<APRIA 2007 Proposal>
International Comparison of Trust Level on Insurance
Hongjoo JUNG
Professor
School of Business
Sungkyunkwan University
Myungryundong 3-53, Jongro
Seoul 110-745
Korea
jungpro@skku.edu
82-2-760-0480 (phone)
82-2-766-0527 (fax)
<Abstract>liberalization, insurers in some countries suffer from loss of reputation or trust by insurance consumers (for example, Korea and Japan). Aim of this empirical research is twofold; 1) to identify determinants of trust level in Korea, Japan, and Taiwan, and 2) to compare the trust level among those countries. In order to execute this empirical work, we take survey with college students group (potential insurance consumers in the future) attending insurance lectures in three countries. Results, in spite of limitation on target group, show some implication on general impression and level comparison in terms of trust on insurance product, marketing channel, and/or company per se.
Keywords: Trust, Insurance, Asia, International comparison
1. Background of research (Research purpose)
The principle of “utmost good faith” in insurance has often been criticized not only in underdeveloped countries but also in developed countries. It was early 1990s when U.S. life insurance industry established IMSA (Insurance Market Standard Association) to enhance its service quality level as well as to escape from increasing regulatory threat. In early 21st century, UK financial supervision agency
concentrated its resources in insurance supervision due to that fact that insurance market faced most significant problem in financial sector. Recently Japanese financial supervision agency suspended a few domestic insurance companies due to underpayment of claims, and Korean supervision agency called attention to “Trust or Reputation” of insurance sector in late 2006, when listing of life insurers as well as miss-selling of variable life received public attention.
Trust is often defined as subjective feeling, developed when what is perceived matches consistently what is expected. It is especially important in business since it enables to reduce transaction costs and to develop larger market, in particular for service goods including insurance, than otherwise. That is, trust or reputation is extremely important for both supply and demand of insurance. In addition, reputation risk becomes an important element at risk management, as information transmission (for example, through internet) gets speedier than before.
determinants of trust from marketing discipline (see Morgan/Hunt [1994], Garbarino/Johnson [1999]), Kennedy/Ferrel/Leclair [2000], Sirdeshmukj/Singh/Sabol [2002]). One of the very few examples on the issue is Jung/Oh (2005) on the determinants of trust level of insurance industry.
2. Literature Review
Several research showed that trust plays important role between service supplier and service demander, and that trust is not single-dimensional but multi-dimensional (Ganesan [1994], Geysken et al [1996]). Those research results can be summarized that trust consists of three elements : credibility, benevolence and honesty. Based upon those conceptual construction, Jung/Oh (2005) tried to find difference between credit level of insurance and that of bank in Korea, and to find determinants of trust in insurance products, companies and distribution channels. Based upon survey at members at an academic conference, their result showed components of credit (through factor analysis technique) for product, company and distribution respectively. And they compared credit level of insurance sector to that of bank sector. Eventually, they showed that honesty of insurance is consistently lower in product, channel or company, than that of bank. However, benevolence and credibility of insurance are not so significantly lower than those of bank. They also did research to locate the difference between groups, classified by experience of claim payment and/or lapse.
3. Research Method
This research takes a similar methodology to Jung/Oh (2005), but it differs in that it is international comparison (Korea, Japan and Taiwan). It is generally accepted that Japanese people have strong sense of moral among Asian countries as well as recent scandal in insurance sector, and that Taiwan has counted as a success in insurance sector both in terms of growth (10 times growth in the last 15 years) and in terms of consumer satisfaction level. An extensive survey on general public can ensure more stable and consistent comparison among countries, but we are pursuing comparison of student group (college student) in those three countries this time due to limited accessibility. Of course research method include survey, factor analysis, and regression here.
4. Expected Result
Empirical results may show commonality or difference of determinants of credit in those countries. Also, whether there are significant differences in the level of credit among countries remains to be seen. Those results may provide policy implications for some supervision or regulation agents in the countries.
5. Reference
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Journal of Marketing, Volume 51, pp.11-27.
Ganesan, Shankar, Determinants of Long-term orientation in Buyer-Seller Relationship,
Journal of Marketing, Volume 58, pp.1-19.
Garbarino, Ellen and Mark S. Johnson (1999), The Difference Roles of Satisfaction, Trust, and Commitment in Consumer Relationships, Journal of Marketing, Volume 63, pp.70-87.
Jung, Hongjoo and Taehyung Oh (2005), An Empirical Study on the Trust and Determination of Trust in the Insurance Industry, Korean Insurance Journal, Volume 71, pp.49-75. (in Korean)
Kennedy, Marry Susan, Linda K. Ferrell and Debbie Thome LeClair, Consumers’ Trust of Salesperson and Manufacturer: An Empirical Study, Journal of Business
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