INTRODUCTION
Introduction
After the Renovation (or “Doi Moi” in Vietnamese) campaign was implemented since 1986, Vietnam has been becoming an emerging country in not only in Southeast Asia area, but also in the whole world, which achieving significant growth and improvements Vietnam’s gross domestic product (GDP) has growth sharply since Renovation, from only 6,5 billion in 1990 to 223,8 billion in 2017 1 The rising in living standard lead to the creation of new consumer habit Some service industries are experiencing sharply growth rate, like health care, tourism and especially financial service
The non-life insurance market plays an increasingly important role in the development of a country in general and the whole world in particular The role of non-life insurance reflects through economic stabilization, mitigation of losses and risk prevention for organizations and individuals participating who bought insurance in society when unfortunately encountering risks; contributing to creating jobs and ensuring social security, etc In daily life as well as in production, although people may pay attention to prevent possible risks, anything could be happened For example, due to natural disasters such as storms, floods, earthquakes, etc cannot be forecasted accurately, it would result in property damages, life losses and production and business stagnations Social environment is also a cause of risk, like traffic accidents, occupational accident, etc People have taken many measures to minimize losses caused by natural and social environmental risks One of the measures is transferring the costs of risks to the insurance companies
In Vietnam, in financial service field, insurance market has grown sharply in recent years and continues to be regarded as a prospective market In particular, the Vietnam’s demographic and economic development conditions are expected to create further demand for insurance services both in non-life and life sectors In the last decade, Vietnam’s insurance sector changed the legal system to transform insurance market from a State-owned monopolist field to an intensive competitive industry for both domestic and foreign insurers as new entrants Despite the economic downturn rooted from the financial crisis since 2008 in United State, with an average annual GDP growth rate around 6% last 10 years 2 , not only domestic companies but also foreigner enterprises are interesting in entrant Vietnam’s insurance market It is obviously that there is an intensive competition in Vietnam’s insurance market Gain marketing share from other competitors is a difficult mission for each company While Vietnam’s customer still not acknowledge about the core and additional benefit of insurance products, most of exiting companies have to use the price strategy to attract consumer
With the booming of e-commerce, customers are now shifting from traditional consumer to digital natives It is raising an emergency issue for insurance: What are the main factors which impact Vietnamese customers’ purchase decisions for non-life insurance products?
Problem statement
Non-life insurance is a guarantee and reciprocity products, is the type of risk transfer through which the insurance company commits to pay compensation when an insurance event occurs in relation to material loss, human accident and responsibility of the insured, so non-life insurance is very social In Vietnam, regarding to the rapidly increase of income, people are becoming more aware of the issue of ensuring their safety, especially in saving, consumption and investment behavior for safety However, in general, the level of interest, understanding and implementation of insurance activities of people is still limited Therefore, non-life companies in Vietnam are being struggled to engage with potential customers
Because customers are misunderstanding or underestimate the values of non-life insurance products, they seem tend to be driven by price or promotion over the purchasing decisions
2 https://vnexpress.net/longform/mot-nam-kinh-te-nhieu-ky-luc-3861228.html
However, in recent years, because of the booming of social media and e- commercial trend, information could be accessed much easier, cheaper, faster and more detail than ever before, they could research for the price comparison as well as insurance condition, insurers’ reputation and claims’ experience Moreover, nowadays customers demand insurance films provide them intelligibility, accessibility products that they could be experienced in other fields Customers, through the platform they choose, demands prices and benefit policies which they want, supports and consultations when they need and only want to have contact from insurers when they have claims or renewals Base on insurers reputation and regular basis, customer will happily to choose other companies and have little inclination to build last long relationships When the customers are considering the benefits and values rather than the price, they offer policies and conditions which tailored their requirements
However, not many insurers in Vietnam, both domestics and foreigners could recognize current situation Understanding about the customers is lagging behind the new trend of business when their techniques are changing dramatically by the signification improved of internet and telecommunications’ businesses while they still concentrate on products, risks management and ratings Comparing with other financial or service sectors that focus on customer experience like bank or tourism, insurers need to change the way they approach to their customers.
Purpose of the study
Through the theoretical research on the factors affecting the buying decision toward non-life insurance products of insurers participating in Vietnam’s market, I hope that could help them to have further understanding about their customers and improve their business activities
In this research, I also attempt to establish a model which reflects the interplay between the several factors and their impact weights on different stages of the non- life insurance purchase decision making.
Objectives of the study
In this study, I focus on the following specific objectives:
- To examine the factors that affect the customers’ inclination and purchase decision on non-life insurance products;
- To examine the different impacts weights of these factors;
- To examine the relationships between customers’ inclination and purchase decision.
Research question
To solve the above problems and purpose, I attempt to figure answers for the following specific questions:
- What are the main factors which impact Vietnamese customers’ purchase decisions for non-life insurance products?
- Is there significant different in the impact weights among factors that influent Vietnam’s customer purchase decision toward non-life insurance products?
- What factor has the most powerful effect on Vietnam customer purchase decision?
Subjects and scope of the research
Research subject: Issues related to the buying decision on non-life insurance product and the factors affecting customers’ buying inclination and decision
Scope of research: this research focus on Vietnamese who are possible customers or purchase non-life insurance products before of companies participating in Vietnam’s insurance market.
Structure of the research
This research including 6 chapter Chapter 1 is the overview of this this research, introduction about the research’s problem and research’s questions Chapter 2 is an overview about the Vietnam’s insurance market, previous paper on consumer’s behavior and insurance sector, and proposal research model Chapter 3 is about the research methodology and survey design In chapter 4, the author discusses about the data analysis process and results In the chapter 5, this study mentions about the research limitations and future study And finally, in chapter 6, the author discusses about this paper’s implications.
LITERATURE REVIEW
Overview about insurance
Currently there are many different concepts of insurance, because the concept of insurance is built on each aspect of research fields (such as society, legal, economic, technical, etc.) Through study, we can offer some concepts of Insurance as follows:
- According to Justice Lawrence, insurance “is a contract by which the on party, in consideration of a price paid to him adequate to the risk, becomes security to the other that he shall not suffer loss, damage or prejudice by the happening of the perils specified to certain things which may be exposed to them” (Tyagi,C.L
- In another book, the term insurance is defined as “a method by which interested members of a society can band together and collect funds to pay losses suffered later by members of the group” (Marshall Wilson Reavis III, 2012, p 2;
- Vietnam’s Law on Insurance Business, insurance business means “activity of an insurance enterprise with the objective of profit, in which the insurance enterprise accepts risks of an insured person on the basis of the purchaser of insurance paying a premium in order for the insurance enterprise to pay insurance proceeds to the beneficiary of the insurance or to indemnify the insured person on the occurrence of the insured event”
Therefore, Insurance is a business activity that express the insurer’s commitment to compensate the insured in each case of the risks occurring during the coverage period (coverage period is an insured time period is stated in the policy or insurance certificate) by the insurer This means that the insured transfers the consequences of the risk to the insurer by paying a fee to form a reserve fund When related expenses or consequences due to insurance risk occurring during the coverage period, insurer uses the reserve fund to reimbursement the insured partly or all of cost these expenses or consequences However, the insurer only reimbursement for the risks which are in the written contract signed by and between insurer and the insured
Uncertainty is at the heart of insurance In the “real” world all our activities depend on uncertain and unknown circumstances beyond the control of a single individual (Peter Zweifel & Roland Eisen, 2012, p 1) Although we may be awareness about uncertain events that could happened, it still can cost disastrous financial and human cost risks
Usually, (re)insurance companies are characterized as a risk warehouses (Nowak,
2014, p 2) Insurance is a social device of sharing the risk in a community when people in this social could be suffered same type of risk, by each person in the community contributing a certain amount of money to a common fund and from such a general fund to compensate for the losses of the members of the community who are unfortunately damaged by the risk
Insurance is a way of risk management, which is a type of financial risks managements, used to deal with losses which usually are financial and human losses
Obviously, individuals could apply a wide range of methods, measures to prevent, transfer and deal with the uncertain or risks However, Insurance is, however, of particular importance for risks with negative consequences (which corresponds to the colloquial meaning of “risk”) (Peter Zweifel & Roland Eisen, 2012, p 2)
2.1.3 The differences between types of insurance
Definition of Life insurance and Non-life insurance
Insurance is a very broad and abstract concept; therefore, it is difficult to apply a general definition to both insurance and non-life insurance because the characteristics of these two types of insurance is very different Typically, in Vietnam's Insurance Business Law, life and non-life insurance are defined in an abstract way:
- Life insurance means a class of insurance provided to cases where the insured is
- Non-life insurance means a class of property, civil liability and other insurances other than life insurance
In the book Insurance Law and Practice, the author mentioned the term life insurance as “a contract in which one party agrees to pay given sum on the happening of particular event contingent upon the duration of human life, in consideration of the payment of a sum by another Thus, insurer pays a sum assured on survival up to a certain specified period or death” (Tyagi,C.L el al., 2007, p 21)
According to AIG, “A life insurance policy is a protective contract between the insured and an insurer (the life insurance company) In the event of your passing, the life insurance company pays your beneficiary (a person or organization that the insured choose) a set amount of money (benefit amount)” 3
So, to summarize, life insurance is a commitment between the insurer and the insured in which the insurer will pay the participant (or beneficiary of this insurance commitment) a certain amount when a certain event occurs (the insured person is dead or still alive up to a certain time signed in the insurance contract) Life insurance is usually a long-term contract and depend on the human life
Non-life insurance is defined as an agreement between an insurance company and a customer – a policy holder – in which the insurer undertakes to compensate the customer for certain unpredictable losses during a time period, usually one year, against a fee, the premium A non-life insurance policy may cover damages on a car, house or other property, or losses due to bodily injury to the policyholder or another person (third party liability); for a company, the insurance may cover property damages, cost for business interruption or health problems for the employees, and more (Esbjửrn Ohlsson & Bjửrn Johansson, 2010, p 1)
According to Bao Viet Insurance, non-life insurance is the type of insurance to which cover the risks that are stabled over time and often independent of human life
Therefore, this type of insurance policy is usually short term 4
3 https://www.aigdirect.com/life-insurance-basics/what-is-life-insurance
4 http://www.baoviet.com.vn/baohiem/Kien-thuc-Bao-hiem/Kien-thuc-chung-ve-bao-hiem-phi-nhan- tho/Phan-loai-cac-loai-hinh-bao-hiem/201/3470/MediaCenterDetail/
The different between Life insurance and Non-life insurance
- Life insurance is the only type of insurance that will pay for the insured whether there is a risk, or no risk occurred However, non-life insurance companies’ reimbursement for the insured depend on the particular financial costs result from the insured risks written on the contract This is fundamental difference between non-life insurance and life insurance
- Life insurance is one of saving types, has some similar characteristics with the banking saving However, non-life has no component of saving
Compared with Western insurance markets with hundreds of years of establishment and development, Vietnam Insurance market is a very new market and consumer habits have not been fully formed In 1965, Bao Viet Insurance was formed, it was the first insurance company established in Vietnam and was a state-owned monopoly In the early years, Bao Viet only provided marine insurance for example insurance for import and export goods, ocean marine insurance, etc
Customer behavior
Marketing experts and researcher always regard customer behavior as a hot topic on this area Hawkins D.I., Mothersbauch D.L & Best R.J (2007) emphasized the important of the knowledge about customer behavior as all marketing decisions are based on assumptions and knowledge of consumer behaviour The more they are understanding about the reason and the way customers response while making their purchase decisions, the more they could advance their marketing strategies and gain more successful
Customer behavior, according to Leon Schiffman (2013, p 4), is defined as the behavior that consumer display in searching for, purchasing, using, evaluation and disposing of the products and services that they expect will satisfy their needs
Nowadays, researchers still concentrate on the study of how individuals make decisions to spend their available resources (time, money, effort) on consumption- related items (Schhiffman J.B & Kanuk Lealie Lazar, 1997)
As retailing must keep pace and remain vigilant in the pursuit of deeper customer understanding (Puccinelli, N., Goodstein, R., Grewal, D., Price, R., Raghubir, P &
Stewart, D., 2009), this research also study about customer behavior, concentrate on customer buying decision, specifically on finding out factors that influence customers’ buying decision making in Vietnam non-life insurance market
Because customer behavior is always a hot topic in marketing, there are many studies on this field According to Philip Kotler & Gary Armstrong (2016, p 692) they defined consumer buyer behavior refers to the buying behavior of final consumers – individuals and households that buy goods and services for personal consumption In another research, consumer purchase is defined as a process of gathering and processing information, evaluating it and selecting the best possible option to solve a problem or make a buying choice (Komal Prasad, Ram & Jha, Manoj, 2014)
There are four types of consumer buyer behavior (2016, pp 182-183), which are:
- Complex buying behavior is the consumer buying behavior in situations characterized by high consumer involvement in a purchase and significant perceived differences among brands
- Dissonance-reducing buying behavior, this type occurs when consumers are highly involved with an expensive, infrequent, or risky purchase but see little difference among brands
- Habitual buying behavior, this type occurs under the situations characterized by low consumer involvement and few significant perceived brand differences
- Variety seeking buying behavior, consumers undertake this type in situation characterized by low consumer involvement but significant perceived brand differences
Actually, buying decision is a part of the process and activities people engage (Belch, 1978) starting from recognizing a need through how you feel after making the purchase (2016, p 183) Customers would experience some certain steps while considering buying decisions Depending on different research field, researcher’s proposal different step model of consumer buying process According to Charles W
Lamb, consumer decision-making process is a five-step process used by consumers when buying goods or services, which included: (1) need recognition, (2) information search, (3) evaluation of alternatives, (4) purchase, and (5) post purchase behavior (2010, p 191)
Figure 2.2 Consumer Decision-making process (Source: Charles W Lamb, 2010)
Researchers traditionally study about the Five-stage model of consumer buying decision when they want to understand further about their customer For example, Engel, Kollat and Blackwell (1968) in their researches proposal a model demonstrating five-stages of consumer decision process which including problem recognition, internal search and alternative evaluation, external search and alternative evaluation, purchasing processes and outcomes Kotler and Keller (2016) describe consumer decision making process as a five-stages model, in which consumer will involve in problem recognition, information search, evaluation of alternatives, purchase decision and post-purchase behavior Belch G & Belch M
(2014) in their book also discuss this five-stages model in the influence of various psychological concepts, including motivation, perception, attitude formation, integration and learning
However, Kotler and Keller (2016) in their book pointed out that, consumer don’t always follow all the stages in the decision making process, they may skip or reserve some while making purchase decisions The path which consumer moves through the decision-making process would be differed by certain factors, including cultural factors, social factors and personal factors (2005) Many levels of factors affect consumer’s purchase decision – from broad cultural and social influences on motivations, beliefs, and attitudes lying deep within consumers’ themselves
Consumer purchase decision are impacted strongly by cultural, social, personal, and psychological characteristics, as shown in figured 2.3 below
Figure 2.3 Factors Influencing Consumer Behavior (Philip Kotler & Gary
Research gap
Although customer behavior always has been widely studied and getting more interested in when information technology, especially internet of thing, has been considerable influencing on consumer buying decision; there is a limited on the attention on the analysis of the particularities of insurance consumer behavior as a specific object (Ulbinaite, Aurelija & Kučinskienė, Marija, 2013)
In financial field, especially banking sector, research is paying a lot of attention in studying customer behavior, for example Capuano & Ramsay (2011), Milner &
Daniela (2013), Pousttchi & Maik (2018), Leong & Hibbert & Ennew (2018), etc
However, there is a lack of identifying and systematically modelled the various factors that impact the customer purchase decision in insurance sector, especially in non-life insurance service
Another problem is that in overall, research on insurance field often focus on purely monetary decisions Hsee & Kunreuther (2000) pointed out usually researchers concentrate on consumer purchase decisions which depend on well-specified quantitative factors, such as premium, probability of loss, and size of compensation
With the fast development of information technology and the wide spread of new business trend, for example e-commercial, the consumer behavior is now much more complicated, influenced by various factors, from sociological, cultural, economical to demographical factors And insurance sector also cannot stay out of these global trends Researchers and experts should have a wider overview of the factors that influence customer decisions in insurance sector
In recent year, insurance business is increasingly receiving attention from researcher, however it is usually assumed that they are much more focusing in life insurance once (Jain & Kunal (2012); Bansal A, Goel S, Singh A, Singh AA, Goel AK, Naik
SM, et al (2015); Sandeep Chaudhary (2016), etc.) There are research gaps between life insurance and non-life insurance field, also in geographical when South East Asia countries do not get many attentions.
Factors impact on consumers’ buying decision
Personal income is a term referring to all income of an individual earned in a certain time period from salary, investment and other sources of ventures In economic, this term has a broader view as it is the gross of total earning of individuals or household A country’s personal income level and GDP have a positive relationship, when the GDP increase, personal income also increase, and when the income increase tends to create an increase in consumption, according to basically economic theory Peter Zweifel & Roland Eisen (2012, p 17), in their book, figure out that the demand for insurance increases proportionally with GDP, although there is a difference between the increase in life and non-life insurance
The relationship between personal income and insurance purchase decision is widely studied Many scientific-based reasons for non-consumption of insurance services are strongly concentrated in economic state and purchasing ability (low or no income) of individuals (Ulbinaite, 2013) According to Liu & Chen (2002) research, income have a potential relationship with insurance purchase decision as people are more willing to purchase insurance when income increases In another research in United State insurance market, Leiyu Shi (2001) pointed out that un- insurance and partial insurance are associated with low income According Bawa &
Ruchita (2011), while researching for the impact of demographical on willingness to purchase health insurance, figured out that income of respondents along with other demographical factors (gender, age, education and occupation) has significant association with their willingness to pay for insurance In a broader research on the impact of level of education on insurance purchase decision, Diane M Dewar (1998) also found out that in general, higher salaries, higher education levels, or employment in industries with higher concentrations of college-educated employees have a higher interest in taking insurance coverage
From these previous research evidence, in this study about Vietnam’s customer insurance purchase decision, the result is expected that in Vietnam, personal income also have a positive impact on consumer willing to purchase insurance products
In daily life, people could face many uncertain events that they cannot predict, and these events could cause some possible losses In insurance economic, these losses due to these discrepancies in terms of money or utility are called risk (2012, p 26)
Risk recognition, according to Nick Pidgeon (1998) is “the perception to include people's beliefs, attitudes, judgements and feelings, as well as the wider cultural and social dispositions they adopt towards threats” Cognition about insurance is defined as “insurance consciousness which determines the motivation of insurance consumption” (Zhang, Xumei & Zhang, Yingxiu & Qiu, Hanguang & Dan, Bin,
According to the insurance definition above, insurance companies have the function of allocation and managing risks more effectively when insurance buyers transfer risks to them Therefore, it could be logical to assume that when customers have cognition (by themselves or by consulting) about the risks they may have to face, they would tend to consider buying insurance as a protection measure
In traditional five-steps model of consumer purchase decision, consumer knowledge (or awareness) about the products or services they are thinking about always is the first step of the process In the model of Charles W Lamb (2010, p 191) the buying process starts with consumer need cognition, while according to Philip Kotler &
Gary Armstrong (2016, p 176), the first step in the model is consumer recognition – the buyer recognizes a problem or need
Cause the uncertainty is the heart of insurance and insurance business is the business of risk, researchers want to understand more about the customer they have to put some attention on studying the relation between customer risk recognition and willing to purchase insurance Ming Wang et al (2012) investigated in analyzing about the impact of Chinese people’s risk awareness on insurance acceptance in area where often suffering from natural disasters and hazards
Schwarcz (2010) in his research concluded that the purchase decision toward insurance is depended on individualized predictions about the magnitude of highly unlikely, and largely unfamiliar, future events In another study, the authors pointed out that people would form an inclination towards purchasing an insurance product when they exposure to risks (Ulbinaite, Aurelija & Kucinskiene, Marija & Le Moullec, Yannick., 2014) In a rarely study conducted in Vietnam, according to Lofgren et al (2008), because the awareness about health is raising in rural area, so there is also an increasing in private health insurance demand
Consumer inclination toward insurance purchasing is the customers’ motivation for feeling of need and willing to pay for insurance product Like any other business field, if insurance companies want to attract customers’ inclination toward their services, insurance products have to satisfy the consumer needs and consistent to their ability to pay for Because insurance is a business that related to the consumers’ risk recognition and risk transfer as insurance company take charge for consumer incurred risk, so if consumers don’t have awareness about risk, they could not form an inclination toward insurance services It also happened when customer cannot afford insurance coverages to protect them from threats and tend to find other measures
Ulbinaitė and Le Moullec (2010) investigated in researching and analyzing the influence of consumer’s need and affordability of insurance product on their willing to pay In another previous research, according to Kunreuther and Pauly (2005) figured out that the imperfect information, including the misperception of risk as well as the budget constraints could lead to purchase non-optimal insurance or not take any insurance coverages Xumei Zhang et al (2007) also putted attention on examining the impact of economic factors and risk recognition on consumer’s inclination and buying-decision toward insurance products
However, beside analysis the relation between the personal income, risk recognition with consumer’s inclination, there are not many researchers investigating on analysis impact of consumer’s inclination and consumer buying-decision Ulbinaite and Kučinskienė (2013) in their research stated that customer’s inclination is form from their intellect and income and has an impact on their purchase decision
This research put an attention to found out if there is any influence on consumer inclination from their risk recognition and income and when consumers already inclined to purchase insurance services, how consumer inclination impact this decision
Industrial 4.0 era is becoming a new trend of this decade, orienting customers to enjoy all services on the information technology platform Insurance industry is also not out of that trend, whereas information technology plays an extremely important role for insurance industry in particular and the financial sector in general
Theoretical model and research hypothesis
Despite, the fact that there is a considerable research gap in insurance field, there is some models of behavioral research consumers in this business sector The question is which model could be applied to analysis customer purchasing decision toward non-life insurance service in Vietnam Nowadays customers required insurance companies provide them intelligibility, accessibility service that they could be experienced in other fields Customers, through the advance online platform they choose, demands prices and benefit policies which they want, supports and consultations when they need and only want to have contact from insurers when they have claims or renewals Base on insurers reputation and regular basis, customer will happily to choose other companies and have little inclination to build last long relationships The consumer will offer policies and conditions which tailored their requirements, when they are considering the benefits and values rather than the price,
In a research that examination of the rationale for insurance service purchase decision making reflects the several stages of the insurance service purchase decision making processes, Aurelija Ulbinaitė and Marija Kučinskienė (2013) proposed model of rationale for insurance service purchase decision making as described in figure 2.4
Based on the narrowed down scope of literature review above and the current situation of Vietnam insurance market, based on the theory of factors affecting consumer purchasing decisions of Philip Kotler, and the model Aurelija Ulbinaitė and Marija Kučinskienė, the author proposal Hypothetical research model about consumer purchase decision toward insurance service as describe in figure 2.5 below
Figure 2.4 Model of rationale for insurance service purchase decision making
(source Aurelija Ulbinaitė and Marija Kučinskienė (2013))
Personal income could be defined as all income of an individual gained in a certain time period from salary, investment and other sources of ventures The researches of Liu & Chen (2002), Bawa & Ruchita (2011), Diane M Dewar (1998) and Ranson M Kent (2001) pointed out that personal income had a positive impact on customer’s willing to purchase private insurance services Base on that, Hypothesis
1 is proposed: Personal income has significant positive effect on the consumer’s inclination to purchase non-life insurance service
Risk recognition is defined as consumer’s perception that reflect personal attitudes, beliefs, feelings, knowledges, judgements as well as cultural and social disposition they adopt toward threats Previous studies of Ming Wang et al (2012), Schwarcz
(2010), Lofgren et al (2008) and Ulbinaite et al (2014) figured out that when consumer’s awareness about risks is raising, there is also an increasing willing to purchase private insurance Based on these conclusions, Hypothesis 2 is proposed:
Risk recognition significant positive effect on the consumer’s inclination to purchase non-life insurance service
In this paper, customers’ motivation for feeling of need and willing to pay for insurance product is considered as consumer inclination toward insurance purchasing Zhang et al (2007) and Ulbinaite and Kučinskienė (2013) in their research putted attention on examining the impact of consumer’s inclination on buying-decision toward insurance products and results suggest that there is a positive relationships between these two factors Based on these results, Hypothesis
3 is proposed: Consumer’s inclination to purchase insurance service has significant positive effect on the consumer’s decision to purchase non-life insurance service
Online communication in this paper refers to the continuously communication processes that occur between consumers and insurers through online information technology platforms According researchers who investigating in communication and marketing review in general and insurance service business quality in particular had found out that the quality of online communication has positive impact on consumer purchase decision (Martin and Clark (1996), Mohr and Spekman (1994), Weiss et al (2008), Dean and Lang (2008)) Based on these evidences, Hypothesis
4 is proposed: Online communication quality has significant positive effect on the consumer’s decision to purchase non-life insurance service
The perception and opinion of target groups (customers, suppliers, opponents, etc.) in general about an organization based on its past activities on business, investing or for social is defined as organization’s reputation Previous papers suggested that corporate reputation and image brand could have impact on buying-decision (Brown (1997), Hatch and Schultz (2001), Smaiziene and Jucevicius (2010) and Jung and Seock (2016)) Therefore, Hypothesis 5 is proposed: Positive reputation has significant positive effect on the consumer’s decision to purchase non-life insurance service
Sale promotion refers to stimulating activities that target to gain consumer attention and encourage their purchase decisions Previous literature reviews about the relation between sale promotion tools and consumer buying behavior suggested that sale promotion could enhance buying decision making (Blattberg and Neslin (2003), Blackwell, Miniard and Engel (2001), Ndubisi and Chew (2006) and Syed Ali Ahmad et al (2015)) Hence, Hypothesis 6 is proposed: Sale promotions have significant positive effect on the consumer’s decision to purchase non-life insurance service
Figure 2.5 Hypothetical research model about consumer purchase decision toward insurance service (Source: author)
RESEARCH METHODOLOGY
Research purpose
According to Yin (1994), research’s purposes could be exploratory, descriptive or explanatory In an exploratory study, research(s) pay attention to examine their research’s questions and hypotheses stated in this study (Yin R , 1994) Explaining is defined as causal explanation and explanatory modeling is the use of statistical models for testing causal explanations, thus explanatory studies are aimed at testing or comparing exiting causal theories (Shmueli, 2010) Descriptive research is aimed to describe the current issues or problems by using a process of data collection to explain the situation more completely (Fox, W & Bayat, M.S., 2007, p 45) These purposes have some different characteristics, however according to Saunders, Lewis
& Thornhill (Saunders M., Lewis P., A., & Thornhil, 2000), researchers could combine more than one strategy in a study
Regarding the above discussion about the purposes of research, since the objective of this study is to acquire knowledge about the perceived triggers and barriers of purchase non-life insurance coverage among the different group of potential consumers in Vietnam, this study in some certain extent could be considered as exploratory research.
Research approach
There are some different methodological approaches which be applied by researchers in their studies According to Yin (2003), researchers could form a framework base on the literature review and compare it with other relevant literature to test the figures analyzed from data collection (Eisenhardt, 1989) A study could be applied either qualitative method or quantitative method, however researchers when attempt to test their research’s questions practically would use some information or numerical data (Saunders M., Lewis P., A., & Thornhil, 2000)
To archive the reliable answer to the research’s question, this study adopts quantitative research method, follow the process as the figure 3.1
Figure 3.1 Data collection process (Source: Yin (2003), Eisenhadt (1989))
Data collection process
Because of flexibility characteristics of the quantitative analysis (Yin R , 2003), various of data collection approach could be applied in study applying quantitative methodology In the data collection steps of this study, data was gathered by using questionnaire survey as this approach has lower cost, time-saving advantages while remain effective By implementing this approach, larger number of consumer responses could be gathered, and survey form could be added some more questions
In this study investigating in analyzing the impacts of factors on customer purchase’s decision toward insurance services, online survey via social media platform and face-to-face interview was applied to collect the data Before doing survey, the pilot test was applied to test the questionnaire, 23 respondents were collected to gather the comment about the questionnaire format so that it can be revised, and the type of survey may be altered into a more suitable one After that, the process of data collection is described as below:
Online survey via social platform: at first, an online form using the Google Docs platform was created contain the survey question about the factors that could have effect on customer purchase decisions Then the author used the view form of this survey and spread it to various channels to gather the possible potential answer The link of this survey was post in different groups of people in social media platform and sincerely suggest them to full the survey The total of 196 respondents were collected by using the online survey form After cleaning the data, 27 respondents were rejected, and 169 respondents were gathered
Face to face interview: since the author is still part-time service agent at an insurance company in Vietnam, face to face interviews with potential consumer who come to the author’s office for asking information were applied The questions were asked is the same as in the online form The consumers were kindly asked if they want to participate in the research and filled in the hard-copy form of the online survey This was done while the guests were either while they have consultation with staffs, or after purchasing service After completing the questionnaire, consumers were asked to hand in at the reception desk Complete confidentiality of responses was assured and maintained The total of 170 answered form were collected After cleaning the data, 20 respondents were rejected, and 169 respondents were gathered.
Questionnaire design
After reviewing carefully literature, the questionnaires were developed by utilized and modified the structure questionnaires formed in previous studies, in the field of consumer behavior, marketing, and social psychology The questionnaires were structured into two major parts as describe below:
The first part of the survey form includes questions which aimed to collection the demographical information of consumers, including age, gender and social- economic status (marriage status, job type and total monthly income)
The following part of the survey was designed to gather the consumers’ perception about measured items (personal income, risk recognition, consumer’s inclination, insurer’s online communication quality, insurer’s reputation and sale promotion) and consumer’s buying-decision making A five-point Likert Scale was applied ranking from strongly disagree, disagree, neutral, agree to strongly agree to ask the consumers to choose their statement that could fit their opinion and perception when considering about insurance services
At first, because the questionnaires were modified from the original research to suitable for the insurance field, pilot tests were set up and sent to some respondents to check for test the validity and gather comments for editing the questionnaires if needed After that, the data collection process was applied List of the measured items of variables and consumer purchase decision is introduced in the table 3.1 below
1 Your salary (wage) could afford insurance services
2 Beside salary (wage), you use other availability of funds to afford insurance services
3 Your total income could afford insurance services
2 Ashish Bansal, Shewtank Goel, Abhishek Singh, Anurag Ambroz Singh, Anil Kumar Goel, Sulabha M Naik, Virender K Chhoker &
1 You are aware about the risk that you could be burden
2 You have been suggested about these risks
3 Insurance plays an important role as a coping mechanism for disaster
4 Having insurance coverage could help to minimize some financial burden toward risks expenses
2 Ming Wang, Chuan Liao, Saini Yang, Weiting Zhao, Min Liu &
3 Ashish Bansal, Shewtank Goel, Abhishek Singh, Anurag Ambroz Singh, Anil Kumar Goel, Sulabha M
Customer’s Inclination to purchase insurance services
1 Insurance provides a feeling of financial safety
2 Insurance provides a feeling of psychological safety
3 It is worth purchasing an insurance service which is not compulsory according to the law
4 I (am inclined to) periodically spend a certain amount of money for insurance premiums as a guarantee for financial stability in the future
& Kucinskiene, Marija & Le Moullec, Yannick,
1 Insurance companies provides correct information about the item that I want to purchase clearly in their website
2 Insurance companies have to provides reliable
3 Alkhlaifat, Baker, information in online platforms
3 Information in insurers’ website is well designed in order not to waste my time
4 The insurance company is willing and ready to respond to your needs via online platforms
5 The company exchanges the data and information through internet continuously and provides the needed facilities to achieve this
1 I have a need for a trustful insurer (or its representative)
2 I want to purchase services from insurer which is a company that everyone recognizes
3 I want to purchase services from insurer which is a big company
4 Brand Name and Image of insurer attract me to purchase
& Kucinskiene, Marija & Le Moullec, Yannick,
1 If an insurer brand offers sale promotion that could be a reason for me to buy it
2 I usually buy the same insurer brand even when
I have sale promotion on the other brands
3 I have favorite insurer brands, but most of the time I buy a brand that offers sale promotion
4 Ads of the brand attract me to purchase
5 When evaluating an insurance service, I pay attention to the consented discounts
1 Syed Ali Ahmad Waqas Mehmood,
& Kucinskiene, Marija & Le Moullec, Yannick,
Decision to purchase insurance services
1 It takes me time and much consideration when
I decide to purchase insurance services
2 Before purchasing insurance services, I want to have a consultation with an insurer
3 When purchasing an insurance service, I (would) carefully read
& Kucinskiene, Marija & Le Moullec, Yannick,
2013 and analyses the insurance contract and insurance conditions
4 I (am inclined to) actively communicate with insurers to clarify the questions I care about
Table 3.1 Describe of measured items
DATA ANALYSIS AND DISCUSSTION
Sample characteristics
Data collected through the survey were processed by SPSS 22.0 software, encoded and cleaned, and then conducted to test the theoretical model Customers participating in interviews are aged from 18 to 60 years old, mostly from 22 to 30 years old (24.8%) and from 31 to 40 years old (25.4%) Most of the interviewees married (55.5%), the rest were single with only one case out of 319 respondents divorced The other demographic characteristics of the sample is described in the table 4.1: Personal profile of the respondents
From 18 to 22 years old From 22 to 30 years old From 31 to 40 years old From 41 to 50 years old From 51 to 60 years old Above 65 years old
Self-business Government employed Private employed Others Total
Below 3,000,000 VNĐ From 3,000,000 to 5,000,000 VNĐ From 5,000,000 to 7,000,000 VNĐ From 5,000,000 to 7,000,000 VNĐ From 10,000,000 to 15,000,000 VNĐ From 15,000,000 to 20,000,000 VNĐ
Table 4.1 Personal profile of the respondents (Source: author)
Reliability analysis
Reliability Test is a statistical testing technique on the effectiveness of the research tool set, used for many different research purposes Reliability test could figure out the equivalence, stability and internal consistency of the measurement items In reliability test, Cronbach’s alpha index is used to indicate how well of the correlation among the items in a set to one another (Uma Sekaran & Roger Bougie,
2016) To ensure convergent validity, the Cronbach’s alpha index should be more than 0.7 for a factor loading However, in this regard, some researchers agree that the Cronbach’s alpha scores greater than 0.6 could be considered acceptable (Cronbach & Shavelson (2004), Loewenthal (1996))
Table 4.2 below describe the coding name and the Cronbach’s alpha scores of the measurement items In this table, all of the Cronbach’s alpha scores is above 0.7, range from 0.748 to 0.879 which indicate reliability and high internal consistency
However, OQ2 and SP3 indexes have Cronbach’s alpha score greater than factor once (OQ2 α = 0.863 > 0.748 and Corrected item = 0.104 < 0.3 and SP3 α = 0.889 >
0.760 and Corrected item = 0.248 < 0.3) Therefore, the item OQ2 and SP2 are disqualified)
Factors and measurement items Name
Cronbach’s alpha if item deleted
Your salary (wage) could afford insurance services
Beside salary (wage), you use other availability of funds to afford insurance services
Your total income could afford insurance services
You have been suggested about these risks RC1 0.826 0.602
You are aware about the risk that you could be burden
Insurance plays an important role as a coping mechanism for disaster
Having insurance coverage could help to minimize some financial burden toward risks expenses
Customer’s Inclination to purchase insurance services α = 0.874
Insurance provides a feeling of financial safety
Insurance provides a feeling of psychological safety
It is worth purchasing an insurance service which is not compulsory according to the law
I (am inclined to) periodically spend a certain amount of money for insurance premiums as a guarantee for financial stability in the future
Insurance companies provides correct information about the item that I want to purchase clearly in their website
Insurance companies have to provides reliable information in online platforms
Information in insurers’ website is well designed in order not to waste my time
The insurance company is willing and ready to respond to your needs via online platforms
The company exchanges the data and information through internet continuously and provides the needed facilities to achieve this
I have a need for a trustful insurer (or its representative)
I want to purchase services from insurer which is a company that everyone recognizes
I want to purchase services from insurer which is a big company
Brand Name and Image of insurer attract me to purchase
If an insurer brand offers sale promotion that could be a reason for me to buy it
I usually buy the same insurer brand even when I have sale promotion on the other brands
I have favorite insurer brands, but most of the time I buy a brand that offers sale promotion
Ads of the brand attract me to purchase SP4 0.684 0.670 When evaluating an insurance service, I pay attention to the consented discounts
Customers’ Decision to purchase insurance services α = 0.879
It takes me time and much consideration when I decide to purchase insurance services
Before purchasing insurance services, I want to have a consultation with an insurer
When purchasing an insurance service, I (would) carefully read and analyses the insurance contract and insurance conditions
I (am inclined to) actively communicate with insurers to clarify the questions I care about
Table 4.2 Reliability analysis – Cronbach’s alpha index (Source: author)
Factor analysis
Exploratory factor analysis is a statistic technique used to reduce data to a smaller set of summary factors and to test the underlying theoretical structure The factor loading index is considered as an indicator to examine the realistic of the exploratory factor analysis (Hair et al, 2016) The ensure the validity of practical significance of exploratory factor analysis, the factor loading scores have to be greater than 0.5 and the Kaiser-Meyer-Olkin index have to greater than 0.5 In the result table 4.3 below, after eliminated 2 item OP2 and SP3, all of the remain items have factor loading scores above 0.5 and Kaiser-Meyer-Olkin test also greater than 0.5
Table 4.3 Exploratory factor analysis (Source: author)
Multiple regression method
After testing the reliability and validity of the sample to identify the factor that impact the consumer’s buying decision toward non-life insurance, the next step in data analysis process is implementing the multiple regression technique to analysis the weight influence of individual factors on the purchase decision In this study, the author distinguishes the model into two different phases: the first once is to test the impact of personal income and consumer’s risk recognition on the inclination as a dependent variable and then analysis the other factors which including inclination as an independent factor on purchase decision as a dependent factor
In the first phase, the independent factors are personal income and consumer’s risk recognition and dependent factor is customer’s inclination to purchase insurance services The result is illustrated in the table 4.4: Statistical measures of the first stage of the multiple regression analysis The R square score equals to 0.200 indicates the only 20 per cent of customer’s inclination factor is explained by 2 independent factors personal income and consumer’s risk recognition Meanwhile, the Adjusted R square, which evaluates the number of respondents and the number of independent factors, illustrates that the proposal model explains 0.195 per cent of the variation of customer’s inclination, dependent factor The R square and Adjusted R square are satisfactory measures The Sig value in this phase is below p value (0.05 – 5%) that allows evaluating the significance of the model indicates that in the first phase of the multiple regression process the model is statistically significant The impact weight of individual independent factors on customer’s inclination is also demonstrated as the Beta index in the table 4.4 Therefore, the consumers’ inclination toward non-life insurance services is illustrated by the following formula:
Consumer’s inclination = 0.201*PI + 0.338*RC + e1 when p