The insurance industry in India was opened up to private sector participation in the year 2000. Prior to this, Life Insurance Corporation (LIC) of India was the sole player in the life insurance industry in India. In six years since the entry of private players in the insurance market, LIC has lost 29% market share to the private players, although both, market size and the insurance premium being collected, are on the rise. In 2005, life insurance accounted for 79% of the total insurance market in India. In view of the increasing competition, this paper attempts to understand the dimensions of service quality, which helps ensuring maximum customer satisfaction, and hence, helps life insurers to acquire a larger share of the market. The study was done on a systematic sampling design. SERVQUAL scale was used to discern the different dimensions of service quality and stepwise multiple regression was run with the scores on tangibility, reliability, responsiveness, assurance and empathy as independent variables and customer satisfaction as the dependent variable. It was found that the responsiveness dimension of service quality provides maximum customer satisfaction in the life insurance industry in India.

The state-sponsored Life Insurance Corporation (LIC) of India, before 2000, was the sole player in the Indian life insurance market. The insurance industry in India was opened up to the private sector participation in the year 2000. In case of life insurance, the share of insurance premium to GDP (Gross Domestic Product) is meagerly 1.04% and 0.6% in the case of non-life insurance in India, against the US share of 3.85% and 4.64% respectively, (Nayak and Vivek, 2006). According to an estimate prepared by Max New York Life Insurance in 2002, the Indian insurance market would increase by five times to Rs. 2,50,000 cr by the end of 2008 and the life insurance segment alone would increase by four times to Rs. 1,50,000 cr.

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