NATIONAL ECONOMICS UNIVERSITY BUSINESS SCHOOL FACTORS AFFECTING CUSTOMERS’ LIFE INSURANCE PURCHASING DECISION IN HANOI Bachelor of Business Administration in English (E-BBA) Thesis Student: Tran Phuong Linh Class: E-BBA 7B Supervisor: Assoc. Le Thi Bich Ngoc HANOI, 2019 1 ACKNOWLEDMENTS First of all, I would like to show my sincere gratefulness to my supervisor, Assoc. Le Thi Bich Ngoc for her helpful guidance throughout the process. Without her careful and detailed suggestions, this thesis would not have been completely accomplished.
Secondly, I want to honor all lecturers and staff at Business School for eagerly supporting me during the past four years. In addition, I gratefully acknowledge E-BBA program for providing me with high-quality learning condition where I can not only acquire useful knowledge but also hone my intellectual and social skills. Also, I dedicate my thanks and appreciation to the board of directors and all the employees at BIC’s Company, where I took a three-month internship, for supporting me with my study and providing all the data needed to complete the thesis. All in all, to my beloved family and friends, it is my pleasure to receive your assistance, encouragement, trust and timely support.
2 TABLE OF CONTENTS ACKNOWLEDMENTS. 7 LIST OF TABLES. 8 LISTS OF FIGURES. 15 CHAPTER 2: THEORETICAL BACKGROUND OF FACTORS AFFECTING LIFE INSURANCE PURCHASING DECISION.
Introduction to Life Insurance. Definitions of Life Insurance. Types of Life Insurance. Permanent Life Insurance.
18 a, Whole Life Insurance. 19 b, Universal Life Coverage. Variable Life Insurance. Variable Universal Life Insurance.
Definition of Purchasing Decision. Purchasing Decision Process. Factors affecting Consumer Behavior. Literature Review of Factors Affecting Customers’ Decision to Buy Life Insurance.
Customers’ Motives to Buy Life Insurance. Customers’ Experience of Purchasing Insurance. Events in Life. Barriers When Purchasing Life Insurance.
Reputation of the Insurance Company. Opinions of Family Members and Friends. Demographic Factors’ Influence on Life Insurance Purchasing Decision. 32 CHAPTER 3: AN OVERVIEW OF THE LIFE INSURANCE MARKET IN VIETNAM.
The Development of Life Insurance Industry. The Life Insurance Industry and the Demands for Life Insurance in Vietnam. Competitors in the Life Insurance Market. Life Insurance Products in Vietnam.
The Potential of Life Insurance Industry in Vietnam. 38 CHAPTER 4 – RESEARCH METHODOLOGY AND FINDINGS. Creating Data Measurement Scales. Data Processing Methods.
Age and gender of the sample. Customers' knowledge about life insurance. Verification Result of the Scales. The Results of Exploratory Factor Analysis (EFA).
The Results of the Cronbach Alpha Coefficient Analysis. 52 To determine and evaluate the effect of each factors on the decision to buy life insurance, the research used the linear regression. Adjusted R square and ANOVA Analysis. T-test and Anova Differential Analysis.
T-test for Male and Female Customers. T-test for Customers who have bought and have not bought life insurance before. Anova Differential Analysis. 58 a, Customers of Different Income.
58 5 b, Customers of Different Age Groups. 59 CHAPTER 5 – RESULTS ANALYSIS AND RECOMMENDATIONS. Analysis of factors affecting the purchase decision of products insured in the regression model. Recommendations for Life Insurance Companies in Vietnam.
Raising Awareness of the Benefits of Life Insurance for People. Focus on expanding and developing communication channels. Improving skills and knowledge for insurance staff. Promoting consultation to specific customers.
Boosting the Reputation of the Company in the Insurance Market. Improving Customer Services. 73 APPENDIXES II: Result of Survey Questionnaire. 80 6 ABBREVIATIONS AD&D Accidental Death and Dismemberment AIA America Institute of Architects and the Initials EFA Exploratory Factors Analysis GDP Gross Domestic Product KMO Kaiser – Meyer - Olkin LI Life Insurance MoF Ministry of Finance OCB Ocean Bank S&P Global Market Intelligence: SHB Saigon Hanoi Bank Sig.
Significant TV Television USA United States of America USD The United States Dollar VIB Vietnam International Bank VIF Variance Inflation Factor VND Vietnamese Dong VPBank Vietnam Prosperity Bank 7 LIST OF TABLES Table4.2: Customers’ Occupation…………………………………………………45 Table 4.3: KMO and Bartlett’s Test of the Independent Variables……………….4: Total Variance Explained of the Independent Variables……………….5: Rotated Component Matrix of Independent Variables………………….6: KMO and Bartlett’s Test of the Dependent Variables………………….7: Total Variance Explained of the Dependent Variables…………………79 Table 4.8: Cronbach Alpha Reliability Statistics of all variables………………….9: Cronbach Alpha Analysis of Variables…………………………………50 Table 4.10: Cronbach Alpha Analysis…………………………………………….11: Model Summary of the Regression Analysis………………………….12: Regression Anova Analysis……………………………………………51 Table 4.13: Regression Analysis of Decision to Buy Life Insurance………………52 Table 4.14: T-test Analysis for Male and Female Customers…………………….15: T-test Analysis for Customers who have bought and have not bought life insurance……………………………………………………………………………55 Table 4.16: Descriptive Results between Different Income Range……………….17: Anova Analysis for Customers of Different Levels of Income……….18: Descriptive Results between Different Age Groups………………….19: Anova Analysis for Customers of Different Age Groups…………….20: Survey Questionnaire in English………………………………………74 Table 4.21: Survey Questionnaire in Vietnamese………………………………….76 8 LISTS OF FIGURES Figure 1: Research Process…………………………………………………………14 Figure 2.1: Sheth’s Model of factors that affect customers’ life insurance products purchasing decision (2001)…………………………………………………………23 Figure 2.2: Research Model of factors that affect customers’ life insurance products purchasing decision…………………………………………………………………24 Figure 3.1: Structure of Vietnam Insurance Industry………………………………32 Figure 3.2: Market Share Proportion of Life Insurance Companies in Vietnam (2014).3: Market Share Proportion of Life Insurance Companies in Vietnam (2017).4: Gross Direct Premiums for Insurance Industry in 2015……………….5: Insurance Penetration Rates Vs. GDP Per Capita…………………….38 Figure 4: Customers’ Income Range……………………………………………….46 9 EXECUTIVE SUMMARY The research conducted to find out and understand consumers’ decision- making in the life insurance sector in Vietnam market, to recommend some solutions in order to help life insurance companies make better progress in their business and to collect complementary data of the whole market. It has become common that Vietnamese people are uninsured against a wide range of risks, disability, health, longevity, goodness or other pitfalls. Conventional thinking assumes that the purchase of risk protection through life insurance products would help to increase individual and social welfare.
A simple inference is that individuals buy insurance to meet a basic need for protection. Life insurance industry was set up in Vietnam in 1996 and up to now, there are 9 enterprises operating in the market and more insurance companies are licensed to operate in the future. With the entry of life insurance companies, the life insurance market in Vietnam has developed in terms of scale, products, quality of service and professionalism. Total premiums in the first two months of 2018 of life insurance revenue is estimated at VND 9,316 billion, increased 33.34% compared with the same period of 2017.
It is from this source that the life insurance industry has provided a large amount of capital for the economy. The number of new agents recruited in the first 6 months of 2017 is 141,305 agents, increased 25.3% over the same period last year. Life insurance coverage industry is showing great potential to grow in Vietnam market. More and more Vietnamese have demands to buy life insurance as a form of saving and accumulating personal financial investment with weak risk control factor.
Currently the population of Vietnam is 96 million people, ranking 14th in the world, with 66 million people in working age. However, the proportion of people taking life insurance now in Vietnam accounts for only 8% of the population. With the fact that Vietnam has the highest savings rate in the world and GDP per capita will reach USD 2300 in 2019, the development opportunities for the life insurance industry in Vietnam are believed to be greater, but also the challenges are not small. To be successful, businesses need to have production strategy, distribution, and technology in place.
The research was quantitative research, conducted through offline and offline questionnaire surveys of people who have and have not bought life insurance before. 10 The survey interviewed people aged from 25 to 55 years old, settled in 5 main districts of Hanoi such as Ba Dinh, Hai Ba Trung, Hoan Kiem, Cau Giay and Long Bien. The scale is based on the theory of building the scale and the decision to buy life insurance products of customers. The Likert scale is used to measure each statement of the research variables.
The research expected to suggest some recommendations to help life insurance companies improve their current business. Firstly, insurance companies should not be too focused on approaching and explaining to the insurers themselves but also on their family as well as the people being closest to the customers, ensuring that everyone understands the benefits of life insurance. They should continue to introduce life insurance and the benefits of life insurance to people through mass media such as TV, newspapers and magazines. Secondly, life insurance companies should pay attention to improve the ability of their consultants.
Companies need to equip their staff with basic knowledge and advanced soft skills. Thirdly, insurance companies need to be transparent and open about their financial capabilities on the company websites, in press conferences and especially in public financial statements with customers at all time. Fourth, companies need to modernize technologies and techniques to support customer service activities. Finally, insurance companies should design products that are flexible and can serve the demands of customers.
11 CHAPTER 1: INTRODUCTION This chapter presents the rationale of the study on factors affecting customers’ decision to buy life insurance, research questions, research objectives and an overview of research methodology and thesis structure. Rationale Legal and General (2017) stated that a life insurance policy is commonly known as a contract between an insured and an insurance company. The insurance company provides a lump-sum payment and other expenses, such as funeral expenses, known as a death benefit, to beneficiaries upon the insured's death to exchange for premium payments. Life insurance has great importance because it helps individuals in their time of need; retirement, death or disability to the benefit of society.
In addition, the development of life insurance contributes to national economic growth. It not only provides jobs and contributes to the national GDP but also increases the average income for households. In the development of the economy, the Finance sector in general and the life insurance sector in particular has made remarkable progress. According to S&P Global Market Intelligence (2017), the life insurance industry posted a 6.8 percent increase in net income after taxes; surplus and capital and increased by $394.5 billion in 2017 from $380.
Moreover, sustained improvement in emerging markets is expected to raise global life insurance growth to about 4% by 2019. According to Bao Viet Securities (2018), Vietnam’s life insurance industry has grown at a relatively rapid 30% in each of the last three years but the penetration rate was just 1%, or about $3 billion, as at the end of 2017. This is relatively low compared to developed markets. Around 7-8% of the population have insurance policies, which represents substantial potential in the country.
People’s awareness about insurance is also improving and is driving the industry forward. Vietnam’s middle class is also growing, and the country’s population is aging rather quickly. Other factors include international cooperation, with many foreigners investing in Vietnam and creating competition in the insurance market. The continuous development of the insurance sector also provides good opportunities for insurance companies operating in Vietnam.
Therefore, it is necessary for insurance companies to try to optimize their financial performance and improve the flexibility of their 12 insurance services. By improving all these features, they can contribute to the financial standing of insured businesses and households as well. This can be made possible by a search for factors that can improve the competitiveness of businesses and by raising the awareness of the general public. Also, insurance companies want to seek for new comprehensive solutions in order to maximize their profits.