Indian Policyholders and Insurance Services: A Critical Study of Consumer Behavior in Life and Term Insurance – Sept 2025

Author: Gawale M.R.*
Research Scholar
Department of Commerce,
MVPS’s K.R.T. Arts, B.H. Commerce and A.M. Science
(KTHM) College , Nashik, Maharashtra, India.

Gadakh S.S.**
Associate Professor, Department of Commerce,
MVPS’s K.R.T. Arts, B.H. Commerce and A.M. Science
(KTHM) College, Nashik, Maharashtra, India.

Abstract:

The Indian insurance sector plays a pivotal role in ensuring financial stability and long-term security for individuals and families. Within this sector, life insurance and term insurance products have emerged as two key instruments that attempt to meet diverse customer needs, ranging from savings and wealth creation to protection against unforeseen risks. While life insurance has traditionally been viewed as a combination of investment and protection, term insurance is increasingly recognized for its affordability and focus on pure risk coverage. This study examines the behavior of customers toward life and term insurance, with a particular focus on the factors that shape their decision-making processes. Primary data was collected through structured questionnaires and semi-structured interviews, while secondary data was drawn from the annual reports of insurance companies such as LIC, HDFC Life, ICICI Prudential, and from regulatory bodies like IRDAI. Additionally, relevant academic research and industry studies were consulted to provide a theoretical foundation. The analysis highlights that customer decision-making in insurance is influenced by a combination of functional and emotional factors. Claim settlement ratio and trust in the company emerged as the most critical elements in shaping preferences, confirming the centrality of transparency and reliability in this sector.
Interestingly, the findings reveal generational differences in attitudes toward insurance. While 60% of respondents still preferred life insurance for its dual benefits of savings and investment, 40% opted for term insurance, attracted by its low premiums and pure protection features. Younger respondents, particularly those in the 25–35 age group, demonstrated a greater openness to digital platforms, with 55% preferring online purchase channels over traditional agent-driven models. This aligns with broader industry trends, where digital literacy, social media awareness, and convenience are shaping the buying behavior of India’s youth. The results also uncovered gaps in consumer awareness, especially regarding the distinctions between life insurance and term insurance. Many respondents viewed life insurance as a more “secure” product, without fully understanding the cost-benefit advantages of term insurance. This suggests a pressing need for improved financial literacy initiatives and transparent communication strategies from insurance providers. Overall, this research underscores the importance of customer-centric approaches in the insurance industry. Companies that prioritize service quality, transparent claim settlement processes, affordable premiums, and digital ease of access are more likely to build long-term trust and customer loyalty. The findings have both practical and policy implications, as they call for a balanced strategy that integrates traditional trust-building mechanisms with innovative, technology-driven solutions to cater to evolving consumer expectations.

Keywords: Life Insurance, Term Insurance, Customer Behavior, Service Quality, Insurance Sector.

DOI: 10.65282/sjrl.vo.1.issue.02.011