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An Analysis of Factors Influencing Purchase

Intensions Towards Life Insurance Policies in Sri Lanka

with Special Reference to Colombo District

A presentation by Yesitha BatepolaFor BSc in Business Management (Hons)2011011050

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Structure of the presentation Introduction to the research Research objectives Research design Research strategy Reliability and validity analysis Discussion Key findings Recommendations Limitations to the study Conclusion and future research

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Introduction to the ResearchLife insurance

Life insurance is a financial instrument that pays out a sum of money either on the death of an insured person or after an agreed period (Investopedia, 2014).

Mainly concerned with providing financial stability to dependents/ beneficiaries of an insured person in the event of their death.

Life insurance is a globally lucrative market (Ernst and Young, 2014). South Asia has been named ‘the global powerhouse of growth for life insurance’ (Wiley finance, 2012).

Compared to other countries in the region with similar economic, cultural and social characteristics, market penetration is low in Sri Lanka (Wiley finance, 2012).

Hence problem statement: ‘What are the factors that influence potential Sri Lankan consumers’ formation of purchase intentions towards life insurance policies?’

2,494,899

number of life policies in force in

Sri Lanka as at end 201317

life insurance providers

in the local market

0.6%

insurance premium income as

a percentage of GDP

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Introduction to the ResearchJustification

1 2 3 40.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

$0.00

$500.00

$1,000.00

$1,500.00

$2,000.00

$2,500.00

$3,000.00

$3,500.00

24.30%

7.80%

18.29%12.20%

4.40% 0.30% 0.88% 0.61%

$1,489.23$1,256.66

$2,587.02$2,923.21

Life insurance market penetration As a % of GDP from income of premiums Per capita income (US$)

Perc

ent

(%)

Country

Per

capi

ta In

com

e

(Sources: Author contribution based on data gathered from Business Times, 2013, World Population Statistics, 2013, Insurance Commission of Philippines, 2011, Insurance Regulatory and development authority India, 2013, Swiss RE, 2013, Remo, 2014, Alam. 2012, Tirmizi, 2012)

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Research ObjectivesoMain research objective The main objective is to identify factors that influence the purchase intentions towards

life insurance policies.

oSpecific research objectives To identify the best target market with the highest potential in order achieve a loyal

customer base. To find out the consumer awareness about life insurance and its importance. To find the best marketing strategies to sell life insurance policies to Sri Lankan

consumers. To identify market opportunities that the insurers have not assessed before and assess

them. To identify the mutual areas that need developing in how the sales personnel market

different life insurance policies. To gain undiscovered insights into the life insurance market and come up with

strategies to be used as tools to gain competitive advantage over the other insurers.

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Purchaseintentions

Demographic and geographic characteristics

Cultural characteristicsReference groups

Uncertainty avoidance

Perceived Risk

Consumer awareness

Convenience

Personal factorsBeliefs

Attitudes

Lifestyle

Research DesignConceptual framework

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Research StrategyResearch Approach • Quantitative• Descriptive

Research Population• Individuals who

does not possess a life insurance policy

Sample frame• All non-Muslim

consumers who does not possess a life insurance policy residing in the Colombo district

Sampling Method• Random sampling

Data collection• Self-administered

questionnaires

Statistical tools • Cross Tabulation• Correlation analysis• Multiple Regression

analysis

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Reliability and Validity analysis

Variables

Reliability analysis Validity analysis

Cronbach’s alpha

Bartlett's Test Sig. KMO CR AVE

Cultural characteristics

.587

Perceived risk.802

X2= 271.315, α=.000

0.763

0.837

0.563

Consumer awareness .825

X2= 435.151, α=.000

0.827

0.903

0.612

Convenience.767

X2=413.438, α=.000

0.840

0.893

0.629

Personal factors.749

X2= 661.312, α=.000

0.491

0.882

0.652

Lifestyle.751

X2= 68.882, α=.000

0.732

0.765

0.524

Purchase intentions.879

X2= 517.458, α=.000

0.818

0.891

0.623

Decision criteria: Cronbach’s alpha > 0.7, α < 0.05, KMO > 0.7, CR > 0.7 and AVE > 0.5

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Discussion All hypotheses accepted except for the statistically insignificant

variables namely Cultural characteristics and Lifestyle. Multiple regression model generated:

Coefficient of determination show 45.6% of the mean life insurance purchase intentions variations can be explained by the regression model.

𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆 𝒊𝒏𝒕𝒆𝒏𝒕𝒊𝒐𝒏𝒔=𝟏 .𝟗𝟕𝟓−𝟎 .𝟑𝟖𝟏 (𝑷𝒆𝒓𝒄𝒆𝒊𝒗𝒆𝒅𝒓𝒊𝒔𝒌 )+𝟎 .𝟏𝟖𝟗 (𝑪𝒐𝒏𝒔𝒖𝒎𝒆𝒓 𝒂𝒘𝒂𝒓𝒆𝒏𝒆𝒔𝒔 )+𝟎 .𝟏𝟗𝟗 (𝑪𝒐𝒏𝒗𝒆𝒏𝒊𝒆𝒏𝒄𝒆 )+𝟎 .𝟐𝟔𝟖 (𝑷𝒆𝒓𝒔𝒐𝒏𝒂𝒍 𝒇𝒂𝒄𝒕𝒐𝒓𝒔 )+𝑬Independent variable Pearson correlation

coefficientPerceived risk - 0.563Consumer awareness 0.612Convenience 0.629Personal factors 0.652

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Key findings in the research (Contd.)

61 – 70 age category

Married individuals

individuals employed in the strategic level

Construction & engineering, Footwear & textile and Tobacco industries

Best markets to endorse

life insurance policies

Convenience and the perceived risk are the most influential factors towards purchase intentions.

Sri Lankans have negative trust in purchasing life insurance policies.

Life insurance is often perceived as ‘another form of’ investment.

There is no relationship between those individuals who have occupational hazards and purchase intentions.

Computer and other technology related industries record the lowest

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Recommendations IBSL should be proactively involved in the market Create product categories to promote life insurance to Islam devotees

Insurers should provide better training to sales agents

Provide sales agents with a basic life insurance policy

Describe the legal terminology in the policy documents

Create life insurance corporate packages Promote insurance as an essential protection plan or a necessity

Incorporate academic and institutional support Life insurance covers for people who has contracted AIDS

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Limitations to the study The sample size of this research was 200 The research was only limited to Colombo district Time provided for this research was from 6th March to 20th October 2014

Only one dependent concept, ‘purchase intentions’ was considered

Other financial constraints

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Conclusion and future research

Sri Lankans are quite reluctant in purchasing life insurance policies. This is a fact.

Although this research was conducted with many constraints, it generated previously undiscovered insights into the life insurance market in Sri Lanka.

Thus all research objectives predetermined were achieved in the research.

Hence it is recommended to do future improved and resourceful researches on the subject to assist the life insurance policy providers not only in penetrating more into the market, but also in evolving the current market.

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List of References Alam, K. (2012) ‘Pakistan could be ranked ‘most lucrative’ to sell life policies’

(available online) Available at: http://tribune.com.pk/story/454805/pakistan-could-be-ranked-most-lucrative-to-sell-life-policies (Accessed 17 March 2014)

Alam, K. (2012) ‘Pakistan could be ranked ‘most lucrative’ to sell life policies’ (available online) Available at: http://tribune.com.pk/story/454805/pakistan-could-be-ranked-most-lucrative-to-sell-life-policies (Accessed 17 March 2014)

Business Times (2013) ‘Life insurance penetration as a percentage of GDP still stands low’, Sunday Times, 28th April 2013

Central Bank of Sri Lanka, Annual Report 2011-2012, Central Bank of Sri Lanka Chui, A. and Kwok, C. (2007) ‘National culture and life insurance consumption’

(available online) Available at: https://staging-secure.palgrave-journals.com/jibs/journal/v39/n1/pdf/8400316a.pdf (Accessed 25 March 2014)

Insurance Commission of Philippines, Department of Finance, Insurance Commission Report 2011

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List of References Remo, M. V. (2014) ‘Life insurance market penetration rising’

(available online) Available at: http://business.inquirer.net/161733/life-insurance-market-penetration-rising (Accessed 17 March 2014)

Swiss Re (2013) ‘World insurance in 2012: Progressing on the long and winding road to recovery’ [PDF] (Sigma No. 3/2013) Available at: http://www.tsb.org.tr/images/Documents/sigma3_2013_en.pdf

Tirmizi, F. (2012) ‘Increasing coverage: Why Pakistan’s life insurance business is taking off’ (available online) Available at: http://tribune.com.pk/story/454814/increasing-coverage-why-pakistans-life-insurance-business-is-taking-off/ (Accessed 17 March 2014)

World Population Statistics (2013) ‘India Population 2013’ (available online) Available at: http://www.worldpopulationstatistics.com/india-population-2013 (Accessed 17 March 2014)

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Thank you!

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Appendix

Table 1: Life insurance market in like countries according geography and per capita income

(Sources: Business Times, 2013, World Population Statistics, 2013, Insurance Commission of Philippines, 2011, Remo, 2014, Alam., 2012, Tirmizi, 2012)

Country Per capita income (US$)Life insurance market

penetrationAs a % of GDP from income of premiums

India $1,489.23 24.30% 3.17%

Pakistan $1,256.66 7.80% 0.43%

Philippines $2,587.02 24.25 % 0.90%

Sri Lanka $2,923.21 12.00% 0.61%

Bangladesh $752.16 Not available 0.70%

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Appendix

Table 2: Life Insurance performance in Sri Lanka over the years

(Source: Central Bank of Sri Lanka)

2007 2008 2009 2010 2011 2012 2013No. of life policies

issued1,867,98

12,082,35

82,068,54

82,214,97

62,355,44

92,438,34

02,494,89

9No. of new life policies issued

490,454 567,621 468,317 516,139 526,023 514,516 552,436

No of life policies in force as a % of total

population9.30% 10.30% 10.10% 10.70% 11.30% 12.00% 12.20%

No. of Life Policies in Force as a % of the

Labor Force24.90% 25.80% 25.60% 27.30% 27.50% 28.80% 28.30%