Assessing the Insurance Industry in Mauritius

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The Mauritian insurance industry has significantly changed over the last few decades with the emergence of many new firms. Vittas (2003) describes the Mauritian insurance industry as one which is relatively well-developed and whose success underscores the benefits of operating in an environment of macroeconomic stability and sound regulation, free from the pervasive premium, product, investment and reinsurance controls that have bedevilled the insurance markets of so many developing countries around the world.

Though being a small island, Mauritius includes a large number of insurance companies which are either local or international ones. According to the African Fixed Income Guide Book (2006), around 22 insurance companies operate in the country. Some examples include Mauritian Eagle Insurance, Albatross Insurance, Life Insurance Corporation of India amongst others. Vittas (2003) points out that, despite the large number of insurance companies in Mauritius, the sector is characterised by a highly oligopolistic structure with a few companies holding the lion's share of the market. The three largest groups incorporate SICOM, Swan/Anglo Mauritius and BAI, representing around two-thirds of total industry assets, with SICOM being a state-owned company (afdb.org, 2006).

Moreover, insurance companies are major participants in the contractual savings market. As noted by Vittas (2003), Mauritius belongs to a select group of developing countries where contractual savings (i.e., savings with insurance companies and pension funds) exceed 40 percent of GDP and represent a major potential force in the local financial system. Despite being claimed as highly concentrated, the insurance industry is a competitive one, operating with high efficiency and reasonable profitability. Vittas adds that the profitability of the insurance sector is healthy, but not excessive.

Although the Mauritian insurance sector is seen as being well-regulated and policyholders feel that their money is in safe hands (Jagoo, 2011); this industry suffers from considerable cyclicality which is linked to the impact of cyclones, the conditions prevailing in financial markets and other cause of large but infrequent losses (Vittas, 2003). However, Vittas argues that sensible use of reinsurance facilities may protect local companies from this problem. It is important to mention here that the insurance companies are regulated and supervised by the Financial Services Commission (FSC) through the Insurance (Amendment) Act 2007.

The services provided by the Mauritian insurance companies are life insurance, personal insurance, motor insurance and general insurance. The figure below shows the different insurance policies in Mauritius.

Breakdown on general insurance policies by class

Source: FSC, 2009

Info2Finance (2010) states that the most significant insurance in Mauritius is motor insurance and adds that life insurance is favoured by tax incentives.

Consumer Buying Behaviour of Insurance

Consumer behaviour refers to how individuals make decisions to spend their available resources (time, effort, money) on consumption-related items (Schiffman and Kanuk, 2006). It also includes the study of what individuals buy, why they buy, when they buy, where they buy, how often they buy and the usage frequency. Peter, Olson and Grunert (1999) stated that consumer behaviour is dynamic which involves exchange and interaction between affect and cognition, and behaviour and environmental events.

There are basically four types of buying behaviour which is determined by the level of involvement in the purchase decisions; and the importance and intensity of interest in a product in a particular situation: Routinised Response Behaviour, Limited Problem Solving, Extended Problem Solving and Impulse Buying. The buying behaviour faced by insurance customers are extended problem solving as purchasing this product requires significant information and a great deal of conscious effort.

It is vital to mention about consumer behaviour as Hawkins and Mothersbaugh (2007) argue that all marketing decisions are based on assumptions and knowledge of consumer behaviour. Furthermore, understanding consumer behaviour is critical to marketers as it helps in providing value and customer satisfaction; segmenting the markets accordingly; effectively target customers; position the product; create competitive advantage; and improving marketing strategies to devise new product or improve an existing one (MarketingTeacher.com, 2011). To better understand consumer behaviour, it is important to see how consumers go about in their purchase behaviour as illustrated below.

According to Rohan (2010), there are three types of influences of consumer behaviour namely:

Situational Influences

Pascale et al. (2007) suggest that consumers behave differently depending on situation and situational influences are categorised into five dimensions: Purchase Task, Temporal Effects, Antecedent State, Physical and Social Surroundings.

Psychological Influences

Psychological influences, termed as inferred internal influences, are factors within the individuals on which companies have no control. The psychological factors comprise of motivation, perception, personality, lifestyle and learning.

Social Influences

Rashotte (2008) defines social influence as change in an individual's thoughts, feelings, attitudes, or behaviour that result from interaction with another individual or a group. Rashotte further concurs that social influence is the process by which individuals make real changes to their feelings and behaviour as a result of interaction with others who are perceived to be similar, desirable, or expert. Social influences include factors like reference group, social class, family, role and status, and culture.

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