<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>
1
As insurance market becomes more competitive due to globalization and
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.
However, trust has attracted little attention from academic viewpoint in insurance
area. Most of research has focused on importance of trust or determinants of trust from
2
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
3
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
Anderson E. and Weitz B. (1992), The Use of Pledges to build and sustain commitment
in distribution channels, Journal of Marketing 54, pp.42-58.
Dwyer, R.F. Schurr, P. H. & Oh, S. (1987), Developing Buyer-Seller Relationship,
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
Research, Volume 51, No.1, pp.73-86.
Mooreman, Christine, Gerald Zaltman and Rohit Deshpande (1992), Relationship
between Providers and Users of the Market Research: The Dynamics of Trust
within and between Organizations, Journal of Marketing Research, Volume 29,
No.3, pp.314-328.
Lee, Sungsoo et al (1999), Research on relationship development between investors and
investment consultants in security brokerage companies, Journal of Marketing,
Volume 14, No.3, pp.45-68. (in Korean)
Sirdeshmukh, Deepak, Jagdip Singh and Barry Sabol (2002) , Consumer Trust, Value
and Loyalty in Relational Exchanges, Journal of Marketing, Volume 66, No.1,
pp.15-37.
Yu, Changjo et al (1999), Naturalistic Inquiry about customer-salesperson relationship
building at shop, Consumer Research, Volume 10, No.2, pp.41-69. (in Korean)
4
5