Characterizing electronic insurance services

Insurance as a service was generally characterized in chapter 3.1.3, and the conceptual nature of electronic services was discussed in chapter 4.1.1. As the main focus of this study is on electronic insurance services it is also essential to shortly review the specific nature of electronic insurance services.

In the following sections the nature of electronic insurance services is discussed from two essential perspectives. First, the electronic insurance services are reflected through the IHIP framework. After that, electronic insurance services are classified based on the ear-lier discussion on general service classification and a model of classifying financial services from a strategic point of view.

1 In their model of e-trust for electronic banking Yousafzai et al. (2003, 856) propose perceived security and perceived privacy as main antecedents of e-trust.

IHIP framework perspective

From the IHIP framework point of view, the specific characteristics of insurance and elec-tronic services are somewhat similar (cf. discussions in chapters 3.1.1 and 3.1.3). However, few refining remarks should be made. As to intangibility, it is stated that insurance services possess high level of both physical and mental intangibility. However, all electronic services, although physically intangible, are not necessarily mentally intangible. Buying a camera over the Internet can be considered as an example of physical but not mental intangibility.

Thus, in electronic insurance services mental intangibility is emphasized.

Furthermore, Lovelock and Gummesson (2004) claim that heterogeneity is not fully applicable service characteristic in the electronic context. While I agree with that, my opinion is that insurance products and services are more heterogeneous than simple services, such as buying a camera over the Internet or reading an online newspaper, since insur-ance cover is usually affected by personal customer characteristics (see also chapter 3.1.3).

Thus, I suggest that heterogeneity can be considered as an applicable characteristic of elec-tronic insurance service.

Inseparability of the service production and consumption is neither applicable service characteristic for traditional (physical) insurance services nor electronic services in gen-eral. Thus, inseparability is not a relevant characteristic for electronic insurance services.

From perishability point of view, Lovelock and Gummesson (2004, 31) state that a possibility to record some types of electronic services, such as music or movies, enables the reusing of electronic services. As discussed in chapter 3.1.3, a possibility to reuse a pur-chased insurance cover makes insurance services perishable, to some extent. Combining these two insights, I shall argue that electronic insurance services can be considered perish-able as well.

Classifying electronic insurance services

The above presented discussion referring to the IHIP framework provides a detailed picture about the characteristics of electronic insurance services. However, in order to provide a more comprehensive picture about the essential nature of electronic insurance services, they are classified by referring to the earlier literature discussed in chapter 3.1.1.

The discussion is concluded by applying a three-dimensional cube model on classifying different types of financial services from strategic point of view to the scope of this study (Järvinen, Lehtinen, and Vuorinen 2003).

In their model Järvinen et al. (2003) have combined the insights of earlier studies on classifying services by attaching customization approach together with service encounter and technology approaches. The model reflects services through three dimensions which comprise: 1) service encounter (extent of physical resources by service provider in service

performance); 2) technology (extent of technology involved in the service process); and 3) service type (whether the service is “standardized”, “partly customized”, or “customized).

All the dimensions are ranging from “low” through “middle” to “high” in terms of their extent.

Even though the cube model is developed for the context of financial services, it is not applicable for the purposes of this study as such. As customer-friendliness is one of the key phenomena of this study customers’ insights are taken into account also in the clas-sification of electronic insurance services. In this regard, the cube model has to be refined according to the following remarks.

First of all, service encounter is not distinctively examined in this study. Services are often seen as being produced and consumed simultaneously. This is especially the case in the context of electronic services since customers’ operations are based on self-service logic. Fol-lowing the IHIP framework, the above presented statement refers to inseparability (i.e.

simultaneity) of service. On the other hand, service production and consumption might be considered as two different phases of service as well (Järvinen et al. 2003, 776). Since the focus of this research is not on examining neither service production nor service con-sumption distinctively, but it is on investigating the service environment in which the overall service performance occurs, service production and service encounter are considered as one entity, namely, service performance.

Regarding this, Chase (1978) has suggested that service performances can be classi-fied according to the extent of customer contact required in service delivery. Due to the highly intangible (both physically and mentally) nature of electronic insurance services the proportion of tangible elements and physical resources, such as presence of service personnel, in service performance is particularly low. Hence, the extent of customer contact in insurance service performance is high. On the other hand, as Järvinen et al. (2003, 779) point out, Internet-based service supported by call center services, can be perceived rather as middle touch than high touch services since there is physical interaction between the customer and a representative of service provider to some extent. Based on the notions of Chase (1978), Kotler (1980; 2008), and Järvinen et al. (2003) the first classification di-mension for electronic insurance services is suggested to be the extent of customer contact (touch) in service performance (from “low touch” to “high touch”).

Second, in this study electronic services are the focus of attention. Although the cube model also reflects the electronization of services, in this study no other than electronic services are examined. Therefore, the technology dimension of the cube model is irrelevant, and thus, it is not examined in this study.

Instead, one of the most crucial features of insurance services in both physical and elec-tronic environments is that they are used only occasionally. For instance, when compared to certain banking services (i.e. paying bills etc.), which might be used even daily,

insur-ance services are often used only a couple of times a year. As Grönroos (2000, 49–50) has suggested, services can be classified according to their frequency of use (discretely/continu-ously rendered services). Thus, following and applying the insights of Grönroos (2000) the second classification dimension for electronic insurance services, and naturally insur-ance as a service in general too, is named according to the extent of the frequency of use (from “low frequency” to “high frequency”).

And third, customization is discussed as a discouraging characteristic of electronic services in general from customers’ point of view. However, the emphasis of this study is not on investigating the customization of the (electronic) services distinctively. Thus, customization dimension of the cube model was found somewhat irrelevant for the scope of this study.

In order to describe customers’ attitude towards insurance services in general, it can be stated that insurance does not arouse any particular interest or emotion among customers.

Instead, insurance as a service is usually perceived as a more or less compulsory matter by the customers, which just has to be taken care of. Customers are rather interested in, for instance, their leisure-related affairs, such as traveling, hobbies, culture etc.

In the field of consumer research, there has been discussion about the extent of involve-ment of customers (e.g. Rotschild 1984; Kapferer and Laurent 1985a; Kapferer and Lau-rent 1985b; Dahlén, Rasch, and Rosengren 2003). Originally the construct was related to products and advertising, but my opinion is that it can be discussed in case of (insurance) services just as well. Involvement refers to the “customers’ state of motivation, arousal, or interest in getting themselves familiar with a certain product or service, and it appears through types of searching, information processing and decision making” (Rotschild 1984, 217). In their recent study on consumer responsiveness to marketing communica-tion Heinonen and Strandvik (2005, 190) have taken a more extensive approach to the topic by discussing about relevance that indicates the extent of customer’s commitment to a certain service provider as well as his involvement to a certain product category. However, as insurance services (and products) are of the focus in this study, more narrow approach embracing the involvement of the customers in insurance services is preferred.

Earlier research has suggested five antecedents for determining the involvement, namely: 1) personal importance of the product, 2) perceived importance of negative con-sequences of a mispurchase, 3) subjective possibility of a mispurchase, 4) hedonic value of the product class, and 5) perceived sign value of the product class. The involvement is usually described through two dimensions: high or low. Following the generally acknowl-edged definition of involvement by Rotschild (1984) high involvement indicates custom-ers’ high levels of interest, motivation and arousal towards a certain product and/or service whereas low involvement indicates the opposite situation. In order to limit the discussion on involvement in this study, it is not considered in its extensive meaning through the five

antecedents but it is considered from the perspective of its above presented generic definition by indicating the extent of the interest of the customers only. In this regard, the third classifi-cation dimension for electronic insurance services indicates the extent of the involvement by the customers in relation with (electronic) insurance services (from “low involvement”

to “high involvement”).

After introducing the most crucial classification dimensions elements a cube model for classifying electronic insurance services is proposed in Figure 10. As discussed above the model is based on the logic introduced by Järvinen et al. (2003), which adapted to the purposes of this study.

To conclude, the black colored area on the lower right corner illustrates my insight into how insurance as a service can be classified in electronic service environment. It is re-flected by low involvement by the customers, low frequency of use, but on the other hand, high customer contact because customers are, according to the self-service logic of Inter-net-based services, basically using the services to the extent their skills enable them to use them. A grey area on the left side of the black area describes the notion of Järvinen et al.

(2003) that electronic, Internet-based, services supported with, for instance, call center services are rather considered as middle touch than high touch services.

High Frequency

of use

Low Performance

(touch)

Involvement High

Low High Low

FIGURE 10. APROPOSED MODEL FOR CLASSIFYING ELECTRONIC INSURANCE SERVICES (ADAPTED FROM

JÄRVINEN ET AL. 2003, 787)