A Research Proposal

FILIPINO PERCEPTION

ON

LIFE INSURANCE POLICY

A project submitted in Partial Fulfilment of the

Requirement

For the Degree

Masters of Science in Business Administration

Prepared by:

Titus Keith U. Caddauan

Submitted to:

Dr. Billy Siddayao

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Introduction

As we grow older and start to work, we become aware of the

importance of income. We know that most men work because

they have to earn income for their families. Money is an

essential element in satisfying our basic needs such as

food, shelter, clothing, education, and medical care.

Clearly, the life of a man has an economic value, to his

family and dependents, which is represented by the support

he gives them. While a man is strong and healthy, while he

is working and earning an income, he and his family continue

to enjoy the necessities and comforts of life. As long as

this man can keep working and has this earning power and

income, his familys daily needs are provided for. However,

drastic times can be just around the corner. A man's

disability or death can leave immense effect to his family,

especially their financial needs. In just a blink of an eye

anything that has been customary would halt. It is of these

times life insurance policies can be so beneficial.

Life insurance policy(or commonly known as life insurance)

is a contract between an insured (insurance policy

holder) and an insurer or assurer, where the insurer

promises to pay a designated beneficiary a sum of money in

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exchange for a premium, upon the death of the insured

person. Depending on the contract, other events such

as terminal illness can also trigger payment. The policy

holder typically pays a premium, either regularly or as one

lump sum. The insurance policy is generally an integrated

contract, meaning that it includes all forms associated with

the agreement between the insured and insurer. (Wollner

KS,1999)

With its economic financial significance, life insurance

policies play as an indemnification for the loss of the

economic value a man can give. Because of the uncertainty of

life and the consequences it may leave, many financial

advisors recommend availing life insurance policies as early

as possible, especially when you're young. However, young

adults arent likely thinking about their need for a life

insurance policy. In fact, it may be the furthest thing that

will come to their mind. In today's practice, employers may

offer it but they can opt out, not wanting to spend a few

pesos a month.

Truth is, most people rarely consider life insurance while

theyre in their twenty's because they mistakenly believe it

is only something their parents buy to protect themselves in

case one of them dies and the surviving spouse is saddled

3
with paying all the expenses. With this aspects of life

insurance policies, the researcher aims to look into the

perceived effects of availing it by young employees.

Review of Related Literature and Studies

This chapter presents the review of related literature to

identify and understand the implications of different issues

related to consumer behavior and life insurances from

foreign and local sources. The findings of the past

literature relating to consumer behavior especially the

young adults are not many. Only few studies towards the

behavior of young adults to insurance policies are carried

out in the Philippines. This review of literature enabled

the researcher to identify sources for the present study.

The literature and studies are collected from research

articles, company journals, independent reports and

projects.

Foreign

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Life insurance for the young single adult.

If youre young, single, and think you dont need life

insurance, you may want to reconsider, especially if youre

paying off student loans. According to a June 26, 2013,

forbes.com article, student debt load topped $1 trillion as

two-thirds of students graduate with debt. There are nearly

37 million student loan debt borrowers in the U.S. currently

repaying a student loan, according to The Federal Reserve.

Thats a whole lot of debt, some of which you may carry. If

you were to die before your debts were paid off, who do you

think will have to carry that burden? Well, depending on the

type of debt and its terms, if you had a co-signer, such as

your parents or grandparents, it will likely be them, or

possibly their estate if they are no longer living. Think

about that before you say youre young and single and

couldnt possibly have a need for life insurance. You may

need it just as much as someone raising a family. And

although you may not be married yet or, perhaps, like an

increasing number of young Americans, marriage is not part

of your plans for the foreseeable future; your death would

still have a financial impact on your loved ones. Plus,

there are actually a number of benefits you gain by

purchasing life insurance at a young age. First, if you were

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to buy life insurance today, it would likely ensure that you

would be eligible for insurance in the future even if the

state of your health changes. Second, the older you get the

more expensive insurance becomes. However, the opposite is

usually true if you buy now. The cost of permanent life

insurance essentially 'freezes' at the rate when you first

purchase it, as long as you continue to pay the premiums.

Look ahead. Who knows what college financing will look like

in the future? With permanent life insurance in place, you

may be able to take a loan against the cash value of the

policy to help your kids or grandkids with their education.

Its hard to imagine now, but you just never know.(2015 New

York Life Insurance Company, New York, NY)

According to New York Life Insurance Company it is best to avail

of a life insurance policy as early as possible because it would

ensure the eligibility for insurance in the future whether the

state of your health changes or not; and it is also cheaper.

The Complete Guide to Life Insurance

Forbess LearnVest did a nationwide study on life insurance in

America that showed 57% of respondents owned life insurance but

only 28% were extremely confident about their understanding of

life insurance. 66% of study respondents had a poor understanding

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of how accessing payouts on their life insurance worked.(Karla

Lant, The Simple Dollar,2015)

Forbes' study according to Karla Lant revealed that not all

respondents who owned an insurance policy actually know much

about what they are availing of. The study only shows that the

respondents had a poor understanding of their life insurance

policies.

Security in an uncertain world: Life insurance and the emergence

of modern America

This article analyzes the creation and expansion of the life

insurance industry through the eyes of the people who both

directly and indirectly influenced its growth. On the one hand, I

examine the businessmen who created this new industry: how they

took an existing British model, reinvented it, and adapted it to

a new environment in the United States. In the process, they were

forced to combat moral hazards such as gambling policies, murder,

suicide, and insurance fraud, confront legal barriers to the

industry's growth, expand their limited actuarial knowledge,

respond to external shocks such as economic recessions, the Civil

War, and emancipation, meet the challenges of competition both

from within the industry as well as from other industries such as

savings banks, and most importantly, gain public acceptance. At

the same time, I also examine life insurance through the eyes of

those outside the industry- the regulators who saw practices that

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needed to be controlled, potential rivals such as savings bank

entrepreneurs, and the people actually choosing to buy or not to

buy life insurance. By the second half of the nineteenth century

middle-income Americans would form the core of the life insurance

market, and life insurance would become a defining characteristic

of what it meant to be a member of the middle class. Insurance

promoters recognized that the main appeal of their product was in

compensating for the breakdown of traditional community safety

nets that occurred as a by-product of urbanization. Life

insurance companies thus marketed protection of a lifestyle to

the emerging middle class-people with economic and social

aspirations but who were dependent on the existence of a regular

income. The industry understood that this growing segment of the

population faced opportunities and anxieties that made them

unique among Americans. Life insurance thus appealed not to their

status consciousness, but to their fears. And it doing so, it

allowed the middle class to take more risks during their

lifetimes since their families were now protected from the risk

of death.(Sharon Ann Murphy, 2005)

Sharon Murphy's study revealed how life insurance policies can be

a vanguard of a person's family from drastic times like financial

instability. The study also shows that respondents became more

comfortable of whatever risk they'll encounter because of the

peace of mind the insurance policy they believe can give.

Local

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Filipino perception on life insurance

Life Insurance is very important, both in the lives of every

Filipino, and in the development of our country. It is very

important in the lives of every Filipino because it protects

their loved from financial loss whenever an insured suddenly

passes away. Life Insurance provides economic security to those

people who are insured. Life Insurance serves many purposes. It

gives the family continued income even after the insured retires

from work. It also provides the family payments in case the

family has load and debts. Even though life insurance is very

significant to both the people and the Philippines, only 11 % of

the total population of the Philippines is insured compared to

other developed countries.(Byron I. Tamayo,1997)

Byron's study stressed out the importance of life insurance

policies especially to Filipinos wanting to secure the future of

their families. However, almost of the Filipino people doesnt

have one. His study showed that only 11% of the total population

as of the year 1997 is insured.

Theoretical Framework

Life insurance is not one of those things that anybody likes

to talk about. This is doubly true for young professionals

who are kick starting their careers; when you feel on top of

the world, your inevitable demise is not exactly top of

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mind. Most young adults laugh at the idea of life

insurance, but there is one simple rule to determining

whether or not life insurance is worth it: if you have

anyone in your life who will be severely affected

financially by your death, then life insurance is a good

investment. Still, with all the facts about life being

uncertain, life insurance being an embodiment for

indemnification of loss, few are availing it. With this

study, the researcher aims to know the factors that affect

young Filipino adults in deciding to avail or not life

insurance policies.

Statement of the Problem

The study focuses on the factors that affect the young

Filipino adult in deciding to avail life insurance policies

in the Philippines. It is mainly concerned with the

perceptions of young working adults from Tuguegarao City.

Specifically it seeks to answer the following:

1. What is the profile of the respondents in terms of

sociodemographic variables?

a) sex

b) age

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 c) civil status

d) employment status

e) number of dependents

f) overall income

2. How do the sociodemographic variables of the

respondents affect their decisions in availing life

insurance?

3. What is the level of willingness by the respondents in

availing a life insurance policy?

4. What are the respondent's perceived effects in availing

life insurance?

Significance of the Study

The findings of this study will redound to the benefit of

society considering that life insurance is indeed one

practical way to ensure the comfort of ones family in their

absence. Through this study, young people will know the

essence of being financially prepared on whatever fortuitous

event that may come. For the researcher, the study will help

him understand the behavior of young people towards life

insurance policies and formulate strategies to educate them

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about financial literacy and preparedness. The study can

also be a great help for future researchers with similar

undertakings for formulation of product marketing strategies

especially insurance agents.

Scope and limitations of the Study

This study was conducted to determine the perceived effects

of some socio-demographic variables of the respondents like:

sex, age, civil status, employment status, number of

dependents and overall income to their decisions on the idea

of availing life insurance policies. The study will focus on

the young working adults in their early twenty's,

specifically, twenty to twenty-five years of age, of

Tuguegarao City. Thus, the researchers findings will only

be a representation of the young working adults on the said

location. The study will not cover marketing strategies that

will be beneficial to insurance agents nor conducted for the

benefit of the different insurance companies in the city.

The study will be of educational purposes only and any

materials or articles found in this study do not intend to

breach any copyright clause.

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Definition of terms

Actuarial knowledge. As used in the study, actuarial

knowledge means the measurement and management of risk and

uncertainties.

Drastic times. As used in the study, drastic times mean

extreme and undesirable circumstances or situations.

Emancipation. As used by the researcher emancipation means

the fact or process of being set free from legal, social, or

political restrictions; liberation

Earning power. As used by the researcher earning power is

the ability to generate income or profit.

Income. As used in the study income is money received,

especially on a regular basis, for work or through

investments.

Insured. As used in the research insured means the insurance

policy holder or the person availing the insurance policy.

Insurer. As used in the study insurer is a person or company

that underwrites an insurance risk; the party in an

insurance contract undertaking to pay compensation.

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Premium. As used in the study it is the specified amount of

payment required periodically by an insurer to provide

coverage under a given insurance plan for a defined period

of time. The premium is paid by the insured party to the

insurer, and primarily compensates the insurer for bearing

the risk of a payout should the insurance agreement's

coverage be required.

Permanent Life Insurance. As used in the study permanent

insurance provides lifelong protection, and the ability to

accumulate cash value on a tax-deferred basis. Unlike

term insurance, a permanent insurance policy will remain in

force for as long as you continue to pay your premiums.

Redound. As used in the study redound means to contribute

greatly.

Sociodemographic. As used by the researcher it means of,

relating to, or involving a combination of social and

demographic factors.

Vanguard. As used in the study vanguard means some sort of a

shield or protection.

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Research Design

The study will use the descriptive survey method. The method

was used to poll or question on a large group of employees

in Tuguegarao City. This method is quick and efficient but

in-depth knowledge is sometimes obtained. Obtained data from

the survey will be carefully analyzed to produce a good

representation of the population on which the conclusion

will be drawn.

Sampling Techniques

The sampling techniques that will be used to facilitate the

study are absolute frequency sampling and mean.

Participants of the study

The participants of the study will be young employees who

are working in Cagayan State University, University of Saint

Louis, International School of Asia and the some private

entities in Tuguegarao City. The age range of the employees

under study will be twenty to twenty-five years old. There

shall be a maximum of 20 employees for both private sectors

and government agencies as participants to this study.

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Instrumentation

Survey Questionnaire

Please provide information with confidence. Please be

assured that this will be confidential.

Name:______________________________________________

Age:______ Sex:_______ Civil Status:_______

No. of dependents(if any):_______

Please check the boxes in answering the following questions.

1. What is the nature of your employers business?

Private
Public
2. What is your employment status?
Regular/Permanent
Casual
Contractual/Job order
3. What is the range of your income per month?
P10,000 and below
P10,001 to P15,000
P15,001 to P20,000
P20,001 to P25,000
P25,001 and above
4. How much is your knowledge about Life Insurance
policies?(1-none or limited, 10-very knowledgeable)

1.
2. 3. 4. 5. 6. 7. 8. 9. 10.

5. Are you currently insured by a life insurance policy?

Yes No
If Yes, what company?
SSS GSIS Others(please specify)________

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6. Aside from insurance policies required by law(SSS,GSIS)
are you insured of another life insurance policy from
other companies?
Yes No
7. Would you still avail a life insurance policy even if
not required by law?
Yes No
8. What is the effect of availing a life insurance policy
in you?
No idea
Burdensome
Just right
Secured

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Data Gathering Procedures

The survey will be conducted to CSU, USL, ISAP and some

private entities in Tuguegarao City. Questionnaires will be

floated either through Email or phone interview or directly

administered by the researcher. The said types of procedures

will give the flexibility the researcher needs in the manner

of gathering the data for study. The procedures will also

guarantee that data are gathered with ease according to the

respondents convenience.

Data Analysis

A total of forty respondents were subject to the

researchers study. Seventeen of them were female and

twenty-three are male. The data gathered were summarized

below:

Sex

Male-23 Age

Female-17 20 yrs old-2 Civil status

21 yrs old-0 Single-37 Nature of

22 yrs old-3 Married-3 employment

23 yrs old-10 Private-16

24 yrs old-16 Public-24

25 yrs old-9

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Employment status

Regular/permanent - 29 Contractual - 7 Casual - 4

Range of Income per month a - 3

a 10,000 below b - 6
b 10,001 to 15,000
c - 12
c 15,001 to 20,000
d 20,001 to 25,000 d - 16
e 25,001 above
e - 3

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All of the respondents are currently insured by a life

insurance policy that is required by law-that is either SSS

or GSIS. Four of the participants are also insured by

another life insurance policy aside from SSS or GSIS;

thirty-six of them were not.

Upon inquiry, only four of the respondents were willing to

avail of a life insurance policy even without the

requirement of law, and the rest werent. Of the total

respondents, eighteen of them believed that they are already

secured by their current life insurance policy, seventeen

answered just right and the rest believe that these

insurance policies are burdensome.

Bibliography

Wollner KS. (1999). How to Draft and Interpret Insurance

Policies. Casualty Risk Publishing LLC.

2015 New York Life Insurance Company, New York, NY. An

article on life insurance policy for young adults.

Karla Lant, The Simple Dollar,2015. The complete guide to

life insurance.

Sharon Ann Murphy, 2005. Security in an uncertain world:

Life insurance and the emergence of modern America

Byron I. Tamayo,1997. De La Salle University Library.

Filipino perception on life Insurance.

Porter K. (2007). The Legal Environment of Insurance, 5.17.

AICPCU.

Hadland v. NN Investors Life Ins. Co., 24 Cal. App. 4th

1578 (1994)

St. Paul Fire & Marine Insurance Co. v. Albany County

School District No. 1, 763 P.2d 1255 (Wyo. 1988).