Evaluate the factors that impact vietnamese customer’s buying decision for non life insurance product

In this research, the author aims examine the factors that affect the customers’inclination and purchase decision on non-life insurance products and measure thedifferent impacts weights

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY VIETNAM JAPAN UNIVERSITY

INSURANCE PRODUCT

MASTER’S THESIS MASTER OF BUSINESS ADMINSITRATION

MASTER THESIS BUSINESS ADMINISTRATION

Hanoi, 2019

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

-PHAN MINH HAI

EVALUATE THE FACTORS THAT IMPACT VIETNAMESE CUSTOMER’S BUYING DECISION FOR NON-LIFE

This is all my respectful gratitude that I place on express sincere thanks to all theprecious guidance, support and encouragement that I receive during researching andcompleting Master of Business administration program at Vietnam Japan University.Thanks to the guidance of Associate Professor Pham Thi Lien – Vietnam JapanUniversity and Professor Hiroshi Morita – Yokohama National University, whoalways support and give me many in-times valuable instructions during my research,this thesis has been completed I own my heartfelt gratitude to my supervisors for theadvice given, orientations and instructions Through many discussions during theresearch process, with their insightful suggestions and extensively scienceknowledge, I can improve research and completing for my Master thesis

I also wish to express my sincere gratitude to Ms Huong, Master of Businessadministration program assistance for her in-times support and providinginformation required any point of time during study time at Vietnam JapanUniversity

I also want to express my heartfelt and grateful gratitude for my family support asthey constant encourage and support me

Phan Minh Hai

In this research, the author aims examine the factors that affect the customers’inclination and purchase decision on non-life insurance products and measure thedifferent impacts weights of these factors, based on the results to propose somerecommendation for insurers to improve service quality in the future To archive thereliable answer to the research’s question, this study adopts qualitative researchmethod, online survey via social media platform and face-to-face interview wasapplied to collect the data from 319 respondents The results suggest that there aretwo factors indirectly impact on consumer’s purchase decision through consumer’sinclination, which are personal income and risk recognition, and four factorsdirectly impact on the consumer’s final decision, including consumer’s inclination,sale promotion, insurer’s reputation and insurer’ online communication quality Theauthor suggests some recommendations for insurance companies to enhancebusiness activities, including diversifying products, building a professionalconsultant teams, and improve companies imagine

CHAPTER 1: INTRODUCTION 1

1.1 Introduction 1

1.2 Problem statement 2

1.3 Purpose of the study 3

1.4 Objectives of the study 4

1.5 Research question 4

1.6 Subjects and scope of the research 4

1.7 Structure of the research 5

CHAPTER 2: LITERATURE REVIEW 6

2.1 Overview about insurance 6

2.1.1 Insurance concept 6

2.1.2 Insurance characteristics 7

2.1.3 The differences between types of insurance 7

2.1.4 Vietnam’s insurance market overview 9

2.2 Customer behavior 11

2.2.1 Customer behavior concept 11

2.2.2 Customer buying decision 12

2.3 Research gap 15

2.4 Factors impact on consumers’ buying decision 16

2.4.1 Personal income 16

2.4.2 Consumer risk recognition 17

2.4.3 Consumer inclination 18

2.4.4 Insurer’s online communication quality 19

2.4.5 Insurer’s reputation 20

2.4.6 Sale promotion 21

2.5 Theoretical model and research hypothesis 22

CHAPTER 3: RESEARCH METHODOLOGY 26

3.1 Research purpose 26

3.2 Research approach 26

3.3 Data collection process 27

3.4 Questionnaire design 28

CHAPTER 4: DATA ANALYSIS AND DISCUSSTION 35

4.1 Sample characteristics 35

4.2 Reliability analysis 36

4.3 Factor analysis 42

4.4 Multiple regression method 43

4.5 Finding and discussion 46

CHAPTER 5: LIMITATION AND FUTURE RESEARCH 50

CHAPTER 6: CONCLUSTION AND IMPLICATION 51

REFERENCES 53

LIST OF TABLES

Table 3.1 Describe of measured items 34

Table 4.1 Personal profile of the respondents (Source: author) 36

Table 4.2 Reliability analysis – Cronbach’s alpha index (Source: author) 41

Table 4.3 Exploratory factor analysis (Source: author) 42

Table 4.4 Statistical measures of the first stage of the multiple regression analysis (Source: author) 44

Table 4.5 Statistical measures of the first stage of the multiple regression analysis (Source: author) 46

LIST OF FIGURES

Figure 2.1 Non-life insurance revenue growth rate in particular business sectors(billion VND) (Source: Bao Viet Securities) 10Figure 2.2 Consumer Decision-making process (Source: Charles W Lamb, 2010) 13

Figure 2.3 Factors Influencing Consumer Behavior (Philip Kotler & GaryArmstrong, 2016) 14Figure 2.4 Model of rationale for insurance service purchase decision making(source Aurelija Ulbinaitė and Marija Kučinskienė (2013)) 23Figure 2.5 Hypothetical research model about consumer purchase decision towardinsurance service (Source: author) 25Figure 3.1 Data collection process (Source: Yin (2003), Eisenhadt (1989)) 27

CHAPTER 1: INTRODUCTION

1.1 Introduction

After the Renovation (or “Doi Moi” in Vietnamese) campaign was implementedsince 1986, Vietnam has been becoming an emerging country in not only inSoutheast Asia area, but also in the whole world, which achieving significantgrowth and improvements Vietnam’s gross domestic product (GDP) has growthsharply since Renovation, from only 6,5 billion in 1990 to 223,8 billion in 20171.The rising in living standard lead to the creation of new consumer habit Someservice industries are experiencing sharply growth rate, like health care, tourism andespecially financial service

The non-life insurance market plays an increasingly important role in thedevelopment of a country in general and the whole world in particular The role ofnon-life insurance reflects through economic stabilization, mitigation of losses andrisk prevention for organizations and individuals participating who bought insurance

in society when unfortunately encountering risks; contributing to creating jobs andensuring social security, etc In daily life as well as in production, although peoplemay pay attention to prevent possible risks, anything could be happened Forexample, due to natural disasters such as storms, floods, earthquakes, etc cannot beforecasted accurately, it would result in property damages, life losses andproduction and business stagnations Social environment is also a cause of risk, liketraffic accidents, occupational accident, etc People have taken many measures tominimize losses caused by natural and social environmental risks One of themeasures is transferring the costs of risks to the insurance companies

In Vietnam, in financial service field, insurance market has grown sharply in recentyears and continues to be regarded as a prospective market In particular, theVietnam’s demographic and economic development conditions are expected tocreate further demand for insurance services both in non-life and life sectors In the

1 https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=VN

last decade, Vietnam’s insurance sector changed the legal system to transforminsurance market from a State-owned monopolist field to an intensive competitiveindustry for both domestic and foreign insurers as new entrants Despite theeconomic downturn rooted from the financial crisis since 2008 in United State, with

an average annual GDP growth rate around 6% last 10 years2, not only domesticcompanies 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 notacknowledge about the core and additional benefit of insurance products, most ofexiting 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?

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-commercialtrend, information could be accessed much easier, cheaper, faster and more detailthan ever before, they could research for the price comparison as well as insurancecondition, insurers’ reputation and claims’ experience Moreover, nowadayscustomers demand insurance films provide them intelligibility, accessibilityproducts that they could be experienced in other fields Customers, through theplatform they choose, demands prices and benefit policies which they want,supports and consultations when they need and only want to have contact frominsurers when they have claims or renewals Base on insurers reputation and regularbasis, customer will happily to choose other companies and have little inclination tobuild last long relationships When the customers are considering the benefits andvalues rather than the price, they offer policies and conditions which tailored theirrequirements.

However, not many insurers in Vietnam, both domestics and foreigners couldrecognize current situation Understanding about the customers is lagging behindthe new trend of business when their techniques are changing dramatically by thesignification improved of internet and telecommunications’ businesses while theystill concentrate on products, risks management and ratings Comparing with otherfinancial or service sectors that focus on customer experience like bank or tourism,insurers need to change the way they approach to their customers

1.3 Purpose of the study

Through the theoretical research on the factors affecting the buying decision towardnon-life insurance products of insurers participating in Vietnam’s market, I hopethat could help them to have further understanding about their customers andimprove their business activities

In this research, I also attempt to establish a model which reflects the interplaybetween the several factors and their impact weights on different stages of the non-life insurance purchase decision making

1.4 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

1.5 Research question

To solve the above problems and purpose, I attempt to figure answers for the

following specific questions:

Main question:

- What are the main factors which impact Vietnamese customers’ purchase

decisions for non-life insurance products?

1.6 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 inVietnam’s insurance market

1.7 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 anoverview about the Vietnam’s insurance market, previous paper on consumer’sbehavior and insurance sector, and proposal research model Chapter 3 is about theresearch methodology and survey design In chapter 4, the author discusses aboutthe data analysis process and results In the chapter 5, this study mentions about theresearch limitations and future study And finally, in chapter 6, the author discussesabout this paper’s implications

CHAPTER 2: LITERATURE REVIEW

2.1 Overview about insurance

2.1.1 Insurance concept

Currently there are many different concepts of insurance, because the concept ofinsurance 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 otherthat 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 & Tyagi,M., 2007, p 1)

- In another book, the term insurance is defined as “a method by which interestedmembers of a society can band together and collect funds to pay losses suffered later bymembers of the group” (Marshall Wilson Reavis III, 2012, p 2; Schiffman, 2013)

- Vietnam’s Law on Insurance Business, insurance business means “activity of aninsurance enterprise with the objective of profit, in which the insurance enterprise acceptsrisks of an insured person on the basis of the purchaser of insurance paying a premium inorder for the insurance enterprise to pay insurance proceeds to the beneficiary of theinsurance 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 tocompensate the insured in each case of the risks occurring during the coverageperiod (coverage period is an insured time period is stated in the policy or insurancecertificate) by the insurer This means that the insured transfers the consequences ofthe 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, insureruses the reserve fund to reimbursement the insured partly or all of cost these

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expenses or consequences However, the insurer only reimbursement for the riskswhich are in the written contract signed by and between insurer and the insured.

2.1.2 Insurance characteristics

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 aboutuncertain events that could happened, it still can cost disastrous financial and humancost 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 whenpeople in this social could be suffered same type of risk, by each person in thecommunity contributing a certain amount of money to a common fund and fromsuch a general fund to compensate for the losses of the members of the communitywho are unfortunately damaged by the risk

Insurance is a way of risk management, which is a type of financial risksmanagements, 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, ofparticular importance for risks with negative consequences (which corresponds tothe 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 ageneral definition to both insurance and non-life insurance because thecharacteristics of these two types of insurance is very different Typically, inVietnam's Insurance Business Law, life and non-life insurance are defined in anabstract way:

- Life insurance means a class of insurance provided to cases where the insured is alive or dead;

- 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, inconsideration 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 theinsured 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 theinsured choose) a set amount of money (benefit amount)”3

So, to summarize, life insurance is a commitment between the insurer and theinsured in which the insurer will pay the participant (or beneficiary of this insurancecommitment) a certain amount when a certain event occurs (the insured person isdead or still alive up to a certain time signed in the insurance contract) Lifeinsurance 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 thecustomer 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 anotherperson (third party liability); for a company, the insurance may cover propertydamages, cost for business interruption or health problems for the employees, andmore (Esbjörn Ohlsson & Björn Johansson, 2010, p 1)

According to Bao Viet Insurance, non-life insurance is the type of insurance towhich 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 whetherthere is a risk, or no risk occurred However, non-life insurance companies’reimbursement for the insured depend on the particular financial costs result from theinsured risks written on the contract This is fundamental difference between non-lifeinsurance 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

2.1.4 Vietnam’s insurance market overview

Compared with Western insurance markets with hundreds of years of establishmentand development, Vietnam Insurance market is a very new market and consumerhabits have not been fully formed In 1965, Bao Viet Insurance was formed, it wasthe first insurance company established in Vietnam and was a state-ownedmonopoly In the early years, Bao Viet only provided marine insurance for exampleinsurance for import and export goods, ocean marine insurance, etc

Until December 1993, when Vietnamese Government 100 Decree on insurancebusiness was issued, Vietnamese insurance market became a fully competitivemarket, creating a potential platform for development According to thisgovernment decree, Insurance Bao Viet was no longer the monopoly company inthe market Since then, many other Vietnamese insurance companies haveestablished, and many foreign companies have joined the Vietnamese insurancemarket, providing all types of insurance (both life and non-life)

With 95.5 million population and 2,100 USD GNI per capital 5 , Vietnam is apotential market for insurance companies In Vietnam, since recent years insurancecompanies’ revenues is increasing significantly despite the global economic crisishappened in 2008 from United Stated According to the Annual report of VietnamInsurance market 2017 (2018, p 9), the revenue growth rate is 23,4% in compare

with the previous year

Figure 2.1 Non-life insurance revenue growth rate in particular business sectors

(billion VND) (Source: Bao Viet Securities)

Up to 31st December 2017, In Vietnam’s insurance market, there are 64 companiesproviding non-life insurance, life insurance, reinsurance and insurance brokerageservice (with 30 non-insurers) (2018, p 5) However, also according to the annualreport the Ministry of Finance, the contribution of insurance services to Vietnam'sGDP is only over 2% (2018, p 8)

5 https://data.worldbank.org/country/vietnam

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In recent years, with efforts to enhance policies and improve legal regulations in theinsurance business sector to advance the investment environment and administrativereform of the Vietnamese government, Vietnam insurance market will attract morereputable investors, and become more effective operation, healthy competitionmarket Therefore, Although Vietnam's insurance market seems to be a fiercelycompetitive once, it will be a market with a lot of development potential Whatinsurance companies need to do is have further understanding about their consumerbehavior.

2.2 Customer behavior

2.2.1 Customer behavior concept

Marketing experts and researcher always regard customer behavior as a hot topic onthis area Hawkins D.I., Mothersbauch D.L & Best R.J (2007) emphasized theimportant of the knowledge about customer behavior as all marketing decisions arebased on assumptions and knowledge of consumer behaviour The more they areunderstanding about the reason and the way customers response while making theirpurchase decisions, the more they could advance their marketing strategies and gainmore successful

Customer behavior, according to Leon Schiffman (2013, p 4), is defined as thebehavior that consumer display in searching for, purchasing, using, evaluation anddisposing of the products and services that they expect will satisfy their needs.Nowadays, researchers still concentrate on the study of how individuals makedecisions 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 customerunderstanding (Puccinelli, N., Goodstein, R., Grewal, D., Price, R., Raghubir, P &Stewart, D., 2009), this research also study about customer behavior, concentrate oncustomer buying decision, specifically on finding out factors that influencecustomers’ buying decision making in Vietnam non-life insurance market

2.2.2 Customer buying decision

Because customer behavior is always a hot topic in marketing, there are manystudies on this field According to Philip Kotler & Gary Armstrong (2016, p 692)they defined consumer buyer behavior refers to the buying behavior of finalconsumers – individuals and households that buy goods and services for personalconsumption In another research, consumer purchase is defined as a process ofgathering and processing information, evaluating it and selecting the best possibleoption 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 situationscharacterized by high consumer involvement in a purchase and significant perceiveddifferences among brands

- Dissonance-reducing buying behavior, this type occurs when consumers arehighly involved with an expensive, infrequent, or risky purchase but see little differenceamong 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 makingthe purchase (2016, p 183) Customers would experience some certain steps whileconsidering buying decisions Depending on different research field, researcher’sproposal different step model of consumer buying process According to Charles W.Lamb, consumer decision-making process is a five-step process used by consumerswhen buying goods or services, which included: (1) need recognition, (2)information search, (3) evaluation of alternatives, (4) purchase, and (5) postpurchase 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 buyingdecision when they want to understand further about their customer For example,Engel, Kollat and Blackwell (1968) in their researches proposal a modeldemonstrating five-stages of consumer decision process which including problemrecognition, internal search and alternative evaluation, external search andalternative evaluation, purchasing processes and outcomes Kotler and Keller (2016)describe consumer decision making process as a five-stages model, in whichconsumer will involve in problem recognition, information search, evaluation ofalternatives, purchase decision and post-purchase behavior Belch G & Belch M.(2014) in their book also discuss this five-stages model in the influence of variouspsychological concepts, including motivation, perception, attitude formation,integration and learning.

However, Kotler and Keller (2016) in their book pointed out that, consumer don’talways follow all the stages in the decision making process, they may skip orreserve some while making purchase decisions The path which consumer movesthrough the decision-making process would be differed by certain factors, includingcultural factors, social factors and personal factors (2005) Many levels of factorsaffect consumer’s purchase decision – from broad cultural and social influences onmotivations, beliefs, and attitudes lying deep within consumers’ themselves.Consumer purchase decision are impacted strongly by cultural, social, personal, andpsychological characteristics, as shown in figured 2.3 below.

Figure 2.3 Factors Influencing Consumer Behavior (Philip

Kotler & Gary Armstrong, 2016)

2.3 Research gap

Although customer behavior always has been widely studied and getting moreinterested in when information technology, especially internet of thing, has beenconsiderable influencing on consumer buying decision; there is a limited on theattention on the analysis of the particularities of insurance consumer behavior as aspecific object (Ulbinaite, Aurelija & Kučinskienė, Marija, 2013)

In financial field, especially banking sector, research is paying a lot of attention instudying 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 variousfactors that impact the customer purchase decision in insurance sector, especially innon-life insurance service

Another problem is that in overall, research on insurance field often focus on purelymonetary decisions Hsee & Kunreuther (2000) pointed out usually researchersconcentrate on consumer purchase decisions which depend on well-specifiedquantitative factors, such as premium, probability of loss, and size of compensation.With the fast development of information technology and the wide spread of newbusiness trend, for example e-commercial, the consumer behavior is now muchmore complicated, influenced by various factors, from sociological, cultural,economical to demographical factors And insurance sector also cannot stay out ofthese global trends Researchers and experts should have a wider overview of thefactors 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 insuranceonce (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 betweenlife insurance and non-life insurance field, also in geographical when South EastAsia countries do not get many attentions

2.4 Factors impact on consumers’ buying decision

2.4.1 Personal income

Personal income is a term referring to all income of an individual earned in a certaintime period from salary, investment and other sources of ventures In economic, thisterm has a broader view as it is the gross of total earning of individuals orhousehold A country’s personal income level and GDP have a positive relationship,when the GDP increase, personal income also increase, and when the incomeincrease tends to create an increase in consumption, according to basicallyeconomic theory Peter Zweifel & Roland Eisen (2012, p 17), in their book, figureout 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 widelystudied Many scientific-based reasons for non-consumption of insurance servicesare strongly concentrated in economic state and purchasing ability (low or noincome) of individuals (Ulbinaite, 2013) According to Liu & Chen (2002) research,income have a potential relationship with insurance purchase decision as people aremore willing to purchase insurance when income increases In another research inUnited State insurance market, Leiyu Shi (2001) pointed out that un-insurance andpartial insurance are associated with low income According Bawa & Ruchita(2011), while researching for the impact of demographical on willingness topurchase health insurance, figured out that income of respondents along with otherdemographical factors (gender, age, education and occupation) has significantassociation with their willingness to pay for insurance In a broader research on theimpact of level of education on insurance purchase decision, Diane M Dewar (1998)also found out that in general, higher salaries, higher education levels, oremployment in industries with higher concentrations of college-educated employeeshave a higher interest in taking insurance coverage

From these previous research evidence, in this study about Vietnam’s customerinsurance purchase decision, the result is expected that in Vietnam, personal incomealso have a positive impact on consumer willing to purchase insurance products.

2.4.2 Consumer risk recognition

In daily life, people could face many uncertain events that they cannot predict, andthese events could cause some possible losses In insurance economic, these lossesdue 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 includepeople's beliefs, attitudes, judgements and feelings, as well as the wider cultural andsocial dispositions they adopt towards threats” Cognition about insurance is defined

as “insurance consciousness which determines the motivation of insuranceconsumption” (Zhang, Xumei & Zhang, Yingxiu & Qiu, Hanguang & Dan, Bin,2007)

According to the insurance definition above, insurance companies have the function

of allocation and managing risks more effectively when insurance buyers transferrisks to them Therefore, it could be logical to assume that when customers havecognition (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 thefirst step of the process In the model of Charles W Lamb (2010, p 191) the buyingprocess 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 thebusiness of risk, researchers want to understand more about the customer they have

to put some attention on studying the relation between customer risk recognitionand willing to purchase insurance Ming Wang et al (2012) investigated in analyzingabout 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 towardinsurance is depended on individualized predictions about the magnitude of highlyunlikely, and largely unfamiliar, future events In another study, the authors pointedout that people would form an inclination towards purchasing an insurance productwhen they exposure to risks (Ulbinaite, Aurelija & Kucinskiene, Marija & LeMoullec, Yannick., 2014) In a rarely study conducted in Vietnam, according toLofgren et al (2008), because the awareness about health is raising in rural area, sothere is also an increasing in private health insurance demand.

2.4.3 Consumer inclination

Consumer inclination toward insurance purchasing is the customers’ motivation forfeeling of need and willing to pay for insurance product Like any other businessfield, if insurance companies want to attract customers’ inclination toward theirservices, insurance products have to satisfy the consumer needs and consistent totheir 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 consumerincurred risk, so if consumers don’t have awareness about risk, they could not form

an inclination toward insurance services It also happened when customer cannotafford insurance coverages to protect them from threats and tend to find othermeasures

Ulbinaitė and Le Moullec (2010) investigated in researching and analyzing theinfluence 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 aswell as the budget constraints could lead to purchase non-optimal insurance or nottake any insurance coverages Xumei Zhang et al (2007) also putted attention onexamining the impact of economic factors and risk recognition on consumer’sinclination and buying-decision toward insurance products

However, beside analysis the relation between the personal income, risk recognitionwith consumer’s inclination, there are not many researchers investigating onanalysis impact of consumer’s inclination and consumer buying-decision Ulbinaiteand Kučinskienė (2013) in their research stated that customer’s inclination is formfrom 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 consumerinclination from their risk recognition and income and when consumers alreadyinclined to purchase insurance services, how consumer inclination impact thisdecision

2.4.4 Insurer’s online communication quality

Industrial 4.0 era is becoming a new trend of this decade, orienting customers toenjoy all services on the information technology platform Insurance industry is alsonot out of that trend, whereas information technology plays an extremely importantrole for insurance industry in particular and the financial sector in general.Enhancing digital technology implementation, including online communicationquality, in insurance business activities could help simplify, optimize customerservice process from information searching, product sale, compensation payment,creating favorable condition to attract more customer, as insurance service inVietnam only count for around 2% of Vietnam’s GDP

According to Muniz and O’Guinn (2000), “strong brand community can lead to asocially embedded and entrenched loyalty, brand commitment” Beside traditionalcommunication, with the signification improve of internet and social network,online communities are formed around a common interest or product category(Williams, Ruth L & Cothrel, Joseph , 2000), and the communication betweencustomers and companies via online platform also is included in these Onlinecommunities could help to enhance stronger social ties and greater mutuallybeneficial relationships, therefore establish a good and enduring onlinecommunication also could exhibit increases in product sale and marketing

According researchers who investigating in communication and marketing reviewfound out that quality of communication is related to quality of informationexchanges between people in the communities, including studies of Martin andClark (1996), Mohr and Spekman (1994), Weiss et al (2008) In traditional model

of consumer buying-decisions making, information searching is an important step infive-steps process, for example in Philip Kotler’s model (2016), especialcommercial sources (Advertising, Web sites, etc.), play an essential role forproviding information functions In studies on the influences of insurance servicebusiness quality on consumer purchase decision, the dimensions related to quality isattracting attention, including public mutual relationships with customers,willingness to help and respond to customer questions, quick reply to clients desiresand requires (Joseph, M & Stone, G & Anderson, K, 2003) or rely oncommunication about clients interest service (Dean, D.H & Lang, J.M, 2008)

In recent years, implementing “Insurtech” – a term combining “insurance” and

“technology” – is becoming a crucial mission for insurance companies as allplatforms of commerce is transforming because of the ongoing develop of digital aswell as the demand of customers Although these impacts can be observed inworldwide insurance markets, there is a lack of literature review about the relationbetween insurers’ online communication quality and consumer buying decisions.Therefore, this research aims to analysis the impact of this factor on consumerpurchase decision in non-life insurance field

2.4.5 Insurer’s reputation

Corporation reputation is the perception and opinion of target groups (customers,suppliers, opponents, etc.) in general about this organization based on its pastactivities on business, investing or for social Depending on each target groups, theirimage about a certain corporation reputation could be different Therefore, anycompany or organization have to create a good reputation There is a fact thatcompanies and organizations usually have to spend many years to acquire goodreputation but only with a fraud their reputation would be ruined very fast and

significantly damage the business activities, the illegal toxic waste emission scandal

of Vedan – an multinational manufacturer of fermentat ion-based amino acids, foodadditive and cassava starch-based products – in Vietnam is an example More than

10 years ago, before this scandal, Vedan had a dominant share in the food additive

in Vietnam However, when this happened in 2008, Vedan was faced 5000 petitions

of Vietnamese farmers, had to compensate more than 218,000 billion VND, ruinedthe company’s reputation and lost almost market share to Japanese opponents likeAjinomoto6 In the worldwide context, the reputation crisis of Arthur Andersen in

2002 also is a good demonstration of how reputation could affect the performance

of a corporation

Researching about the impact on performance of a corporation depend on itsreputation as intangible assets has been attracting attention since 20st century(Greenspan [1998], Chun (2005), Jung and Seock (2016)) Other studies found outthat beside brand image, corporate reputation is formed from the customers’attitudes forward this corporation (Hatch and Schultz (2001), Smaiziene andJucevicius (2010)) and could have impact on customers’ inclination toward buying-decision (Brown (1997)) This study proposes to examine how insurer reputationinfluence customer buying-decision toward non-life insurance services

2.4.6 Sale promotion

Promotion is defined as “activities that communicate the merits of the product andpersuade target customers to buy it” (Philip Kotler & Gary Armstrong, 2016) Salepromotions refer to stimulating activities aim to acquire inclination from clients andencourage customers’ buying decisions in a short period by providing them withadditional benefits Sale promotion usually be utilized when products and services isnot attracting many attentions from customer, for example business fields requires alot of customer cognition like insurance service Sale promotion tools arediversified, including discounts, vouchers and coupons, free gifts, etc

6

To attract more consumer to purchase the companies’ services and products, salepromotion is one of the most effectiveness tools as it could enhance consumers’inclination toward products and services lead to increase in purchase decisions andrevenues Therefore, the impact of sale promotion on consumer buying decision isachieving a lot of attention from researchers There are a lot of literature reviewsabout the relation between sale promotion tools and consumer buying behavior,including studies on price discount suggests that it enhance response to buyingdecisions (Blattberg and Neslin (2003), Blackwell, Miniard and Engel (2001)) andprevious studies also investigating on coupons as promotion tool (Ndubisi andChew (2006), Syed Ali Ahmad et al (2015)) Hence, this research aims to figure out

if there is an influence of sale promotion on consumer purchase decision in non-lifeinsurance field

2.5 Theoretical model and research hypothesis

Despite, the fact that there is a considerable research gap in insurance field, there issome models of behavioral research consumers in this business sector The question

is which model could be applied to analysis customer purchasing decision towardnon-life insurance service in Vietnam Nowadays customers required insurancecompanies provide them intelligibility, accessibility service that they could beexperienced in other fields Customers, through the advance online platform theychoose, demands prices and benefit policies which they want, supports andconsultations when they need and only want to have contact from insurers whenthey have claims or renewals Base on insurers reputation and regular basis,customer will happily to choose other companies and have little inclination to buildlast long relationships The consumer will offer policies and conditions whichtailored their requirements, when they are considering the benefits and values ratherthan the price,

In a research that examination of the rationale for insurance service purchasedecision making reflects the several stages of the insurance service purchasedecision making processes, Aurelija Ulbinaitė and Marija Kučinskienė (2013)

proposed model of rationale for insurance service purchase decision making asdescribed in figure 2.4

Based on the narrowed down scope of literature review above and the currentsituation of Vietnam insurance market, based on the theory of factors affectingconsumer purchasing decisions of Philip Kotler, and the model Aurelija Ulbinaitėand Marija Kučinskienė, the author proposal Hypothetical research model aboutconsumer purchase decision toward insurance service as describe in figure 2.5below

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 certaintime period from salary, investment and other sources of ventures The researches ofLiu & 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 whenconsumer’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 forinsurance product is considered as consumer inclination toward insurancepurchasing Zhang et al (2007) and Ulbinaite and Kučinskienė (2013) in theirresearch putted attention on examining the impact of consumer’s inclination onbuying-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 communicationprocesses that occur between consumers and insurers through online informationtechnology platforms According researchers who investigating in communicationand marketing review in general and insurance service business quality in particularhad found out that the quality of online communication has positive impact onconsumer 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 orfor social is defined as organization’s reputation Previous papers suggested thatcorporate 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)