Islamic Motor Vehicle Insurance Acceptance Among the Sarawak Native Community

By Masita Hassan, Mahani Abdu Shakur and Hamsiah Sanusi

Introduction

Sarawak has one of the fastest growing populations in Malaysia. According to the Fifth Malaysian Development Plan, Sarawak 's population growth rate is estimated at 2.7% each year. Sarawak is also home to a variety of ethnic groups such as Malay, Chinese, Iban, Bidayuh, Melanau, Kelabit, Kenyah and Kayan, amongst other minorities. Given the population growth and the variety of ethnic groups in Sarawak, it is interesting to examine the acceptance of the Sarawak native community towards purchasing Takaful products.

According to Takaful Malaysia, there are many Malaysian natives who are purchasing the Takaful Motor Vehicle plan for their vehicles. Thus there is scope for a study to be carried out to identify the factors that deter these people from purchasing this product and also to look at how to improve services in order for current clients to remain loyal to the product. This article will reveal the possible factors influencing the Sarawak natives community in purchasing Takaful motor cover.

Methodology
100 questionnaires were used as research instruments and distributed randomly to respondents from Kuching, Bau, Kota Sentosa, Kota Samarahan, Sarikei and the Sibu area (see Table 1). A number of respondents were then interviewed to obtain a further insight into certain statements they made in their questionnaires. However, only 80 questionnaires were returned and usable for the study. A reliability test was conducted as a precautionary measure to ensure the consistency and dependability of the questionnaires, as well as to avoid bias among the respondents. With a Cronbach Alpha reading of 0.849, the questionnaires were reliable enough as compared to the 0.6 standard.

Table 1: Questionnaire distribution

Findings and discussion
Table 2 below shows the demographic findings of the respondents. The discussion of these findings is based on those respondents who were currently consumers of Takaful products.

Table 2: Demographics

The 26 respondents who owned a Takaful motor vehicle policy were then asked to provide their main reason for purchasing the product and to make a few statements relating to these reasons for obtaining the product. Table 3 reveals these general findings.

Table 3: Reasons to purchase

In a broad spectrum, the fact that a product made it easy to claim seemed to be the most popular reason for the respondents to purchase a Takaful product, followed by belief in the product. “Easy to claim” means that whenever the policyholder made a claim, the responsible officers processed the claim promptly and without unnecessary hassle. “High confidence” means that the policy of the Takaful product will provide good coverage for their vehicle. Respondents who were interviewed said that they were confident they would not be cheated if they purchased Takaful products.

There was only a slight difference between the easy payment factor and the online renewal, and promotion seemed to be the least important factor in purchasing a product.

Table 4: Reasons to consume

Table 4 shows the findings relating to the reasons why the respondents used auto Takaful. It reveals that 18 respondents (69%) agreed with the statement that they consumed the product because Takaful is an Islamic based insurance. On the other hand, two respondents (5%) did not agree with this statement, and six (23%) were unsure with the statement. Looking at the cross-tabulation in Table 5, it can be seen that the majority of the respondents (58%) who agreed with the statement were Muslim, but most of the unsure category (12%) were Christian. It is believed that Muslim consumers prefer to purchase Islamic based products to ensure that they are physically and spiritually practicing the Islamic teachings.

Table 5: Cross-tabulation between religion and Takaful product acceptance

Location is another strong factor that affects the respondents in purchasing the product. Table 4 reveals that 69% of respondents agree that location plays an important role for them in purchasing the product. The cross-tabulation in Table 6 reveals that 10 out of 14 respondents who live in Kota Samarahan consume the product because there is a branch available in the heart of Kota Samarahan. Furthermore, currently no other insurance company exists in Kota Samarahan, leaving them with almost no other choices to insure their motor vehicles. The branch availability makes it easier for them to complete any Takaful transactions. The converse scenario is in evidence in Bau, where 11 out of a total of 15 respondents did not consume Takaful since there is no branch available at Bau. Thus location seemingly plays an important factor in influencing individual decisions to purchase or consume a product or services.

Table 6: Cross-tabulation between location and reason to purchase Takaful

The authors are from the Faculty of Economics and Business, UNIMAS, Sarawak. Tel: 082 679261, 679262; fax: 082 671794; email: hmasita@feb.unimas.my, asmahani@feb.unimas.my.