Soh, Boon Heng
(2021)
Gender, social behaviour and other corollary motivations and the purchase of endowment plans.
[Dissertation (University of Nottingham only)]
Abstract
The main thrust of this project was to examine what motivated people to consider and own endowment insurance policy. The usual approach was that this product from the insurance industry was sold rather than bought because the product was usually considered expensive on the basis of premium per dollar of sum assured and was frequently misunderstood. In addition to that, it was also considered a pariah of the investment world because of its low returns of about 3-4% compared to other investments like stocks, bonds and alternatives like real estate other real property that was considered “sexier”. The reality, however, was that the pariah was, upon further evaluation, considered quite the loyal guard dog.
The endowment insurance product basically gave, admittedly a “low” returns, but it came with much less risk such that the risk adjusted returns when compared to the other “sexy” investment products was fairly decent, especially when prevailing savings interest rates were low, like what we experienced in Singapore over about 15 years where the savings rate of interest was less than 1% per annum (Economics, 2020), which made 3-4% really attractive if one was unwilling to take market risk.
This study attempts to understand what causes individuals to invest in an instrument that evokes such confusion. Is it an insurance policy, or is it a savings plan? It is both, and but for the efforts of insurance salespeople would have been largely ignored and perhaps least desired for inclusion into any investment portfolio, and much less insurance portfolio.
So this study reached out to investigate if gender and other demographics would excite the consideration to engage in savings and hence consider endowment plans. We looked at what life experiences would evoke interest in insurance, and hence perhaps also consider endowment plans. Because of the lack of preceding studies and the scarcity of even the mention of “endowment insurance”, we are probably at the cusp of a new area of research.
The results of the analysis was, honestly, not what we had expected, and there were lessons learnt which will be further discussed at the findings segment of this report.
Many questions still remain unanswered, and many aspects of this research needs further clarification and follow up study, but the findings from these studies will help us understand human financial motivations better, and perhaps contribute further to the study of behavioural finance. We also hope that insurance companies will, upon understanding why people would buy endowment products, design a more beneficial product, clearer in its function, that would be an indispensable instrument in any investment/insurance portfolio.
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