The significant factors in customers' decisions to purchase travel insurance

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The significant factors in customers' decisions to purchase travel insurance


Author: Man, Shik-kee
Title: The significant factors in customers' decisions to purchase travel insurance
Degree: M.Sc.
Year: 1996
Subject: Insurance, Travelers'
Risk perception
Hong Kong Polytechnic University -- Dissertations
Department: Multi-disciplinary Studies
Pages: vi, 121, iv, xxviii leaves : ill. (some col.) ; 30 cm
Language: English
InnoPac Record:
Abstract: This study was on the use of travel insurance by the travelers as a means of risk handling or risk reduction to their perceived risk in travel tour products. The travel agents as a service facilitators offered tour packages which were intangible, difficult to be standardized nor evaluated objectively beforehand, and the travelers themselves were involved in the production of travel experiences. Therefore, tour packages could be a product involved consumer perceived risks and travelers would engage in risk handling and risk reduction activities. They were not expected to purchase the travel packages unless their perceived risks were below their acceptable risk levels. The travel insurance provided a form of risk reduction similar to a specific-result guarantee in that the compensation could be triggered by conditions specified in the policy. It was not exactly a form of the normal specific-result guarantee in service because the travelers had to purchase it and the amount of compensation from the travel insurance could be much larger than the fee earned by the agents or the price of the travel packages themselves. Since this was a study on risk perception on travel products, and the use of travel insurance as a means of risk handling, a methodology to measure the levels of travelers' perceived risks was required. With the measurement of levels of perceived risks, investigations could be made on whether the use of travel insurance could reduced levels of risk perceived, and whether the use of travel insurance would increase as the levels of perceived risks increased. Dowling and Staelin (1994) investigated on the consumer perceived risks and risk handling activities and developed a methodology in the measurement of consumer perceived risks. The validity and reliability of the methodology was established in their study. In this study, their methodology would be adapted and used for risk measurement. Since the levels of risks perceived by the travelers depended on a number of factors. To control the scope of study, three risk scenarios were established: the high risk, medium risk and the low risk. The travelers were requested to give their estimations of the perceived risk levels on a 10-point scale. The scenarios were established by different levels of risk factors. The study by Roehl and Fesenmaier (1992) suggested that the destinations to travel, and the physical-equipment risks involved in the activities offered in the tours should be included in the scenarios. The results of two focus group interviews also indicated that these were two of the important factors. The results of the two focus group interviews also suggested that the travel agents, the price levels and the time of travel were also important in their perception of risks. Hence, three scenarios with different levels of these five factors were established. The pretest of the scenarios with 60 respondents supported their reliability in presenting different levels of perceived risks to the respondents. Since the scenarios were established by summarizing the results of two focus group interviews and the results of Roehl and Fesenmaier (1992), they were of enough face validity. To focus the study, six hypothesis were established in this direction. The first three hypothesises were on risk perception and use of travel insurance for risk handling. The fourth and fifth hypothesises were on the sources of information to be sought by the travelers to handle their risks. The sixth hypothesis was on their objective knowledge of the travel insurance coverage. Some previous study suggested that the purchasers of insurance product did not fully understand the coverage. They bought insurance on their beliefs or on what reliable sources told them. A questionnaire was constructed based on the above concepts and the hypothesises. Questions on the demographic data, travel experience, attitude and acceptance of insurance products, and importance of different benefits being sought from the travels were included to facilitate the analysis. There were some more questions on the perceived risks for specific destinations and for activities involved in typical travel tours. These questions acted as direct measurements of the destination risks and the physical-equipment risks so as to countercheck the reliability of the measurement by the adapted Dowling and Staelin methodology. A questionnaire survey was conducted in March, 1996 and 236 respondents were successfully interviewed. The results of the study supported all the hypothesisesm, and also the findings of Dowling and Staelin (1994), and Roehl and Fesenmaier (1992). Statistically significant relationships were identified in that the intention to proceed with risk handling activities increased with the levels of perceived risks, that the use of travel insurance could increase the level of acceptable risks, and that the travelers were more likely to purchase travel insurance when higher risks were perceived. However, the adjusted R2 were low, about 0.25 to 0.60, and the predictive power was low. Since travel insurance could increase acceptable risk levels to travel products, it would be worthwhile for the travel agents to include them free of charge, especially for deluxe tours, or new destinations. As travel agents were among the most important information sources to the travelers in seeking information and for the purchase of travel insurance, the insurers, or the insurance companies, should put more marketing efforts in them, or to establish strategic alliances with the travel agents. The majority of respondents did not fully understand the coverage of the typical travel insurance policy, which also seemed to be lack of sufficient differentiation from the common personal accident insurance in the minds of most respondents. Better marketing communication was required to differentiate the benefits of travel insurance and to avoid misunderstanding and potential dissatisfaction of the travelers. The respondents were divided into two groups for comparison to their characteristics: one group was of prior experience in the purchase of the travel insurance and the other did not. The prior travel insurance purchasers were found to be older, better educated, tended to be married and of higher incomes. They tended to buy travel insurance irrespective to the levels of perceived risks and put more emphasis on the benefits from travels. About 28% of the respondents were found to be of higher acceptable level of perceived risks when travel insurance was included in the risk scenarios. They tended to be younger, of lesser travel experience, lower incomes and lower education attainments. The results of these two ways of classification and comparison of respondents indicated that it would be better to influence the young and less experience travelers to purchase travel insurance and continue to provide them with satisfactory services. By the time when the travel insurance adopters became aged, they would buy travel insurance irrespective to the levels of perceived risks.

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