Electronic and Traditional Word of Mouth as Trust Antecedents in Life Insurance Buying Decisions

Electronic and Traditional Word of Mouth as Trust Antecedents in Life Insurance Buying Decisions

Amron Amron (Dian Nuswantoro University, Semarang, Indonesia)
Copyright: © 2018 |Pages: 13
DOI: 10.4018/IJEBR.2018100106
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This research was conducted to examine the effects of electronic word of mouth (eWOM) and traditional word of mouth (tWOM) on the level of consumers' trust in deciding to buy life insurance products in Indonesia. It involved 430 respondents who were online community members in two of Indonesia's largest cities; Jakarta and Surabaya. Surprisingly, this study found that eWOM was a more dominant predictor than tWOM in influencing trust. The other research result is that the trust variable influences consumers' buying decisions in positive and significant ways. This research recommends that managements of life insurance companies should build promotion policies based on trust so that the consumer decision level to buy life insurance products increases. The trick is for company management to identify and develop practices that improve the roles of positive eWOM and tWOM, so as to increase the level of consumers' trust to buy.
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Large market potential must be balanced with an effective marketing strategy. In the rapidly evolving era of information technology today, companies must be able to penetrate the market by maximizing the role of information technology. Recently, various marketing strategies using information technology have developed very rapidly, such as in the form of the electronic media of word of mouth, commonly referred to as eWOM (Allsop et al., 2007; Christodoulides et al., 2012). According to Hennig-Thurau et al. (2004), the service industry is very dependent on word of mouth (WOM) because the nature of service cannot be consumed directly in the beginning. Service consumers do not feel the immediate benefits at the time of buying (Zeithaml, 1981). Hence, consumers need information from other consumers who have experience consuming the services (Buttle, 1998; Bayus, 1985). One of the ways to disseminate this information is through electronic word of mouth (eWOM) (Hennig-Thurau et al., 2004). According to Hennig-Thurau et al. (2010) and Shin et al. (2014), eWOM is a positive or negative statement made by one customer to another customer about the performance of a product or company via online media. A customer statement may be positive or negative depending on the level of experience during the interaction with the service or the service provider company. When the eWOM conveyed is positive, the company will benefit from the information. Otherwise, it will be impaired when negative eWOM is delivered by the consumer (Hennig-Thurau et al., 2004). According to Matute et al. (2016) and Prasad et al. (2017), eWOM plays a very significant role in the level of customer trust when deciding to buy a service product.

One of the service businesses currently developing in Indonesia is the life insurance business. Over the last ten years, this business has seen a significant increase in premium income. The average increase in premiums in the period from 2005 to 2015 was 9% (OJK, 2016). However, an increasing premium was occurred in period of 2015-2016. In 2015 was reported the total premium of US$10.2 million, and in 2016 was reported the total premium of US$12.9 million, it increased up to 26% (OJK, 2016). The increasing amount of premiums was also offset by an increase in the number of life insurance companies. In 2011, there were 45 insurance companies in Indonesia. In 2016, the number of insurance companies increased to 52 (OJK, 2016). However, the increase was still less significant when viewed from the level of consumer participation in buying life insurance products, which was only US$54 per person per year. This is not comparable with the huge population of Indonesia, which is approximately 240 million people (BPS, 2010). Therefore, further research is necessary to reveal the factors that influence decisions to buy life insurance services in Indonesia.

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