FACTORS AFFECTING UPTAKE OF INSURANCE

PRODUCTS AMONG MILLENNIALS IN KENYA

BY

KANYINGI KAGUCIA

UNITED STATES INTERNATIONAL UNIVERSITY -

AFRICA

SPRING 2016
FACTORS AFFECTING UPTAKE OF INSURANCE
PRODUCTS AMONG MILLENNIALS IN KENYA

BY

KANYINGI KAGUCIA

A Project Report Submitted to the Chandaria School of

Business in Partial Fulfilment of the Requirement for
the Degree of Masters in Business Administration
(MBA)

UNITED STATES INTERNATIONAL UNIVERSITY -

AFRICA

SPRING 2016

ii
 STUDENT’S DECLARATION

I, the undersigned declare that this is my original work and that it has not been submitted
to any other College, Institution or University other than the United States International
University - Africa for academic purposes.

Signed: ____________________________ Date: _________________________

Kanyingi Kagucia (ID. No: 630404)

This project has been presented for examination with my approval as the appointed
supervisor.

Signed: ____________________________ Date: _________________________

Fred Newa

Signed: ____________________________ Date: _________________________

Dean, Chandaria School of Business

iii
 COPYRIGHT

All rights reserved. No part of this report may be photocopied, recorded or otherwise
reproduced, stored in a retrieval system or transmitted in any electronic or mechanical
means without prior permission of the copyright owner.

Kanyingi Kagucia. Copyright © 2016

iv
 ABSTRACT

The main purpose of this study was to investigate the factors affecting the purchase of
insurance products and services among Millennials in Kenya. The study was guided by the
following research objectives: To explore the methods of access that Millennials in Kenya
prefer when accessing insurance products and services; To assess how promotion and
messaging methods impact on the Millennial population in Kenya with regard to uptake of
insurance products and services and; To explore the considerations that Millennials make
when making purchasing decisions.

This study used a descriptive research design. The study focused on the age group that
covers those born between the years of 1982 and 2000, which has been identified as the
Millennial generation. The population was drawn from the total population of Nairobi as
per the National census of 2009 which indicated that in total there were 38,610,097 people
living in Kenya with the specific target population standing at a total of 11,145,872.

The study was undertaken in Nairobi County with the sampling frame being drawn from the
three age groups of 20 – 24 years, 25 – 29 years and 30 – 34 years. The study used stratified
and simple random sampling techniques. To determine the sample size for this study, the
statistical formula from Krejcie and Morgan (1970) was used providing a sample size of
384 respondents taking into consideration variables such as homogeneity in the data, and
the sample frame under consideration.

The study made use of primary data which was collected using questionnaires, through
simple randomized sampling. The questionnaire included both open-ended and closed-
ended questions. A pilot test was conducted to field test the reliability and the validity of
the questionnaire with suggestions of the pre-test group being used to change confusing
questions. The actual research was carried out by research assistants from a reputable
research organisation who had received the requisite training and possessed the necessary
experience.

Once the data was received, coding was done using the statistical software SPSS. The data
was analysed using mean, mode, range, standard deviations and variances. The data was
then presented through tables and figures.

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The study established that the majority of the Millennial cohort in Kenya, prefer to deal with
the insurance company directly when buying insurance products. It further revealed that
Millennials, even though they are digitally savvy and prefer to handle product and service
information searches on their own, still feel the need to have an insurance specialist take
them through the solutions available for them. Television and radio remain the preferred
channels for information searches with social media following closely. The study also
confirmed mobile payments as one of the preferred modes of payment.

The study indicated that a vast majority of Millennials prefer the internet to traditional
mainstream media and are more likely to buy a product if it was marketed on social media.
This seems to indicate a contradiction to their earlier stated preference for television and
radio. They are also likely to buy a product if friends and other users said good things about
it on social media and the internet. The study indicated that the internet has an influence on
the purchase habits of Millennials who primarily access it through their mobile phones. The
study also confirmed that Millennials are getting more accustomed to mobile advertisements
with a majority becoming as comfortable with mobile advertising as they are with TV or
online advertising.

The study found that a majority of the Millennials show an inclination toward new brands
and that they are loyal to the brands they choose. The study also revealed peer referencing,
especially through social media, as a strong consideration for purchase in the earlier years
of a Millennial’s life. It also indicated that with the increase in age and net income,
Millennials prefer to deal directly with the insurance agent and brokers rather than peers
and social media. The study showed a direct relationship between customer service and
likelihood of the Millennial to buy.

The study concluded that even though the traditional methods of access to information and
payment remain strong, alternative methods are also gaining popularity especially with the
Millennial age group. The internet and social media are now a critical part of business
promotion and messaging and must form an integral part of insurance companies’ marketing
endeavors. The study also concluded that the purchase activity for Millennials is an
experience that encompasses their emotions, world view and general status in society. It is
important to them how a product of service feels, how it looks to others, its impact on the
environment and the relations it provides for them with the provider of the product or
service.

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The study recommends that in the new dispensation, insurance companies in Kenya must
develop a 360-degree view of the customer, where they know the customers’ needs and
potential and deliver it back on their terms – in real time. The companies should develop a
multi-intermediary approach to business allowing the potential customers access
information and services through their preferred methods. They should in addition
modernize their IT architecture across all lines of business to support this approach. The
companies should embrace an omni-channel approach to the Millennial population. They
should pass messaging through email, short messaging service (SMS), websites, social
media, telemarketing and any other appropriate channels. This will enable customers to
research, review and interact on their terms. In addition, they ought to include emotional
and belonging needs of the Millennial in their product research and development. Even
though product features and benefits remain important, as these become less and less
differentiated in a competitive market, service experience is what shall provide sustainable
competitive advantage to the insurance company.

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 ACKNOWLEDGEMENT

I wish to thank God for the strength, clarity of thought and endurance given to me as I
undertook this study.

I wish also to thank my family, friends, classmates and colleagues at work for their
support and encouragement. I also thank Dr Fred Newa for his guidance and support all
through the process of conducting my research.

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 TABLE OF CONTENTS
STUDENT’S DECLARATION ............................................................................. iii
COPYRIGHT .......................................................................................................... iv
ABSTRACT.............................................................................................................. v
ACKNOWLEDGEMENT……………………………………………………….. viii
TABLE OF CONTENTS....................................................................................... ix
LIST OF TABLES.................................................................................................. xi
LIST OF FIGURES................................................................................................. xii

CHAPTER ONE......………………..………………………………..…………………....1
1.0 INTRODUCTION.................................................................................................... 1
1.1 Background of the Problem.................................................................................... 1
1.2 Statement of the Problem ....................................................................................... 3
1.3 Purpose of the Study .............................................................................................. 6
1.4 Research Questions ................................................................................................ 6
1.5 Significance of the Study ....................................................................................... 6
1.6 Scope of the Study.................................................................................................. 7
1.7 Definition of Terms ................................................................................................ 7
1.8 Chapter Summary................................................................................................... 8
CHAPTER TWO.....………………..………………………………..…………………..10
2.0 LITERATURE REVIEW ...................................................................................... 10
2.1 Introduction .......................................................................................................... 10
2.2 Methods Millennials use to Access Insurance ..................................................... 10
2.3 Promotion and Messaging - Targeting the Millennials ....................................... 18
2.4 Considerations For Purchase ................................................................................ 26
2.5 Chapter Summary................................................................................................. 29
CHAPTER THREE.……………..………………………………..………………….....31
3.0 RESEARCH METHODOLOGY ........................................................................ 31
3.1 Introduction .......................................................................................................... 31
3.2 Research Design ................................................................................................... 31
3.3 Population and Sampling Design ......................................................................... 31
3.4 Data Collection Methods ...................................................................................... 34
3.5 Research Procedures ............................................................................................ 34

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 3.6 Data Analysis Methods ........................................................................................ 35
3.7 Chapter Summary................................................................................................. 35
CHAPTER FOUR ............................................................................................................. 36
4.0 RESULTS AND FINDINGS ................................................................................ 36
4.1 Introduction .......................................................................................................... 36
4.2 Background Information ...................................................................................... 36
4.3 Methods of Accessing Insurance Products........................................................... 44
4.4 Promotion and Messaging of Insurance Products and Services ........................... 46
4.5 Considerations for Purchase of Insurance Products and Services........................ 49
4.6 Correlation Analysis ............................................................................................. 53
4.7 Regression Analysis ............................................................................................. 55
4.8 Chapter Summary................................................................................................. 57
CHAPTER FIVE .............................................................................................................. 58
5.0 DISCUSSION, CONCLUSIONS, AND RECOMMENDATIONS .................. 58
5.1 Introduction .......................................................................................................... 58
5.2 Summary .............................................................................................................. 58
5.3 Discussion ............................................................................................................ 59
5.4 Conclusion............................................................................................................ 63
5.5 Recommendations ................................................................................................ 64
REFERENCES:………………………………………………………………………….66
APPENDICES:…………………………………………………………………………..81
Appendix I: Cover Letter ................................................................................................81
Appendix II: Research Questionnaire..............................................................................82

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 LIST OF TABLES
Table 2.1: SWOT Analysis of Online Social Networking Sites…………………………...13
Table 2.2: Internet Subscriptions and Internet Users………………………………………20
Table 2.3: Brand Cultures and their social agenda……………………....………………...27
Table 2.4: Brand Cultures and Self expression……………….…………..……………….29
Table 3.1: Sampling Frame………………………………….…………………..………...32
Table 3.2: Sample Size…………………………..………….……………………….........33
Table 4.1: Marital Status ...........................................................................………………..39
Table 4.2: Length of Stay at Current Employment .......................................................…..39
Table 4.3: Insurance Policies Held .....................................................................................40
Table 4.4: Mode of Payment ...............................................................................................41
Table 4.5: Preferred mode of access to information on products and services……..….....42
Table 4.6: Correlations – Mode of payment………………………….……….……..…....43
Table 4.7: Correlations - Preferred mode of access to information on products………….44
Table 4.8: Statements Relating to Methods of Accessing Insurance Products ...................45
Table 4.9: Correlations - Methods of Accessing Insurance Products…………………......46
Table 4.10 Social Media Platform Accounts. .....................................................................47
Table 4.11: Frequency of Social Media Access..................................................................48
Table 4.12: Impact of Promotion and Messaging ...............................................................49
Table 4.13: Brand Loyalty ..................................................................................................50
Table 4.14: The Environment .............................................................................................50
Table 4.15: Peer Reference .................................................................................................51
Table 4.16: Correlations - Peer Reference……………………….……………………......52
Table 4.17: Pricing ..............................................................................................................52
Table 4.18: Customer Service…………………………………………..............................53
Table 4.19: Correlations – Customer Service……………………………………..……....54
Table 4.20: Correlations – Considerations for Purchase………..………………..…….....55
Table 4.21: Model Summary………..……………………………………………..….......55
Table 4.22: ANOVA………………………………………………………………………55
Table 4.23: Ceofficients………….…………………………………………………..……56

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 LIST OF FIGURES
Figure 2.1: Mobile payment classification framework……………………………..…….16
Figure 2.2: Consumer Decision Making Process ..............................................................25
Figure 2.3: The Modified Consumer Decision Making Process………………………….25
Figure 4.1: Gender of the Respondent ................................................................................36
Figure 4.2: Age ...................................................................................................................37
Figure 4.3: Highest Level of Education ..............................................................................38
Figure 4.4: Work Status………………………….………………………………………..39
Figure 4.5: Income Levels ..................................................................................................40
Figure 4.6: Mode of Access to the Internet.........................................................................41

xii
 CHAPTER 1

1.0 INTRODUCTION

1.1 Background of the Problem

Insurance is the process through which individuals known as insurers accept the financial
risk of another individual insured for consideration in the form of premiums paid. Within
any given economy, the insurance industry is an essential agent for sustainable economic
growth and development (Haufler, 2013).

Insurance has its origins among the Chinese and Babylonian traders in the 3 rd and 2nd
millennia BC, respectively. To ensure that they did not lose their goods should a ship
capsize, Chinese merchants would redistribute the goods among many vessels to limit the
loss. The early Babylonian sailing merchants on the other hand developed a system where
on receiving a loan to fund a shipment, the merchant would pay the lender an additional
sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen
or lost at sea (Vaughan, 1997).

Globally, the insurance industry is dominated by wealthy developed countries. In fact, the
Group of Seven (G7) alone accounts for almost 65% of the world’s insurance premiums
even though it covers just over 10% of the world’s population (KPMG, 2014). The
insurance industry is dominated by companies from the developed nations with Berkshire
Hathaway (Property/casualty insurance) of USA, AXA (Life/health Insurance) of France
and Allianz (Property/casualty insurance) of Germany leading in first, second and third
place respectively (Global Fortune 500, 2015). In Africa, South Africa, Morocco, Nigeria
and Egypt are the leading countries in gross insurance premiums with penetration rates of
14.28%, 2.97%, 0.68% and 0.68% respectively (KPMG, 2014).

Kenya’s insurance industry ranked fourth highest in Africa in terms of penetration after
South Africa, Namibia and Mauritius. The insurance industry in Kenya consists of a
number of players namely; 49 insurance companies (including foreign reinsurance
companies’ operating liaison offices in Kenya) and 3 reinsurance companies, 4,847
intermediaries (insurance brokers including foreign reinsurance brokers authorized to run
liaison offices, medical insurance providers, and insurance agents) and 298 other service
providers (insurance investigators, motor assessors, insurance surveyors, loss adjusters,
claims settling agents and risk managers) (IRA, 2013).

In Kenya, the penetration stands at this 3.44% (Association of Kenya Insurers, 2013) in
2013. This remains low compared to 14.16% in South Africa, 8.00% in Namibia and 5.94%
in Mauritius (Price Waterhouse Coopers, 2014). The uptake of insurance products in Kenya
is impacted by several factors. These include awareness, access, cost and complexity of the
products. Additionally, buyer behaviour is influenced by socialization, economic status,
social status, age, gender, educational level and religion. When interrogating the uptake of
insurance products in the market in Kenya, it is critical to reflect the factors affecting, on
the influencers of buyer behaviour.

Of interest to this study is the age group that covers those born between the years of 1982
and 2000, which has been identified as the Millennial generation (Strauss and Howe 1991;
Howe and Strauss 2000). In Kenya, this cohort forms approximately 48% of the population
(Kenya National Bureau of Statistics, 2014).

As a result of the emerging technologies, the Millennial has emerged as a new kind of
consumer that is discerning, well informed and pressed for time. They are looking for real-
time access, faster and easier ways of transacting, clarity in product information and ease
of payment. Recent events in the world economy have resulted in a drop in consumerism,
with potential customers holding on to their money. They are now more careful with how
they spend, have an increase propensity to shop around and negotiate deals (Parsons and
Maclaran, 2011).

As consumers seek more meaningful associations from products and services, they are
moving away from wanting value for money to wanting value for time (Parsons and
Maclaran, 2011). Millennials are characterized by heavy digital media usage and a unique
preference for smart phones. They are both experimental and experiential. They are quick
to criticize and expect instant feedback. They are spending more time on the social spaces
on the internet and increasingly, their work and play revolves around online platforms
essentially; the internet is their first port of call for all things.

The Millennial is global in nature and outlook. The market make-up is not only from
different regions, nationalities and cultures, the product and service requirements have also
taken a global character. They are now much more aware of products and services on offer

2
elsewhere in the world. They have therefore come to expect the same options and standards
of service (Ryan, 2014).

They exist in a time when consumer-driven marketing is increasingly important as

customers seize control of the process and actively “pull” information helpful to them.
Consumer-driven marketing activities included Internet reviews and word-of-mouth
recommendations from friends and family, as well as in-store interactions and recollections
of past experiences (McKinsey, 2009).

A modification of the consumer decision making process has also had an effect on the
Millennials’ purchase behaviour. Traditionally, the consumer decision making process has
been depicted as a funnel where consumers systematically narrow the initial-consideration
set as they weigh options, make decisions, and buy products. Then, the post-sale phase
becomes a trial period determining consumer loyalty to brands and the likelihood of buying
their products again (McKinsey, 2009).

This is however changing. The contemporary consumer now moves back and forth between
the stages depending on how much time they have and the quality of the references they
are using. The resulting consumer purchase decision journey is circular (MacKinsey, 2009).
Tapscott and Williams (2008) say technology has made the process more complex and
dynamic and time starved consumers are demanding empowerment.

Li and Bernoff (2011) make reference to an emerging phenomenon they call the
groundswell- a social trend in which people use technologies to get the things they need
from each other, rather than from traditional institutions like corporations. It is a result of
people’s desire to connect, new interactive technologies and online economies. Reference
groups in the post-internet age no longer require face to face contact. They are now virtual
communities involved in mass collaboration with a great influence on individual product
choice.

1.2 Statement of the Problem

Various studies have been undertaken to look at the insurance industry in Kenya and its
challenges. Gitau (2013) for example looked at strategies adopted by Kenyan insurance
companies to alleviate low insurance penetration while Odemba (2013) looked at factors

3
affecting uptake of life insurance in Kenya. On his part, Kiragu (2014) assessed the
challenges facing insurance companies in building competitive advantage in Kenya.

The results of these and other studies give a good insight into their research areas, but do
not indicate if there is variation in uptake of insurance based on age demographics. The
insurance industry in Kenya, in addition, has targeted customers mostly on the basis of
traditionally available products and services. These include the long term products
(Pensions and life insurance) and the short term products (General and medical insurance
which last for one year or less). Insurance companies have also focused on the purchasing
power of the prospective customers. There is need to review this and begin segmenting the
market, looking at demographically influenced buyer behaviour.

Not much study has been done on this subset of the market, especially regarding their
perception of insurance, and their buying habits. Information is also lacking on the products
and services that Millennials prefer and percentage representation in the insurance market.
Such information would be quite useful for managers. It would influence strategic direction
in regard to positioning of insurance products targeted to Millennials.

An area of additional interest is the legal framework that guides and regulates how
insurance products are to be presented to prospective customers, and how the
documentation which enforces the insurance contract is to be assembled, ensuring that the
contract is in force. The current status is that all documentation is presented in hard copy
paper as recognized by law. The emerging digitized environment is increasingly
interrogating this process, and exploring the possibility of commencing, negotiating and
finalising insurance contracts in a paperless process.

Insurance has traditionally been sold either directly, from insurance companies’ branches
and offices (Brophy, 2013), or through brokers (Cummins and Doherty, 2006) and agents
(Arulsuresh and Rajamohan, 2010) who would be the liaison between the prospective client
and the insurance company. These transactions require face to face meetings at the various
business locations. The emerging customer, the Millennial, is however transacting on
online and mobile platform and all indications are that they much prefer to access insurance
in the same way. It is likely that they will not easily be reached using these traditional
methods and this could contribute to the low uptake of insurance.

4
Related to this, are the methods of promotion and messaging. Companies (insurers
included) have continued to use the traditional print and electronic media to create
awareness of their products and services (Millennial Case Study, 2006). Millennials seldom
read hard copy print advertisements in newspapers and magazines. They access their
content online using apps and on social media like Twitter and Facebook (Hershatter and
Epstein, 2010). It would follow then that the insurance message is likely not getting through
to this segment of the market. This is an area that should be looked into.

There are also a number of considerations that Millennials will look at as they make their
purchase decision. These include novelty of brands (Xu, 2007), environmental concerns
(Henrichs, 2008) peer referencing (Smith, 2012), price (Gauzente and Roy, 2012) and
service experience (Beauchamp and Barnes, 2015). The service experience has been touted
as the last frontier in the market for goods and services; including financial services wherein
insurance falls. It has been argued that as goods and services become less and less
differentiated, the quality of the service experience will be the source of competitive
advantage for the discerning and customer oriented organisation.

From various publications and studies, indications are that the Millennial is unique in their
purchase behaviour, content consumption and by extension their service consumption.
Insurance is consumed from the onset, at the point of purchase, but more so, at the point of
claim, when a loss occurs. It should be of interest to look at the whole customer journey to
ensure that all pain and pleasure points are investigated exhaustively for strategic purposes.

Collins, Rasmussen, Garber and Doty (2013) found that young adults actually think they
need health insurance. The survey of adults ages 19 to 29 found that when offered health
insurance benefits through an employer 67% took the coverage. 54% of those who did not
take up the employer health plan indicated that they were covered by a parent, spouse, or
partner while 22% indicated that they couldn’t afford the premiums. Only 5 percent turned
down coverage because they felt they didn’t need insurance.

There was need therefore to explore the demographic of the Millennial to identify age
related factors that influenced insurance purchase and hence penetration, especially with
respect to methods of access, promotion and messaging, and considerations for purchase.

5
1.3 Purpose of the Study

The purpose of the study was to investigate the impact of methods of access, promotion
and messaging, and considerations for purchase on the uptake of insurance products and
services, among Millennials in Kenya.

1.4 Research Questions

1.4.1 What methods of access do Millennials in Kenya prefer when accessing insurance
products and services?

1.4.2 How have promotion and messaging methods impacted on the Millennial
population in regard to uptake of insurance products and services?

1.4.3 What are the considerations that Millennials make when making purchasing
decisions?

1.5 Significance of the Study

1.5.1 Insurance Companies

The study will provide insurance companies with insights on the demographics of the
customer base that lies between the ages of 18 and 33 years. It will provide information on
what their awareness levels regarding insurance products are, their preferred means of
accessing information on insurance and their ability to purchase the products.

1.5.2 Millennials

The study will enlighten the Millennials on the workings of the insurance industry and the
vital role they play in its development. Further, it should serve to show them that the
industry considers them to be an important segment of their market and is willing to take
the necessary measures to ensure that their needs are met.

1.5.3 Financial Institutions

The study will investigate the issue of pricing of insurance products and services, and cost
as an influencer of purchase. Financial institutions stand to gain from information on the

6
Millennials’ incomes and their purchase preferences. It will provide an opportunity for the
institutions to explore business opportunity that would come with offering purchase plans
and insurance premium financing.

1.5.4 ICT and Related Companies

A key characteristic of the Millennials is that they are heavily digitized and will access
information and content online from various devices; which will be mostly mobile devices.
ICT companies stand to gain from information on the platforms Millennials prefer, their
user experiences and what they would like to see improved on. This information will prove
invaluable in the innovations these companies could provide.

1.5.5 Academicians and Researchers

The study will form a basis for further research in the area of demographic based insurance
product design, with an emphasis on Millennials. Research could also be carried out on
other products and services that are of interest to Millennials.

1.6 Scope of the Study

The study was a cross sectional one based on the Kenyan urban population, with specific
emphasis on those between the ages of 20 and 34 years and was carried out between the
months of October 2015, and December 2015. It was carried out in the City of Nairobi.

Specific Information on the particular target population was not abundantly available. This
was however be mitigated by information available from the developed and developing
countries that mirror the Kenyan situation.

In addition, the study focused on the consumers and not the Insurance companies who are
the suppliers of the Insurance products, or the distributors of the products like the Brokers
and Agents who might hold useful feedback based on interactions with the consumers. This
could have led to some information being left out.

1.7 Definition of Terms

1.7.1 Insurance
The process through which individuals known as insurers accept the financial risk of
another individual insured for consideration in the form of premiums paid. Within any

7
given economy, the insurance industry is an essential agent for sustainable economic
growth and development (Haufler, 2013)

1.7.2 Insurance Penetration

Insurance penetration is calculated as the ratio of the percentage of total Insurance
premiums to gross domestic product (Association of Kenya Insurers, 2013).

1.7.3 Insurance policy

This is generally an integrated contract, meaning that it includes all forms associated with
the agreement between the insured and insurer (Wollner, 1999)

1.7.4 Millennial
The age group that covers those born between the years of 1982 and 2000 (Strauss and
Howe 1991; Howe and Strauss 2000). For the purpose of this study, those involved were
aged between the ages of 20 and 34 years.

1.7.5 Social Media

A group of Internet-based applications that build on the ideological and technological
foundations of Web 2.0, and that allow the creation and exchange of user-generated content
(Kaplan and Michael, 2010).

1.7.6 Promotion and messaging

Promotion refers to raising customer awareness of a product or brand, generating sales,
and creating brand loyalty (McCarthy, 1964)

1.7.7 Customer delight:

Customer delight is defined as “a profoundly positive emotional state generally resulting
from having one’s expectations exceeded to a surprising degree” (Oliver, Rust, and Varky
1997).

1.8 Chapter Summary

Chapter 1 has provided a background of the insurance industry in Kenya on the backdrop
of insurance in Africa and the globe, and introduced the concept of the Millennials who are
the principle subject of this study. The study is necessitated by the need to establish the
purchase patterns and preferences of Millennials in light of the low uptake of insurance in
Kenya. The importance of the study to insurance companies, financial institutions, ICT

8
companies and academicians and researchers has also been looked at. This lays the
foundation for the rest of the study.

The subsequent chapters discuss the subject matter in detail. Chapter 2 is a literature review
of content related to factors affecting the uptake of insurance among Millennials in Kenya.
Chapter 3 outlines and discusses the research methodology while chapter 4 presents the
results and findings. Chapter 5 includes discussions of the findings, and provides
conclusions and recommendations.

9
 CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter reviewed literature on how methods of access, impact of technology and
purchase behaviour among Millennials globally can be reflected on consumption of
insurance. This was done from a theoretical perspective citing the works of different
authors. Providing their arguments for and against in relation to the study. It presents review
of literature in relation to the research questions that are the basis of the study. The
information used here is collected from different, articles, journals, magazines and books
amongst other sources.

2.2 Methods Millennials use to Access Insurance

Insurance is sold either directly by insurance companies, or through intermediaries. The

intermediary represents customers to the company acting as their liaison and managing the
buyer- seller relationship (Kotler, 2000). To enhance performance and penetration,
companies should utilise the available mix of distribution channels; brokers, tied agents
and banks for optimum results (Mwangi, 2010).

AKI argues that in order to improve insurance penetration, it is critical that insurance
companies stop relying on the traditional methods of distribution but start looking at
alternative channels. This is corroborated by Mbogo (2010), who argues that the low uptake
of insurance among the Kenyan persons has been partly a result of using inadequate
channels to sell insurance products.

Sunikka and Bragge (2009) also provide that the financial services sector, including
insurance, is a prime example of an industry in which multichannel service delivery is the
norm rather than the exception.

2.2.1 Traditional Channels of Insurance Access

Traditionally, insurance in has been sold through the following channels:

2.2.1.1 Direct Channel of Insurance Sales

Direct channel refers to insurance companies using their own resources and capacity to
distribute their products and services. Brophy (2013) points out how insurance companies

10
have set up networks of branches that provide this direct service. A client in need of an
insurance product or service walks into the company’s premises and deals with the
company’s employees without any intermediation, hence direct channel. The insurance
companies have also used their employees to seek out prospective clients especially by way
of referral (Incentive Marketing Association, 2004). The employee represents the company
and therefore in all respects, the company is viewed to be selling directly to the client.

2.2.1.2 Brokers as a Channel of Insurance Sales

Cummins and Doherty (2006) define an insurance broker as “an individual or business firm,
with some degree of independence from the insurer, which stands between the buyer and
seller of insurance.” They go ahead to indicate that that intermediaries play a decisive role
in facilitating the exchange between consumers and providers of financial services.

The Insurance act as captured in the laws of Kenya allows for the use of brokers in the
sourcing of insurance and reinsurance business, in return for payment in the form of
commissions (The Insurance Act, 2014).

It has been traditionally argued that market imperfections, such as asymmetric information
and transaction costs, are the reason for the need for brokers and financial intermediaries
in financial services (Allen and Santomero, 2001; Freixas and Rochet, 1997). With the
emergence of new technologies and globalization which in effect minimise the asymmetry
and transactional costs, this argument is challenged. The fact that the demand for these
intermediaries has even increased points to the existence of other factors other than market
imperfections driving the demand for financial intermediation (Allen and Santomero, 1998;
Scholtens and van Wensveen, 2000; Schmidt, Hackethal and Thyrell (1999); Allen and
Gale, 1997).

2.2.1.3 Agents as a Channel of Insurance Sales

An agent is defined as a person, not being a salaried employee of an insurer who in

consideration of a commission, solicits or procures insurance business for an insurer or
broker (The Insurance Act, 2014). Sales people represent customers to the company
championing their interests and managing the buyer- seller relationship (Kotler, 2000).
Arulsuresh and Rajamohan (2010) describe an agent as a primary source for procurement
of insurance business. Customers also do not want to make a complicated decision on their
own. (Mayer, 2008; Williams, 1999).

11
Agnihotri and Rapp (2012) note that the above intermediaries will need to move their
current skill sets to include data analysis and communicating via social media. They will
also need to enhance knowledge of competition as competitive intelligence has emerged as
a key tool to success in competitive environments. Kazemi Tame (2007) argues along the
same lines indicating that the insurance industry extremely requires creativity, innovation,
and entrepreneurship activities.

2.2.2 Emerging channels for Insurance Access - Millennials

2.2.2.1 Banc assurance

Yuan (2011) defines banc assurance as the process of a bank selling insurance products
manufactured by insurance subsidiaries that are owned by the bank, either through its own
distribution channels or through outside agents. When Barclays Bank created Barclays Life
in 1965, It was a pioneering move, with a bank now entering into the insurance industry
(Jaffer, 2007) Banc assurance has been traced back to France in 1980’s with the
development of the consumer and mortgage credit as well as the liberalisation of the
financial markets (Artikis, Mutenga and Staikouras; 2008). The trend is yet to catch on in
Asia only emerging in 2002 (Wu, Lin and Lin, 2008).

In Kenya, effective 2nd May 2013, the central bank issued guidelines on incidental business
allowing banks to partner with regulated financial institutions to provide products other
than banking through their branches (CBK, 2013).

This directive in effect allowed banks to be involved in marketing and selling insurance
products and service, which would fall under the umbrella of financial services and
products. Following this, the Insurance Regulatory Authority (IRA) issued guidelines to
the industry, in which they defined banc assurance as the collaboration between financial
institutions and insurance companies to distribute and market insurance products (IRA,
2014). The directive essentially allows banks, which have a large captive market, to
compete with the traditional insurance distribution channels.

2.2.2.2 Online Platforms

Developments in communications and technology have changed distribution channels,

allowing underwriters to bypass traditional intermediaries like insurance brokers (Debling,
1998).

12
Several research studies have been undertaken in regards to the use of online platforms in
the marketing of products and services (De Valck, Van Bruggen and Wierenga, 2009;
Ohbyung and Yixing, 2010; Trusov, Bucklin and Pauwels, 2008; Van Den Bulte and
Wuyts, 2007). Steyn, Wallströ and Pitt (2010) however point out that these studies have
barely touched on financial services. However Majtánová and Brokešová (2012) have
examined how these platforms, which they refer to as online social network sites (OSNSs),
can be used for the marketing of financial services with a leaning to insurance. They
indicate that even when insurance marketing has been considered online, it is discussed
within the confines of websites of the insurance companies. Social media are left out.

The following SWOT analysis captures the strengths and weaknesses of online platforms
while indicating the opportunities and threats that they carry.

Table 2.1: SWOT Analysis of Online Social Networking Sites

Author Issue

Strength Facebook (2015) Enormous base of user of OSNSs

Majtánová and Brokešová (2012) Low costs of marketing and distribution
Majtánová and Brokešová (2012) Users spend lot of time on OSNSs
Majtánová and Brokešová (2012) Online 24/7 availability
Farkas, Laurin and Tomek (2008) Online word-of-mouth marketing opportunity
Weakness Majtánová and Brokešová (2012) Insurance is not vaunt product
Majtánová and Brokešová (2012) Users login to OSNSs for communication with
Majtánová and Brokešová (2012) Friends can’t
friends not to advise
buy easily
Cheung, Lee and Thadani (2009) Many people do not trust OSNSs
Fogel and Nehmad (2009). Problems with validity of personal data
Opportunit Banan, (2009) Higher level of intensive and extensive
Eherlich and Fanelli, (2004) Opportunity
acquisition for insurance company to stay top of
y
Shih (2009), Doyle, (2007) Easy
mind way for hyper-targeting and hyper-
Threats Pengelley (2009) Poor level of security
segmenting
Majtánová and Brokešová (2012) Damage of goodwill
Majtánová and Brokešová (2012) Cyber risks

Source: Majtánová and Brokešová, (2012)

These social sites serve to create online word-of-mouth marketing which for insurance
companies would include Evangelist marketing, Community marketing, viral marketing
and referral programs: (Farkas, Laurin and Tomek, 2008). The platforms allow varied
comments open for all to read. It has been scientifically proven that 50 per cent of these are
positive and only 33 per cent are critical of the company or product (Jansen, Zhang, Sobel,

13
and Chowdury, 2009). Banan (2009) finds that social online platforms work better than
the insurance companies’ web sites which suffer low rates of repeat visits.

Majtánová and Brokešová (2012) argue that insurance companies can utilise online
platforms by creating applications or direct links to their home web sites allowing
customers to purchase insurance policies. This could allow for improved trust with clients
regarding the security of their personal information and provide an opportunity for
interaction with professional employees during the purchasing of an insurance policy.

2.2.2.3 Mobile Payment Platforms

The mobile phone has now become an extension of most users’ digital experiences. Where
as in the past it was used primarily for communication, it now serves as a nerve centre for
access to information and entertainment. The smart phone has further enhanced the user
experience with applications and programs that have opened up a whole new world of
possibilities (International Telecommunication Union, 2010).

Globally, more people now have mobile phones than have bank accounts. Morgan Stanley
expects mobile internet usage to overtake desktop usage by 2015 (Meeker, 2010). Uptake
of smartphones has increased dramatically with research indicating that the number of
people with smartphones has leapt from 9% to 24% in the space of a year, and this is
predicted to rise next year as cheaper devices become available (Mintel, 2011).

In 2012, Kenyan users accounted for more than 50 per cent of all the money transferred via
cell phones globally – or more than $11billion (NBC News, 2012). Latest statistics indicate
that Mpesa, the flagship mobile money transfer platform in the country, now has 20 million
users, with a monthly transaction deposit value of $1.64 billion (CBK, 2014).

In addition, the service has now been enhanced to enable mobile payments for utilities,
commodities and services, and public transport. It has also been optimized for mobile
banking services. The combined effect of increased internet access via mobile, and the
proliferation of the use of mobile payment platforms indicate an emerging opportunity for
players in the financial (Slade, Williams and Dwivedi 2013). The mobile phone presents a
new channel through which potential consumers can be reached, substantially expanding
the target market.

14
Payment systems and mobile devices and services have become a critical part of our lives.
We are able to carry out commerce by making payments through mobile phones which are
now available in most places and have been enabled to carry out payment transactions.
(Ballagas, Borchers, Rohs and Sheridan, 2006; Berg, Mörtberg and Jansson, 2005; Carton,
Hedman, Damsgaard, Tan and McCarthy, 2012).

Slade, Williams and Dwivedi (2013) provide a comprehensive outlook of the evolution and
development of mobile payment services from the rudimentary era of mobile data services
(MDS) to the present forms. The two forms of mobile payments, proximity and remote m-
payments, provide the consumer with choice and freedom, and are a departure from the
traditional payment modes.

15
Figure 2.1: Mobile payment classification framework
Source: Juniper research (2012)

16
2.2.2.3.1 Remote M-payment Systems

Remote m-payments have been used to provide various remote payment solutions. Using
the mobile phone for payment is restrictive however, as it is limited in the number of
scenarios it can handle and communication between the consumer and the merchant can be
unreliable. (Amoroso and Magnier-Watanabe, 2012; Chou, Lee and Chung, 2004).

Remote m-payments have improved through the evolution of network technologies and of
mobile devices from basic phones to smartphones. This has facilitated m-payments via the
devices’ Mobile Internet (MI) connection, to provide payment systems such as mobile
wallets (m-wallet) (Amoroso and Magnier-Watanabe, 2012; Au and Zafar, 2008; Lai and
Chuah, 2010; Nysveen, Pedersen and Thorbjornsen, 2005). Examples include PayPal
mobile and Mpesa payment platforms.

2.2.2.3.2 Proximity M-payment Systems

Unlike the remote m-payment platforms, proximity m-payment systems require that the
consumer be at the same location with the merchant as the mobile device has to interact
with the merchant’s pay point system. They are applied to situations such as ticketing,
vending and POS (Point Of Sale) purchases. Remote m-payment remains more popular
though (Bamasak, 2011; Dahlberg, Mallat, Ondrus and Zmijewska, 2008; Kim,
Mirusmonov and Lee, 2010; Mallat, 2007; Mallat, Rossi, Tuunainen and Öörni, 2009;
Ondrus and Pigneur, 2006).

Research studies have shown that Millennials differ significantly from other user groups in
how they adopt new interactive media such as social networking sites, SMS, and mobile
services (Bolton, Parasuraman, Hoefnagels, Migchels, Kabadayi, Gruber, Loureiro, and
Solnet, 2013; Dunne, Lawlor, and Rowley, 2010; Kilian, Hennigs, and Langner, 2012) and
how they use the interactive media.

However, even though most studies seem to indicate heavy use of the internet as potential
for business marketers, Moore (2012) suggests that Millennials’ use the Internet rarely to
purchase products compared to Generation X, even though they are in touch with brands
and retailers very frequently. He continues to suggest that marketers should use interactive

17
promotional tactics online to attract customers without depending on their existing online
channels to sell.

2.2.3 Improving Accessibility for Millennials

Majtánová and Brokešová (2012) indicate that online social network sites can be useful and
profitable of insurance companies as a channel of distribution although they have to be
careful to protect their goodwill and brand. They further find that these sites are viewed
more as a channel of distribution than for advertising. Seeing that the internet is now the
Millennials’ medium of choice (Neuborne, 1999) it online social network sites could be an
important insurance channel for Millennials going forward.

Cheung, Lee and Thadani (2009) however found that consumers’ lack of trust constitutes
a major psychological barrier to the adoption of electronic commerce. Consumers are
concerned with the security of their personal information. Buchner (2006), Mayer (2008)
and Williams (1999) however found that customers do not want to make a complicated
decision on their own and therefore their concerns about sharing personal information
online is surpassed by the need to speak with an agent.

In addition, insurers’ perception of the Internet as an advertising tool rather than as a

primary distribution channel is a problem (Reich-Hale, 1999; Eastman, Eastman and
Eastman, 2002). Empirical evidences also imply continued dominance of offline
distribution channels on the demand side of insurance contract (Yahoo, 2005).

2.3 Promotion and Messaging - Targeting the Millennials

The earning potential of Millennials makes them an important consumer group (Taylor and
Cosenza, 2002). They represent powerful aggregate spending (Cui, Trent, Sullivan and
Matinu, 2003; Krotz, 2005) and they are interested in purchasing jewellery, clothes,
sporting equipment shoes, health and beauty aids, entertainment, ,and food (Barbagallo,
2003). The age or life-stage of this generation makes them unique to other age groups
(Krotz, 2005). With a variety of electronic technology at their disposal, they are accustomed
to instant global communication, material excess and media saturation (Barbagallo, 2003).

Millennials frequently use a wide variety of media which makes selecting the appropriate
medium through which to reach them a challenge (Hershatter and Epstein, 2010; Kinley,
Josiam and Lockett, 2010). They are sceptical of traditional advertising making traditional

18
marketing formulas ineffective in reaching them (Millennial Case Study, 2006). Traditional
media has changed with new cable channels and magazine coming up and targeting niche
markets. The internet is now the Millennials’ medium of choice, just as network TV was
for Boomers (Neuborne, 1999).

Millennials view television moderately leaning more to network and cable stations, and
less toward prime time (Engebretson,2004; Neuborne, 1999), are not influenced by
mainstream media, and are much more resistant to advertisements than previous
generations (Ciminillo, 2005; Engebretson, 2004; Pesquera, 2005). Companies are
therefore relying more on digital media event marketing and product placements
(Ciminillo, 2005). Success in targeting them comes from using fewer traditional
advertisements (Peterson, 2004).

This generation is most likely to utilize texting as a regular mode of communication less
likely use e-mail on a regular basis (Hershatter and Epstein, 2010; Pew Research Centre,
2007). They regularly use blogs, reviews, and social networks to openly express their
interests and feelings (Hershatter and Epstein, 2010). These platforms have proved useful
to organisations in connecting with the Millennials as well as obtaining feedback and
insight that has been difficult to access through conventional methods (Engel, Bell, Meier,
Martin and Rumpel, 2011).

Valentine and Powers (2013) found that Millennials primarily used electronic media with
television ranking first, the internet second, magazines third and radio fourth. The internet
and television were rated high as a source of advertising information. Free community
papers, in-store ads, Billboards, radio, direct mail, magazines, daily newspapers and weekly
newspaper were rated low as a source of advertising information. Overall, traditional print
media was rated lower than electronic media.

In Kenya, companies spent KES 85.8 billion on advertising last year compared to KES 79.2
billion in 2013, with TV stations being paid KES 41.8 billion in advertising revenue, nearly
half the industry spend, followed by radio KES 36.3 billion and print KES 7.7 billion
(Business Daily,2015)

In a study on Millennials carried out by InMobi in 2012, which had 793 Kenyans out of the
total population of 7,403 respondents from around the world, it emerged that Millennials
are spending an average of 7.2 hours per day consuming media content, with more of that

19
time spent on mobile devices than any other platform. They are also getting more
accustomed to mobile advertisements with 63% of them being as comfortable or more
comfortable with mobile advertising as they are with TV or online advertising.

2.3.1 Digital Marketing Strategies

There has been an increased uptake in the use of the internet in Kenya. Statistics from the
Communications Commission of Kenya indicate that in the year 2004 the number of users
was roughly 1 million. The December 2014 report shows the users now at 26.1 million
(Communications Authority, 2015). Whereas the traditional mode of access to the internet
has been through desktop computers at work, in cybercafés and on personal computers, the
use of the mobile phone is emerging as the new preferred mode. In fact, statistics show that
mobile data/internet subscriptions account for 99% of all subscriptions across all service
providers in the country.

Table 2.2: Internet Subscriptions and Internet Users

Source: CCK (2014)

With regard to information communications technology, Mougayer (1998) highlighted two

kinds of convergence that were predicted to take place in the future. These are Infrastructure
convergence (the increase in the number of delivery media channels for the internet such
as phone lines, mobile phones, cable and satellite often in combination), and technology

20
convergence (the use of different hardware devices to access and deliver the content of the
internet).

Traditionally, insurance companies have mainly marketed their products and services
through print and electronic media. The use of online social media sites by different
companies has however been on the increasing. These sites provide brand, service and
product information making it easier for their prospective clients to find what they need.
(Hanna, Rohm, and Crittenden, 2011). Social media sites which initially only gave
information nor provide platforms for interaction, communication and sharing of
information (Bodendorf and Kaiser, 2009; Singh, Hansen, and Podolny, 2010).

Trusov, Bucklin, and Pauwels (2009) allude to the fact that social media sites have
generated interactive virtual communities where people share product reviews, preferences,
information, opinions and experiences. Companies are using social media applications for
customer relationship and brand management by building brand communities and
promoting brand tribalism (Taute and Sierra, 2014). These sites provide many opportunities
for companies and their current and prospective customers to interact with each other
(Wilcox and Kim, 2012).

Researchers have found that the online organisation’s corporate brand image is determined
by how customers evaluate its performance with regard to factors including security,
customer care, personalisation of service and user-friendliness (Brophy, 2013).

Currently, Twitter, Facebook, and YouTube are the three prominent social media sites
allowing individuals to share content and comments. Twitter is a web-based service that
enables users to send short messages that are 140 characters long, or to engage in micro-
blogging. To illustrate its diffusion, Twitter has 302 million active users, 77% of whom are
outside the United States of America, with 500 million tweets (short messages) per day in
33 languages. There operations are quite a large scale to the extent that they have more than
35 offices around the world employing 3,900 people (Wikipedia, 2015).

Users on Facebook create profiles which they use to interact with other users. It is the most
commonly used online social media tool among adults (Lenhart, Purcell, Smith, and
Zickuhr, 2010). YouTube on the other hand provides a platform for users to discover,
watch, and share user-generated videos through social networking.

21
Social media sites and tools have grown in number and availability to include many online
activities such as blogging, chatting, instant messaging, gaming, and webcasting (Boyd and
Ellison, 2008). The use of mobile devices is on the rise and they are increasingly being used
by individuals to access various social media sites. Kaplan (2012) describes a mobile devise
as “any tool that permits an individual to access a ubiquitous network beyond one specific
access gate”.

Moss, Gunn, and Heller (2006) suggest that due to the increased adoption of mobile
devices, social media sites must be modified to enhance ease of use and provide improved
display on mobile devices. Insurance companies, if they are to successfully target
Millennials, who are a majority user on these sites, must develop strategies that exploit the
potential on the sites and provide content that is in keeping with online communities.

Lim, Lim and Heinrichs (2014) have cautioned, though, that as the use of social medial is
studied, personal and behavioural factors and their influence on social media evaluation
and usage should be considered. Characteristics of the individual, such as their mobile
expertise, social media knowledge, goal orientation, and other demographic factors should
be investigated.

In summary, the Millennial generation has grown up in a more media-saturated and brand-
conscious world. They respond to ads differently, preferring sources other than traditional
media. To appeal to them, the message needs to be quick, direct, and honest (Pesquera,
2005). They do not trust the traditional news media as much as earlier generations
(Peterson, 2004).

2.3.2 Emerging Consumer Behaviour Realities

The following are some of the emerging consumer behaviour realities that have resulted
from developments in technology and media. For organisations, including insurance
companies, to be successful in their promotion and messaging, they have to take these
realities into account.

2.3.2.1 The Contemporary Consumer

As a result of the emerging technologies, the new kind of consumer is discerning, well
informed and pressed for time. They are looking for real-time access, faster and easier ways
of transacting, clarity in product information and ease of payment. As consumers seek more

22
meaningful associations from products and services, they are moving away from wanting
value for money to wanting value for time (Parsons and Maclaran, 2011).

The consumer now accesses product information through multiple channels (Brashear,
Kashyap, Musante, & Donthu, 2009). Chaffey and Ellis-Chadwick (2012) comment on how
the bargaining power of a retail shopper is greatly increased when they are using the internet
as they are able to evaluate products and compare prices. Yu and Portera (2015) contend in
their Gallup study that Millennials are more than twice as likely as all other generations to
purchase their insurance policies online rather than through an agent. Clemons and Hitt
(2000) and Nogueira and Oliveira (2002) allude to the fact that the nature of the insurance
product itself works against a rapid change in consumer purchasing habits.

Martin (2013) discusses the impact of mobile shopping on commerce. It is continuous as it

can happen anytime and the customer does not have to be physically present at the store.
The scope of mobile is also massive and the well-known Cisco Visual Networking Index
Global Mobile Data Traffic Forecast indicates that by 2016, the number of mobile web-
connected devices could be more than the total population of the earth (Cisco, 2012). In
fact in Kenya, during the third quarter of 2014, the number of mobile subscriptions grew
by 3.6 per cent to stand at 34.8 million up from 33.6 million subscriptions reported during
the previous quarter which was a growth of 1.6 per cent compared to the same period the
previous year.

Similarly, the number of mobile subscriptions per 100 inhabitants increased by 2.9
percentage points to stand at 85.5 per cent up from 82.6 per cent recorded during the
previous quarter. In comparison to the same period of the previous year, penetration had
registered a 1.3 percentage point’s increase (CAK, 2015).

2.3.2.2 The Global Consumer

Keegan (2002) notes that globalization is no longer a marketing fantasy and global brands
can now be consumed in many countries throughout the world. As digital technology
continues to be more prevalent in people’s lives, time, geography, and location cease to be
an issue. Consumers can satisfy their needs from anywhere (Ryan, 2014)

Beinhocker, Davis and Mendonca, (2009) indicate that globalization is unlikely to reverse,
even though there has been a decline in demand for global products due to the economic

23
crisis of 2008-2010. Ghemawat (2011) also weighs in arguing that in the current global
world, countries abroad matter as much as the home country, for firms with a global
strategy.

The consumer is also now global in nature and outlook (Tapscot and Williams, 2008). The
market make-up is not only from different regions, nationalities and cultures, the product
and service requirements have also taken a global character. The consumer is now much
more aware of products and services on offer elsewhere in the world. They have therefore
come to expect the same options and standards of service.

2.3.2.3 Consumer-driven Marketing

Consumer-driven marketing is increasingly important as customers seize control of the

process and actively “pull” information helpful to them. Consumer-driven marketing
activities included Internet reviews and word-of-mouth recommendations from friends and
family, as well as in-store interactions and recollections of past experiences (McKinsey,
2009).

Ryan (2014) alludes to the rise of the ‘Prosumer’, online customers who are getting
increasingly involved in the creation of the products and services they purchase, shifting
the balance of power from producer to consumer. Consumers are breaking from the
predefined moulds given to them by marketers and are now creating their own identities
(Schouten and McAlexander, 1995).The consumer is no longer the victim of corporate
branding but has instead become a source of liberation (Firat and Venkatesh, 1995) and the
resultant globalisation and increased products provide people with an increased degree of
control over their lives (Oswald, 1999)

2.3.2.4 The Modified Consumer Decision Making Process

Traditionally, the consumer decision making process has been depicted as a funnel where
consumers systematically narrow the initial-consideration set as they weigh options, make
decisions, and buy products. Then, the post-sale phase becomes a trial period determining
consumer loyalty to brands and the likelihood of buying their products again (McKinsey,
2009)

24
Figure 2.2: Consumer Decision Making Process
Source: Solomon, Bamossy, Askegaard, and Hogg, (2010)

Marketers had the opportunity to influence decision, at the second stage of information
search. This is however changing. The contemporary consumer now moves back and forth
between the stages depending on how much time they have and the quality of the references
they are using. The resulting consumer purchase decision journey is circular and comes in
variants of the one shown in Figure 2.3 as suggested by MacKinsey (2009). Tapscott and
Williams (2008) say technology has made the process more complex and dynamic and time
starved consumers are demanding empowerment.

Figure 2.3: The Modified Consumer Decision Making Process

Source: McKinsey, (2010)

25
2.3.2.5 Virtual Communities and Mass Collaboration

Li and Bernoff (2011) make reference to an emerging phenomenon they call the
groundswell- a social trend in which people use technologies to get the things they need
from each other, rather than from traditional institutions like corporations. It is a result of
people’s desire to connect, new interactive technologies and online economies. Reference
groups in the post-internet age no longer require face to face contact. They are now virtual
communities with a great influence on individual product choice.

The Millennial generation dislikes being an advertising target and therefore depend more
on word-of-mouth and their friends’ opinions when making purchase choices (Peterson,
2004). They are more aware of marketing spin than previous generations and have a strong
aversion to "push" marketing, preferring brands that are engaging and already embraced by
their friends (InMobi, 2012)

2.4 Considerations For Purchase

2.4.1 Novelty of New Brands

Curtin (2009) notes that Millennials are inclined towards western culture in many ways,
including in how they spend their money. They are highly adaptable to new brands and
products but generally not loyal to these brands thus earning themselves the tag of “brand
switchers” (Xu, 2007; Noble, Haytko and Phillips, 2009; Olivier and Tanguy, 2008). It is
important to note though that this does not in any way directly imply that Millennials have
reached their purchasing potential. This can only be expected to increase and grow with
time (Juristic and Azevedo, 2011; Waters, 2006).

Millennials are not as brand-loyal or as driven by the same kind of brand label
consciousness as the previous age cohorts (Wolfe, 2004). They have grown up in an era
where shopping has become a form of entertainment with experiential aspects in a retail
setting (Bakewell and Mitchell, 2003).

Gupta, Brantley and Jackson (2010) hold that Millennials are attracted to distinctive brands
through which they can self-express. They are also seen to carry a materialistic and
consumer culture that is a result of technological innovation (Hanzaee and Aghasibeig,
2010). They openly express their concerns and feeling through various media (Hershatter
and Epstein, 2010) and retailers are now alive to this facts, using the same media to gain

26
feedback and insight from Millennials, whom they have hitherto been unable to reach
through conventional methods (Engel et al.,2011).

2.4.2 Environmental Consciousness

Millennials have shown that they are environmentally conscious even in their purchase
decisions (Henrichs, 2008). They are concerned about social responsibility and
environmental issues (Barber, Taylor and Dodd, 2009; Smith, 2012). They are supportive
of social causes and socially responsible companies (Furlow, 2011). A majority are likely
to trust socially responsible companies more and pay attention to their messaging, with
resultant increase in purchase of their products (Millennial Case Study, 2006).

Some studies have found that Millennials are the most environmentally conscious
(Vermillion and Peart, 2010). They favour socially and environmentally friendly brands
(Spehar, 2006). Studies have also shown that educated consumers are increasingly worried
about the long-term effects of products on their health, community, and environment
(Spehar, 2006). However, According to Vermillion and Peart (2010), consumers will not
purchase a product only for its environmentally friendly attributes. A product must also
contain an added benefit, such as safety, health, or cost efficiency.

Table 2.3 shows how some brands have identified themselves with social agenda.

Table 2.3: Brand Cultures and their social agenda

Brand Social Agenda

Bodyshop Ethically sources goods and environmental awareness

Benetton Awareness of global issues such as AIDS, racism and poverty

The Mini Small is beautiful: mocking pretentions of larger cars'

Apple Against the totalizing uniformity of large corporations such as Microsoft and IBM

Harley Davidson Being true to oneself - an outlaw image and disregard for convention

Source: Parsons and Maclaran (2011)

27
2.4.3 Customer Delight

An emerging area of interest in consumer behaviour is customer delight. Whereas customer

satisfaction is broadly characterized as a “post-purchase evaluation of product quality given
pre-purchase expectation” (Kotler, 1991), customer delight is described as the act of
surprising a customer by exceeding his or her expectations, which in turn creates a positive
emotional reaction (Scott, 2004, and Seth, R and Seth, K, 2005).

It has also been shown that delighted customers had significantly high levels of willingness
to pay, commitment loyalty, and repeat purchase (Barnes, Beauchamp, and Webster 2010).
They are also more prone to sharing their experiences with others 62 per cent of the time
(Swanson and Davis 2012). Beauchamp and Barnes (2015) identified employee affect,
effort and skill as specific types of employee factors necessary to delight Millennials.

2.4.4 Peer Referencing

Smith (2012) alludes to the fact that Millennials use peers as a measure of merit of a product
considering them to be more credible than traditional media or company sources of
information. Li and Bernoff (2011) make reference to an emerging phenomenon they call
the groundswell- a social trend in which people use technologies to get the things they need
from each other, rather than from traditional institutions like corporations. They are
increasingly success-driven, demonstrating their achievements through status products
(Meister and Willyerd, 2010). They will thus choose the brands that will help them
construct and maintain this and other identities (Elliot and Wattanasuwan, 1998).

Parsons and Maclaran (2011) find that brands provide numerous ways in which consumers
can express themselves and with which to obtain the approval of peers, enabling them to
make a social statement of who they are or who they would like to be. Table 2.3 shows the
correlation between brand choice and brand culture.

28
Table 2.4: Brand Cultures and Self expression

Brand Culture Brand

I am a high achiever Mercedes, Rolex, Hermes

I am on my way to the top BMW, Tag Heuer, Armani

I am an individual Apple, Swatch

I am a world citizen British Airways, Benetton

I care about the environment Co-perative Bank, Body Shop

Source: Goodchild and Callow (2001)

2.4.5 Price

Gauzente and Roy (2012) note that Millennials are price sensitive and take time to
gathering and processing price-related information, including looking at non-price features.
The first impression that Millennials get, of a retailers website for example, impacts their
decision on whether to return. This is because, they form their judgements and opinions
very quickly (Kim and Fesenmaier, 2007; Lindgaard, Fernandes, Dudek and Brown, 2006).

Eastman and Liu (2012) found that Millennials have higher levels of status consumption
than Generation X or Baby Boomer consumers. Furthermore, Young and Hinesly (2012)
emphasis that there should be further study undertaken to determine the motives that
underlie Millennials' behaviours.

2.5 Chapter Summary

This chapter has reviewed the existing literature on the age cohort identified as Millennials,
and in particular their use of online platforms and factors that influence purchase. The
insurance industry has been discussed in light of emerging trends especially with regard to
digital marketing strategies, mobile payments and emerging distribution channels.

The literature is reviewed from international journals, dissertations and books. The lack of
empirical evidence in the East African region and specifically in Kenya creates a huge
literature gap. The study of the Millennials is a new phenomenon in Kenya and there is
therefore little literature that directly addresses this segment of the market. Neither is there

29
much study directed at their buying habits or their perception of insurance in general. Most
of the literature considered here is drawn from other parts of the world, especially the west.
This would be the major critic. But as has been discussed in the study, Millennials across
the globe exhibit similar habits which would make lessons drawn from other parts of the
world applicable in the Kenyan context.

This research seeks to look at this age group which if approached strategically, could hold
a huge business potential for insurance companies, and by extension, contribute to the
improvement of insurance penetration in Kenya.

Chapter three, which is the next chapter, presents the research methodology to be used in
the study. It presents the research design, population and sampling techniques, the data
collection and analysis techniques

30
 CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

This chapter captures information regarding the research design method, the population
under review, sampling design, data collection method, research procedure and data
analysis method used in this study.

3.2 Research Design

Orodho (2008) defines a research design as the blue print of the study that provides the
outline and direction of a research. Kothari (2004) describes research design as the
arrangement of conditions for collection and analysis of data in a manner that is aimed at
combine relevance to the research purpose with economy in procedure. This study used a
descriptive research design. According to Cooper and Schindler (2003), a descriptive study
is concerned with finding out the what, where and how of a phenomenon. A descriptive
research design was useful for this study because it allowed the use of the findings of the
study, as a general reflection of the large population. It allowed for the collection of
quantitative data which was analysed using descriptive and inferential statistics (Saunders,
Lewis and Thornhill, 2003).

3.3 Population and Sampling Design

3.3.1 Population

The study focused on the age group that covers those born between the years of 1982 and
2000, which has been identified as the Millennial generation (Strauss and Howe, 1991;
Howe and Strauss, 2000). In Kenya, this cohort forms approximately 48% of the population
(Kenya National Bureau of Statistics, 2014).

Cooper and Schindler (2001) define population as the total collection of elements about
which we wish to make some inferences. The population includes all groups with the same
attributes. The population of this study was drawn from the total population of Nairobi as
per the National census of 2009 (KNBS, 2014). In total there were 38,610,097 people living
in Kenya. Specifically, the target population stood at a total of 11,145,872.

31
3.3.2 Sampling Design
3.3.2.1 Sampling Frame

According to Cooper and Schindler, a sampling frame (2001) is a list of elements in the
population from which the sample is actually drawn. The study was undertaken in Nairobi
County with the sampling frame being drawn from the three age groups indicated in Table
3.1 below.

Table 3.1: Sampling Frame

Age Group (Years) Male Female Total Population Percentage

20 - 24 2,123,653 2,045,890 4,169,543 11%
25 - 29 1,754,105 2,020,998 3,775,103 10%
30-34 1,529,116 1,672,110 3,201,226 8%
Total 11,145,872 29%

Source: KNBS (2014)

3.3.2.2 Sampling Technique

Sampling techniques refers to all the systems and process that a researcher uses to select
the sample size (Cooper and Schindler, 2001). This study used stratified and simple random
sampling techniques. This technique was justified for use in this study as it is based on
scientific rules of probability, ensures adequate representation of the age groups of interest
within the target population and reduces the probability of respondent bias in the study.
Whereas the age group that fits the definition of the Millennial cohort; those born between
the years of 1980 and 2000, would be 15 to 34 years, the study strata targeted the age groups
of 20 – 24, 25 – 29, and 30-34. This is because those in this age group are more likely to
have the ability to purchase insurance products and services.

3.3.2.3 Sample Size

Kothari (2006) defines sample size as the number of items to be selected from the
population. The size of the sample should neither be excessively large nor too small. It
ought to be ideal. An ideal sample is one which fulfils the requirement of efficiency
representativeness, flexibility and reliability.

32
To determine the sample size for this study, the following statistical formula from Krejcie
and Morgan (1970) was used. If is useful for the estimation of sample size from a finite
population.

n = X2NP (1-P)

d2 (N-1) + X2P (1-P)

Where:

n = minimum sample size

X = Z value (e.g. 1.96 for 95% confidence level)

N = Population Size

P = Population proportion of the Millennials (expressed as decimal and assumed to

be 0.5 (50%) – this provides the maximum sample size).

d = Degree of accuracy (5%), expressed as a proportion (.05);

The workings are as follows:

n= (1.962) (11,145,872) (0.5) (1-0.5)

(0.052) (11,145,871) + (1.962) (0.5) (1-0.5)

= 384.19 ~ 384

Hence, the minimum sample size was 384 respondents taking into consideration variables
such as homogeneity in the data, and the sample frame under consideration.

The distribution of the sample size was as shown in Table 3.2 below.

Table 3.2: Sample Size

Age Group (Years) Sampling Frame Sample Size Proportion

20 - 24 4,169,543 48 0.001%
25 - 29 3,775,103 168 0.004%
30-34 3,201,226 168 0.005%
Total 16,180,727 384 0.003%

33
3.4 Data Collection Methods

The research made use of primary data which was collected using questionnaires, through
stratified and simple random sampling techniques. The questionnaire included both open-
ended and closed-ended questions (Kothari, 2011). The questionnaires were administered
through the help of research assistants to ensure reliability, clarification, accuracy and
efficiency. The questionnaire was divided into four sections. The first section sought for
background information of the respondents while the subsequent sections addressed each
of the research objectives. The questions were designed to collect both qualitative and
quantitative data.

The questionnaire used both monochotomous questions designed to give the respondents
alternatives that most closely corresponded to their position on the subject, and agreement
scale questions based on a five point scale with steps labelled Strongly Agree, Agree, Fair,
Disagree, and Strongly Disagree. The two kinds of questions we chosen because the
ensured the questionnaire was relevant, logical, simple to fill and brief.

3.5 Research Procedures

A pilot test was conducted to field test the reliability and the validity of the questionnaire.
Suggestions of the pre-test group were used to change confusing questions. The pre-test
was carried out among 40 colleagues and acquaintances of the researcher who fall within
the age cohort of the study

The actual research was carried out after analysing and including the feedback from the
pre-test group. To ensure that there was a good response rate, respondents were not required
to give their personal details, hence ensuring confidentiality and anonymity. The
questionnaires were also accompanied by a letter introducing the researcher and confirming
that the information and data obtained would be confidential and was intended for academic
purposes only.

To ensure accuracy and quality, the study was carried out by research assistants from a
reputable research organisation who had received the requisite training and possess the
necessary experience. The use of research assistants ensured that the whole sample was
addressed, simplified data collection and provided for accuracy of the data collected. It also
ensured that all questions were understood and answered

34
3.6 Data Analysis Methods

Once the data was received, the researcher edited the data by checking for missing data or
unfilled sections of the questionnaire and only sections properly filled were used. After
cleaning and editing of data, coding was done using the statistical software SPSS
(Statistical Package for Social Sciences) which is accurate and fairly easy to use.

The data was analysed using mean and mode which are measures of central tendency. Other
data analysis techniques and measures used included range, standard deviations and
variances. In addition, relationships between various factors were tested using correlation
analysis and regression modelling. The data was then presented through tables and figures.

3.7 Chapter Summary

This chapter presents the research methodology of the study. It shows the research design,
data collection, population and sampling techniques and data analysis processes adopted.
The research design is descriptive in nature focusing on Millennials in Nairobi. It also
presents the sample size, sampling techniques and tools, used to collect primary data and
indicates the use of SPSS for data cleaning, editing and analysis. Chapter four presents the
findings and results of data collected and analysed.

35
 CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

This chapter discusses the interpretation and presentation of the findings obtained from the
field. The chapter presents the background information of the respondents and findings of
the analysis based on the objectives of the study. Descriptive statistics have been used to
discuss the findings of the study. The study targeted a sample size of 384 respondents from
which 344 filled and returned the questionnaires making a response rate of 89.6 %. This
response rate was satisfactory and representative for the drawing of conclusions for the
study. According to Mugenda and Mugenda (1999), a response rate of 50% is adequate for
analysis and reporting; a rate of 60% is good and a response rate of 70% and above is
excellent. Based on the assertion, the response rate was considered to excellent.

4.2 Background Information

4.2.1 Respondents’ Gender

The study requested the respondents to indicate their gender category. From the research
findings, the study majority of the respondents as shown by 61% were males whereas 39%
of the respondents were females. This implies that both genders were fairy engaged in this
research and therefore the findings of this research did not suffer from gender bias.

Male Female

39%

61%

Figure 4.1: Gender of the Respondent

4.2.2 Respondents’ Age

The study requested the respondents to indicate their age. From the research findings, the
study revealed that 30.2% are in the 20-24 age band, 37.8% in the 25-29 age band, 25% in

36
the 30-34 age band and 5.2% in the 35 and above age band. 1.7% of the respondents did
not indicate their age. The findings indicate that a majority of the respondents (95%) fall
within the Millennial cohort that the study was targeted at.

Age
40.0

35.0 37.8

30.0
30.2
25.0
25.0
20.0
Age
15.0

10.0

5.0
5.2
1.7
0.0
20-24 25-29 30-34 35 and above No Response

Figure 4.2: Age

4.2.3 Respondents’ Marital Status

The study requested the respondents to indicate their marital status. From the research
findings, the study revealed that 50% were single, 47% were married, 2% were divorced
and 0.9% were widows or widowers.
Table 4.1: Marital Status

Marital Status
Frequency Percent
Single 172 50.0
Married 162 47.1
Divorced 7 2.0
Widow(er) 3 .9
Total 344 100.0

37
4.2.4 Respondents’ Highest Level of Education Achieved

The study requested the respondents to indicate their highest level of education achieved.
From the research findings, 3.2% held primary level certificates, 20.1% secondary level
certificates, 36.9% held diploma certificates, 34.3% held bachelor’s degree certificates and
3.2% held graduate degrees. Also, 2.3% of the respondents did not indicate their education
levels. The fact that 94.5% of the respondents were holding secondary and post-secondary
school education, is an indication that they were well educated and that they were in a
position to respond to research questions with ease.

Education level
40.0
35.0 36.9
34.3
30.0
25.0
20.0
20.1 Education level
15.0
10.0
5.0
3.2 3.2 2.3
0.0
Primary Secondary Diploma Degree Masters No
Response

Figure 4.3: Highest Level of Education

4.2.5 Respondents’ Work Status

The study requested the respondents to indicate their work status. From the research
findings, 48% of the respondents were employed, 39% were self-employed, and 12% were
unemployed with 1% not indicating their work status. In terms of length of stay at their
current jobs, 14.2% had been with their current employer for less than a year, 36.9%
between 1and 3 years, and 36.6% 4 years and above. While 2.3% of the respondents did
not make an indication.

38
 WORK STATUS
UnemployedNo Response
12% 1%

Employed
48%

Self
employed
39%

Figure 4.4: Work Status

Table 4.2: Length of Stay at Current Employment

Length at current job

Frequency Percent
Less than one year 49 14.2
1-3years 127 36.9
4-5 years 65 18.9
7-9 years 23 6.7
10 years and above 38 11.0
Not applicable 34 9.9
No Response 8 2.3

Total 344 100.0

4.2.6 Respondents’ Income Levels

The study requested the respondents to indicate their income levels. From the research
findings, 24.7% earned below KES 15,000, 40.4% earned between KES 15,000 and KES
50,000, 15.4% earned between KES 51,000 and KES 100,000, and 8.8% earned above KES
100,000. Those who did not indicate their income level were 10.8%.

39
 Net monthly income
45 40.4
40
35
30 24.7
25
20 15.4
15 10.8
10 4.4 4.4
5
0

Figure 4.5: Income Levels

4.2.7 Insurance Policies Held

The study requested the respondents to indicate whether or not they had any insurance
policies. From the research findings, 31.8% of the total respondents had life insurance
policies, 68.4% had medical insurance policies, 29.9% had general insurance policies and
26.3% had pension plans. It is important to note here that these are not cumulative
percentages as it is possible for a respondent to hold multiple types of insurance policies.

Table 4.3: Insurance Policies Held

None 1(one) 2(two) 3(three) 4 or more

Life policy 68.2 28.0 2.1 1.0 .7

Medical policy 31.6 58.8 8.0 1.3 .3
General Insurance policy 70.2 27.7 1.4 .4 .4
Pensions plan 73.8 24.1 1.1 .4 .7

4.2.8 Preferred Mode of Payment

The study requested the respondents to indicate their preferred mode of payment. From the
research findings, 84.6% of the total respondents preferred cash payments, 71% Mobile
transfer services, 18.5% cheque payments, 13% credit card payments, 9% standing orders
and 7.9% check-offs.

40
Table 4.4: Mode of Payment

Always Very often Sometimes Rarely Never

Cash 68.8 15.8 5.7 3.5 6.3

Mobile Money e.g. MPESA 39.6 31.4 17.6 3.8 7.5
Cheque 7.6 10.9 24.2 20.5 36.8
Credit Card 6.1 7.4 20.2 20.2 46.1
Standing Order 4.0 5.0 11.4 19.1 60.5
Check-offs 5.9 2.0 6.2 14.8 71.1

However, a further analysis on the mode of payment preferred between online payment and
mobile payment shows 61.4% of are comfortable making mobile payment for products
compared to 34.1% who are comfortable making payments for products online. Further,
there are greater percentage of respondents who were unsure of both online and mobile
payment with online at 24% and mobile 17.6%. This supports earlier findings on cash
payment (table 4.4) as the common mode of payment despite other preferences.
On the correlation between demographic data and preferred mode of payment. There was
no correlation between gender and the mode of payment. The only correlation that exists
between age and mode of payment is on MPESA (p=.037, r= .118). This correlation means,
the preference to use MPESA as mode of payment increases with age; as one advance in
age, the preference to use MPESA as mode of payment increases.

Similarly, the trend on mode of payment was noticed in the level of education and income
level though the strength of the relationships are weak; r = < .25. There was a positive
correlation between education level and Mpesa (p=.020, r=.132), Cheque (p=.0001,
r=.207), credit card (p=.017, r=.140), and standing order (p=.012, r=147). This shows the
higher the education level, the more likely one will use Mpesa, cheque, credit card and
standing order as indicated above. There was no relationship between cash and check-offs
with level of education.

The positive correlation on net monthly income were on Mpesa (p=.005, r=.166), cheque
(p=.0005, r=.284), credit card (p=.004, r=.177), standing order (p=.007, r=.165) and check-
offs (p=.010, r=.156). Similar to education level, the more one earns, the more likely they
will use Mpesa, cheque, credit card, standing order and check-off. However, net income
does not affect cash payment.

41
Table 4.5: Preferred mode of access to information on products and services

Always Very Sometimes Rarely Never Mean Std. CV

often Deviation

Social Media 42.2 21.4 16.2 10.4 9.7 2.2403 1.35086 0.603
Radio 49.1 17.4 22.8 7.3 3.5 1.9873 1.15188 0.5796
Television 59.9 16.7 18.3 3.8 1.3 1.6972 0.9791 0.5769
Online review
27.7 18.3 22 17 15 2.7333 1.41264 0.5168
and blogs
Bill boards 19.9 14.6 29.1 22.8 13.6 2.957 1.30987 0.443
Company
16.8 16.4 31.5 18.1 17.1 3.0235 1.30634 0.4321
website
Posters 16.6 13 29.9 25.9 14.6 3.0897 1.27877 0.4139
Referral by a
19.1 13.8 47 14.1 5.9 2.7401 1.10276 0.4024
friend
Visit by
insurance 7.2 10.5 23 22.3 37 3.7148 1.26203 0.3397
agent or broker
Through trade
7.7 4.7 25.4 26.4 35.8 3.7793 1.20323 0.3184
fairs

Further analysis on the individual characteristics and mode of accessing information shows
there is no relationship between gender and preferred mode of accessing information on
products and services. However, there is correlation between education level and website
as preferred mode of accessing information (p=.0005, r=.299), social media (p=.015,
r=.139), and online reviews and blogs (p=.0005, r=.231). This shows the higher the level
of education, the preference of access to information is website, social media and online
review and blogs. However, the strength of the correlation are weak at r=< .25.

On net monthly income, there is correlation on website as preferred source of information

on products and services (p=.004, r=.175), visit by insurance agent or broker (p=.017,
r=.144) and through trade fairs (p=.003, r=.182). This indicates, the higher the monthly net
income, the more the preferred source of information to be website, visit by insurance
agents or brokers and through trade fairs. Similar to level of education, the strength of the
relationship are weak (r = < .25).

On age, there was a negative correlation between age and social media (p=.014, r = -.141).
This means, as one advance in age, the least they will use social media as source of
information. Instead, there was positive correlation on the visit by insurance agent or broker
(p=.001, r= .197). This shows preference will shift from social media to visit by insurance

42
agent or broker as preferred mode of accessing information though at a weak relationship
(r= <.25).

Table 4.6: Correlations - Mode of Payment

Correlations
Modes Modes Modes Modes Modes of Modes
of of of of payment: of
payment payment payment payment Standing payment
:Cash :Mpesa :Cheque :Credit Order :Check-
card offs
Gender Pearson
.018 .050 .023 -.005 .009 .021
Correlation
Sig. (2-tailed) .752 .375 .690 .927 .881 .718
N 317 318 302 297 299 305
Age Pearson
-.111 -.150** -.139* -.100 -.117* -.116*
Correlation
Sig. (2-tailed) .050 .008 .016 .088 .044 .044
N 312 314 298 293 295 301
Educational Pearson
-.013 -.132* -.207** -.140* -.147* -.097
Level Correlation
Sig. (2-tailed) .822 .020 .000 .017 .012 .096
N 310 310 296 290 293 299
Net monthly Pearson ** ** ** **
.004 -.166 -.284 -.177 -.165 -.156**
Income Correlation
Sig. (2-tailed) .942 .005 .000 .004 .007 .010
N 282 283 268 263 267 271
**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-
tailed).

4.2.9 Preferred Modes of Accessing Information on Products and Services

The study requested the respondents to indicate their preferred modes of accessing
information on products and services. From the research findings, 76.6% and 66.5% still
prefer Television and Radio respectively. Social media came in at 63.6% of total
respondents with online reviews and blogs being preferred by 46% of the respondents. Bill
boards, Company website, Referral by a friend, Posters, Visit by insurance agent or broker
and Trade fairs attracted a preference rate of 35% and below each as indicated in table 4.6.
On the comparison with the coefficient of variation, social media had the highest dispersion
at .603 while the least used mode was trade fair at .3184.

43
Table 4.7: Correlations - Preferred mode of access to information on products and
services

Correlations
Gender Age Educational Net monthly
Level Income
Access information, Pearson Correlation .004 -.077 -.049 -.081
Television Sig. (2-tailed) .940 .173 .388 .173
Access information, Pearson Correlation .054 -.050 -.032 .020
Radio Sig. (2-tailed) .339 .381 .572 .738
*
Access information, Pearson Correlation .135 .012 -.070 .043
Bill boards
Sig. (2-tailed) .019 .832 .231 .481
Access information, Pearson Correlation .076 .074 -.062 .054
Posters
Sig. (2-tailed) .187 .207 .287 .380
Access information, Pearson Correlation -.020 -.032 -.293** -.171**
Company websites Sig. (2-tailed) .734 .580 .000 .005
Access information, Pearson Correlation -.060 .185** -.163** .069
Social Media
Sig. (2-tailed) .298 .001 .004 .260
**
Access information, Pearson Correlation -.083 .062 -.244 -.107
Online Review and Sig. (2-tailed) .152 .285 .000 .082
blogs
Access information, Pearson Correlation -.031 .036 -.026 .102
Referral By a friend Sig. (2-tailed) .589 .533 .658 .094
Access information, Pearson Correlation .052 -.149** -.063 -.134*
Visit by Insurance Sig. (2-tailed) .369 .010 .279 .027
agent or broker
Access information, Pearson Correlation .116* -.074 -.079 -.165**
Through trade fairs Sig. (2-tailed) .046 .204 .176 .007
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).

4.3 Methods of Accessing Insurance Products

4.3.1 Preferred Methods of Accessing Insurance Products and Services

The study sought to establish preferred methods of accessing insurance products and
services. From the research findings majority of the respondents as shown by 77.6% would
prefer to deal with the insurance company directly when buying insurance products as
compared to 12.1% who were of a contrary opinion and 10.3% who were unsure. Of the
respondents who preferred to deal with a broker or agent were 44.7% while 50.7% prefers
to buy insurance from a bank over brokers or agents. Alternative channels showed
acceptability also with Sacco’s and Microfinance institutions being preferred by 37.2% and
30.3% of the respondents respectively. Similarly, 27.2% and 27.8% were unsure on buying

44
insurance products from SACCO and from micro-finance institutions as indicated in the
table that follow.

Table 4.8: Statements Relating to Methods of Accessing Insurance Products

Strongly Agree Fair Disagree Strongly

agree disagree

I prefer dealing with a broker or agent

24.8 19.9 16.6 16.3 22.4
when buying insurance products

I prefer dealing directly with the insurance

50.0 27.6 10.3 3.6 8.5
company when buying insurance products

I would prefer to buy insurance from my

25.8 24.9 16.9 18.8 13.5
bank over brokers or agents

I would consider buying insurance products

15.8 21.4 27.2 15.8 19.8
from a SACCO

I would consider buying insurance products

12.7 17.6 27.8 20.7 21.3
from a microfinance institution

4.3.2 Relationship Between the Preferred Mode of Accessing Information and

Methods of Accessing Insurance Products

On further analysis, there is some relationship between the preferred mode of accessing
information and methods of accessing insurance products. Gender and education level were
not factors that depicts a trend on methods relating to accessing insurance products as there
was no correlation. The only correlation was between net monthly income and age on
preference to deal with brokers or agents when buying insurance products. On the net
monthly income, the more one earns, the likely to deal with broker or agent when buying
insurance product at (p=.048, r=.116). Similarly, as one advances in age, the more likely to
deal with broker or agent when buying insurance products (p=.003, r=.166). Other
statements relating to insurance products had no relationship with individual
characteristics.

45
Table 4.9: Correlations - Statements Relating to Methods of Accessing Insurance
Products

Correlations
Gender Age Educational Net monthly
Level Income
I prefer dealing with a Pearson .074 -.153** -.076 -.131*
broker or agent Correlation
Sig. (2-tailed) .180 .006 .178 .026
I prefer dealing directly Pearson -.025 .032 -.103 -.077
with the insurance Correlation
company Sig. (2-tailed) .647 .563 .064 .187
*
I would prefer to buy Pearson -.012 .110 -.002 .030
insurance from my bank Correlation
over brokers or agents Sig. (2-tailed) .835 .049 .971 .609
I would consider buying Pearson .080 .025 -.003 .156**
insurance products from a Correlation
SACCO Sig. (2-tailed) .149 .663 .959 .008
I would consider buying Pearson .023 .165** .013 .086
insurance products from a Correlation
microfinance institution Sig. (2-tailed) .679 .003 .812 .147
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).

4.4 Promotion and Messaging of Insurance Products and Services

4.4.1 Preferred Methods of Accessing The Internet

The study sought to establish preferred methods of accessing the internet. From the research
findings majority of the respondents as shown by 47.5% access the internet through their
smart phones. Tablets and laptops are used by 15.9% and 21.1% respectively. The smart
phone remains the preferred method of access for this age cohort. Desktop and cybercafé
were the list at 6.7% and 8.7% respectively.

46
 INTERNET ACCESS
50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Smart Phone Tablet Laptop Desktop Cybercafe
internet access 47.50% 15.90% 21.10% 6.70% 8.70%

Figure 4.6: Mode of Access to the Internet

4.4.2 Social Media Platform Accounts Held By Respondents

The study sought to establish the social media platform accounts held by the respondents.
26% had a Facebook account, 17.9% Twitter account, 18.3% Google + account and 15.2%
Instagram account. Others were 12.9% and 9.70% had YouTube and LinkedIn accounts
respectively. Table 4.10 shows this.

Table 4.10: Social Media Platform Accounts.

Responses
N Percent

Facebook 307 26.00%

Twitter 211 17.90%

Google+ 216 18.30%
Linkedln 115 9.70%
Instagram 180 15.20%
YouTube 153 12.90%
Total 1182 100.00%

47
4.4.3 Frequency of Social Media Use

The study sought to establish the often the respondents were on social media. Being a multi-
response question, 85.7% of the respondents were on social media at least once a day with
14.3% being on social media at least once a week. Further distribution shows those in social
medial almost always were 41.0%, a few times a day were 35.2% and once a day were
9.6%. For weekly classification, a few times a week were 5.9%, once a week were 2.2%
and those stated as rarely were 6.2%. The frequency is indicated in table 4.8. However,
there is a negative correlation between frequency of social media access and net monthly
income (p=.027, r= -.131) and with age (p=.001, r=.-190). This means as one advances in
income and age, the less the frequency of using social media platforms.

Table 4.11: Frequency of Social Media Access

How often are you on social media

Valid Cumulative
Frequency Percent Percent
Almost always 133 41.0 41.0
A few times a day 114 35.2 76.2
Once a day 31 9.6 85.8
A few times a week 19 5.9 91.7
Once a week 7 2.2 93.8
Rarely 20 6.2 100.0
Total 324 100.0

4.4.4 Preferred Methods for Promotional and Messaging Information

The study sought to establish the methods the respondents preferred for promotional and
messaging information. From the research findings majority of the respondents as shown
by 88.4% preferred the internet to traditional mainstream media. Further, 75.5% were more
likely to buy a product if it was marketed on social media with 71.5% being more likely to
buy a product if friends and other users said good things about it on social media and the
internet.

48
Table 4.12: Impact of Promotion and Messaging

Strongly Agree Fair Disagree Strongly

agree disagree
I use a wide variety of media to access information 53.5 27.6 10.8 3.6 4.5

I prefer the internet to traditional mainstream media 45.4 29.9 13.1 6.4 5.2

I am more likely to buy a product if it is marketed on social

20.6 23.7 31.2 14.3 10.3
media.

I am more likely to buy a product if friends and other users

25.2 21.6 28.3 14.9 10.0
say good things about it on social media and the internet.

I trust what my friends say more than what an organization

17.1 21.3 19.2 26.2 16.2
says about its products on social media.

If an organization has a presence on social media, I am

18.6 25.3 29.0 15.2 11.9
more likely to buy from them.

If I like an organization’s products, I will share its posts on

31.0 30.7 17.9 11.2 9.1
social media with my friends.

If I believe that an organization’s products are bad, I will

23.0 17.9 13.6 26.1 19.4
share this information on social media.

I get all my insurance information online 11.1 19.4 23.5 25.6 20.4

4.5 Considerations for Purchase of Insurance Products and Services

4.5.1 Brand Loyalty

The study sought to establish what the respondents consider when purchasing insurance
products; 81.3% of the respondents were attracted to new and distinctive brands with 89.4%
of them indicating that they were loyal to the brands they choose, and do not switch easily.
However, 36.7% indicated that they do not necessarily choose the brands preferred by their
friends.

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Table 4.13: Brand Loyalty
Strongly Agree Fair Disagree Strongly
Brand Loyalty agree disagree

I am attracted to new and distinctive

34.7 23.0 23.6 10.3 8.5
brands.

I am loyal to the brands I choose, and

39.4 35.2 14.8 5.8 4.8
do not switch easily

I choose the brands that my friends

9.7 10.3 16.7 32.1 31.2
choose

4.5.2 The Environment

A majority of the respondents have a green consciousness with more than three quota
(75.7%) of them purchasing good and services whose production has least negative effect
on the environment. While 57.1% are attracted to ethically produced goods as indicated in
table 4.14.

Table 4.14: The Environment

Strongly Agree Fair Disagree Strongly
The Environment agree disagree

I am attracted to ethically produced

30.4 26.7 26.7 9.5 6.7
goods

I buy goods whose production does

41.7 34.0 14.1 5.2 4.9
not harm the environment

4.5.3 Peer Referencing

In comparison to peer reference, 70.1% of the respondents read product reviews before
making a purchase with 60.5% finding out about new products from their networks on
social media and 57.1% choose products that help them make statements. However, only
15.8% only buy products that their friends like. These findings present cumulative of
strongly agree and agree as indicated in table that follows.

50
Table 4.15: Peer Reference
Strongly Agree Fair Disagree Strongly
Peer Reference agree disagree

I read product reviews before I make

49.4 20.7 19.5 5.5 4.9
a purchase

I find out about new products from

27.8 32.7 21.6 9.0 9.0
my networks on social media

I choose products that help me make

28.4 28.7 26.2 9.0 7.7
a statement

I buy only those products that my

9.3 6.5 12.3 33.6 38.3
friends like

Further analysis on peer reference shows there is no relationship between gender and
education level when it comes to peer reference. However, there is negative relationship
between net income and finding new products from an individual’s network on social media
(p=.033, r= -.125), and with choice of products that makes one make a statement (p=.030,
r= -.128). This shows with the increase in income, the ability of an individual to find out
about new products from their network on social media reduces similar to choosing
products that helps them make a statement.

Similarly, the more one advances on age, the less likely they will find out about new
products on their network on social media (p=.001, r= -.180). Also there was negative
relationship between age and the notion ‘clients do not feel the value for their money due
to low-quality insurance products’ (p=.009, r=.146). These findings resonate with
correlation between individual characteristics specifically age and net income on mode of
accessing information about products and services, methods of accessing insurance and
frequency of using promotional messaged on social media; with the increase in age and net
income, individuals prefers to deal directly with the insurance agent and brokers rather than
peers and social media (discussed in 4.2, 4.3, 4.4).

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Table 4.16: Correlations - Peer Reference

Correlations
Gender Age Educational Net
Level monthly
Income
I read product reviews Pearson Correlation .067 .017 .056 .102
before I make a
Sig. (2-tailed) .230 .758 .317 .081
purchase
**
I find out about new Pearson Correlation .027 .186 -.042 .125*
products from my
networks on social Sig. (2-tailed) .632 .001 .454 .033
media
I choose products that Pearson Correlation -.024 .137* .087 .128*
help me make a
statement Sig. (2-tailed) .663 .015 .121 .030
I buy only those Pearson Correlation .068 -.025 .040 .045
products that my
friends like Sig. (2-tailed) .220 .655 .478 .447
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).

4.5.4 Pricing

On the pricing, 44.4% of the respondents strongly agreed and agreed that the insurance
products are highly priced with high number (32.7%) not sure of the product prices. More
than half of the respondents also strongly agreed and agreed at cumulative of 45.4% that
insurance industry does not have a standardized product price while similar cumulative of
38.4% agreed and strongly agreed that clients do not feel the value for their money due to
low-quality insurance products. The view on technology and insurance regulation on
pricing were on the negative as indicated in the following table.

Table 4.17: Pricing

Strongly Agree Fair Disagree Strongly
Pricing agree disagree
The insurance products are highly
24.8 19.6 32.7 13.8 9.2
priced.
The insurance industry does not
21.5 23.9 22.7 20.2 11.7
have a standardized product price.
No adoption of technology to
enhance purchasing or payments of 16.3 21.6 23.4 23.4 15.3
premiums
Clients do not feel the value for
their money due to low-quality 18.3 20.1 30.3 22.9 8.4
insurance products.

There is no regulation on the

19.7 19.7 20.6 21.9 18.1
pricing of insurance products.

52
4.5.5 Customer Service

Opinion was split with regard to customer service with half the respondents looking at the
customer service offered by insurance companies favorably, with the other half disagreeing.
On whether insurance firms have poor customer service, 30.2% disagreed while 23.7%
strongly disagreed. This shows more than half of the respondents; 53.9% think insurance
customer service are good. Similarly, 23.8% disagreed and 22.0% strongly disagreed that
insurance firms have no feedback channels for clients to voice their concerns. On whether
insurance firms have poor claim handling and repayment, 24.9% disagreed and 21.5%
strongly disagreed. Similar to the preceding, cumulative of 46.4% supports that insurance
have good claim handling and repayments. Details of these are indicated in table 4.18.

Table 4.18: Customer Service

Strongly Agree Fair Disagree Strongly
Customer Service agree disagree
Insurance firms have poor customer
14.8 10.5 20.9 30.2 23.7
service.

Insurance firms have no feedback

channels for clients to voice their 20.1 13.3 20.7 23.8 22.0
concerns.

Insurance firms have poor claim

21.5 14.8 17.2 24.9 21.5
handling and repayments.

On the correlation between probability of purchasing and social media, the correlation that
one would buy or likely to buy products under the following circumstances: ‘ I use a wide
variety of media to access information’, ‘I prefer the internet to traditional mainstream
media’ ‘I trust what my friends say more than what an organization says about its products
on social media’, ‘If an organization has a presence on social media’, ‘I am more likely to
buy from them’, ‘If I like an organization's products’, ‘I will share its posts on social media
with my friends’, ‘If I believe that an organization's products are bad’, ‘I will share this
information on social media’ and ‘I get all my insurance information online’. The details
of each is indicted in the following table.

4.6 Correlation Analysis

The study used correlation analysis to establish whether there is an association between the
likelihood to buy a product and the product’s presence on the internet by way of advertising
or feedback from friends and other users on their experience with a product.

53
Table 4.19: Correlations - Customer Service
Correlations
I am More likely I am more likely to buy a
to buy a product product if friends and other
if it is marketed users say good things about
on social media it on social media and the
internet
I use a wide variety of media to Pearson Correlation .326** .164**
access information Sig. (2-tailed) .000 .003
N 321 326
I prefer the internet to traditional Pearson Correlation .345** .168**
mainstream media Sig. (2-tailed) .000 .002
N 317 324
I trust what my friends say more Pearson Correlation .130* .465**
than what an organization says Sig. (2-tailed) .021 .000
about its products on social media N 319 324
If an organization has a presence on Pearson Correlation .363** .388**
social media, I am more likely to Sig. (2-tailed) .000 .000
buy from them N 316 324
If I like an organization's products, I Pearson Correlation .206** .208**
will share its posts on social media Sig. (2-tailed) .000 .000
with my friends N 319 327
If I believe that an organization's Pearson Correlation .256** .190**
products are bad, I will share this Sig. (2-tailed) .000 .001
information on social media N 319 326
I get all my insurance information Pearson Correlation .281** .129*
online Sig. (2-tailed) .000 .020
N 314 321
**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).

In order to predict the extent to which different factors affect the buying decision, a number
of variables were clustered as; online presence, customer service, brand loyalty, peer
reference and price of the product. Correlation analysis shows all the products were
correlated to buying.

54
Table 4.20: Correlations – Considerations for Purchase
Likelihood Online Brand Peer Price Customer
to Buy Presence Loyalty Reference Service
Likelihood Pearson Correlation 1
to buy
Sig. (2-tailed)
Online Pearson Correlation .298** 1
presence Sig. (2-tailed) .000
Brand Pearson Correlation .454** .127* 1
Loyalty
Sig. (2-tailed) .000 .022
**
Peer Pearson Correlation .354 .362** .221** 1
Reference Sig. (2-tailed) .000 .000 .000
** *
Price Pearson Correlation .279 .117 .267** .188** 1
Sig. (2-tailed) .000 .035 .000 .001
** **
Customer Pearson Correlation .295 .041 .262 .114* .600** 1
Service
Sig. (2-tailed) .000 .466 .000 .040 .000
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).

4.7 Regression Analysis

Since all the factors had positive correlation with likelihood to buy, a regression model was
conducted. The dependent variable is the probability preference of buying as for the
independent variable, online presence, customer service, brand loyalty, peer reference and
price of the product were the main factors. The regression output is as follow:

Table 4.21: Model Summary

Model Summary
Model R R Adjusted R Std. Error Change Statistics
Square Square of the R Square F df1 df2 Sig. F
Estimate Change Change Change
a
1 .567 .322 .311 .60939 .322 29.817 5 314 .000
a. Predictors: (Constant), Customer service, Online presence, Brand loyalty, Peer reference, Price

Table 4.22: ANOVA

ANOVAa
Model Sum of Squares df Mean Square F Sig.
Regression 55.362 5 11.072 29.817 .000b
1 Residual 116.604 314 .371
Total 171.967 319
a. Dependent Variable: Likelihood to buy
b. Predictors: (Constant), Customer service, Online presence, Brand loyalty, Peer reference, Price

55
Table 4.23: Coefficients
Coefficientsa
Model Unstandardized Coefficients Standardized t Sig.
Coefficients
B Std. Error Beta
(Constant) .946 .159 5.937 .000
Online presence .146 .037 .196 3.916 .000
Brand loyalty .291 .044 .324 6.553 .000
1
Peer reference .143 .041 .178 3.491 .001
Price .017 .045 .023 .383 .702
Customer service .102 .035 .170 2.873 .004
a. Dependent Variable: Likelihood to buy

This shows the model is fit for predicting the likelihood of a person to buy insurance
products based on online presence, customer service, brand loyalty, peer reference and
price of the product. The model is fit to predict 32% of the likelihood to purchase based on
the R Square value of 0.322.
However, based on the coefficient table above, price has no significant effect on the
predictor (ability to purchase) hence dropped from the model.

X1 = online presence
X2 = brand loyalty.
X3 = Peer reference
X4 = Customer service

According to the findings in table 4.23, the regression model takes the form;
Y = .946 + .146 (X1) + .291 (X2) + .143 (X3) +.102 (X4).

These findings show that taking the four independent variables (online presence, brand
loyalty, peer reference and customer service) constant, the value of likelihood to buy among
Millennials will be 0.946. In addition, the findings show that there is a positive relationship
between online presence and likelihood to buy as shown by a regression coefficient of 0.146
and a p-value of 0.000. Holding all the other variable constant, a unit increase in online

56
presence would lead to a 0.146 increase in likelihood to buy among Millennials. The
findings also show that there is a positive relationship between brand loyalty and likelihood
to buy as shown by a regression coefficient of 0.291 and a p-value of 0.000. Holding all the
other variable constant, a unit increase in brand loyalty would lead to a 0.291 increase in
likelihood to buy among Millennials. The findings show that there is a positive relationship
between peer reference and likelihood to buy as shown by a regression coefficient of 0.143
and a p-value of 0.001. Holding all the other variable constant, a unit increase in peer
reference would lead to a 0.143 increase in likelihood to buy among Millennials. The
findings also show a positive relationship between customer service and likelihood to buy
as shown by a regression coefficient of 0.102 and a p-value of 0.004. Holding all the other
variable constant, a unit increase in customer service would lead to a 0.102 increase in
likelihood to buy among Millennials.

4.8 Chapter Summary

The chapter presented the results of the survey with 89.6 % response rate. The data obtained
from the survey was analyzed using descriptive statistics; frequency, percentage and
correlation. The presentation of the findings is thematically done by description, tables and
figures. The study finds are; most respondents had insurance products and were of the target
age group. Variance mode of accessing information, method of accessing insurance,
promotional messages used and consideration for purchases are discussed in details.
Further correlation between these factors and individual characteristics are presented with
age, education level and net income as major characteristics with correlation effect. Gender
had minimal relationship with all the objectives.

The next chapter discusses the major findings of the study, major conclusions drawn and
areas for further research.

57
 CHAPTER FIVE

5.0 DISCUSSION, CONCLUSIONS, AND RECOMMENDATIONS

5.1 Introduction

From the analysis and data collected, the following discussions, conclusion and
recommendations were made. The responses were based on the objectives of the study
which were to find out the methods of access Millennials in Kenya prefer when accessing
insurance products and services, the impact of promotion and messaging methods on the
Millennial population in regard to uptake of insurance products and services, and, the
considerations that Millennials make when making purchasing decisions.

5.2 Summary

The major purpose of the study was to determine the factors affecting uptake of insurance
products among Millennials in Kenya The study was guided by the following research
questions; What methods of access do Millennials in Kenya prefer when accessing
insurance products and services, how have promotion and messaging methods impacted on
the Millennial population in regard to uptake of insurance products and services and what
are the considerations that Millennials make when making purchasing decisions.

This study used a descriptive research design. The study focused on the age group that
covers those born between the years of 1982 and 2000, which has been identified as the
Millennial generation. The population was drawn from the total population of Nairobi as
per the National census of 2009 which indicated that in total there were 38,610,097 people
living in Kenya with the specific target population standing at a total of 11,145,872.

The study was undertaken in Nairobi County with the sampling frame being drawn from
the three age groups of 20 – 24 years, 25 – 29years and 30 – 34 years. The study used
stratified and simple random sampling techniques. To determine the sample size for this
study, the statistical formula from Krejcie and Morgan (1970) was used providing a sample
size of 384 respondents taking into consideration variables such as homogeneity in the data,
and the sample frame under consideration.

The study made use of primary data which was collected using questionnaires, through
simple randomized sampling. The questionnaire included both open-ended and closed-
ended questions and administered through the help of research assistants. A pilot test was

58
conducted to field test the reliability and the validity of the questionnaire with suggestions
of the pre-test group being used to change confusing questions. The actual research was
carried out by research assistants from a reputable research organisation who had received
the requisite training and possessed the necessary experience.

The questionnaire used both monochotomous questions designed to give the respondents
alternatives that most closely corresponded to their position on the subject, and agreement
scale questions based on a five point scale with steps labelled Strongly Agree, Agree, Fair,
Disagree, and Strongly Disagree. The two kinds of questions we chosen because the
ensured the questionnaire was relevant, logical, simple to fill and brief.

Once the data was received, coding was done using the statistical software SPSS. The data
was analysed using mean, mode, range, standard deviations and variances. The data was
then presented through tables and figures.

From the finding, the study found out that the Millennial cohort in Kenya preferred to deal
with the insurance company directly when purchasing insurance. Brokers, agents and banks
were also used by the Millennials.

The study established that, Millennials accessed the internet quite often preferring it to
traditional mainstream media. They visited social media sites with the smartphone as the
primary mode of access.

The study finally revealed that a majority of Millennials were attracted to new brands and
remained loyal to the brands they chose. The choices their friends made did not necessarily
influence their purchase decisions.

5.3 Discussion
5.3.1 Methods of Accessing Insurance Products

The study established that the majority of Millennials as shown by 77.6% of the respondents
would prefer to deal with the insurance company directly when buying insurance products.
Approximately one in two would consider purchasing insurance through an intermediary
like a broker, agent or bank. A further one in three would consider alternative channels.
This agrees with the traditional thinking that market imperfections, such as asymmetric
information and transaction costs, are the reason for the need for brokers and financial
intermediaries in financial services (Allen and Santomero, 2001; Freixas and Rochet, 1997)

59
Insurance still remains a complex service that requires a lot of information search and
evaluation of options. The study revealed that Millennials, even though they are digitally
savvy and prefer to handle product and service information searches on their own, still feel
the need to have an insurance specialist take them through the solutions available for them.

The study further revealed that Television and radio are still preferred for information
searches with social media following closely. This tends to indicate a contradiction since
the same respondents indicated that they preferred the internet over mainstream media. The
difference can be explained by the fact that television and radio would be viewed as passive
sources of information while online sources would be considered to be active sources. It
should also be noted that there is also an increase of TV viewership online which would
indicate the duality of preference for both TV and online sources. Valentine and Powers
(2013) clarified this apparent contradiction by indicating that Millennials primarily used
electronic media with television ranking first, the internet second, magazines third and radio
fourth. The internet and television were both rated high as a source of advertising
information.

It was noted though that even though gender does not have an effect on the access methods
chosen, education level, and income level and age each have an effect. It appears that the
higher the level of education and income level, the more likely for the Millennial to prefer
online access to information. Age though has the reverse effect on social media; as one gets
older, they gravitate away from social media and prefer direct access the insurance
company or interactions with an intermediary.

Online sources of information form an important part of the life of the Millennial. The
online experience is an extension of their day to day life indicating the importance this has
to insurance companies. Income and education levels also have an effect on the preferred
modes of payment with the more highly educated and paid individuals preferring mobile,
card and online payment options. Cash though remains the most preferred mode of
payment.

The preference for non-cash modes confirms the fact that Millennials are pressed for time.
As they seek more meaningful associations from products and services, they are moving
away from wanting value for money to wanting value for time (Parsons and Maclaran,
2011). The study also confirmed mobile payments as one of the preferred modes of

60
payment. This confirms earlier studies that have indicated that we are able to carry out
commerce by making payments through mobile phones which are now available in most
places and have been enabled to carry out payment transactions. (Ballagas, Borchers, Rohs
and Sheridan, 2006; Berg, Mörtberg and Jansson, 2005; Carton, Hedman, Damsgaard, Tan
and McCarthy, 2012).

5.3.2 Promotion and Messaging of Insurance Products and Services

The study indicated that a vast majority of Millennials prefer the internet to traditional
mainstream media and are more likely to buy a product if it was marketed on social media.
They are also likely to buy a product if friends and other users said good things about it on
social media and the internet. Additionally, they are on social media at least once a day
which makes it a very powerful tool for promotion and messaging. This agrees with
Hershatter & Epstein (2010) who observed that Millennials access their content online
using apps and on social media like Twitter and Facebook.

The positive correlation between the likelihood to buy a product and the product’s
presence on the internet by way of advertising or feedback from friends and other users
on their experience with a product, is an indicator that the internet has an influence on the
purchase habits of Millennials. This agrees with earlier findings that Millennials are
increasingly spending more time on the internet. Chaffey and Ellis-Chadwick (2012) have
indicated how the bargaining power of a retail shopper is greatly increased when they are
using the internet as they are able to evaluate products and compare prices

The study further revealed that a majority of Millennials are more likely to buy a product
if it was marketed on social media and more likely to buy a product if friends and other
users said good things about it on social media and the internet. This establishes the
emergence of the internet and social media as prominent promotion and messaging
platforms

Of particular interest here is that the mobile phone has emerged as the preferred tool for
internet access. Mintel (2011) indicated that the uptake of smartphones has increased
dramatically with research indicating that the number of people with smartphones has leapt
from 9% to 24% in the space of a year, and this is predicted to rise in coming years as
cheaper devices become available.

61
Availability of product information online and the ability to share experiences with
networks empowers the Millennial to make an informed decision, and feel that their
information search and comparisons have been effective. This supports Tapscott and
Williams (2008) assertion that technology has made the buying process more complex and
dynamic and time starved consumers are demanding empowerment.

The study also confirmed findings of the study by InMobi (2012) indicating that Millennials
are getting more accustomed to mobile advertisements with a majority becoming as
comfortable with mobile advertising as they are with TV or online advertising.

5.3.3 Considerations for Purchase of Insurance Products and Services

A majority of the Millennials show an inclination toward new brands which agrees with
previous studies that indicate that they are highly adaptable to new brands and products.
These studies however also indicate that they are generally not loyal to these brands thus
earning themselves the tag of “brand switchers” (Xu, 2007, Noble et al., 2009, Olivier and
Tanguy, 2008). The study revealed on the contrary that they are loyal to the brands they
choose which might be attributed to the Kenyan culture or to the ability or lack thereof to
incur costs switching brands.

The green agenda seems to resonate well with the Millennials with a majority preferring
goods whose production has least impact on the environment, and that are produced using
ethical means. Earlier studies have indicated the same outcomes (Henrichs, 2008; Barber,
Taylor and Dodd, 2009; Smith, 2012).

The study also revealed peer referencing as a strong consideration for purchase in the earlier
years of a Millennial’s life. As they grow older, the less likely they are to find out about
new products on their network on social media, or to choose products that help them make
a statement. This would give an indication that peer referencing could be a useful
communication tool for insurance companies, especially to the younger Millennial market.
The same effect with regard to advancement in age, is observed with increase in income.
The more income the Millennial makes, the less likely they are to refer to their peers for
purchase decisions, and the less likely they are to make a statement through their purchases.
With age also, the study revealed that they feel that they are getting value for money from
their insurance services and are comfortable with the quality of service they receive.

62
These trends are similar to the correlations found between individual characteristics
specifically age and net income on, mode of accessing information about products and
services, methods of accessing insurance and frequency of using promotional messaged on
social media; with the increase in age and net income, individuals prefers to deal directly
with the insurance agent and brokers rather than peers and social media.

Pricing and product standardization came out as an issue of interest although it appears that
the products available and their prices are not known to approximately a third of the
Millennial population. This indicates that there hasn’t been enough effort put into first of
all assessing the insurance needs of this particular age group and further, pricing the
resultant products and services at levels that are commensurate with their income levels.

With regards to customer service, half the population under study is satisfied with the
service levels, feedback mechanisms and claims handling and repayment. The study
showed a direct relationship between customer service and likelihood of the Millennial to
buy. As customers’ service levels increase, so does the likelihood to buy.

5.4 Conclusion
5.4.1 Methods of Accessing Insurance Products

The study established that direct access to the insurance company, and use of intermediaries
like brokers and agents still remains the preferred method of accessing insurance products
and services. It also revealed that banc assurance and other non-traditional intermediaries
are emerging as likely alternatives for the Millennials. Television and radio remain the
preferred sources through which information is passively accessed. Active information
searches though indicated that online sources are preferred. Cash payments remain the
preferred payment mode with non-cash options gaining traction. The study therefore
concludes that even though the traditional methods of access to information and payment
remain strong, alternative methods are also gaining popularity especially with the
Millennial age group.

5.4.2 Promotion and Messaging of Insurance Products and Services

The internet and social media have emerged as strong platforms through which information
on products and services is sourced. This is strengthened by the fact that the mobile phone
is now ubiquitous and forms the primary mode of internet access by the Millennials. The

63
study concludes that the internet and social media are now a critical part of business
promotion and messaging and must form an integral part of insurance companies’
marketing endeavors.

5.4.3 Considerations for Purchase of Insurance Products and Services

The study revealed that Millennials are brand conscious and will be attracted to new brands
and will be loyal to them. It also showed that the green agenda is gaining popularity with
peer referencing, price and customer service being important considerations for Millennials
when they are making a purchase. The indication here is that the purchase activity for
Millennials is an experience that encompasses their emotions, world view and general
status in society. It is important to them how a product of service feels, how it looks to
others, its impact on the environment and the relations it provides for them with the provider
of the product or service.

5.5 Recommendations
5.5.1 Recommendations for Improvement

The study makes the following recommendations for improvement

5.5.1.1 Methods of Accessing Insurance Products Leadership

In the new dispensation, insurance companies in Kenya must develop a 360-degree view of
the customer, where they know the customers’ needs and potential and deliver it back on
their terms – in real time. The companies should develop a multi-intermediary approach to
business allowing the potential customers access information and services through their
preferred methods. They should in addition modernize their IT architecture across all lines
of business to support this approach.

5.5.1.2 Promotion and Messaging of Insurance Products and Services

Insurance companies should embrace an omni-channel approach to the Millennial

population. They should pass messaging through email, short messaging service (SMS),
websites, social media, telemarketing and any other appropriate channels. This will enable
customers to research, review and interact on their terms.

64
5.5.1.3 Considerations for Purchase of Insurance Products and Services

Companies ought to include emotional and belonging needs of the Millennial in their
product research and development. Even though product features and benefits remain
important, as these become less and less differentiated in a competitive market, service
experience is what shall provide sustainable competitive advantage to the insurance
company.

5.5.1.4 Recommendation for Further Studies

The study sought to determine factors affecting the uptake of insurance products and
services among Millennials in Kenya. The study recommends that further study should be
carried out on this age cohort, this time segmenting it to provide insights on insurance needs
of the Millennial in the different age-sets. Study should also be carried out to establish the
extent to which the Millennials have moved their TV viewership and radio listening to
online platforms.

65
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 APPENDICES

APPENDIX I: Letter

Kanyingi Kagucia
United States International University – Africa
P.O Box, 14634 00800
Nairobi.
August 2015

Dear Sir/Madam,

RE: DATA COLLECTION

I am a postgraduate student at The United States International University - Africa

undertaking a Master of Business Administration degree Program majoring in Strategic
Management. One of the requirements for the award of this degree is a thesis.

The theme of my thesis is “Factors that affect the purchase of Insurance among Millennials
in Kenya”.

You have been selected to form part of the study. This is to kindly request you to assist me
collect the data by responding to the interview guide. The information you provide will be
used strictly for academic purposes and will be treated in utmost confidence. A copy of the
final report will be made available to you upon request.

Your assistance will be highly appreciated.

Yours Sincerely,

KANYINGI KAGUCIA

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APPENDIX II: Questionnaire

SECTION A: PERSONAL INFORMATION

This section asks some general questions about you and your job. This information was be
kept in the strictest confidence and used for statistical purposes only. TICK () the most
appropriate answer below:

1. City/Town of Residence ______________________________________

2. Gender a. Male ☐ b. Female ☐

3. Age Bracket 20-24 ☐ 25-29 ☐ 30-34 ☐

4. What is your marital status?

a. Single ☐ b. Married ☐ c. Divorced ☐ d.Widow(er) ☐

5. What is your highest level of education received?

a. Primary ☐ b. Secondary ☐ d. Diploma ☐ e. Degree ☐
f. Other____________________

6. Work status:
a. Employed ☐ b. Self-employed ☐ c. Unemployed ☐

7. How long have you been at your current job?

Less than one year ☐ 1 – 3 years ☐ 4 – 6 years ☐

7 – 9 years ☐ 10 years and above ☐ Not Applicable ☐

8. Net Monthly income

Below Kshs 15,000 ☐ Kshs 15,000 – 50,000 ☐ Kshs 51,000 – 100,000
☐
Kshs 101,000 – 150,000 ☐ Over Kshs 150,000 ☐

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9. Number of Insurance Policy (ies) you have :

None 1 2 3 4 or more
Life policy

Medical policy

General Insurance policy (e.g. car insurance)

Pensions plan

10. How often do you use the following modes of payment?

Always Very often Sometimes Rarely Never
Cash

Mobile Money e.g. MPESA

Cheque

Credit Card

Standing Order

Check-offs

11. How do you access information about products and services?

Always Very Sometimes Rarely Never
often
Television

Radio
Bill boards
Posters

Company website
Social Media
Online review and blogs
Referral by a friend

Visit by insurance agent or broker

Through trade fairs

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Any other (please specify)
………………………………………………………………………………………………
………

SECTION B: Methods of Access to Insurance

Please indicate the extent to which you agree with the following statements regarding
methods of accessing insurance products by using a scale of 1-5, where 1=strongly
agree 2=agree 3= fair 4=disagree and 5=strongly disagree. Tick inside the box that
best describes your opinion on the question asked.

1 2 3 4 5
1. I prefer dealing with a broker or agent when buying insurance products

2. I prefer dealing directly with the insurance company when buying

insurance products

3. I would prefer to buy insurance from my bank over brokers or agents

4. I would consider buying insurance products from a SACCO

5. I would consider buying insurance products from a microfinance

institution

6. I am comfortable making payments for products online

7. I am comfortable making mobile payment for products

SECTION C: Promotion and Messaging of Insurance products and services

1. How do you access the internet?

Smart phone ☐ Tablet ☐ Laptop ☐ Desktop ☐ Cybercafé ☐

2. Indicate whether you have an account with the following social media platforms.
Facebook ☐ Twitter ☐ Google+ ☐
LinkedIn ☐ Instagram ☐ YouTube ☐

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 Any other (please specify)
…………………………………………………………………………………………
………

3. How often are you on social media?

Almost always ☐ A few times a day ☐ Once a day ☐
A few times a week ☐ Once a week ☐ Rarely ☐

Please indicate the extent to which you agree with the following statements regarding
products online by using a scale of 1-5, where 1=strongly agree 2=agree 3= fair
4=disagree and 5=strongly disagree. Tick inside the box that best describes your
opinion on the question asked.

1 2 3 4 5
4. I use a wide variety of media to access information

5. I prefer the internet to traditional mainstream media

6. I am more likely to buy a product if it is marketed on social media.

7. I am more likely to buy a product if friends and other users say good
things about it on social media and the internet.

8. I trust what my friends say more than what an organization says

about its products on social media.

9. If an organization has a presence on social media, I am more likely

to buy from them.

10. If I like an organization’s products, I will share its posts on social

media with my friends.

11. If I believe that an organization’s products are bad, I will share this
information on social media.

12. I get all my insurance information online

SECTION D Considerations for purchase of Insurance products and services

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Please indicate the extent to which you agree with the following statements regarding
products online by using a scale of 1-5, where 1=strongly agree 2=agree 3= fair
4=disagree and 5=strongly disagree. Tick inside the box that best describes your
opinion on the question asked.

Brand Loyalty 1 2 3 4 5

1. I am attracted to new and distinctive brands.

2. I am loyal to the brands I choose, and do not switch easily

3. I choose the brands that my friends choose

The Environment 1 2 3 4 5

4. I am attracted to ethically produced goods

5. I buy goods whose production does not harm the environment

Peer Reference 1 2 3 4 5

6. I read product reviews before I make a purchase

7. I find out about new products from my networks on social media

8. I choose products that help me make a statement

9. I buy only those products that my friends like

Pricing 1 2 3 4 5

10. The insurance products are highly priced.

11. Clients do not feel the value for their money due to low-quality
insurance products.
12. The insurance industry does not have a standardized product price.
13. No adoption of technology to enhance purchasing or payments of
premiums
14. There is no regulation on the pricing of insurance products.

Customer Service 1 2 3 4 5

15. Insurance firms have poor customer service.

16. Insurance firms have no feedback channels for clients to voice their
concerns.
17. Insurance firms have poor claim handling and repayments.

**** Thank you for your Feedback****

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