VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY VIETNAM JAPAN UNIVERSITY PHAN MINH HAI PHAN MINH HAI EVALUATE THE FACTORS THAT IMPACT VIETNAMESE CUSTOMER’S EVALUATE THE FACTORS THAT BUYING DECISION FOR NON-LIFE IMPACT VIETNAMESE CUSTOMER’S INSURANCE BUYING DECISION PRODUCT FOR NON-LIFE 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 INSURANCE PRODUCT MAJOR: BUSINESS ADMINSITRATION CODE: 60340102 RESEARCH SUPERVISORS: ASSOC.PROF DR PHAM THI LIEN PROF DR HIROSHI MORITA Hanoi, 2019 ACKNOWLEDGEMENT This is all my respectful gratitude that I place on express sincere thanks to all the precious guidance, support and encouragement that I receive during researching and completing Master of Business administration program at Vietnam Japan University Thanks to the guidance of Associate Professor Pham Thi Lien – Vietnam Japan University and Professor Hiroshi Morita – Yokohama National University, who always 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 the advice given, orientations and instructions Through many discussions during the research process, with their insightful suggestions and extensively science knowledge, I can improve research and completing for my Master thesis I also wish to express my sincere gratitude to Ms Huong, Master of Business administration program assistance for her in-times support and providing information required any point of time during study time at Vietnam Japan University I also want to express my heartfelt and grateful gratitude for my family support as they constant encourage and support me Phan Minh Hai ABTRACT In this research, the author aims examine the factors that affect the customers’ inclination and purchase decision on non-life insurance products and measure the different impacts weights of these factors, based on the results to propose some recommendation for insurers to improve service quality in the future To archive the reliable answer to the research’s question, this study adopts qualitative research method, online survey via social media platform and face-to-face interview was applied to collect the data from 319 respondents The results suggest that there are two factors indirectly impact on consumer’s purchase decision through consumer’s inclination, which are personal income and risk recognition, and four factors directly impact on the consumer’s final decision, including consumer’s inclination, sale promotion, insurer’s reputation and insurer’ online communication quality The author suggests some recommendations for insurance companies to enhance business activities, including diversifying products, building a professional consultant teams, and improve companies imagine CONTENTS CHAPTER 1: INTRODUCTION 1.1 Introduction .1 1.2 Problem statement 1.3 Purpose of the study .3 1.4 Objectives of the study 1.5 Research question 1.6 Subjects and scope of the research 1.7 Structure of the research CHAPTER 2: LITERATURE REVIEW 2.1 Overview about insurance .6 2.1.1 Insurance concept .6 2.1.2 Insurance characteristics 2.1.3 The differences between types of insurance 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) 10 Figure 2.2 Consumer Decision-making process (Source: Charles W Lamb, 2010) 13 Figure 2.3 Factors Influencing Consumer Behavior (Philip Kotler & Gary Armstrong, 2016) 14 Figure 2.4 Model of rationale for insurance service purchase decision making (source Aurelija Ulbinaitė and Marija Kučinskienė (2013)) 23 Figure 2.5 Hypothetical research model about consumer purchase decision toward insurance service (Source: author) 25 Figure 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 implemented since 1986, Vietnam has been becoming an emerging country in not only in Southeast Asia area, but also in the whole world, which achieving significant growth and improvements Vietnam’s gross domestic product (GDP) has growth sharply since Renovation, from only 6,5 billion in 1990 to 223,8 billion in 2017 The rising in living standard lead to the creation of new consumer habit Some service industries are experiencing sharply growth rate, like health care, tourism and especially financial service The non-life insurance market plays an increasingly important role in the development of a country in general and the whole world in particular The role of non-life insurance reflects through economic stabilization, mitigation of losses and risk prevention for organizations and individuals participating who bought insurance in society when unfortunately encountering risks; contributing to creating jobs and ensuring social security, etc In daily life as well as in production, although people may pay attention to prevent possible risks, anything could be happened For example, due to natural disasters such as storms, floods, earthquakes, etc cannot be forecasted accurately, it would result in property damages, life losses and production and business stagnations Social environment is also a cause of risk, like traffic accidents, occupational accident, etc People have taken many measures to minimize losses caused by natural and social environmental risks One of the measures is transferring the costs of risks to the insurance companies In Vietnam, in financial service field, insurance market has grown sharply in recent years and continues to be regarded as a prospective market In particular, the Vietnam’s demographic and economic development conditions are expected to create further demand for insurance services both in non-life and life sectors In the https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=VN last decade, Vietnam’s insurance sector changed the legal system to transform insurance market from a State-owned monopolist field to an intensive competitive industry for both domestic and foreign insurers as new entrants Despite the economic downturn rooted from the financial crisis since 2008 in United State, with an average annual GDP growth rate around 6% last 10 years2, not only domestic companies but also foreigner enterprises are interesting in entrant Vietnam’s insurance market It is obviously that there is an intensive competition in Vietnam’s insurance market Gain marketing share from other competitors is a difficult mission for each company While Vietnam’s customer still not acknowledge about the core and additional benefit of insurance products, most of exiting companies have to use the price strategy to attract consumer With the booming of e-commerce, customers are now shifting from traditional consumer to digital natives It is raising an emergency issue for insurance: What are the main factors which impact Vietnamese customers’ purchase decisions for non-life insurance products? 1.2 Problem statement Non-life insurance is a guarantee and reciprocity products, is the type of risk transfer through which the insurance company commits to pay compensation when an insurance event occurs in relation to material loss, human accident and responsibility of the insured, so non-life insurance is very social In Vietnam, regarding to the rapidly increase of income, people are becoming more aware of the issue of ensuring their safety, especially in saving, consumption and investment behavior for safety However, in general, the level of interest, understanding and implementation of insurance activities of people is still limited Therefore, non-life companies in Vietnam are being struggled to engage with potential customers Because customers are misunderstanding or underestimate the values of non-life insurance products, they seem tend to be driven by price or promotion over the purchasing decisions https://vnexpress.net/longform/mot-nam-kinh-te-nhieu-ky-luc-3861228.html Because the impact weight of individual independent factors on customer’s inclination (dependent factor) is measured by standard deviations (Beta index) So, when the personal income factor increases by unit (1 standard deviation), the dependent factor (Consumer’s inclination) increases by 0.201 (0.201 of standard deviation), while we consider the values of another factor (Risk recognition) is not changed With the same logic, when the risk recognition factor increases by unit (1 standard deviation), the consumer’s inclination toward the insurance services increases by 0.338 (0.338 of standard deviation), while we consider the values of personal income factor is not changed In collinearity statistic test, the maximum value of Variance Inflation Factor (VIF) index is 1.128 The Variance Inflation Factor indicates that in the regression model there is presence of multicollinearity or not In this proposal model, as Variance Inflation Factor is small, so it reflects the unrelated independence of factors Table 4.4 Statistical measures of the first stage of the multiple regression analysis (Source: author) 44 In the second phase, Consumer’s inclination along with three other independent factor which including Sale promotion, Insurer’s reputation and Insurer’s online communication quality are evaluated their impact on final buying decision The similar indexes are considered as in the first phase and the result is illustrated in the table 4.5 Statistical measures of the second stage of the multiple regression analysis The R square score equals to 0.200 indicates the only 20 per cent of customer’s inclination factor is explained by independent factors In this multiple regression phase, R square score demonstrates that the proposed model reflects 56.1 per cent (Adjusted R square – 55.5 per cent) of the Consumer’s buying decision toward nonlife insurance product, dependent factor In analysis of the variance (Anova) test, the Sig index also below the p value (0.05 – 5%), this result also indicates that in the second stage of the regression process, the significance of the proposal model has a statistically significant The impact weight of individual independent factors on customer’s buying decision is also demonstrated as the Beta index in the table 4.5 Therefore, the consumers’ inclination toward non-life insurance services is illustrated by the following formula: Consumer’s buying decision = 0.293*CI + 0.251*OQ + 0.245*IR + 0.283*SP + e2 when p-value