challenges 157

7.3 Opportunity To Professionalize The

Agency Channel 158

7.4 Scope To Boost Alternate Channels 159

7.5 Delayed Break-Even For Private Insurance

Companies 160

7.6 Challenges In Marketing Risk-Cover Products

161

7.7 Role Of Intermediaries 162

7.8 Distribution Scenario In The Indian Market 162

7.8.1 Distribution channels and its challenges 163

7.9 Entry Barrier 170

7.10 Competitive Challenges 171

7.11 Opportunities For Growth 177

Chapter 8 RETENTION, CUSTOMER SERVICE AND PRODUCTIVITY IN INDIAN INSURANCE SECTOR

182

V

8.1 Attrition In Indian Insurance Sector 183

8.2 Retention Challenges In Insurance Sector 189

8.3 Retention Success Strategies For Insurance Companies

191

8.4 Customer Service Challenges In Indian Insurance Sector

193

8.5 Productivity Challenges In Indian Insurance Sector

202

Chapter 9 DATA ANALYSIS AND HYPOTHESIS TESTING

209

Chapter 10 MAJOR FINDINGS 260

Chapter 11 CONCLUSION AND RECOMMENDATIONS

268

Appendices Appendix I BIBLIOGRAPHY 275

Appendix II RESEARCH QUESTIONNAIRE 293

Appendix III SPSS OUTPUTS 298

VI

LIST OF TABLES

Sr No

Table No

Title Page No

1 1.1 Milestones in the Life Insurance Business in India 04

2 1.2 Milestones in the General Insurance Business in India 05

3 1.3 Tracing the Chronological Evolution of the Insurance

Industry 06

4 3.1 List of Life Insurance Companies selected for Data

Collection 81

5 8.1 IRDA Report on Attrition Figures in Indian Life

Insurance Sector since 2006-2011 188

6 9.2.1 Reliability Statistics- Organizational Climate 213

7 9.2.2 Reliability Statistics- Retention 213

8 9.2.3 Reliability Statistics- Customer Service 214

9 9.2.4 Reliability Statistics- Productivity 215

10 9.3.1

Pearson’s Correlation Co-Efficient Between

Communication, Career Development, Training,

Performance Feedback And Retention. 217

11 9.3.2 Model Summary- Retention 218

12 9.3.3 ANOVA- Retention 219

13 9.3.4 Coefficient Matrix- Retention 219

14 9.4.1

Pearson Correlation Co-Efficient Between Role Clarity,

Direction, Quality Of Service, Work Life Policies And

Customer Service. 221

15 9.4.2 Model Summary- Customer Service 222

VII

16 9.4.3 ANOVA- Customer Service 223

17 9.4.4 Coefficient Matrix- Customer Service 223

18 9.5.1

Pearson’s Correlation Co-Efficient Between Reward And

Recognition, Innovation, Teamwork, Autonomy And

Productivity. 225

19 9.5.2 Model Summary- Productivity 226

20 9.5.3 ANOVA- Productivity 226

21 9.5.4 Coefficient Matrix- Productivity

227

22 9.6.1 Group Statistics - Retention 228

23 9.6.2 Independent Samples Test- Retention 229

24 9.7.1 Group Statistics – Customer Service 230

25 9.7.2 Independent Samples Test – Customer Service 231

26 9.8.1 Group Statistics - Productivity 232

27 9.8.2 Independent Samples Test- Productivity 232

28 9.9.1 Chi Square Test: Retention * Job Level 233

29 9.9.2 Chi-Square Tests - Retention 234

30 9.10.1 Chi Square Test: Customer Service * Job Level 235

31 9.10.2 Chi-Square Tests – Customer Service 236

32 9.11.1 Chi Square Test: Productivity * Job Level 236

33 9.11.2 Chi-Square Tests - Productivity 237

34 9.12.1 ANOVA Test For Companies – Impact of Organizational

Climate on Retention 237


Climate on Customer Service 238

VIII


Climate on Productivity 239

37 9.13.1 Results Of Hypothesis Testing 256

IX

LIST OF FIGURES

Sr No

Figure No

Title Page No

1 1.1 Greater private sector activity over the years 07

2 1.2 Factors driving repeat purchasing 12

3 1.3 Research sources used before buying a policy 16

4 1.4 Information sources for consumers life and pensions research 19

7 5.1 Reasons why customers see personal interaction as important 120

8 5.2 Market share of all life insurance companies in India at the end of march 2012/FY 2012

122

9 5.3 Customers opinions on how the insurers need to improve claims handling

129

10 7.1 Factors that would persuade customers to stay 158

11 7.2 Weighted new business premium for April 2011 to March. 2012 compared to April 2010 to March. 2011 160

12 8.1 Perception of Indian customers towards service quality

provided by insurance companies in India 194

13 9.1.1 Classification of data collected on the profile of gender of the respondents

210

14 9.1.2 Classification of data collected on the profile of age of the respondents

211

15 9.1.3 Classification of data collected on the profile of experience of the respondents

212

16 9.1.4 Classification of data collected on the profile of job level of the respondents

212

X

LIST OF ABBREVIATIONS

GIC General Insurance Company

LIC Life Insurance Company

TAC Tariff Advisory Committee

IRDA Insurance Regulatory and Development

SHG’s Self Help Group’s

MI Micro Insurance

NBFC Non Banking Financial Company

NGO Non Governmental Organization

ULIP Unit Linked Insurance Plan

MIDS Maruti Insurance Distribution Services

MIBL Maruti Insurance Brokers

ALM Asset Liability Management

NAV Net Asset Value

FDI Foreign Direct Investment

XII

EXECUTIVE SUMMARY

India’s rapid rate of economic growth over the past decade has been one of the most

significant developments in the global economy. This growth traces its origin in the

introduction of economic liberalization in the early 1990s, which has equipped India to

exploit its economic potential and substantially raise the standard of living of its people.

The insurance industry in India has visibly progressed since the time when businesses

were tightly regulated and concentrated in the hands of a few public sector insurers.

Following the passage of the Insurance Regulatory and Development Authority Act in

1999, India abandoned public sector exclusivity in the insurance industry in favor of

market-driven competition. This shift has brought about major changes to the industry.

The new era of insurance development has seen the entry of international insurers, the

proliferation of innovative products and distribution channels, and the raising of

supervision standards.

Before the year 1999, there was monopoly state run LIC transacting life business and the

General Insurance Corporation of India with its four subsidiaries transacting the rest. In

the wake of reform process and passing Insurance Regulatory and Development

Authority (IRDA) Act through Indian parliament in 1999, Indian Insurance was opened

for private companies.

Liberalization of the Insurance sector has allowed the foreign players to enter the market

with their Indian partners. India offers immense possibilities to foreign Insurers since it is

the world's most populous country having over a billion people. While companies have

been successful in product innovation, most of them are still grappling with right mix of

distribution channels for capturing maximum market share to build brand equity, building

XIII

strong and effective customer relationships and cost effective customer service. While the

traditional channel of tied up advisors or agents is the chief distribution channel, insurers

are also innovating and finding new methods of delivering the products to customers.

Corporate agency, brokerage, Bancassurance, e-insurance, cooperative societies are some

of the channels, which are being tapped by the insurers to reach the appropriate market

segments.

Organizational climate is defined as a global impression of one’s organization and

personal impact of the work environment, which influences the individual’s work

behaviors and job-related attitudes. It describes the perception of employees towards their

organizations which would link to work attitude formation (Litwin & Stringer, 1968;

Pritchard & Karasick, 1973).A good organizational climate according to empirical

demonstrations is related to higher-level behaviors and consequently to organizational

performance indicators such as customer satisfaction, organizational effectiveness, total

quality management outcomes and financial performance (Bowen and Ostroff, 2004).

The organizational climate study facilitates the firm to identify the deficiencies in

connection with different organizational factors which can throw light on retention

strategies that can be adopted to overcome attrition problems among employees and

agents in the insurance sector along with identifying measures to improve service quality

in employees and agents during interactions with customers and also adopt measures to

increase employee and agent productivity.

The turnover of insurance agents has usually been high in this business. The highest

employee turnover is at the financial advisors' (agent) level, where the entry barriers are

low but targets and work pressures are very high.Attracting and retaining employees and

XIV

agent is a great challenge for the Indian insurance industry. Critical analysis of the work

force trends points to an impending shortage of highly skilled employees who possess the

requisite knowledge and ability to perform at high levels, meaning that insurance

companies failing to retain high performers will be left with an understaffed, less

qualified workforce that ultimately hinders the ability to remain competitive.

Privatization has also brought in new players in the insurance market with almost all

having foreign partners. For the last one decade of this liberalized era, Indian life

insurance industry has been witnessing tremendous changes with private players having

reasonable growth rate and market share. The emerging scenario provides the customers

with choice of insurance, wider range of new and innovative products, competitive

pricing of products and services. The trend of insurance companies has shifted from a

product-focused view to a customer-focused one.

Insurance companies in India are consequently directing their strategies towards

increasing customer satisfaction and loyalty through improved service quality. Therefore

in light of this evolution insurance industry is finally becoming aware of the fact that

service quality is the vital factor that will ensure success, especially in this competitive

environment.

According to the survey done by global actuarial consulting firm Milliman, low

productivity of agents is a major concern and improving that would involve significant

efforts in training and ongoing agent management activities. Indian insurance is a

relatively new industry where the rapid growth has increased the demand for trained

workforce with specific skills in sales, operations, product design and management. The

specialized needs of the industry in underwriting, actuarial, assessment and risk

XV

management also require investment in training and development. The future growth of

the industry will to a large extent depend on the supply of trained manpower and the

insurance companies have therefore realized the significance of raising the productivity

of their existing intermediaries.

However the presence of competition has changed the way the insurance industry

functions this is evident in the increasing attrition rates, poor customer service and low

productivity that are seen among its employees and agents. The ability to handle

organizations most valuable asset, employees and agents will play a crucial role in the

success of Indian Insurance Companies. In the light of the importance of the Insurance

Sector to the economy, it becomes extremely important to study the drivers for success in

this sector. Thus the study of factors of Organizational Climate impacting Employee and

Agent Performance with respect to Retention, Customer Service and Productivity

becomes most relevant.

RESEARCH GAP

A healthy Organizational Climate is a pre-requisite for increasing employee and agent

performance and it also has an impact on employee and agent retention, the manner in

which services are provided to customers and their overall productivity. The companies

that have aimed at creating the best organizational climate for their employees and agents

have created adequate framework for the success of their organization. Organizations

must invest in their employees and agents to succeed in business. Identifying quantifiable

measurable factors that can correlate organizational climate to employee and agent

performance in a consistent manner could prove valuable for organizations and leaders.

The study of the literature review indicated there is gap in the field of investigation

XVI

specifically in this area of Organizational Climate impacting employee/agent

performance with respect to employee and agent retention, customer service and

productivity in the Indian insurance sector. The literature did not suggest any specific

and direct historical correlation between organizational climate and employee/agent

performance especially in the Indian insurance sector.

Understanding the relationship between organizational climate and employee/agent

performance can assist the organizational leaders from the insurance sector in framing

solutions to reduce attrition rates among employees and agents, it can also help in

enhancing the quality of service provided to customers at the same time identify ways to

increase employee/agent productivity leading to the success of the organization.

PURPOSE OF THE STUDY

With several national and international players competing and growing rapidly the Indian

Insurance Sector is facing high levels of attrition among its employees and agents, it is

also characterized by poor customer service quality and is plagued with low productivity

levels which is seen in the performance of its employees and agents. The study sought to

identify the degree to which specific factors in the organizational climate relate to

employee and agent performance. The current study was conducted to establish and

identify measurable link between organizational climate and employee and agent

performance within insurance companies.

SCOPE OF RESEARCH

Keeping pace with the advancement in country, insurance sector is showing tremendous

growth and carries great significance because of the emerging competition. The eight

organizations under study are some of the well known organizations in this sector. This

XVII

study is an attempt to find out the impact of organizational climate on employee/agent

performance with reference to employee retention, customer service and productivity.

The respondents were mainly agents and employees such as sales managers, operations

staff, trainers and agents from eight insurance companies located in Mumbai namely Max

New York Life, Reliance Life, ING Vysya, LIC, Tata AIG, ICICI Prudential HDFC Life,

and Bajaj Allianz.

RESEARCH OBJECTIVES

1. To study the impact of Organizational Climate variables like Communication,

Career Development, Training, and Performance Feedback on Employee/Agent

Retention in Indian Insurance Companies.

2. To analyze the impact of Organizational Climate variables like Role Clarity,

Direction, Quality of Service and Work life Policies on Customer Service in

Indian Insurance Companies.

3. To assess the impact of Organizational Climate variables like Reward &

Recognition, Innovation, Team work and Autonomy on Employee/Agent

Productivity in Indian Insurance Companies

4. To assess the differences in the perception of male and female, employees &

agents regarding the impact of organizational climate on employee/ agent

retention, customer service and employee /agent productivity.

5. To assess the differences in the perception of employees and agents regarding the

impact of organizational climate on employee/ agent retention, customer service

and employee /agent productivity.

XVIII

6. To analyze the differences in the perception of insurance companies regarding the



SAMPLING

SAMPLE SIZE

Since the total population (N) that is the number of companies in Maharashtra was not

known the following formula was used to calculate the sample size. Assuming the

percentage of companies where sound Organizational Climate prevails to be 40% (based

on the estimates by Industry Sources) the sample size n required to estimate this

percentage is

n = Z2 PQ assuming N ∞ d2

Where Z= 1.96 for 95% confidence

P= % of Companies with existence of a sound Organizational Climate

Q= (100-p), d = 10% of P=4.0, (10% error)

n= 576

To ensure balanced representativeness of the consumers, the random sampling was used.

The target population tapped was the employees and agents of eight insurance companies

in Mumbai namely Max New York Life, Reliance Life, ING Vysya, LIC, Tata AIG,

ICICI Prudential HDFC Life and Bajaj Allianz. The sample size calculation showed a

sample of 576 based on which a sample of 596 was chosen which included 240

employees and 356 agents of these various eight companies. The participants who were

employees comprised of sales managers, operations and trainers from different insurance

XIX

companies. 44 items were used to measure 12 dimensions of organizational climate and

which was found to influence the organizational climate of a company.

The current study was conducted to establish if an identifiable and measurable link exists

between organizational climate and employee/agent performance within insurance

companies as this was found to have a significant impact on employee and agent

retention, customer service quality and employee and agent productivity.

HYPOTHESIS OF THE STUDY To pursue the proposed study, the following hypotheses are framed and their validity is

tested through research techniques:

1. H01: No significant relationship exists between Communication, Career

Development, Training, Performance Feedback and Retention.

H11: There is a significant relationship between Communication, Career


2. H02: No significant relationship exists between Role Clarity, Direction, Quality of

Service, Work life Policies and Customer Service.

H12: There is a significant relationship between Role Clarity, Direction, Quality of


3. H03: No significant relationship exists between Reward & Recognition,

Innovation, Team work, Autonomy and Productivity.

H13: There is a significant relationship between Reward & Recognition,


XX

4. H04: There exists no significant difference in the perception of male and female,

employees & agents regarding the impact of organizational climate on employee/

agent retention.

H14: There exists a significant difference in the perception of male and female,


agent retention.


employees & agents regarding the impact of organizational climate on customer

service.



service.

6. H06: There exists no significant difference in the perception of male and female

employees & agents regarding the impact of organizational climate on employee

/agent productivity.




7. H07: There exists no significant difference in the perception of employees and


retention.

XXI

H17: There exists a significant difference in the perception of employees and


retention.


agents regarding the impact of organizational climate on customer service.

H18: There exists a significant difference in the perception of employees and agents

regarding the impact of organizational climate on customer service.


agents regarding the impact of organizational climate on employee /agent

productivity.



productivity.

10. H010: There exists no significant difference in the perception of different insurance

companies under study regarding the impact of organizational climate on

employee/ agent retention.

H110: There exists a significant difference in the perception of different insurance





customer service.

XXII



customer service.



employee /agent productivity.




METHODOLOGY

This research study was designed to investigate the impact of Organizational Climate on

Employee Performance with respect to Employee/Agent Retention, Customer Service

and Employee/Agent Productivity. In order to find this the methodology adopted was

Primary data as well as Secondary data. A questionnaire-based survey was used to elicit

responses from the sample. Structured questionnaire was used to collect data from both

employees as well as agents of eight insurance companies in Mumbai namely Max New

York Life, Reliance Life, ING Vysya, LIC, Tata AIG, ICICI Prudential HDFC Life,

Bajaj Allianz.

The organizational climate questionnaire consisted of 44 items which was used to

measure 12 dimensions of the organizational climate. The total number of respondents

who responded was 596, of which 240 were employees comprising of sales managers,

operations and trainers and 356 were agents from different companies. The questionnaire

utilized a Likert-type scale in which the respondents was presented with five alternative

XXIII

responses for each statement, ranging from strongly disagree (1) to strongly agree (5).

The respondents were asked to rate statements on this five point rating scale. The

responses from these different respondents such as Sales Agents, Sales Managers,

Operation Staff and Insurance Trainers were used to study if organizational climate has

an impact on employee/agent performance.

To assess the internal consistency of the items which made up each one of the constructs

of this study cronbach’s alpha coefficient were calculated. Following Parametric and Non

Parametric tests were used to test the hypothesis:

Correlation

Regression

T-Tests

Chi-Square

ANOVA

The analysis was done using SPSS version 20.

FINDINGS

The research has clearly shown that in the opinion of employees and agents of

insurance company taken for survey the most important Organizational Climate

factors influencing employee/agent Retention are Communication, Career

Development, Training and Performance Feed Back. It was found through

correlation analysis that the Organizational Climate factor ‘Communication’ had

the strongest relationship with Retention followed by Training, Performance

Feedback and Career Development. Regression analysis showed that the variable

‘Communication’ had the maximum impact on Employee and Agent Retention.

XXIV



factors influencing Customer Service are Role Clarity, Direction, Quality of

Service, Work life Policies. It was found through correlation analysis that the

Organizational Climate factor ‘Direction’ had the strongest relationship with

Customer Service followed by Role Clarity, Quality of Service, Work life

Policies. Regression analysis showed that the variable ‘Direction’ had the

maximum impact on Customer Service.



factors influencing Productivity are Reward and Recognition, Innovation,

Teamwork and Autonomy. It was found through correlation analysis that the

Organizational Climate factor ‘Team Work’ had the strongest relationship with

Productivity followed by Innovation, Reward & Recognition and Autonomy.

Regression analysis showed that the variable ‘Team Work’ had the maximum

impact on Employee and Agent Productivity.

The research showed that there was no significant difference in the opinion of

male and female, employees and agents regarding the impact of organizational

climate on employee/ agent retention, customer service, productivity

The research showed that there was a significant difference in the employees and

agents perception on whether the Organizational Climate affects employee/ agent

retention, customer service and productivity.

XXV

The research showed there was a significant difference in the perception of

various insurance companies taken for the study such as LIC, Max New York,

Reliance Life, HDFC, Bajaj Allianz, ING Vysya, ICICI Prulife and Tata AIG on

how they perceived organizational climate of a company to affect employee /

agent retention, customer service and productivity.

RECOMMENDATIONS

Insurance Companies must take active role in communicating their expectations

to employees and agents through a well planned systematic communication

channel. Open communication climate must be encouraged as this can lead to

retention of highly skilled and talented employees and agents.

Strategic plans must be adopted which can provide direction and focus to all

employees and agents, as this can help insurance companies to focus on specific

results that needs to be achieved, especially in areas of providing quality service

by employees and agents to customers.

Insurance companies must provide opportunities for teamwork within the

organizations as this can play a very important role in maximizing the

productivity of employees and agents. This can foster a climate of new

innovations, ideas and creativity to emerge at work place.

Insurance companies must actively adopt newer retention, customer service and

productivity strategies to retain agents in the agency channel of distribution, as the

presence of competition is bringing in newer distribution channels that can dilute

the effectiveness of the agency channel.

XXVI

LIMITATION OF THE STUDY

The study is limited to Maharashtra, since the companies under study are mainly from

Mumbai the findings may not be applicable to all other states of India. Researcher has

assumed that the information provided by the employees and agents is transparent and

accurate. However there can be constraints while sharing information by them for general

and academic survey.

The literature search and review was dependent upon the availability and access to

research information on this subject in India. It must be acknowledged that not many

research projects in this field have been conducted and consequently only limited

authentic published work was available as a source for secondary data.

2

CHAPTER 1

INTRODUCTION

1.1 INDIAN INSURANCE INDUSTRY

The Insurance Industry in India has gone through a gradual change. Over the past decade,

there has been increase in premiums, players and outreach. The Insurance Industry, like

many other industries has also become competitive with number of insurers attracting

investors with numerous product innovations. A combination of these factors along with

strong economic growth in the last few years has positioned India as a regional insurance

hub and now India aspires to be an international financial center. The pace of growth of

this industry is fast. But in an endeavor to expand beyond the current growth levels there

needs to be a persistent effort to sustain what has already been achieved.

The growing demand for insurance around the world is having a positive effect on the

Insurance Industry in all economies. For India, increasing GDP, coupled with the growth

in demand, has opened many doors for the country’s Insurance Industry. The Insurance

Industry in India has taken impressive measures in recent years and has recorded

phenomenal growth complemented by country’s improving economic growth. The Indian

Insurance Industry is gaining is size and is in par with the Asian markets.

The insurance sector in India is one of the booming sectors of the economy and is

growing at the rate of 15–20% per annum. Together with banking services, it contributes

to about 7% of the country’s GDP. The sector has completed a full circle in India from

being an open competitive market to nationalization, and back to a liberalized market

again. The government of India liberalized the Insurance Sector in March 2000, lifting all

entry restrictions for private players and allowing foreign players to enter the market with

3

some limits on direct foreign ownership. Under the current guidelines, there is a 26%

equity cap for foreign partners in an insurance company. There is a proposal to increase

this limit to 49%. With several reforms and policy regulations, the Indian Insurance

Sector has witnessed tremendous growth in the recent past.

With all the changes occurring in the insurance industry there was a requirement among

the policymakers to introspect the current policies in the Indian insurance industry.

Committees on insurance sector reforms followed suit and it was found that India had

continued to be one of the least insured countries till the late 20th century. Experts

emphasized that customer service, insurance coverage, allocation of resources needed to

be improved within the industry. Also more innovative products were needed to suit

varied customer needs and to change opinion of people towards insurance, from tax

exemption product to a tool for mitigating risks and increasing savings. Thus opening of

the sector to private firms was aimed at fostering competition and innovation through a

greater variety of products and was also looked at as an avenue for generating greater

awareness on the need for buying insurance as a service.

1.2 HISTORY OF INSURANCE

Protection from uncertainty and loss has been a primary goal of humans and institutions

throughout history. Protecting against these risks is what insurance is all about. It actually

started nearly 4,500 years ago, in the ancient land of Babylonia where, traders used to

bear risk of the caravan trade by giving loans that had to be later repaid with interest

when the goods arrived safely. Life insurance came about a little later in ancient Rome,

where burial clubs were formed to cover the funeral expenses of its members, as well as

help survivors monetarily.

4

The type of insurance we see today owes its roots to 17th century to Lloyd's of London,

of England. Lloyd's Coffee House was the location where merchants, ship owners and

underwriters met to discuss and transact business deals. Insurance moved to America in

year 1735 and the first life insurance policy for the general public in the United States

was issued, in Philadelphia, on May 22, 1761.Then public liability insurance made its

appearance in the 1880s and gained importance and acceptance.

The business of life insurance in India in its existing form started in India in the year

1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of

the important milestones in the life insurance business in India are given in the table 1.1.

TABLE 1.1: MILESTONES IN THE LIFE INSURANCE BUSINESS IN INDIA

Year Milestones in the life insurance business in India

1912 The Indian Life Assurance Companies Act enacted as the first statute to

regulate the life insurance business

1928 The Indian Insurance Companies Act enacted to enable the government

to collect statistical information about both life and non-life insurance

businesses

1938 Earlier legislation consolidated and amended to by the Insurance Act

with the objective of protecting the interests of the insuring public.

1956 245 Indian and foreign insurers and provident societies taken over by the

central government and nationalized. LIC formed by an Act of

Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore

from the Government of India.

5

The General insurance business in India, can trace its roots to the Triton Insurance

Company Ltd., the first general insurance company established in the year 1850 in

Calcutta by the British. The intense competition brought about by deregulation has

encouraged the industry to innovate in all areas; from underwriting, marketing, policy

holder servicing to record-keeping. The aggressive marketing strategies by private sector

insurers has also raised consumer awareness of risk and expanded the markets for

products. Milestones in the general insurance business in India are given in the table 1.2.

TABLE 1.2: MILESTONES IN THE GENERAL INSURANCE BUSINESS IN

INDIA

Year Milestones in the general insurance business in India

1907 The Indian Mercantile Insurance Ltd. set up, the first company to transact

all classes of general insurance business

1957 General Insurance Council, a wing of the Insurance Association of India,

frames a code of conduct for ensuring fair conduct and sound business

practices

1968 The Insurance Act amended to regulate investments and set minimum

solvency margins and the Tariff Advisory Committee set up.

1972 The General Insurance Business (Nationalization) Act, 1972 nationalized

the general insurance business in India with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz. the

National Insurance Company Ltd., the New India Assurance Company

Ltd., the Oriental Insurance Company Ltd. and the United India

Insurance Company Ltd. GIC incorporated as a company.

6

TABLE 1.3 : TRACING THE CHRONOLOGICAL EVOLUTION OF THE INSURANCE INDUSTRY

1. Year Eve

Year Event 1818 Oriental Life Insurance Co. was established in Calcutta.

1870 The first insurance company, Bombay Mutual Life Insurance Society, was formed.

1907 The Indian Mercantile Insurance Limited was formed.

1912 Life Insurance Companies Act and the Pension Fund Act of 1912

1912 Beginning of formal insurance regulations

1928 The Indian Insurance Companies Act was passed to collect statistical data on both life and non-life.

1938 The Insurance Act of 1938 was passed; there was strict state supervision to control frauds.

1956 T he Central Government took over 245 Indian and foreign life insurers as well as provident societies and nationalized these entities.

1956 The LIC Act of 1956 was passed.

1957 The code of conduct by the General Insurance Council to ensure fair conduct and ethical business practices was framed.

1972 The General Insurance Business (Nationalization) Act was passed.

1991 Beginning of economic liberalization

1993 The Malhotra Committee was set up to complement the reforms initiated in the financial sector.

1994 Detariffication of aviation, liability, personal accidents and health and marine cargo products

1999 The Insurance Regulatory and Development Authority (IRDA) Bill was passed in the Parliament.

2000 IRDA was incorporated as the statutory body to regulate and register private sector insurance companies.

2000

General Insurance Corporation (GIC), along with its four subsidiaries, i.e., National Insurance Company Ltd., Oriental Insurance Company Ltd., New India Assurance Company national reinsurer.Ltd. and United India Assurance Company Ltd., was made India's

2005 Detariffication of marine hull

2006 Relaxation of foreign equity norms, thus facilitating the entry of new players

2007 Detariffication of all non-life insurance products except the auto third-party liability segment

nt Source :Ernst &Young 2010

7

1.3 PRESENT SCENARIO OF INSURANCE INDUSTRY

India with about 200 million middle class household shows a huge untapped potential for

players in the Insurance Industry. Saturation of markets in many developed economies

has made the Indian market even more attractive for global insurance majors. The

Insurance Sector in India has come to a position of very high potential and

competitiveness in the market. Indians, have always seen life insurance as a tax saving

device, are now suddenly turning to the private sector that are providing them new

products and variety for their choice.

Figure 1.1: Greater private sector activity over the years

Source : IBEF ( India Brand Equity Foundation )2011.

Consumers remain the most important centre of the insurance sector. After the entry of

the foreign players the industry is seeing a lot of competition and thus improvement of

the customer service in the industry. Computerization of operations and updating of

0%

20%

40%

60%

80%

100%

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

98% 95% 91% 86% 82% 74% 71% 70%

2% 5% 9% 14% 18% 26% 29% 30%

Greater pvt sector activity (% share) over the years.

Public sector Private Sector

8

technology has become imperative in the current scenario. Foreign players are bringing in

international best practices in service through use of latest technologies.

The insurance agents still remain the main source through which insurance products are

sold. The concept is very well established in the country like India but still the increasing

use of other sources is imperative. At present the distribution channels that are available

in the market are listed below.

Direct selling

Corporate agents

Group selling

Brokers and cooperative societies

Bancassurance

Customers have tremendous choice from a large variety of products from pure term

(risk) insurance to unit-linked investment products. Customers are offered unbundled

products with a variety of benefits as riders from which they can choose. More customers

are buying products and services based on their true needs and not just traditional money

back policies, which is not considered very appropriate for long-term protection and

savings.

The rural consumer is now exhibiting an increasing propensity for insurance products. A

research conducted exhibited that the rural consumers are willing to spend between Rs

2,900 and Rs 3,500 as premium each year. The awareness level for life insurance in rural

India is much higher than cattle or motor insurance. In a study conducted by MART the

results showed that nearly one third said that they had purchased some kind of insurance

with the maximum penetration skewed in favor of life insurance. The study also pointed

9

out the private companies have huge task to play in creating awareness and credibility

among the rural populace.

1.4 GOVERNMENT INITIATIVES

IRDA is now planning to allow agents to sell products of more than one insurance

company. The new model would not only allow private insurers to have access to the

huge range of agents selling LIC products, but would also increase the income in the

hands of agents. This would also facilitate deeper penetration of insurance products in the

Indian markets. IRDA is also planning to ban misleading products (which offer so-called

highest NAV) and staggered commissions for agents at the welfare of policy buyers.

According to the regulator, the still-evolving industry needs new set of rules that protect

the interests of consumers so that they do not get carried away with the promises of high

returns that are just shown on papers.

According to a survey by Swiss Re, the world’s second largest reinsurance company,

India’s next generation of consumers are increasingly getting aware of the benefits of

insurance and will be more-than-willing to purchase cost-effective policies in years to

come. The competitive landscape of the Indian insurance industry coupled with the

introduction of new products has given way to an increasing customer base and the

emergence of new distribution channels. Distribution accounts for the largest element in

insurers’ costs and impacts their profitability. Besides, it also influences product design

and directly impacts the market image of distributors.

The insurance market in India has a good range of distribution channels, but direct sales

agents dominate and account for a majority of all Indian life and general insurance

premiums. Traditionally, captive agents wrote the bulk of an insurance company’s

10

business. Public sector insurance companies had their branches in almost all parts of the

country and attracted local people to become their agents. These agents were from

various segments in society and collectively covered the entire spectrum of society.

But post liberalization, people have started buying insurance products from independent

producers and institutional channels such as banks, broker-dealers and wire houses. The

widening and strengthening of distribution channels has helped the insurance industry to

become more competitive and healthy. Today, a lot of insurance policies are bought

online. The development of information technology and the emergence of online and

offline insurance education and training has initiated a marked change in the range and

quality of insurance services.

Direct sales agents dominate various insurance distribution channels, as the case is in the

rest of Asia. But the share of other low-cost channels such as bancassurance, brokers and

direct distribution is likely to rise due to the removal of tariffs. While insurance is a price

competitive arena, trust and customer service play huge roles in attracting and retaining

customers. Although the technology is still in its early stages, more insurance agents and

brokers are beginning to embrace the concept of online customer self-service. The new

generation companies claim to grow by customer service, and by tuning up technology,

training staff, and tackling existing markets. Private players are picking up market share

from competitors. Most companies have information technology (IT) departments that

are critical to the success of the business. They provide services primarily to internal

customers. The insurance industry has witnessed increased convergence and

consolidation.

11

Indian insurance industry is witnessing a demographic change in the country and the

younger generation which is exposed to the outside world demands products and services

which are at par with what is available in the advanced countries. This is the biggest

challenge. Indian Insurance companies have taken up this challenge and are trying to

provide services on par with services provided in the advanced countries. The regulatory

regime is happy to facilitate this process whenever its intervention is required. In addition

to the growth of insurance market the other area where there is significant beneficial

change with the entry of the private insurance companies is in the area of insurance

intermediation.

The three words Liberalization, Globalization and Privatization have brought about a

radical change in the world and have given a new orientation to the market conditions.

The participation in the new system is not optional; it is an essential requirement of the

developments. The agents have to diversify their activities to meet the complex needs of

the customers. Spreading of education, economic activities and social consciousness have

made the job of agents more challenging and complex. It is an unending process for

capitalizing the opportunities and avoiding threats arising out of the changing economic

situation and consumer awareness. More companies today are moving their effort from

Transaction Marketing to Relationship Marketing for the development of long-term

customer relationship. The agents, therefore, have to adopt, relationship marketing as

against the present transaction selling. The performance of agents will now depend on not

how many hours he works but the quality of service, his attitude to customers and the

image that he will create for the entire life insurance business.

12

Figure 1.2 : Factors Driving Repeat Purchasing

Source : Ernst& Young,2012.

Direct Sales Agents constitute an integral part of the distribution channels that reach out

to corporate clients as they prefer to deal directly with insurers to obtain discounts. About

70–75% of the Indian general insurance premiums come through direct sales agents who

are largely employed by public sector insurance companies. The life insurance industry

has more than two million tied agents (in-house sales force), of which LIC accounts for

about one million. Since private sector players have entered the market at a relatively

later stage, the number of agents in their network has been limited. As distribution

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

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56%38% 34%

24% 22% 17% 14% 1% 1%

Factors driving repeat purchasing.

13

through agents requires a long gestation period as well as investment, private players

prefer to select other distribution options.

1.5 INDIAN LIFE INSURANCE INDUSTRY IN THE POST LPG ERA

In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor

R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its

future direction. The committee submitted its report in January 1994 recommending that

private insurers be allowed to co-exist along with government companies like LIC and

GIC companies. This recommendation had been prompted by several factors such as

need for greater deeper insurance coverage in the economy, and a much a greater scale of

mobilization of funds from the economy for infrastructural development. Liberalization

of the insurance sector is at least partly driven by fiscal necessity of tapping the big

reserve of savings in the economy. Committee's recommendations were as follows:

1) Government stake in the insurance Companies to be brought down to 50%.

Government should take over the holdings of GIC and its subsidiaries so that these

subsidiaries can act as independent corporations. All the insurance companies should be

given greater freedom to operate.

2) No Company should deal in both Life and General Insurance through a single entity.

Foreign companies may be allowed to enter the industry in collaboration with the

domestic companies. Postal Life Insurance should be allowed to operate in the rural

market.

3) The Insurance Act should be changed. An Insurance Regulatory body should be set

up. Controller of Insurance should be made independent.

14

4) Mandatory Investments of LIC Life Fund in government securities to be reduced from

75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company

5) Raising the capital base of LIC and GIC up to Rs. 200 crores, half retained by the

government and rest sold to the public at large with suitable reservations for its

employees.

6) Private sector is granted to enter insurance industry with a minimum paid up capital of

Rs. 100crores.

7) Foreign insurance be allowed to enter by floating an Indian company preferably a joint

venture with Indian Partners.

8) Steps are initiated to set up a strong and effective insurance regulatory in the form of a

statutory autonomous board on the lines of SEBI.

9) Limited number of private companies to be allowed in the sector. But no firm is

allowed in the sector. But no firm is allowed to operate in both lines of insurance (life or

non-life).

10) Tariff Advisory Committee (TAC) is delinked form GIC to function as a separate

statuary body under necessary supervision by the insurance regulatory authority.

11) All insurance companies be treated on equal footing and governed by the provisions

of Insurance Act. No special dispensation is given to government companies.

12) Setting up of a strong and effective regulatory body with independent source for

financing before allowing private companies into sector.

Insurance companies were encouraged to set up unit linked pension plans.

Computerization of operations and updating of technology was to be given due

importance in insurance industry. But at the same time, the committee felt the need to

15

exercise caution as any failure on the part of new players could ruin the public confidence

in the industry. Hence, it was decided to allow competition in a limited way by

stipulating the minimum capital requirement of Rs.100 crores. The committee felt the

need to provide greater autonomy to insurance companies in order to improve their

performance and enable them to act as independent companies with economic motives.

For this purpose, it had proposed setting up an independent regulatory body.

As per the provisions of IRDA Act, 1999, Insurance Regulatory and Development

Authority (IRDA) was established on 19th April 2000 to protect the interests of holder of

insurance policy and to regulate, promote and ensure orderly growth of the insurance

industry. IRDA Act 1999 paved the way for the entry of private players into the insurance

market which was hitherto the exclusive privilege of public sector insurance companies/

corporations. The Authority has notified 27 Regulations on various issues which include

Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance,

Obligation of Insurers to Rural and Social sector, Investment and Accounting Procedure,

Protection of policy holders' interest etc. Applications were invited by the Authority with

effect from 15th August, 2000 for issue of the Certificate of Registration to both life and

non-life insurers.

Government companies had to face competition with private sector insurance companies

not only in issuing various range of insurance products but also in various aspects in

terms of customer service, channels of distribution, effective techniques of selling the

products etc. Privatization of the insurance sector has opened the doors to innovations in

the way business can be transacted. New age insurance companies are embarking on new

concepts and more cost effective way of transacting business.

16

The opening up of the sector is likely to lead to greater spread and deepening of insurance

in India and this may also include restructuring and revitalizing of the public sector

companies. A host of private Insurance companies operating in both life and non-life

segments have started selling their insurance policies since 2001.

Figure 1.3: Research Sources used before buying a policy

Source : Ernst & Young,2012.

The Life Insurance market in India is an underdeveloped market that was only tapped by

the state owned LIC till the entry of private insurers. The state owned LIC sold insurance

as a tax instrument, not as a product giving protection. Most customers were under-

insured with no flexibility or transparency in the products. With the entry of the private

insurers the rules of the game have changed. The year 1999 saw a revolution in the Indian

insurance sector, as major structural changes took place with the ending of government

Family or friends - word of mouth

Advice from intermediary or agent

Direct contact with bank or insurance …

Advertising/direct mail from product …

Online comparison websites

Bank or insurance company website

Financial press/media

Other online sources

Information from employer

Online blogs/communities

Others

65%

61%

30%

23%

22%

21%

15%

14%

14%

11%

5%

17

monopoly and the passage of the Insurance Regulatory and Development Authority

(IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players

to enter the market with some limits on direct foreign ownership.

1.6 EVOLUTION OF LIFE INSURANCE IN INDIA

With the Government implementing the New Industrial Policy in 1991, the country

underwent a major wave of globalization. Strategic sectors such as the banking and the

financial sector were reformed. Time had come for the policymakers to introspect the

current policies in the Indian Insurance industry as well. Committees on insurance sector

reforms followed suit and it was found that India had continued to be one of the least

insured countries till the late 20th century. Experts emphasized that customer service,

insurance coverage, allocation of resources needed to be improved within the industry.

Also more innovative products were needed to suit varied customer needs and to change

opinion of people towards insurance, from tax exemption product to a tool for mitigating

risks and increasing savings. Thus it was recommended that the industry should be

opened up to enhance competition and autonomy be given to insurance companies to

improve their performance and enable them to act as independent companies with

economic motives. Thus the life insurance industry was liberalized with the aim of

increasing contribution to the GDP and to the society.

1.7 THE EVOLUTION OF LIFE INSURANCE INDUSTRY IN THE LAST

DECADE (2000 – 2010)

Indian Life Insurance industry during the pre opening decades prior to 1999-2000 catered

to the insurance needs of a wide section of the population, leaving a sizeable number of

insurable populations untouched. When the reforms were swaying the Indian Financial

18

sector during 90s, in order to increase the insurance coverage for more number of

population, with a better product choice, enabling the customers to take an informed

decision, the Government of India opened the Insurance Industry in the year 1999 by

enacting IRDA Act, 1999 on the recommendations of committee on insurance reforms.

It is envisaged that development of insurance market is entwined with the development of

distribution channels. With over 1.10 billion of population geographically spread over

length and breadth of the country an acceptable delivery channel is essential for further

penetration of insurance. In order to facilitate the penetration of insurance IRDA

introduced corporate agency and brokers as new class of intermediaries which lead to the

evolution of bancassurance channel in India.

Despite the development of other alternate channels in distribution of insurance products,

individual insurance agents are still dominating the market with higher slice of share. In

order to infuse the professional approach to the process of distribution of insurance

products the training norms are introduced to the entire gamut of various distribution

channels of Indian insurance industry. In addition to pre licensing training, norms are

mandated to infuse the periodical training to these sales personnel at the time of renewal

of their respective licenses or on expiry of a pre defined period. Further, all the personnel

who are involved in the process of sale of insurance products are subjected to a code of

conduct which also attempts to enhance the professional approach of these distribution

channels.

From a stage where policy services were being rendered in specified timings at specified

locations of insurers offices, the industry has moved to the stage of rendering 24x7 policy

services. During the last decade the industry introduced various proactive policy services

19

like call centre facilities, Interactive Voice Response Services, Toll Free Numbers and on

line services. The increased use of Information Technology in developing and offering

customized policy services not only helped in enhancing the spread of insurance business

but also reinforced the faith of policyholders in the system of insurance itself. On the

other hand the procedure of making available the grievances redressal mechanisms is

introduced at various levels.

Figure 1.4 : Information Sources for Consumers Life And Pensions Research

Source: Ernst & Young 2012.

Advice from intermediary agent

Family, friends or word of mouth

Direct contact with bank or insurance company people (call center, branch)

Online comparison website

Advertising/direct mail from product provider (bank or insurance company)

Bank or insurance company websites

Financial press/media

Other online sources

Online blogs/communities

Information from your employer

Other

72%

71%

29%

28%

27%

24%

17%

13%

12%

10%

1%

Information sources for consumers life and pensions research

20

1.8 IRDA – A UNIQUE ROLE MODEL

Indian Insurance regulator is unique in its model as legislation has entrusted the

responsibility of developing the nascent insurance market. While regulating the insurance

market is inevitable after privatization, the regulator is expected not to lose sight of the

requirement for expanding the base of insurance business with conferment of these

responsibilities. It was envisaged that opening up of the insurance sector would enable all

sections of the society an opportunity to access the services offered by insurance

companies. It is the obligation of the regulator to oversee and facilitate the penetration of

insurance amongst the hinterlands of the land, one of the prime objectives of privatization

of the insurance industry. Insurance Act, 1938 empowers IRDA to put in place

regulations for carrying out the purposes of Insurance Act, 1938 and IRDA Act, 1999.

Promoting the market efficiency of the industry is one of the prime objectives of any

regulatory body.

As regards insurance industry market efficiency is to be monitored through both off site

and on site examinations of the Governance Practices and Market Conduct aspects of

insurance companies. Since the entry of new players, IRDA has been successfully

striking the right balance in regulating and developing the insurance market keeping the

interests of policyholders as its prime objective while prescribing any regulatory norms.

While regulations require insurance companies to adhere to the prescriptions laid down in

the course of their business, reasonable relaxations are also provided in the areas where

the industry expects to explore the available business potentialities of insurance markets.

Of the notable relaxations; lower academic qualification requirements to the Insurance

21

Agents of the rural areas, facilitative norms for appointing micro insurance agents are the

few prominent norms one can cite.

As against the previous practice of incorporating the Government owned insurance

companies through statutes, the era of licensing of new companies by a regulatory body

was started in the year 1999-2000. Keeping in mind the requirements of the capital for

insurance business and the gestation period that the insurance business takes to break

even, stringent capital and solvency norms were laid down in the legislation so that only

serious players would enter the market. In a developing market it is essential to prioritize

the stability and solvency of the insurance companies as any failure to meet the claims

requirements of the policyholders will have an impact on the growth of overall financial

sector. Apart from the stringent capital norms and solvency norms IRDA also carries out

due diligence to examine fit and propriety of the companies before granting the license, a

pre requisite before commencing insurance operations.

1.9 SPREADING INSURANCE THROUGH RURAL, SOCIAL SECTOR AND

MICRO INSURANCE

Development of insurance market is complete only on its reaching all the sections of

society. In order to ensure that all insurance companies take forward their business

operations to the rural lands and also with the aim of bridging the demand supply gap in

rural areas and to ensure even spread of insurance business amongst all geographical

sections of the country, mandatory norms were introduced to cover rural and social sector

population in the year 2002. Rural areas and occupations that come under social sector

were pre defined and insurance companies are required to fulfill these norms. This is as

22

part of its developmental role. IRDA notified these Rural and Social Sector obligations

mandating business norms for all insurance companies to fulfill in these sectors.

To further the concept of facilitating the spread of insurance as also in order to let the

insurance companies tap the business that is prevailing at the bottom of pyramid as also

to drive inclusive insurance to the hitherto neglected sections of insurable population

IRDA floated the concept of Micro Insurance by bringing out separate regulations. India

is the first country to come out with a sub-ordinate legislation on Micro Insurance and

Indian experience and approach has been deliberated in various international forums.

Integrating the life and non life insurance products, introduction of standalone micro

insurance delivery channel, covering the family as a unit are the prime features of micro

insurance regulations notified by IRDA. Regulations empowered Micro Insurance agents

with additional functions and introduced a need based reward system with a higher

percentage of remuneration than that was normally available to other agents. By

leveraging on the strengths of local institutions like NGOs, Micro Finance Institutions

and SHGs, who are permitted to take up Micro Insurance Agency, Micro Insurance

regulations attempted to customize the insurance products to meet the domestic needs of

localized population as also to create the necessary awareness amongst the insurable

population to appreciate the need for insurance. Though MI regulations paved the way for

furthering Micro Insurance as a business concept, they are equally subjected to prudent

regulatory norms like applicability of File and Use norms for MI products, prescription of

code of conduct and training norms to MI agents and a mandatory due diligence before

appointing MI agent. For the first time in the insurance industry the regulations required

the insurance companies to issue the policy documents in vernacular languages. Though

23

industry garnered Rs 401.63 Crores of premium during 2009-10, under Micro Insurance

there is an abundant business potentiality that is available to tap.

1.10 PRODUCT INNOVATION DURING THE LAST DECADE

One of the prominent results of privatization of insurance industry is the innovation of

products to cater to the needs of various sections of the population. Unveiling the Unit

Linked Life Insurance products is the biggest innovation in the life insurance industry

during the last decade. Based on the buoyancy of capital markets these products have not

only driven the growth of life insurance business but also ensured the participation of

retail policyholders in the capital markets. In addition to this the life industry also

witnessed the launch of insurance cover for the first time specifically for cancer and

another product catering to the needs of Diabetes patients. In respect of Annuity products

also Indian Insurance Market witnessed entry of innovative products where under the

annuity payable to the annuitant will be revisited periodically even after vesting. In

respect of Group Insurance also, the industry introduced Unit Linked Group

Gratuity/Superannuation products. Further life industry also introduced standalone health

insurance products apart from health riders to base products.

Advanced technologies like networking of operating offices of insurance companies

enabled the insurance companies to offer policy services in a time bound manner. With

population growing at 1.5% p.a. it is expected that real per capita income quadruples by

2020. There are changes in the socio economic life style of Indian population. With

fragmentation of joint family system more number of people are leading independent

family units. The income levels of young generation are also expected to increase

significantly. With the development of infrastructure projects there is a migration of

24

labour forces from rural to urban lands finding better employment avenues thereby

enhancing the purchasing capacity. Keeping in view these dynamics it is expected that

life insurance industry designs market segment-specific insurance solutions to enhance

the acceptance levels of insurance products. With better prospects offered in technology

sector, the ability of the insurance industry to retain the customer base lays in rendering

the timely and effective policy service.

1.11 UNDERLYING GROWTH DRIVERS

Growing economy and purchasing power

Exponential growth of household savings, purchasing power, the middle class and the

country’s working population are the factors which will influence the demand of

insurance products. Financial services sector, specifically insurance sector can tap this

increased disposable income group people.

Favorable government and regulatory initiatives

The IRDA and the Government are in the process of making the following regulatory

reforms. With private players completing nearly a decade in Indian insurance sector, the

industry is looking at new ways to meet its capital needs. Many a times, proposals have

come to increase the share of FDI from 26% at present to 49%.Detailed guidelines are

being formulated on IPO’s and M&A.

Disclosure norms and other recent changes

The IRDA is in the process of drafting mandatory disclosure of insurers’ financial

statements and investment portfolios at regular intervals, as well as their financial and

operating ratios, actual solvency margins, policy lapse ratio, current financial position,

risk management architecture, etc.To monitor the insurance claims, data warehouse is

25

being set up. Policy and draft documents are being published in regional languages for

people to understand them better and to extend their reach.

The Insurance regulator IRDA has made many changes in the ULIP plans like capping of

the charges, increased lock-in period and a minimum guarantee for such plans, which are

hybrid products that combine the features of insurance and investment in equities.

Launch of innovative and customized products

Many innovative and customized products have been launched after the liberalization of

the sector. While ULIPs were an innovative concept in earlier years, they soon caught the

fancy of consumers and distributors alike, to become their mainstay. The last years have

seen that capital guarantee products and premium guaranteed plans — primarily in

response to the changing scenario in capital markets. Also the combi products having the

combination of Unit Linked Health Plans that collate health insurance and investment

have been introduced. Many more innovative products are expected to come seeing the

customer preferences.

Emergence of new distribution channels such as bancassurance, brokers and

channels, with enhanced reach

Industry has seen the emergence of new distribution channels like bancassurance, direct

selling agents, brokers, online distribution, corporate agents such as nonbanking financial

companies (NBFCs) and tie-ups of para-banking companies with local corporate

agencies, e.g., NGOs, in remote areas.

26

1.12 ORGANIZATIONAL CLIMATE AND EMPLOYEE/AGENT

PERFORMANCE

Organizational success depends upon the organizational climate. Organizational climate

represents how the employees feel about the atmosphere prevailing in the organizations.

An organizational climate that encourages employee involvement and empowerment in

decision-making predicts the financial success of the organization .Organizational climate

encompasses the organizational atmosphere and how employees feel, what employees

believe, and what employees perceive to be real within the organizational boundaries.

Business climates affect how well company goals are being met because maximum

efficiency, production and employee motivation are impossible when the work climate is

poor. Effective work climates ensure that employees are clear about their purpose in the

larger realm of the company and know exactly what is expected of them. In this way,

insurance companies can better function as a whole to meet their goals.

Agents are the most ancient channel members for the life insurance sector. To be an

insurance agent has become more difficult in the present market situation. An agent needs

to be multi skilled to attract the customer and sell the products. To the average customer

every new company is the same. It is the agent who makes the difference in the services

he provides to the customer, and builds the image of the company and with the increase

in the number of private companies the competition in the insurance sector has also

increased tremendously.

Hence, the company has to train their agents so that they know which product will appeal

to the customer. The agents not only should be aware of the products which are offered

by his company but also with the products which are offered by the competitive

27

companies to be an effective salesperson. The new companies are looking for educated,

aware individuals with marketing flair, an elite group who can be attracted only with high

remuneration and the lure of a fashionable job, all of which may not be possible in this

business with its price pressures and the complexity of selling insurance.

Agents aspire to have a regular employment and often quit the profession for want of

regular jobs. While job attrition rates ranging between 15 per cent and 20 per cent are

commonplace in the software sector, this is pale in comparison to the kind of turnover

that the insurance industry witnesses with its agency force. Conservative estimates put

the attrition rates at 35-40 per cent in the Indian insurance industry.

Most of those who drop out are non-performers and this is attributed to high expectations

on the part of the agents. Most of the recruits are of the opinion that they can earn lot of

money in a short span of time. Since it is a high-pressure job, sustenance requires

constant networking and acquiring new relationships that require a lot of discipline. Since

life insurance industry is a sunrise industry, many join the race, but cannot retain their

enthusiasm till the end.

Insurance companies have to go beyond building a brand to offering the agents careers

and let them grow with the market. While retaining employees may be a problem,

attracting fresh talent is still relatively easy. This problem can be addressed by offering

employees learning and growth opportunities such as cross-functional learning, skills and

talent development, thereby expanding one's job profile.

Insurance companies in India is growing vertically and horizontally bringing growth and

new employment opportunities. It is an intensively people-oriented business and human

resources will be the undoubted differentiator. The quality of manpower attracted and

28

retained by insurers and how their abilities and ambitions are harnessed would be the

litmus test for the industry. Traditionally insurance business is managed by a large

number of insurance agents who work on a commission basis. The turnover of insurance

agents has usually been high in this business. The insurance sector faces high rates of

employee turnover. The highest employee turnover is at the financial advisors (agent)

level, where the entry barriers are low but targets and work pressures are very high.

The presence of competition has also changed the way the insurance industry functions

this is evident in the increasing attrition rates, poor customer service and low productivity

that are seen among its employees and agents. The purpose of this study was to identify

certain dimensions of the organizational climate which can impact employee and agent

performance in insurance companies with special reference to employee and agent


30

CHAPTER 2

LITERATURE REVIEW

2.1 DEFINITIONS

Forehand and Gilmer (1964) referred to climate as a set of relatively enduring

characteristics that describe an organization, distinguishes it from other organizations,

and influences the behaviour of organizational members, while Litwin and Stringer

(1968) maintain that “organizational climate is a set of measurable properties of the work

environment based on the collective perceptions of the people who live and work in the

environment, and whose behavior is influenced by their perceptions”. The employees will

take their “cues” from a variety of organizational events and will fit these events into

what is for them a meaningful pattern – an organizational climate. This climate, in turn,

can then be measured and described in terms of dimensions like supportiveness,

cooperativeness, and openness.

According to Glick 1985 “Organizational Climate is a generic term from a broad class of

organizational, rather than psychological, variables that describe the context for

individual’s actions”. Organizational Climate is a concept reflecting the content and

strength of the prevalent values, norms, attitudes, behaviors and feelings of the people in

an organization (McNabb & Sepic, 1995).

Cooper (2003) describes organizational climate as “people’s perception of their working

environment with regard to caring and friendliness”. In other words, the interaction of

workers and management should create a healthy organizational environment.

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Organizational climate has been defined as the “shared perception of what organization is

like in terms of practices, policies, procedures, routines”(Bowen and Ostroff, 2004).

Climate is “the attitude of the individuals concerning the organization”(Burton et al

2004). Schneider et al (1994) define climate as “the feeling in the air one gets from

walking around a company”.

Subsequent research from Tagiuri, Litwin, and Barnes (1968) build upon Forehand and

Von Gilmer by adding the notion that climate should be described as the set of qualities

that encompass the organization of inquiry. Beyond this, several researchers have

proposed other definitions that place more weight on the environment, including things

such as guidelines, actions, and the atmospherics (Argyris, 1958; Schein, 1992), while

another group insists that leader and manager behavior are most important (Fleishman,

1953; McGregor, 1960; Meyer, 1968).

By synthesizing the definitions of various researchers, Pritchard and Karasick (1973),

defined organizational climate as a relatively enduring quality of an organization’s

internal environment which results from the behaviour and policies of its members, is

perceived by its members, and acts as a source of pressure for directing activity.

Finally, Steers (1977) defined climate as the perceived characteristics taken from the

environment that results largely from actions taken by the organization and that

presumably affect subsequent behaviour. In sum, organizational climate can be defined as

employees' subjective perceptions of the work environment which are descriptive and

these perceptions can lead to affective responses which govern employees' behaviour.

Organizational climate is made up of perceived organizational properties intervening

between organizational characteristics and behavior (Friedlander & Margulies, 1969).

32

Organizational climate is a set of attitudes and expectations describing the organization’s

static characteristics and behavior outcome (Campbell, et al., 1970).

Tagiuri, et al. (1968) identified several aspects of climate that help to clarify the domain

of the concept according to him ‘Climate is a molar, synthetic concept (like personality).

Climate is a particular configuration of situational variables. Its component elements may

vary, however, while the climate may remain the same’.

It may or may not be capable of description in words, although it may be capable of

specification in terms of response. It has potential behavioral consequences. It is an

indirect determinant of behavior in that it acts upon attitudes, expectations, and states of

arousal, which are direct determinants of behavior (Tagiuri, et al., 1968) in organization.

Organizational climate is defined by the employees’ perception of what the organization

is like in terms of practices, policies procedures, routines, expected behavior and rewards

(James & Johns, 1974).

Benjamin Schneider (1975), defined organizational climate as a mutually agreed internal

(or molar) environmental description of an organization’s practices and procedures.

Tagiuri (1968) defines organizational climate as a relatively ending quality of the internal

environment that is experienced by the members, which influences their behavior and can

describe in terms of values of a particular set of characteristics of the organization.

Taylor and Bowers (1970) defined organizational climate as the perceived traits of

organizational stimuli which become group property through interpersonal interaction

and which modify overall behaviour within the organization.

Poole (1987) describes climate as “a relatively enduring quality of the environment that

is experienced and perceived by individuals; influences individual interpretations and

33

actions; and can be described in terms of a particular set of characteristics which describe

a system’s practices, procedures, and tendencies.

Reichers and Schneider (1990) define organizational climate as “the shared perception of

the way things are around here. Katz and Kahn (1996) say that “the climate in an

organization which reflects the type of people who compose the organization, the work

processes, means of communication and the exercise of authority within the individual

organization.” Further, they recognize that it is easy to detect differences in the climate of

organizations but it is difficult to name the dimensions of these differences.

“The climate of an organization is thought to represent the perception of objective

characteristics by organizations members.” As an example, the size of an organization is

objectives but a person’s feelings about that size is subjective, it is the perception of these

objectives that is represented by the climatic of an organization (Landy and Trumbo,

1980).

The essence of the meaning and usefulness of organizational climate, as quoted by

Massie (1985) is the degree and quality of the environmental factors essentially reflected

by members’ perceptions. Prakasam (1986) defined organizational climate as ‘ the shared

perception of the employees’ who work and live together in the organization. It is the

sum total of individual perceptions regarding organizational procedures, policies,

practices and it represents the psychological environment in the organization consisting

of individual perceptions and opinions framed upon the micro events that happen to them

as well as to others over a period of time.

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2.2 HISTORY OF ORGANIZATIONAL CLIMATE

Organizational climate theory has been described as “one of the most important, but least

understood concepts” (Hellriegel and Slocum, 1974). In the 1930’s, it was recommended

that in order to better understand behavior, one must look at it as it was related to the

environment in which the behavior took place. This suggestion seemed very logical to

researchers and thus began the investigation into environmental research.

The notion of organizational climate has commonly been attributed to the Lewin, Lippitt,

and White (1939). In their study of aggressive behavior in juvenile males, Lewin, et al.

(1939) coined the term “social climate” to connote the environment that was created in

diverse treatment groups in their study. In this study, the researchers were largely

interested in investigating leader behaviors across the experimental groups and

identifying the influence that those leader behaviors had on the relational exchanges

within that group, specifically focusing on the aggressive behavior of boys. During their

study, Lewin, et al. (1939) found three methods of leader behavior – authoritarian,

democratic, and laissez-faire.

The researchers assigned each leader behavior to a specific group where they then found

that as the boys were moved from group to group, authoritarian behaviors created

aggressive or apathetic social climates while democratic and laissez-faire leader

behaviors created aggressive social climates and created leaders who were more revered

by the boys. This research provided the first empirical link between the behavior of a

leader and the organizational climate.

Later, the notion of climate was investigated and made clearer by Litwin and Stringer

(1968) and Stringer (2002). Using Lewin, et al (1939) work, as well as the social needs

35

concepts of aroused social motives (Atkinson, 1964; McClelland, 1987), Litwin and

Stringer fashioned a simulated business situation using three different manufacturing

firms. These simulated organizations had similar make up except for the leadership

qualities of the company presidents. Litwin and Stringer identified a relationship between

leader behavior and the organizational climate perceived by the workers, as well as a

relationship between the organization’s climate and the performance of the employees in

terms of overall business performance. These findings highlighted two essential elements

in our understanding of climate. First, climate impacts employee attitudes and motivation

which, in turn, has a direct impact on business performance (Stringer, 2002). Secondly,

they reported that the realities of the firm’s climate are only understood as they are

perceived by the members of the organization, and thus, we must allow these

organizational members to utilize the firm’s climate to filter phenomena to those

employees (Litwin & Stringer, 1968).

The concept of organizational climate originated in the late 1950s as social scientists

studied variations in work environments. Although researchers interested in educational

organizations (Pace and Stern, 1958; Halpin and Croft, 1963) made the initial efforts to

define and measure dimensions of organizational climate, the usefulness of the concept

was soon recognized by scholars of business organizations (Tagiuri, 1968). Climate was

initially used as a general notion to express the enduring quality of organizational life.

Tagiuri (1968) observed that "a particular configuration of enduring characteristics of the

ecology, milieu, social system and culture would constitute a climate, as much as a

particular configuration of personal characteristics constitutes a personality." Gilmer

(1966) specified organizational climate as "those characteristics that distinguish the

36

organization from other organizations and that influence the behavior of people in the

organization." According to Gilmer (1966), the notion of psychological climates was

introduced in the industrial psychology literature by Gellerman (1960), but other writers

(Forehand and Gilmer, 1964; Halpin and Croft, 1963; Tagiuri, 1968) have also noted that

definitions of climate are quite similar to early descriptions of personality types. In fact,

the climate of an organization may roughly be conceived as the "personality" of the

organization; that is, climate is to organization as personality is to individual.

The concept became popular in the industrial and organizational literature particularly in

the 1960’s and 1970’s with the book of Litwin and Stringer (1968) and the two major

reviews of Forehand and Gilmer (1964) and James and Jones (1974). Organizational

climate has been researched and studied extensively dating from 1967. Litwin and

Stringer (1968, as cited in Al-Shammari, 1992), defined organizational climate as “a set

of measurable properties of the work environment and assumed to influence their

motivation and behavior.” An earlier study by Likert (1967, as cited in McMurray, Scott,

& Pace, 2004) gave specific examples of some of those properties and posited,

“Organizational climate is a psychological, multidimensional, complex phenomenon that

has an effect on learning, performance, turnover, absenteeism, and tenure.”

Researchers continue to explore the variables and the influences of organizational climate

and perpetually seek to establish a universal definition for organizational climate; modern

researchers have begun to revise the earlier adoptions of the definition of organizational

climate that was once acceptable by researchers such as Likert (1967) and Litwin and

Stringer (1968).

37

According to Owens (1998), “Organizational behaviour is a discipline that seeks to

describe, understand and predict the human behavior in the environment of formal

organizations. A distinctive contribution and characteristics or organizational behavior as

a discipline is the explicit recognition that (1) organizations create internal contextual

settings, or environments, that have great influence on the behavior of people in them and

(2) to some extent the internal environment of an organization is influenced by the larger

context in which the organization itself exists (for example, the social, political,

economic and the technological systems that support the organization). Moreover, the

internal environment or context of the organization is not merely physical and tangible

but also includes the social and psychological characteristics of the living human

system.”

2.3 EVOLUTION OF THE CONCEPT

The earliest reference of Organizational Climate is found in the article of Lewin, Lippitt

and White (1939). The article mainly emphasized on the relationship between leadership

styles and so-called ‘Social Climate’. Climate was again mentioned in an article by

Fleishman (1939). This article discussed the development of leadership attitude and its

implication through the measurement of behavioural scales. In that article Fleishman

discussed ‘Leadership Climate’ as a construct but he did not explain the concept of

climate very elaborately.

Climate was first very comprehensively defined by Argyris (1958). In his attempt to

diagnose the group dynamics in a bank, Argyris introduced the concept of Organizational

Climate. In that paper Argyris defined climate in terms of formal organizational policies,

employee needs, values, and personalities. The famous book ‘The Human Side of

38

Enterprise’ (1960) by McGregor opened a new horizon of management science. It

introduced many pioneering concepts of organizational and industrial psychology.

McGregor in this book elaborated the concept of managerial climate. He argued that the

climate is primarily determined by the managerial assumptions and the relationship

between the managers and their subordinates.

Apart from these principal research works there were also other studies and the collection

of all the research work ultimately provided the initial framework of Organizational

Climate. In their research work Forehand and Gilmer (1964) defined Organizational

Climate as a ‘set of characteristics that (a) describe the organization and distinguish it

from other organizations (b) are relatively enduring over time and (c) influence the

behaviour of people in the organization’. Gregopoulos (1963) defined Organizational

Climate as a ‘normative structure of attitudes and behavioural standards which provided a

basis for interpreting the situations and act as a source of pressure for directing activities’.

In their extensive research work Litwin and Stringer (1966) introduced a very

comprehensive framework of Organizational Climate. They provided six dimensions of

Organizational Climate that include i) structure ii) responsibility iii) reward iv) risk

v)warmth and vi) support. In another book by Litwin and Stringer (1968) emphasis was

given on the concept of climate and its influence on the McClelland’s ‘need factors’ of

motivation that is power, achievement, and affiliation. Attempts were also made to

establish the operationalization of climate through the assessment of member’s

perceptions.

During this time the actual concept of Organizational Climate began to take shape. In a

study by Schneider and Bartlett (1968), attempts were made to develop a measure of

39

climate. The authors conducted extensive empirical study on the employees in life

insurance companies by developing two sets of separate dimensions, one managerial

level and another for the field agents of the companies. During this time the studies of

Organizational Climate had established the fact that it can be conceptualized and

measured through the shared perceptions of the organizational members and almost all

the contemporary studies embraced the concept.

Over the years, there has been a long standing interest in the study of organizational

climate among scholars. The concept of organizational climate can be traced back to

several studies, i.e. the work of Lewin et al. (1939), analyzing the relationship between

the leadership style and climate, the Koffka’s study (1935), focused on “behaviour

environment”, the Lewin’s (1936) study on “life space” and Murray’s (1938) work on

organizational climate. Following these seminal studies, many scholars have proposed

different definitions of organizational climate (e.g. Argyris, 1958; Brown and Leigh,

1996; Dawson et al., 2008; Deninson, 1996; James and James, 1989; Litwin and Stringer,

1968; Patterson et al., 2005; Pritchard and Karasich, 1973; Schneider 2000).

2.4 FORMATION OF ORGANIZATIONAL CLIMATE

The notion of organizational climate has been thought to have many dimensions to its

makeup. These varying dimensions have been cause for much of the debate surrounding

the concept. In the early 1970’s, researchers proposed many dimensions to organizational

climate. These dimensions include autonomy, structure of the job, reward orientation of

the employee, and the consideration, warmth, and support offered by the organization

(Campbell, et al., 1970). Autonomy, as described by the researchers, was said to be the

freedom of the person to be his/her own boss and keep extensive decision-making power

40

for him/her. The structure of the job refers to how the objectives and methods within the

job are created and communicated to the worker by his/her superiors. Reward orientation

suggests how motivated the worker is to perform his/her job, while consideration,

warmth, and support, refers to the support, stimulation, and overall relationship quality

perceived from one’s organization (Campbell, et al., 1970). A meta-analysis of

organizational climate by Koys and DeCotiis (1991) found that climate is a perception

and not an assessment of their job satisfaction.

Since organizational climate involves perceptions of an organization’s environment,

different organizations with differing practices and procedures may have different

climates (Muchinsky, 1976). One of the problems with the climate concept is the

specification of appropriate climate dimensions. It is difficult to identify several core

climate dimensions relevant to heterogeneous organizations because climate involves

employees' perceptions of their work environments and different types of organizations

with their differing practices and procedures will have relatively unique climates

(Muchinsky, 1976).

2.5 MEASUREMENT OF CLIMATE

In step with the formation of organizational climate is its measurement. Researchers have

suggested at least three different approaches for measuring climate (James & Jones,

1974). These approaches include a multiple measurement organizational attribute

approach, a perceptual measurement organizational approach, and a perceptual

measurement individual approach (Jackson-Malik, 2005).

The first approach is a Multiple Measurement of Organizational Attributes (MMOA)

approach which asserts that organizational climate is measurable as a set of attributes or

41

properties about the organization -- organizational climate includes a set of firm

attributes. The MMOA presumes organizations have specific climate attributes that are

significantly different from climate attributes within other organizations. These attributes

are typically based on the organization rather than employee perceptions as other

approaches may suggest. The MMOA approach also assumes that the firm’s climate

cannot be affected by fluctuations in employee behaviors such as turnover (Forehand

&Von Gilmer, 1964). Moreover, these researchers suggested that a firm’s culture

characteristics hold over time and influence employee behavior.

While this approach has been used in the literature, it is rather narrow in its assertion that

employees do not contribute to the climate. The other two measurement approaches take

into account the vital role of the employee in the formation of climate.

The second measurement approach is the Perceptual Measurement Organizational

Attribute approach (PMOA). The PMOA views organizational climate as a set of

perceptual variables which combine the organization’s attributes, as well as the

perceptions of its agents. The third approach for measuring organizational climate is the

Perceptual Measurement of Individual Attributes (PMIA) approach, which views

organizational climate as perceptual and as an individual attribute (perceived by

individuals —-the individual’s attribute). This approach considers the individual and

assesses what is psychologically important to him/her and how he/she perceives the work

environment (James & Jones, 1974). This popular approach has seen the most acceptance

within the organizational research field.

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2.6 DIMENSIONS OF ORGANIZATIONAL CLIMATE

Review of literature on climate studies show climate dimensions such as individual

responsibility, reward orientation, clarity of structure, and warmth and consideration to be

similar to the four factors identified by Campbell et al. (1970). Risk, performance

standards, conflict avoidance, intimacy, and organizational identification appear to be

similar to the other factors identified in other climate studies.

1. Risk : The perception that the organizations is willing to take calculated risks, take

chances on employees ideas accept differing opinions, and allow productivity to take care

of itself.

2. Warmth and consideration: The feeling of warmth and consideration in relationships

among organizational members, supported by a relaxed, friendly, and people-oriented

work atmosphere.

3. Accountability: The perception that lines of authority and accountability are unclear

and the degree to which people try to cover up mistakes.

4. Individual responsibility: The feeling that mistakes are frowned upon and the extent to

which individual judgment and discretion are encouraged on the job.

5. Egoism: The feeling that people in the organization are self-centered and do not trust

each other much.

6. Clarity of structure: The perception that jobs, policies, and organizational structure are

clearly defined.

7. Performance standards: The perception that the organization has set exacting standards

of performance.

43

8. Conflict avoidance: The feeling that one has to maintain good interpersonal relations

and avoid open arguments and disagreements to get ahead in the organization.

9. Intimacy: The perception of the ease or difficulty in getting acquainted and socializing

with others in the organization.

10. Reward orientation: The perception that rewards are based on performance and that

positive rewards outweigh punishments in the organization.

11. Organizational identification: The feeling of pride and loyalty toward the organization

and workgroup.

12. Challenge: The perception that reward and recognition are lacking and the belief that

corporate risks have to be taken occasionally.

Likert has proposed six dimensions of organizational climate: leadership, motivation,

communication, decisions, goals, and control. Litwin and Stringer have emphasized

motivational framework of organizational climate. Motivational framework of climate

includes motives of:

1. Achievement: Concern for excellence.

2. Expert Influence: Concern for making impact on others.

3. Control: Concern for power and orderliness.

4. Extension: Concern for others, and for macro issues.

5. Dependency: Concern for being in close touch with others in a significant way.

6. Affiliation: Concern for building and maintaining close personal relationships.

On the basis of review of various studies and discussions with managers, Pareek(1989)

has identified twelve processes of organizational climate.

44

1. Orientation: Priority of members may range between concern to adhere to established

rules, to concern for excellence and achievement.

2. Interpersonal Relationships: Depending on the pattern of relationship it may lead to

climate of clique formation, or climate of control, or a climate of dependency etc.

3.Supervision: Depending on supervisory style, the climate may be of extension or it may

be of affiliation.

4. Problems: Problems may be taken as an opportunity or irritants; manager may solve

problems alone or jointly by the superior and the subordinates.

5. Management of mistakes: Attitudes towards mistakes may be of tolerance or of

annoyance; such attitudes contribute to organizational climate.

6. Conflict Management: Conflict may be perceived as opportunity or as threat; such

perceptions influence organizational climate.

7. Communication: Direction, mode and type of communication influence climate of an

organization.

8. Decision Making: Levels at which decisions are taken, degree of participation in

decision making are the issues, which influence organizational climate.

9. Trust: Degree of trust or its absence influence organizational climate.

10. Management of Rewards: Perception about what is rewarded in the organization

influences the organizational climate.

11. Risk Taking: It is an important determinant of climate.

12. Innovation and Change: Styles of managing change and innovations are critical in

establishing climate.

45

Campbell, Dunnette, Lawler, and Weick (1970) in a review of organizational studies

identified four dimensions that seemed to be common to these studies: individual

autonomy, structure, reward, and consideration, warmth, and support. Muchinsky (1976)

factor analyzed the Litwin and Stringer climate questionnaire and found six derived

dimensions which he referred to as interpersonal milieu, standards, general affective tone

toward management, organization structure and procedures, responsibility, and

organizational identification.

In their analysis of the organizational climate literature, Koys and DeCotiis (1991)

identified approximately 80 separate features. Through a reduction procedure, Koys and

DeCotiis condensed the features from 80 to 45, and ultimately identified eight super-

ordinate climate dimensions: autonomy, cohesion, trust, pressure, support, recognition,

fairness, and innovation. Koys and DeCotiis (1991) finally concluded that organizational

climate should be assessed at an individual level, and that each worker’s observation can

be expected to differ across the eight global categories.

Forum’s research identifies six dimensions of climate that influence the work

environment and employee motivation:

1. Clarity: People’s degree of understanding of the organization’s goals and policies, as

well as the requirements of their job.

2. Commitment: The expression of continuing dedication to a common purpose and to

achieving goals.

3. Standards: The emphasis management places on high performance standards and the

amount of pressure it exerts on teams to improve performance.

4. Responsibility: The degree to which people feel personally responsible for their work.

46

5. Recognition: The feeling that people are recognized and rewarded for doing good

work, and that they receive accurate performance feedback.

6. Teamwork: The feeling of belonging to an organization characterized by cohesion,

mutual support, trust, and pride.

Litwin & Stringer, (1968) Model: A .The framework considers six motives relevant for

studying organizational climate.

1. Achievement – this motive is characterised by concern for excellence, improvements

against standards set by others or by oneself, the setting of challenging goals for oneself,

awareness of the obstacles that might be encountered in attempting to achieve these

goals, and persistence in trying alternative paths to one’s goals.

2. Influence – this motive is characterised by a concern for making an impact on the

others, a desire to make people do what one thinks is right and an urge to change

situations and develop people.

3. Control – this is characterised by a concern for orderliness, a desire to be and stay

informed, an urge to monitor events and to make corrective action when needed, and a

need to display personal power.

4. Extension – this is characterised by a concern for others, interest in super ordinate

goals, and an urge to be relevant and useful to large groups, including society as a whole.

5. Dependency – This motive is characterised by a desire for the assistance of the others

in developing oneself, a need to check with significant others (those who are more

knowledgeable or have a higher status, experts, close associates and so on), a tendency to

submit ideas or proposals for the approval, and an urge to maintain a relationship based

on the other person’s approval.

47

6. Affiliation – this is characterised by a concern for the establishing and maintaining

close personal relationships, and emphasis on friendship, and a tendency to express one’s

emotions.

Although McGregor introduced “psychological climate”, Redding (1972) became known

for conceptualizing the “ideal communication climate” construct that includes

supportiveness; participative decision-making; trust, confidence, and credibility,

openness and high performance.`

Jones and James (1979) analyzed 35 factors which, based on their research, they

represented important components of climate; they found these 35 factors could be

classified into five basic climate dimensions as follows:

1. Perceived conflict and ambiguity: This aspect of climate reflected a perception on the

part of the employees that there was a lack of interdepartmental cooperation, poor

communication for management, poor planning, and the lack of fairness and objectivity

in the reward process.

2. Perceived job challenge, importance, and variety: This reflected the degree to which

the job was seen as providing autonomy and feedback, and demanding high standards of

quality and performance.

3. Perceived leader facilitation and support: This reflected perceived leader behavior such

as the extent to which the leader was seen as helping to accomplish work goals by

scheduling activities etc., as well as the extent to which he or she was perceived as

facilitating interpersonal relationships and providing personal support.

48

4. Perceived work-group cooperation, friendliness, and warmth: This measured the

perceived cooperation, friendliness, and warmth among group members and their pride in

their work group.

5. Professional and organizational expert: This measured the growth potential of the

employee’s job, as well as his or her perceptions of an open atmosphere to express

personal feelings and thoughts, confidence in the leader, consistently applied

organizational policies, and reduced job pressure.

A number of dimensional organizational climate measures exist. Litwin and Stringer’s

(1968) 50 items Organization Climate Questionnaire (Form B) is designed to measure

nine characteristics reflecting the degree of organizational emphasis on Structure,

Responsibility, Reward, Risk Warmth Support, Standard, Conflict and Identity.

1.Structure : The feeling that employees have about the constraints in the group and how

many rules, regulations, procedures there are; the feeling that there is an emphasis on

“red tape'' and going through channels, or that there is a loose and informal atmosphere

2. Responsibility: The feeling of being your own boss; not having to double-check all

your decisions; when you have a job to do, knowing that it is your job.

3. Reward: The feeling of being rewarded for a job well done, emphasizing positive

rewards rather than punishments; the perceived fairness of the pay and promotion

policies.

4. Risk: The sense of riskiness and challenge in the job and in the organization; whether

there is an emphasis on taking calculated risks, or that playing it safe is the best way to

operate.

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5. Warmth: The feeling of good general fellowship that prevails in the work group

atmosphere; the emphasis on being well-liked; the prevalence of friendly and informal

social groups.

6. Support: The perceived helpfulness of the managers and other employees in the group;

emphasis on mutual support from above and below.

7. Standard: The perceived importance of implicit and explicit goals and performance

standards; the emphasis on doing a good job; the challenge represented in personal and

group goals

8. Conflict: The feeling that manager and other workers want to hear different opinions;

the emphasis placed on getting problems out in the open, rather than smoothing them

over or ignoring them.

9. Identity: The feeling that one belongs to the company and is a valued member of a

team, the importance attached to that spirit. It includes the feeling of sharing personal

goals with those of the organization.

The four attributes of an organization’s climate according to (Denison, 1996)

(1) Supportive climate (2) Climate of risk taking (3) Climate of cohesiveness (4) Climate

with the motivation to achieve. The four elements described here have been thought to

promote job satisfaction and increase motivation at individual and organizational levels.

Other measures were also developed by Jones and James (1979), Halpin and Croft (1963)

and Pritchard and Kurasick (1973).

According to Schnake (1983), the dimensions of organizational climate include

participation and reward orientation, structure, warmth and support, standards, and

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responsibility. In general, organizational climate has been shown to be an important

predictor of many employee attitudinal and behavioral outcomes.

An initial assumption of theory and research in the area of organizational climate was that

social environments could be characterized by a limited number of dimensions. James

and his colleagues (James & James, 1989; James & McIntyre, 1996; James & Sells,

1981) describe four dimensions they identified across a number of different work

contexts:(1) role stress and lack of harmony; (2) job challenge and autonomy; (3)

leadership facilitation and support; and (4) work group cooperation, friendliness, and

warmth. James suggested that individuals developed a global or holistic perception of

their work environment (e.g., James & Jones, 1974), which could be applied to any

number of contexts and industries.

Hellriegel and Slocum (2006) explain that organizations can take steps to build a more

positive and employee-centered climate through:

1. Communication – how often and the types of means by which information is

communicated in the organization.

2. Values – the guiding principles of the organization and whether or not they are

modeled by all employees, including leaders.

3. Expectations – types of expectations regarding how managers and behave and make

decisions.

4. Norms – the normal, routine ways of behaving and treating one another in the

organization.

5. Policies and rules - these convey the degree of flexibility and restriction in the

organization.

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6. Programs – programming and formal initiatives help support and emphasize a

workplace climate.

7. Leadership – leaders that consistently support the climate desired.

2.7 CONCEPT OF EMPLOYEE/AGENT PERFORMANCE

Employee performance is recognized as an important predictor variable of company

productivity and long-term organizational survival. Organizations must invest in their

employees to succeed in business (Denny, 2002, p. 160). Identifying quantifiable

measurable factors that can correlate organizational climate to employee performance in

a consistent manner could prove valuable for organizations and leaders.

McMurray, Scott, and Pace (2004) asserted that organizational climate encourages

employee commitment to an organization, its performance, and their own responsibilities.

Their assertion provided further evidence that organizational climate may be one of the

exclusive influences of employee performance.

Organizational climate can affect how employees perform within an organization because

the way people feel and the way they perform are strongly associated (Freedman, 2005).

A poor organizational climate characterized by lack of trust, no collaboration, lack of

accountability, or any of the other contextual factors used in the present study, may lead

to low productivity and possibly high employee turnover.

This study was designed to reveal a plausible and measurable relationship between

employee/agent performance and organizational climate in Indian Insurance companies.

According to Freedman (2005), one can link people’s feelings and performances,

suggesting an association of employee performance and organizational climate. Further,

Freedman suggested that different groups in the same organization can be driven by

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different factors, indicating that the influences of organizational climate on employee

performance may be available to identification and measurement and could possibly

assist organizations in receiving the maximum potential out of their employees

The Insurance sector reaches out to the people through the main traditional route of the

agency model for the selling processes of the numerous complex need-based products.

The agents help in marketing its policies by spreading the message of insurance among

the masses. They serve as the kingpin for insurance companies seeking to provide

traditional and innovative products, and function as focal point for customers seeking to

procure insurance coverage and long term savings.

Agents by providing enough information to the customers, enable them in forming their

assessment about the products or services, which ultimately becomes customer value.

Customer satisfaction and acumen orientation significantly influence the future business

opportunities and if the salespersons are able to foster their relationships with the clients,

clients will be more satisfied and more willing to trust, and thus secure the long term

demand for the services (Tam and Wong, 2001).

According to Crosby et al. (1990) the lack of concreteness of many services of which

insurance is one, increases the value of the persons responsible for delivering them.

Putting the customer first, and, exhibiting trust and integrity have been found essential in

selling insurance (Slattery, 1989). In marketing life insurance, insurance agents are often

considered to be marketing complex services (Nik Kamariah, 1995). Insurance sales

agents fully understand the customers’ needs and requirements as well as build a trusting

relationship between themselves and their clients to promote long-term mutually

beneficial relationship (Crosby et al., 1990). The agent has to deal with the dilemma

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between making sales (self interest) and providing service (customer benefit) (Oakes,

1990). Customers are, therefore, likely to place a high value on their agent’s integrity and

advice (Zeithaml et al., 1993).

The present study was designed to identify the influence that the organizational climate

factors have on employee/agent performance with special reference to retention,

customer service and productivity.

2.8 CONCEPT OF EMPLOYEE RETENTION

Employees’ turnover is a much studied phenomenon Shaw et al. (1998). Employee

turnover is the rotation of workers around the labour market; between firms, jobs and

occupations; and between the states of employment and unemployment Abassi et al.

(2000). The term “turnover” is defined by Price (1977) as: the ratio of the number of

organizational members who have left during the period being considered divided by the

average number of people in that organization during the period. Frequently, managers

refer to turnover as the entire process associated with filling a vacancy: Each time a

position is vacated, either voluntarily or involuntarily, a new employee must be hired and

trained. This replacement cycle is known as turnover Woods, (1995).

A considerable amount of literature has been published on retention. It means the

existence of an ongoing employment relationship. With today's high employment levels,

organizations find out that balance of power has shifted from the employer to the

employee since the turn over impact have not be administered well. Excessive turnover is

often a symptom of fundamental problems within the business.

Previous studies indicate Cappelli (2000) that several factors are considered important in

a well-functioning of employee retention. The determinants that are considered to have a

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direct affect are career opportunities, work environment and work-life balance. Cole

(2000) suggests that people stay at such companies where there is a sense of pride and

will work to their fullest potential. The reasons to stay are work environment, rewards,

growth and development and work-life balance.

Companies today are forced to function in a world full of change and complexity, and it

is more important than ever to have the right employees in order to survive the

surrounding competition. New companies and business are blossoming, new technologies

are constantly developed and the knowledge and perception of how much your

employees actually mean to your organization is greater for every day. Most companies

are looking for the right expertise in different areas, and human resources are therefore an

important competitive factor that needs to be taken into consideration while managing

business (Ljungberg & Larsson, 2005).

Even if a company has managed to secure the right employees, it is not enough. The

crucial factor is to retain employees and reduce the turnover rate. In some industries the

level of staff turnover is very high, and this could affect the company in terms of

rendering customer service (Curtis & Wright, 2001).

Insurance sector is an area where expertise is of utter importance, and a long-term

commitment of the right employees is important to the organization’s functionality,

development and credibility.

Organizations invest a lot on their employees in terms of induction and training,

developing, maintaining and retaining them in their organization. Therefore, managers at

all costs must minimize employee’s turnover. Although, there is no standard framework

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for understanding the employees turnover process as whole, a wide range of factors have

been found useful in interpreting employee turnover Kevin et al. (2004).

Therefore, there is need to develop a fuller understanding of the employee turnover,more

especially, the sources- what determines employee turnover, effects and strategies that

managers can put in place minimize turnover. With globalization which is heightening

competition, organizations must continue to develop tangible products and provide

services which are based on strategies created by employees. These employees are

extremely crucial to the organization since their value to the organization is essentially

intangible and not easily replicated Meaghan et al. (2002). Therefore, managers must

recognize that employees as major contributors to the efficient achievement of the

organization’s success Abbasi et al. (2000). Managers should control employee turnover

for the benefit of the organization success.

Employee retention is most critical issue facing corporate leaders as a result of the

shortage of skilled labour, economic growth and employee turnover. Retention is defined

as “the ability to hold onto those employees you want to keep, for longer than your

competitors” (Johnson, 2000). The analysis of retention should be considered at more

than just a single level because the “influences” of retention can arises at multiple levels

(Klein et al., 1994; Klein and Kozlowski, 2000; Raudenbush and Bryk, 2002; Yammarino

and Dansereau, 2004).

A number of studies have found that managing turnover is a challenge for organizations,

as different organizations using different approaches to retain employees (American

Management Association, 2001). Retention is considered as all-around module of an

organization’s human resource strategies. It commences with the recruiting of right

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people and continues with practicing programs to keep them engaged and committed to

the organization (Freyermuth, 2004).

Today the demands of workers have been increased very much as ever before. It is in

terms of every aspect, not only salaries and perks but also work experience and cultural

context in which it occurs. Providing a prolific, flexible and dynamic work environment

can be a critical asset in attracting and retaining valuable employees. In order to develop

an effective retention plan for today’s employment market, it is vital to realize the

varying needs and expectation. If the retention strategies are not properly embedded in

the business processes, the all effort since recruitment will ultimately proves futile (Earle,

2003).

Retaining top talent remains a primary concern for many organizations today. Critical

analysis of workforce trends points to an impending shortage of highly-skilled employees

who possess the requisite knowledge and ability to perform at high levels, meaning that

organizations failing to retain high performers will be left with an understaffed, less

qualified workforce that ultimately hinders their ability to remain competitive

(Rappaport, Bancroft, &Okum, 2003).

Despite the vast literature on employee turnover, which is aimed at identifying factors

that cause employees to quit (e.g., Griffeth, Hom, & Gaertner, 2000), much less is known

about the factors that compel employees to stay. For example, Maertz and Campion noted

“relatively less turnover research has focused specifically on how an employee decides to

remain with an organization and what determines this attachment. Steel, Griffeth, and

Hom added “the fact is often overlooked, but the reasons people stay are not always the

same as the reasons people leave” (2002).

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Retention is a critical element of an organization’s more general approach to talent

management, which is defined as “the implementation of integrated strategies or systems

designed to increase workplace productivity by developing improved processes for

attracting, developing, retaining, and utilizing people with the required skills and aptitude

to meet current and future business needs” (Lockwood, 2006). The latter part of this

definition is important because it suggests that talent management programs should be

tailored to those who are most responsible for the organization’s success.

Blanket retention policies may be disadvantageous if they appeal to employees at all

levels of performance, and organizations would want to adopt particular strategies that

contribute to the retention of their most valued employees while avoiding control

methods that would appeal primarily to average or low performers (Steel et al., 2002). In

terms of job level differences, many talent management programs emphasize developing

and retaining the group of employees who have potential to occupy the top leadership

positions within the organization in the near future. To this end, organizations can benefit

from knowing whether retention reasons differ based on job level, which might then call

for different retention strategies depending on where individuals reside within the

organizational hierarchy.

In today’s competitive scenario, as the awareness and technology plays a vital role in

developing the competition more vigorous and intense. Retention becomes one of the

biggest issues for the Indian insurance industry because people are the one who generate

profits and therefore are considered as the capital or asset of the organization. Insurance

is one of the fastest growing industries of India so the most important thing to make pace

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with this evolving competition is to work on the most important determinants of

employee retention.

The importance of this study is to examine the capability of insurance industry in

retaining employees by different determinants. Reducing employee turnover is a strategic

and very important issue. No business can enjoy and sustain the success until it deals with

this turnover problem efficiently and successfully. Most critical thing is to lay the

groundwork for long term commitment. Without valuable employees, a business cannot

generate revenue and prosper.

2.9 CONCEPT OF CUSTOMER SERVICE

Customer service has become a distinct component of both product and service sectors

and with the developments in information technology many businesses find demanding

and knowledgeable customers. The worldwide trend toward service quality was initiated

in the 1880s when businesses realized that a quality product, in itself, is not guaranteed to

maintain competitive advantage (van der Wal et al., 2002). Many researchers recognize

that service quality can bring an organization a lasting competitive advantage (Moore and

Lewis).

Quality of services can be the difference between success and failure in both service and

manufacturing firms. Service quality, customer satisfaction and customer value have

become the main concern of both manufacturing and service organizations in the

increasingly intensified competition for customers in today's customer-centered era

(Wang et al., 2004).As a result many organizations are paying increasing attention to

improve service quality.

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Service climate refers to the shared perception of employees concerning the practices,

procedures, and kinds of behavior that get rewarded and supported in a particular setting

(Schneider, 1998). The service climate is the message employees get about how

important service is in their organization. Employees get this message from the

experiences they have during their workday (Schneider & Bowen, 1995).

Climate for service refers to employee perceptions of the practices, procedures, and

behaviors that get rewarded, supported, and expected with regard to customer service and

customer service quality. For example, to the extent that employees perceive that they are

rewarded for delivering quality service, their organization's service climate will be

stronger. Additionally, perceptions that customer service is important to management will

also contribute to a strong service climate.

Service climate is a collective and shared phenomenon. This climate is built in the light

of organizational practices focused on customer service. The way boundary workers

(employees with whom customers physically interact in the course of doing business with

an organization) perceive their organizations' service climates are related to the service

quality perceived by those organizations' customers.

In the service encounter, employees are performers rather than simply workers, and their

behavioral performance is the service quality that customers perceive (Bitner, 1990).

Thus, employee service quality, as perceived by customers, is one of most the important

variables to examine in regards to service encounter experiences.

Employee service quality, as a behavioral performance, is likely to reflect the amount of

employee effort expended in the service encounter situation. Brown and Peterson (1994)

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and Walker et al. (1977) consider effort as a mediator between motivation and

performance or as a mechanism of translating motivation into accomplished work.

Also in the marketing area, Brown and Leigh (1996) and Brown and Peterson (1994)

presented evidence that salespeople’s work-related efforts have a strong impact on their

sales performance. Extending these previous findings within a service encounter and

viewing them from the customer perspective, the effort that employees put into their

work should be reflected in their service performance, as seen through the eyes of their

customers.

Employee job satisfaction is also likely to relate to their job performance in regard to

their level of service performance. In fact, the relationship between job satisfaction and

performance has been extensively examined in the organizational behavior and marketing

literatures. Results from several studies indicate that satisfied employees are more likely

to engage in behaviors that assist customers (Locke & Latham, 1990; Weatherly &

Tansik, 1993). Schneider (1980) found evidence that job satisfaction is a primary reason

that employees deliver quality service. According to Parasuraman et al. (1988), service

quality has become a significant differentiator and the most powerful competitive

weapon, which many leading service organizations possess. Leading service

organizations strive to maintain a superior quality of service in an effort to gain customer

satisfaction. Therefore, a service organization’s long-term success in a market is

essentially determined by its ability to expand and maintain a large and loyal customer

base (Zeithaml, 1998).

Schneider and his colleagues (Schneider & Bowen, 1985, Schneider et al., 1980, 1998)

examined the direct relationships between employees perceptions of service climate and

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customers perceptions of service quality. They found that the way contact employees

perceive their organization’s service climate is directly related to the customer

perceptions of service quality at the organizational level of analysis. To retain customers

and stay competitive, many organizations are making customer perceptions of service

quality a priority (Berry, 1995; Zeithaml & Bitner, 1996).

Much has been made of ‘climate for service’ and its role in enhancing customer

experiences in service environments. Research has revealed how employee attitudes

towards and perceptions of customer service quality contribute to customer evaluations of

the service experience (Johnson, 1996; Schneider & Bowen, 1985; Schneider, White, &

Paul, 1998).

The literature has suggested that service quality is determined by the difference between

customers’ expectations of a service provider’s performance and their evaluation of the

services they have received (Parasuraman et al, 1985; 1988). Customers expectations are

beliefs about a service that serve as standards against which service performance is

judged (Zeithaml et al, 1993) and what customers think a service provider should offer

rather than what might be on offer (Parasuraman et al, 1988). Expectations are also

formed from a variety of sources such as the customers personal needs and wishes

(Edvardsson et al, 1994); the customers’ personal philosophy about a particular service;

by promises (through staff, advertisements and other communications); by implicit

service promises (such as price and tangibles associated with the service); by word-of-

mouth communication (with other customers, friends, family and experts), including past

experiences of that service (Zeithaml and Bitner, 1996).

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Gronroos (2000) proposed the concept of service climate as the internal climate, the

picture of how internal relationships function between people in an organization. When

there is a climate for service, employees have come to understand that superior customer

service is expected, desired and rewarded; other things being equal, they are more likely

prove good service (Liao and Chuang, 2004).

Every organization has its own service climate because the basis of the services and

interaction within the organization create the uniqueness of the service climate. An

organization encounters thousands of events, practices and procedures, demonstrates a

climate for service which are perceived in many clusters of related sets (Schneider, 1983;

Schneider et al, 1992). Different kinds of people may report different types of service

climate because of their uniqueness of behaviour, even though they may experience the

same service practices and procedures at the same point in time (Schneider, 1983).

Therefore, there is no room for quality control between the employees’ behaviour and the

customer’s purchase because Schneider (1980) assumed that service customers are

responsive to the same kinds of organizational practices and procedures that affect

employees. Even though they view service from a different perspective, employee and

customer perceptions of organizational effectiveness are positively related (Schneider and

Bowen, 1993; Schneider et al, 1998).

If frontline employees had a positive experience with a customer, they would strive to

obtain a similar or higher quality interaction the next time. This attitude, in turn, would

improve the organization’s service climate (Baker and Fesenmaier, 1997). For that

reason, the organization should play a pivotal role in creating foundations, providing the

development of a service climate that supports and encourages teamwork and eliminating

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barriers between departments (Chung, 1993) this is because an organization’s service

climate as perceived by customers is the result of interactions among managers, frontline

employees and customers (Schneider, 1990; Bateson, 1985; Schneider, 1980) that focus

directly on service quality (Schneider et al, 1998) by changing the way it pulls teams

together to work on projects (Johnson, 1992).

Bowen and Schneider (1985) argued that the creation of a climate for excellent service

was important to ensure that customers received high-quality service. The participating

organizations in Schneider et al’s (1998) research paid close attention to their customers’

expectations and needs to create conditions generating a climate for service. When

excellent service is an important theme in an organization, a positive service climate

exists. That climate for service in turn yields behaviors that result in customer perceptions

of quality. Schneider (1980) suggested that a climate for service created a positive

feedback

Service firms need to manage and enhance their internal climate to positively affect the

attitudes and behaviours of employees who serve the public (Bowen and Schneider,

1989). Olaisen and Revang (1991) agreed that quality aspects should be measured

horizontally for the entire service offered if service organizations are going to be

successful, with collaboration from all levels of the organization (Bowen and Cummings,

1990; Jong et al, 2005).

The majority of the service quality literature stresses the importance of focusing on

customers even Schneider and Bowen (1985) stated that employee and customer

perceptions, behaviours, and purchase intentions share a common basis and are related to

each other .Many service firms are subject to failures in service delivery because they

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must depend on customer-contact employees to deliver service to their customers

(Hartline and Ferrell, 1996). High quality service can be provided only if customer’s

expectations are met or exceeded. Therefore, the key to manage the customer’s

experience of service quality is to manage employees’ experiences within their own

organization (Schneider and Bowen, 1989; 1993).

The worldwide trend toward service quality was initiated in the 1880s when businesses

realized that a quality product, in itself, is not guaranteed to maintain competitive

advantage (van der Wal et al., 2002). Many researchers recognize that service quality can

bring an organization a lasting competitive advantage. Quality of services can be the

difference between success and failure in both service and manufacturing firms. Service

quality, customer satisfaction and customer value have become the main concern of both

manufacturing and service organizations in the increasingly intensified competition for

customers in today's customer-centered era (Wang et al., 2004).

As a result, many organizations are paying increasing attention to improve service

quality. In some manufacturing industries "service quality" is considered a more

important order winner than "product quality" (Ghobadian et al., 1994). Service quality

improvements will lead to customer satisfaction and cost management that result in

improved profits (Stevenson, 2002). Contemporary service sector firms are compelled by

their nature to provide excellent service in order to prosper in increasingly competitive

domestic and global marketplaces (Sultan and Simpson, 2000). As service firms find

themselves in an increasingly competitive and complex business environment, they are

inevitably driven to examine their service delivery processes critically.

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The focus of such internal analysis is ultimately about customer satisfaction, and how

bottom-line results can be actualized through delivering quality services to customers via

flawless interface platforms. This is not only the case in the private sector, but it also is

increasingly so in the public sector. Public sector firms are trying to make administration

more efficient and more citizen-oriented (Scharitzer and Korunka, 2000).

Employee’s perceptions of their work climate are strongly related to customers’

evaluations of the service and their intentions to continue to use the service. Each person

must improve what is around them and look for ways to satisfy the requirements of others

in the organization efficiently. Employee perception of work climate not only influences

organizational variables such as work effort and job satisfaction, but also affects service

evaluation by customers (Mahn et al, 2001). In settings where customers directly

encounter organizational climate, a service climate can offer a profitable competitive

edge (Gelade and Young, 2005) where a firm’s financial performance (e.g. profit) is

derived from employee performance. An internal climate focus on cost alone is likely to

result in employee dissatisfaction which will hurt quality and customers (Chung, 1993).

Services usually involve face-to-face contact as they are produced and consumed at the

same point in time (Schneider and Bowen, 1993). For service organizations, quality of

service has emerged as a key differentiator in the marketplace (Curry and Penman, 2004)

Owing to the high level of unpredictability of human involvement, not all frontline

employee behaviours can be specified and pre-determined by management guidelines

(Boshoff and Tait, 1996). Therefore, Schneider (1986) pointed out that service

organizations need to be concerned with the kinds of members they attract, select and

retain. This could go a long way to improving the quality of service consumers receive. It

66

is the people who transmit climate through their behaviour. Since people are the capital

assets of service firms, they should invest heavily in the right members on which to build

their organization.

After people are hired, trained and informally socialized, organizations can nonetheless

still manage identity; they can still help promote a sense of belonging (Boshoff and Tait,

1996). Schneider (1986) also commented on how people come to feel a part of their

organization, how they come to identify with the organization’s goals and values, whilst

Boshoff and Tait (1996) were concerned that if the extent to which frontline employees

identify with the firm’s goals and values exerts an influence on the service quality

delivered, this level of commitment can be enhanced and thus also the level of service

quality delivery

Some employees may consider the interests of the organization to be more important than

the interests of customers. Internal climate is the picture on how internal relationships

function between people in an organization (Gronroos, 2000). It communicates a message

to employees about what is valued by the organization. Convincing frontline employees

to accept and support the organization’s values, goals and objectives (e.g. customer

orientation) should be beneficial to both the organization and its customers, as well as to

its employees.

2.10 CONCEPT OF PRODUCTIVITY

In this study, subjective productivity measurement method is used. The measures of this

method are not based on quantitative operational information. Instead, they are based on

personnel’s subjective assessments. Wang and Gianakis (1999) have defined subjective

performance measure as an indicator used to assess individuals’ aggregated perceptions,

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attitudes or assessments toward an organizations product or service. Subjective

productivity data is usually collected using survey questionnaires. Subjective data can

also be descriptive or qualitative collected by interviews. (Clements-Croome and

Kaluarachchi 2000).

Patterson, et al. (2004) asserted that organizational climate influences organizational

productivity through emotional, learning, and behavioral changes on the part of

employees. Productivity is a performance measure encompassing both efficiency and

effectiveness. High performing, effective organizations have a culture that encourages

employee involvement. Therefore, employees are more willing to get involved in

decision-making, goal setting or problem solving activities, which subsequently result in

higher employee performance (Hellriegel, Slocum & Woodman, 1998). The behaviors

that improve productivity are attachment behaviors, which involve staying in the

organization, role-prescribed behaviors, which refer to one’s actions as part of his or her

role in the organization, and citizenship behaviors, referring to helpful but voluntary

actions that assist the organization.

It is believed by Cole (2005), that an organization’s productivity and efficiency is best

achieved when employees are satisfied, and when attention is paid to their physical as

well as socio-emotional needs. It is argued by human relations researchers that employee

satisfaction sentiments are best achieved when the organization maintains a positive

organizational climate, such as by providing autonomy, participation, and mutual trust.

Wright (1989) summarizes the obstacle which exists in the route of reaching productivity

as follows: lack of direction, weak organizational structures, the systems of payment and

management. In other words, the management of productivity is the programming

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process, coordinating and monitoring the productivity program in the organization. A

productive manager is a person who takes responsibility for doing important tasks (Lam

& Ngee, 1987). Kopelman (1986) considers environment, the features of the

organization, work characteristics, and individual characteristics as the four main factors

which affect productivity.

The main goal of management is to increase productivity and keep its growth. In fact, the

basis of productivity management is to create a suitable condition for higher level of

performance. The process of productivity management indicates the existence of change,

and change does not occur easily. Organizations must identify obstacles that confront

change and should undertake measures to overcome them. Organizations must vigorously

supervise and handle the change continually (Belcher, 1987).

Ross (1977) also believes that the productivity of an organization depends on resources,

and management duties. He also states that making the staff to apply their abilities and

capabilities leads to a higher level of organizational productivity and in turn to job

satisfaction. Managing human resources and management performances related to job

designing, job enrichment and flourishing, job circulation and shifting affect the staff’s

level of productivity. French (1986) believes that the success and survival of

organizations depend on the managers attention to the internal (organizational) and

external environments and outcome (results). These factors affect each other. For

instance, when the organization management strengthens and supports educational

programs (an internal factor), it affects the legal disciplines of employment (an external

factor).

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Participation has a strong effect on both job satisfaction and productivity, but its effect on

satisfaction is somewhat stronger than on productivity. Human resource policies that

encourage worker involvement aim at providing employees with opportunities to have an

input in decisions, incentives to expend discretionary effort and the means to acquire the

appropriate skills (Berg 1999). Among these policies, participation schemes directly

affect the first two aspects, opportunities and incentives, and as a result are thought to

improve incentives to acquire skills as well as work organization and information flows.

These combined effects are expected to increase efficiency and productivity.

2.11 RESEARCH GAP

A healthy Organizational Climate is a pre-requisite for increasing employee and agent

performance and it also has an impact on employee and agent retention, the manner in

which services are provided to customers and their overall productivity. The companies

that have aimed at creating the best organizational climate for their employees and agents

have created adequate framework for the success of their organization. Organizations

must invest in their employees and agents to succeed in business. Identifying quantifiable

measurable factors that can correlate organizational climate to employee and agent

performance in a consistent manner could prove valuable for organizations and leaders.

The study of the literature review indicated there is gap in the field of investigation

specifically in this area of Organizational Climate impacting employee/agent

performance with respect to employee and agent retention, customer service and

productivity in the Indian insurance sector. The literature did not suggest any specific

and direct historical correlation between organizational climate and employee/agent

performance especially in the Indian insurance sector.

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Understanding the relationship between organizational climate and employee/agent

performance can assist the organizational leaders from the insurance sector in framing

solutions to reduce attrition rates among employees and agents, it can also help in

enhancing the quality of service provided to customers at the same time identify ways to

increase employee/agent productivity leading to the success of the organization.

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CHAPTER 3

OBJECTIVE OF THE STUDY AND RESEARCH METHODOLOGY

3.1. STATEMENT OF THE PROBLEM

Business environment is going through a radical change; this is especially true for Indian

Insurance Industry. As the insurance sector takes on new challenges to face the existing

competition that has risen due to privatization of the insurance sector, we see insurance

companies attempting to find solutions to handle problems relating to employee and

agent retention, there exists a greater need to provide quality customer service to

customers and identify measures to raise the productivity levels of its employees and

agents.

Work-group climate influences results. A positive work group climate motivates

employees to improve their performance by going above and beyond job expectations. It

helps the organization to produce more, and creates emotional engagement and loyal

customers. Positive Organizational Climate helps in retaining employees, it helps in

providing good customer service at the same time increases employee productivity. To

evaluate the prevailing organizational climate existing in different companies in the

Insurance Industry, the researcher felt the need to undertake the present study stated as

“The Impact of Perceived Organizational Climate on Employee/ Agent Performance with

special reference to Retention, Customer service and Productivity”.

3.2 IMPORTANCE OF THE STUDY

The insurance industry forms an integral part of the Indian financial market, with

insurance companies being significant institutional investors. It is an industry with

strategic importance for any country as it contributes to the financial sector as well as

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confers social benefits on the society. In recent decades, the insurance sector, like other

financial services, has grown in economic importance. This growth can be attributed to a

number of factors including rising income and demand for insurance, rising insurance

sector employment, and increasing financial intermediary services for policy holders.

A number of foreign insurance companies have set up representative offices in India and

have also tied up with various Life Insurance Companies. The business environment is

constantly changing and demand for adaptability among the organizations tends to

increase. Demands from customers, technological development, change of value and

globalization are the factors that drive the need to change and develop an organization. It

is hard to get advantages by quickly adopting technology to product or service in an

efficient manner.

The ability to handle organizations most valuable asset employees and agents will play a

crucial role in the success of Indian insurance companies. Thus this study attempts to

show a link between how organizational climate can affect employee performance which

in turn can be seen in retention of employees and agents, in the way customers are

provided service and in the high productivity of employees and agents.

Being a growing economy it is important to understand climate factors that impact

employee performance which in turn can affect retention, customer service and

productivity. At present there are very few empirical studies conducted on the Indian

insurance sector and not many studies have been undertaken, which establishes a link

between organizational climate and employee performance. This present study is an

attempt to bridge this gap in knowledge. Since Indian insurance sector is facing

challenges rising from high attrition, poor customer service and low productivity levels

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among employees and agents the findings from this study can be used to understand

factors that can lead to employee retention, customer service, and employee productivity.

3.3 PURPOSE OF THE STUDY

The purpose of this case study was to determine the degree to which specific factors in

the organizational climate relate to employee and agent performance. The goal was to

identify which factors of an organizational climate impact employee and agent

performance. The current study was conducted to establish if an identifiable and

measurable link exists between organizational climate and employee and agent

performance within Indian insurance companies.

3.4 SCOPE OF RESEARCH

Keeping pace with the advancement in country, insurance sector is showing tremendous

growth and carries great significance because of the emerging competition. The eight

organizations under study are some of the well known organizations in this sector. This

study is an attempt to find out the impact of organizational climate on employee/agent

performance with reference to employee retention, customer service and productivity.

The respondents were mainly agents and employees such as sales managers, operations

staff, trainers and agents from eight insurance companies located in Mumbai.

3.5 RESEARCH OBJECTIVES

1. To study the impact of Organizational Climate variables like Communication,

Career Development, Training, and Performance Feedback on Employee/Agent

Retention in Indian Insurance Companies.

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2. To analyze the impact of Organizational Climate variables like Role Clarity,

Direction, Quality of Service and Work life Policies on Customer Service in

Indian Insurance Companies.

3. To assess the impact of Organizational Climate variables like Reward &

Recognition, Innovation, Team work and Autonomy on Employee/Agent

Productivity in Indian Insurance Companies

4. To assess the differences in the perception of male and female, employees &


retention, customer service and employee /agent productivity.

5. To assess the differences in the perception of employees and agents regarding the



6. To analyze the differences in the perception of insurance companies regarding the



3.6 RESEARCH HYPOTHESES

1. H01: No significant relationship exists between Communication, Career




2. H02: No significant relationship exists between Role Clarity, Direction, Quality of


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3. H03: No significant relationship exists between Reward & Recognition,






agent retention.



agent retention.



service.



service.

6. H06: There exists no significant difference in the perception of male and female



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retention.



retention.



H18: There exists a significant difference in the perception of employees and agents

regarding the impact of organizational climate on customer service.



productivity.



productivity.




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customer service.



customer service.







3.7 SAMPLE DESIGN

To ensure balanced representativeness of the consumers, the random sampling was used.

According to Gupta (2005), Simple random sampling refers to that sampling technique in

which each and every unit of the population has an equal opportunity of being selected in

the sample, personal bias of the researcher does not influence the selection.

To ensure a true representative sample, few organizations were selected at random to

represent various industry/ functional areas and also keeping the convenience of data

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collection in mind. Then samples were drawn at random from these organizations to

ensure cross section representation from these organizations.

The target population tapped was the employees and agents of eight insurance companies

in Mumbai namely Max New York Life, Reliance Life, ING Vysya, LIC, Tata AIG,

ICICI Prudential HDFC Life, Bajaj Allianz. The responses were collected from 596

respondents which included 240 employees and 356 agents from these various eight

companies. The participants who were employees comprised of sales managers,

operations and trainers from different insurance companies. 44 items were used to

measure 12 dimensions of organizational climate and which was found to influence the

organizational climate of a company. The current study was conducted to establish if an

identifiable and measurable link exists between organizational climate and

employee/agent performance within insurance companies as this was found to have a

significant impact on employee and agent retention, customer service quality and

employee and agent productivity.

SAMPLE SIZE

Since the total population (N) that is the number of companies in Maharashtra was not

known the following formula was used to calculate the sample size.

Assuming the percentage of companies where sound Organizational Climate prevails to

be 40% (based on the estimates by Industry Sources) the sample size n required to

estimate this percentage is

n = Z2 PQ assuming N ∞ d2

Where Z= 1.96 for 95% confidence

P= % of Companies with existence of a sound Organizational Climate

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Q= (100-p), d = 10% of P=4.0, (10% error)

n= 576

3.8 DATA SOURCES

SECONDARY DATA

Review of literature and other available information from various published and

unpublished reports, journals, periodicals, books, newspapers, articles, websites, previous

research studies and seminar and conference proceedings etc.

PRIMARY DATA

A questionnaire-based survey was used to elicit responses from the sample. Structured

questionnaire was used to collect data from both employees as well as agents of eight

insurance companies in Mumbai namely Max New York Life, Reliance Life, ING Vysya,

LIC, Tata AIG, ICICI Prudential, HDFC Life and Bajaj Allianz. The organizational

climate questionnaire consisted of 44 items which was used to measure 12 dimensions of

the organizational climate. The total number of respondents who responded were 596, of

which 240 were employees comprising of sales managers, operations and trainers and

356 were agents from different companies. The questionnaire utilized a Likert-type scale

in which the respondents was presented with five alternative responses for each

statement, ranging from strongly disagree (1) to strongly agree (5). The respondents

were asked to rate statements on this five point rating scale. The responses from these

different respondents such as Sales Agents, Sales Managers, Operation Staff and

Insurance Trainers were used to study if organizational climate has an impact on

employee/agent performance. The final figure of the insurance companies from where

data was collected is represented in the table and chart below.

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Table 3.1 LIST OF LIFE INSURANCE COMPANIES SELECTED

FOR DATA COLLECTION

Sr

No

Name of the

Insurance company

No of Respondents/Sample

Employees Agents Total

1. Life Insurance

Corporation of India

38 38 76

2. Max NewYork Life 39 47 86

3. Reliance Life 15 63 78

4. HDFC Life 44 29 73

5. Bajaj Allianz 29 45 74

6. ING Vysya 32 46 78

7. ICICI Prudential Life 23 39 62

8. Tata AIG 20 49 69

Total 240 356 596

3.9 TABULATION AND STATISTICAL ANALYSIS OF DATA

A questionnaire-based survey was used to elicit responses from the sample. To assess the

internal consistency of the items which made up each one of the constructs of this study

cronbach’s alpha coefficient were calculated. Following Parametric and Non Parametric

tests were used to test the hypothesis:

Correlation

Regression

T-Tests

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Chi-Square

ANOVA

The analysis was done using SPSS version 20.

3.10 LIMITATION OF THE RESEARCH

The study is limited to Maharashtra, since the companies under study are mainly from

Mumbai the findings may not be applicable to all other states of India. Researcher has

assumed that the information provided by the employees and agents is transparent and

accurate. However there can be constraints while sharing information by them for general

and academic survey.

The literature search and review was dependent upon the availability and access to

research information on this subject in India. It must be acknowledged that not many

research projects in this field has been conducted and consequently only limited authentic

published work is available as a source for secondary data.

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CHAPTER 4

STUDY ON ORGANIZATIONAL CLIMATE

4.1 CONCEPT OF ORGANIZATION

Human beings have always lived in organized groups. Initially, group activities were

simple like gathering food, migrating or defending the security of the group. The

outcome of this group effort was mainly that it gave people a chance to pool their talents

and efforts for attaining larger goals such as building and protecting their communities.

The group also gives it a distinct identity. Later on, specialized nature of functions

enabled individuals to concentrate on tasks that they were best at, instead of doing every

task which was required for survival and progress. This sort of group activity requires co-

operation without which members may work at cross-purposes and thus miss the benefits

of association. To achieve this co-operation and thereby the desired goals, some system

of structural relationships had to be established. This type of a system of group

relationship built on co-operation is basically the meaning of an organization.

In a nutshell, an organization can be seen as two or more people working co-operatively

towards a common objective or a set of objectives. This system of co-operation is made

up of several components: the human element, physical element, work element and

coordination element. All these components put together collectively can be thought of as

an organization. Thus, an organization can be viewed as a social system of co-operation

that is designed to enhance individual effort at goal accomplishment.

Organization can be understood as a social unit of people, systematically structured and

managed to meet a need or to pursue collective goals on a continuing basis. All

organizations have a management structure that determines relationships between

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functions and positions, and subdivides and delegates roles, responsibilities, and authority

to carry out defined tasks. Organizations are open systems in that they affect and are

affected by the environment beyond their boundaries.

Organization is the foundation upon which the whole structure of management is built.

Organization is related with developing a frame work where the total work is divided into

manageable components in order to facilitate the achievement of objectives or goals.

Thus, organization is the structure or mechanism (machinery) that enables living things to

work together. In a static sense, an organization is a structure or machinery manned by

group of individuals who are working together towards a common goal. Alike

'management', the term 'organization' has also been used in a number of ways. Broadly

speaking, the term 'organization' is used in four different senses: as a process, as a

structure of relationship, as a group of persons and as a system, as given below:

Organization as a Process: In this first sense, organization is treated as a dynamic

process and a managerial activity which is essential for planning the utilization of

company's resources, plant and equipment, materials, money and people to accomplish

the various objectives.

Organization as a Framework of Relationship: In the second sense organization refers

to the structure of relationships and among position jobs which is created to release

certain objectives.

Organization as a Group of persons: In the third sense, organization is very often

viewed as a group of persons contributing their efforts towards certain goals.

Organization begins when people combine their efforts for some common purpose.

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Barnard has defined 'Organization' as an identifiable group of people contributing their

efforts towards the attainment of goals.

Organization as a System: In the fourth sense, the organization is viewed as system.

System concepts recognize that organizations are made up of components each of which

has unique properties, capabilities and mutual relationship. The constituent element of a

system is linked together in such complex ways that actions taken by one producer have

far reaching effect on others.

Thus organizing is the determining, grouping and arranging of the various activities

deemed necessary for the attainment of the objectives, the assigning of people to those

activities, the providing of suitable physical factors of environment and the indicating of

the relative authority delegated to each individual charged with the execution of each

respective activity.

4.2 CONCEPT OF CLIMATE

Climate is the label used to describe the dimensions of the work environment that can be

measured with relative precision. George Litwin and Robert Stringer first wrote up their

ground-breaking research on organizational climate in 1968. They demonstrated that

certain leadership styles produce a positive and stable organizational climate that makes

an impact on motivation and performance. Technically, according to Stringer, “Climate is

a set of measurable properties of the work environment, based on the collective

perceptions of the people who work in the environment and demonstrates to influence

their motivation and behavior”. More simply put, climate is people’s perceptions of the

corporate environment, what it feels like to work in a place. To ignite employees’

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motivation and sense of ownership, managers must understand and apply a framework,

feedback, and some tools for reaping the advantages of a positive organizational climate.

Climate determines the action and it creates few expectations as to consequences.

Climate is interchangeable with the term psychological environment and is concerned

with the structure, autonomy, reward structure, tolerance and conflict, need for

innovation, warmth, support, consideration, job stress, job satisfaction, leadership style

etc. Organizational climate is the term frequently employed to describe the psychological

structure of organization and their sub units. Climate is atmosphere in which individual

help, judge, reward, constrain, and find out about each other. It influences moral attitude

of the individual toward work and his environment.

Climate perceptions are descriptions of environmental events and conditions rather than

evaluations of them. The climate construct is multidimensional. It refers to the 'feeling of

an organization'. Climate can potentially influence an individual's behaviour. Climate in

organizations can affect how employees perform within an organization because the way

people feel and the way they perform are strongly associated (Freedman, 2005).

The construct of climate has been studied extensively and has proven useful in capturing

perceptions of the work context (Denisson, 2006; Ostroff, Kinicki & Tamkins, 2007).

Climate has been described as an experientially based description of the work

environment and more specifically employee’s perceptions of the formal and informal

policies, practices and procedures in their organization (Schneider, 2008).

Climate may be thought of as the perceptions of the characteristics of an organization.

Climate for an organization is somewhat like the personality for a person. Just as every

individual has a personality that makes each person unique, each organization has an

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organizational climate that clearly distinguishes its personality from other organization.

Every organization is different and has a unique feeling and character beyond its

structural characteristics.

A variety of factors determine the climate of an organization. Leadership is the single

most important determinant of organizational climate in the day-to-day leadership style

of the leader. The leader has a powerful influence on the expectations and behaviours of

everyone in the organization. Optimally, knowing how to anticipate, lead and manage

change is an art. The degree in which a leader and his team address these dynamics will

be reflected in the gains made.

Organizational structure is an equally powerful determinant of climate in an organization.

The formal / informal ways through which a work is accomplished has a greater role to

play in deciding the quality of climate in an organization. The way in which an

organization conducts itself is a direct reflection of what it considers critical to its success

and speaks volumes with regard to its commitment and value to its employees. Historical

forces have a strong impact on an organization’s culture that develops over time.

Standards of accountability measure the ways in which individuals take responsibility

and are held accountable for both what they do and how they do it. Standards of

behaviour are best defined in terms of what will be observed and heard. Leaders can

mandate acceptable behaviours and reinforce those behaviours through a performance

measurement process. For example, a desired behaviour may be treating each other with

mutual respect.

Communication is an important component of desired behaviour, measured by the

organization’s communication patterns. Acceptable behaviours are reflected in direct,

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constructive and timely feedback, open communication, mutual respect and use of

conflict as an asset. Lack of acceptable behaviours such as blaming others, focusing on

problems rather than solutions, allowing rumours, gossip and criticisms will corrupt the

corporate climate.

Rewards measure competencies in tangible ways. Reward systems characterized by a

balance of task and behavioural competencies are powerful messages. Ongoing

constructive feedback offered on a quarterly basis helps to show the seriousness in

achieving results and the creation of values-driven organization. Trust reflects the

prevailing feelings of mutual respect and support within the organization. Trust is high

when individuals sense that their input is valued, their actions are backed by others and

support is direct and constructive. Trust diminishes when individuals break agreements,

miss deadlines impacting others, and do not give each other the benefit of the doubt. The

resultant disappointments damage trust, making it difficult to rebuild. Over time, the lack

of trust has a profound negative impact on the organization’s climate and its ability to

achieve its goals.

Commitment reflects an individual’s sense of pride in belonging to an organization, and

their degree of support to the future of the organization. Strong feelings of commitment

are associated with high levels of productivity, energy and action. Low levels of

commitment make change and effort difficult. Individuals feel disengaged, compliant and

unwilling to participate.

Vision and strategies are statements of the organization’s desired future. They set the

context and focus for the organization. If any organization has chosen an aggressive, far-

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reaching vision and has aligned successfully its strategies, goals, priorities and resources

with its vision, the organizational culture and climate will, over time, reflect the same.

Thus every organization deals with its member in a distinct way through its policies on

allocations of resources, communication pattern, reward and penalty, leadership and

decision making style, etc. The organizational policy and conviction with regard to all

these and a cluster of other related activities influence the feelings, attitudes and behavior

of its members and results in the creation of the unique organizational climate

Climate is a perceived phenomenon, knowledge of which is gained by administering a

questionnaire to employees and then correlating the results with some measure or

measures (either objective or perceived) of performance. Climate is an employee’s

subjective impressions or perceptions of his/her organization.

Schneider and Hall (1972) Climate perceptions emerge as a result of the employee’s

numerous activities, interactions, and other daily experiences with his/her organization.

They further suggest that perceived climate may be related to a number of outcome

variables, such as individual job satisfaction, involvement in the job, and effort.

Climate refers to a situation and its link to thoughts, feelings, and behaviours of

organizational members. Climate is generally considered to be a molar construct that can

change over time. It is perceived by and shared among organizational members, which

can result in consensus among individual. It consists of global impressions of the

organization that members form through interacting with each other and organizational

policies, structures and processes.

External environment also influences an organization’s culture and climate. Factors such

as government regulations, economic conditions, competitive industry forces and

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ongoing change exert pressure on the organization. These factors manifest themselves in

different culture and climate profiles. The determinants of culture and climate provide

leaders with leverage points for shaping the organization’s work environment.

4.3 CONCEPT OF ORGANIZATIONAL CLIMATE

There has been a long-standing interest in the study of organizational climate among

organizational researchers. Its importance is partly due to its hypothesised relationship to

other organizational phenomena including job satisfaction, job performance, leadership

behaviours, and the quality of work group interaction (Schnake, 1983).

In order to promote a real HRD climate in any organization, it is imperative to have the

prevalence of general supportive climate and commitment of the top management, line

management but immensely good supportive personnel policies and positive attitudes are

equally important towards such development. The general climate therefore, is a

combination of a support from all the concerned quarters such as from the management

people working in different levels, good supportive personnel policies and practices as

well as the positive attitudes towards the development of the people vis-à- vis their

organization. (Shneider and Reichers, 1983; Chandra, and Coelho, 1993, Rov 2001).

Organizational success depends upon the organizational climate. Kurt Lewin argued that

different leadership styles affect organizational climate. Organizational climate is the key

factor to explain the innovativeness of the employees. Good and healthy climate

increases productivity level of employees.

Organizational climate represents how the employees feel about the atmosphere

prevailing in the organizations. An organizational climate that encourages employee

involvement and empowerment in decision-making predicts the financial success of the

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organization (Denison, 1990). Schneider (1996) was of the opinion that service and

performance climates predict customer satisfaction. Patterson, Warr, & West (2004)

found that manufacturing organizations that emphasized a positive organizational

climate, specifically concern for employee well-being, flexibility, learning, and

performance, showed more productivity than those that emphasized these to a lesser

degree. Research results from Potosky and Ramakrishna (2001) prove that an emphasis

on learning and skill development was significantly related to organizational

performance. Ekvall (1996) found a positive relationship between climates emphasizing

creativity and innovation and their profits.

Thompson (1996) described how companies utilizing progressive human resource

practices impacting climate such as customer commitment, communication,

empowerment, innovation, rewards and recognition, community

involvement/environmental responsibility, and teamwork outperformed organizations

with less progressive practices.

Organizational climate has a long history in industrial and organizational psychology and

organizational behavior. However, Kurt Lewin was the first researcher to study the

concept and argued that behavior is a function of the person and the environment (Litwin

& Stringer, 1968). Organizational climate has foundationally been identified as the

psychological environment of an organization that affects the organization in manifold

ways (Diekhoff,Thompson & Denney, 2006).

Organizational climate encompasses the organizational atmosphere and how employees

feel, what employees believe, and what employees perceive to be real within the

organizational boundaries. Organizational climate and the research pertaining to

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identifying the characteristics of organizational climate continue to evolve as researchers

continue to explore correlations between organizational climate and other internal

environmental factors within an organization. Employee performance is recognized as an

important predictor variable of company productivity and long-term organizational

survival.

Xaba (1996) defined organizational climate as consciously perceived environmental

factors subject to organizational control. Low (1997) coined the term climate to describe

the attitudes, feelings and social process of organizations. According to him, climate in

this view falls into three major and well-known categories: autocratic, democratic, and

laissez– faire. Kaczka and Kirk (1978) defined organizational climate as a set of

attributes, which can be perceived within a particular organization, department or unit.

The behavioral science literature is replete with theories and empirical research focusing

on employee behavior as a function of the simultaneous variation in both organizational

dimensions and individual characteristics Hellriegel et al, 1994.

Organizational climate can be viewed as a transformation process. It has objective

aspects such as structure, processes, leadership style, and reward systems as inputs. These

inputs are transformed; producing organizationally relevant outcomes. Organizational

climate clearly influences the success of an organization. Many organizations, however,

struggle to cultivate the climate they need to succeed and retain their most highly

effective employees. Attempts were also made to establish the operationalization of

climate through the assessment of member’s perceptions. Climate has very strong

influence on the individuals in terms of job performance and work attitude (Joyce and

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Slocum, 1979 and 1984). Organizational climate can therefore be described as the

aggregate perceptions of the characteristics of organizations.

The idea of organizational climate integrates at least three types of concepts. They

include (1) environmental concepts, such as size and arrangement of the firm, which are

peripheral to the person, (2) individual concepts, such as attitudes the worker brings with

him to the firm, and (3) outcome concepts including such things as satisfaction,

performance, and commitment to the firm, which are determined by the interaction

between the environmental and individual concepts.

Organizational climate is also defined as a global impression of one’s organization and

personal impact of the work environment, which influences the individual’s work

behaviors and job-related attitudes. It describes the perception of employees towards their

organizations which would link to work attitude formation (Litwin & Stringer, 1968;

Pritchard & Karasick, 1973).

Organizational climate comprises of mixture of norms, values, expectations, policies and

procedures that influence work motivation, commitment and ultimately, individual and

work unit performance. Positive climate encourages, while negative climates inhibits

discretionary effort. ‘Organizational climate’ refers to the quality of working

environment. If people feel that they are valued and respected within the organization,

they are more likely to contribute positively to the achievements of the business

outcomes. Creating a healthy organizational climate requires attention to the factors

which influence employee’s perceptions, including the quality of leadership, the way in

which decisions are made and whether the efforts of employees are recognized.

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Organizational climate represents the entire social system of a work-group. It is clearly a

system concept. Good climate attracts good and efficient employees to the organization,

who contribute to the productivity of the organization. The term ‘organizational climate’

can be used in either a technical or a colloquial sense. As a technical term, it is defined as

“a set of measurable properties of the work environment, based on the collective

perception of the people who live and work in the environment and demonstrate to

influence their motivation and behavior.” As an everyday term, it describes the way it

feels to work in an organization. People use “climate” as a catchall phrase to describe the

overall “tone” or “work atmosphere” of an organization. Simply stated, climate is

people’s perceptions of the environment in which they work.

A work climate is the workplace environment. Business climates affect how well

company goals are being met because maximum efficiency, production and employee

motivation are impossible when the work climate is poor. Effective work climates ensure

that employees are clear about their purpose in the larger realm of the company and know

exactly what is expected of them. In this way, companies can better function as a whole

to meet their goals.

Healthy, communicative work environments support an efficient work force that is ready

to commit daily to its assigned tasks to keep the company running profitably. A poor

work climate, on the other hand, does not support a strong, motivated team environment.

Work climate is the “weather of the workplace.” Just as the weather can affect daily

activities, the work climate influences employee behavior. Every organization has a work

climate. Within an organization, the climate of an individual work group may differ from

the prevailing organizational climate. Work-group climate influences results. A positive

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work-group climate motivates employees to improve their performance by going above

and beyond job expectations. Better performing work groups contribute to better

organizational performance, which in turn leads to better results.

To survive and outdo their competitors, organizations are constantly seeking to improve

their performance. Authors such as Brown and Leigh (1996) think that organizational

climate is becoming more important than ever before because organizations need to

ensure that those individuals who add value to the bottom line will want to stay in the

organization and will want to continue pouring their effort into their work to the benefit

of the organization.

The perceptions and responses that comprise the organizational climate originate from a

variety of factors. Some factors include leadership and management practices (types of

monitoring: authoritarian, participatory, etc). Other factors are related to the formal

system and structure of the organization (communication system dependency relations,

promotions, salaries, etc.). Others are the consequences of work behavior (incentive

systems, social support, interaction with other members, etc.).

A good or poor organizational climate will have consequences for the organization as

defined by the perception that members have of the organization. Among the positive, we

can mention the following: achievement, affiliation, power, productivity, low turnover,

satisfaction, adaptation, innovation. The negative consequences, we note the following:

maladjustment, high turnover, absenteeism, low innovation, low productivity, and so on.

Researchers in organizational behavior have long been interested in understanding

employees’ perceptions of the work environment and how these perceptions influence

individuals’ work- related attitudes and behaviors. Early researchers suggested that the

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social climate or atmosphere created in a workplace had significant consequence.

Employees’ perceptions of the work context purportedly influenced the extent to which

people were satisfied and perform up to their potential, which in turn, was predicted to

influence organizational productivity (e.g Katz& Kahn, 2004; Likert,1997, McGregor,

2000).

A large number of studies have consistently demonstrated relationships between unit or

organizational climate and individual outcomes such as performance, satisfaction,

commitment, involvement and accidents (Ostroff et al, 2007). Organizational climate

comprises of cognate sets of attitudes, values and practices that characterize the members

of a particular organization.

Organizational climate has a major influence on human performance through its impact

on individual motivation and job satisfaction. It does this by carrying certain kinds of

expectancies about what consequences will follow from different actions. Individuals in

the organization have certain expectations and fulfillment of these expectations depend

upon their perception as to how the organizational climate suits to the satisfaction of their

needs. Thus organizational climate provides a type of work environment in which

individuals feels satisfied or dissatisfied. Since satisfaction of individual goes a long way

in determining his efficiency, organizational climate can be said to be directly related

with his performance in the organization.

A good organizational climate according to empirical demonstrations is related to higher-

level behaviors and consequently to organizational performance indicators such as

customer satisfaction, organizational effectiveness, total quality management outcomes

and financial performance (Bowen and Ostroff, 2004).

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The organizational climate facilitates the firm to identify the deficiencies in connection

with different organizational factors, such as organizational structure, employee

compensation system, communication level, physical atmosphere, organizational culture,

etc. Organizational Climate is the comparatively enduring excellence of the in-house

atmosphere that is experienced by its employees which influences their performance and

can be described in terms of the values of a specific set of behaviors in the firm. At its

most basic level, organizational climate refers to employee perceptions of their work

environment. Organizational climate is a system of the perception of people about the

organization and its leaders, directly attributed to the leadership and management style of

the leaders, based on the skills, knowledge and attitude and priorities of the leaders. The

personality and behavior of the leaders creates a climate that influences everyone in the

organization.

To improve a work climate, it helps to understand how climate affects people and how it

develops. A positive work climate stimulates staff motivation because it provides

conditions under which people can pursue their own goals while striving toward

organizational objectives.

Everyone has motivators—impulses, needs, and energy reserves—that can drive him or

her to work more effectively. When staff feels motivated, they want to put their

capabilities to work. They may even make efforts that exceed job expectations. Quite

simply, they try harder with all their potential, and doing so improve their performance

on the job. Work climate is the prevailing workplace atmosphere as experienced by

employees. It is what it feels like to work in a group. A positive climate stimulates

motivation and performance. Workgroup Climate is the prevailing workplace atmosphere

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as experienced by employees. It is "what it feels like to work together in a group." As a

positive work climate encourages and sustains employee motivation and high

performance, a manager should focus on assessing and improving climate.

Organizational climate is therefore, a multidimensional distinctive feature of an

organization, which results from a synergic combination of several intangible elements

related to human, relational and structural dimensions of the organization. Human

dimension regards the employees’ perceptions of the organizational context and includes,

for example, knowledge of organization’s structure, autonomy, motivation, initiative,

teamwork capacity, satisfaction, well-being, and so on. Relational dimension, concerns

the relationships within the organization and the dynamics underpinned in the values and

mindsets shared among individuals, e.g. customers care, cooperation, employees’

relationships, employees’ relationships with middle and top management, and so on.

Structural dimensions, concerns the structural features of workplace and the

organizational structure, e.g. information transferring and sharing, formal training,

leadership, incentives and rewards policy, infrastructures, equipments, and so on.

Individuals own perceptions of the work environment constitute psychological climate at

the individual level of analysis, whereas organizational climate has been proposed as an

organizational or unit-level construct. When employees within a unit or organization

agree on their perceptions of the work context, unit-level or organizational climate is said

to exist (Jones & James, 2004; Joyce & Slocum, 2004).

The climate should be viewed from a total system perspective. While there may be

differences in climates within departments these will be integrated to a certain extent to

denote overall organizational climate. Organizational climate influences to a great extent

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the performance of the employees because it has a major impact on motivation and job

satisfaction of individual employees.

Since satisfaction determines or influences the efficiency of the employees, we can say

that organizational climate is directly related to the efficiency and performance of the

employees. The organizational climate can affect the human behavior in the organization

through an impact on their performance, satisfaction and attitudes

In a poor work climate such as one of ineffective communication and unfocused

supervision, the productive goals can become unclear. Employees may lack interest or

motivation which is likely to decrease productivity even further. In this way, a good work

climate is one that is supported and enhanced by effective management.

Business climates that work with employees to set and achieve clear goals can be very

successful. This is one reason why performance management is so important in many

companies today. Regular performance reviews can help motivate employees to keep

improving as well as remind them exactly what tasks are expected of them within the

work climate. Incentives such as raises, promotions and bonuses for jobs well performed,

further motivates employees to continue their best efforts in the workplace.

Hansen and Wernerfelt (1989) found that organizational climate factors explain about

twice as much variance in profit rates as economic factors. Organizational climate has

been described as an organizational atmosphere that can guide and influence the

behaviors of employees to become high performers or low performers. Freedman (2005)

asserted a measurable connection between people’s feelings and performance.

Organizational climate refers to “a contextual situation at a point and time and its link to

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the thoughts, feelings, and behaviors of organizational members” (Bock, Zmud, Kim, &

Lee, 2005).

Assessing the organizational climate can be a barometer of how individuals feel about the

organization or the leaders within the organization, which may or may not affect how an

employee performs his or her job. The importance of investigating the interaction of

organizational and individual variables is that it provides much needed direction for

identifying and conceptualizing environmental variables relevant to the climate.

Organizational climate variables such as supportiveness, participation, feelings of trust,

and performance can provide useful insight for refining work environments (James and

James, 1989).

Organizational Climate, studies the employee’s perceptions and perspectives of an

organization. The surveys address attitudes and concerns that help the organization work

with employees to instill positive changes. Organizational climate surveys increase

productivity. Climate surveys give employees a voice to assist in making desired

transitions as smooth as possible. It also serves as a basis for quality improvements. By

identifying areas of inefficiency and acting on performance barriers identified by

employees of all levels, an organization gains a fresh and different perspective.

Organizational climate serves as a measure of individual perceptions or feelings about an

organization. Organizational climate includes management or leadership styles,

participation in decision making, provision of challenging jobs to employees, reduction

of boredom and frustration, provision of benefits, personnel policies, and provision of

good working conditions and creation of suitable career ladder for academics (Nicholson

and Miljus, 1992).

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Organizational climate is the core circle of human environment in the boundaries of

which the employees of an organization works .Climate affects each activity in an

organization directly or indirectly and is affected by almost everything that occurs in the

organization. The survival and growth of any organization is directly proportional to the

favorable climate in it. Employees in the organization have to be well conversant with

rites, rituals, policies etc. This can only bring sense of belonging among employees and

further help in the growth of organization. Organization climate is of great significance

for utilization of human relations and resources at all levels.

Organizational climate, manifested in a variety of human resource practices, is an

important predictor of organizational success. Numerous studies have found positive

relationships between positive organizational climates and various measures of

organizational success, most notably for metrics such as sales, staff retention,

productivity, customer satisfaction, and profitability.

4.4 LEVELS OF CLIMATE

Burton, Lauridsen and Obel (1998) identified four organizational climate profiles by

applying Koys and DeCotis’s three rules for dimensions of organizational climate to

Zummuto and Krakower’s(1991) model of competing values, initially developed by

Quinn and Rohrbach (1983) which is used to examine criteria for organizational

effectiveness, based on a framework of flexibility versus control and internal versus

external view.

Thus according to them group climate is one which is low on tension and high on

resistance to change. The developmental climate is similarly low on tension, but is also

low on resistance to change. Here, the climate entertains change and is much more

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oriented to the outside world with a sense of adventure. The other two climates are higher

on tension. The rational goal climate has a low resistance to change, driven by an external

orientation to success as measured by outside measurements and competition. The

internal process climate also has high tension and high resistance to change; it sees

change as threatening to current ways of doing things. Their data indicate that the

concepts of tension and resistance to change capture well the basic aspects of the

organization and can be used as basic dimensions of climate.

Besides constructing various measurements of organizational climate, different scholars

also formed number of organizational climate types, which show different kind of work

atmosphere perceived by the staff. Examples of this approach can be seen in the work of

Ginsberg (1978), who described three basic climates (inception, post-entrepreneurial and

bureaucratic) and Halpin and Croft (1962) who felt climates could be categorized as

either open autonomous, controlled, familiar, paternal or closed. Both studies by Halpin

and Croft (1963) and Alavi and Jahandari (2005) produced the same types of climate,

which consisted of six types of climate, range according to the rate of their openness, as

follows: 1) Open, which has characteristics of high motivation for personnel, while the

manager and the personnel have honesty and sincerity in their behavior. The manager

leads the organization through providing a suitable combination of structure and

consideration. The personnel work well with each other and are committed to their duties

because the manager's leadership is realistic. There is no necessity for close supervision

(emphasis on production) or a set of rules and regulations; 2) Autonomous; 3) Controlled

(the emphasis on the duties of the personnel, but little emphasis on the personnel's

relationships); 4) Familiar (a loving environment but without attention to the efficiency);

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5) Paternal (with emphasis on commandments and continuous supervision; and 6)

Closed, which within closed organizational climate, the manager has a close supervision

(emphasis on production).

James and Jones (1974) differentiate between organizational climate and psychological

climate, with the former term being recommended when climate is regarded as an

organizational attribute and the latter when climate is considered to be an individual

attribute. Psychological climate is therefore studied at the individual level of analysis,

referring to individual’s descriptions of the organization’s policies and processes, while

organizational climate is measured by means of the average perceptions of organizational

members, referring to a collective description of the same environment (Joyce & Slocum,

1982).

Hellriegel and Slocum (1974) propose a group or subsystem climate and state that

climate refers to a set of attributes that is perceived about by an organization or its

subsystems and that may be deduced from the way the organization or subsystem deals

with its members and the environment. On the basis of this analysis, Field and Abelson

(1982) postulate that climate has evolved from being considered solely an organizational

attribute to an attribute that may be subsystem specific (group or individual). According

to these authors, the distinguishing mark of climate, regardless of the level of analysis, is

that it has enduring qualities, which can be measured, and influences the behavior of

organizational members.

Tarantino (2005) points out, that even though businesses claim that people are their

greatest assets, they often fail to properly value that most important asset. Tarantino also

asserted, “Organizations use traditional financial measures such as return on equity or

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return on assets to determine performance”. Performance within an organization is not

dependent exclusively on financial means; it has to be evaluated in the context of its

people in an evolving and global marketplace. This research study targeted the necessary

connection between organizational climate and employee performance to assist

organizations in taking a more prudent approach to its most valuable asset.

Organizational climate is the only predictor variable for the current research study.For the

purposes of the current research study, two variables were used: organizational climate

and employee/agent performance. The hypothesis was that employee /agent performance

in Indian insurance companies is influenced by organizational climate. The causal effect

of the relationship between organizational climate and employee performance clearly

defines the differences in variables and identifies each appropriately. It was believed that

employee/agent performance was affected by organizational climate, suggesting that it

was dependent on some factor in the organizational climate; therefore, employee/agent

performance was the dependent variable. Organizational climate was hypothesized to

cause or influence employee performance in some measurable manner, and

organizational climate was hypothesized not to be influenced by any other factor

therefore, it was considered the predictor variable.

The association between organizational climate and employee performance within the

context of this study suggested that organizational climate has some measurable effect or

influence on employee/agent performance. The present research sought to explore in

some measurable manner the potential impact or causal linkage between organizational

climate and employee performance. An abundance of information, research, reviews, and

discussions about organizational climate, organizational performance, employee

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productivity, and employee performance as individual variables, not as interconnected

variables, exists.

The present research was not considered a complete and total compilation of information

but it was considered another link or investigation into possible factors that may cause an

employee to respond, act, perform, or otherwise possess the work ethic in the particular

organization within which he or she works.

4.5 ORGANIZATIONAL CLIMATE DIMENSIONS USED IN THIS STUDY

ROLE CLARITY

Is concerned with clearly defining the goals of the organization (e.g., Locke, 1991).It is

reflected in employees’ sense of being well organized and of having a clear definition of

their roles and responsibilities. Structure is high when people feel that everyone’s role is

well defined. It is low when there is confusion over who has decision-making authority.

Role Clarity is seen in the extent to which employees fully understand the long-term

direction of the organization, are able to see the alignment of their and their colleagues’

activities to that long-term direction and have a clear sense of drive, focus and the way

forward. It is the perception that jobs, policies, structure and organizational structure are

clearly defined. Role Clarity is seen clearly in the way employees clearly understand their

job duties and their role within the organization.

COMMUNICATION

The free sharing of information throughout the organization (e.g., Callan, 1993; Hargie &

Tourish, 2000).Communication is the means by which people are linked together, how

they function to achieve a common goal. Communication is transactional, involving two

or more people interacting within a defined environment. Without effective

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communication among different parties; the pattern of relationships that we call

organization will serve no one's needs. Important information is communicated

effectively, and employees believe they have a voice in the organization.

CAREER DEVELOPMENT

It refers to the initiative by the organization to provide its employees with adequate

training/development opportunities and to improve their professional skills. It is also

reflected in how organizations structure the career progress of their members. Career

development is an organized approach used to match employee goals with the business

needs of the organization in support of workforce development initiatives. It is a

composite organizational process which involves people, addresses their ambitions,

assigns them roles & responsibilities commensurate with their potential, evaluates their

performance, and creates job positions to accommodate growth ambitions of employees.

DIRECTION

Establishing and maintaining a consistent strategic direction for the company begins with

setting a clear vision for the company. Strategic direction is established and

communicated through tools such as visions, missions and values.A vision also provides

a framework for the organization’s missions and goals. A strong vision will connect

these goals to the company’s underlying values and will make it more understandable

about how to achieve each particular goal. Such a vision is essential for developing a

strategy-focused organization and alignment within the company (e.g., Kaplan & Norton,

2000, 2006). Direction can be defined as a course of action that ultimately leads to the

achievement of the stated goals of a business or organizational strategy.

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AUTONOMY

It refers to designing jobs in ways which give employees wide scope to enact work (e.g.,

Cherns, 1976; Klein, 1991).It is seen in the extent to which people are able to get on with

their jobs and take decisions without checking with their boss; they feel accountable for

the outcomes of their work and are prepared to operate outside the strict remit of the role

to deliver results. Autonomy refers to the degree to which the job provides substantial

freedom, independence, and discretion to the individual in scheduling the work and in

determining the procedures to be used in carrying it out (Hackman and Oldham, 1976).

Autonomy may be defined as the degree to which one may make significant decisions

without the consent of others.

TEAMWORK

It refers to the encouragement provided to the employees in organizations to be team

players. Team support to an individual employee is also very important for generating an

environment of role clarity. It is the process of working collaboratively with a group of

people in order to achieve a goal. Teamwork means that people will try to cooperate,

using their individual skills and providing constructive feedback, despite any personal

conflict between individuals. Teamwork is the actions of individuals, brought together for

a common purpose or goal, which subordinate the needs of the individual to the needs of

the group. In essence, each person on the team puts aside his or her individual needs to

work towards the larger group objective. The interactions among the members and the

work they complete is called teamwork.

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TRAINING

It is a subsystem of an organization. It ensures that randomness is reduced and learning or

behavioral change takes place in structured format. The principal objective of training

and development division is to make sure the availability of a skilled and willing

workforce to an organization. It is a learning process that involves the acquisition of

knowledge, sharpening of skills, concepts, rules, or changing of attitudes and behaviours

to enhance the performance of employees. It consists of planned programs undertaken to

improve employee knowledge, skills, attitude, and social behavior so that the

performance of the organization improves considerably.

It is the systematic development of the knowledge, skills and attitudes required by an

individual to perform adequately a given task or job. It is a planned process to modify

attitude, knowledge or skill behaviour through learning experience to achieve effective

performance in an activity or range of activities. Its purpose in the work situation is to

develop the abilities of the individual and to satisfy current and future manpower needs of

the organization.

PERFORMANCE FEEDBACK

Performance feedback is the on-going process between employee and manager where

information is exchanged concerning the performance expected and the performance

exhibited. Constructive feedback can praise good performance or correct poor

performance and should always be tied to the performance standards. Performance

feedbacks are essential to ensure that the organization functions at its optimal level. For

the well-being of employees, as well as the growth of the company, these reviews are

invaluable tools to maintain a satisfying and enriching environment for all. An employee

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performance feedback is given to make sure an individual is operating and functioning at

a satisfactory level within an organization. These evaluations let employees know if they

are achieving the goals and objectives set by an organization. Performance evaluations

have recommendations for action plans and corrective measures designed to help

employees reach or achieve a level of accomplishment that is acceptable within an

organization.

INNOVATION

Innovation refers to the climate that exists within the organization that provides for

encouragement and support for new ideas and innovative approaches (e.g., West & Farr,

1990). Organizational innovation refers to new ways of organizing work, and it is

accomplished within an organization to encourage and promote competitive advantage.

Several researchers have indicated that a climate for innovation may act as this continual

instigator and redirect employees' behavior toward innovation (Amabile, 1988; Isaksen,

1987; Kanter, 1988).

QUALITY OF SERVICE

Quality of Service here refers to employee’s perception of the kind service provided by

the organization to its customers. According to Zeithaml & Bitner quality of service is a

focused evaluation that reflects the customer's perception of specific dimensions of

service: reliability, responsiveness, assurance, empathy tangibles. Asubonteng et al.

(1996) states that Service quality can be defined as “the difference between customers’

expectations for service performance prior to the service encounter and their perceptions

of the service received. Gefan (2002) states that Service quality as the subjective

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comparison that customers make between the quality of the service that they want to

receive and what they actually get.

WORK LIFE

Work–life balance is about people having a measure of control over when, where and

how they work. It is achieved when an individual’s right to a fulfilled life inside and

outside paid work is accepted and respected as the norm, to the mutual benefit of the

individual, business and society. Work life balance practices acknowledge and aim to

support the needs of staff in achieving a balance between their homes and working lives.

The pursuit of work-life balance reduces the stress of employee’s experience. Work-life

balance is assisted by employers who institute policies, procedures, actions, and

expectations that enable employees to easily pursue more balanced lives.

REWARD& RECOGNITION

This refers to the feeling of being rewarded for a job well done, emphasizing positive

rewards rather than punishments, the perceived fairness of the pay and promotion

policies. Scores on this dimension indicate the feeling of being rewarded for a job well

done. High-recognition climates are characterized by an appropriate balance of reward

and criticism. Lower scores on recognition mean that good work is inconsistently

rewarded. This talks about the degree to which reward is directly and differentially

related to performance, here people know how well they are doing and feel their

contribution is valued and appreciated.

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CHAPTER 5

EMPLOYEE AGENT PERFORMANCE

5.1 INSURANCE AGENTS

Insurance agents, referred to as insurance sales agents, help clients to choose insurance

policies that suit their needs. Clients include individuals and families as well as

businesses. Captive agents work for an insurance company, and only sell that company's

products. Independent insurance agents, or brokers, represent several companies. Types

of insurance include property and casualty, life, health, disability, and long-term care

insurance. Many insurance agents also sell mutual funds, variable annuities and other

securities. An agent is someone who legally represents the insurer and has the authority

to act on the insurer’s behalf. An agent is not an employee of the organization.

An insurance agent with ability can advance into a management position, becoming, for

example, a sales manager in a local office. Later on one can become an agency

superintendent or land in another executive position. Insurance agents often receive

benefits that include continuing education, training to help with licensing requirements,

office space and clerical support. An insurance agent is required to perform the following

duties:

Prepare reports and maintain records.

Seek out new clients.

In the event of a loss, help policy holders settle insurance claims, offer their

clients financial planning services, such as retirement planning, assistance in

setting up pension plans.

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Contact prospective customers, understand their needs and motivate them to buy a

product.

Complete all formalities related to the purchase.

Keep in touch with the customers to make sure that renewal premiums are paid;

and assist in claim settlement.

Full information must be provided to the proponent at the point of sale to enable

him to decide on the best cover. An agent should be well versed in all the plans,

the selling points and also be equipped to assess he needs of the clients.

Adherence to the prescribed Code of Conduct for agents is of crucial importance.

Agents must, therefore, familiarize themselves with provisions of the Code of

Conduct.

Agents must provide the office with the accurate information about the prospect

for a fair assessment of the risk involved. Their confidential report must,

therefore, be completed very carefully.

Agents must also possess adequate knowledge of policy servicing and claim

settlement procedures so that the policyholders can be guided correctly.

Submission of proposal forms and proposal deposit to the branch office

immediately to avoid delays and to enable the office to take timely decisions.

A leaflet or brochure containing relevant features of the plan that is being sold

should be available with the agents.

The IRDA, pursuant to the powers conferred on it under Section 42 read with Section

114A of the Act, has made and notified the above titled Regulations, w.e.f. 19-7-2000.

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Some of the important requirements, as prescribed in these Regulations are discussed

herewith:

a. Minimum qualifications: The applicant shall possess the minimum qualification of a

pass in 12th standard or equivalent examination.

b. Practical training: The applicant shall have completed from an approved institution, at

least, 50 hours practical training.

c. Examination: The applicant should have passed the pre-recruitment examination

conducted by the Insurance Institute of India, Mumbai, or any other examination body.

Insurance is a growing business in India. Insurance is sold by insurance agents. The role

of agents is vital. They are responsible for the reputation of the company they are

working for and they also have their obligations towards their clients.

Further the IRDA also has laid down the following code of conduct for the agents such as

the agent cannot hide the facts while selling a policy. He has to be transparent to the

customer. An agent cannot magnify the benefits of a policy to the customer. He is

responsible to properly explain the nature of a policy to the customer as that will help the

customer to take an informed decision. An agent cannot hide facts from the company on

behalf of the customer in order to sell a policy. He is required to be fair to both the

customer and the company while a policy is being sold. Insurance is mostly for protection

purpose. It involves long term dedication on behalf of the customer. An agent cannot sell

a policy by telling that insurance is a short term contract. He is liable to explain to a

customer that insurance is a long term contract. Even in case of ULIPs, an agent must

explain that they are long term contract although ULIPs are a form of investment coupled

with insurance benefits.

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Life Insurance agents typically work under a contract with one insurer. In the Indian

context, the regulators have clearly provided that an agent shall represent a single insurer

only. IRDA also makes provision for institutional agents. This may help distribution of

insurance product in a specific way and bring in professionalism in insurance marketing.

A Life Insurance agent is required to solicit and procure new Life Insurance business, in a

manner, that is consistent with the interest of the consumers and of the insurance

company.

Insurance agents who sell policies are not employees of the insurance companies. Rather,

they work on a commission basis and thus are motivated by the volume of sales made

(Annuar, 2004). This is because insurance agents are involved in long-term commitment

and a continual stream of interaction between buyer and seller. After the sale, agents also

provide follow-up service and help customers make policy changes in response to

changing needs (Noor and Muhamad, 2005). The company – agent link is stronger than

the agent – company link, which in turn, is stronger than the customer – company link.

Customer loyalty depends on how strong the agents’ link with the customer is

(Balachandran, 2004). Agents are indeed ambassadors and the backbone of the insurance

industry (Malliga, 2000). Dubinsky et al. (1988) examined that when agents' sales

supervisors are high on initiating structure, agents had less role ambiguity and more job

satisfaction. When sales supervisors were high on consideration, agents tend to have less

role conflict and higher job satisfaction.

Moreover, it was concluded that role conflict apparently raises agents' role ambiguity,

reduces their job satisfaction, and reduces their performance. Rao and Machiraju (1988)

contended that a proper understanding of the environment, characteristics, strengths &

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weaknesses of the available financial instruments, and the changing scenario would be of

immense advantage for the proper and successful functioning of LIC marketing force.

McElory et al. (1993) investigated three forms of commitment namely, job involvement,

professional commitment, community commitment and their relationship to insurance

agents’ perceptions, attitudes, and performance. The results revealed that professional

commitment demonstrated strong and pervasive relationship with job perceptions, job

attitudes, and annual earned income.

Community commitment exhibited only isolated effects. In addition, job involvement

was significantly associated with some specific job perceptions and attitudes but not with

performance. Chung (2000) observed that ‘ideological system’ of control not only

encourages agents to provide life-long personalized and quality services to customers,

generate strong/mutual trust among agents and managers themselves, but also made

agents willing to behave altruistically, in turn sustaining a warm and supportive working

environment. Tam and Wong (2001) examined that satisfaction, the salesperson’s self-

disclosure, and relation orientation significantly influenced future insurance business

opportunities. Malliga (2000) suggested that LIC should adopt special marketing

strategies and modern sales techniques for better performance of the agents.

Eastman et al. (2002) found that agents appeared to be more concerned about non-

Internet direct marketing. Lal and Dhanda (2003) conducted a survey of agents,

development officers, and employees to know their perception towards different variables

viz., life insurance products, amount of premium, working conditions, training

programmes, computerization and efficiency level etc. The study revealed that there are

no significant differences in the opinion of agents, development officers, and employees

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with respect to the aforesaid variables. Mathew et al. (2003) found that independent

agents who have ability to effectively communicate information, provide service and

effectively solve customers’ problems, will no doubt, be able to sustain long-term

business relationship with the customers. Noor and Muhamad (2005) suggested that

organizational commitment and intrinsic motivation positively influence salespeople to

perform customer-orientation behaviour in their selling activities. Rajatanavin (2005)

found that whole brand image of the company depends directly on the sales force and its

ability to develop strong relationship with customers. Fan and Cheng (2006) suggested

that life insurance companies need to train their sales representatives to an adequate

standard in competencies of problem solving, communication, information technology

utilization, culture compatibility, emotional intelligence, collective competence and

ethics.

Agents are the most ancient channel members for the life insurance sector. To be an

insurance agent has become more difficult a job in the present market situation. An agent

needs to be multi skilled to attract the customer and sell the products. To the average

customer every new company is the same. Hence, it is the agent who makes the

difference in the services he provides to the customer, and builds the image of the

company. At the same time with the increase in the number of private companies the

competition in the insurance sector has also increased tremendously. Hence, the company

has to train their agents so that they know which product will appeal to the customer. The

agents not only should be aware of the products which are offered by his company but

also with the products which are offered by the competitive companies to be an effective

salesperson. The new companies are looking for educated, aware individuals with

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marketing flair, an elite group who can be attracted only with high remuneration and the

lure of a fashionable job, all of which may not be possible in this business with its price

pressures and the complexity of selling insurance

Life Insurance Corporation of India, the capital intensive business, provides the most

important financial instrument to customers aimed at protection as well as long term

savings. The Corporation reaches out to the people through the main traditional route of

the agency model for the selling processes of the numerous complex need-based

products. The agents help in marketing its policies by spreading the message of life

insurance among the masses. They serve as the kingpin for insurance companies seeking

to provide traditional and innovative products, and focal point for customers seeking to

procure insurance coverage and long term savings.

Sales personnel by providing enough information to the customers, enables them in

forming their assessment about the products or services, which ultimately becomes

customer value. Customer satisfaction and acumen orientation significantly influence the

future business opportunities and if the salespersons are able to foster their relationships

with the clients, clients will be more satisfied and more willing to trust, and thus secure

the long term demand for the services (Tam and Wong, 2001).

According to Crosby et al. (1990) the lack of concreteness of many services of which

insurance is one, increases the value of the persons responsible for delivering them.

Putting the customer first, and, exhibiting trust and integrity have been found essential in

selling insurance (Slattery, 1989). In marketing life insurance, insurance agents are often

considered to be marketing complex services (Nik Kamariah, 1995). Insurance sales

agents fully understand the customers’ needs and requirements as well as build a trusting

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relationship between themselves and their clients to promote long-term mutually

beneficial relationship (Crosby et al., 1990). The agent has to deal with the dilemma

between making sales (self interest) and providing service (customer benefit) (Oakes,

1990). Customers are, therefore, likely to place a high value on their agent’s integrity and

advice (Zeithaml et al., 1993).

Figure:5.1 Reasons why customers see personal interaction as important

Source: Ernst & Young .2012.

It is evident from the literature that most of the studies on agents have been done in

foreign countries. In India, much effort has not been devoted to record the views of

agents towards insurance selling in respect of supervisor’s behaviour, training,

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systematization, working condition etc. thus, the present research focuses on those issues

of agents perception which are not yet considered from an Indian perspective.

The gigantic superstructure that LIC has evolved into over the years is in fact built on the

singular efforts of the salesperson, the primary contact point of the customers who

motivates and persuades them to buy an insurance product. Such a salesperson, a sole

player must display highest degree of integrity and ethics to foster a trusting relationship

with his clients who would be more than satisfied and willing to be buyers.

5.2 MAXIMIZING EMPLOYEE AND AGENT PERFORMANCE

George (1990) has pointed out that before selecting an agent there has to be a great

process than just interview. He asserts that pre-hire assessment like testing and call center

simulations have become essential tool in the industry.

Tett (2000) of employment Technologies Corporation says that, for the insurance

industry to succeed in improving agents retention there has to be simulation centers

where the applicants would be given the opportunity to experience what they expect to

find in the field and how sales are like.

Under present market forces and strict competition, the insurance companies are forced to

be competitive. Contemporary companies must seek ways to become more efficient,

productive, flexible and innovative, under constant pressure to improve results. The

traditional ways of gaining competitive advantage have to be supplemented with

organizational capability i. e. the firm’s ability to manage people (Ulrich and Lake 1990).

Organizational capability relates to hiring and retaining competent employees and

developing competencies through effective human resource management practices

(Ulrich and Lake 1991). Indeed, developing a talented workforce is essential to

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sustainable competitive advantage (Kundu and Vora 2004). High performance work

practices provide a number of important sources of enhanced organizational performance

(Pfeffer and Veiga 1999). Human Resource systems have important, practical impacts on

the survival and financial performance of firms, and on the productivity and quality of

work life of the people in them (Cascio 2006).

Figure:5.2 Market share of all Life Insurance Companies in India at the end of

March 2012/FY 2012

Source : www.FreePress.in

Liberalization in the Indian insurance sector has opened the sector to private competition.


have also tied up with various asset management companies (Shanker 2006). All these

developments have forced the insurance companies to be competitive. What makes a firm

best is not just technology, bright ideas, masterly strategy or the use of tools, but also the

63.47

0.090.20.330.39

0.410.41

0.420.53

0.58 0.990.99

1.021.05

1.27 1.27 2.3

2.46

2.73

3.14

4.4

5.66

5.88

LIC IndiaICICI-PrudentialHDFC -StandardSBI-LifeMax-New YorkBajaj-AllianzBirla-SunlifeReliance-LifeTata-AIGING-VysyaMetLifeAvivaCanara-HSBC-OBCKotak-MahindraStar-Union-DaiichiFuture-GeneraliIDBI-Forties-LifeIndia-FirstBharti-Axa-LifeAegon-ReligareShriram-LifeDLF-PramericaSahara-Life

Market Share of all Life Insurance Companies in India at the end of March-2012 / FY 2012

123

fact that the best firms are better organized to meet the needs of their people, to attract

better people who are more motivated to do a superior job (Waterman 1994). In this

manner the management of human resources becomes very crucial.

Recruitment is a process of attracting a pool of high quality applicants so as to select the

best among them (Kulik 2004). Top performing companies devote considerable resources

and energy to creating high quality selection systems (Pfeffer 1995). Placement involves

assigning a specific rank and responsibility to an employee (Jyothi and Venkatesh 2006).

Socialization, the process of orienting new employees to the organization, can make the

difference between a new worker’s feeling like an outsider and feeling like the member

of the team (Gomez-Mejia, Balkin and Cardy 2003).

Companies must develop a customer-oriented workforce to deliver service quality, which

is met through training (Kundu 2000). Training must be viewed as an important

investment for future success (Zeithmal and Bitner 2004). Companies need to provide

comprehensive training to the agents in the ways to narrow the gap between clients and

agents i. e. trust – building training (Law, Wong, and Theresa 2005). Long-term basis

training has a systematic influence on the improvement of management techniques (Zadel

2006).

Performance is defined as the record of outcomes produced on a specific job function or

activity during a specified time period (Bernardin and Russell 1993). Effective managers

need to incorporate performance review and feedback as part of their day-to-day

communications with employees (Webb 2004).

Present day firms are facing increased pressure to create human resources policies and

programs that avert discrimination against individuals on non-work related aspects with

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respect to the various functions within human resource management, particularly

selection and performance appraisal (Lillevik 2007).

An effective set of choices about compensation systems plays a major role in determining

firm performance (Dreher and Dougherty 2005). A fringe benefit is an indirect reward

given to an employee or group of employees as a part of organizational membership

(Mathis and Jackson 2004), which affects performance and retention of employees.

Benefits planning are a critical component of human resource planning processes on

account of enormous costs and the financial commitment made for the future (Bernardin

and Russell 1993). A pay-for competence program enhances productivity and product

quality, and reduces absenteeism, turnover, and accident rates (Jyothi and Venkatesh

2006). A career comprises of series of work related activities that provide continuity,

order, and meaning to a person’s life (Schein 1996). Career management includes both

organizational actions and individual efforts aimed.

A Human Resource Information Systems is basically a data base system that offers

important information about employees in a central and accessible location that, when

needed, could be retrieved and used to facilitate human resources planning decisions

(Wolfe 1998). Intensified global competition, dynamic change, and increasing un-

certainty have led organizations to become more innovative in order to survive and grow

(Lassen 2007).

Innovation is critical to sustaining and enhancing shares of mainstream markets and

obtaining a desirable balance between entrepreneurial and strategic forces (Lassen 2007).

So, firms have to adopt new/ innovative human resource practices like workforce

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diversity, work-life balance, attitude surveys, and leading with proactive human resource

practices to remain competitive in the changing environment.

Diverse workforce (diversity) refers to the co-existence of people from various socio-

cultural backgrounds within the company (Kundu 2004). A growing diverse workforce

(Kundu 2003), increased competition for businesses (Jain and Verma 1996), growing

number of mergers and acquisitions, and increased emphasis on globalization (Terrisse

2001) require an understanding and appreciation of a diverse set of cultures for having

the ‘best’ people for an organization (Lillevik 2007). Dynamic companies look for people

who are different from us because the diverse workforce may bring different talents,

interests, and viewpoints (Simmons 1996). The companies can succeed at diversity with

full support from the top management (Hayes 1999). The work communities as a whole

should be helped to deal with increasing cultural diversity (Pitkanen 2007).

Work-life balance is a state where an individual manages real or potential conflict

between different demands on his/her time and energy in a way that satisfies his/her

needs for well-being and self-fulfillment (Clutterbuck 2004). Recent studies suggest that

employees want jobs that give them flexibility in their work schedules, so that they can

better manage work/life conflicts (Conlin 1999).

Attitude surveys can provide information on the preferences of employees, give warning

on potential problem areas, diagnose the cause of particular problems, and compare levels

of job satisfaction, commitment and morale in different parts of the organization

(Armstrong 2005).

Compensation is all forms of financial returns and tangible services and benefits

employees receive as part of an employment relationship (Milkovich and Newman 1999).

126

An effective set of choices about compensation systems plays a major role in determining

firm performance (Dreher and Dougherty 2005). A fringe benefit is an indirect reward

given to an employee or group of employees as a part of organizational membership

(Mathis and Jackson 2004), which affects performance and retention of employees.

5.3 MEASURES TO INCREASE INSURANCE SELLING

The Indian economy has witnessed healthy growth in overall GDP in the recent years.

The growth has been spurred by favourable demographic profile, growing literacy levels,

robust investment climate and all-around infrastructure development in the country. With

rising income levels, the country today boasts of a rapidly growing middle income group.

The financial services sector has seen significant growth backed on these favourable

conditions.

It is an acknowledged fact that Insurance, especially in India, is more sold than bought.

Since life insurance is meant to cover potential losses in future and not to cater to

immediate consumption needs, there is always a tendency to postpone or avoid the

purchase of life insurance. The low awareness levels in the society further add to the

difficulty in selling life insurance. Distribution, therefore, becomes the key link in the

chain of activities in the business of Insurance.

With the notification of the IRDA Act, 1999 and the pursuant opening up of the sector to

private players, distribution of insurance has witnessed a flurry of activities such as the

specification of minimum educational qualification for agents and intermediaries,

mandatory pre-license training and examination, issue of license by IRDA, elaborate

regulation prescribing the code of conduct for all intermediaries and the issue of

regulations allowing/regulating corporate agencies, brokers and referrals. The above

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initiatives have completely changed the complexion of insurance distribution in the

country. The raised level of qualifications at entry, pre-license training, qualifying

examination and tightening of the code of conduct for the intermediaries over the last few

years have all contributed to improvement in the quality of distribution in the insurance

sector.

Need based product and capacity based sales

The agent before offering any products must know his clients well enough. he must have

the knowledge about the state of client’s personal habits, health occupation, financial

position and income, moral character, his family history and all other related aspects

which help in field underwriting of a case. After accumulating the needed

data/information if the life is apparently found insurable, only in such a case proposal

should be procured. An agent has a long-term stake in the health of an insurance

organization; therefore, he must canvass and procure only such business, which has a

reasonable chance of staying in the books of the insurer. Neither early claim nor lapsation

of a policy helps an agent to build a sizable portfolio for his stable income and

professional standing. Thus the agents should offer to their clients only such products that

are not only will suited to their needs but also are financially viable for them.

After sales service

In the present age of information explosion and competition, the service industries like

insurance companies cannot survive without an action based philosophy of excellent after

sales service. After sales service in an insurance industry includes collection of premia,

revival / reinstatement of paid up / lapsed policies, nomination and assignment, grant of

loan payment of survival benefits, settlement of surrender value, alteration and finally the

128

settlement of claims (death or maturity) under a policy and an agent can render invaluable

help to his clients in these areas. When agents fail to provide these services to needy

customers their faith in the organization gets eroded and this in may increase the

likelihood of discontinuance of their policy, such a situation not only creates a bad image

of the organization making it difficult to procure further business from such a section of

policyholder but it also implies irreparable loss to the agent and the organization.

Customer service has become a distinct component of both product and service sectors

and with the developments in information technology many businesses find demanding

and knowledgeable customers. As service firms find themselves in an increasingly

competitive and complex business environment, they are inevitably driven to examine

their service delivery processes critically. Claim settlement is one of the most important

services that an insurance company can provide to its customers. Insurance companies

have an obligation to settle claims promptly. .If the agents are well conversant with the

claim settlement procedure and assist the claimants in completing the necessary

requirements, it would not only quicken the process of claim settlement and enhance their

professional status but also help the organization to improve upon their outstanding claim

ratio.

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Figure:5.3 Customers opinions on how the insurers need to improve claims handling

Source: Ernst &Young.2012

Unrealistic Sales

Such sales are effected either to complete the quota for renewal of agency or achieve top

business targets with various considerations. Of late, this unhealthy practice has shown a

sharp rising trend as confirmed by high ratios of lapsation in the mean duration of one

year. Obviously, such sales cannot be financially beneficial to agents but certainly put the

corporation to financial loss.

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130

To gain competitive advantage, the insurance companies need quality people in order to

sell the product to customers. The insurance business is traditionally managed by a large

number of insurance agents who work on a commission basis. Though these are not the

regular employees of the organization, organizational success, however, critically

depends on the effectiveness of these people. These agents are expected to promote the

company philosophy of providing quality advice to customers and sell the company

products. Further, in order to increase sales, the companies need to expand their business

from cities to urban and suburban areas for which they need to hire and retain agents who

can serve in those markets.

It is a challenge for any insurance business organization to attract qualified and capable

persons to join and work with them to sell insurance in the competitive environment.

Agents could enhance the possibility of success by understanding the needs of the

customer and then sell insurance policy to potential customers. It requires capable people

who could analyze the financial status and generate confidence among potential

customers to accept the advice. However, the turnover of insurance agents has

traditionally been high in this business.

5.4 CHALLENGES FACED BY EMPLOYEES AND AGENTS

Challenges faced by employees and agents in insurance companies can be attributed to

the following reasons:

Difficult selling process

Agents are expected to understand the customer’s needs and sell the products

accordingly. This process involves high level of persuasion and a sustained effort for a

long period of time.

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It is a challenge for any insurance business organization to attract qualified and capable

persons to join and work with them to sell insurance in the competitive environment.

Agents could enhance the possibility of success by understanding the needs of the

customer and then sell insurance policy to potential customers through appropriate use of

technology.

Expectation gap

The expectation gap adds to the turnover of insurance agents. To begin with, very few

competent people want to become agents owing to their low social status and uncertain

but potentially high income. Most of them are lured to the profession with high earning

potential. However, to earn decent income, agents have to go through a learning curve

that requires a lot of patience, perseverance, and persuasion in the field. During this early

phase, the earnings of the agents are low despite hard work. This expectation gap leads

many of them to break down in the initial period of joining the profession.

5.5 POSSIBLE WAYS TO ATTRACT AND RETAIN AGENTS

Recruitment and selection of agents

As stated earlier, attracting and retaining of agents is one of the major challenges. To

overcome this challenge, the companies need to involve local management to recruit

agents among the local population. For such wide recruitment efforts, local managers

could be provided support in managing applications and conducting the selection process.

Further, to ensure the success of this decentralization process, it should become a part of

the performance appraisal of the local management.

132

Part-time agents

Most of the insurance companies have not fully leveraged on the potential of part-time

agents. A large chunk of prospective agents cannot devote full time to the profession due

to their existing engagements. These people have a wide social network which would

enable them to get good business.

Growth and remuneration

The agents work primarily on the commission which is paid to them on the basis of

annualized premium per policy. The percentage of commission varies from product to

product. There is no fixed remuneration to them. The IRDA guidelines prohibit paying

any compensation to agents. It makes the early career phase of the agents difficult as they

generally do not get too many policies in that phase. There is a need to find ways of

overcoming the early phase difficulties and revising the existing norms.Agents could be

trained to develop their competencies to get business in a continuously changing business

environment. Freshly selected agents attend their first 50 hours of mandatory training as

stipulated by IRDA. This training primarily consists of technical issues of insurance

business.

At present, the insurance industry is in a nascent stage. With the liberalization and entry

of private companies in insurance, the Indian insurance sector has started showing signs

of significant change. However, there is still a huge untapped demand for insurance. The

penetration of insurance still remains at low levels and there is a requirement to develop

this sector. Experience suggests that consumers still favour insurance as a saving tool for

their wealth management which, in turn, puts the onus on the distribution channel to

advise and educate the consumers.

133

There is a need to change the perceptions of the Indian consumers towards pure term

insurance/alternative products. The competitive and risk pressures in the industry call for

multi-channel distribution footprint, technological advancement, quality of manpower,

customized product offerings (for financially knowledgeable customers and OTC

products for middle class and lower middle class segment), investment strategy, fund

management, and acquisition cost in the initial years. The regulator is trying to play its

role by amalgamating the efforts of the industry, actuaries, and accounting professionals,

ensuring rigorous systems of internal controls to manage risk and complying with the

regulatory and legislative requirements. There are many other problems (viz., retarded

growth of health insurance, low awareness levels, adverse selection of risk, conservative

approach of insurers, and limited availability of data, inadequate infrastructure, and

technology) that make it very difficult to assume that India is comparable at the global

platform.

Thus, the future of life insurance lies in increasing the pure protection products, a

refreshing look at ULIP with rising protection components, and continuously improving

service levels. The cooperative sector and microcredit organizations may help in

increasing the penetration into rural areas by formulating low-cost policies and in the

urban areas by improving customer service standards, documentation, IT support, etc.

Expansion of the market through increased penetration calls for strategic discussions

between the insurers and the regulators though the awareness has improved substantially.

The entry of the new players, the consequent expansion of offices, new channels of

distribution, increase in number of tied agents along with the increasing awareness and

acceptance of insurance have all contributed to the massive expansion of the insurance

134

sector in the past few years. The unprecedented buoyancy in the economy during this

period has no doubt supported this splendid performance.

Distribution is an integral and significant part of the Insurance Industry. More so, in a

country like India, with its diversities and expanse, a challenge for all Insurance

companies would be to set up a robust distribution structure. Creating an effective

channel – both in terms of reach and cost, would have a major impact on the success of

the insurance companies. With increasing awareness, a strong distribution system would

come in handy not only to increase penetration in the Indian market, but to create

insurance as a priority in the saving habit of an individual.

Agency force continues to be the back-bone of life insurance selling although new

channels like bancassurance have had an impact on the distribution. High attrition rates in

tied agency results in higher sales costs as well as slowdown in the growth plans of the

carriers. Insurance companies are still struggling with strategies to leverage information

technology to optimize the performance of its agency force and develop promising agents

to their full potential.

The insurance sector is undergoing fundamental transformation and has an important part

in building up of the country’s economic infrastructure. The insurance regulator will play

a key role in laying down the ground rules and paving the way for the sector’s growth

and development. But the challenge clearly rests with the insurers to take the industry to

its next level of evolution.

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CHAPTER 6

INSURANCE SECTOR OVERVIEW

6.1 INTRODUCTION

Rao, S. (2000) analyzed that India still has an underdeveloped insurance market, it has a

huge catch-up potential. According to him even though there is strong potential for

expansion of insurance into rural areas, growth has so far remained slow. Considering

that the bulk of the Indian population still resides in rural areas, it is imperative that the

insurance industry’s development should not miss this vast sector of the population. Jain

A.K. (2004) revealed that waves of liberalization have done wonders to prosper the

insurance occupation to the status of a career with a bright future. The average mindset,

particularly of younger generation in India was very amenable to the changes in

insurance as an avenue where exhilarating opportunities are opened up in changed

environment.

Krishnamurthy S. (2005) revealed that Insurance companies have a pivotal role in

offering insurance products which meet the requirements of the people and, at the same

time, are affordable. With the liberalization and entry of private companies in insurance,

the Indian insurance sector has started showing signs of significant change.

Mittal and Chandhok (2002) analyzed the pre and post-privatization scenario, which

indicated that the awareness of public towards insurance had grown. Before privatization,

most of the agents did the job on part time basis and only 10% of the agents procured

90% of the total Life Insurance business and the remaining 90% of the agents procured

the remaining 10% of the total Life Insurance business. There was a lack of efficient

services, competition, and innovative products and there were so many complaints from

137

policyholders. But in the post-privatization scenario, private sector and LIC had been

offering efficient services for the benefits of the customers. The LIC branch offices were

interconnected through computers and Internet. The publicity campaigns were launched

to create awareness about the concept of Life Insurance and its products. It was also

observed that majority of people preferred LIC products due to its credibility and

efficient services. The study reflected that Life Insurance business was mainly procured

from the male segment of the population while the female segment constituted only

around 14-16% of the total Life Insurance business.

Ray, Subhashish Pathak and Ajay (2006) opined that ever since the privatization of the

insurance sector in India in 2000, the industries has been witnessing the birth of

numerous private players, mostly joint ventures between foreign insurance giants and

Indian diversified conglomerates and each one is trying to make an inroad into the huge

untapped market. Goswami, P. (2007) examined that prior to privatization of insurance

sector, Life Insurance Corporation (LIC) of India was the sole player in the life insurance

industry in India.

Lal and Dhanda (2003) explained the implications of opening up of Life Insurance sector

on the performance of existing Life Insurance business. An opinion survey of 51 agents,

21 development officers and 55 employees was conducted in order to know their

perception towards Life Insurance products, amount of premium, working conditions,

training programmes, computerization and efficiency level etc. The study revealed that

agents, development officers and employees had similar opinion with respect to various

variables. It was also analyzed that the survey results would be helpful to improve the

business performance of the LIC and the satisfaction level among policyholders.

138

A recent survey highlighted the statistic that India was fast emerging as one amongst the

youngest nations in the world. The 18-35 years segment was considered the ideal target

audience for an entire range of ‘cradle to grave’ insurance plans from pure protection to

endowment, children’s endowment and money back plans, to whole life and pension

plans. The evolving change in this key demographic variable along with the significant

increase in the middle class segment of the Indian society is perceived to throw up

enormous business opportunities for the life players.

Seventy per cent of the Indian insurance market is still considered to be dominated by

money-back plans and the consumer still perceives insurance as a saving device. The new

age insurers have taken it upon themselves to educate the masses on pure term insurance

and its importance but it has a long way to go.

Recent surveys show that consumers still favour insurance policies as a savings tool and a

tax saver. What is equally interesting is that the two most prominent barriers to insurance

are lack of liquidity and the fear of the consumers that their money may get locked in.

This again reiterates the fact the this country still understands and favours money-back

and endowment plans from the insurance catalogue. ULIPs with higher returns and

greater flexibility are also on course for the contemporary demand patterns. Thus,

understanding the changing perceptions of the Indian consumer and accordingly altering

the product offering, marketing communication, and positioning is what is important for

the insurer.

IRDA, in its role as the regulator, has undertaken the work of overlooking an orderly

development and growth of the industry. It acts as the amalgam aggregating the efforts of

the industry, the actuarial, and the accounting professionals and expects the industry to

139

ensure that they have in place a rigorous system of internal controls to manage risks and

comply with regulatory and legislative requirements. On the marketing front, sanctity of

communication to the consumer and ensuring that reasonable policy holder expectation is

built at all times is another area that the regulator focuses on. Coupled with the above,

IRDA ensures that the customer is placed as the conundrum of all activity and the

ultimate mark of success for the industry will lie in its ability to meet the needs of the

customer effectively.

Given the above backdrop, the factors that will act as differentiators in the long run will

be customer orientation and service. The opening up of the sector has had positive

fallouts like improved disclosure to the policy holder, both presale and post-sale, and

efficient claims and complaint/grievance management. These were areas that were

overlooked in the pre-liberalization era but new age insurers have capacitated themselves

in terms of technology as well as processes to handle these important customer service

subjects which are prerequisites to success in this industry.

6:2 NEW INITIATIVES IN THE INSURANCE SECTOR

The new entrants in the life insurance sector have done very well in terms of introducing

new products, customer service standards, documentation, IT support, etc. Innovative and

perhaps aggressive selling techniques too have helped a lot. For instance, competition in

group insurance has been very severe. Introduction of the ‘unit linked’ policies has been a

significant development. LIC appears to have taken timely hold on the issues and is

meeting competition very effectively in all key areas such as new products, IT, customer

service, innovative distribution relationships, PR and publicity, HR, etc. It has also

increased the emphasis on unit-linked policies.

140

In general insurance too, the new insurers have come out with the features displayed by

the life insurers. General insurance business is annual in nature and frequency and

severity of claims are inherent in the business. Ability to settle claims quickly and resolve

disputes are matters central to the sector. While the private sector insurers have rendered

good service and gained the confidence of the consumer, the public sector insurers seem

to have upset a vast section of the insuring public at all levels. Consequently, the new

private sector insurers are able to secure significant shares in the profitable segments

leaving the loss-making ones to the public sector companies. Further, the four public

sector general insurance companies are not yet in a state of readiness to meet the new

competition effectively. For example, the extent to which IT is used effectively is still

inadequate.

Awareness

Increasing awareness is a condition precedent to penetration of insurance. Anecdotal

evidence and empirical observations indicate that awareness of insurance has improved

substantially. This is attributable to the effective campaign launched by IRDA and the

combined impact of sustained wide-ranging publicity by all insurers. Insurance has been

in the spotlight at all times.

Customer Service

In the short time since the market has been opened, the private sector companies have set

a completely new paradigm of service in both life and general insurance sectors. All

companies have come up with benchmarks for each aspect of service and also internal

measurement of quality. Indian insurers in the public sector are responding slowly.

Regulations have helped achieve standards of disclosure. Here again, in the life insurance

141

sector, both LIC and the new companies seem to have set high standards in settlement of

claims. This is sure to cause further dissatisfaction and consequent loss of good business.

Though structural inefficiencies are stated as reasons for such a situation, the main cause

seems to be a pervasive attitude problem coupled with a need for transparency in claims

handling.

Intermediaries

Some of the significant requirements introduced by IRDA to promote professionalism

among intermediaries relate to minimum qualifications, mandatory training, and passing

an examination before a license is issued to an agent or a broker. The number of life

insurance agents in the market has almost doubled to more than a million now. There is

no evidence yet to show that more agents in the new paradigm show higher level of

professionalism than those before. The uglier aspects of competition have been seen in

the training, examination, and consequently in the performance of the agents. Drop-out

rates are still very high and productivity is quite low. Intermediaries such as agents and

brokers from all parts of the country will have to play a significant role if insurance is to

be spread to all segments and regions of India. The present trend does not seem to show

significant improvement in the quality of the distribution force to achieve higher

penetration. Insurance agency is not yet seen as a viable career in terms of income

security and social acceptance.

Structure of remuneration, limits imposed by law, flexibility of ownership, and

transferability of agency are some of the legal rigidities that stifle the development of

professionalism among intermediaries. Distribution is the key to development of

142

insurance and achieving penetration. For the first time, we have licensed brokers in the

market and their role will expand and develop.

Increasing importance of bancassurance is a trend of significance and it has helped in

launching of products jointly developed by the insurance and the banking sectors.

Introduction of corporate agency as a distribution arm has also been a development of

significance. Even as these are happening; some adverse developments attributable to

misuse of the trust reposed by the regulator appear to have raised concerns. Corrective

measures are being introduced as reaction to lack of compliance. The insurance industry

should observe rules and regulations and avoid a situation where the regulator is obliged

to introduce on-the spot or ad hoc directions instead of looking for systemic solutions that

have a better chance of success in strengthening the market.

Self-regulation

In a healthy development, IRDA has made known its intention to have more self-

regulating bodies for implementation of guidelines and ensuring compliance. The Life

and General Insurance Councils, the Actuarial Society, the Surveyors’ Association, the

Brokers’ Association, etc. are examples. These are trusting and mature moves. Each

player in the industry has a major responsibility in making a success of this approach.

Lack of self discipline and consequent failure may result in frequent and rigorous

regulatory intervention with implications.

The law and regulations in place are adequate to ensure financial strength and solvency of

insurers. The regulator’s challenge lies in monitoring compliance to the several

requirements. Delay in taking steps against erring parties would erode the credibility of

regulations and customer confidence. In these past few years since opening up, new

143

insurance companies have faced the challenge of convincing an average customer that the

commitments under the polices will be met by the new companies and that their stability

is no less than that of the public sector companies. This depends to a great extent on the

credibility of the regulations and the regulator. Early detection of problems and quick

solutions are vital for maintaining the confidence of the average consumer.

In a recent study, Swiss Re mentions that India (and China) would create ample

opportunities for the development of insurance backed by regulations in line with

international best practices. The opening up of this sector has been a great success. There

is no doubt that, in a decade, Indian insurance market will be among the front-runners in

the world.

6.3 DYNAMIC REGULATORY STRUCTURE

With the rate at which businesses evolve, rules and regulations become obsolete almost

as soon as they are formulated. Regulators have to keep up with the burst of product

innovations, alternative distribution channels, electronically-linked payment systems, e-

commerce, investment avenues and alternative risk transfers, just to mention a few. These

developments create intricate links in a commercial chain which are potentially fragile in

the sense that if one link snaps, the whole chain comes apart. With such complex and

unique interdependencies, it would be virtually impossible to prescribe regulations that

deal with every possible contingency. In the first place, regulators may not even be aware

of the potential risk factors emerging every day. Secondly, regulators may be faced with

constraints of jurisdiction. The answer to this dilemma is not deregulation but finding the

right regulatory structure. In other aspects of regulatory reform convergence of financial

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products will also create the need for domestic regulators to re-examine financial sector

regulation at a macro level.

Instead of being watchdogs, regulators should act more like pacesetters, catalysts and

navigators. This approach recognizes that the industry is often best placed to make

decisions concerning the rapid changes revolutionizing insurance markets. In such an

environment greater reliance should be placed on the inherent knowledge and capabilities

of the industry to adapt to these changes.

6.4 INSURANCE SECTOR REFORMS

Institutional and regulatory reforms are already well underway in India. The current

statute was drafted in 1938 and has seen numerous amendments and changes. Many of its

provisions have become outdated and some have lost their relevance. New developments

have taken place in the insurance world, which do not find a reflection in the law.

Therefore there was an urgent need to overhaul the Insurance Act, 1938 in order to reflect

the new circumstances that exist today. The Law Commission has in the recent past

submitted its recommendations on the proposed amendments to the Insurance Act, 1938.

Another area of reforms is the process of corporate governance. Today corporate

governance is strictly applicable to listed companies and none of the insurance companies

in India are so far listed. Guidelines have been set that clearly enunciate the role and

functions of directors and Appointed Actuaries of life insurance companies, so that they

can provide greater professional stewardship to protect and enhance the interests of

policy holders. With greater competition in the marketplace, enhanced standards of

corporate governance, investment management, and market conduct are necessary to

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protect policyholders' interests. Regulations need to be introduced to strengthen the

corporate governance of insurance companies in line with international best practices.

In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor

R.N. Malhotra- was formed to evaluate the Indian insurance industry and recommend its

future direction. The Malhotra committee was set up with the objective of

complementing the reforms initiated in the financial sector. The reforms were aimed at

creating a more efficient and competitive financial system suitable for the requirements

of the economy keeping in mind the structural changes currently underway and

recognizing that insurance is an important part of the overall financial system where it

was necessary to address the need for similar reforms. In 1994, the committee submitted

the report and some of the key recommendations included:

Structure

Government stake in the insurance Companies to be brought down to 50%. Government

should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act

as independent corporations. All the insurance companies should be given greater

freedom to operate.

Competition

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter

the sector. No Company should deal in both Life and General Insurance through a single

entity. Foreign companies may be allowed to enter the industry in collaboration with the

domestic companies.

Postal Life Insurance should be allowed to operate in the rural market. Only one State

Level Life Insurance Company should be allowed to operate in each state.

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Regulatory Body

The Insurance Act should be changed. An Insurance Regulatory body should be set up.

Controller of Insurance- a part of the Finance Ministry- should be made independent.

Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced from

75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company

(there current holdings to be brought down to this level over a period of time)

Customer Service

LIC should pay interest on delays in payments beyond 30 days. Insurance companies

must be encouraged to set up unit linked pension plans. Computerization of operations

and updating of technology has to be carried out in the insurance industry.

The committee emphasized that in order to improve the customer services and increase

the coverage of insurance policies, industry should be opened up to competition. But at

the same time, the committee felt the need to exercise caution as any failure on the part of

new players could ruin the public confidence in the industry. Hence, it was decided to

allow competition in a limited way by stipulating the minimum capital requirement of

Rs.100 crores.

The committee felt the need to provide greater autonomy to insurance companies in order

to improve their performance and enable them to act as independent companies with

economic motives. For this purpose, it had proposed setting up an independent regulatory

body- The Insurance Regulatory and Development Authority.

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in

Parliament in December 1999. The IRDA since its incorporation as a statutory body in

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April 2000 has fastidiously stuck to its schedule of framing regulations and registering

the private sector insurance companies. Since being set up as an independent statutory

body the IRDA has put in a framework of globally compatible regulations. The other

decision taken simultaneously to provide the supporting systems to the insurance sector

and in particular the life insurance companies was the launch of the IRDA online service

for issue and renewal of licenses to agents. The approval of institutions for imparting

training to agents has also ensured that the insurance companies would have a trained

workforce of insurance agents in place to sell their products

6.5 ROLE OF IRDA

IRDA was set up by the parliament in 1999. The section 4 of IRDA Act' 1999, Insurance

Regulatory and Development Authority specify the composition of Authority. The

Authority is a ten-member team consisting of a. Chairman; b. five whole-time members;

c. four part-time members. All these positions are appointed by the Government of India.

IRDA is the highest authority for regulating and promoting the activities of Insurance in

India. All the Insurance companies get its certificate of registration from this highest apex

body.

6.5.1 MISSION OF IRDA

The missions behind establishment of IRDA are laid down here. The main motto was to

remove inconsistencies and inefficiencies from Indian insurance market and to have an

ethical code of conduct for all the participants.

To protect the interest of and secure fair treatment to policyholders

To bring about speedy and orderly growth of the insurance industry

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To set, promote, monitor and enforce high standards of integrity, financial

soundness, fair dealing of those it regulates

To ensure speedy settlement of genuine claims, to prevent insurance frauds and

other malpractices

To promote fairness, transparency and orderly conduct in financial markets

dealing with insurance and build a reliable management information system to

enforce high standards of financial soundness

To take action where such standards are inadequate or ineffectively enforced

To bring about optimum amount of self-regulation in day-to-day working of the

industry

6.5.2 RECENT REGULATORY INITIATIVES

During recent past IRDA initiated various regulatory to enhance transparency at various

stages of the sales process.

ULIP related changes

1. Life insurers are mandated to provide a detailed account of the premium received,

charges and money available for investment. This is to be given for each year of the

contract period.

2. Every prospective policy holder has to sign the sales illustration at the time of

submitting a proposal form, so that this becomes part of policy document.

3. The mandatory level of Life coverage is increased. Further all unit-linked products,

other than pension and annuity products shall compulsorily provide life cover or health

cover.

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4. Lock-in period increased from 3 years to five years and ULIPs shall have Minimum

Premium Paying Term of Five Years.

5. All regular premium / limited premium ULIPs shall have uniform / level paying

premiums. Any additional payments shall be treated as single premium for the purpose of

insurance cover

6. Charges on ULIPs are mandated to be evenly distributed during the lock in period, to

eliminate the high front-loading of expenses.

7. As regards pension products, all ULIP pension / annuity products shall offer a

minimum guaranteed return of 4.5% per annum or as specified by IRDA from time to

time. The objective of the same is to protect the lifetime savings of pension policyholders

from any adverse fluctuations at the time of maturity.

8. With a view to smoothen the cap on charges, the charges have been rationalized to

ensure that the difference in yield is capped from the 5th year onwards. This will not only

reduce the overall charges on these products, but also smoothen the charges structure for

the policyholder.

9. IRDA has also addressed the issue of discontinuance of charges for surrender of

ULIPs. The IRDA (Treatment of Discontinued Linked Insurance Policies) Regulations

ensure that policyholders do not get overcharged when they wish to discontinue their

policies for any emergency cash requirement. The Regulations stipulate that an insurer

shall recover only the incurred acquisition costs in the event of discontinuance of policy

and that these charges are not excessive. The discontinuance charges have been capped

both as percentage of fund value and premium and also in absolute value. The

Regulations also clearly define the Grace Period for different modes of premium

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payment. Upon discontinuance of a policy, a policyholder shall be entitled to exercise an

option of either reviving the policy or completely withdrawing from the policy without

any risk cover. Further, the regulations also enable IRDA to order refund of

discontinuance charges in case they are found excessive on enquiry. These regulations

are applicable to all new ULIP products approved by IRDA after these regulations are

notified.

Distribution channel related changes

1.IRDA (Insurance Advertisements and Disclosure) Regulations were amended to

remove any scope for the involvement of unlicensed personnel / entities in the sale of

insurance products.

2. IRDA (Licensing of Corporate Agents) regulations were amended to further tighten the

Code of Conduct of corporate agents to ensure that the prospect does not deal with any

unlicensed person.

The Regulations also prohibited payment of any amounts other than the eligible

commission to a Corporate Agent. This measure will reduce the expenses of the insurer,

thereby lowering premiums to be paid by the policyholder.

3. The issue of referrals was addressed by bringing out separate Regulations leaving no

scope for misuse of the system. Companies which wish to share their database of

customers with insurers would need to get approval from IRDA after having conformed

to the requirements as laid down in the Regulations.

6.5.3 FAVOURABLE GOVERNMENT AND REGULATORY INITIATIVES

The Insurance Regulatory and Development Authority (IRDA) has taken the following

initiatives to further regulate and develop the sector:

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• De-tariffication except for auto third party liability has been introduced and now the

insurers can underwrite the type of risks which they want to underwrite at their own

desirable rates.

• Number of years after which companies can raise capital via an Initial Public Offering

(IPO) has been reduced from 10 years to 5 years.

Furthermore, the IRDA and the Government are in the process of making the following

regulatory reforms:

• With private players completing nearly a decade in Indian insurance sector, the industry

is looking at new ways to meet its capital needs. Many a times, proposals have come to

increase the share of FDI from 26% at present to 49%.

• Detailed guidelines are being formulated on IPO’s and M&A.

6.5.4 INSURANCE AWARENESS & MARKET CONDUCT

Enhancing consumer information about insurers' prices, products and financial strength is

a critical function given the heavy reliance on competition to ensure good market

performance. IRDA would also move away from merit-based regulation to a disclosure-

based regime. IRDA, for instance, will look to market institutions and intermediaries to

ensure that prospectuses contain all the relevant information necessary to enable the

potential policyholder to make an informed decision. Through regular checks and reviews

of practices of the market institutions and through punitive action against the recalcitrant,

the IRDA will ensure compliance with a prudential regime.

Market discipline will also become a prominent feature in the regulatory infrastructure.

However, the keys to effective market discipline lie in public disclosure and consumer

education. These will become important aspects of the regulator's role in the years ahead.

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Informed and educated consumers are often the most effective means of commercial

discipline as they can exert significant influence over an institution's business decisions

and practices, as well as pricing policies.

6.5.5 REGISTRATION OF INSURERS

The Authority has fixed a strict criterion for awarding registration. The criteria for

awarding direct insurance registrations have been: financial strength, track record and

reputation of the promoters. Other aspects examined have been their compliance with law

and regulations, the strength of internal control systems; and commitment to contribute to

India's development. IRDA has been keen to see the industry develop in terms of product

innovation and the use of alternative distribution channels. Applicants with a strong

record in these areas, or in specialist and niche fields, and who have also undertaken upon

themselves to underwrite health insurance business have received favourable

consideration.

The experience so far in India is that the local partners are sound with an excellent track

record in their respective fields, and their foreign collaborators are very well established

insurance companies with vast experience in both developed and emerging insurance

markets. We have, thus, sound companies presently operating in the Indian insurance

scene.

6.5.6 FINANCIAL REPORTING

The accounting standards are in alignment with international standards and regulations

set out in detail the manner in which the information is to be furnished to the Regulator

along with disclosure norms. IRDA is working with the professional accountants'

institute in a bid to refine the responsibilities of auditors and the standards of audits,

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besides helping in building the capacity of the domestic actuarial profession, a crucial

element of the regulatory framework.

6.5.7 INVESTMENT

Prudential investment norms have been notified to further enhance the financial

flexibility and risk management ability of insurers, and for better management of

investment portfolios. In addition guidelines on related-party transactions to ensure

management integrity and public accountability in the conduct of insurance business are

also in place. The guidelines reinforce the fiduciary duty owed by insurers to properly

manage insurance funds in an independent and transparent manner for the interest of

policyholders at all times.

6.6 SWOT ANALYSIS

Strengths

A vast, emerging economy and a country with more than 1bn people, India is simply too

large to ignore, even if the present barriers to entry are high. The country is a democracy

with functioning governance and a regulatory framework that is familiar to Western

corporations, even if it is overloaded with bureaucracy. The economy is growing quite

strongly and will exhibit less of a slowdown than a number of other emerging economies.

Weaknesses

The market is dominated by state-owned insurers and the movement to open up the

market is at best. In the current political climate, there is even less support for change.

The non-life penetration rate is among the lowest in the world and, even though it is

growing, will remain extremely low throughout the forecast period. Life density is low

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and the life market is growing only slowly. Over the forecast period, it is expected the life

sector will grow at barely half the rate of GDP growth.

Opportunities

The long-term potential in an emerging economy with more than 1bn people is

unmistakable. While GDP per capita remains very low, there is an emerging wealthier

group, loosely referred to as ‘middle class’ and an elite group of extremely wealthy

Indians. Various economic forces will probably force the government to relinquish

ownership of the major insurers.

Threats

The current political environment is not conducive to constructive change, or even sound

economic management. The overwhelming dominance of the entrenched players makes it

possible that the industry will stagnate. The legal framework, bureaucracy and financial

infrastructure serve to worsen the insurance business environment

Most of these developments have commenced only in the last few years. In the near

future the industry is expected to grow both in stature and strength. It has to come a long

way from the days when private insurance was seen in the public eye as something to be

avoided as far as possible and misconduct in various forms was rife in the industry.

In the near future insurers, in particular, shall be less financially vulnerable to the

vagaries of the market because of the adoption of a prudential regulatory regime, which

has set very high solvency requirements and capital adequacy norms. Domestic

institutions, be they insurers or intermediaries are expected to catch up with their

international counterparts in terms of efficiency, innovation and customer service.

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Productivity levels are expected to be as per international best practices. The level of

market penetration is also expected to substantially improve.

The insurance industry will face greater competition from other financial service

providers along all aspects of their value chain. Insurers, for instance, with their

significant and growing asset base, shall have to develop asset management capabilities

and expertise on par with professional fund managers, otherwise they will face pressure

to farm out their funds for professional management. IRDA will monitor the progress of

the industry and make further changes where necessary. It will continue to consult

industry representatives in developing a conducive regulatory environment, and

formulating incentives to enhance the operational capabilities of insurers, for instance, in

product development, distribution and asset management. Such partnership and dialogue

will be vital for the growth of the industry, and for meeting the challenge of making India

a regional insurance hub.

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CHAPTER 7

CHALLENGES AND OPPORTUNITIES IN THE INDIAN

INSURANCE SECTOR 7.1 INTRODUCTION

Privatization of Insurance eliminated the monopolistic business of Life Insurance

Corporation of India. It helped to introduce new range of products which covered wider

range of risks. It resulted in better customer services and helped in improving the variety

as well as the price of insurance products. The entry of new player has increased the

spread of both life and general insurance. It will increase the insurance penetration and

measure of density. Entry of private players has ensured the mobilization of funds that

can be utilized for the purpose of infrastructure development. The participation of

commercial banks into insurance business has helped in the mobilization of funds from

the rural areas because of the availability of vast branches of the banks. It has been

instrumental in creating tremendous employment opportunities.

7.2 CRITICAL ISSUES AND CHALLENGES

There is a need to raise foreign direct investment (FDI) in insurance from 26% to

49%.Joint venture with the foreign partner gives easy access to capital to the domestic

partners. But today, the FDI in the insurance sector is restricted to 26% which is a huge

deterrent to growth in the industry. It is more difficult for the smaller players to expand

their business which require significant capital.

Many economists have spoken about the importance of FDI in the insurance sector in

India at many forums over the last decade. The sector is highly capital-intensive, since its

development period is long. It requires capital infusion at regular intervals, especially in

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an insurance market where there is a high growth potential, such as in India. Fixed costs

are also high due to India’s the vast geographic spread.

Many players, especially the smaller ones with limited access to capital, do not have

adequate funds to make such large investments in their businesses at the regular intervals.

An increase in FDI will help weaker players, as the foreign partners will invest the capital

so that they can tap the highly potential insurance sector of India. It can be seen as the

win-win joint venture as the domestic partner will get the required capital and the

technical expertise of the foreign partner, and the foreign partner would be able to secure

a strong foothold in a rapidly growing insurance market.

7.3 OPPORTUNITY TO PROFESSIONALIZE THE AGENCY CHANNEL

Figure 7.1: Factors That Would Persuade Customers to Stay

Source: Ernst & Young.2012

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As in many markets, the agency channel accounts for the 85 per cent of new business

premiums. But the overall inactivity and attrition rates are quite high which are estimated

to be 50 to 55 per cent, significantly higher than global benchmarks of about 25 per cent.

With recruitment aimed at just growing the base, productivity has suffered.

Proprietary survey conducted by the consultancy firm, Mckinsey of Indian life insurance

agents in eight cities indicates that proper strategies are not implemented while selecting

the agency force in a life insurance market. It shows, about 20 per cent of agents recruited

fail certification and/or leave immediately after initial training, without selling a single

policy. Most of the agents, approximately, more than two- thirds of agents, part-time and

full-time, have had no selling experience before becoming agents. As a result, their

success depends heavily on the training provided to them by the life insurance

companies. While many agents, about 70 to 80 per cent, say they undergo sales and

product- related training, this does not seem to translate into superior sales skills. Even

the result suggests, agents with two and three years’ experience are not more productive

than agents who are just one year into the job. This is because unit managers usually

focus only on tenured and higher performing agents. Only 30 per cent of agents surveyed

felt that their unit manager motivates them to perform better.

7.4 SCOPE TO BOOST ALTERNATE CHANNELS

Customers prefer bancassurance channel (after the agency channel) as compared to the

other channels like non-bank finance companies, brokers, or direct channels such as the

telephone or internet. Given the high penetration of banking products, bancassurance

could be the single most important channel for insurers to rapidly acquire new customers.

However, cross-sell rates in Indian banking are significantly lower than those in

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developed markets. Indian bancassurance faces several challenges. Bank employees have

high variance in selling skills, and banks in the public-sector typically face low operating

flexibility in creating a true sales culture. Insurers usually do not invest in systematic

training, a problem compounded by product complexity. In many cases, low

technological capability and lack of process integration also results in poor service.

7.5 DELAYED BREAK-EVEN FOR PRIVATE INSURANCE COMPANIES

Figure 7.2 : Weighted new business premium for April 2011 to Mar. 2012 compared to April 2010 to March. 2011 (in Rs million)

Source : Towers Watson.2012

Break-even point is achieved in the insurance industry when the new business premium is

equal to the renewal premium. However, as the Indian industry is growing, the volume of

new premiums is much more than the renewal premiums. Globally, life insurance

0 10000 20000 30000 40000 50000 60000

ICICI Prudential LifeHDFC Life

SBI LifeBajaj Allianz Life

Birla SunlifeMax New York Life

Reliance LifeMet Life

IndiaFirst LifeAviva Life

Tata AIG LifeKotak Life

Canara HSBC LifeOthers

Weighted new business premium for April 2011 to Mar. 2012 compared to April 2010 to March. 2011 (in Rs

million)

April 2011-Mar.2012 April 2010-Mar.2011

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companies break-even in six to eight years but in India , it has not been achieved and it

may take another one or two years due to the recent financial crisis in the world.

Other reasons for delayed break-even are the high operating expenses like management

costs, real estate prices, salaries, distribution cost and technology expenses, which are

higher than what was accounted for in the original business plans of insurers. Moreover,

the capital-intensive nature of the life insurance segment has extended this process by a

couple of years.

7.6 CHALLENGES IN MARKETING RISK-COVER PRODUCTS

The distribution of insurance, till recently, has been through individual agents. They may

have sold insurance more as investment and tax-saving products. The feature of insurance

cover and its ability to retain the financial status of the family in case of the death of the

bread winner may not have been emphasized. This phenomenon is also seen recently

where the sales of insurance continue more for savings and tax purposes rather than for

pure insurance requirements.

Agents do not push this product as the commission amounts are lower than in savings

products where they are higher. There is also a typical customer requirement of getting

something back on survival that leads the agent to sell a savings plan. This leads to the

phenomenon of under-insurance as the customer believes that he has bought an

investment plan and does not need to review his insurance needs frequently. The reality is

that insurance needs change as per changes in income, life stages, and life style of each

individual and these needs have to be addressed frequently. However, the customer treats

insurance as an investment plan which is not revisited leading to the phenomenon of

under-insurance.

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7.7 ROLE OF INTERMEDIARIES

The practice of selling insurance as an investment has perpetuated over a long period of

time and is fed by an agent’s obvious need to maximize his income. Agents will have to

be educated that having a long-term relationship with clients will result in much more

income than maximizing income in the first sale. With this recognition, agents may

recommend the right investment and insurance products that suit the individual’s specific

needs at different stages in their lives. Building a long-term relationship is a lengthy and

cumbersome process but with significant long term benefits. Agents will first have to

imbibe this behaviour and then convince their clients that what is being recommended is

in their best interests. Doing this will require the tailoring of training programmes to

convince agents to manage their client relationships in a manner that has the highest pay-

off in the long term.

7.8 DISTRIBUTION SCENARIO IN THE INDIAN MARKET

In today's Indian insurance market, the challenge to insurers and intermediaries is two-

pronged:

1. Building faith about the company in the mind of the client.

2. Intermediaries being able to build personal credibility with the clients.

Traditionally tied agents have been the primary channels for insurance distribution in the

Indian market; the public sector insurance companies have their branches in almost all

parts of the country and have attracted local people to become their agents. The agents

are from various segments in society and collectively cover the entire spectrum of

society. The profile of the people who acted as agents suggests they may not have been

sufficiently knowledgeable about the different products offered, and may not have sold

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the best possible product to the client. Nonetheless, the customers trust the agent and

company. This arrangement has worked adequately in the absence of competition.

In today's scenario agents continue as the prime channel for insurance distribution in

India, as is the case in most markets, supported by call centre to a small extent. Almost all

the new players follow this model primarily because the regulations for other channels

are yet to be put in place. The new companies have attempted appealing only to the

middle, upper middle and elite classes in the major cities. Contrasted with Public sector

insurance companies, with their offices across the country, the new companies have miles

to go before they reach anywhere. Meanwhile, the public sector companies are going to

great lengths to revamp their image to look and feel more contemporary. Both the public

and new private sector companies are fighting their own battles from the perspective of

customer perception management.

Though a multi-channel strategy is better suited for the Indian market as well, it is

important to keep in mind that this market is really a conglomeration of multiple markets.

Each of the markets within this conglomeration requires a different approach. Apart from

geographical spread the socio-cultural and economic segmentation of the market is very

wide, exhibiting different traits and needs.

7.8.1 DISTRIBUTION CHANNELS AND ITS CHALLENGES

Agents

The new companies are looking for educated, individuals with marketing flair, an elite

group who can be attracted only with high remuneration and the lure of a fashionable job,

all of which may not be possible in this insurance business with its price pressures and

the complexity of selling insurance. Unable to attract this segment, Insurance companies

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have started easing recruitment conditions as against the stringent norms they had earlier,

thereby diluting the process. While the public sector companies are able to attract agents,

they continue to suffer from high attrition rates due to indiscriminate agent appointment.

The most successful of these companies' tied agents are hardly of the elite variety of

salesman. They are still the people belonging from the neighbourhood -- the postman, the

schoolteacher, and the shopkeeper -- who know the people and are themselves known in

the community.

The challenge here is the lack of knowledge of the competitive market and the inability

to do intelligent comparisons with the competitor's products. Educating and training these

agents is a serious challenge for the insurance company. The relevance of this kind of

agent continues even today as agents are sought or contacted by families by word of

mouth.

Another social feature in the market is the considerable respect for age in Indian society

and a belief that an older person knows better. A very young up-market agent who is a

typical salesman may not appeal to a large segment of the middle class, which is looking

for a solid trustworthy person from whom they can buy insurance. In this context it might

be a rewarding exercise to recruit some older people to sell some lines of products like

pension plans annuities etc.

Gender of agents is another relevant feature in the rural context that makes a difference,

especially for the female population. Women to whom the customers can relate can target

the female segment of the population more effectively.

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Banks

The public sector banks, with their vast branch networks, are also plagued by a rigid

unionized workforce and archaic systems, and lack vision of a broader service spectrum

encompassing non-banking products. The newer banks are constrained by their lack of

reach and poor branch strength. For banks to become a predominant channel for selling

insurance will require a paradigm shift. But the encouraging fact for insurance companies

waiting for bancassurance to take off is that bank branches are here to stay, and

customers do want them.

A customer survey by Deloitte Consulting in the western developed markets found that

for banking activities, customers place high importance on having convenient branches in

their banking relationships. This is good news for the Indian banks with their many

branches, and also makes a strong case for taking up bancassurance.

The major lines of business that can be sold through bancassurance successfully are term

insurance, creditor insurance, and non-life products like Property, Motor and Personal

accident, Homeowners comprehensive insurance etc.The strategy should be to use

multiple banks according to their presence in different regions. Success would come by

using bancassurance where it will be most effective - i.e selling simple, cheap products to

the masses at a low cost. This awareness is growing and is evident from the fact that

nearly every insurance company has partnered with one or many banks to implement

bancassurance.

Bancassurance

Bancassurance as a concept has its origins in France where this channel today is a

predominant source of insurance business. The opportunity that bancassurance provides

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for the insurer has been much discussed since the opening up of the industry. Banks are

also viewing this route as an important opportunity primarily in the area of alternate

income generation for the following reasons:

• Banks are in the prime function of banking and they will always remain so. However,

with the shrinking margins on the business due to intense competition, banks are looking

at alternate options of income generation. Today, life insurance may only be a small drop

in the ocean as far as revenues for the banks are concerned but, as the contributions grow,

they will start assuming more significant proportions.

• Banks are fast moving towards being viewed as a financial supermarket or a one-stop

shop providing the entire gamut of financial products ranging from personal finance to

life insurance to mutual funds.

• Banks generally have a service oriented culture as against insurance companies that

have an aggressive need-based selling philosophy. The rubbing-off of this selling culture

on the bank will also help the bank with its own core business.

• The key challenges that are implicit to bancassurance are more people-related than

anything else. Management of differences in the organizational culture of the banks and

insurance companies will be a key variable. The partners need to have a common

business vision and direction towards future objectives.

The market has already seen a range of strategic alliances between banks and insurance

companies based on their vision with regard to distribution reach, costs, target audience,

and geographical spread.

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Brokers

With the broker regulation under review and expected any time, this could be the next

hope, especially for the urban market. This will be a new experience for the insurance

customer, accustomed to brokers in financial services, real estate, and travel and tourism.

For historical reasons the image that 'broker' carries in the minds of the customer is not

very favourable. Thus the new breed of insurance brokers face the challenge of

establishing credibility.

The positives are that brokers in the urban arena can attract the elite and the upper middle

class customer. Brokers represent the customer and will sell the products of more than

one company. They seek to determine the best fit for the client and can effectively

address the mind block faced by the public about the various companies. This is

applicable in the case of life insurance for the high-end and corporate/group segment.

In the non-life segment, broking is not entirely new, as reinsurance brokers were

arranging exotic covers. For individual customers also, with a wide range of competitive

products, the broker can get a good deal. The corporate broking companies will have to

play a prominent role. If NGOs based in rural areas can be attracted into the rural sector

cooperatives arena, they stand a good chance of succeeding and can help the new players

get a foothold in the rural market. These are the players with the potential to make the

difference, as they have the trust of the people. ICICI Prudential Insurance and HDFC

Standard Life Insurance have already partnered with NGOs to sell some low cost

insurance in rural areas. However, the challenge lies in establishing regulations that

protect the customer and attract the right players into the brokerage market rather than

creating another middlemen segment eroding the premium.

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Work site marketing

This area needs to be tapped, as in any country one of the biggest markets is through the

worksite. With changes in human resources management polices and compensation

packages, group products or work site products do have a definite market that cannot be

ignored. Here the advantages would be:

1. Captive customer base

2. Potential to sell individual insurance and group insurance

3. High trust factor

4. High hit ratio for the intermediaries

The challenges would be the cost effectiveness, product customization and efficient post

sales servicing, which would determine continued business. Technology has a key role to

play in worksite marketing to ensure cost benefits. Banks and financial institutions have

been successfully marketing credit cards and other financial products using this channel.

If not an identical model a similar approach can be used for selling insurance.

Internet

Though India is joining the fast growing breed of net users, using net for transactions has

not yet caught up. Though a few banks provide online banking, the usage is still a small

fragment. The insecurity associated with transactions over the net is still an inhibiting

factor. At present most of the insurance companies have product information and/or

illustrative tools on the web.

We do not see the web evolving into a means for direct selling of insurance in the current

scenario. In the Indian market, where insurance is sold after considerable persuasion even

after face-to-face selling, the selling over the net, which must be initiated by the client,

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would take some more time. While the technology capability is there, improvements in

bandwidth and infrastructure are needed. Also needed are simpler products where auto-

underwriting is feasible. Automobile insurance, one of the segments of insurance

purchased "off the shelf" in India, would be the ideal segment to start with. On the life

side, term assurance for standard lives with simplified underwriting is a possibility. These

channels by themselves will not be able to overcome the mindset of the people, but rather

can only be enablers for the human channels.

Invisible Insurer

In this model, the insurance company or its representative is not the entity marketing the

products. The insurance cover is sold by an automobile /credit card company as an add-

on product leveraging the brand of the retailer. The risk is carried by the insurance

company, which underwrites it. . Products like creditor insurance, automobile insurance,

and credit card related insurance could be distributed using this channel. This model can

be adopted in all market segments for the lines of business mentioned. It is already

prevalent in some areas like credit card insurance and crop insurance for agricultural

loans. The new players are also attempting this model. The venture of Maruti into

insurance by setting up two subsidiaries MIDS and MIBLto sell automobile insurance is

a case in point. These firms will largely arrange insurance cover for Maruti's captive

customer base. MIDS has been registered as a corporate agent with an exclusive

arrangement with Bajaj Allianz General Insurance, while MIBL has linked up with state-

owned National Insurance Company Limited.What makes these arrangements attractive

is the low distribution cost and captive customer base. However, repeat business or

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renewal of business cannot be assured. In the life segment, group creditor insurance may

be the most suitable product for this channel.

7.9 ENTRY BARRIER

Life insurance covers approx 3% of the total Indian population. India needs that more

players come in life insurance sector and cover a large population with life insurance.

Therefore there is a greater need for the government to allow FDI into this sector. Despite

the progress, India’s insurance sector remains very small compared with some of the

major emerging markets. India’s share of global insurance market is less than 1%. The

insurance industry lags behind other economies in the baseline measure of insurance

penetration.

Industry is now open to private players under the government mandate of a minimum

capital of Rs.100 crore of which a maximum of 26% stake can be held by a foreign

partner as equity. Global insurers are now permitted to set up and register a domestic

company in order to write business in India. However, regulations stipulate that they have

a capital base of at least US $ 20 million, and their investment in such company is capped

at 26 percent. Thus, to participate in the market, they must form a joint venture with an

Indian partner that is able to invest the remaining funds.

The equity investments limit is the same for global reinsures seeking to write business in

India.A recent proposal has been put forward to increase foreign direct investment to 49

percent. In addition, global companies are pushing for the right to establish branch offices

in India. These changes are likely to substantially increase the presence of international

insurers, reinsurers, and brokers in India.FDI in insurance would increase the penetration

of insurance in India, where the penetration of insurance is abysmally low with insurance

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premium at about 3 percent of GDP against about 8 percent global average. This would

be better through marketing effort by MNCs, better product innovation, consumer

education etc. An increase in FDI in insurance would indirectly be a boon for the Indian

economy, the investments not withstanding but by making more people invest in long

term funds to fuel the growth of the Indian economy.

The Insurance Amendment Bill, tabled in parliament, had proposed to raise the foreign

investment limit in the key financial sector to 49% from 26% fixed a decade ago. A

majority of committee members felt that a higher foreign direct investment ceiling could

affect domestic players. FDI cap is the biggest entry barrier stopping the growth of the

life insurance market and narrowing down the market size. With the opening up of

market for foreign players the competition will get a boost and the service will reach out

for masses increasing the size of market. As the market grows the market has to meet out

the Capital adequacy norms. Capital infusion can be brought in terms of Foreign Direct

Investment. And preventing FDI in India is proving to be a hindrance in increasing the

market size

7.10 COMPETITIVE CHALLENGES

Multi-Channel Distribution Footprint

Understanding the science of multi-distribution channel management and developing a

robust field footprint will remain the most distinctive competitive challenges for the new

age insurers. Managing the expectations of channel partners, viz., banks, corporate

agents, brokers, and advisory force, and keeping the acquisition costs at manageable

proportions at the same time will help the new players reach break-even relatively sooner.

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Increased rural penetration of insurance will also be fallout of the above factors and will

depend upon the spread that the distribution footprint will help the insurer achieve.

Technological advancement

A key driver of growth in a long-term business like life insurance, technological

advancement will be critical to functions like data management, underwriting, fund

management, actuarial efficiency, and the end-to-end service delivery process.

Technology will provide the cutting edge in terms of improved disclosure to the policy

holder as well as the regulator in due course of time.

Quality of manpower

Insurance is an intensively people- oriented business and human resources will be the

undoubted differentiator like in any other retail industry. The quality of manpower

attracted and retained by insurers and how their abilities and ambitions are harnessed

would be the litmus test for the industry.

Investment strategy and fund management

Expertise in fund management is the value proposition that any insurance company

offers and the quality of asset-liability management (ALM) in a falling or stable interest

rate regime will thus be a key challenge. The regulator is progressively in favour of

insurance companies setting up their own investment research and dealing cells and

against knowledge sharing with group asset management companies. Bonus performance

on traditional plans and the net asset value (NAV) performance on ULIPs will determine

the demand patterns and investment strategy will remain at the core of successful

insurance business.

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Acquisition costs

Acquisition costs which is a sum total of technological, operational, and distribution

costs, will be the key differentiating factor in the initial years. While the initial hits on the

technology and process costs have already been absorbed by a majority of the new

insurers, intermediary costs of distribution is a critical variable.

Further, the intermediary costs to distribution channel partners are also lower due to the

bargaining power that the strong brand possesses in life insurance.

Product Offerings and Market Scenario

The product market scenario has already started witnessing some revealing changes

which are an indicator of what is to be expected. Product offerings can be classified into

two broad categories as we move ahead:

• Customized high-end complicated products aimed at the high-end, financially-aware

customer with risk appetite. Key-man insurance and ULIPs will belong to this segment.

• Simplified, OTC insurance products to cater to the middle class and lower middle class

segments. These products will essentially be a combination of endowment, money-back,

and pensions in varying proportion.

One other area of keen interest would be the future of ULIPs which have a very low

proportion of risk cover and a very high proportion of investment and savings. Given the

fact that IRDA is progressively moving towards development of insurance mainly as a

protection device and the resistance from the mutual fund industry which sees insurance

as a favoured industry, we might see a movement towards ULIPs with a less lop-sided

proportion of risk and savings. The postulate that the average size of policy will go down

as the insurance company’s increase their geographical spread is not something that can

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be taken as a certainty. The counter argument is that the balance in the product mix of the

insurers will ensure that average premium levels per policy remain stable. Even if there is

bottoming out, it will be marginal.

The proportion of key-man policies, ULIPs, and high-value policies will ensure that the

new age players manage their average policy sizes. With regard to intermediary costs, the

initial cost hits with regard to branch infrastructure, technology, process, channel partner

management, etc., have already been incurred and the coming years will see a

rationalization in cost levels.

There is a case that the acquisition cost, primarily commission, might see a downward

trend across agents as well as other channels. All in all, rationalization of average costs

will be a very important realm of differentiation which will translate itself into lower

prices, better value propositions, and better returns.

With regard to costs, in addition to what has been highlighted above, the administration

charges and fund management charges that are being collected by the insurers will

progressively reduce due to economies of scale and competitive forces from insurance as

well as mutual funds. The reductions in overall costs will be passed on to the customer in

the form of lower administration costs, better bonuses, and lower prices.

Learning from Foreign Partners

Insurance in India was by and large governed by the remuneration charges paid out to the

agents until the liberalization of the sector came about. The opening up of the sector was

essentially to provide the customer with customized protection and savings solutions

suited to his overall financial requirement. The value that the joint venture partners have

brought in this context is huge. The foreign partners have brought in their technical and

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financial expertise in a range of functions such as technology and operational processes.

The development of underwriting practices is again suited to the dynamics of the social

practices of a nation like India. Agency management, training, and the entire end-to-end

service delivery process are other areas where Indian partners have benefited a lot.

Going forward, we could see two kinds of polarization in the industry: (a) products that

are inclined towards pure protection, and (b) return oriented products that will

progressively provide more degree of protection as the regulator is keen on increasing the

percentage of risk protection in unit-linked insurance products.

In India, our approach to reforms has been built on the belief that sustainable growth is

only possible in an environment which values and promotes financial strength and

stability, management capability and public accountability. Reforms have included the

setting up of a modern well resourced supervisor, the Insurance Regulatory and

Development Authority (IRDA). IRDA's hallmark has been its belief in openness and

transparency. It has followed the practice of prior consultation with various stakeholders

before notification of regulations, and this has resulted in a broad acceptance of the

regulations.

To operationalize various provisions of the IRDA Act and Insurance Act, so far 29

regulations have been notified covering all aspects of insurance business. Four broad

areas of operation have been carved by regulations for the Authority to function and these

are:-(i) admission of insurers including powers of onsite and offsite supervision; (ii)

functioning of the intermediaries; (iii) control on rates of premium , terms and conditions,

and (iv) policyholders protection. These are inter-related. The misunderstanding that may

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develop in the functioning of the various players are sought to be settled by the Authority

- initially by persuasion, failing which, by issue of directions.

The Authority has also helped in establishing support mechanisms to sustain the

Insurance Ombudsman system under the Settlement of Public Grievances Scheme, 1998.

Twelve ombudsmen have been appointed in the country. This has created a very

important grievance settlement machinery for customers. Complaints of non-settlement

or delayed settlements of claims received from customers have been attended to. Many a

time insurers have been penalized for breach of tariff terms and conditions.

Today, to the credit of combined efforts by both the regulators and industry players, the

benefits of insurance are widely acknowledged, public confidence in the industry has

been very much visible and the industry on the whole is far more relevant than it has ever

been in this country. The industry is expected to significantly improve its public image in

years to come.

A healthy insurance market is an important source of long-term capital in domestic

currency, especially for infrastructure financing. Reforms in insurance are therefore

expected to strengthen the capital market by giving it greater depth or liquidity.

The insurance sector has already witnessed some fundamental changes in the landscape.

The insurance industry has been opened up, with a restriction of 26% on foreign

ownership to Indian insurers. Foreign participation has enabled local players to form joint

ventures with foreign insurance partners, and benefit from transfer of technical know-

how and increased financial strength. This has also enhanced the local insurers' ability to

modernize, expand, and to become credible players. Insurers are being encouraged to

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form strategic alliances with other financial industry players, in order to flourish in a

liberalized environment.

7.11 OPPORTUNITIES FOR GROWTH

High Potential Demand for Insurance Products

Rise in household savings, a growing middle class, as well as an increasing working

population, and consequently, higher purchasing power are the factors which will lead to

the higher demand of life insurance. Since more than two-thirds of India’s population

lives in rural areas, micro-insurance and micro health insurance is seen as the most

suitable means of reaching the socially disadvantaged sections of society.

Low awareness of insurance products, high transaction costs, as well as inadequate

regulations and understanding of client needs and expectations has restricted the demand

for micro-insurance products. However, with the development of rural health insurance

regulations and growing awareness about micro insurance products, the focus of many

private players has shifted to these areas.

Newly Emerging Bankable Class

The “aspirers” (annual household income of Rs. 90,000 to Rs2 lakhs) will comprise 46

per cent of the population or 107.7 million households by 2012, representing a

formidable emerging bankable class. Insurance is seen as long term savings instrument

by this segment of the society providing higher return at low risk, given the lack of

alternative investment options.

Rising Affluent

The number of the affluent “global” (annual household income greater than Rs.10 lacs)

will be 2.3 million households strong by 2012 and will earn almost 12 per cent of the

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country’s aggregate disposable income. Going forward to 2025, this segment will swell to

9.5 million households earning 22 per cent of total disposable income. This segment has a

relatively low need for risk protection, being self-insured with high investment balances.

Insurance is viewed primarily as an investment vehicle and an estate management tool.

Primary influencers for this segment are wealth or relationship managers, rather than

insurance agents, as the former also provide third-party investment products, brokerage,

and other advisory services.

Under- penetrated Health Insurance Sector

The health insurance sector is one of the booming sectors of the insurance industry as

people are becoming more aware about the health insurance and their health care so

taking advantage of this, private sector insurers are more aggressive in this segment. Life

insurance companies are likely to primarily target the young population to amortize the

risk over the policy term

Growing Demand for Indian Insurance off shoring Business

After the recent financial crisis, insurance companies want to reduce their costs and

outsourcing some of the noncore processes like claims processing, policy management,

etc., can help them to reduce their costs and focus on the core processes. India is seen as

one of the favourable partners for the outsourcing business. Services such as analytics

and decision support are likely to be the higher-end, billing rate-based services that will

drive value growth for BPO organizations.

The industry is expected to obtain more business from the European market from 24% of

the total global business in FY07 to 36% by FY10. Employment is also expected to more

than double from 41,600 in FY06 to around 100,500 in FY10.

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Growing Pension Sector

According to the Old Age Social and Income Security (OASIS Report, 1999), there will

be 113 million Indians over 60 years of age by 2016 and 179 million by 2026. On the one

hand, this is good news as the life expectancy has increased but on the other hand, it has

also increased the risk that people will outlive their savings. Indians will have an

expected life span of 80 years, i.e., live a full 20 non-earning years. Healthcare costs have

also increased many folds eroding retirees’ purchasing power. Savings and investment

risks are intensifying, with rising inflation or steep market declines.

Social security provided by the Government of India is very limited; in fact that less than

4% of the population is covered under any social security scheme. Only Government

employees are entitled to pension benefits after retirement. Opening up of the pension

sector and the establishment of a new pension regulator have made this segment highly

attractive. Hence, insurance products are being considered as the next best option to

secure the future.

To facilitate insurance and social security cover for the economically weaker sections of

society, the Pension Fund Regulatory and Development Authority (PFRDA) has

launched a low-cost pension scheme, since April 2010, for rickshaw-pullers, barbers,

daily wage labourers etc.

Movement from Solvency I Norms to Solvency II Norms by 2012 to Increase

the Demand for Actuaries and Risk management Professionals

The transition from Solvency I norms to Solvency II norms by 2012 is likely to increase

the demand for actuaries and risk management professionals. The regulator has also

asked insurance companies to get their risk management systems and processes audited

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every three years by an external auditor to ensure the solvency of private sector

companies. Hence, the need for professionals is expected to rise. Furthermore, insurance

companies will now be able to calculate risk better, bringing enhanced stability in their

operations and transparency in the sector.

Life Insurance is critical for the development of Indian economy. Apart from a brief dip

in FY 2009 due to downturn, the industry has grown around 20 per cent per annum. In

the first decade of privatization the insurance penetration has doubled, which has all

going for it to only rise significantly in a country of 1.2 billion people.

Post the global financial crisis financial capital infusion by foreign partners has

considerably slowed down; from Rs. 8,170 core in 2008-9 to less than Rs. 2,300 crore in

2010-11. For a capital intensive business like life insurance, the trickling down of capital

severely impacts growth and also changes the strategy that the company adopts with its

business.

The Indian life insurance industry’s biggest advantage is the country’s favorable

demographics. Market penetration is guided by the rise in income levels. From 80 per

cent policy renewals in early 2000s, today only about 65 per cent policies come up for

renewal after the first year. The working population (25–60 years) is expected to increase

from 675.8 million to 795.5 million by 2025 with the projected per capita GDP expected

to increase to Rs. 100,680 in 2025, which is indicative of rising disposable incomes.

With increasing levels of income, higher cost of living and longer life expectancy, the

Indian consumer will require innovative products that will cater to wealth management,

protection and retirement solutions. For insurance companies, profit from innovation will

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be integral to driving success, and technology will help insurers to develop and customize

products to befit individual needs.

Since this industry is an intensively people-oriented business, human resources will be

the undoubted differentiator. The quality of manpower attracted and retained by insurers,

quality of service provided to customers and how these parameters are harnessed would

be the litmus test for the industry.

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CHAPTER 8

RETENTION, CUSTOMER SERVICE AND PRODUCTIVITY IN

INDIAN INSURANCE SECTOR

Intense competition and globalization of businesses has put mounting pressure on

organizations to deliver more and better than before. Insurance companies must develop

and deploy human resources that can articulate the vision of the company and make

teams with synergy to perform at much higher levels. Human resource builds and drives

the knowledge assets of an organization, the value of which has been established to be

many times more than the tangibles. In the present scenario it is becoming important for

Insurance companies to focus on finding, developing, and retaining talented employees.

The insurance sector in India is rising rapidly to bring in growth and employment

opportunities. Insurance companies are basically human intensive, and human resources

act as an undoubted differentiator.

8.1 ATTRITION IN INDIAN INSURANCE SECTOR

Agents aspire to have a regular employment and often quit the profession for want of

regular jobs. While job attrition rates ranging between 15 per cent and 20 per cent are

commonplace in the software sector, this is pale in comparison to the kind of turnover

that the insurance industry witnesses with its agency force. Conservative estimates put

the attrition rates at 35-40 per cent in the Indian insurance industry.

The opening up of the sector a decade ago provided insurance agents with new

opportunities and an image makeover as "life insurance advisors".

But little has changed in the basic nature of the business - insurance still needs to be sold

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to a reluctant populace. Once the initial list of potential customers such as close relatives,

friends and neighbors is exhausted, the climb for an agent is difficult.

Traditionally, a large number of insurance agents, who work on a commission basis,

manage the insurance business. The turnover of insurance agents has usually been high in

this business. The highest employee turnover is at the financial advisors' (agent) level,

where the entry barriers are low but targets and work pressures are very high. It is

estimated that the attrition rate is about 35% in the first year of recruitment. This goes

down to about 18% by the fourth year. Most of those who drop out are non-performers

and this is attributed to high expectations on the part of the agents. Most of the recruits

are of the opinion that they can earn lot of money in a short span of time. Since it is a

high-pressure job, sustenance requires constant networking and acquiring new

relationships that require a lot of discipline. Since life insurance industry is a sunrise

industry, many join the race, but cannot retain their enthusiasm till the end.

Insurance companies have to go beyond building a brand to offering the agents careers

and let them grow with the market. While retaining employees may be a problem,

attracting fresh talent is still relatively easy. This problem can be addressed by offering

employees learning and growth opportunities such as cross-functional learning, skills and

talent development, thereby expanding one's job profile. Recruiters explain that high

employee turnover rates significantly increase the investments that are made in the

employees. The problem of losing funds in employee acquisition is prominent.

Companies invest significant amounts of money and time in training in the initial phase;

but these investments do not always get converted into actual profits. In the case of the

insurance industry, recruitment of an agent costs a company a lot of money as even other

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associated costs of training and administrative service are also involved. Each agent

works in a non-productive or partly productive mode in the organization for nearly the

first 2-3 months. An employee leaving the organization within the first 6 months is a bad

investment for the company.

Individual agents have been the traditional distribution channel for life insurers but now it

is taking a hit; as during first three quarters of 2011-12 more than 3 lakh active agents

have left the profession or faced a cancellation of licenses. As of 31 December 2011

number of agents came down to 23.78 lakh from 27.10 lakh last year. Especially Life

Insurance Corporation of India (LIC), HDFC Life and ICICI Prudential life has witnessed

this mass exodus. Low incentive for agents is the main reason of exodus.

Another reason of agents quitting the profession is stringent regulations imposed on Unit-

Linked Insurance Plan (ULIPs) which reduced the commission for agents. Earlier agent

use to get 12-18% commission on ULIPs but now after new norms this commission has

fallen to 5-7%. New norms came in September 2010 and in 2010, 10 lakh agents left the

profession as it made this business less lucrative for agents.

Insurance companies are also asking agents to leave the job if they fail to meet the

targets. Targets for agents are set on the number of policies sold and premium

earned. During April-December 2011 individual agents contributed 44% new business

premium of life insurance industry against 55% in corresponding period last

year. Insurance Regulatory and Development Authority (IRDA) is also willing to

increase the productivity of agents. At present an agent on an average sells 18 policies in

a year and now IRDA is finding ways to increase it to 25 policies per year. This will

improve agent’s income. Global average life of an agent is 4-5 years. After leaving the

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job of insurance sector they join their previous job, join a broker or start selling mutual

funds.

Some insurance companies complain that the booming economy has caused the rampant

poaching of insurance employees. They say that in a business such as insurance one has

to accept the fact that 20 per cent of the work force will bring in 80 per cent of their

business. But, while private insurance companies are still struggling to break even, the

rising attrition rate is yet another challenge that they have to battle. New-age insurance

companies are experiencing high levels of attrition, ranging from 40% to 60%. New

entrants have been poaching into the front-line and mid-level management of older

private insurance companies.

The biggest attrition levels affect front-line sales and this is truly the biggest challenge for

HR. Talent is scarce and every company tries to recruit the best of employees. Today the

many of the insurance companies operating in India are truly national and international

brands in themselves and they offer a lucrative ground for poaching for newer insurers

and for the non-insurance companies as well. It is estimated that the level of attrition has

increased manifold over the last few months. While 35-40% churn has been experienced

in the front-line sales category, 25-30% of the middle management has moved from one

place to another. A much smaller 10% shift is said to be happening at the top

management levels.

Reasons that can be attributed to high agent turnover in the insurance sector are:

• Being an insurance agent in India is seen as a societal stigma as there is uncertainty of

job and income attached to it. People join insurance companies as a part time job or a gap

filler occupation and not as a long – term career. Very few competent people want

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to become agents owing to low social status attached to it.

• It is a high pressure job. It is expected from an agent to understand the customer’s needs

and sell the products accordingly. This process involves a high level of persuasion and a

sustained effort for a long period of time. A lot of people succumb to such pressures.

• The expectation achievement gap adds to the turnover. Many people are lured to the

profession with a high earning potential. However, to earn a decent income, agents

require a lot of patience, perseverance, and persuasion in the field. During early phase,

the earnings of the agents are low despite hard work. This expectation achievement gap

leads many of them to break down in the initial period of joining the profession.

• Scarce skilled or experienced human resource in insurance market leads to wide – scale

poaching and head – hunting amongst the competitors. The industry has yet to witness

mature hr processes, like work force planning, training, motivation and retention.

The lack of preplanned recruitment leads the firms to indulge in poaching human

resources working in other insurance firms.

• With insurers having a high percentage of the workforce from multiple sectors (non-

domain), the chances of losing employees to other fields, like Fast Moving Consumer

Goods companies or other financial outfits, are high. Employee/Agent Turnover is

perhaps paid the least attention among various employees’ issues. It is shrugged off as

inevitable. Few companies take a proactive approach towards reducing employee/agent

turnover.

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Table 8.1: IRDA report on attrition figures in Indian Life Insurance Sector since

2006-2011

Year Company name

Initial Agent Strength

Agents added during the year

Agents departed during the year

Net agent strength at the end of the year

2006-2007 Private 370846 666622 147316 890152

LIC 1052993 197963 147909 1103047

Total Industry

1423839 864585 295225 1993199

2007-2008 Private 890152 772910 336314 1326748

LIC 1103047 234852 144155 1193744

Total Industry

1993199 1007762 480469 2520492

2008-2009 Private 1326748 943484 677653 1592579

LIC 1193744 345729 194617 1344856

Total Industry

2520492 1289213 872270 2937435

2009-2010 Private 1592579 625336 642439 1575476

LIC 1344856 312547 254596 1402807

Total Industry

2937435 937883 897035 2978283

2010-2011 Private 1575476 395467 668615 1302328

LIC 1402807 306296 372039 1337064

Total Industry

2978283 701763 1040654 2639392

Source : IRDA annual report

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8.2 RETENTION CHALLENGES IN INSURANCE SECTOR

Attracting and retaining employees and agent is a great challenge for the Indian insurance

industry. Critical analysis of the work force trends points to an impending shortage of

highly skilled employees who possess the requisite knowledge and ability to perform at

high levels, meaning that insurance companies failing to retain high performers will be

left with an understaffed, less qualified workforce that ultimately hinders the ability to

remain competitive.

Effective employee retention is a systematic effort by employers to create and foster an

environment that encourages current employees to remain employed by having policies

and practices in place that address their diverse needs. A strong retention strategy

becomes a powerful recruitment tool.

Retention of key employees is critical to the long-term health and success of any

organization. It is a known fact that retaining your best employees ensures customer

satisfaction, increased product sales and leads to long term success of the company.

Research studies indicate the following steps that can be taken by insurance companies to

retain its agents and employees.

1. Compensation

Compensation constitutes the largest part of the employee retention process. Employees

always have high expectations regarding their compensation packages. So an attractive

compensation package plays a critical role in retaining the employees. Compensation

includes salary and wages, bonuses, benefits, perks, stock options, bonuses, vacations,

etc.

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2. Organization Environment

People want to work for an organization which provides appreciation for the work done,

where there are ample opportunities to grow, a friendly and cooperative environment, a

feeling that the company is second home to the employee etc Lack or absence of such

environment pushes employees to look for new opportunities. The environment should be

such that the employee feels connected to the organization in every respect.

3. Growth and Career development

Growth and development are the integral part of every individual’s career. If an employee

cannot foresee his path of career development in his current organization, there are

chances that he’ll leave the organization as soon as he gets an opportunity. The important

factors in employee growth that an employee looks for are:

Work profile

Personal growth

Training and development

4. Importance of Relationship in Employee Retention Program

Sometimes the relationship with the management and the peers becomes the reason for an

employee to leave the organization. There are times when an employee starts feeling

bitter towards the management or peers. A supportive work culture helps grow employee

professionally and boosts employee satisfaction. To enhance good professional

relationships following points can be considered:

Respect for the individual

Relationship with the immediate manager

Relationship with colleagues

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Individual development

5. Support

Insurance Companies can undertake measures to support their staff in a number of ways

as follows:

By providing feedback

By giving recognition and rewards

By providing opportunities for career advancement.

By providing good work life balance practices

8.3 RETENTION SUCCESS STRATEGIES FOR INSURANCE COMPANIES

1. Transparent Work Culture

In today’s fast paced insurance industry where employees are constantly striving to

achieve business goals under time restrictions; open minded and transparent work culture

plays a vital role in employee retention. Insurance companies must invest in training and

educating employees. More and more companies have now realized the importance of a

healthy work culture. Employees comprise the most vital asset of any insurance company

and therefore it is vital for insurance companies to provide a work place where employees

are able to function to their full potential.

2. Quality of Work

The success of any organization depends on how it attracts recruits, motivates, and

retains its workforce. Insurance companies need to be more flexible so that they develop

their talented workforce and gain their commitment. Thus, organizations are required to

retain employees by addressing their work life issues. The elements that are relevant to an

individual’s quality of work life include the task, the physical work environment,

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social environment within the organization, administrative system and relationship

between life on and off the job. The basic objectives of insurance companies should be to

improve the working conditions for the employees and increase organizational

effectiveness.

3. Supporting Employees

Employers can support their employees by creating an environment of trust and

inculcating the organizational values into employees. The management can support

employees directly or indirectly and provide support in during times of personal crisis,

managing stress and for personal development.

Employee and agent turnover affects the whole organization in terms of productivity.

Managing the turnover, hence, becomes an important task. A proactive approach

can be adopted to reduce attrition. Strategies should be framed in advance and

implemented when the times arrives. Turnover costs should also be taken into

consideration while framing these strategies.

Employee turnover is perhaps paid the least attention among various employees' issues. It

is shrugged off as inevitable. Few companies take a proactive approach towards reducing

employee turnover. It always includes substantial costs of replacing the key employee

who fall into the category of high performers. Replacing includes the costs of recruitment

advertisement, referral bonuses, selection testing, training costs, etc. Moreover, turnover

results in loss of time and efforts, low productivity, loss of morale, loss of knowledge and

so on. Therefore it is inevitable for insurance companies to take proactive measures to

reduce attrition by adopting a comprehensive retention strategy for its employees and

agents.

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8.4 CUSTOMER SERVICE CHALLENGES IN INDIAN INSURANCE SECTOR

Privatization has brought in new players in the insurance market with almost all having

foreign partners. For the last one decade of this liberalized era, Indian life insurance

industry has been witnessing tremendous changes with private players having reasonable

growth rate and market share. The emerging scenario provides the customers with choice

of insurance, wider range of new and innovative products, competitive pricing of

products and services.

Marketing of life insurance service is critical and complex compared to non-life

insurance for various obvious reasons that include time span, periodicity and potentiality

of claims and higher brand switching costs affecting the buying behaviour. In the present

scenario, insurance companies are facing problem of transiting from a perceived selling

activity to a structured-strategic marketing activity.

With both LIC and private players in the fray, Indian life insurance market has undergone

significant changes recently. One of the greatest challenges facing organizations is the

ever–growing competition, the continuous increase in customer expectation. In order to

achieve competitive advantage and efficiency, organizations have to seek profitable ways

to differentiate themselves. There are many different strategies to reach success, but the

delivery of competent service quality is the vital one, especially in this competitive

environment. It is an overwhelming response that most of the life insurance providers are

keen on only selling their product, not on understanding the customers need. Moreover,

they are also not concerned about the post-sales services. Since, a satisfied customer

brings in more customers and carries out word of mouth publicity, life insurers need to

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identify customer’s needs and fulfill them rather than selling insurance policies to keep

their customers satisfied.

Figure:8.1 : Perception of Indian Customers towards service quality provided by

Insurance Companies in India

Source : Ernst and Young.2012

The insurance industry forms an integral part of the Indian financial market, with

insurance companies being significant institutional investors. In recent decades, the

insurance sector, like other financial services, has grown in economic importance. This

growth can be attributed to a number of factors including rising income and demand for

insurance, rising insurance sector employment, and increasing financial intermediary

services for policy holders.

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A sound national insurance market is an essential characteristic of economic growth. This

is not surprising as the insurance industry forms a major component of an economy by

virtue of the amount of premiums it collects, the scale of its investment, and, more

fundamentally, the essential social and economic role it plays by covering personal and

business risks. By encouraging these factors that promote insurance demand and aid

financial development, policymakers possess a strong tool to stimulate economic growth.


have also tied up with various Life Insurance companies. The business environment is

constantly changing and demand for adaptability among the organizations tends to

increase.

The trend of insurance companies shifting from a product-focused view to a customer-

focused one has been developing recently as insurance products become increasingly

difficult to differentiate in fiercely competitive markets. Insurance companies in India are

consequently directing their strategies towards increasing customer satisfaction and

loyalty through improved service quality. It is becoming desirable for insurance

companies to develop a customer centric approach for future survival and growth. The

awareness has already dawned that prompt, efficient and speedy service alone will tempt

the existing customers to continue and induce new customers to try the services of the

company.

Demands from customers, technological development, change of value and globalization

are the factors that drive the need to change and develop an organization. It is hard to get

advantages by quickly adapting technology to product or service in an efficient manner.

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The ability to handle organizations intangible assets such as service is of great

importance to reach success, then the ability to invest and manage tangible assets.

Faced with the unprecedented challenges of troubled financial markets, changing

regulatory oversight and economic uncertainty, there is a risk that some insurers may not

be listening and responding to the most important voice of all that of their customers. For

any insurer hoping to navigate through this difficult time, understanding how customer

behaviors and attitudes are changing is critical. Previous assumptions and received

wisdom about customers may no longer be reliable, and those insurers who are able to

respond best to what customers want now are most likely to succeed.

With the rise in affluence and increased product awareness, the middle class is fast

emerging as the most lucrative segment of the Indian market for financial services

companies. India has a large working population, with higher disposable income than in

the past and therefore a greater propensity to buy products to meet their growing

aspirations. However, due to rapidly evolving markets, customer loyalty to brands is

fickle and very much dependent on price points, customer service and innovative product

offerings. Only one in five Indian consumers say they are “extremely loyal” to their

favorite brands.

In light of this evolution, companies need to reevaluate their long-held beliefs about the

consumer in the Indian markets. Research shows there is strong evidence that customer

behaviors in India are changing and that some of these beliefs have become outdated. As

a result, it is important that insurers in this market will need to think differently if they are

to continue to be successful in attracting customers.

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Indian life Intermediaries continue to play an important role

Direct agents or independent intermediaries are currently the dominant channel for

distribution of life products, However, Indian consumers say that greater transparency

about products and performance, more personal contact with the provider, better offers

and better service would persuade them to reconsider — all of which give considerable

grounds for optimism to insurers as these are all factors that are strongly in their power to

influence.

While customers view the industry favorably, they still see it trailing behind other

industries, particularly in service quality and rewarding loyalty. Although overall

satisfaction rankings are currently high, younger consumers in particular are less inclined

to view the industry favorably, and issues around claims and mis-selling could indicate

trouble ahead.

Providers must respond better to customers changing needs

Insurers need to continually evolve their propositions to meet customers’ changing needs

and expectations, particularly for improved information and transparency, and to protect

against any potential claims of agent mis-selling, which would reflect poorly on the

providers. Insurers should also consider more frequent and improved communication

with customers, particularly at the time of purchase, making more concerted efforts to

ensure that the customer is aware of the terms and conditions of the policy through a

welcome kit or call. Such an approach would reassure customers that they have bought

the right product and provide an early opportunity to identify potential mis-selling.

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The approach to low-income customers needs review

Another area of focus for Indian insurers is to improve the quality of the offering for low-

income customers to help ensure that they get the right advice. This is likely to require a

close review of information provided by direct channels, which is this demographic

group’s preferred means of interaction with insurers. Again, this is especially important at

the time of purchase to help ensure that the customer fully understands the product

features. Insurance companies can work at improving certain service elements that can

bring more satisfaction to their customers especially in areas such as general

administration, helpfulness of the call center, billing, access to online services and

information etc.

Customer expects a lot while purchasing a life insurance product as it is a pure service.

Both desired and adequate expectation varies under different situation. It may be personal

or influenced by the surrounding. Apart from policy bond, claim, relationship building,

technology are few core area which have major impact on customers mind and finally

expectation. Multinational companies must consider various factors relating to customer

expectation and design service design accordingly.

Increasing market competition, heightened customer service expectations and the need to

build competencies that stand out from the competition are some of the key challenges

facing the insurance industry today. In response, insurance companies are expanding and

enhancing offerings, and searching for new customer segments. They are focusing on

better servicing of existing customers by improving response times and improving the

exchange of information.

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All of these efforts require that insurance companies do a better job of sharing

information across business units that traditionally have been isolated. To maintain

profits and provide shareholder value in this environment, insurance companies are more

aggressively trying to acquire competitors’ customers. At the same time insurance

customers have increasingly higher expectations for service. One of the greatest

challenges forcing the life insurance player is to differentiate its services through quality

improvement. With a greater choice and an increasing awareness, there is a continuous

increase in the customers’ expectations and they demand better quality service. As a

result, LIC and private players are competing with each other in each and every aspect of

their functioning i.e. from product designing to the settlement of claims and ensuring

benefits to the Indian customers.

To achieve customer expectations, insurance industry should employ strategic plans to

provide appropriate products and services. To do so, using customers’ point of view,

these organizations are supposed to measure their customers’ expectations and

satisfaction level in that these findings help them match their services with those in local

and global markets.

In a highly competitive industry that is not traditionally known for innovation, changes in

demographics, technology, and business models are creating significant new

opportunities for insurance companies to defend market share and grow revenues.

Insurers can either prosper by becoming more relevant, or continue along the same path

and see business slowly deteriorate as customers migrate to companies with more

innovative solutions and business models that better suit their needs.

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In today’s Internet- and mobile-enabled world, customer expectations are being shaped

by daily transactions and interactions with companies across various industries. The

inability of traditional insurance companies to deliver what consumers expect is creating

an opportunity for new entrants and niche players to erode the market shares of

incumbents. Young people are becoming a significant target segment for insurers and are

creating unprecedented opportunities for the insurance industry. Insurers can now create

and offer products and services that meet the specific needs of distinct customer groups.

Today, consumers have countless choices for products and services from a myriad of

companies across multiple channels. Greater use of the Internet for virtual

communication, entertainment, and commerce has also made customers much more

informed. This increased comfort level with new technologies has spawned a new breed

of consumers capable of quickly finding, evaluating, and purchasing products online.

With regard to insurance, people now use the Internet to find and compare products,

several companies are taking advantage of this trend to make it even easier for consumers

to buy from the lowest-cost provider.

Life insurance companies are at a critical juncture from a number of dimensions — not

only increased pressure on operating margins, but also from rising customer expectations.

Customers have higher expectations than ever before. Delivering a highly effective

customer experience that meets these expectations will likely require insurers to leverage

information management and analytics to better understand both customer requirements

and internal costs.

The critical role of analytics can help insurers in their efforts to create a more efficient

operating model that is focused on information and incorporates stronger decision

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making processes, around both customers and efficient operations. This ability should be

combined with the discipline and flexibility to adjust interactions and operations in a

cost-effective way.

The first step is to know the customers, gaining insight into their expectations and

requirements around product, service, and interaction. The second is to understand costs

in order to profitably meet those expectations. Finally, realigning the organization is

needed in order to quickly analyze information, make decisions, and take action. All three

of these actions can be beneficial to providing a highly effective customer experience.

Given the significant challenges insurance companies face today, it is important for

executives to think seriously about transforming their companies’ business models to

better understand and become more relevant to their customers. Doing so will not only

improve short-term results, but promote revenue growth, financial stability, and

prosperity. Recent trends, including heightened consumer expectations, new market

entrants and niche players, significant demographic shifts, and advances in technology,

have created an important window of opportunity for innovative insurers to reconsider

their strategies. Insurers that take steps to transform their business models to become

more customer relevant can improve employee and agent productivity, increase their

customer base, grow total lifetime customer value, and create additional revenue streams

from new business models. Thus, insurance companies will have to put a strong emphasis

on product innovation, strengthening core product proposition and exploring alternate

channels of distribution to match the consumer requirement and to keep up with

regulatory changes.

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8.5 PRODUCTIVITY CHALLENGES IN INDIAN INSURANCE SECTOR

As life insurance firms go on an expansion spree productivity of agents is likely to

become a key issue while insurers across the board talk of the best training levels

industry-specific studies indicate that productivity per agent perhaps needs a big lift. It

has been observed that most companies focus more on expanding networks and less on

improving agent productivity.

Insurance agents and brokers play an important role in marketing life insurance policies.

They are the face of the insurance company. Most of the insurance policies world over is

sold by insurance agents and brokers. To drive productivity and build loyalty among

distribution partners, insurance companies have to find ways to reward performers.

Insurance companies must perform this through quicker processing and better

management of commissions; through incentives and benefits and through preferential

services etc. To motivate agents to perform better, insurance companies must periodically

launch special offers and incentive schemes and offer flexible payment services, quicker

processing and accurate calculation of compensation to sustain loyalty among its agency

force.

Brokers and agents are essential sales and distribution channels for most insurance

insurers. Being able to effectively manage and improve sales channel performance is both

an operational and performance imperative. An accurate and complete understanding of

the producer network is needed in order to better segment, target and manage the channel

for improved sales performance and profitability. The ability of insurers to identify and

engage those agents that are best aligned with the company’s products and offerings at

the right time is a competitive advantage that translates into sales growth.

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Traditionally, agency channel has been the backbone of life insurance industry. But after

the slew of changes adopted by the regulator and insurers to revamp the agency force, the

distribution channel turns out to be expensive. Hence, insurers are becoming cautious

about the existing intermediaries and their productivity.

The rate of lapsation of policies can be linked with the declining strength of the agency

force to an extent. Lapsation ratio means the number of policies lapsed divided by the

average number of policies at the beginning and end of the year. Since this distribution

channel cannot be ruled out completely, insurers are in the process of reviving it in a

more effective manner.

The insurance industry in India has been growing at a remarkable pace after its opening

to the private players. Entry of new players into the industry has increased the

competition which facilitated insurance companies to design newer insurance products

according to the needs of insured. In a country like India where insurance penetration is

not so high, there should be an intermediary between the insurers and insured who would

not only identify and analyze insurance needs of insured but also advise the insurance

companies in designing the insurance products accordingly. Insurance agents play the

role of professional risk & insurance advisors who advise the client by analyzing the

operational risk exposures of the client and getting proper insurance policies with the best

lowest premium determined from amongst competing insurers.

Undoubtedly there is still a huge untapped or only partially tapped market for life and

health insurers in India. As with insurers worldwide the challenge is effective product

distribution. When deregulation came to India’s insurance market virtually the only

distribution channel was through tied agents. Mass recruitment led to quality and sales

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skill issues, and widespread complaints of misrepresentation of insurance plans. Most

agents consider insurance sales a secondary pursuit for additional income, and they often

rely on their immediate contacts to make sales this has led to high agent turnover and a

high percentage of policy lapses, which has affected insurers’ long-term profitability. The

IRDA took note of what had become a free-for-all in the life agent arena and in February

2011 and introduced new rules aimed at enhancing the professional standards of agents.

Among these, if an agent’s annual persistency ratio based on policy numbers is under

50% his or her license will not be renewed. The IRDA intends increasing the persistency

ratio hurdle to 75% in 2015-2016.With the assistance of the UK-based Chartered

Insurance Institute, the IRDA has also developed more stringent entry exams for agents.

These came into effect in October 2011.

Notably, a 2011 study by professional services firm Deloitte found that in India 88% of

individual agent sales are produced by the top 25% of agents. Private life insurers have

also begun trimming back on the number of branch offices they operate. Over the last few

years, several studies have shown that insurance agents are not working nearly as hard as

they once did. Additionally, productivity is declining as well. With that being said,

consumers are noticing the same thing when dealing with a current agent or attempting to

purchase a new policy. Reasons for low productivity can be attributed to an expansion

within this industry which is diluting professionals who have been working in this

capacity for many years. Insurance companies are hiring at such a fast pace that current

agents are not getting the appropriate training. Another reason for decreased productivity

is the increase of internet usage. Insurance agents who were forced to work long hours in

order to draw up new business are today purchasing leads online, and work on those until

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they make a few sales. While this sounds good in theory, some agents rely too much on

this and eventually phase out their marketing plan altogether.

Finally, a large number of insurance agents are finding it difficult to make a full-time

living in this industry. In order to make ends meet, many of them take up another job in

another field. This has adversely affected their productivity. New insurance agents need

to be very careful when entering the industry and even the agents who have been working

in insurance for many years have to put in quality hours in order to succeed. According to

the survey done by global actuarial consulting firm Milliman, low productivity of agents

is a major concern and improving that would involve significant efforts in training and

ongoing agent management activities. Indian insurance is a relatively new industry where

the rapid growth has increased the demand for trained workforce with specific skills in

sales, operations, product design and management. The future growth of the industry will

to a large extent depend on the supply of trained manpower.

Insurance is a difficult product to sell owing to the financial complexity, low financial

literacy and lack of awareness among the consumers of the need for such a product. Two

major areas of concern are instances of mis-selling and non-settlement of claims.

Moreover, the specialized needs of the industry in underwriting, actuarial, assessment and

risk management require investment in training and development. Some of the pertinent

issues faced by insurance companies are:

• Sustaining growth with scarcity of trained manpower

Increasing competition in the industry requires a steady supply of trained workforce. The

different product categories of life and general insurance require specialized skill sets in

various areas like sales effectiveness, product design, risk assessment, underwriting,

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claims settlement, and management. The decreasing stock of trained human resource has

put pressure on the growth plans of the companies.

• Customer Interfacing

Agency model of distribution requires a large investment in putting together the

necessary infrastructure for training of agents so that the business models are more

oriented towards providing financial advice to the customer than just selling. However,

with the overall financial literacy of the Indian population improving and with the agents

being the primary interface with the customer; they need to be well trained in all aspects

of insurance. Thus, the sales staff and agents need to be skilled in product knowledge and

sales effectiveness. The other aspect of customer interfacing is claims settlement where

the existing process is cumbersome .Specialized and trained investigators are required to

differentiate between genuine and fraud claims.

• Managing product development and life cycle

Most players in the industry sell products which may not be significantly differentiated

from competition. Differentiating product offering from the competition will necessitate

product development including underwriting, actuarial, risk assessment skills and

effectively managing product lifecycle for sustained growth. All of these are high skilled

jobs which necessitate technical training.

• Increasing process efficiency

The expansion mode of the industry has led to many players gaining presence across a

vast geography. In this expansion phase, insurers face the challenge of achieving high

efficiencies of processes. Training in technology enablement is necessary to bridge

distances and attain efficiencies.

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Training requirements at different levels of the organization is extremely vital in

increasing the productivity of employees and agents. Generally speaking, the importance

of training for any industry or firm cannot be over-emphasized. A structured training

program provides the following advantages:

• Optimum utilization of human resources -Training helps in molding the human resource

towards the organization’s objective thus making the best possible use of resources.

• Builds job skills of employees – Training enhances job-related knowledge of the

employees and thus increases their speed of delivery and improves customer servicing.

• Develops employees’ behavioral skills – Training assists in enhancing the soft-skills of

employees, thus facilitating personal growth .

Specific to insurance industry, training and development is of paramount importance at

this juncture. As any other industry in the growth phase, the insurance industry has the

capacity to create a large number of job opportunities.

An expanding industry together with high attrition levels has increased the number of

new recruits (employees and agents). These new joiners need to be imparted knowledge

on the specific company’s business model and sales philosophy. To complete the sale of

the insurance policy, there is also a need for strong interpersonal, networking and

communication skills. Though many of these skills can be learnt on the job, experience of

the industry has shown that structured sales and agent training is very important to lay the

foundation of a fruitful career for the sales managers and agents.

Training requirements in the insurance industry vary according to levels in the

organization. People in the insurance industry may be segmented into sales, non-sales and

senior management/ board and training programs may be designed accordingly. Training

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should be an integral part of the overall business plan of the organization to develop skills

in dealing with customers, industry and product knowledge, governance, compliance and

developing leaders and managers. Indian insurers must design the most appropriate

training module post considering organizational objectives, competencies required and

the most appropriate mode of training. Participant feedback needs to be analyzed in depth

in order to constantly improve the training modules.

Traditionally, agency channel has been the backbone of life insurance industry. But after

the slew of changes adopted by the regulator and insurers to revamp the agency force, the

distribution channel turns out to be expensive. Hence, insurers are becoming cautious

about the existing intermediaries and their productivity. The rate of lapsation of policies

can be linked with the declining strength of the agency force to an extent. Since this

distribution channel cannot be ruled out completely, insurers are in the process of

reviving it in a more effective manner.

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CHAPTER 9

DATA ANALYSIS AND HYPOTHESIS TESTING

9.1 PROFILE OF RESPONDENTS

The Classification of this Data pertains to data collected over four questions. It was felt

necessary to collect directly details of respondents pertaining to gender, age, and

experience and job level to get an overall profile about the employees and agents working

in insurance companies.

The relevant charts and figures pertaining to the data obtained with reference to the four

classification factors have been provided for the purpose of effective visual presentation

of sample distribution.

9.1.1 GENDER

Figure: 9.1.1 Classification of Data collected on the profile of Gender of the

respondents

Female33%

Male67%

Genderwise Distribution

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Figure: 9.1.1 shows the demographic profile of the respondents. The total respondents

were 596, male are 66.8 percent whereas female are 32.9 percent.

9.1.2 AGE

Figure 9.1.2: Classification of Data collected on the profile of Age of the respondents In Figure 9.1.2 we find that out of the total of 596 respondents, 15.1 percent are in 20-25

years group, 23.5 percent are in 26-30 years group, 18.8 percent are in 31-35 years group,

13.8 percent are in 36-40 years group, 10.9 percent are in 41-45 years group, 8.6 percent

is in 46-50 years group and 9.4 percent are in above 50 years group.

0

5

10

15

20

25

20-25 26-30 31-35 36-40 41-45 46-50 Above 50

15.1

23.5

18.8

13.8

10.9

8.6 9.4

Age group wise Respondent

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9.1.3 EXPERIENCE

Figure 9.1.3: Classification of data collected on the profile of experience of the respondents In Figure 9.1.3 we find that in terms of work experience about 55 percent had experience

below 5 years, 23.8 percent had experience between 5-10 years, 10.7percent had

experience between 11-15 years, and 10.4 percent had experience between 16-20 years.

9.1.4: JOB LEVEL

Figure 9.1.4: Classification of data collected on the profile of Job level of the respondents

Below 5 yrs55%

5-1024%

11-1511%

16-2010%

Experience in Years

4%

27%

9%60%

Job Level

Trainers Sales Managers Operations Agent

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In Figure 9.1.4 we find that in terms of job level the employees comprising of trainers,

sales managers and the operations make up 40.1 percent of the sample and the remaining

59.9 consists of agents.

9.2 RELIABILITY AND VALIDITY OF THE CONSTRUCT

9.2 .1: Reliability Statistics- Organizational Climate

Table 9.2 .1: Reliability Statistics- Organizational Climate

Cronbach's

Alpha Cronbach's Alpha Based on

Standardized Items N of Items

.949 .951 12

To assess the internal consistency of the items which made up each one of the constructs

of this study cronbach’s alpha coefficient were calculated. This is a general formula for

estimating the reliability of a test consisting of items on which different scoring weights

may be assigned to different responses.

Reliability refers to the consistency of scores obtained by the same person when re-

examined with the same test on different occasions or with different sets of equivalent

items or under variable examining conditions. SPSS version 20 was used to analyze the

data. In this research, Cronbach Alpha reliability coefficient for the organizational

climate questionnaire was found to be 0.949 which is within the acceptable range.

9.2 .2: Reliability Statistics- Retention

Table 9.2 .2: Reliability Statistics- Retention

Cronbach's

Alpha

Cronbach's Alpha Based

on Standardized Items N of Items

.867 .867 12

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The questionnaire was further tested for Cronbach Alpha α reliability to test the internal

consistency of the items to find the impact of organizational climate on retention and this

revealed a cronbach’s alpha coefficient of .867. Here split half reliability test was used

which is a method of assessing internal reliability by correlating scores from one half of

the items on an index or test with scores on the other half of the items. Guttman split half

co-efficient for the questionnaire was found to be .872 which is within the acceptable

range. Thus this was accepted as a reliable testing instrument.

9.2.3: Reliability Statistics- Customer Service

Table 9.2 .3: Reliability Statistics- Customer Service

Cronbach's

Alpha



.866 .868 12


consistency of the items to find the impact of organizational climate on customer service

and this revealed a cronbach’s alpha coefficient of .866. Here split half reliability test was

used which is a method of assessing internal reliability by correlating scores from one

half of the items on an index or test with scores on the other half of the items. Guttman

split half co-efficient for the questionnaire was found to be .834 which is within the

acceptable range. Thus this was accepted as a reliable testing instrument.

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9.2.4: Reliability Statistics- Productivity

Table 9.2 .4: Reliability Statistics- Productivity

Cronbach's

Alpha



.849 .849 10


consistency of the items to find the impact of organizational climate on productivity and

this revealed a cronbach’s alpha coefficient of .849. Here split half reliability test was

used which is a method of assessing internal reliability by correlating scores from one

half of the items on an index or test with scores on the other half of the items. Guttman

split half co-efficient for the questionnaire was found to be .828 which is within the

acceptable range. Thus this was accepted as a reliable testing instrument.

The researcher has collected responses from 240 employees and 356 agents across eight

different insurance companies. Hence the data to be analyzed is entirely primary data.

The objective of the analysis is to determine its statistical significance. For example,

whether there is correlation between the independent variable organizational climate and

the dependent variable retention, customer service and productivity if so what is the

strength of the relation, how much of variation in dependent variable is explainable and

have a model which can predict the value of dependent variable. Similarly it will be

important to know, statistically significant operational difference among the female &

male employees and employees & agents and among the different insurance companies

taken for the study on how they perceive organizational climate to affect employee/agent

retention, customer service and employee/agent productivity. For this the statistical tools

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of correlation, regression, chi square and ANOVA were used with the help of SPSS

version 20.

Output from SPSS package and inference drawn from the same is summarized below:

CORRELATION AND REGRESSION

Correlation analysis deals with the association between two or more variables (Gupta,

2005) Correlation was used because researcher wanted to know whether there is a

correlation between the independent variable organizational climate and the dependent

variable Retention, Customer service and Productivity . The Researcher used the Karl

Pearson’s method, popularly known as Pearson’s co-efficient of correlation as this

describes not only the magnitude of correlation but also its direction.

Once the correlation is established, regression output is obtained to determine statistically

significant causal relationship between independent and dependent variables. Here the

value of R2 which is the value of coefficient of determination determines the explainable

part of the dependent variable by the variation in the independent variable. Any value

was accepted as statistically significant only if it has a minimum significance of .05 or

95% confidence level.

The researcher used regression output to formulate a predictive model using the value of

independent variable organizational climate to predict the value of dependent variable of


Correlation and regression exercise has been done for:

1. Organizational Climate and Retention

2. Organizational Climate and Customer Service

3. Organizational Climate and Productivity

217

9.3. Correlation and Regression - Organizational Climate and Retention:

Here it is assumed that Organizational Climate is independent variable and Retention is

dependent variable. Organizational Climate has four variables namely Communication,

Career Development, Training, Performance Feedback.

The result of correlation analysis is tabulated below.

Table: 9.3.1: Pearson’s correlation co-efficient between Communication, Career


Communication Career Development

Training Performance Feedback

Retention .655 .564 .644 .626

Significance .01 .01 .01 .01

N= 596. N is the total sample size of this study

Independent Variable: Communication, Career Development, Training, Performance

Feedback.

Dependent Variable: Retention

From the above table it is clear that there is a positive correlation between Organizational

Climate variables such as Communication, Career Development, Training, Performance

Feedback and Retention. The above table shows that there is a positive correlation

between Communication and Retention and the strength of the relationship is .655

at.01significance or 99% confidence level. Career Development also has a positive co-

relation with Retention and the strength of the relation is .564 at .01 significance or 99%

confidence level. Training also has a positive correlation with Retention and the strength

of the relation is .644 at .01 significance or 99% confidence level. Performance feedback

218

also has a positive correlation with Retention and the strength of the relation is .626 at .01

significance or 99% confidence level.

To find out as to how much of variation in dependent variable is explained by the

variation in independent variable the researcher obtained the regression output of the

data. This research study also used regression analysis to illustrate the impact of

Organizational variables such as Communication, Career Development, Training, and

Performance Feedback on the dependent variable Retention

In order to construct a meaningful predictive model, regression output of data consisting

of Organizational Climate variables and Retention was done and the results are tabulated

below.

9.3.2 Regression Results of Model

Table 9.3.2 : Model Summary- Retention

Model R

R

Square

Adjusted R

Square

Std. Error of the

Estimate

1 .738 .545 .541 1.650

Independent Variable: Communication, Career Development, Training,

Performance Feedback


From the above tables the value of R2 is .545 which means that 54.5% of the variation in

Retention score can be explained by the model which includes variables such as

Communication, Career Development, Training, and Performance Feedback.

219

However to assess the statistical significance of the result, it is necessary to look at the

ANOVA table. The model in this research has a statistical significance ( sig=.000; where

p<.001)

Table 9.3.3: ANOVA- Retention

Model

Sum of

Squares df

Mean

Square F Sig.

1 Regression 1920.866 4 480.216 176.377 .000

Residual 1606.378 590 2.723

Total 3527.244 594

Independent Variable: Communication, Career Development, Training, Performance

Feedback. Dependent Variable: Retention

Table 9.3.4: Coefficient Matrix- Retention

Model

Unstandardized

Coefficients

Standardized

Coefficients t Sig.

B Std.

Error Beta

1 (Constant) 1.766 .555 3.184 .002

Communication .321 .047 .285 6.907 .000

Performance

feedback .298 .053 .224 5.634 .000

Training .283 .056 .216 5.018 .000

Career

development .249 .066 .140 3.749 .000

220

Independent Variable: Communication, Career Development, Training,

Performance Feedback


The regression co-efficient for the predictor variables; Communication, Career

Development, Training, Performance Feedback are .285, .224, .216 and.140 respectively.

The coefficient values show, the change in retention with a unit change in a variable

value, when all other variables are held constant. When we analyze the coefficient value

for the variable ‘Communication’ we can say that there is an increase of .285 in the

retention of an employee /agent for every unit increase in Communication, keeping all

other variables constant.

The multiple regression equation of this model is given below. The equation from the

SPSS output gives us the estimate of b-value and these indicate the individual

contribution of each predictor of the model. If we replace the b values in the equation, we

find that we can define the model as in equation.

The Regression Equation:

Y = α + β1 C +β2 PF + β3 T + β4 CD + ε

Where Dependent Variable: Y= Retention

Independent Variable: C= Communication, PF = Performance Feedback, T= Training,

CD= Career Development, ε= error term

Retention = 1.766 + 0.285 (Communication) + 0.224 (Performance Feedback) +

0.216 (Training) + 0.140 (Career Development).

221

9.4. Correlation and Regression - Organizational Climate and Customer Service

Here it is assumed that Organizational Climate is independent variable and Customer

Service is dependent variable. Organizational Climate has four variables namely Role

clarity, Direction, Quality of service, Work life policies.


Table 9.4.1 : Pearson correlation co-efficient between Role clarity, Direction,

Quality of service, Work life policies and Customer service.

Role clarity Direction Quality of service

Work life policies

Customer service

.715 .741 .696 .665



Independent Variable: Role clarity, Direction, Quality of service, Work life policies

Dependent Variable: Customer service


Climate variables such as Role clarity, Direction, Quality of service, Work life policies

and Customer service. The above table shows that there is a positive correlation between

Role clarity and Customer service and the strength of the relationship is .715 at.01

significance or 99% confidence level. Direction also has a positive co- relation with

Customer service and the strength of the relation is .741 at .01significance or 99%

confidence level. Quality of service also has a positive correlation with Customer service

and the strength of the relation is .696 at .01 significance or 99% confidence level. Work

life policies also have a positive correlation with Customer service and the strength of the

relation is .665 at .01 significance or 99% confidence level.

222




Organizational variables such as Role clarity, Direction, Quality of service, Work life

policies on the dependent variable Customer service.


of Organizational Climate variables and Customer service is done and the results are

tabulated below.


Table 9.4.2 Model Summary- Customer Service

Model R

R

Square

Adjusted R

Square

Std. Error of the

Estimate

1 .846 .715 .713 2.490

Independent Variable: Role clarity, Direction, Quality of service, Work life policies Dependent Variable: Customer service


Customer service score can be explained by the model which includes variables such as

Role clarity, Direction, Quality of service and Work life policies .However to assess the

statistical significance of the result, it is necessary to look at the ANOVA table. The

model in this research has a statistical significance ( sig=.000; where p<.001).

223

Table 9.4.3 : ANOVA- Customer Service

Model

Sum of

Squares df

Mean

Square F Sig.

1 Regression 9184.433 4 2296.108 370.373 .000

Residual 3657.678 590 6.199

Total 12842.111 594

Independent Variable: Role clarity, Direction, Quality of service, Work life policies Dependent Variable: Customer service

Table 9.4.4 : Coefficient Matrix- Customer Service

Model

Unstandardized

Coefficients

Standardized

Coefficients t Sig.

B Std. Error Beta

1 (Constant) 5.586 .845 6.610 .000

Direction .764 .081 .305 9.490 .000

Role clarity .728 .081 .277 9.038 .000

Quality of Service .600 .082 .226 7.289 .000

Work life policies .465 .068 .201 6.788 .000

Independent Variable: Role clarity, Direction, Quality of service, Work life policies. Dependent Variable: Customer service

The regression co-efficient for the predictor variables; Direction, Role clarity, Quality of

service, Work life policies are .305, .277, .226 and .201 respectively. The coefficient

values show, the change in Customer service with a unit change in a variable value, when

224

all other variables are held constant. When we analyze the coefficient value for the

variable ‘Direction’ we can say that there is an increase of .305 in the Customer service

rendered by an employee /agent for every unit increase in Direction, keeping all other

variables constant.






Y = α + β1 D +β2 RC + β3 QS + β4 WLP + ε

Where, Dependent Variable: Y= Customer Service

Independent Variable: D= Direction , RC = Role Clarity, QS= Quality of service, WLP

= Work life Policies, ε= error term

Customer Service= 5.586+0.305 (Direction) +0.277 (Role clarity) +0.226 (Quality of

service) +0.201 (Work life policies).

9.5. Correlation and Regression - Organizational Climate and Productivity

Here it is assumed that Organizational Climate is independent variable and Productivity

is dependent variable. Organizational Climate has four variables namely Reward and

Recognition, Innovation, Teamwork, Autonomy and Productivity.


225

Table 9.5.1 : Pearson’s correlation co-efficient between Reward and Recognition,

Innovation, Teamwork, Autonomy and Productivity.

Reward and Recognition

Innovation Teamwork Autonomy

Productivity

.679 .723 .727 .606



Independent Variable: Reward and Recognition, Innovation, Teamwork, Autonomy Dependent Variable: Productivity


Climate variables such as Reward and Recognition, Innovation, Teamwork, Autonomy

and Productivity. The above table shows that there is a positive correlation between

Reward and Recognition and Productivity and the strength of the relationship is .679

at.01 significance or 99% confidence level. Innovation also has a positive co- relation

with Productivity and the strength of the relation is .723 at .01 significance or 99%

confidence level. Teamwork also has a positive correlation with Productivity and the

strength of the relation is .727 at .01 significance or 99% confidence level. Autonomy

also have a positive correlation with Productivity and the strength of the relation is .606

at .01 significance or 99% confidence level.




Organizational variables such as Reward and Recognition, Innovation, Teamwork,

Autonomy on the dependent variable Productivity

226


of Organizational Climate variables and Productivity is done and the results are tabulated

below.


Table 9.5.2: Model Summary- Productivity

Model R

R

Square

Adjusted R

Square

Std. Error of the

Estimate

1 .871 .759 .757 2.485

Independent Variable: Reward and Recognition, Innovation, Teamwork,

Autonomy

Dependent Variable: Productivity


Productivity score can be explained by the model which includes variables such as

Reward and Recognition, Innovation, Teamwork, Autonomy.

However to assess the statistical significance of the result, it is necessary to look at the

ANOVA table. The model in this research has a statistical significance ( sig=.000; where

p<.001).

Table 9.5.3 :ANOVA- Productivity

Model

Sum of

Squares df

Mean

Square F Sig.

1 Regression 11453.038 4 2863.259 463.726 .000

Residual 3642.936 590 6.174

Total 15095.973 594

227

Independent Variable: Reward and Recognition, Innovation, Teamwork, Autonomy

Dependent Variable: Productivity.

Table 9.5.4: Coefficient Matrix- Productivity

Model

Unstandardized

Coefficients

Standardized

Coefficients t Sig.

B

Std.

Error Beta

1 (Constant) 3.841 .819 4.689 .000

Teamwork .777 .073 .295 10.668 .000

Reward and

Recognition 2.189 .151 .346 14.528 .000

Innovation .686 .071 .275 9.678 .000

Autonomy .514 .072 .182 7.180 .000

Independent Variable: Teamwork, Reward and Recognition, Innovation, Autonomy Dependent Variable: Productivity

The regression co-efficient for the predictor variables; Teamwork, Reward and

Recognition, Innovation, Autonomy are .295, .346, .275 and .182 respectively. The

coefficient values show, the change in Productivity with a unit change in a variable value,

when all other variables are held constant. When we analyze the coefficient value for the

variable ‘Reward and Recognition’ we can say that there is an increase of .346 in the

Productivity of an employee /agent for every unit increase in Reward and Recognition,

keeping all other variables constant.

228






Y = α + β1 TW +β2 RR + β3 I + β4 A + ε

Where, Dependent Variable: Y= Customer Service

Independent Variable: TW= Team work , RR = Reward & Recognition, I=Innovation,

A = Autonomy, ε= error term

Productivity = 3.841+0.295 (Team Work) +0.346 (Reward &Recognition) +0.275

(Innovation) +0.182 (Autonomy).

INDEPENDENT SAMPLE T-TEST

The independent sample t-test was used to analyze the data to find the differences in the

perception of male and female, employees & agents on how they perceive the

organizational climate to affect retention. Independent sample t-test compares the means

of two unrelated groups on the same continuous, dependent variables.

9.6 T-Tests - Retention

Table9.6.1: Group Statistics - Retention

Gender N Mean Standard

Deviation

Standard

Error Mean

Retention Female 198 16.29 2.155 .153

Male

398 16.28 2.572 .129

229

This gives the descriptive statistics for each of the two groups as defined by the grouping

variable; in this case it is male and female. There are 198 females, and they have an

average, 16.29 with a standard deviation of 2.155. There are 398 males and they have an

average, 16.28 with a standard deviation of 2.572. The last column gives the standard

error of the mean for each of the two groups.

This shows that the female perceive the organizational climate variables such as

Communication, Performance Feedback, Training and Career Development as an

important variable affecting retention more than males.

Table 9.6.2 : Independent Samples Test- Retention

Levene's Test for Equality

of Variances

t-test for Equality of Means

Retention F Sig. t df Sig.(2 tailed)

.070 460.363 .944

From the above table it is assumed that sig (2 tailed) value is .944 is not less than or equal

to .05, so we fail to reject the null hypothesis. This implies that we failed to observe

differences of impact of independent variable organizational climate on Retention to

gender.The t- test failed to reveal a statistically reliable difference between the mean

values of male perception (M=16.28,s= 2.572) and that of the mean values of female

perception (M=16.29,s=.2.155),t(460)=0.070 p=0.944, α= 0.05.

It proves that the independent variable organizational climate consisting of factors

Communication, Performance Feedback, Training and Career Development does not

have any impact on the dependent variable Retention with respect to gender.

230



organizational climate to affect customer service. Independent sample t-test compares the

means of two unrelated groups on the same continuous, dependent variables.

9.7 T-Tests – Customer Service

Table 9.7.1: Group Statistics – Customer Service


Deviation

Standard

Error Mean

Customer

Service

Female 197 37.24 4.440 .316

Male

398 37.38 4.755 .238






This shows that the males perceive the organizational climate variables such as Role

clarity, Direction, Quality of service, Work life policies as an important variable affecting

customer service more than females.

231

Table 9.7.2 : Independent Samples Test – Customer Service

Levene's Test for

Equality of Variances


F Sig. t df Sig. (2-tailed)

Customer Service

.152 .696 -.347 593 .728



differences of impact of independent variable organizational climate on Customer Service

to gender. The t- test failed to reveal a statistically reliable difference between the mean

values of male perception (M=37.38,s= 4.755) and that of the mean values of female

perception (M=37.24,s=.4.440), t (593)=-.347 p=.728, α= 0.05.

It proves that the independent variable organizational climate consisting of factors Role

clarity, Direction, Quality of service, Work life policies does not have any impact on the

dependent variable Customer Service with respect to gender.



organizational climate to affect productivity. Independent sample t-test compares the

means of two unrelated groups on the same continuous, dependent variables.

232

9.8 T-Tests

Table 9.8.1: Group Statistics - Productivity


Deviation

Standard

Error Mean

Productivity Female 197 37.24 4.728 .337

Male 398 37.57 5.191 .260






This shows that the males perceive the organizational climate variables such as Reward

and Recognition, Innovation, Teamwork, Autonomy as an important variable affecting

productivity more than females.

Table 9.8.2 Independent Samples Test- Productivity

Levene's Test for

Equality of Variances


Productivity


.043 .836 -.749 593 .454

233



differences of impact of independent variable organizational climate on productivity to

gender. The t- test failed to reveal a statistically reliable difference between the mean

values of male perception (M=37.57, s= 5.191) and that of the mean values of female

perception (M=37.24, s=.4.728), t (593)=-.749 p=.454, α= 0.05.

It proves that the independent variable organizational climate consisting of factors

Reward and Recognition, Innovation, Teamwork, Autonomy does not have any impact

on the dependent variable Productivity with respect to gender.

PEARSON’S CHI-SQUARE TEST

9.9: Chi Square test - Retention

The Chi-Square Tests was used to analyze the data to find the differences in the

perception of employees & agents on how they perceive the organizational climate to

affect retention.

Table 9.9.1: Chi Square Test: Retention * Job level Job level Total Employees Agents Retention Low Count 95 105 200 % within Job

level 39.6% 29.5% 33.6%

Moderate Count 84 119 203 % within Job

level 35.0% 33.4% 34.1%

High Count 61 132 193 % within Job

level 25.4% 37.1% 32.4%

Total Count 240 356 596 % within Job

level 100.0% 100.0% 100.0%

234

In the given sample,

39.6% of the employees and 29.5% of the agents from various insurance

companies do not strongly perceive that the organizational climate variables of a

company can impact employee/agent retention.

35% of the employees and 33.4% of the agents moderately perceive that the

organizational climate variables have an impact on employee/agent retention.

25.4% of the employees and 37.1% of the agents strongly perceive that the

organizational climate variables of a company can impact employee/agent

retention.

Table 9.9.2 : Chi-Square Tests - Retention

Value df Asymp. Sig. (2-

sided) Pearson Chi-Square 10.473 2 .005

N of Valid Cases 596

A chi-square test of independence was used to analyze the data to find the differences in

the perception of employees and agents on how they perceive the organizational climate

to affect retention. The chi-square test revealed that there was a significant difference in

the perception of employees and agents regarding the impact of organizational climate on

employee/ agent retention and the findings were (χ2 (2, N=596) = 10.47, P<.005).



affect Customer Service.

235

9.10: Chi Square test – Customer Service



affect Customer Service.

Table 9.10.1 : Chi Square Test: Customer Service * Job level Job level Total Employees Agents Customer Service

Low Count 88 100 188

% within Job level 36.7% 28.2% 31.6%

Moderate Count 100 123 223 % within Job

level 41.7% 34.6% 37.5%

High Count 52 132 184 % within Job

level 21.7% 37.2% 30.9%

Total Count 240 355 595 % within Job

level 100.0% 100.0% 100.0%




company can impact Customer Service.

41.7% of the employees and 34.6% of the agents moderately perceive that the

organizational climate variables have an impact on Customer Service.


organizational climate variables of a company can impact Customer Service.

236

Table 9.10.2 : Chi-Square Tests – Customer Service Value df Asymp. Sig. (2-sided)

Pearson Chi-Square 16.303 2 .000




to affect Customer Service. The chi-square test revealed that there was a significant

difference in the perception of employees and agents regarding the impact of

organizational climate on customer service and the findings were (χ2 (2, N=595) = 16.30,

P<.001).

9.11: Chi Square test – Productivity



affect Productivity.

Table 9.11.1: Chi Square Test: Productivity * Job level Job level Total Employees Agents Productivity Low Count 97 94 191 % within

Job level 40.4% 26.5% 32.1%

Moderate Count 88 108 196 % within

Job level 36.7% 30.4% 32.9%

High Count 55 153 208 % within

Job level 22.9% 43.1% 35.0%

Total Count 240 355 595 % within

Job level 100.0% 100.0% 100.0%

237




company can impact Productivity.

36.7% of the employees and 30.4% of the agents moderately perceive that the

organizational climate variables have an impact on Productivity.


organizational climate variables of a company can impact Productivity.

Table 9.11.2 : Chi-Square Tests – Productivity Value df Asymp. Sig. (2-sided)

Pearson Chi-Square 27.044 2 .000




to affect Productivity. The chi-square test revealed that there was a significant difference

in the perception of employees and agents regarding the impact of organizational climate

on employee /agent productivity and the findings were (χ2 (2, N=595) = 27.044,

P<.001).

9.12 : ANOVA

Table 9.12.1 :ANOVA test for companies –Impact of organizational climate on retention

Sum of Squares df

Mean Square F Sig.

238

Retention Between

Groups 419.851 7 59.979 11.299 .000

Within Groups 3121.228 588 5.308

Total 3541.079 595

One way ANOVA was used to analyze the data to find the differences in the perception

of various insurance companies chosen for the study namely LIC, Max New York,

Reliance Life, HDFC, Bajaj Allianz, ING Vysya, ICICI Prulife and Tata AIG on how

they perceived organizational climate of a company to affect employee / agent retention.

The findings revealed that the two mean squares were (59.979 and 5.308) resulting in a

significant difference (F 11.299; sig = .000).

Thus the result showed that there is a significant difference in the perception of the

companies on how they perceived the organizational climate of a company to impact

employee and agent retention.

Table 9.12.2 :ANOVA test for companies –Impact of organizational climate on

Customer Service

Sum of Squares df

Mean Square F Sig.

Customer

Service

Between

Groups 2495.823 7 356.546 20.229 .000

Within Groups 10346.288 587 17.626

Total 12842.111 594

239




they perceived organizational climate of a company to impact customer service. The

findings revealed that the two mean squares were (356.546and 17.626) resulting in a

significant difference (F 20.229; sig = .000). Thus the result showed that there is a

significant difference in the perception of the companies on how they perceived the

organizational climate of a company impacts customer service.

Table 9.12.3 : ANOVA test for companies – Impact of organizational climate on Productivity

Sum of

Squares df

Mean

Square F Sig.

Productivity Between

Groups 2657.034 7 379.576 17.912 .000

Within

Groups 12438.939 587 21.191

Total 15095.973 594




they perceived organizational climate of a company to impact productivity. The findings

revealed that the two mean squares were (379.576 and 21.191) resulting in a significant

difference (F 17.912; sig = .000). Thus the result showed that there is a significant

240

difference in the perception of the companies on how they perceived the organizational

climate of company impacts employee/agent productivity.

The multiple comparisons output gives the result of the Post-Hoc Tests. The results from

the sample ( see annexure 3 Post-Hoc tests ) reveals the following about the eight

insurance companies taken for the study namely LIC, Max New York, Reliance Life,

HDFC, Bajaj Allianz, ING Vysya, ICICI Prulife and Tata AIG.

Reliance Life is the only company showing significant difference in their

perception on how they perceive the organizational climate of a company to

impacts employee/agent Retention, Customer Service and employee /agent

productivity with all other companies taken for the study.

Most of the companies are showing significant difference in their perception on

how they perceive the organizational climate of a company to impact

employee/agent Retention, Customer Service and employee /agent productivity

with ICICI Pru Life except Bajaj Allianz which shows no significant difference.

There is no significant difference among insurance companies like LIC, Max New

York, HDFC, Bajaj Allianz, ING Vysya, and Tata AIG in their perception of how

an organizational climate of a company impacts employee/agent Retention,

Customer Service and employee /agent productivity.

9.13 HYPOTHESIS TESTING

1. Organizational Climate and its impact on Employee/Agent Retention in Indian

Insurance Companies.

H01: No significant relationship exists between Communication, Career


241



In the analysis of data for testing hypothesis 1 we have used statistical tool of Correlation

and Regression. Communication, Career Development, Training, Performance Feedback

are independent variables and Retention is taken as the dependent variable.

Based on correlation analysis it is evident that there is a significant positive relationship

between Communication and Retention (r= 0.655**,sig=.01) between Career

Development and Retention (r=0.564**,sig=.01) between Training and Retention

(r=0.644**,sig=.01) and between Performance Feedback and Retention

(r=0.626**,sig=.01).

Thus the analysis of the result indicates there is a significant relationship between all the

four independent variables of Organizational Climate namely Communication, Career

Development, Training and Performance Feedback and the dependent variable Retention.

The correlation coefficient is significant at 0.01 level.

This research study also used Regression analysis to illustrate the impact of

Organizational variables such as Communication, Performance Feedback, Training,

Career Development on Retention. Regression summary shows how much of the variance

in the dependent variable Retention is explained by the model which includes variables

like Communication, Performance Feedback, Training, Career Development. In this

research R2 is .545. It means the model explains 54.5% of the variance in Retention.

The researcher also found that the largest beta coefficient is .285 which was for

Communication. This means that this variable makes a significant or unique contribution

to explain the dependent variable Retention, when the variable explained by all other

242

variables in the model is controlled. The beta value for Performance Feedback is (0.224),

Training is (0.216), and Career Development is (0.140) and these made less of a

contribution. And since the P value is less than .05 for all the Organizational Climate

variables impacting Retention, we can say it makes a significant contribution to the

prediction of the dependent variable Retention.

Hence the alternative hypothesis (H11) i.e. there is a significant relationship

between Communication, Career Development, Training, Performance

Feedback and Retention is supported and is therefore accepted.

And the null hypothesis (H01) i.e. No significant relationship exists between

Communication, Career Development, Training, Performance Feedback and

Retention is rejected.

2. Organizational Climate and its impact on Customer Service in Indian Insurance

Companies.

H02: No significant relationship exists between Role Clarity, Direction, Quality of





and Regression. Role Clarity, Direction, Quality of Service, Work life Policies are

independent variables and Customer Service is taken as the dependent variable.


between Role Clarity and Customer Service (r= 0.715**,sig=.01) between Direction and

Customer Service (r=0.741**,sig=.01) between Quality of Service and Customer Service

243

(r=0.696**,sig=.01) and between Work life Policies and Customer Service (r=

0.665**,sig=.01) .Thus the analysis of the result indicates there is a significant

relationship between all the four independent variables of Organizational Climate namely

Role Clarity, Direction, Quality of Service, Work life Policies and the dependent variable

Customer Service. The correlation coefficient is significant at 0.01 level.


Organizational variables such as Role Clarity, Direction, Quality of Service, Work life

Policies on Customer Service. Regression summary shows how much of the variance in

the dependent variable Customer Service is explained by the model which includes

variables like Role Clarity, Direction, Quality of Service, Work life Policies. In this

research R2 is .715. It means the model explains 71.5% of the variance in Customer

Service.

The researcher also found that the largest beta coefficient is .305 which was for

Direction. This means that this variable makes a significant or unique contribution to

explain the dependent variable Customer Service, when the variable explained by all

other variables in the model is controlled. The beta value for Role Clarity is (0.277),

Quality of Service is (0.226), and Work life Policies is (0.201) and these made less of a

contribution. And since the P value is less than .05 for all the Organizational Climate

variables impacting Customer Service, we can say it makes a significant contribution to

the prediction of the dependent variable Customer Service.


between Role Clarity, Direction, Quality of Service, Work life Policies and

Customer Service is supported and is therefore accepted.

244

And the null hypothesis (H02) i.e. No significant relationship exists between Role

Clarity, Direction, Quality of Service, Work life Policies and Customer Service is

rejected.

3. Organizational Climate and its impact on Productivity in Indian Insurance

Companies.

H03: No significant relationship exists between Reward & Recognition,





and Regression. Reward & Recognition, Innovation, Team work, Autonomy are

independent variables and Productivity is taken as the dependent variable.


between Reward & Recognition and Productivity (r= 0.679**,sig=.01) between

Innovation and Productivity (r=0.723**,sig=.01) between Team work and Productivity

(r=0.727**,sig=.01) and between Autonomy and Productivity (r= 0.606**,sig=.01) .Thus

the analysis of the result indicates there is a significant relationship between all the four

independent variables of Organizational Climate namely Reward & Recognition,

Innovation, Team work, Autonomy and Productivity and the dependent variable

Productivity. The correlation coefficient is significant at 0.01 level.


Organizational variables such as Reward & Recognition, Innovation, Team work,

Autonomy on Productivity. Regression summary shows how much of the variance in the

245

dependent variable Productivity is explained by the model which includes variables like

Reward & Recognition, Innovation, Team work, Autonomy. In this research R2 is .759.

It means the model explains 75.9% of the variance in Productivity.

The researcher also found that the largest beta coefficient is .346 which was for Reward

& Recognition. This means that this variable makes a significant or unique contribution

to explain the dependent variable Productivity, when the variable explained by all other

variables in the model is controlled. The beta value for Team work is (0.295), Innovation

is (0.275), and Autonomy is (0.182) and these made less of a contribution. And since the

P value is less than .05 for all the Organizational Climate variables impacting

Productivity, we can say it makes a significant contribution to the prediction of the

dependent variable Productivity.


between Reward & Recognition, Innovation, Team work, Autonomy is

supported and is therefore accepted.

And the null hypothesis (H03) i.e. No significant relationship exists between

Reward & Recognition, Innovation, Team work, Autonomy and Productivity is

rejected.

4. Perception of male and female employee’s & agent’s regarding the impact of

organizational climate on employee/ agent retention.

H04: There exists no significant difference in the perception of male and female,


agent retention.

246



agent retention.

In the analysis of data for testing hypothesis 4 we have used Independent Samples Test

as the statistical tool. Independent Samples Test was used to analyze the data to find the

differences in the perception of male and female employees & agents on how they

perceive the organizational climate to affect retention. The t- test failed to reveal a

statistically reliable difference between the mean values of male perception (M=16.28,s=

2.572) and that of the mean values of female perception (M=16.29,s=.2.155),

t(460)=0.070 p=0.944, α= 0.05.Based on the analysis of the t- Test it is evident that there

is no significant difference in the perception of male and female employees and agents on

how they perceive the organizational climate to affect retention.

Hence the alternative hypothesis (H14) i.e. there exists a significant difference in

the perception of male and female, employees & agents’ regarding the impact of

organizational climate on employee / agent retention is rejected.

And the null hypothesis (H04) i.e. there exists no significant difference in the

perception of male and female, employees & agents regarding the impact of

organizational climate on employee/ agent retention is supported and

therefore accepted.


organizational climate on customer service.

247

H05: There exists no significant difference in the perception of male and female,


service.



service.



differences in the perception of male and female employees and agents on how they

perceive the organizational climate to affect customer service. The t- test failed to reveal

a statistically reliable difference between the mean values of male perception

(M=37.38,s=4.755) and that of the mean values of female perception (M=37.24,s=4.440),

t(593)=-.347,p=.728, α= 0.05.Based on the analysis of the t- Test it is evident that there is

no significant difference in the perception of male and female employees and agents on

how they perceive the organizational climate to affect customer service.

Hence the alternative hypothesis (H15) i.e. There exists a significant difference in

the perception of male and female, employees & agents regarding the impact of

organizational climate on customer service is rejected.

And the null hypothesis (H05) i.e. H05: There exists no significant difference in

the perception of male and female, employees & agents regarding the impact

of organizational climate on customer service is supported and therefore

accepted.

248


organizational climate on employee/ agent productivity.

H06: There exists no significant difference in the perception of male and female








differences in the perception of male and female employees and agents on how they

perceive the organizational climate to affect employee /agent productivity. The t- test

failed to reveal a statistically reliable difference between the mean values of male

perception (M=37.57, s= 5.191) and that of the mean values of female perception

(M=37.24, s=.4.728), t (593)=-.749 p=.454, α= 0.05.Based on the analysis of the t- Test it

is evident that there is no significant difference in the perception of male and female

employees & agents on how they perceive the organizational climate to affect employee


Hence the alternative hypothesis (H16) i.e. There exists a significant difference in

the perception of male and female, employees & agents regarding the impact of

organizational climate on employee /agent productivity is rejected.


perception of male and female employees & agents regarding the impact of

249

organizational climate on employee /agent productivity is supported and

therefore accepted.

7. Perception of employee’s and agent’s regarding the impact of organizational

climate on employee/ agent retention.

H07: There exists no significant difference in the perception of employees and


retention.



retention.

In the analysis of data for testing hypothesis 7 we have used Pearson’s Chi square as the

statistical tool. Chi-square test of independence was used to analyze the data to find the

differences in the perception of employees and agents on how they perceive the

organizational climate to affect retention. Based on the Chi-Square tests it is evident that

there is a significant difference in the perception of employees and agents on how they

perceive the organizational climate to affect retention the findings were (χ2 (2, N=596) =

10.47, P<.005).

Among the employees of various insurance companies taken for the survey a majority of

them (39.6%) had a very low perception and did not strongly feel that the organizational

climate of the company can affect employees and agent retention. Whereas a larger

majority of the agents (37.1%) had very high perception and strongly felt that the

organizational climate of the company is a contributing factor which affects employee

and agent retention.

250

Hence the alternative hypothesis (H17) i.e. there exists a significant difference

in the perception of employees and agents’ regarding the impact of

organizational climate on employee/ agent retention is supported and

therefore accepted.

And the null hypothesis (H07) i.e. there exists a significant difference in the

perception of employees and agents’ regarding the impact of organizational

climate on employee / agent retention is rejected.


climate on Customer Service.








organizational climate to affect Customer Service. Based on the Chi-Square tests it is

evident that there is a significant difference in the perception of employees and agents on

how they perceive the organizational climate to affect Customer Service the findings

were (χ2 (2, N=595) = 16.303, P<.001).


them (41.7%) had a very moderate perception and did not strongly feel that the

organizational climate of the company can affect Customer Service. Whereas a larger

251


organizational climate of the company is a contributing factor which affects Customer

Service.

Hence the alternative hypothesis (H18) i.e. there exists a significant difference in

the perception of employees and agents regarding the impact of organizational

climate on customer service is supported and therefore accepted.



climate on customer service is rejected.


climate on employee /agent productivity.



productivity.



productivity.




organizational climate to affect employee /agent productivity. Based on the Chi-Square

tests it is evident that there is a significant difference in the perception of employees and

252

agents on how they perceive the organizational climate to affect employee /agent

productivity the findings were (χ2 (2, N=595) = 27.044, P<.001).



climate of the company can affect employee /agent productivity. Whereas a larger




Hence the alternative hypothesis (H19) i.e. there exists a significant difference

in the perception of employees and agents regarding the impact of

organizational climate on employee /agent productivity is supported and

therefore accepted.



climate on employee /agent productivity is rejected.

10. Perception of Insurance Companies regarding the impact of organizational


H010: There exists no significant difference in the perception of different insurance






253

In the analysis of data for testing hypothesis 10 we have used One way ANOVA as the

statistical tool. One way ANOVA was used to analyze the data to find the differences in

the perception of various insurance companies chosen for the study namely LIC, Max

New York, Reliance Life, HDFC, Bajaj Allianz, ING Vysya, ICICI Prulife and Tata AIG

on how they perceived organizational climate of a company to affect employee / agent

retention. The findings revealed that the two mean squares were (59.979 and 5.308)

resulting in a significant difference (F 11.299; sig = .000). Thus the result showed that

there is a significant difference in the perception of the companies on how they perceived

the organizational climate of a company to impact employee and agent retention.

Hence the alternative hypothesis (H110) i.e. there exists a significant

difference in the perception of different insurance companies under study

regarding the impact of organizational climate on employee/ agent retention

is supported and is therefore accepted.


perception of different insurance companies under study regarding the impact of

organizational climate on employee/ agent retention is rejected.


climate on customer service.



customer service.

254



customer service.





on how they perceived organizational climate of a company to affect customer service.

The findings revealed that the two mean squares were (356.546and 17.626) resulting in a

significant difference (F 20.229; sig = .000). Thus the result showed that there is a

significant difference in the perception of the companies on how they perceived the

organizational climate of a company to impact customer service.



regarding the impact of organizational climate on customer service is

supported and is therefore accepted.



organizational climate on customer service is rejected.



255











on how they perceived organizational climate of a company to affect employee /agent

productivity. The findings revealed that the two mean squares were (379.576 and 21.191)

resulting in a significant difference (F 17.912; sig = .000) .Thus the result showed that

there is a significant difference in the perception of the companies on how they perceived

the organizational climate of a company to impact employee /agent productivity.



regarding the impact of organizational climate on employee /agent

productivity is supported and is therefore accepted.



organizational climate on employee /agent productivity is rejected.

These hypotheses have been summarized in a tabular format given below.

256

TABLE 9.13.1 : RESULTS OF HYPOTHESIS TESTING

Sr No Null Hypothesis Alternative Hypothesis

H1 H01 - No significant relationship

exists between Communication,

Career Development, Training,

Performance Feedback and

Retention

REJECTED

H11: There is a significant relationship

between Communication, Career

Development, Training, Performance

Feedback and Retention.

ACCEPTED

H2 H02: No significant relationship

exists between Role Clarity,

Direction, Quality of Service,

Work life Policies and Customer

Service.

REJECTED


between Role Clarity, Direction, Quality of

Service, Work life Policies and Customer

Service.

ACCEPTED

H3 H03: No significant relationship

exists between Reward &

Recognition, Innovation, Team

work, Autonomy and

Productivity.

REJECTED


between Reward & Recognition,

Innovation, Team work, Autonomy and

Productivity.

ACCEPTED

H4 H04: There exists no significant

difference in the perception of

male and female, employees and

H14: There exists a significant difference in

the perception of male and female,

employees and agents regarding the impact

257

agents regarding the impact of

organizational climate on


ACCEPTED

of organizational climate on employee/

agent retention.

REJECTED



male and female, employees and



customer service.

ACCEPTED

H15: There exists a significant difference

in the perception of male and female,

employees and agents regarding the

impact of organizational climate on

customer service.

REJECTED



male and female employees and




ACCEPTED


in the perception of male and female,

employees and agents regarding the



REJECTED



employees and agents regarding

the impact of organizational

climate on employee/ agent


in the perception of employees and agents

regarding the impact of organizational


258

retention.

REJECTED

ACCEPTED






REJECTED

H18: There exists a significant difference in

the perception of employees and agents



ACCEPTED





climate on employee /agent

productivity.

REJECTED


in the perception of employees and agents



ACCEPTED

H10

H010: There exists no significant


different insurance companies

under study regarding the impact

of organizational climate on


REJECTED


in the perception of different insurance

companies under study regarding the



ACCEPTED

259






customer service.

REJECTED





customer service.

ACCEPTED







REJECTED






ACCEPTED

261

CHAPTER 10

MAJOR FINDINGS

During the survey and data collection some useful insights were obtained, both from

employees as well as agents of various insurance companies. Some of the important

findings are summarized below:

1. Organizational Climate and its impact on employee/agent retention in Indian


The research has clearly shown that in the opinion of employees and agents of insurance

company taken for survey the most important Organizational Climate factors influencing

employee/agent Retention are Communication, Career Development, Training and

Performance Feed Back. It was found through correlation analysis that the

Organizational Climate factor ‘Communication’ had the strongest relationship with

Retention followed by Training, Performance Feedback and Career Development.

It was also found through regression analysis that the largest beta coefficient was for the

factor ‘Communication’. This means that this factor makes a significant contribution to

explain the dependent variable ‘Retention’, and this was followed by Performance

Feedback, Training and Career Development.

2. Organizational Climate and its impact on Customer Service in Indian




Customer Service are Role Clarity, Direction, Quality of Service, Work life Policies. It

262

was found through correlation analysis that the Organizational Climate factor ‘Direction’

had the strongest relationship with Customer Service followed by Role Clarity, Quality of

Service, Work life Policies.


factor ‘Direction’. This means that this factor makes a significant contribution to explain

the dependent variable ‘Customer Service’, and this was followed by Role Clarity,

Quality of Service, Work life Policies.

3. Organizational Climate and its impact on Productivity in Indian Insurance

Companies.



Productivity are Reward and Recognition, Innovation, Teamwork and Autonomy. It was

found through correlation analysis that the Organizational Climate factor ‘Team Work’

had the strongest relationship with Productivity followed by Innovation, Reward &

Recognition and Autonomy.


factor ‘Reward & Recognition’. This means that this factor makes a significant

contribution to explain the dependent variable ‘Productivity’, and this was followed by

Team work, Innovation and Autonomy.


organizational climate on employee/ agent retention.

The Research showed that there was no significant difference in the opinion of male and

female, employees and agents regarding the impact of organizational climate factors such

263

as Communication, Career Development, Training and Performance Feed Back on

employee/ agent retention. The findings also reveal that female perceive the

organizational climate variables such as Communication, Performance Feedback,

Training and Career Development as an important variable affecting retention more than

males.


organizational climate on Customer Service.

The Research showed that there was no significant difference in the opinion of male and

female, employees & agents regarding the impact of organizational climate factors such

as Role Clarity, Direction, Quality of Service, Work life Policies on Customer Service.

The findings also reveal that males perceive the organizational climate variables such as

Role clarity, Direction, Quality of service, Work life policies as an important variable

affecting customer service more than females.


organizational climate on employee/ agent Productivity.

The research showed that there was no significant difference in the opinion of male and

female, employees & agents regarding the impact of organizational climate factors such

as Reward and Recognition, Innovation, Teamwork, Autonomy on employee/ agent

Productivity. The findings also reveal that males perceive the organizational climate

variables such as Reward and Recognition, Innovation, Teamwork, Autonomy as an

important variable affecting productivity more than females.

264



The research showed that there was a significant difference in the employees and agents

perception on whether the Organizational Climate affects employee and agent retention

There was a significant difference as to the effect of organizational Climate factors

Communication, Career Development, Training and Performance Feed Back on

employee/agent retention.



climate of the company can affect employees and agent retention. Whereas a larger



and agent retention.




perception on whether the Organizational Climate affects Customer Service. There was a

significant difference as to the effect of organizational Climate factors Role Clarity,

Direction, Quality of Service, Work life Policies on Customer Service.


them (41.7%) had a very moderate perception and did not strongly feel that the

organizational climate of the company can affect Customer Service. Whereas a larger


265

organizational climate of the company is a contributing factor which affects Customer

Service.


climate on employee/agent productivity.


perception on whether the Organizational Climate affects Productivity. There was a

significant difference as to the effect of Organizational Climate factors Reward and

Recognition, Innovation, Teamwork, Autonomy on Productivity.



climate of the company can affect employee /agent productivity. Whereas a larger






The research showed there was a significant difference in the perception of various

insurance companies taken for the study such as LIC, Max New York, Reliance Life,

HDFC, Bajaj Allianz, ING Vysya, ICICI Prulife and Tata AIG on how they perceived

organizational climate of a company to affect employee / agent retention.

Among the various insurance companies taken for the survey Reliance Life had a very

high perception and strongly felt that the organizational climate of the company can

affect employee /agent retention. Whereas ICICI Pru life had a low perception on

266

organizational climate of the company as a contributing factor to affect employee /agent

retention.






organizational climate of a company to affect Customer Service.



affect Customer Service. Whereas ICICI Pru life had a low perception on organizational

climate of the company as a contributing factor to affect Customer Service.


climate on employee/agent Productivity.




organizational climate of a company to affect employee/agent Productivity.



affect employee/agent Productivity. Whereas ICICI Pru life had a low perception on

organizational climate of the company as a contributing factor to affect employee/agent

Productivity

267

Reliance Life is the only company showing significant difference in their perception on

how they perceive the organizational climate of a company to impacts employee/agent

Retention, Customer Service and employee /agent productivity with all other companies

taken for the study.

Most of the companies are showing significant difference in their perception on how they

perceive the organizational climate of a company to impact employee/agent Retention,

Customer Service and employee /agent productivity with ICICI Pru Life except Bajaj

Allianz which shows no significant difference.

There is no significant difference among insurance companies like LIC, Max New York,

HDFC, Bajaj Allianz, ING Vysya, and Tata AIG in their perception of how an

organizational climate of a company impacts employee/agent Retention, Customer

Service and employee /agent productivity.

269

CHAPTER 11

CONCLUSIONS AND RECOMMENDATIONS

Organizational Climate has become an inseparable part of the functioning of almost

all companies in the current business era. Therefore insurance companies must

identify factors that can help them create a positive organizational climate which can

be instrumental in solving problems relating to employee and agent attrition, poor

customer service and low productivity. Keeping this in the background this research

highlights the following recommendations.

11.1 Of all the organizational climate variables predicted to impact retention the study

shows that the variable ‘Communication’ has the maximum impact on retention.

Therefore it becomes necessary for insurance companies to make it a part of their

corporate culture through policies and practices. Insurance companies must use

‘Communication’ to clearly present to their employees and agents rules, regulations

and responsibilities designed specifically for them to achieve their goals.

Insurance companies must create an open climate, where employees and agents feel

free to express their opinions, voice complaints and offer suggestions to their

superiors. Opportunities should be provided for employees and agents to

communicate freely among themselves about important policy decisions etc. Open

Communication climate encourages employees to participate in decision making and

it also provides employees and agents with all information necessary for them to carry

out their work. Clear lines of communication can create a positive Organizational

Climate that can be instrumental in retaining talented, skilled and committed

employees and agents.

270

11.2 Alongside Communication, ‘Performance Feedback’ also has a considerable

impact on ‘Retention’. Insurance Companies can use this to assess employee and

agent performance to understand employee and agent abilities and competencies.

Feedback can help the insurance companies in chalking out promotion and

programmes, compensation packages for efficient employees and agents. This can be

useful in analyzing the strengths and weaknesses of employees so as to facilitate

framing suitable training policies and programmes, as this can motivate a person for a

better job and help in improving his performance in the future.

11.3 The study also shows that ‘Training’ is another variable said to impact retention.

Insurance companies adopt training programmes to help the employees and agents to

achieve their personal goals and improve their individual effectiveness. Training

modules can be designed to increase the job knowledge and skills of employees and

agents at each level. It can also play an important role in developing leadership skills

that can further help the employees to achieve the organizational goal as well as their

individual goal.

11.4 Companies must also look into the aspect of ‘Career Development’ as an

important factor affecting retention. Strategies towards ‘Career development’ can

provide employees with an opportunity to grow; it gives an opportunity for employees

and agents to acquire higher level skills and competencies. Insurance companies can

therefore utilize this as a composite organizational process to involve people, address

their ambitions, assign them roles and responsibilities that commensurate with their

potential, evaluate their performance and create job positions to accommodate growth

ambitions of employees. Helping the employee in understanding the type of jobs

which will be best suited for their career growth and helping subordinates to define

271

their short and long term development needs which support organizations objectives

and employee career goals act as a very important tool in employee/agent retention.

11.5 Among the Organizational Climate variables impacting Customer Service, the

variable ‘Direction’ has the maximum impact. Strategic plan must provide direction

and focus for all employees. This can help insurance companies to focus on specific

results that needs to be achieved and can help them to establish a course of action for

achieving them. It can help employees and agents within the organization to align

themselves with common goals. A clear direction can give focus to its employees and

agents as it can help them in understanding what is expected of them.

11.6 Another variable impacting ‘Customer Service’ is Role Clarity. Insurance

companies must let employees and agents know what is expected of them ,which

aspects of their job is important, and how their performances will be evaluated as this

will result in them having a higher teamwork. Here the insurance companies must

distribute the work fairly among employees and agents as per each person’s skills and

capability.

11.7 Companies today recognize that they can compete more effectively by

distinguishing themselves with respect to service quality, as they play an important

role in making the customers enjoy the experience or turn to their competitors for

better solutions. Insurance companies must see that service interactions are properly

controlled and handled as this can create good perception of service quality and

customer satisfaction.

11.8 Insurance companies must incorporate work life balance practices to

acknowledge and help staff in achieving a balance between their homes and working

lives. Introducing a sound work life policies in the company can reduce stress levels

272

and can provide an environment that can help employees and agents to build good

relationships so that their goals align with the organizations goal.

11.9 Among the organizational climate variables impacting productivity the variable

‘Team Work’ has the maximum impact. An effective team is built on the foundation

of open and honest communication, with each team member being able to suggest

ideas and provide feedback through the progression of the project. Insurance

companies must therefore provide encouragement and opportunities for the team

players. Companies must provide opportunities for the team to be trained as a group,

also help provide support to maximize their job performance and help to make an

inviting and productive atmosphere for new team members.

11.10 Insurance companies must encourage and implement policies that promote

‘Reward and Recognition’ at work place. Opportunities should be provided for

employees and agents to indicate the feeling of being rewarded for a job well done.

When employees and agents know that their contribution is valued and appreciated

there will be a significant improvement in their productivity. Insurance companies

must also create an encouraging work environment. If employees and agents see that

their ideas are encouraged and accepted, they will be more likely to be creative,

leading to potential innovation in the workplace.

11.11 Since workplace ‘Innovation’ is heavily influenced by the organizational

climate, organizations become highly innovative when employees have the freedom

to be creative and develop new ideas, products and services and ways of doing work.

Insurance companies must design jobs in ways which give employees wide scope to

enact work. Employees and agents should be given substantial freedom, independence

and discretion in scheduling the work and in determining the procedures to carry it

out.

273

11.12 Insurance companies can produce innovation when staff is clear about the

vision they are working towards, and have the autonomy to make decisions based on

achieving that vision rather than being restricted by out of date policies and unwritten

rules that often undermine the vision. Thus ‘Autonomy’ is another variable that

impacts employee/agent productivity.

275

ANNEXURE 1

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ANNEXURE 2 QUESTIONNAIRE

Questionnaire for Research Study on

‘The Impact of Perceived Organizational Climate on Employee/Agent Performance

with reference to Retention, Customer service and Productivity

(Questionnaire for Trainers, Sales Managers, Operations, Agents)

Name : _________________________________________

Gender : Male

Female

Age : 20-25 years

26-30 years

31-35 years

36-40 years

41-45 years

46-50 years

Above 51 years

Experience 1-5 years

6-10 years

11-15 years

16-20 years

Above 21 years

Job level Trainers

Sales Managers

Operations

Agent

294

Please indicate the level of your agreement /disagreement with each of the

following statements by marking your preference with an ‘X’

Q No

Statement Strongly Agree

Agree Neutral Disagree Strongly Disagree

1. I receive all the information I need to carry out my work

2. I have adequate opportunities for professional growth in this organisation

3. The future of this company has been well communicated to us all

4. I know what is expected of me

5. There is sufficient provision made for training for my current job

6. My department receives all the information it needs to carry out its function well

7. There is good coordination and cooperation among various departments in the company

8. The management gives staff a clear vision of the direction in which we are going

9. I schedule my own work activities

10. I get clarification and feedback promptly from our superiors

11. I feel free to talk openly and honestly with members of my work group

12. My current job makes full use of my talents

13. My job does not cause unreasonable amount of stress in my life.

295

Please indicate the level of your agreement /disagreement with each of the following statements by marking your preference with an ‘X’

Q No



14.

I have the tools and equipment to do a great job

15. I am clear about my priorities at

work

16. I am kept informed about

department results against targets

17. My company acknowledges me for my contribution when company goals and objectives are achieved

18. My team works well together

19. My supervisor supports my goals for self development

20. I have clear goals and objective

for my job

21. I receive feedback that helps me improve my performance

22 I am clear in the part I can play in helping this company to achieve its goals

23. I am aware of the available training and development opportunities offered by the Company

24. Management keeps my department adequately informed about what is going on in the company

25 .

My supervisor sets performance goals for my job

296

Please indicate the level of your agreement/ disagreement with each of the

following statements by marking your preference with an ‘X’ Q No



26 The quality of our product and services are very important to this organisation

27. I make most of the decision that affect the way my work is performed

28 Employee performance evaluations are fair and appropriate

29. Our organisation structure facilitates effective inter departmental cooperation and coordination

30. My manager encourages me to develop my ideas

31. I have confidence in my co-workers at my company

32. I determine my own work procedure

33 My salary is competitive with similar jobs I might find elsewhere

34. I know about the organization and what it is trying to achieve.

35. I am given encouragement to find new ways around old problems

36. In this organisation we maintain high standards of service quality

37. In my company management seeks the involvement of employees when making important decisions

297

Please indicate the level of your agreement/ disagreement with each of the following statements by marking your preference with an ‘X’ Q No



38. My manager supports and provides me with all resources I need to perform my task well

39. The environment in this organisation supports a balance between work and personal life.

40. I know what my supervisor expects of me in my job

41. My manager likes me to try new ways of doing my job

42. The organisation understands customer needs

43. My company encourages me to help in developing improved work processes

44. My company supports policies that help staff with families

298

ANNEXURE-3

SPSS OUTPUTS

DEMOGRAPHICS

Gender Frequency Percent

Female 196 32.9

Male 398 66.8

4 2 .3

Total 596 100.0

Age Frequency Percent

20-25 90 15.1

26-30 140 23.5

31-35 112 18.8

36-40 82 13.8

41-45 65 10.9

46-50 51 8.6

Above 50 56 9.4

Total 596 100.0

299

Experience Frequency Percent

Below 5 yrs 328 55.0

5-10 142 23.8

11-15 64 10.7

16-20 62 10.4

Total 596 100.0

Job Level Frequency Percent

Trainers 26 4.4

Sales

Managers 160 26.8

Operations 53 8.9

Agent 357 59.9

Total 596 100.0

300

Reliability Statistics (Organizational Climate)

Cronbach's

Alpha

Cronbach's Alpha

Based on


.949 .951 12

Item-Total Statistics- Organizational Climate

Scale Mean

if Item

Deleted

Scale

Variance

if Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if

Item Deleted

Role Clarity 151.81 347.529 .755 .625 .944

Communication 148.04 334.272 .776 .622 .944

Career

Development 156.13 362.369 .696 .529 .946

Direction 151.88 340.672 .817 .732 .943

Autonomy 152.11 353.053 .658 .471 .947

Team Work 151.98 344.012 .744 .575 .945

Training 151.89 341.588 .805 .712 .943

Performance

Feedback 152.17 340.627 .811 .668 .943

Innovation 151.96 338.371 .785 .674 .944

Quality of Service 151.76 347.919 .758 .608 .944

Work Life 152.69 342.148 .729 .556 .945

Reward &

Recognition 160.24 381.109 .604 .408 .949

301

Reliability - Organization Climate (Retention)

Reliability Statistics

Cronbach's

Alpha

Cronbach's Alpha Based on


.867 .867 12

Item-Total Statistics

Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

q1 45.21 33.067 .516 .340 .859

q6 45.27 31.864 .570 .363 .855

q16 45.37 31.757 .592 .369 .854

q34 45.47 33.590 .364 .172 .868

q12 45.40 31.146 .610 .410 .852

q2 45.19 32.549 .543 .343 .857

q5 45.22 30.991 .631 .444 .851

q14 45.32 32.348 .545 .355 .857

q23 45.24 31.838 .591 .381 .854

q21 45.31 31.747 .603 .410 .853

q10 45.26 32.067 .529 .310 .858

q28 45.46 32.363 .506 .281 .859

302

Split-half Reliability Reliability Statistics Cronbach's Alpha Part 1 Value .743

N of Items 6(a)

Part 2 Value .781

N of Items 6(b)

Total N of Items 12

Correlation Between Forms .774

Spearman-Brown

Coefficient

Equal Length .873

Unequal Length .873

Guttman Split-Half Coefficient .872

a The items are: q1, q6, q16, q34, q12, q2.

b The items are: q5, q14, q23, q21, q10, q28.

Reliability - Organization Climate (Customer Service)

Reliability Statistics

Cronbach's

Alpha



.866 .868 12

303


Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

q4 45.25 32.808 .532 .323 .857

q15 45.28 33.263 .522 .322 .858

q20 45.25 32.036 .591 .406 .853

q3 45.19 32.362 .594 .385 .853

q8 45.38 32.021 .550 .340 .856

q22 45.32 32.357 .601 .421 .853

q36 45.28 32.387 .562 .334 .855

q42 45.33 31.865 .614 .433 .852

q26 45.13 33.850 .493 .274 .859

q39 45.47 31.930 .551 .350 .856

q13 45.74 32.495 .438 .226 .865

q44 45.46 31.758 .568 .395 .855


N of Items 6(a)

Part 2 Value .760

N of Items 6(b)

Total N of Items 12


Spearman-Brown

Coefficient

Equal Length .834

Unequal Length .834


a The items are: q4, q15, q20, q3, q8, q22. b The items are: q36, q42, q26, q39, q13, q44.

304

Reliability - Organization Climate (Productivity) Reliability Statistics

Cronbach's

Alpha



.849 .849 10


Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

q17 37.19 23.417 .512 .306 .838

q35 37.30 22.781 .592 .386 .831

q41 37.20 22.848 .569 .351 .833

q30 37.08 21.895 .664 .461 .824

q11 37.19 22.935 .498 .302 .840

q18 37.21 22.982 .580 .365 .832

q31 37.22 22.978 .583 .357 .832

q9 37.21 23.714 .489 .273 .840

q27 37.27 24.123 .431 .255 .845

q32 37.28 23.003 .573 .387 .833

305


N of Items 5(a)

Part 2 Value .727

N of Items 5(b)

Total N of Items 10


Spearman-Brown

Coefficient

Equal Length .831

Unequal Length .831


a The items are: q17, q35, q41, q30, q11.

b The items are: q18, q31, q9, q27, q32

Correlations - Retention

Retention

Communication Pearson Correlation .655(**)

Sig. (1-tailed) .000

N 596

Career development Pearson Correlation .564(**)


N 596

Training Pearson Correlation .644(**)


N 595

Performance feedback Pearson Correlation .626(**)


N 596

** Correlation is significant at the 0.01 level (1-tailed).

306

Correlations- Customer Service

Customer Service

Role clarity Pearson Correlation .715(**)


N 595

Direction Pearson Correlation .741(**)


N 595

Quality of Service Pearson Correlation .696(**)


N 595

Work life policies Pearson Correlation .665(**)


N 595

** Correlation is significant at the 0.01 level (1-tailed). Correlations – Productivity

Productivity

Reward and Recognition Pearson Correlation .679(**)


N 595

Innovation Pearson Correlation .723(**)


307

N 595

Teamwork Pearson Correlation .727(**)


N 595

Autonomy Pearson Correlation .606(**)


N 595

** Correlation is significant at the 0.01 level (1-tailed). Regression – Retention

Model Summary

Model R

R

Square

Adjusted

R

Square

Std. Error

of the

Estimate Change Statistics

R

Square

Change F Change df1 df2

Sig. F

Change

1 .655(a) .429 .428 1.843 .429 445.175 1 593 .000

2 .709(b) .503 .502 1.720 .075 88.900 1 592 .000

3 .731(c) .534 .531 1.668 .030 38.469 1 591 .000

4 .738(d) .545 .541 1.650 .011 14.053 1 590 .000

a Predictors: (Constant), Communication

b Predictors: (Constant), Communication, Performance feedback

c Predictors: (Constant), Communication, Performance feedback, Training

d Predictors: (Constant), Communication, Performance feedback, Training, Career development

308

ANOVA

Model

Sum of

Squares df Mean Square F Sig.

1 Regression 1512.501 1 1512.501 445.175 .000(a)

Residual 2014.742 593 3.398

Total 3527.244 594

2 Regression 1775.551 2 887.776 300.032 .000(b)

Residual 1751.693 592 2.959

Total 3527.244 594

3 Regression 1882.603 3 627.534 225.504 .000(c)

Residual 1644.641 591 2.783

Total 3527.244 594

4 Regression 1920.866 4 480.216 176.377 .000(d)

Residual 1606.378 590 2.723

Total 3527.244 594

a Predictors: (Constant), Communication

b Predictors: (Constant), Communication, Performance feedback

c Predictors: (Constant), Communication, Performance feedback, Training

d Predictors: (Constant), Communication, Performance feedback, Training, Career development

e Dependent Variable: Retention

Coefficients

Model

Unstandardized

Coefficients

Standardized

Coefficients t Sig.

B

Std.

Error Beta

1 (Constant) 4.159 .579 7.180 .000

Communication .739 .035 .655 21.099 .000

2 (Constant) 2.544 .567 4.486 .000

309

Communication .489 .042 .433 11.613 .000

Performance

feedback .466 .049 .352 9.429 .000

3 (Constant) 2.028 .556 3.645 .000

Communication .357 .046 .317 7.762 .000

Performance

feedback .337 .052 .254 6.446 .000

Training .341 .055 .260 6.202 .000

4 (Constant) 1.766 .555 3.184 .002

Communication .321 .047 .285 6.907 .000

Performance

feedback .298 .053 .224 5.634 .000

Training .283 .056 .216 5.018 .000

Career development .249 .066 .140 3.749 .000

a Dependent Variable: Retention Regression - Customer service Model Summary

Model R

R

Square

Adjusted

R

Square

Std. Error

of the


R

Square


Sig. F

Change

1 .741(a) .548 .548 3.127 .548 720.071 1 593 .000

2 .803(b) .645 .643 2.777 .096 160.282 1 592 .000

3 .832(c) .693 .691 2.583 .048 93.019 1 591 .000

4 .846(d) .715 .713 2.490 .022 46.078 1 590 .000

a Predictors: (Constant), Direction

310

b Predictors: (Constant), Direction, Role clarity

c Predictors: (Constant), Direction, Role clarity, Quality of Service

d Predictors: (Constant), Direction, Role clarity, Quality of Service, Work life policie

ANOVA

Model

Sum of


1 Regression 7042.445 1 7042.445 720.071 .000(a)

Residual 5799.666 593 9.780

Total 12842.111 594

2 Regression 8278.126 2 4139.063 536.883 .000(b)

Residual 4563.985 592 7.709

Total 12842.111 594

3 Regression 8898.775 3 2966.258 444.562 .000(c)

Residual 3943.336 591 6.672

Total 12842.111 594

4 Regression 9184.433 4 2296.108 370.373 .000(d)

Residual 3657.678 590 6.199

Total 12842.111 594

a Predictors: (Constant), Direction

b Predictors: (Constant), Direction, Role clarity

c Predictors: (Constant), Direction, Role clarity, Quality of Service

d Predictors: (Constant), Direction, Role clarity, Quality of Service, Work life policies

e Dependent Variable: Customer Service

311

Coefficients

Model

Unstandardized

Coefficients

Standardized

Coefficients t Sig.

B Std. Error Beta

1 (Constant) 14.197 .872 16.288 .000

Direction 1.853 .069 .741 26.834 .000

2 (Constant) 8.938 .878 10.176 .000

Direction 1.199 .080 .479 14.944 .000

Role clarity 1.066 .084 .406 12.660 .000

3 (Constant) 5.909 .875 6.751 .000

Direction .874 .082 .349 10.679 .000

Role clarity .845 .082 .322 10.353 .000


4 (Constant) 5.586 .845 6.610 .000

Direction .764 .081 .305 9.490 .000

Role clarity .728 .081 .277 9.038 .000


Work life policies .465 .068 .201 6.788 .000

a Dependent Variable: Customer Service Regression - Productivity

Model Summary

Model R

R

Square

Adjusted

R

Square

Std. Error

of the


R

Square


Sig. F

Change

1 .727(a) .528 .527 3.466 .528 663.865 1 593 .000

312

2 .818(b) .669 .668 2.907 .140 250.914 1 592 .000

3 .859(c) .738 .736 2.589 .069 155.313 1 591 .000

4 .871(d) .759 .757 2.485 .021 51.553 1 590 .000

a Predictors: (Constant), Teamwork

b Predictors: (Constant), Teamwork, Reward and Recognition

c Predictors: (Constant), Teamwork, Reward and Recognition, Innovation

d Predictors: (Constant), Teamwork, Reward and Recognition, Innovation, Autonomy

ANOVA

Model

Sum of


1 Regression 7973.559 1 7973.559 663.865 .000(a)

Residual 7122.414 593 12.011

Total 15095.973 594

2 Regression 10093.719 2 5046.859 597.279 .000(b)

Residual 5002.255 592 8.450

Total 15095.973 594

3 Regression 11134.725 3 3711.575 553.750 .000(c)

Residual 3961.248 591 6.703

Total 15095.973 594

4 Regression 11453.038 4 2863.259 463.726 .000(d)

Residual 3642.936 590 6.174

Total 15095.973 594

a Predictors: (Constant), Teamwork

b Predictors: (Constant), Teamwork, Reward and Recognition

c Predictors: (Constant), Teamwork, Reward and Recognition, Innovation

d Predictors: (Constant), Teamwork, Reward and Recognition, Innovation, Autonomy

e Dependent Variable: Productivity

313

Coefficients

Model

Unstandardized

Coefficients

Standardized

Coefficients t Sig.

B

Std.

Error Beta

1 (Constant) 13.669 .934 14.628 .000

Teamwork 1.914 .074 .727 25.766 .000

2 (Constant) 9.174 .834 11.006 .000

Teamwork 1.371 .071 .521 19.276 .000

Reward and Recognition 2.704 .171 .428 15.840 .000

3 (Constant) 6.252 .779 8.031 .000

Teamwork .904 .074 .343 12.273 .000


Innovation .863 .069 .346 12.462 .000

4 (Constant) 3.841 .819 4.689 .000

Teamwork .777 .073 .295 10.668 .000


Innovation .686 .071 .275 9.678 .000

Autonomy .514 .072 .182 7.180 .000

a Dependent Variable: Productivity

T-Test Group Statistics

Gender N Mean Std. Deviation

Std. Error

Mean

Communication

Female 198 16.39 2.110 .150

Male 398 16.40 2.184 .109

Career

development

Female 198 8.17 1.382 .098

Male 398 8.32 1.364 .068

314

Training Female 197 12.42 1.764 .126

Male

398 12.56 1.911 .096

Performance

feedback

Female 198 12.26 1.725 .123

Male 398 12.26 1.896 .095

Role clarity Female 198 12.39 1.776 .126

Male

398 12.72 1.762 .088

Direction Female 198 12.49 1.655 .118

Male

398 12.49 1.955 .098

Quality of Service

Female 198 12.61 1.741 .124

Male 398 12.67 1.759 .088

Work life policies

Female 198 11.78 1.923 .137

Male 398 11.69 2.060 .103

Reward and

Recognition

Female 198 4.16 .715 .051

Male 398 4.16 .836 .042

Innovation Female 198 12.53 1.816 .129

Male

398 12.43 2.116 .106

Teamwork Female 198 12.50 1.756 .125

Male

398 12.40 1.991 .100

Autonomy Female 198 12.24 1.728 .123

Male 398 12.31 1.822 .091

315

Independent Samples Test

Levene's Test for

Equality of Variances t-test for Equality of Means


Communication

.000 .998 -.016 594 .987

Career

development

.418 .518 -1.237 594 .217

Training

.459 .498 -.825 593 .410

Performance

Feedback

2.222 .137 .008 594 .993

Role clarity

.007 .935 -2.146 594 .032

Direction

2.782 .096 .015 594 .988

Quality of Service

.658 .418 -.359 594 .720

Work life policies

.402 .526 .510 594 .611

Reward and

Recognition

.012 452.224 .990

Innovation

2.687 .102 .530 594 .597

Teamwork

1.492 .222 .588 594 .557

Autonomy .006 .936 -.460 594 .646

316

T-Test Group Statistics

Gender N Mean Std. Deviation

Std. Error

Mean

Retention Female 198 16.29 2.155 .153

Male

398 16.28 2.572 .129

Customer

Service

Female 197 37.24 4.440 .316

Male

398 37.38 4.755 .238

Productivity Female 197 37.24 4.728 .337

Male 398 37.57 5.191 .260

Independent Samples Test

Levene's Test for

Equality of Variances t-test for Equality of Means


Retention

.070 460.363 .944

Customer

Service

.152 .696 -.347 593 .728

Productivity .043 .836 -.749 593 .454

317

Chi- Square Company * Job level Job level Total

Employees Agents

Company LIC Count 38 38 76

% within Company 50.0% 50.0% 100.0%

Max Newyork life Count 39 47 86

% within Company 45.3% 54.7% 100.0%

Reliance life Count 15 63 78

% within Company 19.2% 80.8% 100.0%

HDFC Count 44 29 73

% within Company 60.3% 39.7% 100.0%

Bajaj Allianz Count 29 45 74

% within Company 39.2% 60.8% 100.0%

ING VYSYA Count 32 46 78

% within Company 41.0% 59.0% 100.0%

ICICI Count 23 39 62

% within Company 37.1% 62.9% 100.0%

TataAIG Count 20 49 69

% within Company 29.0% 71.0% 100.0%

Total Count 240 356 596

% within Company 40.3% 59.7% 100.0%

318

Retention * Job level Job level Total

Employees Agents

Retention Low Count 95 105 200

% within Job level 39.6% 29.5% 33.6%

Moderate Count 84 119 203

% within Job level 35.0% 33.4% 34.1%

High Count 61 132 193

% within Job level 25.4% 37.1% 32.4%


% within Job level 100.0% 100.0% 100.0%

Chi-Square Tests

Value df

Asymp. Sig.

(2-sided)

Pearson Chi-Square 10.473(a) 2 .005


a 0 cells (.0%) have expected count less than 5. The minimum expected count is 77.72. Customer Service * Job level Job level Total

Employees Agents

Customer

Service

Low Count 88 100 188

% within Job level 36.7% 28.2% 31.6%


319

% within Job level 41.7% 34.6% 37.5%


% within Job level 21.7% 37.2% 30.9%


% within Job level 100.0% 100.0% 100.0%

Chi-Square Tests

Value df

Asymp. Sig.

(2-sided)



a 0 cells (.0%) have expected count less than 5. The minimum expected count is 74.22. Productivity * Job level Job level Total

Employees Agents

Productivity Low Count 97 94 191

% within Job level 40.4% 26.5% 32.1%


% within Job level 36.7% 30.4% 32.9%


% within Job level 22.9% 43.1% 35.0%


% within Job level 100.0% 100.0% 100.0%

320

Chi-Square Tests

Value df

Asymp. Sig.

(2-sided)



a 0 cells (.0%) have expected count less than 5. The minimum expected count is 77.04. One-way Anova Descriptives N Mean Std. Deviation Std. Error

Retention LIC 76 16.57 2.625 .301

Max Newyork life 86 16.00 2.306 .249

Reliance life 78 17.96 2.022 .229

HDFC 73 16.19 2.066 .242

Bajaj Allianz 74 15.86 2.835 .330

ING VYSYA 78 16.63 2.291 .259

ICICI 62 14.68 2.063 .262

TataAIG 69 16.03 2.029 .244

Total 596 16.28 2.440 .100

Customer Service LIC 76 38.47 4.471 .513

Max Newyork life 86 37.14 4.306 .464

Reliance life 78 41.22 3.847 .436

HDFC 73 37.03 3.778 .442

Bajaj Allianz 74 36.30 4.592 .534

ING VYSYA 77 37.26 4.083 .465

ICICI 62 33.06 4.401 .559

TataAIG 69 37.28 4.051 .488

Total 595 37.33 4.650 .191

Productivity LIC 76 38.37 4.761 .546

Max Newyork life 86 36.87 4.529 .488

Reliance life 78 41.04 3.863 .437

321

HDFC 73 36.95 4.275 .500

Bajaj Allianz 74 37.23 5.326 .619

ING VYSYA 77 38.81 4.597 .524

ICICI 62 32.77 5.287 .671

TataAIG 69 36.68 4.111 .495

Total 595 37.46 5.041 .207

ANOVA

Sum of

Squares df

Mean

Square F Sig.

Retention Between Groups 419.851 7 59.979 11.299 .000

Within Groups 3121.228 588 5.308

Total 3541.079 595

Customer

Service

Between Groups 2495.823 7 356.546 20.229 .000

Within Groups 10346.288 587 17.626

Total 12842.111 594

Productivity Between Groups 2657.034 7 379.576 17.912 .000

Within Groups 12438.939 587 21.191

Total 15095.973 594

322

Post Hoc Tests

Multiple Comparisons

Games-Howell

Dependent

Variable

(I)

Company (J) Company

Mean

Difference

(I-J)

Std.

Error Sig.

95% Confidence

Interval

Lower

Bound

Upper

Bound

Retention LIC Max

Newyork life .566 .390 .833 -.63 1.77

Reliance life -1.396(*) .378 .008 -2.56 -.23

HDFC .374 .386 .978 -.81 1.56

Bajaj Allianz .701 .446 .767 -.67 2.07

ING VYSYA -.062 .397 1.000 -1.28 1.16

ICICI 1.888(*) .399 .000 .66 3.12

TataAIG .537 .388 .863 -.66 1.73

Max

Newyork

life

LIC

-.566 .390 .833 -1.77 .63

Reliance life -1.962(*) .338 .000 -3.00 -.92

HDFC -.192 .347 .999 -1.26 .87

Bajaj Allianz .135 .413 1.000 -1.14 1.41

ING VYSYA -.628 .359 .656 -1.73 .48

ICICI 1.323(*) .361 .008 .21 2.43

TataAIG -.029 .349 1.000 -1.10 1.04

Reliance

life

LIC 1.396(*) .378 .008 .23 2.56

Max

Newyork life 1.962(*) .338 .000 .92 3.00

323

HDFC 1.770(*) .333 .000 .75 2.79

Bajaj Allianz 2.097(*) .401 .000 .86 3.33

ING VYSYA 1.333(*) .346 .004 .27 2.40

ICICI 3.284(*) .348 .000 2.21 4.36

TataAIG 1.933(*) .335 .000 .90 2.96

HDFC LIC -.374 .386 .978 -1.56 .81

Max

Newyork life .192 .347 .999 -.87 1.26

Reliance life -1.770(*) .333 .000 -2.79 -.75

Bajaj Allianz .327 .409 .993 -.93 1.59

ING VYSYA -.436 .355 .922 -1.53 .65

ICICI 1.514(*) .357 .001 .42 2.61

TataAIG .163 .344 1.000 -.89 1.22

Bajaj

Allianz

LIC -.701 .446 .767 -2.07 .67

Max

Newyork life -.135 .413 1.000 -1.41 1.14

Reliance life -2.097(*) .401 .000 -3.33 -.86

HDFC -.327 .409 .993 -1.59 .93

ING VYSYA -.763 .419 .608 -2.05 .53

ICICI 1.187 .421 .099 -.11 2.48

TataAIG -.164 .410 1.000 -1.43 1.10

ING

VYSYA

LIC .062 .397 1.000 -1.16 1.28

Max

Newyork life .628 .359 .656 -.48 1.73

Reliance life -1.333(*) .346 .004 -2.40 -.27

HDFC .436 .355 .922 -.65 1.53

Bajaj Allianz .763 .419 .608 -.53 2.05

ICICI 1.951(*) .369 .000 .82 3.09

324

TataAIG .599 .356 .699 -.50 1.70

ICICI LIC -1.888(*) .399 .000 -3.12 -.66

Max

Newyork life -1.323(*) .361 .008 -2.43 -.21

Reliance life -3.284(*) .348 .000 -4.36 -2.21

HDFC -1.514(*) .357 .001 -2.61 -.42

Bajaj Allianz -1.187 .421 .099 -2.48 .11

ING VYSYA -1.951(*) .369 .000 -3.09 -.82

TataAIG -1.352(*) .358 .006 -2.46 -.25

TataAIG LIC -.537 .388 .863 -1.73 .66

Max

Newyork life .029 .349 1.000 -1.04 1.10

Reliance life -1.933(*) .335 .000 -2.96 -.90

HDFC -.163 .344 1.000 -1.22 .89

Bajaj Allianz .164 .410 1.000 -1.10 1.43

ING VYSYA -.599 .356 .699 -1.70 .50

ICICI 1.352(*) .358 .006 .25 2.46

Customer

Service

LIC Max

Newyork life 1.334 .692 .534 -.79 3.46

Reliance life -2.744(*) .673 .002 -4.81 -.68

HDFC 1.446 .677 .397 -.64 3.53

Bajaj Allianz 2.176 .740 .072 -.10 4.45

ING VYSYA 1.214 .692 .652 -.91 3.34

ICICI 5.409(*) .759 .000 3.07 7.75

TataAIG 1.198 .708 .692 -.98 3.38

Max

Newyork

life

LIC

-1.334 .692 .534 -3.46 .79

Reliance life -4.078(*) .637 .000 -6.03 -2.12

HDFC .112 .641 1.000 -1.86 2.08

325

Bajaj Allianz .842 .708 .934 -1.33 3.02

ING VYSYA -.120 .657 1.000 -2.14 1.90

ICICI 4.075(*) .727 .000 1.84 6.31

TataAIG -.136 .673 1.000 -2.21 1.93

Reliance

life

LIC 2.744(*) .673 .002 .68 4.81

Max

Newyork life 4.078(*) .637 .000 2.12 6.03

HDFC 4.191(*) .621 .000 2.28 6.10

Bajaj Allianz 4.921(*) .689 .000 2.80 7.04

ING VYSYA 3.958(*) .637 .000 2.00 5.92

ICICI 8.153(*) .709 .000 5.97 10.34

TataAIG 3.943(*) .654 .000 1.93 5.95

HDFC LIC -1.446 .677 .397 -3.53 .64

Max

Newyork life -.112 .641 1.000 -2.08 1.86

Reliance life -4.191(*) .621 .000 -6.10 -2.28

Bajaj Allianz .730 .693 .965 -1.40 2.86

ING VYSYA -.232 .642 1.000 -2.21 1.74

ICICI 3.963(*) .713 .000 1.76 6.16

TataAIG -.248 .658 1.000 -2.27 1.78

Bajaj

Allianz

LIC -2.176 .740 .072 -4.45 .10

Max

Newyork life -.842 .708 .934 -3.02 1.33

Reliance life -4.921(*) .689 .000 -7.04 -2.80

HDFC -.730 .693 .965 -2.86 1.40

ING VYSYA -.962 .708 .874 -3.14 1.22

ICICI 3.233(*) .773 .001 .85 5.61

TataAIG -.978 .723 .877 -3.20 1.25

326

ING

VYSYA

LIC -1.214 .692 .652 -3.34 .91

Max

Newyork life .120 .657 1.000 -1.90 2.14

Reliance life -3.958(*) .637 .000 -5.92 -2.00

HDFC .232 .642 1.000 -1.74 2.21

Bajaj Allianz .962 .708 .874 -1.22 3.14

ICICI 4.195(*) .727 .000 1.95 6.44

TataAIG -.016 .674 1.000 -2.09 2.06

ICICI LIC -5.409(*) .759 .000 -7.75 -3.07

Max

Newyork life -4.075(*) .727 .000 -6.31 -1.84

Reliance life -8.153(*) .709 .000 -10.34 -5.97

HDFC -3.963(*) .713 .000 -6.16 -1.76

Bajaj Allianz -3.233(*) .773 .001 -5.61 -.85

ING VYSYA -4.195(*) .727 .000 -6.44 -1.95

TataAIG -4.211(*) .742 .000 -6.50 -1.92

TataAIG LIC -1.198 .708 .692 -3.38 .98

Max

Newyork life .136 .673 1.000 -1.93 2.21

Reliance life -3.943(*) .654 .000 -5.95 -1.93

HDFC .248 .658 1.000 -1.78 2.27

Bajaj Allianz .978 .723 .877 -1.25 3.20

ING VYSYA .016 .674 1.000 -2.06 2.09

ICICI 4.211(*) .742 .000 1.92 6.50

Productivit

y

LIC

Max

Newyork life

1.496

.733

.457

-.75

.75

Reliance life -2.670(*) .700 .005 -4.82 -.52

HDFC 1.423 .741 .538 -.85 3.70

327

Bajaj Allianz 1.139 .826 .865 -1.40 3.68

ING VYSYA -.437 .757 .999 -2.76 1.89

ICICI 5.594(*) .865 .000 2.93 8.26

TataAIG 1.687 .737 .307 -.58 3.95

Max

Newyork

life

LIC

-1.496 .733 .457 -3.75 .75

Reliance life -4.166(*) .656 .000 -6.18 -2.15

HDFC -.073 .699 1.000 -2.22 2.08

Bajaj Allianz -.358 .789 1.000 -2.78 2.07

ING VYSYA -1.933 .716 .131 -4.13 .27

ICICI 4.098(*) .830 .000 1.54 6.66

TataAIG .191 .695 1.000 -1.95 2.33

Reliance

life

LIC 2.670(*) .700 .005 .52 4.82

Max

Newyork life 4.166(*) .656 .000 2.15 6.18

HDFC 4.093(*) .665 .000 2.05 6.14

Bajaj Allianz 3.809(*) .758 .000 1.47 6.14

ING VYSYA 2.233(*) .682 .028 .13 4.33

ICICI 8.264(*) .801 .000 5.79 10.74

TataAIG 4.357(*) .660 .000 2.32 6.39

HDFC LIC -1.423 .741 .538 -3.70 .85

Max

Newyork life .073 .699 1.000 -2.08 2.22

Reliance life -4.093(*) .665 .000 -6.14 -2.05

Bajaj Allianz -.285 .796 1.000 -2.73 2.17

ING VYSYA -1.860 .724 .176 -4.09 .37

ICICI 4.171(*) .837 .000 1.59 6.76

TataAIG .264 .704 1.000 -1.90 2.43

328

Bajaj

Allianz

LIC -1.139 .826 .865 -3.68 1.40

Max

Newyork life .358 .789 1.000 -2.07 2.78

Reliance life -3.809(*) .758 .000 -6.14 -1.47

HDFC .285 .796 1.000 -2.17 2.73

ING VYSYA -1.575 .811 .524 -4.07 .92

ICICI 4.456(*) .913 .000 1.64 7.27

TataAIG .549 .793 .997 -1.89 2.99

ING

VYSYA

LIC .437 .757 .999 -1.89 2.76

Max

Newyork life 1.933 .716 .131 -.27 4.13

Reliance life -2.233(*) .682 .028 -4.33 -.13

HDFC 1.860 .724 .176 -.37 4.09

Bajaj Allianz 1.575 .811 .524 -.92 4.07

ICICI 6.031(*) .852 .000 3.40 8.66

TataAIG 2.124 .721 .071 -.09 4.34

ICICI LIC -5.594(*) .865 .000 -8.26 -2.93

Max

Newyork life -4.098(*) .830 .000 -6.66 -1.54

Reliance life -8.264(*) .801 .000 -10.74 -5.79

HDFC -4.171(*) .837 .000 -6.76 -1.59

Bajaj Allianz -4.456(*) .913 .000 -7.27 -1.64

ING VYSYA -6.031(*) .852 .000 -8.66 -3.40

TataAIG -3.907(*) .834 .000 -6.48 -1.33

TataAIG LIC -1.687 .737 .307 -3.95 .58

Max

Newyork life -.191 .695 1.000 -2.33 1.95

Reliance life -4.357(*) .660 .000 -6.39 -2.32

329

HDFC -.264 .704 1.000 -2.43 1.90

Bajaj Allianz -.549 .793 .997 -2.99 1.89

ING VYSYA -2.124 .721 .071 -4.34 .09

ICICI 3.907(*) .834 .000 1.33 6.48

* The mean difference is significant at the .05 level.

IMPACT OF PERCEIVED ORGANIZATIONAL …...CERTIFICATE This is to certify that the thesis titled...

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