Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus DETERMINANT OF LIFE INSURANCE CONSUMPTION AMONG UNIVERSITY TUNKU ABDUL RAHMAN STAFFS IN PERAK CAMPUS BY CHANG KIM CHUN LIM SHENG CHUO TAN SZE MEI WONG MON TENG A research project submitted in partial fulfilment of the requirement for the degree of BACHELOR OF ECONOMICS (HONS) FINANCIAL ECONOMICS UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF BUSINESS AND FINANCE DEPARTMENT OF ECONOMICS AUGUST 2013 Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus Copyright @ 2013 ALL RIGHTS RESERVED. No part of this paper may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, graphic, electronic, mechanical, photocopying, recording, scanning, or otherwise, without the prior consent of the authors. II Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus DECLARATION We hereby declare that: (1) This undergraduate research project is the end result of our own work and that due acknowledgement has been given in the references to ALL sources of information be they printed, electronic, or personal. (2) No portion of this research project has been submitted in support of any application for any other degree or qualification of this or any other university, or other institutes of learning. (3) Equal contribution has been made by each group member in completing the research project. (4) The word count of this research report is 10502 words. Name of Student: Student ID: Signature: 1. Chang Kim Chun 10ABB00257 2. Lim Sheng Chuo 11ABB00521 3. Tan Sze Mei 09ABB06994 4. Wong Mon Teng 10ABB01660 Date: 19th July 2013. III Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus ACKNOWLEDGEMENT We are from the Faculty of Business and Finance (FBF) students would like to acknowledge the contribution to a number of people. It would be practically hard to list each and every person who assisted in this study, but certain people must be credited for the magnitude of their contributions and sacrifices of their precious time in assisting us throughout the study. First and foremost, a thousand thank of gratitude to Universiti Tunku Abdul Rahman (UTAR) by giving us a chance to take part in this final year project. Besides, UTAR provided us facilities such as library and internet lab which eased our process in completing the final year project. We would like to express our gratitude to our supervisor, Puan Juliana Binti Abu Bakar for her guidance throughout the conduct of the study and 2nd examiner Mr Thurai Murugan a/l Nathan. Their encouragement and suggestions given were greatly appreciated by us. We would also like to extend our special thanks to Ms. Tan Yan Teng, Dr. Eng Yoke Kee, and Mr. Wye Chung Khain for their comments and advices in helping us to polish and make the final year project even more complete. Also, we would like to thank Ms. Lim Shiau Mooi, who is our research coordinator of this study. All of them have been helpful in providing timely, insightful and thoughtful advices regarding our final year project. We are also thankful to all the UTAR staffs in spending their precious time to answer our questionnaires. Without their cooperation and contribution, we would not be able to obtain valuable information for our data analysis. Last but not least, a special thank to our fellow group members for the joy and fun that they have brought to us and also like to express our gratitude to all contributors who are not mentioned here. IV Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus TABLE OF CONTENTS Page Copyright………………………………………………………………………….II Declaration ...…………………………………………………………………….III Acknowledgement…………………………………………...…………………..IV Table of Contents…………………………………………………………………V List of Tables……………………………….……………………….………......IX List of Figures…………...………………………………………………………..X List of Appendix...……………………………………………………………….XI Abstract………………………………………………………………………….XII CHAPTER 1 INTRODUCTION 1.0 Introduction……………………………………………………………1 1.1 Research Background………………………………………………….1 1.2 Problem Statement…………………………………………………….5 1.3 Research Objectives…………………………………………………...6 1.3.1 General Objectives…………………………………………..6 1.3.2 Specific Objectives…………………………………………..6 1.4 Research Question……………………………………………………..7 1.5 Hypothesis of the Study……………………………………………….7 1.6 Significance of Study………………………………………………….8 1.7 Chapter Layout………………………………………………………...9 1.8 Concluding Remarks…………………………………………………10 CHAPTER 2 LITERATURE REVIEW 2.0 Introduction……………………………………………………..……11 2.1 Review of the Literature……………………………………………...11 2.1.1 Dependent Variable - Consumption of life insurance……...11 2.1.2 1st Independent Variable – Income…………………….…...13 2.1.3 2nd Independent Variable – Size of Family…………….......13 2.1.4 3rd Independent Variable - Level of Education………….....14 V Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus 2.1.5 4th Independent Variable – Age……………………….……16 2.1.6 5th Independent Variable – Gender………………………....16 2.2 Review of Relevant Theoretical Models……………………………..17 2.3 Proposed Conceptual Framework/Research Model………………….19 2.4 Hypothesis Development…………………………………………….20 2.5 Concluding Remarks.…………...……………………………………21 CHAPTER 3: METHODOLOGY 3.0 Introduction…………………………………………………………..22 3.1 Research Design……………………………………………………...22 3.2 Data Collection Methods……………………………………………..23 3.2.1 Primary Data…………………………………………...…..23 3.2.2 Secondary Resources...……………………………………..23 3.3 Sampling Design……………………………………………………..24 3.3.1 Target Population…………………………………………..24 3.3.2 Sampling Frame and Sampling Location…………………..24 3.3.3 Sampling Elements…………………………………………25 3.3.4 Sampling Technique………………………………………..25 3.3.5 Sampling Size………………………………………………26 3.4 Research Instrument………………………………………………….26 3.5 Constructs Measurement……………………………………………..27 3.6 Data Processing………………………………………………………28 3.6.1 Data Checking……………………………………………...28 3.6.2 Data Editing………………………………………………...29 3.6.3 Data Coding………………………………………………...29 3.6.4 Data Cleaning………………………………………………29 3.7 Data Analysis………………………………………………………...30 3.7.1 Descriptive Analysis…………………………...…………..30 3.7.2 Scale Measurement…………………………………………30 3.7.2.1 Normality Test……………………………………30 3.7.2.2 Reliability Test…………………………………...31 VI Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus 3.7.3 Inferential Analysis………………………………………...32 3.7.3.1 Pearson Correlation Analysis…………………….32 3.7.3.2 Multiple Linear Regression (MLR)………………32 3.8 Concluding Remarks….………………………………………………34 CHAPTER 4: DATA ANALYSIS 4.0 Introduction…………………………………………………………..35 4.1 Pilot test………………………………………………………………35 4.1.1 Normality Test……………………………………………...35 4.2 Descriptive Analysis…………………………...…………………….36 4.2.1 Respondent Demographic Profile………………………….36 4.2.1.1 Consumption of Life Insurance…………………..36 4.2.1.2 Income Level……………………………………..37 4.2.1.3 Size of Family………………………...………….39 4.2.1.4 Highest Education Level…………………………40 4.2.1.5 Age……………………………………………….41 4.2.1.6 Gender……………………………………………42 4.2.2 Central Tendencies Measurement of Constructs…………..43 4.3 Scale Measurement…………………………………………………..44 4.3.1 Normality Test……………………………………………..44 4.3.2 Reliability Test……………………………………………..45 4.4 Inferential Analysis…………………………………………………..46 4.4.1 Pearson Correlation Analysis………………………………46 4.4.2 Multiple Linear Regressions……………………………….47 4.5 Concluding Remarks…………………………………………………49 CHAPTER 5: DISCUSSION, CONCLUSION AND IMPLICATIONS 5.0 Introduction…………………………………………………………..50 5.1 Statistical Analysis Summary………………………………………...50 5.2 Discussions of Major Findings……………………………………….52 VII Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus 5.2.1 Income……………………………………………………...52 5.2.2 Size of Family……………………………………………...52 5.2.3 Level of Education…………………………………………53 5.2.4 Age…………………………………………………………54 5.2.5 Gender……………………………………………………...54 5.3 Implications of Study………………………………………………...55 5.3.1 Managerial Implications……………………………………55 5.4 Limitation of the Study………………………………...…………….56 5.4.1 Sampling Bias…………………...…………………………56 5.4.2 Moderately strong R2…...……….…………………………57 5.4.3 Limitation of sample size…………………………………..57 5.4.4 Limitation of research model………………………………57 5.5 Recommendations for Future Research……………………………...58 5.6 Conclusion……………………………………………………………58 References………………………………………………………………………..60 Appendix…………………………………………………………………………66 VIII Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus LIST OF TABLES Page Table 3.1 Measurement Used for Each Variable………………………………...28 Table 3.2: Rules of thumb about Cronbach‟s Alpha coefficient size…………….31 Table 4.1: Normality for Pilot Test………………………………………………35 Table 4.2: Frequency Table for Consumption of Life Insurance………………...36 Table 4.3: Frequency table for Income level……………………………………..37 Table 4.4: Frequency Table for Size of Family…………………………………..39 Table 4.5: Frequency Table for Highest Education Level……………………….40 Table 4.6: Frequency Table for Age……………………………………………..41 Table 4.7: Frequency Table for Gender………………………………………….42 Table 4.8: Central Tendencies Measurement of Constructs……………………...43 Table 4.9: Normality Test………………………………………………………..44 Table 4.10: Reliability Test………………………………………………………45 Table 4.11: Pearson Coefficient Correlation……………………………………..46 Table 4.12: Model Summary……………………………………………………..47 Table 4.13: Coefficients………………………………………………………….48 Table 5.1: Summary of Multiple Linear Regressions……………………………51 IX Determinants of Life Insurance Consumption among UTAR Staffs in Perak Campus LIST OF FIGURES Page Figure 1.1: Insurance Density (per capita premium income, USD) in 2010………3 Figure 1.2: Insurance Penetration: Life Insurance Premium as % of GDP in 2010…………………………………………………………...4 Figure 2.1: Proposed Conceptual Framework……………………………………19 Figure 4.1: Percentage of Respondents Consumption of Life Insurance………...37 Figure 4.2: Percentage of Respondents Based on Income Level………………...38 Figure 4.3: Percentage of Respondent Based on Size of Family………………...39 Figure 4.4: Percentage of Respondents based on Highest Education Level……..40 Figure 4.5: Percentage of Respondent Based on Age……………………………41 Figure 4.6: The Percentage of Respondent Based on Gender……………………42 X