1

Awareness, perceptions and purchase intentions towards Islamic

general and life insurance products:

An empirical study of Australian Muslim consumers

Muhammad Abdulsater

A thesis submitted to the University of New South Wales

In partial fulfilment of the requirement for the degree of

Bachelor of Commerce (Honours)

University of New South Wales Business School

School of Marketing

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ORIGINALITY STATEMENT

I hereby declare that this submission is my own work and to the best of my knowledge it

contains no materials previously published or written by another person, or substantial

proportions of material which have been accepted for the award of any other degree or

diploma at UNSW or any other educational institution, except where due

acknowledgement is made in the thesis. Any contribution made to the research by others,

with whom I have worked at UNSW or elsewhere, is explicitly acknowledged in the

thesis.

I also declare that the intellectual content of this thesis is the product of my own work,

except to the extent that assistance from others in the project's design and conception or

in style, presentation and linguistic expression is acknowledged.

---------------------------------

Muhammad Abdulsater

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Acknowledgements

I feel grateful to the Milesian wench who, seeing the philosopher Thales continually

spending his time in contemplation of the heavenly vault and always keeping his eyes

raised upwards put something in his way to make him stumble, to warn him that it

would be time to amuse his thoughts with things in the clouds when he had seen to

those at his feet. Indeed she gave him good counsel, to look rather to himself than to the

sky – Michel de Montaigne.

There were many difficulties I faced during the production of this thesis, from the

personal battles fought right through to the unexpected deaths of my grandfather,

uncle and two cousins all within the space of a few months. If this thesis were to be

dedicated to anybody, it would be dedicated to them. Having reached the end of a

seemingly endless journey, I feel a sense of relief, achievement, and personal

satisfaction knowing that I pushed myself and came through triumphant. However,

around me I was surrounded by some of the greatest people I have had the privilege to

meet for whom words cannot do any justice.

First and foremost I would like to acknowledge my supervisor Associate Professor Dr

Mohammed Abdur Razzaque for everything he has done for me. He was like a father

figure who guided me and continually pushed me to greater heights. I thank him for all

the fun and engaging conversations we had about politics and religion and especially for

his help and expertise in enhancing the quality of my work. I would also like to

acknowledge and thank Associate Professor Dr Jack Cadeaux, Dr Rahul Govind and

Associate Professor Dr Nitika Garg for their advice, ideas, suggestions and help during

the course of my studies. I enjoyed studying under their expertise very much indeed and

found their courses a delight to sit in.

Secondly, I would like to acknowledge my fellow honours and PhD friends whom I have

had the utmost privilege and honour to meet this year. My good friends Anthony, David,

Edwina, Michael and Shachi, you guys are incredible. I mean what can I say? I had an

awesome time this year with you all, enjoyed every second with you and learnt so much

from you all. From the PhD peeps, it was a pleasure spending time with you all. I

certainly benefited tremendously from speaking and engaging with you. A special ‘thank

you’ to David Lie, my good friend and brother from another mother, for answering all of

my questions and always being there for me, I appreciate it all. It was a pleasure sharing

the office with Christopher, Jeenat and Yutian. I learnt so much from you all and I

especially enjoyed talking politics with Chris

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I would like to thank my friends Fatima and Mariam Bazzi and also Mohammed Daher

for supporting me during the journey and always being there for me.

Last but not least, I would like to acknowledge and thank my parents and brothers, for

without them I would not be the man I am today. A special thank you to my mum and

dad, who have always nurtured me, loved me and taught me the value of education and

wisdom. They sacrificed a lot for me and my brothers and I hope to repay them by

making them proud. This is for you. God bless you.

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Table of Contents

Glossary of Arabic Terms

Abstract

1. Overview 9

1.1. Islamic insurance products …………………………………………………………………………. 9

1.2. Purpose of research ……………………………………………………………………… 10

1.3. Potential contributions of study ……………………………………………………………... 11

1.4. Organization of the thesis ……………………………………………………………. 12

2. Literature review 14

2.1. Rationale and focus ……………………………………………………………………. 14

2.2. Culture and consumer behaviour ………………………………………………………. 15

2.3. Religion and its impacts on consumer behaviour …………………………………. 16

2.4. The nature of Islamic insurance (Takaful) ……………………………….... 18

2.5. Nature of conventional vs. Islamic insurance …………………………………. 20

2.6. Conventional insurance in the light of Islamic principles,

the Sharia law and Muslim Scholars …………………………………………………….. 24

2.7. Does Takaful provide a solution to this problem? ………………. 32

2.8. Consumer attitudes, perceptions and awareness of Islamic

insurance products ………………………………………………………………………….. 38

2.9. Determinants of Islamic insurance demand: General and life ……………… 42

3 The Conceptual Model and the Hypotheses 44

3.1. The conceptual model …………………………………………………………………….. 44

3.2. Formulation of hypotheses …………………………………………………………………. 45

4. Methodology ………………………………………………………………… 48

4.1. Research design ……………………………………………………………….. 48

4.2. Selection of sample ……………………………………………………………….. 48

4.3. Questionnaire design ……………………………………………………………….. 49

4.4. Data reduction ……………………………………………………………….. 52

4.5. Moderation, mediation and moderated mediation …………………………. 54

4.6. Correlation and regression ………………………………………………………………. 55

5.0. Results ……………………………………………………………… 57

5.1. Descriptive statistics for demographic questions …………………………. 57

5.2. Testing hypothesis 1 ……………………………………………………………… 59

5.3. Principal component factor analysis ………………………………………….. 60

5.4. Reliability analysis …………………………………………………………….. 62

5.5. Moderated mediation analysis ………………………………………. 62

5.6. Testing hypothesis 2, 3, 4 and 5 ………………………………………. 64

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6.0. Discussion and Conclusion ……………………………………………………………… 67

6.1. Interpreting results ……………………………………………………………… 67

6.2. Implications of the study ……………………………………………………………… 70

6.3. Limitations of the study ……………………………………………………………… 71

6.4. Future research ……………………………………………………………… 72

Bibliography ……………………………………………………………. 73

APPENDIX ……………………………………………………………. 86

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Glossary of Arabic Terms used in this Thesis

Abu Bakr: Senior companion and father in law of Prophet Muhammad; first caliph of Islam.

Ali: Cousin and son in law of Prophet Muhammad. First caliph according to Shia

Muslims and fourth caliph according to Sunni Muslims

Allah: God

Gharar: Uncertainty

Gharar Fahish: Excessive uncertainty

Gharar Yasir: Minor uncertainty

Hadith: Traditions of Prophet Muhammad (pbuh); includes his sayings and actions

Haram: Prohibited for use or consumption by Muslims

Ijtihad: Independent reasoning to deduce religious edicts

Kafala: To guarantee each other against risk and damage through a joint agreement

based on the “law of large numbers”

Maiser: Gambling or activity involving chance

Mudaraba: A trustee-financing contract where one partner, the financier, gives money to

another the entrepreneur for the purpose of commercial investments

Muhammad: Believed by Muslims to be the last and final prophet and messenger of God.

pbuh: Peace be upon him, mandatory for Muslims to say this whenever Prophet

Muhammad’s name is mentioned.

Quran: Muslims consider the Quran to be the word of Allah revealed to Prophet

Muhammad (pbuh) through the archangel Gabriel

Riba: Interest, usury

Shariah: The moral code and religious law of a prophetic religion.

Shia: Represent the second largest denomination of Islam; it is the short form of the

historic phrase Shīʻatu ʻAlī, meaning followers of Ali who believe Ali should have

been the rightful successor to Prophet Muhammad

Sunni: The largest denomination of Islam. Sunnis are people of the tradition of

Muhammad and the consensus of the Muslim Ummah or ahl as-sunnah

Tabaru: Donation

Takaful: Islamic insurance

Umar: Companion of Prophet Muhammad and second caliph

Uthman: Companion of Prophet Muhammad and third caliph

Wakala: A fee based financing model based on an agency contract whereby the

participant nominates a person or agent to manage his business or right

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Abstract

Purpose: The aim of this research is to empirically investigate the relationship between

levels of awareness, perceptions and purchase intentions towards Islamic insurance

products amongst the Australian Muslim consumers. This research delineates between

Islamic general and life insurance and seeks to examine any possible relationships between

the three components of consumer attitudes as expounded by Rosenberg and Hovland

(1960) in their tri-partite attitudinal model and levels of religiosity.

Design/Methodology: This study utilised responses from a convenience sample drawn from

Australian Muslim consumers located across various metropolitan locations within Sydney.

The study was administered via an online survey and facilitated via a hyperlink made

available on the author’s personal Facebook account.

Findings: The study reveals that perception plays no significant mediating role on the

relationship between religiosity and purchase intention of Islamic insurance policies.

However, there is a significant positive relationship between awareness and perceptions of

both Islamic general and life insurance and a significant negative relationship between

religiosity and purchase intentions towards Islamic general insurance. There is also a low to

moderate level of awareness of Islamic general and life insurance products.

Research limitations/implications: A significant limitation in this study is the convenience

sample drawn from a fairly homogeneous sample located within the same city. This may

have affected the research results and thus played a role in reducing the generalisability of

the results to different contexts.

Practical implications: The study highlights the importance of increasing awareness which

has been shown to favourably impact perceptions and also aids international managers by

providing them with vital consumer behaviour insights pertaining to attitudes and

willingness to purchase Islamic insurance products.

Originality/value: This is a pioneering study on Muslim consumers in the context of

Australia, a secular, non-Islamic country. In that sense, it is also an original study. This study

should be useful to both academics and practitioners as it creates and disseminates useful

new knowledge and identifies areas for future research.

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CHAPTER 1

Overview

1.1 Islamic Insurance Products

Islam is a complete code of life for Muslims. For everything they do, purchase, use or

consume, Muslims seek to learn if their proposed action is permissible from the

viewpoint of Islam. Purchasing a conventional insurance policy, a common practice in

modern times, has long been a contestable issue in Islam as religious scholars interpret

it differently. Most Islamic scholars, however, tend to consider it un-Islamic. But given

the nature of the modern economic system, it often becomes mandatory for Muslims to

purchase certain types of insurance policies, particularly policies involving automobiles,

home and contents, boat etc. especially if they are living in non-Muslim countries. There

has also been a latent demand for an ‘Islamic’ type of insurance among the new

generation of Muslims. Consequently, there have been efforts to ‘Islamise’ insurance

which resulted in the development of ‘Takaful’ - a co-operative system of reimbursing

people and companies concerned about hazards when they incur loss out of a fund to

which they agree to donate small regular contributions managed on behalf by an

operator (Bhatti, 2011). Entrepreneurs offering these products claim that these are

permissible according to Islamic tenets. However, talking to the prospective buyers of

such products, the researcher tends to believe that there is lack of understanding and

knowledge of these products among Muslims which may have affected their perception

of these products and their subsequent adoption.

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1.2 Purpose of the research

The purpose of this research is to gain an empirical understanding of knowledge,

perceptions and attitudes of Australian Muslim consumers towards Islamic insurance

products and to examine any possible relationships between these constructs (i.e.,

knowledge, perceptions and attitudes) and consumer’s level of religiosity. The current

research diverges from previous studies as it deliberately distinguishes between

attitudes and subsequent purchase intention for general non-life insurance and that for

life insurance. To measure consumer attitudes the current study uses Rosenberg and

Hovland’s (1960) (Appendix B, Figure B1) tri-partite model that views attitude as a

composite of a cognitive component (knowledge and awareness of a product), an

affective component (emotions and feelings about a product) and a conative or

behavioural component (likelihood or tendency to act or behave with regard to the

product). It must, however, be noted that this study is focused on the measurement of

consumer knowledge (cognitive component) and consumer perceptions (affective

component). The study also measures consumers’ level of religiosity using a religious

commitment inventory scale adapted from Razzaque and Chaudhry (2013) to examine a

possible link between higher levels of religiosity and willingness - current or potential -

to consume both Islamic general and life insurance products.

Muslims constitute about a quarter of world’s total population and therefore gaining a

better understanding of the consumption behaviour of Muslims cannot be

overemphasised (Shafie and Othman, 2006). While there has been an increased

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research interest in ‘Halal’ meat and food products (Harran and Low, 2008) in recent

times, many other products/services, particularly financial products that have become

part and parcel of secular contemporary living have received little research attention. It

is not clear if consumption or use of these products is permissible for Muslims. The

current research makes a modest attempt to shed some light on one such financial

product – Islamic insurance.

1.3 Potential Contributions of the Study

The current research is likely to make both theoretical and practical contributions

towards the understanding of Islamic insurance as a phenomenon; resolution of the

conflict between the Muslim consumer psyche; and its adoption and diffusion as a

popular component of contemporary living. A new generation of researchers have

become engaged in understanding what makes different secular products/services such

as financial products non-permissible for Muslim consumers and what can be done to

make them permissible (and if launched, to make them popular). The current study

would definitely fall in that category. From a theoretical standpoint, the research is

likely to generate new knowledge about a topic hitherto neglected by the researchers

and motivate new researchers to take interest in this area.

Islamic insurance is a relatively new concept. This research can be of practical

importance to multinational companies seeking to expand their Islamic finance

products, particularly Islamic insurance (Takaful) into developed countries such as the

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USA, the UK and Australia where there is a sizeable Muslim market. By providing insights

into perceptions, attitudes and willingness of Muslim consumers towards the purchase

of Islamic insurance products this empirical research may provide some food for

thought for managers seeking expansion into those non-Muslim countries.

1.4 Organisation of the Thesis

The thesis is organised in six chapters. This introductory chapter (Chapter 1) is followed

by Chapter 2 which presents a critical review of the literature and discusses issues such

as religion and its impacts on the behaviour of Muslim consumers; nature of Islamic

insurance commonly known as ‘Takaful’ in Arabic (لتكافل) and conventional insurance

products. It also highlights relevant Islamic principles and presents a scholarly debate on

the permissibility of conventional insurance in Islam. It then discusses if Islamic

insurance or Takaful is a solution to this problem. The remaining parts of the chapter

discusses extant literature on consumer attitudes, perceptions and awareness of Islamic

insurance products and ends with reviewing the determinants of Islamic insurance

demand and the delineation between demand for general and life insurance.

Chapter 3 discusses the conceptual model used in the research and the five hypotheses

developed on the basis of the literature analysed in Chapter 2. The Research

methodology has been discussed in Chapter 4. This chapter discusses the research

design including the sampling procedure, data collection method, operationalisation of

variables, the research instrument and data cleaning and data reduction procedures.

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The questionnaire discusses the principal component factor analysis, moderation,

mediation followed by correlation and regression analyses of the research data. Chapter

5 is devoted to the presentation of the results of the study. Finally, Chapter 6, the

concluding chapter of the thesis is devoted to discussing the results, practical

implications of the study, limitations of the study and possible future research in this

area.

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CHAPTER 2

Literature Review

2.1 Focus and Rationale This chapter reviews extant literature with a view to explore several key facets within

the marketing and Islamic finance field of inquiry. As the research focuses on Muslim

consumers’ attitudes, perceptions and awareness of Islamic insurance products, the

review specifically looks at those research undertakings that are of particular relevance

to this investigation both in terms of consumer behaviour and Islamic insurance.

In order facilitate a comprehensive and holistic understanding of the research topic;

consumer behaviour literature will be examined to show the influence of religion on

consumer decision making behaviour. This might reflect the attitude of Australian

Muslim consumers towards a secular financial product, generally viewed as

controversial and un-Islamic by Muslims, that has been made compliant to Islamic

tenets and as such, permissible for Muslims. A review of the Islamic finance, banking

and insurance literature will foster an understanding of what it is exactly that results in

positive consumer attitudes. This includes defining Takaful, understanding why

conventional insurance has been viewed as non-permissible for Muslim consumers and

also looking at how Takaful overcomes the controversy and presents a permissible

alternative. Finally, after providing a contextual backdrop to our research, the literature

review looks at studies measuring individual consumer attitudes, knowledge and

perceptions of Islamic finance products.

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2.2 Culture and Consumer Behaviour

The body of literature dealing with the definitions and influence of culture and

subculture are both vast and well researched in fields such as psychology (Allport, 1967)

and sociology (Anderson, 1970). Extant consumer psychology research discuss the

impacts of culture on cognitive processes (independent versus interdependent self-

construal) which form the basis of consumer choice (risk seeking versus risk averse),

judgments and decision making (cultural influence through reasons offered to justify

choice) (Mandel, 2003; Briley, Morris and Simonson, 2000). Ever since Johar et al (2006)

urged academic researchers to inquire further into the impacts of culture on consumer

behaviour there has been a plethora of literature devoted to examining the influence of

culture on the consumption of consumer goods (De Mooij, 2001), services (Kwok and

Tadesse, 2006) and life insurance (Chui and Kwok, 2008). Although researchers (e.g.,

Browne and Kim, 1993; Beck and Webb, 2003; Outreville, 1996) have comprehensively

shown the many determinants of life insurance demand around the world, there is a

lack of research examining the relationship between religion and consumer attitudes

towards both general and life insurance. This is precisely the contribution that this

research intends to make to the relevant literature. Previous investigators such as

Crosby and Stephens (1987) maintain that life insurance is inherently a difficult-to-

evaluate product even after consumption and is inherently complex and abstract. Leung

et al (2005) have shown that under conditions of uncertainty, cultural affiliation has a

strong impact on consumer behaviour. Based on these two studies, it makes sense to

argue that religion just like culture (in Leung et al 2005) is likely to have a strong impact

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on consumer intentions and behaviour towards Islamic insurance consumption,

particularly life insurance. This postulation has been confirmed by Chui and Kwok (2008)

who noted that religious people tend to purchase less life insurance if they believed

they were going against God’s decree or not having faith in God’s protection.

No research in consumer behaviour is complete without a thorough investigation into

the influence of culture and subculture on consumer psychology and purchase decisions

(Shaw and Clarke, 1998; Schouten and McAlexander, 1995). These influences also

extend into affecting consumer motives (Chang, 2005). Culture includes beliefs, values,

customs, technologies and knowledge that one generation passes onto the next and

subculture is comprised of nationality, race, geography and religion (Otts, 1989; Alam,

Mohammed and Hisham, 2011).

2.3 Religion and Consumer Behaviour

Religion yields the greatest influence over consumer decisions and actions on an

individual and societal level (Kotler, 2000; Mokhlis, 2009). This notion has been further

reinforced by the fact that Islam is not strictly a doctrinal religion based on a set of

beliefs (Ozalp, 2004). For Muslims, Islam is a complete way of life that governs and

guides each and every action of its adherents (Ozalp, 2004). According to Quranic

injunctions chapter 17 verses 26-27 Muslims are implored and encouraged to spend

only in the way of God and be not excessive in expenditure or consumption (Alam,

Mohammed and Hisham, 2011). Exploring the influence of religion on purchase decision

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making and levels of involvement, Yousaf and Malik (2012) show that consumer

behaviour pertaining to the level of involvement will vary according to the degree of the

consumer’s religiosity. It is now known that highly religious Muslim consumers are less

fashion conscious, less recreational and less impulsive in their shopping behaviour

(Yousaf and Malik, 2012). They are also more likely to be influenced in their purchase

decisions by social factors and are more conscious about the lifestyle they lead (Yousaf

and Malik, 2012). This means they are less confused by factual information over choices

when comparing alternatives in their considered set. These results are starkly

juxtaposed to less religious consumers who appear to be less conscious about their

lifestyles and more confused by information over choices (Yousaf and Malik, 2012).

Further research on the relationship between religious consumers and their interaction

with monetary cost (Yousaf and Malik, 2013) is also quite illuminating. According to

Kamaruddin and Kamaruddin (2009) and Sood and Nasu (1995) consumers who exhibit

higher degrees of religiosity tend to struggle to achieve fair value for their money spent

and also spend considerably more on products that are on sale. Research has shown

that deeply religious consumers also tend to actively seek out and propagate

consumption related information before making final purchase decisions (Hirschman,

1981; Afshan et al, 2011; Razzaque and Chaudhary, 2014). More religious consumers

also tend to be more brand loyal as they try to build environments that foster certitude

and risk aversion which serves to lower brand switching behaviour (Swimberghe et al,

2009; Fontaigne et al, 2005). The interrelationship between deeply religious consumers

and their interaction and tolerance of certain types of appeals in advertisements has

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also been investigated. Religious consumers have been found to display annoyance

towards sexually charged advertisements featuring nudity and profanity (De Run et al,

2010). Furthermore, consumer behaviour research has extended into the domain of

family decision making dynamics and reported that deeply religious households tend to

exhibit conventional gender roles while the less religious households exhibit joint

decision making (Delener, 1994; Kahle et al, 2005).

2.4 The nature of Islamic insurance (Takaful).

For many people in both the Muslim and non-Muslim world, Islamic finance continues

to be a poorly understood concept despite its rapid advancement into a multi-billion

dollar growing segment (Hamid and Nordin, 2001). In 1997 a nationwide survey was

carried out in Britain and the results showed that 74% of respondents considered their

religion important with 80% reporting visiting religious centres every week (Modood et

al, 1997). With over 1.3 billion adherents to the Islamic faith representing 20% of the

world’s population expected to reach 30% by 2025 (Shafie and Othman, 2006) it is

important that alternative religiously compliant financial products and services are

considered, developed and offered to Muslims. There is no reason why insurance

cannot be presented as an alternative for the modern Muslim consumers looking to

engage themselves in the financial community whilst not foregoing central religious

principles (Zaher and Hassan, 2001). There are currently over 200 Islamic banks

functioning over 70 countries sprawled across both Muslim and non-Muslim markets

with the first operator established in Sudan (Hassan and Lewis, 2007; Ahmad, 1991;

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Jaffer, 2007). As of 2005, the Islamic insurance industry was worth over $2 billion

growing at a rate of over 20% annually in recent years and projected to reach $7 billion

by 2015 (Jaffer, 2007). According to reports from Ernst and Young and Bank Negara

Malaysia premiums surpassed $8.9 billion in 2010 and are expected to reach $12.5

billion by 2015 with $30 billion in funds (Hamid, 2010). There are now an estimated 150

Islamic insurance companies operating across 22 nations (Hassan and Lewis, 2007;

Archer, Karim and Nienhaus, 2011). Takaful may be viewed as an unconventional form

of insurance or “cooperative mutual insurance” where members are both the insured

and the insurers (Anwar and Hussain, 1994; Monger and Rawashdeh, 2008). Takaful, a

derivative of the Arabic word kafala, means to guarantee each other against risk and

damage through a joint agreement based on the “law of large numbers” whereby

shared responsibility is used to hedge against risk. Hence, Takaful is mutual protection

and indemnity, implying that one party (insurer) provides help to the other party

(insured) but is also indemnified by them (Bakar, 2011). This interpretation has been

endorsed by many notable scholars such as Bekkin (2007), Garigiparthy (2007), Anwar

and Hussain (1994), Siddiqi (1985) and Maysami and Kwon (1999). The primary function

of Takaful is to protect people from risk and conduct business transactions according to

Sharia principles. Furthermore, these business transactions are to be conducted on a

cooperative basis whereby all functions including underwriting, reinsurance, marketing,

management and corporate governance are to be strictly executed according to the

spirit of Sharia principles (Garigiparthy, 2007; Bakar, 2011).

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2.5 Conventional vs. Islamic insurance

The literature on comparative differences between conventional and Islamic insurance

is quite scarce. However, scholars such as Beck and Webb (2003) and Khan et al (2011)

have enriched the literature by identifying the subtle yet important differences between

the two. Conventional life insurance is a financial product that offers a long term savings

component and also income replacement for the premature death of a policy holder

(Beck and Webb, 2013). The two main categories of life insurance are ‘whole-of-life’ and

‘term’ policies. The former includes both a mortality coverage and savings component

with interest payments given to the policyholder in the form of dividends or cash values

upon policy termination whilst the latter only includes mortality coverage (Beck and

Webb, 2003). Figure 2.1 below is a depiction from Khan et al. (2011, p. 284) illustrating

the mechanism underlying conventional insurance schemes. It shows that the insurance

company receives premiums from the policyholder which is then invested in interest

Figure 2.1 Conventional Insurance Illustrated

Premiums

Claims

Investment in

interest based

instruments

Insurance

company

retains surplus

Policyholder Insurance

company

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bearing financial instruments that provide a profit which is retained by the company as

surplus to be used to meet claims made against the company.

By contrast, in general or non-life Islamic insurance diagrammatically illustrated

(Maysami and Kwon, 1999) in Figure 2.2 below, coverage is offered on fire, liability, car,

marine, fidelity and even crop insurance whereby premiums are pooled into a fund

managed by the insurer. Funds are then invested in islamically permitted financial

instruments and institutions with the investment income less the investment expenses

Figure 2.2 Islamic Insurance Illustrated – 1

Insured Insurer

Premiums Fund managed by

insurer

Net investment income

Payments, expenses and

reserves

Surplus

Shareholders

50%

50%

22

channelled back into the fund. Expenses are then deducted by the insurer with the

remaining funds allocated to reserves. Any balance remaining is surplus and is shared

on an agreed 50-50 basis between the insured and the insurer (Maysami and Kwon,

1999).

The obvious difference being that Islamic life insurance in both the joint venture

mudarabah and fee based waqala financing models, surplus is distributed back to the

policyholder and funds are invested cautiously into non-interest bearing financial

instruments. This is evident in Figure 2.3 (Maysami and Kwon 1999, pp. 116) which

depicts the mechanisms of Islamic life insurance policies.

Figure 2.3 Islamic life Insurance Illustrated – 2

-

-

Insured Insurer

Premiums Fund managed by

insurer

Individual account

Special account

Net investment

income

Payments, expenses

and reserves

Surplus Shareholders 30%

70%

23

One can clearly see that premiums are deposited into two separate accounts, an

individual one for savings and investment and a special one where premiums are built

up as reserves for the heir of the insured in the case of premature death. Funds from

the individual and special account are then invested in the form of mutual funds,

primarily the stock of Islamic financial institutions. Exceptions are, however, made

pertaining to non-Islamic financial institutions so long as their goods and/or services are

permitted within Islamic law. When sharing profits from investments, the insurer only

receives a share from the net income whilst the special and individual accounts remain

untouched. Operating and administrative expenses are deducted from investment

income and upon the death of the insured; the beneficiaries receive the sum of the

funds deposited in the special and individual accounts plus the 70% of the surplus.

Finally, in order to claim death benefits, only the proof of death is required to be

submitted whereas the cause of death is of little importance within this context as death

from the Islamic standpoint is considered to be the decree of God which lies outside

one’s direct loci of control (Maysami and Kwon, 1999).

2.6 Conventional insurance in the light of Islamic principles, the Sharia law and Muslim Scholars

Ever since the Islamic scholar and jurist Muhammad Amin Ibn Abidin (1783-1836 AD)

wrote about the legality and meaning of insurance, the status and permissibility of

insurance within Islam has been thoroughly discussed (Anwar and Hussain 1994, pp. 13-

15; Mankabady, 1989). Conventional insurance involves an exchange contract whereby

24

the policyholder, i.e., the insured, pays the insurer an amount of money called the

premium which provides protection and coverage of up to a certain amount in the case

of unforeseen circumstance. The premiums accumulated are then reinvested in several

asset classes in which their returns are used to make payments to insured parties.

Depending on the risk underwritten, most insurance companies reinvest premiums in

highly liquid asset classes that are also highly marketable securities such as bills of

exchange and certificates of deposit (Viney, 2007). It is clear that conventional insurance

is a form of risk management whereby the insured is essentially purchasing peace of

mind and security by paying money in exchange for coverage against an uncertain and

contingent loss (Maysami and Williams, 2006). Hence, the way insurance practices are

carried out by modern conventional insurance companies is not permissible for

consumption or use by the Muslim consumer because it violates Islamic principles. What

is permissible, however, is cooperative insurance (Mankabady, 1989) whereby the

member is also the owner of the fund whereby if one member were to suffer an

expected loss or damage, he/she receives financial benefit from a common pool of

funds. This pool is comprised of individual contributions of all the participating members

(Abdul-Wahab, Lewis and Hassan, 2007). Islamic insurance is expected to influence the

demand and supply for insurance in Muslim communities.

Early Islamic scholars such as Ibn Abidin rejected the concept of insurance on the basis

of the mode of exchange, the possibility of riba, gharar and maisir (Anwar and Hussain

1994, pp. 1316; Mahmoud, 1991; Khan et al, 2011). This has also been endorsed by

25

Khorshid (2013) who viewed insurance not only unnecessary but also un-Islamic for the

same reasons indicated above. Furthermore, Archer, Abdel-Karim and Nienhaus (2011)

contend that any contract must avoid uncertainty in the buying and selling of assets and

also usury which involves lending and borrowing of money for a premium. According to

Khan and Porzio (2010) gharar is an outcome linked to purchasing or consumption

which is ambiguous or uncertain like the sale of a fish still in the ocean. For Muslims, this

issue is only compounded when they lack the relevant product knowledge or have little

control over the purchase outcome. A re-examination of the consumer behaviour

literature reveals that the requirement for seeking certitude and developing risk

aversion behaviour is very much a fact within highly religious Muslim communities

(Miller, 2000). This view has also been supported by Mokhlis (2008) and Saroglou and

Dupuis (2006) who found highly religious consumers to be more risk averse, meaning

they are less likely to engage in risk taking behaviour and subscribe to certain values

that ensure more certitude is practiced. Finally, this view is further reinforced by the

fact that according to the Hadith of Muslim (10:3614) and Muwatta (31:75) (Tarjumana

and Johnson, 1982), Muslim consumers are discouraged from taking unnecessary risks.

If a contract does not avoid the characteristics mentioned above then it violates sharia

principles making the conventional insurance policy unacceptable to Muslim consumers.

When the legality, i.e., meaning and status of insurance within Islamic tradition, is

examined, one must refer to the two most fundamental and authoritative sources

within Islam, the Quran and the Hadith. Muslims consider the Quran to be the word of

Allah revealed to Prophet Muhammad through the archangel Gabriel and as such,

26

infallible, while the Hadiths are the collected sayings, actions and traditions of the

Prophet Muhammad (pbuh) (Arham, 2010).

Any attempt to understand the role and place of insurance within the Islamic tradition

requires attention to a basic dimension that characterises the followers of Islam:

Muslims do not represent a homogeneous religious group. Just like other major religious

traditions, for example Protestantism and Catholicism within Christianity or Hinayan and

Mahayan in Buddhism, Islam also has many schools of thoughts. The main two are the

Sunni’s and the Shiite’s. According to comparative religion expert and theologian

Mehmet Ozalp (2004) approximately 85% of the Muslims are Sunni; only 13% are Shiites

with the remaining 2% classified as small groups of fringe adherents. Both the Sunni and

the Shiite schools of thought are unanimous in accepting the fact that the Quran is the

ultimate authoritative text in Islam followed by the traditions of Prophet Muhammad

(pbuh). They both share similarities in practically all the essential articles of faith

including prayer, fasting, giving of alms, pilgrimage to Mecca and belief in the unity of

Allah, all his messengers and the divine books sent to mankind (Ozalp, 2004). However,

these similarities notwithstanding, there is a serious theological chasm and ritualistic

differences between the two major sects that go back to early Islamic history. After the

demise of Prophet Muhammad (pbuh), the Shiites took the prophet’s son-in-law and

cousin Ali to be his successor and thus, the legitimate leader of the Muslims. However,

the Sunni’s claim that the community had arrived at a consensus and selected the

prophet’s companion Abu Bakr to be the legitimate leader of the Muslims (Ozalp, 2004).

27

Further discussion on the specifics of this split is beyond the scope and focus of the

current research; but it is important to note that due to this division, major

jurisprudential issues arise pertaining to every fine detail that governs the life of a

Muslim.

According to Muslehuddin (1979), insurance is based on usury and thus clashes with the

Quranic injunctions and prophetic traditions. Permissible financial or business

transactions within the framework of Islamic law must be interest free (Ahmad, 1967).

According to the Quran in chapter 2 verse 275 “those who swallow down usury cannot

arise except as one whom satan has prostrated by his touch does rise. This is because

they say that trading is like usury and God has allowed trading and forbidden usury”;

several subsequent verses (i.e., 276, 278, 280 and 282) in the same chapter clearly show

that usury is forbidden. Having a conventional life insurance policy for a Muslim is not

permissible because the beneficiary of that policy will receive more than what the

original insured paid up until the time of death (Wahab, Lewis and Hassan, 2007).

Furthermore, this is evident when conventional insurance companies use premiums to

re-invest in interest based financial instruments or institutions or even loan their funds

for interest income (Wahab, Lewis and Hassan, 2007). This occurs because all insurance

policies have an inbuilt savings and investment component whereby the insurer

reinvests the insured’s premiums (Wahab, Lewis and Hassan, 2007). The Quran in

chapter 2 verse 219 also forbids gambling and activities involving chance and

uncertainty: “they ask you about games of chance and intoxicants: say in both of them

28

there is a great sin and means of profit for men and their sin is greater than their profit”.

Life insurance resembles a gamble or activity of chance whereby the family of the

deceased expects a large enough pay out. This expectation and hope for such a windfall

violates Quranic injunctions against partaking in activities of chance or gamble

(Mohammad, 1993). Furthermore the interests of both parties (i.e. the insurer and

insured) are utterly opposed and both parties are oblivious to their respective

responsibilities and rights up until the occurrence of the indemnified incident (Lewis,

2005). The insured is betting his/her premiums on the condition that the insurer will

make a payment should a covered event occur. Conventional life insurance is

considered impermissible in Islamic law because it places a value on something that is

invaluable or in other words is paying for a loss of human life (Ali, 1989). According to

Mohammad (1980) life insurance is antagonistic towards the fundamental and central

Muslim belief of pre-destination or fate. By insuring one’s life, the insured is actually

involved in pre-determining his/her death and future earnings by hoping a large payout

will be made to his/her heirs (Siddiqi, 1980). The Quran makes it clear in chapter 31

verse 34 that “Only Allah is the determiner and knower of all things including what one

will earn in the future and also their time and place of death”. Hence, it is clear that

both the concepts of riba and maiser are clearly and explicitly forbidden in the Quran.

Both the Sunni and the Shiite schools of thought are unanimous on this and agree on

forbidding business transactions involving usury and gambling and/or chance because

the Quran is the ultimate source of jurisprudence and authority for Muslims. Gharar,

the last element in this discussion explaining the unacceptability of conventional

29

insurance for Muslims, has its roots in the Hadith. According to the Hadith compilations

namely, Sahih Muslim, Sunan Abu Daud and Malik’s Muwatta, prophet Muhammad

(pbuh) forbade the Muslims in selling anything with elements of uncertainty (Anwar and

Hussain 1994, pp. 1316; Yousaf and Malik, 2012). According to Sahih Muslim (10:3614)

the prophet forbade transactions involving ambiguity and chance while according to

Malik’s Muwatta (31:75) (Tarjumana and Johnson, 1982) the prophet forbade a

transaction between two men over the price of a sheep due to the risk and uncertainty

in the conditions stipulated. Siddiqi (1985) contends that life insurance involves gharar

and maintains that any transaction involving elements of uncertainty is forbidden in

Islam.

Muslim individuals, businesses and even states and nations are discouraged from

engaging in transactions involving ambiguous and ill-defined outcomes whilst expecting

predefined financial gains (Maysami and Kwon, 1999). This stems from the knowledge

that the benefits to be received by the insured depend upon the occurrence of an event

which is simply not known at the time of signing the contract. Hence, it is clear that

according to Sunni traditions, conventional insurance is not permissible for Muslims. The

Shia school of thought, on the other hand, defines gharar differently. The Shiites view

gharar as a concept on a continuum ranging anywhere between ‘gharar yasir’ or

tolerable/minor uncertainty and ‘gharar fahish’ or excessive uncertainty and the

legitimacy of a business transaction is decided depending on the degree of uncertainty

(Rashid, 1993). This explanation is acceptable to the Shia Muslims as it is in line with the

30

Shia tradition of ijtihad, meaning independent reasoning to arrive at religious edicts and

conclusions. It is, however, important to note that the prophetic tradition does not

forbid transactions that are indispensable to human needs and which cannot be free

altogether from hazard, therefore these minor uncertainties are “tolerated” and

deemed permissible (Jensen, 2008). Muhammad Hussein Fadlallah, a leading Lebanese

religious scholar and jurist, was of the opinion that if the riba and maiser components of

insurance were fully removed, the presence of gharar yasir would not make insurance

unacceptable (Jensen, 2008). When Islamic jurists distinguish between the types of

gharar they also pay attention to four conditions which invalidate a contract. These

conditions are:

1) Uncertainty is excessive;

2) The contract must be a sale and not a gift;

3) If the uncertainty affects principal components of the contract and

4) If the contract meets a need that cannot otherwise be met then the contract

will not be deemed invalid based on that level of uncertainty.

Jensen (2008) also cites previous studies (p.827) where religious edicts issued by

prominent scholars including Sunni Jurist Yusuf Al-Qaradawi and Iraq’s most prominent

Shiite cleric Ali Sistani allow Muslims living in non-Muslim countries to get involved in

many forms of conventional finance. Therefore as mentioned before, insurance is a

form of risk management strategy whereby the insured is paying money to receive a

certain level of coverage against a contingent and uncertain loss. There is no guarantee

of a return for the insured, what is being paid for is intangible peace of mind. In the case

of no claims being made to the insurer, from one point of view a tragedy has been

31

avoided but it also means that the insurer receives money from the insured without

having to make payment (Korshid, 2013).

Khan (1979) has argued that according to some Hadith such as the one present in Sahih

Al Bukhari (8:725) it is preferred and highly recommended that one leave his/her family

in a healthy financial position as opposed to leaving them needy and destitute. Many

scholars such as Mohammad (1993) have noted that according to some Muslim scholars

conventional insurance products including life insurance are all about safeguarding the

financial interests and security of those dearest to you so as not to leave them destitute

or in need after the primary income earners demise. Furthermore, life insurance does

not contain gharar because the major elements underlying the contractual agreement

are known and that surely one day the insured will pass away (Mohammad, 1993). Life

insurance does not involve maiser or does not contradict the insured person’s belief in

pre-determination/fate because the former one is hoping for a gain in something and

the latter one is trying to pre-determine something; also it does not contain riba. The

primary objective of life insurance is not to gamble or pre-determine anything but

rather through the depositing of premiums, the individual is, in fact, protecting his/her

family against adverse future risk.

2.7 Does Islamic Takaful provide a solution to this problem?

Takaful, unlike the primarily profit-oriented conventional insurance, is interested in

sharing the risks associated with business transactions equally (Monger and Rawashdeh,

2008). This form of Islamic insurance covers both life and general insurance and

32

operates very similarly to conventional insurance (Anwar and Hussain, 1994). Takaful

exists primarily to cover and protect the insured against potential loss resulting from

specified calamities. It is based upon a financial philosophy of co-operation, mutual

assistance and shared and equal responsibility (Ahmad, 1991). The tabaru that the

insured contributes will vary according to the value of the asset under coverage. The

operator (Islamic insurance company, directors and shareholders) will then reinvest the

tabaru funds with the profits allocated between the fund and management according to

principles of mudaraba (a trustee-financing contract where one partner, the financier

gives money to another the entrepreneur for the purpose of commercial investments)

(Monger and Rawashdeh, 2008). In the case of indemnity, the money will come out of

the tabaru fund. In fact, this is how gharar and riba are avoided. Through tabaru, each

member sincerely pledges to transfer a portion of their insurance instalments to

another member as a donation in order to pay out a compensation claim. This way, the

funds are transferred to the other indemnified party free of charge (Bekkin, 2007). All

operational expenditure pertaining to the insurance policy including reinsurance fees

will be subtracted from the tabaru fund (Anwar and Hussain, 1994).

Takaful is considered to be a solution and Sharia compliant alternative to conventional

insurance because it avoids riba by reinvesting funds in Sharia compliant financial

instruments. It also avoids gharar through compensations and subscription; avoids

maiser by dividing losses amongst members through fund pooling; policyholders

33

cooperate together for mutual good and no advantage is derived at the loss of another

member (Garigiparthy, 2007).

Islam is a tremendously powerful subcultural factor that influences Muslim consumer

behaviour on both the macro societal and governmental level and the micro individual

level (Schiffman et al, 2011). With the Quran being the ultimate root of all Islamic law,

Islamic religious law governs and guides literally all facets of a Muslim’s life including

economic, social, political and legal affairs (Monger and Rawashdeh, 2008).

Unfamiliarity with Islamic principles may prompt one to erroneously conclude that Islam

prohibits profit oriented transactions or may even be anti-business. The truth, however,

is that Islam encourages trade and business but cautions against uncertain transactions

that may unduly advantage one party over another and thus pose an issue of inequality

due to the uncertain, speculative or hidden nature of the outcome (Maysami and Kwon,

1999; Ismail, 1997). Islam seeks to put in place fair systems for all parties to thrive;

Prophet Muhammad (pbuh) himself was a successful businessman of considerable

repute (Trim, 2009; Antonio, 2007). Islam does not prohibit businesses to innovate and

experiment with products and services that ensure profitability of businesses whilst

providing consumers with benefits permissible under Islamic tenets. Seen from this

standpoint, insurance does not have to violate any Quranic injunctions if considered

thoroughly and adjusted to comply with sharia principles, insurance can become central

to the life of the modern Muslim consumer (Khorshid, 2013).

34

There are two main models by which Islamic insurance operates namely Mudarabah,

and Wakala. To learn about the underlying mechanisms by which Islamic insurance

operates, it is important to gain a proper understanding of each of these models.

A diagrammatical illustration of the Mudarabah model (Figure 2.4) is presented below

(Abdul Wahab, Lewis and Hassan 2007, p. 379). With the Mudarabah model, the

participant who is the capital provider and the operator who is the entrepreneur

Figure 2.4 The Mudaraba Model

on the basis of a joint venture. Here the participant and the operator share direct

investment income in which the participant is entitled to a percentage of the profits. It is

Company

Participant

Donation Participant General Fund

Shareholder

Profit

Investment

by Company

Surplus for Participants

60%

Surpluses

General

Fund

Profits

Admin &

Mgmt

Expenses

Operational

costs

Surplus for

Company (40%)

35

evident that the participant’s contributions and investment income are being used to

cover the operational costs associated with re-insurance and cover payments for claims.

The surplus is then divided between participants and the company according to a

defined proportion, 60% allocated to the former party and 40% allocated to the latter

party. The surplus allocated to the company is then used to cover management and

marketing related expenses with the remainder used as shareholder profit (Wahab,

Lewis and Hassan, 2007).

The Wakala model (Figure 2.5) is based on an agency contract whereby the participant

nominates a person or agent to manage his business or right. This person manages the

affairs of the pool of funds for a defined fee. Under such a model, the participants

remains the owner of the fund into which contributions are made and the nominated

person or agent deducts a predefined amount as an operator fee to cover services and

management costs. The contributions of the participants are transferred to the general

fund whereby a large majority is used in the general fund to cover operational costs,

claims and reinsurance. A small amount is also used for investments whereby the profit

of such investments is then shared with 60% allocated to the participants and 40% to

the company. The remaining surplus is then allocated 100% to the participants with the

loss/profit attributed to the company after expenses and costs have been deducted

from shared profits (Abdul-Wahab, Hassan and Lewis, 2007). It is clear that in both the

mudarabah and wakala model there is a claim on surplus and on profits, akin to profit

sharing arrangement.

36

Figure 2.5 The Wakala Model

Source: Abdul Wahab, A, Lewis, M and Hassan, M, (2007, pp. 382)

This is permissible within the framework of Islamic insurance because the profit sharing

ratio is predetermined and thus is permitted in Islam (Maysami and Kwon, 1999).

Company

Participant Contribution by

participant

General fund 70-75%

General fund

Operational cost

Surplus

Share of surplus for participants 100%

Share of profit for company

Management

expenses

Profit/loss for shareholders

Investment by fund

Profit from

investment

Profit sharing basis 40%

60%

Operator fee for

admin expenses

25%-30%

37

2.8 Consumer attitudes, perceptions and awareness of Islamic insurance products.

An examination of the literature on consumer attitudes, perceptions and awareness of

Islamic finance products reveals that it is not as voluminous or rich as the literature on

conventional financial products and institutions. With the growth of Takaful worldwide,

it is imperative to increase awareness and education of such a product amongst both

Muslim and non-Muslim consumers (Wyman, 2009). A 1997 study conducted in

Malaysia revealed that only 45% of respondents actually had some knowledge about life

insurance and it was very little (Asian Insurance Review, 1997).

As the Islamic financial sector continues to grow from an estimated $822 billion in 2009

with Shariah compliant assets to an estimated $1.6 trillion in 2012, the importance of

measuring consumer attitudes towards these products, especially Islamic insurance

cannot be ignored (Wyman, 2009). Keeping this in view, this study investigates this

empirically and aims to enrich the marketing literature, in particular the literature

pertaining to marketing to Muslim consumers. The major shortcoming discovered in the

literature pertains to the lack of balance between the well-researched area of Islamic

banking compared to conventional banking and the under researched area of Islamic

insurance.

It appears that the earliest study on individual consumer attitudes towards Islamic

financial products was conducted by Erol and El-Bdour (1989). The study did not find

any influence of religious motivation on the patronage of either Islamic or conventional

banks. However, efficiency, reputation, image and confidentiality were found to be the

38

decisive variables in purchase decisions. The study also revealed that there was a

moderate level of awareness of Islamic banks amongst the sample of 434 Jordanians

with information coming from the reference group including family and friends. A later

study by Erol et al (1990), however, found that religious factors play a small role on

overall patronage of Islamic finance products. Other research corroborating similar

findings include Gerrard and Cunningham (1997) and Haron et al (1994) who found

religious motivation to be a non-significant factor in determining patronage of Islamic

finance products. However, the former study reported a high level of unawareness of

Islamic methods of finance amongst both the Muslim and non-Muslim samples whereas

the latter study reported moderate levels of awareness. A recent study by Yaacob et al

(2012) also reports an insignificant relationship between religiosity and Islamic

insurance patronage with 19.1% ascribing their patronage due to religious reasons. A

further 42% cite “easiness of damages” which means the ease and efficiency in which

claims are paid out as the reason for patronage. This is contrary to the findings of Husin

and Rahman (2013) who reported consumer intentions to purchase family Takaful

products to be heavily influenced by religious motivations, awareness and perceptions

including behavioural control, norms and attitudes.

Hamid and Nordin (2001) also found that the majority of Malaysian customers sampled

in their study possessed sufficient knowledge of Islamic finance products, however not

enough to say they understood particular intricacies. Omer (1992) also reported that

Muslims living in the United Kingdom have a high level of unawareness of Islamic

39

finance products. Similar findings were reported by Akbar, Shah and Kalmadi (2012),

Maturi (2013) and Othman and Hamid (2009) whereby respondents exhibited low to

moderate awareness of Islamic banking practices. It was not surprising that due to this

lack of knowledge they also expressed negative perceptions regarding Islamic finance

ethical frameworks. In another study Maysami and Williams (2006) found 47.7% of

Muslim respondents to be aware of the existence of non-life Islamic insurance products;

however, less than 30% of these respondents seemed to have favourable dispositions

towards such products. Maysami and Williams (2006) note that the relationship

between awareness and perception is not uniform and the two constructs are not

independent. They found lower levels of awareness to be associated with having

perceptions of Islamic insurance as being encompassing of both religious and social

goals. It is only with higher a level of awareness does the perception of Islamic insurance

being compatible with profit making become apparent (Maysami and Williams, 2006; p.

231). In the study by Maturi (2013) it was found that the majority of sampled

participants were unaware of particular Takaful concepts; they did not know whether

Takaful was really Sharia compliant or not. Hamid and Othman (2009) and Yaacob et al

(2012) also observed a deep level of unawareness amongst Muslim participants in

regards to the main principles of Takaful such as gharar, maiser and tabaru. However,

what was interesting in the Yaacob et al (2012) study was that a high proportion of

participants (61.8%) expressed their preference of Islamic insurance over conventional

insurance. Despite their lack of awareness most participants in the Maturi (2013) study

indicated their willingness to purchase Takaful products provided the coverage of

40

Takaful was similar to that of conventional insurance and at a competitive price.

However, there have been contrary research findings indicating negative perceptions

towards these products. For example, in a study by Dar (2005) more than 82% of the

respondents did not think that Islamic financial products were really Sharia compliant.

Furthermore, this phenomenon is ascribed to the fact that there is a deep unawareness

of Islamic financial products which may adversely affect potential demand and

consumption of such products if no substantial marketing effort is taken to increase

awareness (Dar, 2005).

A large number of research investigations by scholars such as Khan et al (2007), Husin

and Rahman (2013, Hegazy (1995), Metwally (1996), Omer (1992), Naser et al (1999),

Zainuddin et al (2004), Metawa and Almossawi (1998), Okumkus (2005), Sultan (1999)

and Bley and Keuhn (2004) also reported strong inter-relationship between religious

motivation and patronage of Islamic finance products. This is also supported by Siala

(2013) who reports strong relationships between the influence of religious motivation

and consumption of religiously-compliant high involvement indemnity services. The

findings include a positive relationship between religiosity and attitudinal and

behavioural loyalty manifested through repeat patronage, positive word of mouth and

price tolerance. This may be viewed as a reflection of consumers’ positive

perceptions/emotions and affective attachments towards religiously compliant

products. Contrary to the findings reported by Gerrard and Cunningham (1997), Haron

et al (1994), Hamid and Nordin (2001), Omer (1992), Dar (2005), Maturi (2013) and

41

Hamid and Othman (2009) concerning the low and moderate levels of awareness, a

study by Bley and Keuhn (2004) reported otherwise. They reported high levels of

awareness of Islamic finance products amongst the Arab-Muslim sample and

significantly lower levels of awareness amongst the non-Arab-Muslim sample.

The literature cited in this section has shown mixed results. However, the majority of

the studies seem to have corroborated the view that Muslims living in a non-Muslim

country exhibit a lower level of awareness of Islamic finance products as compared to

Muslims living in Muslim countries (Gait and Worthington, 2007).

2.9 Determinants of demand for Islamic insurance: general and life

In their study aimed at identifying the determinants of demand for Islamic insurance

Yazid et al (2012) found nine (9) socio-economic factors namely income, inflation,

interest rates, stocks and price, savings, pension and financial development. They also

found seven (7) socio-demographic factors including age, education, household size,

dependency ratio, life expectancy, urbanization and employment as the major

determinants of demand for family non-life Islamic insurance products. Beck and Webb

(2003) also endorsed price as being an important factor influencing demand for these

products. Exclusion of price from the conceptual framework will subject the empirical

test to omitted variable bias.

Religious convictions may also affect attitudes towards insurance and subsequently risk

aversion. The degree of risk aversion towards insurance may be related to the dominant

42

religion of the country (Outreville, 1996). Muslim consumers typically disapprove of life

insurance because it is perceived to be a hedge against the decree of Allah. Research

has revealed that in Islamic countries there is a negative correlation between religiosity

and demand for life insurance (Browne and Kim, 1993; Meng, 1994). This is further

supported by the fact that penetration of life insurance as opposed to nonlife insurance

such as home, business or motor vehicle which may be mandatory in some countries is

much lower due to religious reasons (Rahim, 2006). According to Rahim (2006) in a

research publication by Swiss Re SITC, insurance penetration in Muslim dominant

countries such as those in the Middle East is generally low with only 1% of total GDP per

capita being spent on insurance premiums (Rahim, 2006). In countries such as

Indonesia, Pakistan and Bangladesh, percentage of GDP per capita spent on insurance

premiums ranges from 0.1 to 0.3%, whilst in India where 15-20% of the total population

is Muslim, percentage spent on insurance premiums again is low at 0.6% (Rahim, 2006).

43

CHAPTER 3

The Conceptual Model and the Hypotheses

3.1 The conceptual Model

This chapter discusses the conceptual model used in the current research followed by

the hypotheses formulation. The model has been developed based on the

comprehensive literature survey presented in Chapter 2. The basic premise of the model

is that intention to purchase Islamic insurance products is a function of four composite

variables namely levels of religiosity, awareness of Islamic insurance, perception of

Figure 3.1 The Conceptual Model

H2

H5

H4

H3

Levels of Religiosity

Awareness of Islamic insurance

Perception of Islamic insurance

Intention to purchase Islamic

insurance

Type of insurance

44

Islamic insurance and purchase intention of Islamic insurance policies. Levels of

religiosity and awareness are the exogenous independent variables (or predictor

variables). Perception is the mediator between religiosity, awareness and purchase

intention and purchase intention is the endogenous dependent variable (or outcome

variable). The type of insurance (whether general or life) is the moderator between

religiosity and perception, perception and intention and religiosity and intention. The

indirect effect of religiosity and awareness on purchase intention which is mediated by

perception is conditional upon whether the type of insurance is general or life, therefore

creating a conditional indirect effect, or otherwise known as a moderated mediation.

3.2 Formulation of Hypotheses

Hypothesis 1: From the literature review it appears that the majority of the studies

conducted on Muslim consumers living in Muslim majority countries yield results quite

contrary to the results obtained from studies on Muslim consumers residing in Muslim

minority countries. With the exception of Maturi (2013), Akbar, Shar and Kalmadi (2012)

and Omer (1992), who conducted their investigations in the UK, all the studies reviewed

in the literature review were conducted in Muslim majority countries where awareness

and knowledge of Islamic methods of finance is higher. Since Muslims in Australia

constitute less than 2.5% of the total national population (ABS, 2012), It is quite likely

that there is a lack of awareness of Islamic insurance products amongst the Australian

Muslim consumers. Therefore the first hypothesis is:

H1: There will be low to moderate levels of awareness and knowledge about Islamic insurance products amongst the Australian Muslim consumers.

45

Hypothesis 2: The literature review established that there is an averseness of religious

Muslim consumers towards risk taking and gravitation towards certitude in purchasing

behaviour when it comes to purchasing a life insurance policy. However, purchase of

Islamic general insurance for boat, business, public liability, home and contents

insurance which are not compulsory or statutory also present theological dilemmas to

the religious Muslim consumers. Although extant research did not corroborate any

significant role of religiosity on the patronage of Islamic financial products; the

researcher argues that religious controversy involving the very notion of ‘insurance’

makes it more likely that Muslim consumers would view insurance products less

favourably than other financial products. This leads to the formulation of the following

hypothesis:

H2: There is a negative relationship between religiosity and willingness to purchase Islamic general insurance products.

Hypothesis 3: Siala (2013) reported an intimate relationship between religiosity and

religiously compliant high involvement services. Given the strict principles of Islam and

somewhat controversial nature of insurance products, the decision to purchase an

insurance policy will be viewed as a high-involvement decision. Hence, it is logical to

assume that consumers with higher levels of awareness and knowledge of Islamic

insurance will demonstrate more positive perceptions towards the purchase of Islamic

insurance products. Therefore, the third hypothesis can be formulated as follows:

H3: There is a positive relationship between awareness and perceptions towards both Islamic general and life insurance.

46

Hypothesis 4: Siala (2013) also indicated a positive relationship between positive

perceptions/emotions consumers have towards a religiously compliant product and the

development of attitudinal/behavioural brand loyalty. In the light of this finding, it

seems likely that in the context of purchasing an Islamic insurance product, there will be

a strong positive relationship between positive perceptions and emotions about the

products and willingness to purchase Islamic insurance. Hence the following hypothesis

is posited.

H4: There is a positive relationship between perceptions and increased willingness to purchase Islamic general insurance products.

Hypothesis 5: It is further assumed that in hypothesis 4 (H4) there must be an

underlying cause that drives the consumers to have this positive perception and/or

strong emotional attachment towards Islamic insurance and that in turn leads to high

levels of loyalty. This research argues that religiosity, more specifically, high levels of

religiosity is the cause of such positive perceptions which in turn drives the decision

makers’ behaviour. Thus, the final hypothesis of this study may be formulated as:

H5: There is a positive relationship between religiosity and perceptions towards Islamic general insurance products.

47

CHAPTER 4

Research Methodology

4.1 Research Design

This chapter discusses the research design including sampling, data collection method

and questionnaire design. It also explains how the variables used in the study have been

operationalized.

Given the very nature of the current research and the intended respondents, i.e., young

Australian Muslim consumers, a descriptive research involving an on-line survey was

deemed to be an appropriate method. Popularity of online survey stems from its ability

to obtain many responses from a wide variety of people that fit a certain profile

reasonably quick, easily and relatively cheap.

4.2 Selection of the Sample

A total of 150 Australian Muslim individuals over the age of 18 who are either born in

Australia or are citizens of Australia were approached to participate in the study by

completing a self-administered questionnaire delivered via the researcher’s personal

Facebook account. One hundred forty (140) of those approached participated in the

study. However, 15 of the responses were unusable as they were not completed

properly. As such the study was based on the responses of 125 valid respondents and

represented a high response rate of 83.3%.

48

4.3 The Questionnaire Design

The questionnaire used in the study (see Appendix A) comprised four (4) sections. The

first section (Table A1) had a total of seven (7) questions, first five of which sought to

develop the participant’s demographic profile and requested each participant to state

his/her age, gender, marital status, academic qualifications and profession. The

remaining two questions asked if the respondent was an insurance policyholder, and the

company from which that policy was bought. The analysis of the demographic variables

was required to relate the profiles of the sampled respondents with their religiosity

(Section 2); levels of awareness of Islamic insurance products, perceptions (Section 3)

and their willingness to purchase or switch to Islamic insurance (section 4) depending on

whether or not they were policyholders.

Section two (Table A2) contained twenty (20) Likert type statements seeking the

respondents’ level of agreement or disagreement on a 5-point scale (5 - strongly agree,

3 – neither agree nor disagree and 1 - strongly disagree) with a view to measure their

religiosity. These statements have been taken from the religious commitment inventory

scale used by Razzaque and Chaudhary (2013) in their research on Australian Muslims.

The major reasons underlying the use of this scale were two-fold. First, the items used in

the scale reflect a holistic Islamic orientation; second, all the scale items were tested on

Muslim consumers in the Australian context and showed high reliability and validity.

In Section 3 of the questionnaire, there were thirteen Likert type statements (5 -

strongly agree, 1 - strongly disagree and 3 – neither agree nor disagree) (see Table - A3)

49

intended to measure the sampled respondents’ awareness (9 statements) as well as

perceptions of Islamic insurance products (4 statements). These statements have been

specifically developed for the current study based on the knowledge gained from the

literature review. Through these statements, the researcher seeks to determine one of

two things about Islamic insurance products. First, if the participants are aware of the

permissibility of these products for Muslims as they are Sharia compliant; avoid riba,

gharar and maiser. Second, how the participants perceive these products. Keeping this

objective in view, each of the thirteen statements in this section have been worded in a

simple, unambiguous, easy to understand manner that can extract the participant’s

honest responses. Furthermore, in order to adequately reflect the differing levels of

religiosity of the sampled respondents, some of the statements were negatively framed

[e.g., Insurance is altogether (conventional and Islamic) haram or prohibited] in order to

elicit stronger emotional responses. Questions such as “I feel like the religious benefits

of consuming Islamic general insurance products outweigh the costs of having to switch

insurance” have been included to examine the participants’ affective attachment or lack

thereof similar to the research carried out by Siala (2013). This question in particular

intends to measure perception by way of understanding whether the participant views

Islamic insurance to be more beneficial religiously than costly monetarily or vice versa.

Due to the scarcity and lack of appropriate and reliable scales in the extant literature,

the questionnaire items regarding the measurement of awareness, perception and

purchase intentions towards Islamic general and life insurance have been specifically

50

developed for this research. However, these statements were mostly based on

Rosenberg and Hovland’s (1960) tri-partite model of attitudes. This is to ensure they

adequately measure relevant cognitive (awareness), affective (perceptions) and

conative (purchase intention) levels of consumer attitudes towards Islamic insurance

products. This model was preferred over competing attitudinal frameworks such as

theory of reasoned action (Ajzen’s and Fishbein, 1980) or theory of planned behaviour

(Ajzen’s and Driver, 1992). In terms of applications (Jackson et al, 1996) as well as

empirical replications, the tri-partite model has had wide reaching influence in attitude

research and understanding consumer psychology and choice both conceptually

(Grimm, 2005) and methodologically (Kothandapani, 1971; Breckler, 1984). The first

cognitive component simply refers to awareness or knowledge that is acquired through

either direct/indirect experience with the attitude object or through information from

extraneous sources (Rosenberg and Holvand, 1960; Grimm, 2005; Schiffman et al, 2011).

The affective component simply refers to feelings or emotions one has towards the

attitude object and can vary from “good” or “bad”, “favourable” or “unfavourable”,

“positive” or “negative” (Breckler, 1984). Finally, the conative component is the

behavioural component concerned with the intention to engage in a specific behaviour

or action in regards to the attitude object and is usually measured through intention-to-

act scales (Rosenberg and Holvand, 1960; Schiffman et al, 2011).

Reliability of these item variables have been measured against Cronbach’s (1951)

coefficient alpha and found to exceed the 0.70 threshold recommended by Nunnally

51

(1978, p. 245). Discriminant validity measured by calculating the shared variance

between all constructs shows that this variance is lower than average variance for

individual constructs indicating evidence of discriminant validity amongst constructs

(Fornell and Larcker (1981).

The fourth and the last section of the questionnaire (see Table A4) contains six Likert

type statements (5 - Very likely, 3 -neither, 1 – very unlikely) to ascertain the likelihood

and/or willingness of the participants to either switch to or purchase Islamic insurance.

This is achieved simply by asking participants to express their likelihood to

purchase/switch to Islamic insurance should certain conditions apply. These statements

are expected to reveal respondents’ affective attachment and conative willingness given

the change in monetary cost associated with the switch/purchase. They are also

expected to bring out the relative strength of influence of religion and influence of

financial considerations in making a switch or a new purchase.

4.4 Data reduction

Principal component factor analysis: Data for each of the scales discussed in the

previous section were subjected to the principal component factor analysis (PCA) with

an oblique direct oblimin (DO) rotation. Factors based on an Eigenvalue exceeding 1

were extracted for further analysis. Several iterations of factor analyses were run with a

view to remove items with negative correlation coefficients (indicate convergent validity

issues) and cross loadings (indicate discriminant validity issues). After successive

52

iterations the statements/questions in each scale eventually loaded onto a single factor

and the following four constructs (Table 4.4) were created.

Table 4.4 Operationalizing the four constructs.

Construct 1: Religiosity [obtained from the religiosity scale (Appendix Table A1) -

included items 3, 12, 15, 2, 4, 6, 8, 11, 13, 14, 17 and 19 of the 20-item scale].

Construct 2: Perception [obtained from the Awareness and perception scale (Appendix

Table A2) - included items 3, 5, 6, 12 and 13. Therefore, only 5 items were

retained out of the initial 9.

Construct 3: Awareness [obtained from the Awareness and perception scale (Appendix

Table A2) – included items 2, 4, 8 and 10 which mean all of the items were

retained.

Construct 4: Intention [obtained from the Intention scale (Appendix Table A3) –

included items 3, 4, 5 and 6; only 4 of the 6 items in the scale were retained.

The communalities output was used to gauge any item with extraction values less than

0.40 which indicated that item may struggle to load appropriately. The pattern matrix

was used to gauge negative correlations and cross loadings and also the variance

explained table was used to gauge the amount of variance explained by the factors. For

convergent validity purposes, small coefficients at the 0.40 level were ignored.

4.5 Moderation, Mediation and Moderated Mediation

The current research has used type of insurance (general or life) as a moderator; i.e., a

quantitative or qualitative variable that influences the strength and direction of the

relation between a predictor and outcome variable (Baron and Kenny, 1986). In the

53

conceptual model, the type of insurance has been postulated to influence the strength

and direction of the relation between religiosity and perception (H5), religiosity and

intention of purchase (H2) and also perception and intention (H4).

Mediation, on the other hand, occurs when (i) a variation in the independent variable

(religiosity) causes variation in the mediator (perception) and (ii) when variations in the

mediator (perception) cause variations in the dependent variable (intention to

purchase). Based on these conditions, the variable perception in the model is a mediator

variable.

However, the variable perception offers moderated mediation as it shows a conditional

indirect effect. In the context of the conceptual model used in this study, this

moderated mediation aims to show exactly how and when the mediating effect of

perception occurs. It occurs when the strength of a mediated relation (the effect of

perception on the causal relation of religiosity on purchase intention) is a function or is

contingent upon a moderator whereby the mediated relation is conditional upon the

type of insurance (whether it is life or general) (Preacher, Rucker and Hayes, 2007).

Because of this moderated mediation it is necessary to run the analysis for two separate

models - one for the Islamic general insurance and the other for the Islamic life

insurance - and compare the effect sizes of both models.

A moderated mediation analysis was conducted through SPSS macro’s made available

by Preacher, Rucker and Hayes (2007) whereby a simple mediation analysis was

54

performed with a Sobel (1982) significance test for indirect effect of the predictor

variable on the outcome variable. Given the fact that the conceptual model used in the

study is not very complex to warrant a more powerful analysis technique such as

bootstrapping advocated by Preacher, Rucker and Hayes (2007), the Sobel (1982)

significance test shall suffice.

4.6 Correlation and Regression

A series of regression and correlation analyses were also conducted to test the

hypotheses of whether or not significant relationships existed between the noted

variables illustrated in the conceptual model. Since all of the variables are metric

(continuous) in nature, the most common correlation technique, that of Pearson’s r

which is a measure of the strength of the relationship between two continuous variables

(Coolidge, 2006) is used. In order to test whether the correlation coefficients are

significant or not, the t distribution is used and the derived t was compared to the

critical value from the t distribution. A series of linear regression was run to test the

hypotheses formulated earlier. If a correlation between the variables of interest is

found, then for every value of the independent variable a different value for the

dependent variable can be predicted. In order to test whether the regressions are

significantly different to zero, an ANOVA was run and the F ratio and significant level

was used to draw inference. Once the regression equation is proven to be either

significant or not, the strength of the individual predictor variable in the prediction of

the outcome variable was examined. This will be done by relying on the unstandardized

55

coefficients and the B value. The beta scores represent correlation coefficients; and the

significance levels was used to ascertain whether or not the t score is statistically

significant or not.

All the tests and analyses undertaken in this research and their results have been

presented in the next chapter - Chapter 5.

56

CHAPTER 5

Results

5.1 Descriptive Statistics of demographic variables

This chapter is devoted to the discussion of results and research findings. It starts with

presenting an analysis of the descriptive statistics for demographic questions followed

by testing the hypotheses. Reliability analyses, principle factor analyses as well as

moderated and mediation analyses have also been presented within the context of

hypotheses testing.

A summary of the demographic variables of the sampled respondents is presented in

Table 5.1 on the next page. The sample included 70 males (56.5%) and 54 females

(43.5%) of whom 65.6% were single, 23.2% were married and the remaining 11.2% in a

relationship. About 77% of the respondents had tertiary education (57.6% -bachelor’s

degree, 17.6% - master’s and 1.6% - doctorate) while a very small percentage (4.0%) did

not finish high school and 19.2% finished high school. In terms of professional affiliation,

49.6% are students, 21.6% private sector employees, 15.2% public sector employees,

11.2% self-employed and 2.4% unemployed. 63.2% of the respondents are not current

insurance policyholders whilst 36.8% of them are. Of the current insurance

policyholders, 45.7% are with NRMA, 15.2% with AAMI, 8.7% with ALLIANZ, 10.9% with

GIO, 2.2% with AMP and 17.4% with other providers.

57

Table 5.1 Demographic Profile of the Respondents

St

ate

me

nt

De

scri

pti

on

Nu

mb

er

Pe

rcen

tage

Stat

em

en

t

De

scri

pti

on

Nu

mb

er

Pe

rcen

tage

Age

18-20 Years 19 15.2

Pro

fess

ion

Self-employed 14 11.2

20-30 Years 91 72.8 Unemployed 3 2.4

30-40 Years 13 10.4 Private sector employee

27 21.6

40-50 Years 2 1.6 Public sector employee

19 15.2

Gender Male 70 56.5 Student 62 49.6

Female 54 43.5 Policy

Holder? Yes 46 36.8

Mar

ital

st

atu

s Single 82 65.6 No 79 63.2

Married 29 23.2 In

sura

nce

Pro

vid

er

GIO Insurance 5 10.9

In a relationship 14 11.2 Allianz Insurance 4 8.7

Edu

cati

on

below high school

5 4.0 AAMI Insurance 7 15.2

High school 24 19.2 NRMA Insurance 21 45.7

Bachelors 72 57.6 AMP Insurance 1 2.2

Masters 22 17.6 Other 8 17.4

Doctorate 2 1.6

In Appendix C – Table A C1 the frequencies of the responses to demographic questions

are shown. Of particular importance is the skewness and kurtosis. All of the

demographic questions except “Which best describes your academic qualifications?”

(-0.23) and “Are you a current insurance policyholder?” (-0.554) are positively skewed.

The statements “What is your relationship status?” (1.209), “What category is your

profession in?” (0.858) and “Which insurance company are you a customer with?”

(1.062) exhibiting the most significant positive skew. All of the demographic questions

except “What is your gender” (-1.963), “What category is your profession in” (-0.066)

and “Are you a current insurance policyholder” (-1.721) have a positive kurtosis. The

58

statement “Which category best describes your age” (2.197) exhibiting the highest value

indicative of a very peaked curve whereas “What is your gender” (-1.963) and “Are you a

current insurance policyholder” (-1.721) exhibiting highly negative values indicative of

very flat curves.

5.2. Testing Hypothesis 1 [H1]

In order to test the first hypothesis - “There will be low to moderate levels of awareness

of Islamic insurance amongst Australian Muslim consumers” - frequency tables and

histograms presented in Appendix D have been used. A summary of the Mean Score

[MS] and standard deviation [SD] of each of the four Awareness Scale items (see

Appendix D) has been presented in Table 5.2.

Table 5.2 Mean Score [MS] and Standard Deviation [SD] of the Awareness Scale items

Awareness Scale Items

Mean Score [MS]

Standard Deviation

[SD]

Islamic life insurance is based on mutual cooperation and guaranteeing one another protection in times of calamity.

3.50 0.867

Islamic life insurance is Sharia compliant because it avoids riba (usury), gharar (uncertainty) and maiser (gambling and chance).

3.46 0.955

Islamic general insurance is based on mutual cooperation and guaranteeing one another protection in times of calamity.

3.69 0.745

Islamic general insurance is Sharia compliant because it avoids riba (usury), gharar (uncertainty) and maiser (gambling and chance).

3.58 0.835

59

Table 5.2 shows that the first of the four questions (Islamic life insurance is based on

mutual cooperation and guaranteeing one another protection in times of calamity)

measuring awareness of Islamic life insurance has a mean score [MS] of 3.5 with a

standard deviation [SD] of 0.867 implying a very low level of awareness. The pattern of

response is very similar for the remaining three questions as well. Responses to

question 2 (Islamic life insurance is Sharia compliant because it avoids riba (usury),

gharar (uncertainty) and maiser (gambling and chance) also shows an MS of 3.46 (SD -

0.955). This indicates a very low level awareness of Islamic life insurance bordering the

level of indifference. The last two questions on awareness of Islamic general insurance

also reveal similar results. Question 3 (Islamic general insurance is based on mutual

cooperation and guaranteeing one another protection in times of calamity) has a MS of

3.69 (SD – 0.745). Question 4 (Islamic general insurance is Sharia compliant because it

avoids riba (usury), gharar (uncertainty) and maiser (gambling and chance) yields a MS

of 3.58 (SD – 0.835 ). It is clear that the mean scores are indicative of a low to moderate

level of awareness of Islamic insurance amongst the sampled respondents leading to the

acceptance of H1.

5.3 Principal component factor analysis

Results of principal component factor analyses (PCA) are shown in Table 5.3 which has

been summarised from the eight tables (i.e., Tables AE1 – AE8) presented in Appendix E.

Table A E1 shows that all the 12 statements/items operationalising religiosity load onto

a single factor explaining 47.667% of the variance and with a very high Eigenvalue

60

exceeding 5.00. The component matrix in Figure A E2 shows that all the items have

correlation coefficients greater than 0.50 with no evidence of cross loadings indicative

of good convergent and discriminant validity.

Table 5.3 Summary Information: Extracted Factors

Factor No FACTOR LABEL (Composite Construct)

No. of items in the construct

EIGENVALUE % Variance Explained

Factor 1 Religiosity 12 5.720 47.667

Factor 2 Awareness 4 2.149 53.723

Factor 3 Perception 5 2.883 57.663

Factor 4 Intention 4 2.149 53.723

The results presented in Table A E3 show that The four (4) awareness items load onto a

single factor which explains 53.723% of the variance with an Eigenvalue exceeding 2.00.

In Table A E4 the component matrix shows that all the correlation coefficients are

greater than 0.60 with no evidence of cross loadings indicative of both convergent and

discriminant validity.

Similarly, the results in Table A E5 show that all the mentioned perception items load

onto a single factor which explains 57.663% of the variance with an Eigenvalue

exceeding 2.00. The component matrix in Table A E6 shows that all the items have

correlation coefficients exceeding 0.60 with no evidence of cross loading indicative of

good convergent and discriminant validity.

61

The results in Table A E7 show that all the mentioned intention items load onto a single

factor explaining 69.881% of the variance with an Eigenvalue exceeding 2.00. In Table A

E8 the component matrix shows that all correlation coefficients are greater than 0.70

with no evidence of cross loadings indicative of both convergent and discriminant

validity.

5.4 Reliability Analysis

A reliability analysis for each of the composite scores (obtained by PCA) was conducted

via SPSS. A summary of the Cronbach alpha scores for all four constructs have been

presented in Table 5.3 (the reliability analysis has been illustrated in Appendix F). It is

evident that all the constructs exceed Cronbach’s (1951) threshold of 0.70 for internal

consistency.

Table 5.4 Reliability analyses of Composite Scores.

Construct Cronbach α Appendix F

Religiosity 0.894 Figure A F1

Awareness 0.712 Figure A F2

Perception 0.815 Figure A F3

Intention 0.856 Figure A F4

5.5. Moderated Mediation analysis

Figure 5.5a illustrates the summary results of the moderated mediation analyses (see

Appendix G – Figure AG1) which are the mediation analyses involving perception and

intention towards Islamic general insurance. In particular the direct effects are shown in

62

the diagram on the next page. The indirect effect as shown in Figure AG1 is significant

but the relationship between religiosity and perception and perception and intention is

non-significant. Since there is no evidence to show that the 4 conditions for mediation

as stipulated by Baron and Kenny (1986) have been met, it is concluded that there is no

mediation effect of perception on the relationship between religiosity and intention.

Figure 5.5a Moderated mediation:

Perception on religiosity and intention to purchase Islamic general insurance

0.0735 -0.1185

-0.1748*

The β value is significant at: *p≤0.05

Figure 5.5b, on the other hand, presents the results found in Appendix G – Figure A G2

which is the mediation analysis involving perception and intention towards Islamic life

insurance. There is no evidence in the direct and indirect effects of any significant

mediation, whether full or partial.

Religiosity

Perception

Intention

63

Figure 5.5b Moderated mediation:

Perception on religiosity and intention to purchase Islamic life insurance

0.1316 -0.0403

-0.1262

5.6. Testing hypotheses 2, 3, 4 and 5 with linear regression

Testing hypothesis 2: Appendix H – Tables A H1, A H2 and A H3 show the results of a

linear regression of Intention towards purchasing Islamic general insurance on

religiosity. Table A H3 reveals that under the unstandardized coefficients column, the B

value is -0.181 with p≤0.05. This indicates a weak negative correlation between

religiosity and intention towards Islamic general insurance whereby with each unit

increase in religiosity there is a 0.181 unit fall in intention. Table A H1 shows that the R

square value is 0.033 which means 3.3% of the variance in intention is explained by

religiosity. In order to test whether the regression coefficient is significantly different

from zero the F ratio and significance (Table A H2) are examined; F (1,119) = 4.050 is

significant at p≤0.05. From these results it is evident that hypothesis 2 has been

supported.

Religiosity

Perception

Intention

64

Testing hypothesis 3: In Appendix H – Tables A H4, A H5 and A H6 show the results of the

linear regression of perception of Islamic general insurance on awareness. B value of

0.678 in Table A H6 under the unstandardized coefficients column indicates a strong

positive relationship between the two constructs; with each unit increase in awareness

there is a 0.678 unit increase in perception. The R square value of 0.449 in Table A H4

implies that 44.9% of the variance in perception of Islamic general insurance is

explained by awareness. The F ratio and significance values, F (1,120) = 97.868 is

significant at the p≤0.01 level (Table A H5) indicates that regression coefficient is

significantly different from zero.

Tables A H7, A H8 and A H9 in Appendix H present the results of the linear regression of

perception of Islamic life insurance on awareness. In Table A H9, the B value of 0.687

under the unstandardized coefficients column indicates a strong positive relationship

between the two variables under consideration here; with each unit increase in

awareness there is 0.687 unit increase in perception. The R square value of 0.470 in

Table A H7 means that 47.0% of the variance in perception of Islamic life insurance is

explained by awareness. The F ratio and significance, i.e., F (1,122) = 108.081 which is

significant at the p≤0.01 level (Table A H8) indicates that regression coefficient is

significantly different from zero. All these results lend support to H3 as stated.

Testing hypothesis 4: Tables A H10, A H11 and A H12 in Appendix H show the result of the

linear regression of intention towards Islamic general insurance on perceptions towards

it. R square value of 0.018 in Table A H10 reveals that just 1.8% of the variance in the

65

intention is explained by perception. Also, under the unstandardized coefficients

column the B value is -0.131 (Table A H12) which reveals a weak negative relationship

between intention and perception of Islamic general insurance; i.e., with each unit

increase in perception there is a 0.131 unit fall in intention to purchase. ANOVA test

results (Table A H11), F (1,117) = 2.104 which is non-significant as p≥0.05, means the

absence of any significant relationship between perception and intention. Hence, H4

cannot be supported.

Testing hypothesis 5: The results of the linear regression of perception of Islamic general

insurance on religiosity have been presented in Tables A H13, A H14 and A – H15

(Appendix H). Table A H13 show the R square value as 0.006 which means that 0.6% of

the variance in perception is explained by religiosity. B value of 0.078 under the

unstandardized coefficients column in Table A H15 also reveals a very weak positive

relationship between religiosity and perception; with each unit increase in religiosity

there is a 0.078 unit increase in perception. ANOVA test results in Table A H14, i.e., F

(1,120) = 0.744 which is non-significant as p≥0.05, also means the relationship between

religiosity and perception is not significant. Based on this evidence hypothesis H5 is not

supported.

66

Chapter 6

Discussion and Conclusion 6.1. Interpreting the results

Results presented in the previous chapter lend support to three (3) of the five (5)

hypotheses posited in this research investigation. The first hypothesis; “There will be low

to moderate levels of awareness of Islamic insurance amongst Australian Muslim

consumers” was supported confirming a generally held speculation. As discussed in

research methodology (Chapter 4), the questions aimed at ascertaining respondents’

awareness of Islamic insurance were based on extant literature. They were also based

on literature that negates its adoption so as to more accurately gauge the respondents’

knowledge and awareness of key issues underlying Islamic insurance offerings. Direct

and to some extent attacking questions such as “Do you know about X and Y?” with an

option of either “Yes” or “No” may lead to socially desirable answers. Therefore specific

Likert type statements were developed so levels of awareness may be viewed on a

continuum ranging from strongly disagree (1) to strongly agree (5). Given the very

nature of the study which involves testing a minority religious group’s awareness of an

unsought product, this was the best option to measure the respondents’ level of

awareness. The mean score of the survey respondent then becomes a proxy measure of

their level of awareness from which inference can be drawn.

Table 6.1 below summarises the test results of hypotheses H2, H3, H4 and H5. It can be

seen that the second hypothesis, which predicted a negative relationship between

67

religiosity and purchase intentions towards Islamic general insurance, was supported.

The β-value, indicative of a weak negative relationship, is an important and interesting

finding nonetheless. This hypothesis was developed and predicted due to the reasoning

that regardless of whether the insurance is Islamic general or life, the more religious a

Muslim consumer is, the more faith he/she places in Allah and it is less likely for him/her

to purchase an Islamic insurance product.

Table 6.1 Summary test results of Hypotheses 2, 3, 4 and 5.

R2 Sig. β Hypothesis

Relig IntIGI 0.033 0.05* -0.180 H2: Confirmed

Awar PerIGI 0.449 0.00** 0.678 H3: Confirmed

Awar PercILI 0.470 0.00** 0.678 H3: Confirmed

Perc IntIGI 0.018 0.15 -0.131 H4: Not supported

Relig PercIGI 0.006 0.39 0.078 H5: Not supported

*Significant at p≤0.05 and **Significant at p≤0.01

The table also shows that both parts of the third hypothesis have been supported; the

more aware a respondent is of Islamic insurance, the more positive his/her perceptions

are of both Islamic general and life insurance. Considering the general averseness

towards and negative penetration of life insurance in Muslim majority countries (Meng,

2004; Beck and Webb, 2003), this is definitely an interesting result. This may be an

outcome of acculturation which explains the process of cultural and psychological

changes that results following meeting between cultures (Sam et al. 2010). In both of

the interacting cultures, the effects of acculturation can be observed at multiple levels.

While at the group level changes to culture, customs, and social institutions may be

68

noticed; at the individual level, changes may be observed in daily behaviour caused by

various psychological and physical well-being considerations. Adjustments and

adaptations made by minorities such as immigrants, refugees and indigenous people in

response to their contact with the dominant majority have been well researched (e.g.,

Croucher, 2011). Perhaps, Muslim consumers living in Australia have been influenced by

the Western culture and developed a liking for insurance, a common phenomenon in

Western cultures. When awareness is increased concerning the permissibility of buying

an insurance policy, inherent inhibition rooted in religiosity may have been reduced and

thus developed positive perceptions towards these products.

The table shows that both hypothesis 4 and 5 lacked support. This is acceptable;

perception need not necessarily translate into intention; perception may be

independent of intention. In the same vein, religiosity may not necessarily be a factor in

perception. In Australia, a highly religious Muslim motorist must purchase a third party

car insurance policy even if he or she does not perceive insurance favourably. In the

moderated mediation analysis, the results showed that there was no evidence of any

mediating effect of perception on the relationship between religiosity and intention.

This may explain the lack of significance in hypotheses 4 and 5 whereby the

relationships between perception and intention and religiosity and perception lack

significance because there is no evidence of mediation.

69

6.2. Implications of the Study

Managerial implications: This study has yielded several important implications –

managerial as well as theoretical. The first and foremost implication comes from the

strong positive relationships between awareness and perception and low to moderate

levels of awareness. This highlights the importance of increasing awareness of Takaful

products amongst Muslim consumers living in non-Muslim, Western countries. It further

points out the vital relationship between increasing the consumer’s level of awareness

and the formation of positive perceptions towards Takaful. It implies that companies

wishing to influence Muslim consumer attitudes towards Takaful should place more

emphasis on educative promotional campaigns aimed at increasing consumer product

knowledge and brand awareness.

An interesting finding of this study with an important managerial implications is the fact

that contrary to common intuitive belief, the relationship between religiosity and

purchase intentions towards Islamic general insurance appears to be negative. In this

study, it seems that although Islamic general insurance poses less of a theological

dilemma as compared to Islamic life insurance, Australian Muslim consumers lean more

towards certitude and less towards uncertainty, be it Islamic general or life insurance.

This finding would indicate to the firm seeking to expand its Takaful products into

Muslim minority markets that depending on the degree of religiosity, the success of its

offering will vary. Furthermore, based on this finding, Takaful products would prove to

be more successful with less religious Muslim consumers as opposed to the more

70

religious consumer. This research can be of practical importance to multinational

companies seeking to expand their Islamic finance products, particularly Takaful into

developed countries such as the USA, the UK and Australia where there is a sizeable

Muslim market. By providing insights into perceptions, attitudes and willingness of

Muslim consumers towards the purchase of Islamic insurance products this empirical

research may provide some food for thought for managers seeking expansion into those

non-Muslim countries.

Theoretical implications: From a theoretical standpoint, the research is likely to generate

new knowledge about a topic hitherto neglected by the researchers and motivate new

researchers to take interest in this area. As mentioned in Chapter 1, the current

research also contributes to marketing literature by providing some theoretical

understanding of Islamic insurance as a phenomenon and shedding light on resolving of

the conflict between the Muslim consumer psyche; and its adoption and diffusion as a

popular component of contemporary living. Recent years have witnessed the

emergence of a new generation of researchers who have become engaged in

understanding what makes different secular products/services such as financial

products non-permissible for Muslim consumers and what can be done to make them

permissible (and if launched, to make them popular). The current study would definitely

fall in that category.

71

6.3. Limitation of the study

Like all survey based studies, this research investigation also suffers from some

limitations. First, online surveys suffer from sample bias problems due to the fact that

not everyone has access to the internet. There is no way to take a random sample of all

internet users and due to the inability of controlling the survey environment, it is

impossible for the researcher to determine if participants took the survey seriously and

recorded their honest responses. Second, the fact that a series of regression analyses

were used rather than a more comprehensive structural equation modelling technique

meant that results could have been overstated. Use of a more comprehensive SEM

technique, could have allowed more flexible assumptions, use of confirmatory factor

analysis to reduce measurement errors and the ability to test the overall model rather

than coefficients individually (Garson, 2012). Furthermore, a more comprehensive SEM

strategy would have assessed the relative model fit which makes it more robust as

opposed to regression which is highly susceptible to error of interpretation due to

misspecification (Garson, 2012). Due to the fact that the convenience sample drawn

from a relatively homogeneous ethnic and geographic subculture means that the results

could have been biased in any number of ways.

Conducting a research on the belief and attitudes of Muslims is not always very easy

since the researcher may often be misunderstood. When it comes to questions seeking

views on theological issues, the researchers’ options in asking the ‘right’ type of

question is often very limited and may become a big issue with respondents who may

72

belong to various denominations such as Sunni, Shia as well as other minor sub-sects.

Consequently, the researchers’ freedom to structure questions (e.g., asking a negatively

worded question/statement on a basic Islamic tenet) gets reduced. For the same

reasons, responses to the questions asked by the researchers may be biased. For

example, the sensitive nature of the questions pertaining to a respondent’s religiosity in

this research investigation, may have led to socially desirable answers further

confounding the results. These limitations make it difficult to generalize the findings of

this study into different contexts such as a Muslim majority country.

6.4 Future research

Since Muslim scholars have not published widely in the area of Muslim consumer

behaviour, this empirical research study presents many opportunities for future

research including replication studies in Muslim majority countries utilizing more robust

methodology. Furthermore, the findings of this study, particularly the non-significant

mediation of perception on religiosity and purchase intention, presents opportunities

for future researchers to find methods of rectifying this issue by developing a more

robust perception scale.

An interesting observation lies in the result showing perception and purchase intention

and religiosity and perception as independent constructs. In an earlier study, Maysami

and Williams (2006) reported awareness and perception to be not independent. While

the current study corroborates the finding reported in Maysami and Williams (2006)

73

that with increased awareness comes more favourable perceptions, there seems to be a

discrepancy between the two findings reported between this study and Maysami and

Williams (2006). This may provide future researchers with a worthwhile area to probe

into. They may also shed some light on whether a significant perception mediator also

results in religiosity and perception or perception and intention constructs that are not

independent.

Finally, it would be a worthwhile undertaking to undertake a broad based study of

Takaful across various countries and with much larger sample size. If undertaken, such a

study would contribute towards marketing literature and enrich it for both marketing

researchers as well as practitioners.

74

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Appendix A

Table A 1

Questionnaire

The following are multiple choice questions. Please only select one answer. Please

be as honest and accurate as possible.

Statement Description

Which category best describes your age?

(a) 18-20 Years (a) 20-30 Years (b) 30-40 Years (c) 40-50 Years (d) 50-60 Years (e) 60+ Years

What is your gender? (a)Male (b) Female

What is your relationship status? (a) Single (b) Married (c) In a relationship

Which best describes your academic qualifications?

(a) Did not finish high school (b) Finished high school (c) Bachelors (with/without honours) (d) Masters (coursework/research) (e) Doctorate

What category is your profession in? (a) Self-employed (b) Retired (c) Unemployed (d) Private sector employee (e) Public sector employee (f) Student

Are you a current insurance policyholder?

(a) Yes (b) No

Which insurance company are you a customer with?

(a) GIO Insurance (b) Allianz Insurance (c) AAMI Insurance (d) NRMA Insurance (e) CGU Insurance (f) AMP Insurance (g) Suncorp Insurance (h) NIB Insurance (i) AXA Insurance (j) Other

87

Table A2

In the following section we present to you a series of statements that require you to pick only one out of the five boxes ranging from strongly agree to strongly disagree. Please be as honest as possible as there is no right or wrong answer.

Statement

Stro

ngl

y A

gree

(5)

Agr

ee (

4)

Neu

tral

(3

)

Dis

agre

e (2

)

Stro

ngl

y D

isag

ree

(1)

1.

I spend time in trying to gain knowledge and understanding of my faith.

2.

It is important to me to spend periods of time in private religious thought and reflection.

3. Religious beliefs influence all my dealings in life. 4. I make financial contributions to my religious organization. 5.

I keep well informed about my local religious group and have some influence in its operations/decisions.

6. I enjoy being involved in activities from my religious organization.

7.

Religion is especially important to me because it answers many questions about the meaning of life.

8.

If religiosity is defined as participating with an organized religion, then I consider myself religious.

9. I believe in Allah, His Messengers, His Books, His Angels and the Day of Judgment.

10. Under no circumstances will I fail to pray five times a day.

11. I always seek Allah’s will in prayer before I make decisions in my everyday life.

12. I always aim to complete the whole period of fasting.

13. During the fasting month, I am more likely to pray, pay charity, and be self-accountable.

14. I make an active effort to pay zakat- a duty for all Muslims, every year.

15. It is my dream to complete Hajj.

16. I believe if I lead a religious life, I do not have to complete the pilgrimage.

17. I base all purchase decisions on my religious values dictated by the Quran and Sunnah.

18. I follow all dietary and hygiene rules set out by Islam because it is part of a Muslim or Islamic identity.

19. I practice Islam in everyday life, therefore I consider myself religious.

20. I believe purchasing halal products is a personal choice.

88

Table A3

In the following section we present to a series of statements that require you to tick only one of the five boxes ranging from strongly agree to strongly disagree. Please be as honest as possible as there is no right or wrong answer. Please note that by general insurance we include car, home and contents, business and boat.

Statement

Stro

ngl

y A

gree

(5

)

Agr

ee (

4)

Neu

tral

(3

)

Dis

agre

e (2

)

Stro

ngl

y D

isag

ree

(1)

1. Insurance altogether (conventional and Islamic) is haram or prohibited.

2. Islamic life insurance is based on mutual cooperation and guaranteeing one another protection in times of calamity.

3. The aim of Islamic general insurance is to help Muslim consumers become more ethical and religious in their insurance purchase.

4. Islamic life insurance is Sharia compliant because it avoids riba (usury), gharar (uncertainty) and maiser (gambling and chance).

5. I feel like the religious benefits of consuming Islamic general insurance products outweigh the costs switching insurance providers

6. Unlike conventional insurance, Islamic life insurance aims to leave the deceased person’s family in a better financial position.

7. I feel Islamic insurance (general and life) is not very different to conventional insurance and just uses different words to mean the same concepts.

8. Islamic general insurance is based on mutual cooperation and guaranteeing one another protection in times of calamity.

9. I am comfortable with Islamic general insurance as an alternative to conventional insurance but I have an issue with Islamic life insurance.

10. Islamic general insurance is Sharia compliant because it avoids riba (usury), gharar (uncertainty) and maiser (gambling and chance).

11. The aim of Islamic life insurance is to help Muslim consumers become more ethical and religious in their insurance purchase.

12. Unlike conventional insurance, Islamic general insurance aims to advance society’s wellbeing.

13. I feel like the religious benefits of consuming Islamic life insurance products outweigh the costs of switching insurance providers

89

Table A4

In the following section we present to a series of statements that require you to pick only one of the five boxes ranging from strongly agree to strongly disagree. Please be as honest as possible as there is no right or wrong answer.

Stro

ngl

y

Agr

ee (

5)

Agr

ee (

4)

Neu

tral

(3

)

Dis

agre

e (2

)

Stro

ngl

y D

isag

ree

(1)

1. Given that Islamic general insurance is offered at a lower price and offers similar coverage to that of other providers, how likely are you to switch or purchase?

2. Given that Islamic life insurance is offered at a lower price and offers similar coverage to that of other providers, how likely are you to switch or purchase?

3. If Islamic general insurance were to be offered at a higher price and with the same coverage as other providers, how likely are you now to switch or purchase?

4. If Islamic life insurance were to be offered at a higher price and with the same coverage as other providers, how likely are you now to switch to or purchase?

5. If Islamic general insurance was offered at a higher price with lower coverage than other providers, how likely are you now to switch or purchase?

6. If Islamic life insurance was offered at a higher price with lower coverage than other providers, how likely are you now to switch or purchase?

90

Appendix B

Figure A B1: tripartite attitudinal model

According to Rosenberg and Hovland (1960) attitudes are comprised of three

components.

Attitude

Stimuli

Affect

Behaviour

Cognition

91

Appendix C

Table A C1

Table A C2

Which category best describes your age?

Frequency Percent Valid Percent

Cumulative

Percent

Valid 18-20 19 11.9 15.2 15.2

20-30 91 57.2 72.8 88.0

30-40 13 8.2 10.4 98.4

40-50 2 1.3 1.6 100.0

Total 125 78.6 100.0

Missing System 34 21.4

Total 159 100.0

Statistics

Which

category best

describes

your age?

What is

your

gender?

What is

your

relationship

status?

Which best

describes

your

academic

qualificatio

ns?

What

category is

your

profession

in?

Are you a

current

insurance

policyholde

r?

Which

insurance

company

are you a

customer

with?

N Valid 125 124 125 125 125 125 46

Missi

ng 34 35 34 34 34 34 113

Mean 1.98 1.44 1.46 2.94 2.12 1.63 3.65

Skewness .534 .263 1.209 -.213 .858 -.554 1.062

Std. Error of

Skewness .217 .217 .217 .217 .217 .217 .350

Kurtosis 2.197 -1.963 .127 .617 -.066 -1.721 .068

Std. Error of

Kurtosis .430 .431 .430 .430 .430 .430 .688

92

Table A C3

What is your gender?

Frequency Percent Valid Percent

Cumulative

Percent

Valid Male 70 44.0 56.5 56.5

Female 54 34.0 43.5 100.0

Total 124 78.0 100.0

Missing System 35 22.0

Total 159 100.0

Table A C4

What is your relationship status?

Frequency Percent Valid Percent

Cumulative

Percent

Valid Single 82 51.6 65.6 65.6

Married 29 18.2 23.2 88.8

In a relationship 14 8.8 11.2 100.0

Total 125 78.6 100.0

Missing System 34 21.4

Total 159 100.0

Table A C5

Which best describes your academic qualifications?

Frequency Percent Valid Percent

Cumulative

Percent

Valid Did not finish high school 5 3.1 4.0 4.0

Finished high school 24 15.1 19.2 23.2

Bachelors (with/without

honours) 72 45.3 57.6 80.8

Masters 22 13.8 17.6 98.4

Doctorate 2 1.3 1.6 100.0

Total 125 78.6 100.0

Missing System 34 21.4

Total 159 100.0

93

Table A C6

What category is your profession in?

Frequency Percent Valid Percent Cumulative

Percent

Valid Student 62 39.0 49.6 49.6

Self employed 14 8.8 11.2 60.8

Private sector employee 27 17.0 21.6 82.4

Public sector employee 19 11.9 15.2 97.6

Unemployed 3 1.9 2.4 100.0

Total 125 78.6 100.0

Missing System 34 21.4

Total 159 100.0

Table A C7

Are you a current insurance policyholder?

Frequency Percent Valid Percent Cumulative

Percent

Valid Yes 46 28.9 36.8 36.8

No 79 49.7 63.2 100.0

Total 125 78.6 100.0

Missing System 34 21.4

Total 159 100.0

Table A C8

Which insurance company are you a customer with?

Frequency Percent Valid Percent Cumulative

Percent

Valid AAMI 7 4.4 15.2 15.2

ALLIANZ 4 2.5 8.7 23.9

NRMA 21 13.2 45.7 69.6

GIO 5 3.1 10.9 80.4

AMP 1 .6 2.2 82.6

OTHER 8 5.0 17.4 100.0

Total 46 28.9 100.0 Missing System 113 71.1 Total 159 100.0

94

Appendix D

Table A D1

Islamic life insurance is based on mutual cooperation and guaranteeing one

another protection in times of calamity.

Frequenc

y Percent

Valid

Percent

Cumulative

Percent

Valid Strongly disagree 1 .6 .8 .8

Disagree 12 7.5 9.6 10.4

Neither Agree nor

Disagree 51 32.1 40.8 51.2

Agree 45 28.3 36.0 87.2

Strongly Agree 16 10.1 12.8 100.0

Total 125 78.6 100.0

Missing System 34 21.4

Total 159 100.0

Table A D2

Islamic life insurance is Sharia compliant because it avoids riba (usury), gharar (uncertainty) and

maiser (gambling and chance).

Frequency Percent Valid Percent

Cumulative

Percent

Valid Strongly disagree 4 2.5 3.2 3.2

Disagree 11 6.9 8.8 12.0

Neither Agree nor Disagree 52 32.7 41.6 53.6

Agree 40 25.2 32.0 85.6

Strongly Agree 18 11.3 14.4 100.0

Total 125 78.6 100.0

Missing System 34 21.4

Total 159 100.0

95

Table A D3

Islamic general insurance is based on mutual cooperation and guaranteeing one another

protection in times of calamity.

Frequency Percent Valid Percent

Cumulative

Percent

Valid Disagree 3 1.9 2.4 2.4

Neither Agree nor Disagree 51 32.1 40.8 43.2

Agree 53 33.3 42.4 85.6

Strongly Agree 18 11.3 14.4 100.0

Total 125 78.6 100.0

Missing System 34 21.4

Total 159 100.0

Table A D4

Please select only one of the five boxes ranging from strongly agree to strongly disagree.

Pleas...-Islamic general insurance is Sharia compliant because it avoids riba (usury), gharar

(uncertainty) and maiser (gambling and chance).

Frequency Percent Valid Percent

Cumulative

Percent

Valid Strongly disagree 2 1.3 1.6 1.6

Disagree 6 3.8 4.8 6.4

Neither Agree nor Disagree 50 31.4 40.0 46.4

Agree 51 32.1 40.8 87.2

Strongly Agree 16 10.1 12.8 100.0

Total 125 78.6 100.0

Missing System 34 21.4

Total 159 100.0

96

Figure A D1

Figure A D2

97

Figure A D3

Figure A D4

98

Appendix E

Table A E1

Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 5.720 47.667 47.667 5.720 47.667 47.667

2 .991 8.256 55.924

3 .852 7.099 63.022

4 .778 6.486 69.508

5 .698 5.817 75.325

6 .617 5.139 80.464

7 .514 4.280 84.744

8 .484 4.037 88.781

9 .431 3.596 92.376

10 .368 3.063 95.439

11 .295 2.462 97.901

12 .252 2.099 100.000

Extraction Method: Principal Component Analysis.

Table A E2

Component Matrixa

Component

1 Religious beliefs influence all my dealings in life. .721

I always aim to complete the whole period of fasting. .780

It is my dream to complete Hajj. .771

It is important to me to spend periods of time in private religious thought and reflection. .669

I make financial contributions to my religious organization. .638

I enjoy being involved in activities from my religious organization. .555

If religiosity is defined as participating with an organized religion, then I consider myself religious. .557

I always seek Allah’s will in prayer before I make decisions in my everyday life. .757

During the fasting month, I am more likely to pray, pay charity, and be self-accountable. .665

I make an active effort to pay zakat- a duty for all Muslims, every year. .682

I base all purchase decisions on my religious values dictated by the Quran and Sunnah. .717

I practice Islam in everyday life, therefore I consider myself religious. .729

Extraction Method: Principal Component Analysis.

a. 1 components extracted.

99

Table A E3

Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 2.149 53.723 53.723 2.149 53.723 53.723

2 .852 21.302 75.025

3 .683 17.067 92.092

4 .316 7.908 100.000

Extraction Method: Principal Component Analysis.

Table A E4

Component Matrixa

Component

1

Islamic life insurance is based on mutual cooperation and guaranteeing one another protection

in times of calamity.

.767

Islamic general insurance is based on mutual cooperation and guaranteeing one another

protection in times of calamity.

.625

Islamic general insurance is Sharia compliant because it avoids riba (usury), gharar

(uncertainty) and maiser (gambling and chance).

.732

Islamic life insurance is Sharia compliant because it avoids riba (usury), gharar (uncertainty) and

maiser (gambling and chance).

.796

Extraction Method: Principal Component Analysis.

a. 1 components extracted.

100

Table A E5

Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 2.883 57.663 57.663 2.883 57.663 57.663

2 .721 14.413 72.076

3 .555 11.094 83.170

4 .424 8.482 91.653

5 .417 8.347 100.000

Extraction Method: Principal Component Analysis.

Table A E6

Component Matrixa

Component

1

The aim of Islamic general insurance is to help Muslim consumers become more ethical and

religious in their insurance purchase.

.764

I feel like the religious benefits of consuming Islamic general insurance products outweigh the

costs switching insurance providers

.705

Unlike conventional insurance, Islamic life insurance aims to leave the deceased person’s family in

a better financial position.

.730

Unlike conventional insurance, Islamic general insurance aims to advance society’s wellbeing. .795

I feel like the religious benefits of consuming Islamic life insurance products outweigh the costs of

switching insurance providers

.797

Extraction Method: Principal Component Analysis.

a. 1 components extracted.

101

Table A E7

Total Variance Explained

Component

Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 2.795 69.881 69.881 2.795 69.881 69.881

2 .810 20.253 90.134

3 .262 6.540 96.674

4 .133 3.326 100.000

Extraction Method: Principal Component Analysis.

Table A E8

Component Matrixa

Component

1

If Islamic general insurance were to be offered at a higher price and with the same coverage as

other providers, how likely are you now to switch or purchase?

.784

f Islamic life insurance were to be offered at a higher price and with the same coverage as

other providers, how likely are you now to switch to or purchase?

.831

If Islamic general insurance was offered at a higher price with lower coverage than other

providers, how likely are you now to switch or purchase?

.871

If Islamic life insurance was offered at a higher price with lower coverage than other providers,

how likely are you now to switch or purchase?

.856

Extraction Method: Principal Component Analysis.

a. 1 components extracted.

102

Appendix F

Figure A F1 – reliability analysis for religiosity construct

Reliability Statistics

Cronbach's

Alpha N of Items

.894 12

Figure A F2 – reliability analysis for awareness construct

Reliability Statistics

Cronbach's

Alpha N of Items

.712 4

Figure A F3 – reliability analysis for perception construct

Reliability Statistics

Cronbach's

Alpha N of Items

.815 5

Figure A F4 – reliability analysis for intention construct

Reliability Statistics

Cronbach's

Alpha N of Items

.856 4

103

Appendix G

Table A G1

VARIABLES IN SIMPLE MEDIATION MODEL

Y newINTEN

X newRELIG

M newPERCE

DESCRIPTIVES STATISTICS AND PEARSON CORRELATIONS

Mean SD newINTEN newRELIG newPERCE

newINTEN -.0221 .9909 1.0000 -.1789 -.1329

newRELIG -.0072 1.0143 -.1789 1.0000 .0741

newPERCE -.0067 1.0062 -.1329 .0741 1.0000

SAMPLE SIZE 119

DIRECT AND TOTAL EFFECTS

Coeff s.e. t Sig(two)

b(YX) -.1748 .0889 -1.9671 .0515

b(MX) .0735 .0915 .8041 .4230

b(YM.X) -.1185 .0895 -1.3234 .1883

b(YX.M) -.1661 .0888 -1.8698 .0640

INDIRECT EFFECT AND SIGNIFICANCE USING NORMAL DISTRIBUTION

Value s.e. LL95CI UL95CI Z Sig(two)

Effect -.0087 .0151 -.0383 .0209 -.5773 .5638

BOOTSTRAP RESULTS FOR INDIRECT EFFECT

Data Mean s.e. LL99 CI LL95CI UL95CI

UL99CI

Effect -.0087 -.0084 .0159 -.0709 -.0476 .0193

.0354

NUMBER OF BOOTSTRAP RESAMPLES 1000

POINT AND INTERVAL ESTIMATES OF EFFECT SIZE FOR INDIRECT EFFECT

Data Mean s.e. LL99CI LL95CI UL95CI

UL99CI

ab -.0087 -.0084 .0159 -.0709 -.0476 .0193

.0354

P_m .0499 .0330 1.2595 -2.1626 -.3484 .8612

3.8045

R_m .0525 .1074 3.6679 -8.3739 -.6207 .7510

9.5473

R2_45 .0033 .0040 .0071 -.0106 -.0044 .0223

.0368

ab_ps -.0088 -.0084 .0157 -.0708 -.0465 .0186

.0350

ab_cs -.0089 -.0084 .0158 -.0683 -.0459 .0175

.0372

********************************* NOTES

------ END MATRIX -----

104

Table A G2

VARIABLES IN SIMPLE MEDIATION MODEL

Y newINTEN

X newRELIG

M newPERCE

DESCRIPTIVES STATISTICS AND PEARSON CORRELATIONS

Mean SD newINTEN newRELIG newPERCE

newINTEN .0054 1.0024 1.0000 -.1270 -.0560

newRELIG -.0046 1.0087 -.1270 1.0000 .1348

newPERCE -.0339 .9850 -.0560 .1348 1.0000

SAMPLE SIZE

121

DIRECT AND TOTAL EFFECTS

Coeff s.e. t Sig(two)

b(YX) -.1262 .0904 -1.3968 .1651

b(MX) .1316 .0887 1.4836 .1406

b(YM.X) -.0403 .0937 -.4295 .6683

b(YX.M) -.1209 .0915 -1.3215 .1889

INDIRECT EFFECT AND SIGNIFICANCE USING NORMAL DISTRIBUTION

Value s.e. LL95CI UL95CI Z Sig(two)

Effect -.0053 .0153 -.0353 .0247 -.3463 .7291

BOOTSTRAP RESULTS FOR INDIRECT EFFECT

Data Mean s.e. LL99 CI LL95CI UL95CI

UL99CI

Effect -.0053 -.0047 .0174 -.0713 -.0421 .0292

.0469

NUMBER OF BOOTSTRAP RESAMPLES

1000

POINT AND INTERVAL ESTIMATES OF EFFECT SIZE FOR INDIRECT EFFECT

Data Mean s.e. LL99CI LL95CI UL95CI

UL99CI

ab -.0053 -.0047 .0174 -.0713 -.0421 .0292

.0469

P_m .0420 -.0101 1.5384 -3.4432 -.7197 .8057

2.4085

R_m .0438 -.0609 2.2647 -8.7665 -.7643 .8327

5.2041

R2_45 .0016 .0018 .0059 -.0211 -.0089 .0172

.0288

ab_ps -.0053 -.0044 .0173 -.0678 -.0409 .0294

.0514

ab_cs -.0053 -.0046 .0167 -.0680 -.0394 .0287

.0472

********************************* NOTES

**********************************

------ END MATRIX -----

105

Appendix H

Table A H1

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .181a .033 .025 .98752712

a. Predictors: (Constant), newRELIGIOSITY

Table A H2

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 3.950 1 3.950 4.050 .046b

Residual 116.050 119 .975

Total 120.000 120

a. Dependent Variable: newINTENTIONIGI

b. Predictors: (Constant), newRELIGIOSITY

Table A H3

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) -.002 .090 -.026 .979

newRELIGIOSITY -.180 .090 -.181 -2.013 .046

a. Dependent Variable: newINTENTIONIGI

Table A H4

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .670a .449 .445 .74523927

a. Predictors: (Constant), newAWARENESS

106

Table A H5

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 54.354 1 54.354 97.868 .000b

Residual 66.646 120 .555

Total 121.000 121

a. Dependent Variable: newPERCEPTIONIGI

b. Predictors: (Constant), newAWARENESS

Table A H6

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) .016 .067 .240 .810

newAWARENESS .678 .069 .670 9.893 .000

a. Dependent Variable: newPERCEPTIONIGI

Table A H7

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .685a .470 .465 .73115883

a. Predictors: (Constant), newAWARENESS

Table A H8

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 57.780 1 57.780 108.081 .000b

Residual 65.220 122 .535

Total 123.000 123

a. Dependent Variable: newPERCEPTIONILI

b. Predictors: (Constant), newAWARENESS

107

Table A H9

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) -.007 .066 -.110 .913

newAWARENESS .687 .066 .685 10.396 .000

a. Dependent Variable: newPERCEPTIONILI

Table A H10

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .133a .018 .009 .98630264

a. Predictors: (Constant), newPERCEPTIONIGI

Table A H11

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 2.047 1 2.047 2.104 .150b

Residual 113.817 117 .973

Total 115.864 118

a. Dependent Variable: newINTENTIONIGI

b. Predictors: (Constant), newPERCEPTIONIGI

Table A H12

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) -.023 .090 -.254 .800

newPERCEPTIONIGI -.131 .090 -.133 -1.451 .150

a. Dependent Variable: newINTENTIONIGI

108

Table A H13

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .078a .006 -.002 1.00105941

a. Predictors: (Constant), newRELIGIOSITY

Table A H14

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression .746 1 .746 .744 .390b

Residual 120.254 120 1.002

Total 121.000 121

a. Dependent Variable: newPERCEPTIONIGI

b. Predictors: (Constant), newRELIGIOSITY

Table A H15

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) 5.542E-5 .091 .001 1.000

newRELIGIOSITY .078 .090 .078 .863 .390

a. Dependent Variable: newPERCEPTIONIGI