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%
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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
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
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