Contributing Customers towards Underinsurance in General Insurance Industry
Added on 2023-06-08
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CONTRIBUTING CUSTOMERS TOWARDS
UNDERINSURANCE IN GENERAL
INSURANCE INDUSTRY
NAME OF THE STUDENT:
NAME OF THE UNIVERSITY:
COURSE ID:
UNDERINSURANCE IN GENERAL
INSURANCE INDUSTRY
NAME OF THE STUDENT:
NAME OF THE UNIVERSITY:
COURSE ID:
M17100002 CHOONG YUEN HUOI FINAL RESEARCH PAPER
ABSTRACT
This research is discovering the contributing customers towards underinsurance in
General Insurance industry. Factors which are, for example, knowledge on insurance,
customer-insurer relation, importance of having insurance, affordability of insurance
product and availability of insurance product are utilized to decide whether the five
factors are the ones adding to dramatically increases of underinsurance rate in
Malaysia. The motivation behind why Malaysians are grossly underinsured is on
account of the absence of information in insurance know how and in addition the
deceptive suspected that public at large generally thinks their insurance company is
continually discovering reasons not to pay their claims, and therefore this will make the
current and potential customers to question on their insurance company.
Information are acquired through distribution of questionnaires in Klang Valley. The
examined data demonstrates that the factors, for example, knowledge on insurance and
significance of having insurance are the contributing variables towards the
underinsurance whereas other factors, for example, customer-insurer relation, the
affordability of insurance product and availability of insurance product does not
influence the rate of underinsurance for the residence in Klang Valley. Additionally, the
researcher can consider to include all the more factors contributing customers toward
underinsurance in General Insurance industry located at Klang Valley as this research
display right now just clarifies the rate of underinsurance's variance behavior. In this
way, there ought to be different factors that may have impact on the underinsurance
that have not been involved into this model. The data analysis successfully showed the
significant relationship between underinsurance and four factors that are knowledge of
insurance, relation between customer and insurer, importance of taking up insurance
coverage, affordability of insurance product and availability of insurance product.
ii
ABSTRACT
This research is discovering the contributing customers towards underinsurance in
General Insurance industry. Factors which are, for example, knowledge on insurance,
customer-insurer relation, importance of having insurance, affordability of insurance
product and availability of insurance product are utilized to decide whether the five
factors are the ones adding to dramatically increases of underinsurance rate in
Malaysia. The motivation behind why Malaysians are grossly underinsured is on
account of the absence of information in insurance know how and in addition the
deceptive suspected that public at large generally thinks their insurance company is
continually discovering reasons not to pay their claims, and therefore this will make the
current and potential customers to question on their insurance company.
Information are acquired through distribution of questionnaires in Klang Valley. The
examined data demonstrates that the factors, for example, knowledge on insurance and
significance of having insurance are the contributing variables towards the
underinsurance whereas other factors, for example, customer-insurer relation, the
affordability of insurance product and availability of insurance product does not
influence the rate of underinsurance for the residence in Klang Valley. Additionally, the
researcher can consider to include all the more factors contributing customers toward
underinsurance in General Insurance industry located at Klang Valley as this research
display right now just clarifies the rate of underinsurance's variance behavior. In this
way, there ought to be different factors that may have impact on the underinsurance
that have not been involved into this model. The data analysis successfully showed the
significant relationship between underinsurance and four factors that are knowledge of
insurance, relation between customer and insurer, importance of taking up insurance
coverage, affordability of insurance product and availability of insurance product.
ii
M17100002 CHOONG YUEN HUOI FINAL RESEARCH PAPER
TABLE OF CONTENTS
CHAPTER 1: OVERVIEW / INTRODUCTION............................................................1
1.1 Introduction............................................................................................................................1
1.2 Background of Study.............................................................................................................2
1.2.1 Knowledge on Insurance.................................................................................................3
1.2.2 Relation between customer and insurer...........................................................................4
1.2.3 Importance of taking up insurance coverage...................................................................4
1.2.4 Affordability of insurance products................................................................................5
1.2.5 Availability of insurance products..................................................................................5
1.3 Problem Statement.................................................................................................................6
1.4 Research Objectives.............................................................................................................15
1.5 Research Questions..............................................................................................................15
1.6 Research Hypothesis............................................................................................................16
1.7 Significance of Study...........................................................................................................17
1.8 Study Limitations.................................................................................................................18
1.9 Research Methodology........................................................................................................18
1.10 Operational Definitions......................................................................................................19
1.11 Organisation of Chapters...................................................................................................20
1.12 Summary of the Chapter....................................................................................................20
CHAPTER 2: LITERATURE REVIEW.......................................................................21
2.1 Introduction..........................................................................................................................21
2.2 Theoretical Support..............................................................................................................21
2.3 Knowledge on Insurance......................................................................................................23
2.4 Relation between customer and insurer...............................................................................26
2.5 Importance of taking up insurance coverage.......................................................................30
2.6 Affordability of insurance product.......................................................................................33
2.7 Availability of Insurance Product........................................................................................35
2.8 Research Hypotheses Formation..........................................................................................38
iii
TABLE OF CONTENTS
CHAPTER 1: OVERVIEW / INTRODUCTION............................................................1
1.1 Introduction............................................................................................................................1
1.2 Background of Study.............................................................................................................2
1.2.1 Knowledge on Insurance.................................................................................................3
1.2.2 Relation between customer and insurer...........................................................................4
1.2.3 Importance of taking up insurance coverage...................................................................4
1.2.4 Affordability of insurance products................................................................................5
1.2.5 Availability of insurance products..................................................................................5
1.3 Problem Statement.................................................................................................................6
1.4 Research Objectives.............................................................................................................15
1.5 Research Questions..............................................................................................................15
1.6 Research Hypothesis............................................................................................................16
1.7 Significance of Study...........................................................................................................17
1.8 Study Limitations.................................................................................................................18
1.9 Research Methodology........................................................................................................18
1.10 Operational Definitions......................................................................................................19
1.11 Organisation of Chapters...................................................................................................20
1.12 Summary of the Chapter....................................................................................................20
CHAPTER 2: LITERATURE REVIEW.......................................................................21
2.1 Introduction..........................................................................................................................21
2.2 Theoretical Support..............................................................................................................21
2.3 Knowledge on Insurance......................................................................................................23
2.4 Relation between customer and insurer...............................................................................26
2.5 Importance of taking up insurance coverage.......................................................................30
2.6 Affordability of insurance product.......................................................................................33
2.7 Availability of Insurance Product........................................................................................35
2.8 Research Hypotheses Formation..........................................................................................38
iii
M17100002 CHOONG YUEN HUOI FINAL RESEARCH PAPER
2.9 Chapter Summary................................................................................................................39
CHAPTER 3: RESEARCH METHODOLOGY...........................................................39
3.1 Introduction..........................................................................................................................39
3.2 Research Method..................................................................................................................39
3.3 Data Source and Sample......................................................................................................40
3.4 Pilot Study............................................................................................................................40
3.5 Pilot Test..............................................................................................................................42
3.6 Data Collecting Procedure...................................................................................................43
3.7. Sample size.........................................................................................................................43
3.8 Data Analysis Technique.....................................................................................................44
3.8.1 Reliability and Validity Test.........................................................................................45
3.8.2 Correlation Test.............................................................................................................46
3.8.3 Normality Test...............................................................................................................46
3.8.4 Regression Test.............................................................................................................47
3.9 Measuring Instrument..........................................................................................................48
3.10 Questionnaire Design.........................................................................................................48
3.11 Study Population, Unit of Analysis, Sample Selection and Sampling Techniques...........49
3.12 Data Collection and Analysis Methods..............................................................................49
3.13 Chapter Summary..............................................................................................................49
CHAPTER 4: DATA ANALYSIS................................................................................51
4.1 Frequency distribution:........................................................................................................51
4.1.1 Demographics................................................................................................................51
4.1.2 Knowledge of Insurance:...............................................................................................53
4.1.3 Relation between Customer and Insurer:......................................................................53
4.1.4 Importance of taking up insurance coverage.................................................................54
4.1.5 Affordability of insurance product:...............................................................................55
4.1.6 Availability of insurance product:.................................................................................56
4.1.7 Factors of Underinsurance:...........................................................................................57
4.2 Reliability Analysis:.............................................................................................................57
4.3 Correlation:..........................................................................................................................60
iv
2.9 Chapter Summary................................................................................................................39
CHAPTER 3: RESEARCH METHODOLOGY...........................................................39
3.1 Introduction..........................................................................................................................39
3.2 Research Method..................................................................................................................39
3.3 Data Source and Sample......................................................................................................40
3.4 Pilot Study............................................................................................................................40
3.5 Pilot Test..............................................................................................................................42
3.6 Data Collecting Procedure...................................................................................................43
3.7. Sample size.........................................................................................................................43
3.8 Data Analysis Technique.....................................................................................................44
3.8.1 Reliability and Validity Test.........................................................................................45
3.8.2 Correlation Test.............................................................................................................46
3.8.3 Normality Test...............................................................................................................46
3.8.4 Regression Test.............................................................................................................47
3.9 Measuring Instrument..........................................................................................................48
3.10 Questionnaire Design.........................................................................................................48
3.11 Study Population, Unit of Analysis, Sample Selection and Sampling Techniques...........49
3.12 Data Collection and Analysis Methods..............................................................................49
3.13 Chapter Summary..............................................................................................................49
CHAPTER 4: DATA ANALYSIS................................................................................51
4.1 Frequency distribution:........................................................................................................51
4.1.1 Demographics................................................................................................................51
4.1.2 Knowledge of Insurance:...............................................................................................53
4.1.3 Relation between Customer and Insurer:......................................................................53
4.1.4 Importance of taking up insurance coverage.................................................................54
4.1.5 Affordability of insurance product:...............................................................................55
4.1.6 Availability of insurance product:.................................................................................56
4.1.7 Factors of Underinsurance:...........................................................................................57
4.2 Reliability Analysis:.............................................................................................................57
4.3 Correlation:..........................................................................................................................60
iv
M17100002 CHOONG YUEN HUOI FINAL RESEARCH PAPER
4.4 Normality test:......................................................................................................................62
4.5 Regression Analysis:............................................................................................................66
4.6 Summary of Hypothesis testing results:...............................................................................70
CHAPTER 5: CONCLUSION....................................................................................70
5.1 Conclusion...........................................................................................................................70
5.2 Recommendation.................................................................................................................71
5.3 Summary of the research......................................................................................................72
5.4 Contributions of the study....................................................................................................73
REFERENCES..........................................................................................................76
APPENDIX................................................................................................................ 90
List of Charts
Chart 1: Rank and insurance penetration (Premium as a % of GDP) 2011.....................9
Chart 2: Insurance penetration and GDP per capita (based on averages over 2004 -
2010............................................................................................................................... 10
Chart 3: Non-life insurance penetration and GDP per capita (2004 – 2010 averages). .11
Chart 4: Level of trust (percentage of consumers citing “complete trust” and “moderate
trust”) by type of business..............................................................................................12
Chart 5: Frequency of outbound communications – current vs. preferred levels Global
developing markets........................................................................................................13
Chart 6: Flow chart of a pilot study procedure................................................................41
List of News Article
News Article 1: Keep Policy Holders Informed 14
v
4.4 Normality test:......................................................................................................................62
4.5 Regression Analysis:............................................................................................................66
4.6 Summary of Hypothesis testing results:...............................................................................70
CHAPTER 5: CONCLUSION....................................................................................70
5.1 Conclusion...........................................................................................................................70
5.2 Recommendation.................................................................................................................71
5.3 Summary of the research......................................................................................................72
5.4 Contributions of the study....................................................................................................73
REFERENCES..........................................................................................................76
APPENDIX................................................................................................................ 90
List of Charts
Chart 1: Rank and insurance penetration (Premium as a % of GDP) 2011.....................9
Chart 2: Insurance penetration and GDP per capita (based on averages over 2004 -
2010............................................................................................................................... 10
Chart 3: Non-life insurance penetration and GDP per capita (2004 – 2010 averages). .11
Chart 4: Level of trust (percentage of consumers citing “complete trust” and “moderate
trust”) by type of business..............................................................................................12
Chart 5: Frequency of outbound communications – current vs. preferred levels Global
developing markets........................................................................................................13
Chart 6: Flow chart of a pilot study procedure................................................................41
List of News Article
News Article 1: Keep Policy Holders Informed 14
v
M17100002 CHOONG YUEN HUOI FINAL RESEARCH PAPER
List of Tables
Table 1: Rules of thumb about Cronbach’s Alpha coefficient size.................................39
Table 2: Interpretations of correlation coefficients..........................................................40
Table 3: Questionnaire design.......................................................................................42
Table 4: Summary of Research Methodology................................................................43
Table 5: Frequency distribution of gender......................................................................44
Table 6: Frequency distribution of Household income...................................................45
Table 7: Frequency distribution of Highest Education Level..........................................45
Table 8: Frequency distribution of Age...........................................................................45
Table 9: Frequency distribution of responses of ‘Knowledge of Insurance’...................46
Table 10: Frequency distribution of responses of ‘Relation between Customer and
Insurer’........................................................................................................................... 47
Table 11: Frequency distribution of responses of ‘Importance of taking up insurance
Coverage’.......................................................................................................................48
Table 12: Frequency distribution of responses of ‘Affordability of Insurance Product’...48
Table 13: Frequency distribution of responses of ‘Availability of Insurance Product’.....49
Table 14: Frequency distribution of responses of ‘Factors of Underinsurance’..............50
Table 15: Reliability of data............................................................................................51
Table 16: Reliability and validity of each variable of the dataset....................................53
Table 17: Correlation matrix...........................................................................................53
Table 18: Normality testing of the factors.......................................................................55
Table 19: Table of ‘coefficient of variation’ of multiple regression model.......................59
Table 20: ANOVA table of multiple regression model....................................................60
Table 21: Table of significant variables of multiple regression model............................60
List of Figure
vi
List of Tables
Table 1: Rules of thumb about Cronbach’s Alpha coefficient size.................................39
Table 2: Interpretations of correlation coefficients..........................................................40
Table 3: Questionnaire design.......................................................................................42
Table 4: Summary of Research Methodology................................................................43
Table 5: Frequency distribution of gender......................................................................44
Table 6: Frequency distribution of Household income...................................................45
Table 7: Frequency distribution of Highest Education Level..........................................45
Table 8: Frequency distribution of Age...........................................................................45
Table 9: Frequency distribution of responses of ‘Knowledge of Insurance’...................46
Table 10: Frequency distribution of responses of ‘Relation between Customer and
Insurer’........................................................................................................................... 47
Table 11: Frequency distribution of responses of ‘Importance of taking up insurance
Coverage’.......................................................................................................................48
Table 12: Frequency distribution of responses of ‘Affordability of Insurance Product’...48
Table 13: Frequency distribution of responses of ‘Availability of Insurance Product’.....49
Table 14: Frequency distribution of responses of ‘Factors of Underinsurance’..............50
Table 15: Reliability of data............................................................................................51
Table 16: Reliability and validity of each variable of the dataset....................................53
Table 17: Correlation matrix...........................................................................................53
Table 18: Normality testing of the factors.......................................................................55
Table 19: Table of ‘coefficient of variation’ of multiple regression model.......................59
Table 20: ANOVA table of multiple regression model....................................................60
Table 21: Table of significant variables of multiple regression model............................60
List of Figure
vi
M17100002 CHOONG YUEN HUOI FINAL RESEARCH PAPER
Figure 1: Theoretical framework.................................................................................... 15
Figure 2: Normal Q-Q plot of ‘Knowledge of Insurance’.................................................56
Figure 3: Normal Q-Q plot of ‘Relation of customer and insurer’....................................56
Figure 4: Normal Q-Q plot of ‘Importance of taking up insurance coverage’..................57
Figure 5: Normal Q-Q plot of ‘Affordability of insurance product’...................................57
Figure 6: Normal Q-Q plot of ‘Availability of Insurance Product’....................................58
Figure 7: Normal Q-Q plot of ‘Availability of insurance product’.....................................58
Figure 8: Fitted histogram of residuals of multiple regression model.............................61
Figure 9: Normal P-P plot of Regression Standardized Residuals.................................62
List of Abbreviations
EY = Ernst and Young
LIAM = Life Insurance Association Malaysia
MBA = Master in Business Administration
MSIG = Mitsui Sumitomo Insurance
PIAM = Persatuan Insurance Am Malaysia
UKM = University Kebangsaan Malaysia
SPSS = Statistical Package for the Social Science
MUST = Malaysia University of Science and Technology
vii
Figure 1: Theoretical framework.................................................................................... 15
Figure 2: Normal Q-Q plot of ‘Knowledge of Insurance’.................................................56
Figure 3: Normal Q-Q plot of ‘Relation of customer and insurer’....................................56
Figure 4: Normal Q-Q plot of ‘Importance of taking up insurance coverage’..................57
Figure 5: Normal Q-Q plot of ‘Affordability of insurance product’...................................57
Figure 6: Normal Q-Q plot of ‘Availability of Insurance Product’....................................58
Figure 7: Normal Q-Q plot of ‘Availability of insurance product’.....................................58
Figure 8: Fitted histogram of residuals of multiple regression model.............................61
Figure 9: Normal P-P plot of Regression Standardized Residuals.................................62
List of Abbreviations
EY = Ernst and Young
LIAM = Life Insurance Association Malaysia
MBA = Master in Business Administration
MSIG = Mitsui Sumitomo Insurance
PIAM = Persatuan Insurance Am Malaysia
UKM = University Kebangsaan Malaysia
SPSS = Statistical Package for the Social Science
MUST = Malaysia University of Science and Technology
vii
M17100002 CHOONG YUEN HUOI FINAL RESEARCH PAPER
CHAPTER 1: OVERVIEW / INTRODUCTION
1.1 Introduction
Insurance is a type of agreement where the underwriter of an organization made a
contract with the insured to shift the insured's hazard to the insurance company and
consents to reimburse or repay the insured in case of misfortune in return for a
legitimate monetary compensation or premium (Mowbray, Albert H.; Blanchard, Ralph
H., 1961).
Nowadays, Malaysian are grossly having an underinsurance coverage because they
may not aware about the significant and importance for the consequences of
underinsurance when they encounter to claim or something unfortune happened to
them. Research will be conducted for factors contributing customers toward
underinsurance in General Insurance industry.
Underinsurance refer to insufficient of insurance coverage held by a policyholder. In
case of a demand, under-insurance might bring about financial hazards to the
policyholder, as the claim would surpass the greatest sum that could be compensated
by the ‘insurance policy’. While under-insurance might bring about lesser amount of
premiums paid by the ‘policy-holder’, the damage emerging from a claim might further
surpass any kind of ‘Marginal savings’ in the ‘Insurance premiums’ (Investopedia.com,
2016).
A lot of customers may not aware the importance toward underinsurance. This is
definitely causing policyholder sustained huge financial losses when an unfortunate
event was occurred to them. The problem is similarly significance to an insurance
company, the company reputation will be tarnish and losing of customers when their
policyholder started to question and unsatisfied why their claims are not being paid.
1
CHAPTER 1: OVERVIEW / INTRODUCTION
1.1 Introduction
Insurance is a type of agreement where the underwriter of an organization made a
contract with the insured to shift the insured's hazard to the insurance company and
consents to reimburse or repay the insured in case of misfortune in return for a
legitimate monetary compensation or premium (Mowbray, Albert H.; Blanchard, Ralph
H., 1961).
Nowadays, Malaysian are grossly having an underinsurance coverage because they
may not aware about the significant and importance for the consequences of
underinsurance when they encounter to claim or something unfortune happened to
them. Research will be conducted for factors contributing customers toward
underinsurance in General Insurance industry.
Underinsurance refer to insufficient of insurance coverage held by a policyholder. In
case of a demand, under-insurance might bring about financial hazards to the
policyholder, as the claim would surpass the greatest sum that could be compensated
by the ‘insurance policy’. While under-insurance might bring about lesser amount of
premiums paid by the ‘policy-holder’, the damage emerging from a claim might further
surpass any kind of ‘Marginal savings’ in the ‘Insurance premiums’ (Investopedia.com,
2016).
A lot of customers may not aware the importance toward underinsurance. This is
definitely causing policyholder sustained huge financial losses when an unfortunate
event was occurred to them. The problem is similarly significance to an insurance
company, the company reputation will be tarnish and losing of customers when their
policyholder started to question and unsatisfied why their claims are not being paid.
1
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