“The Factors Affecting Consumer Buying Decision on Insurance”

A. Background of the Study

The history of insurance consisted of the development of the modern business
of insurance against risks, especially regarding cargo, property, death, automobile
accidents, and medical treatment. The industry helps to eliminate risks (as when fire
insurance companies demand the implementation of safe practices and the installation
of hydrants), spreads risks from the individual to the larger community, and provides an
important source of long-term finance for both the public and private sectors. The
insurance industry is generally profitable and provides attractive employment
opportunities for white collar workers.
The insurance industry comprises companies and people who develop insurance
policies, and sell, administrate, and regulate them. Some insurance companies offer
investment products and employ people who develop, sell, administrate, or service
these products. Insurance is about managing risk, for both the insurance company and
its customers. The company must make sure it collects enough money in premiums to
offset customers’ claims while still maintaining a profit. Customers use insurance to
minimize risk to their finances in the case of lost or damaged property, lawsuits, illness
or accident, business interruption, or premature death.
B. Related Literature
According to FCB (2012) Consumer behaviour patterns are influenced by the culture,
the psychology, the social and financial status of the person making a shopping
excursion. The success or failure of the venture is affected by when, where, how and
why people make the decision to go shopping. This report investigates the differences
between the genders when fashion buying decisions are made. It seeks to determine if
there are basic influences affecting choice. Are they persuaded by advertising in
magazines or on television? Do their friends or celebrities have an influence on their
decision? Does their social life play a part? Consumer behaviour is the study of why,
when, where, and how people either do or do not buy products. It blends fundamentals
of psychology, sociology, cultural experience and economics. This report covers an
investigation into understanding the gender related buying decision making process, It
seeks to find an answer to the question, why do ladies enjoy shopping and spending
money and men do not? The survey also sought to confirm that women make more
shopping visits then men and spend more money than men at that shopping.

According to (Jacob & Lundin, 2010) Income is another important factor influencing
insurance coverage. Income elasticity and risk aversion are two crucial parameters for
the acquisition of insurance and some studies in the field of health insurance have
demonstrated that in the case of constant relative risk aversion and an income elasticity
lower than 1, the demand for insurance decreases with income

According to (Liu et al., 2011). Other researches have demonstrated that risk
preferences and socio-economic status, including income and education, are important
predictors of private insurance take-up.
According to Blanchard-Boehm, Berry and Showalter (2014) Investigates why
homeowners do or do not choose to purchase flood insurance and shows that the
purchase of insurance hinges on institutional requirements and, in the case that the
purchase decision is voluntary, the perception of risk, along with ability to afford
insurance on a fixed income, is a large factor in whether homeowners continue to carry
insurance coverage. Another socio-demographic factor influencing insurance coverage
is gender.

According to Dewar (2010) Different studies have revealed that gender plays a role in
earnings differentials and in consequence in the insurance coverage, because even
with equivalent education women earn less than men on average

According to Sapelli & Vial (2011), Formal education is also associated with status and
with a demand for security and protection of life, health and properties of the individual
through insurance. The more educated potential consumers are more likely to purchase
insurance as a tool allowing them better access to healthcare and high security for their
properties as they consider that there is a positive relationship between the probability
of purchasing private insurance and education, more educated persons facing lower
costs of information when deciding between the complex plans offered by private
insurance. In their study, they find that a higher income, younger age, smaller number of
dependents, residence in an urban area, higher educational level, and employment with
a larger company increase the probability of choosing private insurance.

According to RD (2012) There are major differences in the demand for insurance
among those with various educational backgrounds and with different socio
demographic characteristics and those differences are correlated with risk perception.
The risk perception has large effects on insurance and risk-taking behavior, in
consequence those more educated and more informed are more likely to try to protect
themselves by insurance. Those with higher education are more likely to understand the
benefits of insurance and to have a preventive behavior and, in consequence, to use
insurance as a protecting tool for them, their families and their properties. There are few
economic researches regarding the impact of education on risk perception and on
insurance demand. This research aims at studying the consumer behavior of the
insured and to analyze if the education of consumers plays an important part in the
decision to purchase insurance and to assess its importance compared to other factors
like income, age and gender.

Schiffman and Kanuk (2011) defined consumer behavior as the behavior that
consumers display in searching for, purchasing, using, evaluating and disposing of
products and services that they expect will satisfy their needs.

According to Kumar (20011) consumer behavior can be define as the behavior of

individuals in regards to acquiring, using, and disposing of products, services, ideas or
experiences. Consumer behavior focuses on how individuals make decisions to spend
their available resources (time, money, effort) on consumption related items.

According to Rajkumar (2015) Promotion also plays an important role. Prudential

insurance is one of top brand insurance, so its very easy to stimully consumer mind
based on promotional factor. Promotional activity is an activity to persuade and educate
the market with the purpose of having a positive response or action buyers who
repeatedly made by consumers. In promotion activities contained therein, namely
advertising, personal selling, sales promotion and publicity (public relations). However,
keep in mind that the promotion process is not only done person to person alone but
promotion can also be done by utilizing the existing technological developments such as
using the media TV, radio, newspapers and the Internet. That information from the
internet and advertising are affecting consumer purchase decision.

According to RDIA (2015) it has undertaken various consumer education initiatives

through print, electronic, and other media to spread awareness about insurance. The
most recent one includes connecting to the aam aadmi through radio jingles. This
initiative is currently on air and covers topics related to life insurance, motor insurance,
health insurance, home insurance, policy renewals and mis-selling of products. The
second important factor that influences insurance buying decision is advice of agents.
Over half of the respondents said they bought insurance on the advice of an agent.
Other factors influencing buying decisions are advertisements and advice of friends,
relatives and neighbours. In addition, a marginal percentage of investors said that they
bought insurance policies directly through insurance companies. These respondents
bought insurance policies by comparing premium rates and policy features.
According to Yannick (2011) Reaping the benefits of the rapid growth of the insurance
markets, in particular in Asia, calls for improving the understanding of their respective
consumers' expectations and behaviours. It presents an approach for modelling and
analysing how consumers form their purchase decision for insurance services. Building
upon fragmented insurance consumer behaviour works, it propose a model that
consolidates and expands the current state-of-the-art. The model includes various
consumers' characteristics such as life quality, exposure to risks, insurance culture and
family nest filters, consumers' "intelligence", perception of need for security, need for
insurance and affordability. Combined together, they model the consumers' inclination
towards purchasing insurance. The results show that the relation between the income
level and the purchase intention is not linear; that when an insurance service is
perceived as affordable, consumers are inclined to buy it and pay less attention to its
quality; that consumers tend to behave similarly, proportionally to their income levels;
and that the decoy effect influences the price-quality trade-off.
According to Paul (2013) Emotional factors, consumers are likely to consult their
feelings in making insurance decisions. They are inclined to purchase coverage for an
object that is treasured rather than for an identical object that is not special, as they
expect to deal with their peace of mind and relief of anxiety. They feel that with the
insurance they can sleep much more securely or that they would regret not having the
coverage if something bad happened.
According to Hsee (2012) Insurance market. In general most research on insurance
decisions focuses on purely monetary decisions. It is usually assumed that both
insurance purchase and claim decisions depend on well-specified quantitative factors
such as premium, probability of loss and size of compensation.
According to Krantz and Kunreuther (2011) The goal of such decisions is usually to get
fairly regular financial returns rather than the overall goal of protection. state that the
ability to be reimbursed, irregularly but frequently, may be perceived as a dividend
stream (this is namely the case for small losses when insurance contracts with low
deductibles are made). If the insurance consumers do not collect coverage on their
policies for a certain number of years, they feel that their premiums have been wasted.
Cancelling their insurance policies, the consumers exhibit both their avoidance of
financial anxiety and justification of their actions to themselves and others: the absence
of occurrence of insured risks may make them think that the probability of event is now
lower than before.
According to Slovic (2010) The understanding of consumer risk, uncertainty and
probabilities when there is no direct relationship of these factors with insurance,
however, taking into account how consumers react and evaluate the mathematical
expression of risk, uncertainty and probabilities as well as with the psychology of
consumers when they take more or less risky decisions.
According to MGI (2011) Insurance service consumer behaviour that depends on
consumers’ attitude to risk and their inclination to bear it, among others the questions of
negative selection and moral risk in insurance.
According to LTD (2012) Income, the distinction of the insurance service consumer
behaviour can be drawn by grouping the research participants according to their
monthly income into three groups of consumers: a group of low income, a group of
average income and a group of higher than average income.
C. Research Problem

1. What is the demographic profile of the respondents in terms of:

 Age

 Gender

 Occupation

 Income

2. What are the different factors affecting respondent’s buying decision in

insurance?

 Financial Status

 Educational Status

 Economic Conditions

 Needs

3. What are the most preferred type of insurance by the respondents?

 Life Insurance
 Car Insurance
 House Insurance
 Educational Insurance
 Memorial Insurance

D. Objective of the Study

The study has the following objectives:

1. To determine the factors that affects the customers buying decision on Insurance.

2. To determine the most preferred Insurance.

E. Significance of the Study

Insurance Company,

To be able to know the strengths, weaknesses, and opportunities in the market, to have
a room for innovation to let the customers have an interest in investing for Insurance.
This study will be significance for all the Insurance companies in knowing the factors
that affect the customers buying decision on Insurance. It will educate them to retain
and gain more customers.
Insurance Agents,

This research will help the agents to connect with the customers and not just sell them
Insurance, they will be able to know what are the reason why people buy and does not
buy Insurance. And be able to make a new way of connecting and selling insurance.

Customers,

This research will help the customers know and be educated about the most preferred
Insurance that people usually buy.

Future Researchers,

This research will help the future researchers have future reference in making their
research in the Insurance Industry.

Chapter 2
METHODOLOGY
A. Research Method/Design
This exploration is intended to offer a sensible stream of data. It utilizes a clear
strategy since the specialist intents to examine and talk about the factors that can
affect the buying decision of a customer in buying Insurance.

B. Sampling Plan
The non-probability sampling will be used in this research because the
researcher will not involve random people selection and there are only few
qualified respondents which are the people who has interest in Insurance in
Samson Road, Caloocan City.

C. Research Locale
This study will be conducted in Samson Road Caloocan City.

D. Instrument Used
The researchers used instruments in attaining the objective of this research is
question like “What are their preferred kind of Insurance.” “What are their issues
in not buying an insurance.” And other questions that can cater in finding the
factors that affects the customers buying decision on Insurance.The researchers
will distribute the questionnaire to some streets in Samson Road Caloocan City.
The respondents will be given 5 minutes to answer the questionnaire

E. Scope and Limitation

The researcher’s scope is for those who has interest in Insurance, and the
researchers limited prospects is 60 in the area of Caloocan City.
 “A Study of Factors Affecting Consumer Buying Decision on Insurance”

I. Personal Details
Name:
Location:
Age:
□ Below 20 years old
□ 21 – 30 years old
□ 31 – 40 years old
□ Above 40 years old

Marital Status:
□ Married
□ Unmarried

Educational Status:
□ School level
□ Degree
□ Professional

Occupational Status
□ Student
□ Employed
□ Unemployed
□ Business

Monthly Income of the family:

□ Below 10,000 php
□ 10,001 – 20,000 php
□ 20,001 – 40,000 php
□ 40,001 – 60,000 php
□ 60,001 – Above php
N0. of member in the family:
□ Up to 2
□ 2–4
□ 4–6
□ 6 above
Do you have investment/insurance in your name?
□ Yes
□ No
Do you plan to buy Insurance?
□ Yes
□ No
If yes, what kind of insurance policy/plan you would prefer to purchase at this
stage?
□ Life Insurance
□ Car Insurance
□ House Insurance
□ Educational Insurance
□ Memorial Insurance

What percentage of your Salary do you usually save?

□ Less than 15%
□ 15% - 20%
□ 20% - 25%
□ Greater than 25%
What kind of investment do you prefer?
□ Short Term
□ Long Term
□ Both
 State your expectation on investment alternatives by ticking according
to Its importance.

Expectation in Highly Least Not

Investment Important Important Neutral Important Important
Safety
Capital Growth
Liquidity
Return
Tax Benefit
Company Profile
/ Brand Name