Journal Press India^®

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Indian life insurance market exhibits low penetration and density. The causes of under-performance need to be identified. Given the complexity of life insurance products and the interplay between the three major entities- buyers, intermediaries and companies, it is strongly believed that the Behavioural Economics Framework is the right theoretical framework to study this market. To unveil the information asymmetry and behavioural biases prevalent in the Indian life insurance market, three questionnaires were designed using Behavioural Economics Framework. Survey responses analysed using Heuristic z-test, Simple and Consolidated; Murthy’s Index of Rank Dominance; and Murthy’s Relative Index of Rank Dominance, reveal that informational inefficiency and behavioral biases exist in this Market. Buyers rely excessively on intermediaries and exhibit behavioral biases- ‘availability bias’, ‘inattention bias’ and ‘trust heuristic’. Intermediaries hide/shroud important information. This study provides useful insights for buyers to improve their buying behaviour and the Regulator to design better control mechanism.

Keywords

Indian life insurance market; Behavioral economics framework; Information asymmetry; Behavioral biases; Heuristics

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