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Adoption of Web-Based Applicationsin the Financial Sector:

The Case of Online Insurance

Teuta Cata

Sang M. Lee

ABSTRACT. Implementation of new technologies is a never-ending

process that attempts to secure the best available tools to accomplish or-ganizational goals. Previous studies on technology implementation dis-cuss the technology adoption process and the multiple factors that are

important for making this process successful. This study focuses on theadoption of web-based applications in the insurance industry. An

in-depth investigation of relevant literature on the technology adoptionprocess and data collected from insurance companies helped us identifythe success factors for online insurance. Relevant factors include infra-

structure flexibility, website availability, the degree of business integra-tion, and company age. [Article copies available for a fee from The Haworth

Document Delivery Service: 1-800-HAWORTH. E-mail address: Website: 2006 by The

Haworth Press, Inc. All rights reserved.]

KEYWORDS. Web-based technology adoption, online insurance, tech-nology innovation model, exploratory study

Teuta Cata is affiliated with Northern Kentucky University, Highland Heights, KY(E-mail: [email protected]).

SangM. Lee is UniversityEminentProfessor, Firstier BankDistinguishedProfessor,President, Pan-Pacific Business Association, University of Nebraska-Lincoln, NE

(E-mail: [email protected]) .

Journal of Internet Commerce, Vol. 5(2) 2006Available online at http://www.haworthpress.com/web/JICOM 2006 by The Haworth Press, Inc. All rights reserved.

doi:10.1300/J179v05n02_03 41
http://www.haworthpress.com/http://www.haworthpress.com/web/JICOMhttp://www.haworthpress.com/web/JICOMhttp://www.haworthpress.com/


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INTRODUCTION

Electronic commerce (e-commerce) hasbeen defined as any economicactivity conducted viaelectronic connections(Wigand, 1997). Electronicbusiness (e-business) is generally considered as a broader concept thane-commerce. For example, Alter et al. (2001) define e-business as theautomation of business processes and integration of e-commerce applica-tions to organizational strategies, creating a seamless digital organization.Thus, e-business has become an integral competitive strategy of theorganization and its growth has been dramatic. For example, ForresterResearch reported that US online retail sales would reach $172 billionin 2005 and the figure is projected to grow to $329 billion by 2010, an

annual growth rate of 14% during the next five years (eCommerceForecast, 2005).The e-business concept includes not only buying or selling via

websites, but also facilitating communication, information exchange,collaborative work within or external to the organization, electronicdocument transfer, and customer support via telecommunication net-works (Min & Galle, 2001; Phan, 2003). This study is interested in ex-ploring the key factors that encourage organizations to adopt aweb-based technology. According to a previous study (Phan, 2003),an organization can successfully integrate online activities ifweb-based technologies support the organizations activities in fourbroad areas:

Information access and distribution, Work collaboration, Business transactions, Customer care applications.

Web-enabled technologies have changed thementalityof conductingbusiness in the financial markets. Web-based financial firms have re-duced transaction costs by eliminating the traditional expenses and con-veniently delivering their products and services to customers via theInternet (Panko,2001). Recently, the financial industry has been trying tointegrate all online activities at a single point of entry (Chung et al.,2003). Financial portals allow users to access a variety of financial infor-mation such as financial news, product information, stock quotes, etc.,with a single log-on access. Financial portals in the insurance industry do

not only simplify the access of insurers, but at the same time facilitate theaccess of agents, brokers, advisors, and integrate communication acrossthe companys departments.

42 JOURNAL OF INTERNET COMMERCE


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This study focuses on the insurance industry. This is an information-intensive industry, where technology adoption has a significant impactnot only on products and services offered, but also on business strate-gies and the process of core business redesign (Dos Santos & Peffers,1995). In the financial services sector, information technology (IT) ap-plications are very important in enhancing services and expanding thembeyond geographic boundaries. The insurance sector has increased ITspending in their budgets, up to $25 billion in 2004 (Best Review,2004).

There are two primary factors that are forcing insurance companiesto expand their online activities. First, online access reduces costs byproviding a less expensive delivery channel, expanding the existing net-

work of agencies and branches, eliminating paper work, and decreasingthe level of personal interaction that institutions provide through callcenters and branch offices. Second, online access increases customerperception of the level and quality of service, thus creating and enhancingloyalty (Manning, 2003). Nevertheless, the insurance industry has beenslow in pursuing the benefits of the online business model. A variety ofreasons are responsible for this, including the perception of insurance asan individual product (Insurance Finance and Investment, 1999),complexity of the product (Lysiak, 2001), lack of a clear e-businessstrategy (Kim, 2001), and an ongoing concern about the ability ofe-business applications to handle the back-office (Kumar & Hillegers-berg, 2004; Silver, 2001).

WEB-BASED APPLICATION ADOPTION DECISION

AND RESEARCH HYPOTHESES

Innovation and adoption of IT have been extensively discussed inMIS research. The Technological Innovation Model (TIM) proposed byTornatzky and Fleischer (1990) is used in this study as the framework thatbest allows identification of factors that impact the decision for online in-surance. This framework, shown in Figure 1, has been used by a numberof researchers to investigate adoption of various technologies. Adoptionof technologies such as EDI (Chwelos et al., 2001), client-server

(Chengular-Smith & Duchessi, 1999), and Internet (Mehrtens et al.,2001; Premkumar & Ramamurthy, 1995) are influenced by the external,internal, and/or technical factors.

Teuta Cata and Sang M. Lee 43


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The decision to establish a presence on the Internet depends on the or-ganizations strategy. The organizations strategy may be to createlong-term relationships with its customers and build loyalty and brandidentity. The first step to implement this strategy would be by creating aninformative and pleasing website. If an insurance firm wants to use theInternet as a sales vehicle, it can create a transactional website andgenerate new revenues by selling online. Other organizations mayhave dual intentions, developing websites to inform and create rela-

tions with the customers, as well as to sell products/services (King &Gribbins, 2002).

Independent Variables

Many factors are identified in this study as potential determinants fora successful implementation of the web-based applications for an insur-ance firm. A discussion of those factors and respective references fol-low by grouping them in three main contexts suggested by Tornatzkyand Fleischer (1990). All hypotheses presented in this section are inregard to the insurance industry.

Technological Context

Successful implementation of a new technology in an organizationdepends not onlyon the technology that is being adopted,but also on the


OrganizationalContext

TechnologicalContext

EnvironmentalContext

TechnologicalInnovation DecisionMaking

FIGURE 1. Context of Technological Innovation (Adapted from Tornatzky &

Fleischer, 1990)


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readiness of the organization to support thenew IT application. Success-ful adoption of a new technology is a complicated process often spanningmultiple levels. In the case of e-commerce, the process involves (1) theindividual user level and the degree of usersexpertise with IT, (2) the or-ganization level and issues of integrating a new technology with currentbusiness process capabilitiesand other unique organizational characteris-tics, and (3) the industry level with corresponding issues of integrating anew technology with existing systems, or technologies that are comple-mentary with the new technology.

In the context of e-commerce, the most important technological is-sues are those related to IT infrastructure and public network securityand availability. The most complicated factor is IT infrastructure.

IT Infrastructure Flexibility. IT infrastructure is defined as a set ofshared IT resources that include physical infrastructure consisting ofplatform technology (hardware and operating systems), network andtelecommunication technologies, key data and core data-processing ap-plications (Armstrong & Sambamurthy, 1999) and the human infra-structure consisting of knowledge and the capabilities of IT staff (Byrd& Turner, 2000).

The discussion in the information systems (IS) community on thistopic has focused mainly on the means by which IT flexibility bringsstrategic advantage to an organization. Duncan (1995) considers theflexibility of infrastructure to be a resource that allows an organizationto apply new strategic options and new business processes, yieldingcompetitive advantage that competitors find difficult to match. Re-

cently, research on this topic has confirmed that IT flexibility affects thestrategic business alignment and the ability that the organization has toadapt to the dynamic environment (Chung et al., 2003). Therefore, wepropose the following:

H1: Flexibility of an organizations existing IT infrastructure ispositively related to the decision to adopt the web-basedtechnology.

IT Staff Knowledge. Research on IT infrastructure has identified theskills and capabilities of IT staff as the second component of IT infra-structure in an organization (Broadbent & Weill, 1997; Chung et al.,2003). Byrd and Turner (2000) refer to human infrastructure as the

knowledge and capabilities required for effectively managing the IT re-sources within the organization. As a consequence of rapid changes intechnology, organizations and IT departments must create and sustain



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flexible human infrastructure capable of supporting the organization inits strategic decisions. Henderson and Venkatraman (1994) noted thatfirms need flexible and skillful IT employees capable of handling thehorizontal integration of IT rather than the earlier vertical integration.Horizontal IT integration implies that IT is intensively integrated intobusiness processes across organizational functions, thus enabling theorganization to respond quickly to change (Chung et al., 2003). Recentresearch shows a trend that emphasizes more business, interpersonalskills of IT staff (Byrd & Turner, 2001), and a friendly attitudewith cus-tomers (Murnan, 2003), which enables the IT staff to adapt to changingenvironments and have the desired skills to communicate with otherpersonnel within the organization and with e-customers via e-mails,

chat, or phone.

H2: The flexibility of IT staff skills is positively related to thedecision to adopt the web-based technology.

Website Availability. Website availability provides the ability to re-spond to customer requests at any time, or 24/7. Lack of website avail-ability and network downtime are significant factors for web-basedactivities (Awad, 2000) that have a direct impact on website revenues,customer satisfaction and loyalty, company image, etc. The main con-cern of practitioners regarding website availability is evaluating thetrade-off between significant investments in technology needed to

maintain a high level of website availability or accepting a reductionin sales and revenues as a result of downtime. Different industries re-solve the trade-off differently based on industry characteristics. Thefinancial industry perceives high availability as crucial to maintaininga close relationship with its customers.

H3: Website availability is positively related to the decision toadopt the web-based technology.

Website Security. Security issues are critical to e-commerce. Re-search shows that e-commerce sites are very vulnerable to cyber at-tacks. E-commerce companies face risks on many fronts, beginningwith the simple technical risks (viruses and attacks) and continuing to

more advanced risks such as economic risks (sales, value, image loss)andsocietal risks (industrial espionage and cyber terrorism) (Grzebiela,2002). Different industries have different perceptions of both risks and



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threats. The financial industry perceives all types of risk as very impor-tant (Jung et al., 2001),with legal risk, perceivedas themost threatening(Schoder & Yin, 2000). Recent security threats in this industry have in-cludedan increasedvolumeof virus attacks, identity fraud, andan over-all increase in the sophistication of attacks (Slewe & Hoogenboom,2004) which has made financial institutions incur great expenses in pre-venting and stopping these attacks.

H4: The organizations website security capability is positivelyrelated to the decision to adopt the web-based technology.

Organizational Context. Organizations are complex entities that pos-

sess many resources such as financial, human, values, beliefs, reputa-tion, etc. This study explores resources related to organizationalsupporttoward application of a new technology, such as organizational struc-ture, havingan e-business plan, and thedegreeof e-business applicationto the internal business processes.

Organizational Support. Successful innovations in technology, newproducts, and services are usually accomplished in organizations thatconsider continuous innovation a top priority within their overall strat-egy (Amabile, 1998). Innovation and creativity are fostered and moti-vated not only by organizational leaders, but also by the entireorganization. Managers may use different methods to encourage theiremployees to innovate andbring newideas to their companies. Amabile(1998) suggests that motivation is oneof the levers managers shouldap-

ply in order to increase creativity and innovativeness cheaply andquickly. Other tools and methods that organizations are using includesupporting innovative employees with the latest technology available inorder to improve their collaboration, productivity, and knowledge man-agement (Daud & Kamsin, 2004).

H5: Organizational support is positively related to the decision toadopt the web-based technology.

Integration Level. Extensive IT research has been conducted on therelationship between organizational structure and IT. Lucas andBaroudi (1994) believe that the design of IT is shaping the design of or-ganizations. IT creates opportunities for new communication forms

within and across organizations. In the context of financial industry, IThas created new business opportunities unforeseen before for financialand non-financial institutions (Kumar & Hillegersberg, 2004). Adop-



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tion of communicationand telecommunication technologies have madeit possible for financial companies to expand their financial serviceportfolios, access a larger customer base, and allow a variety of non-fi-nancial institutions to participate in the financial service market.

H6: Organizational integration is positively related to thedecision to adopt the web-based technology.

Having a Business Plan. Porter (2001) states that the main issue inadoption of an Internet-based activity is not whether to deploy it, but howto deploy it. Companies should adopt Internet technology to add value totheir activities, to increase their competence, and to sustain their competi-

tive advantage. Ignoring or improperly applying business strategy(Dandapani, 2004) hasdrivenmany dot-coms andestablished companiesaway from the leading edge of their industry, decreased their compe-tence, hastened convergence between rivals, and increased bankruptcies(Porter, 2001). Investigation of e-commerce adoptions suggests thatcompanies that consider the e-business activity as a business process(Grant, 2003) or part of their corporate strategy (Chang et al., 2003),rather than a technical one, have been more successful in this activity.

H7: Established strategic plans for e-commerce are positivelyrelated to the decision to adopt the web-based technology.

Integration to Business Processes. New technologies should be inte-

grated and complement the existing technology and infrastructure of anorganization, as well as be integrated with existing work practices, valuesand beliefs, bureaucratic structure, authority, etc. If an innovation is con-sidered compatible with existing values, beliefs, and work practices, anorganization will be inclined to adopt it (Lee & Baek, 2002; Tornatzky &Fleischer, 1990). In the context of Internet adoption by financial services,the real-time integration of data and applications is considered one of themajor challenges these institutions face today (Kumar & Hillegersberg,2004; Pan & Vina, 2004). Internet applications need smooth integrationwith internal information related to back-office and proprietary informa-tion with external data such as products from competitors, news and re-ports, and other worldwide information.

H8: The ease of integration of online activities to existing pro-cedures is positively related to the decision to adopt theweb-based technology.



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Environmental Context

Environmental context refers to external pressure that influences anorganizations decision to adopt a new technology. This influencemight be caused by continuous changes that competitors, suppliers, andcustomers experience. All these actors and their respective behaviorspush and influence companies to adjust to new market conditions andrequirements.

In this study, we focus on the pressure that customers exert on onlinebusiness. Todays customers are demanding greater value, more cus-tomized products and services, lower cost, and increased efficiency incustomer service. Successful organizations must not only be effective

and efficient, but also deliver their services and products on time andacross the geographic distance (Riggins, 1999) in the manner and timeof customers choosing (Fleisch & Powell, 1999).This has forcedmanyorganizations to reflect thecustomer perspective in their corporate strat-egy. Transformation towards e-service will allow companies to focusbetter on customers and increase the level of product personalizationand customization (Rust & Kannan, 2003).

Extensive research shows that financial customers are becomingmore knowledgeable about available products/services and careful withtheir financial decisions. Customers are looking for a broader range ofproducts and services, better customer service, customization, and newcommunications with their financial institutions (Papathanassiou,

2004). To remain competitive, financial institutions are trying to in-crease the digital content of their products. Creation of virtual commu-nitieshasbeen a newbusiness model applied by insurancecompanies inorder to allow their customers to interact with each other and learn moreabout the product/services they need. At the same time, it allows thecompanies to pay close attention to the customer needs and strengthenthe relationship with them (Kardaras et al., 2003). The my extensionis one way that financial institutions are expanding customization ac-cording to particular needs of the customer (Wind, 2001). Personaliza-tion of products/services is the extent to which a website adjustsinformation to the individual user (Awad, 2000).

H9: Customer pressure to access existing products online ispositively related to the decision to adopt the web-basedtechnology.



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METHODOLOGY

Research Process

The research process was developed in two main steps:Step One: Identification of Factors. A careful examination of previous

studies and research helped identify factors, issues, and problems that af-fected adoption of other, earlier technologies. Those factors were se-lected from both academic and practitioner studies such as conceptualframeworks, case studies, empirical studies, and practitioner literature.All the recognized factors were classified and grouped according totheir characteristics into Tornatzky andFleischers (1990) contexts. Us-

ing unstructured interviews, insurance managers and industry expertswere invited to help define industry characteristics and provide feed-back on what happens in this sector. This feedback was especially sig-nificant in this step, where the comments from experts were integratedwith the literature review process in order to recognize additional fac-tors that were not previously considered. Thirty-five factors were ini-tially identified from literature and insurance industry experts in thisstep. The number of factors was reduced through a three-round Delphistudy involving insurance industry experts. The results of Delphi studysuggested nine factors as the most important factors that impact theinsurance companys decisionwhether or not to adopt a web-basedtechnology.

Step Two: Survey Study. After the Delphi study was completed, a

survey was undertaken. The first issue at this stage was to identify thefirms that would be invited to participate in this study. Companies thatoffered two types of insurance, automobile and life, were selected to beincluded in this study. These two types of insurance are considered as themost appropriate products for e-business (Bests Review, 2003).

Survey Instrument

Some questionnaire items used in this study had been validated byprevious research, with the remainder created for this study. The surveyquestionnaire had two parts. The first part was designed to obtain dataabout the factors that were identified through the Delphi study. It con-sisted of twenty-nine questions related to those nine factors. The re-

sponse for each item was based on a five-point Likert-type scale with thefollowing choices: (1) not important; (2) low importance; (3) moderateimportance; (4) high importance; and (5) critical importance. Seven



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factors had three questions each, while the factors customer pressureand website security were measured by four items. The items weretested by factor analysis to distinguish the independent variables that willbe tested by statistical methods. Factor analysis helped identify the inde-pendent variables and the items foreach variable. Factor analysis was runseparately for technical variables and organizational variables.

The second part of the questionnaire was designed to obtain informa-tion about the respondents and their organizations: their job title, com-pany characteristics (age, size, insurance types served), websitecharacteristics (age, proportion of web-based activity, level of web inte-gration, the web development), and Internet adoption.

The Sample

A total of 953 questionnaires were sent to all insurance firms listedwith positive ratings (above F) by the AM Best Rating Guide (2002):568 via e-mail and 385 by regular mail. The companies identified oper-ate in almost every state in the US.

Twenty-three postal questionnaires were returned undelivered be-cause of address change, and thirty-seven e-mails were undeliverable.A total of 109 questionnaires were completed and returned, 53 viae-mail and 56 via the postal service. Two questionnaires were partiallycompleted and could not be used for statistical analysis and hypothesistesting. Fifteen of respondents were engaged in auto insurance, sixty-three in life insurance, and twenty-nine were providing both types ofinsurance. Results of independent t-test analysis between the question-naires received through e-mail and the regular mail showed no signifi-cant difference between the independent variables. Therefore, all thequestionnaires obtained were aggregated and used for statistical analy-sis. Table 1 summarizes the responses obtained.

RESULTS AND DISCUSSION

Information About Participants

Company and Website Age

Insurance organizations that participated in this study had a broadrange of maturity and size. Website age ranged from one to ten years.The mean website age was 5.25 years. Both small and large companies



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participated in this study. The smallest company reported 11 employeesand the largest employed 80,000 employees, with the mean of 4507employees.

Website Development

In terms of website development (Table 2), all firms responding tothis survey had an established website, with 65% offering online

quotes through their websites. This survey found that 100% of respond-ing insurance firms used their website as an information tool. Ninety-one percent of the firms communicate with their e-customers viae-mail, and ninety-seven percent use the Internet as a communicationtool within the organization to exchange e-mails among employees.Fifty-one percent of the responding firms use the Internet to communi-cate with agents or external parties. Communication with agents viaInternet is lower than other communication tool usage rates becausesome firms participating in this study are totally online firms (six firmsor 5.6%), or perform the majority (eleven firms or 10.3%) of their salesthrough the Internet. Another reason may be the organization size.About thirty percent of the firms participating in this study have less

than 100 employees, which suggest that those firms are relatively smalland local, and may find other ways to communicate with their salesagents.


TABLE 1. Summary of Survey Responses

Type of Distribution Mail

Electronic(e-mail)

Regular

Number of questionnaires distributed 568 385

Number of questionnaires undelivered 37 (6.5%) 23 (5.9%)

Number of companies responded 53 (10%) 56 (15.4%)

Number of responses discarded 2 (0.3%) 0 (0%)

Number of responses included in statistical analysis 51 (9.6) 56 (15.45)

Responses according to insurance types:

Life 24 (47%) 39 (69.6%)

Auto 15 (29.4%) 0 (0%)

Life and Auto 12 (23.6%) 17 (30.4%)


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Descriptive Statistics

Table 3 summarizes the mean values and standard deviations of thenine factors used in this study. On the five-point Likert scale that re-spondents used to evaluate the importance, the mean values of all ninefactors were above 3.0, i.e., more than average importance. In particu-lar, the two factors that reflect the most technical aspects of the e-busi-ness activity, i.e., website security and website availability, hold thehighest mean values (above 4.0). Organizational context factors allyielded similar importance ratings, indicating respondents see them asclustering together. Their mean values ranged between 3.82 and 4.09.Theexternal context variable,customerpressure,holds thelowestmean

value (3.47) in this study.


TABLE 2. Profile of Website Development of Insurance Firms

Website Development Criteria Have Established Have Not Established

Homepage 107 (100%) 0 (0%)

E-mail to customers 97 (90.7%) 10 (9.3%)

E-mail among employees 104 (97.2%) 3 (2.8%)

Online quote 70 (65.4 %) 37 (34.6%)

Agents 55 (51.4%) 52 (48.6%)

TABLE 3. Results of the Descriptive Statistics

Measurement Criteria Mean S.D.

Technological Context

Website Security 4.50 .46

Website Availability 4.24 .62

IT Staff Knowledge 3.86 .61

IT Flexibility 3.60 .57

Organizational Context

Organizational Support 3.86 .60

E-business Plan 3.82 .72

Integration Level 3.83 .66

Business Integration 4.09 .70External Context

Customer Pressure 3.47 .73


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Logistic Regression Analysis Results

Logistic regression is used to identify factors that impact the organi-zational decision as to whether or not to adopt the Internet technology.Binomial logistic regression is a statistical method used to predict a de-pendent variable on the basis of multiple independent variables, wherethe dependent variable is dichotomous (Tabachnick & Fidell, 1996).The dependent variable Decision is binary: (1) Yes or (2) No. Thecoding is assigned as follows: an organization is assigned code 1 (Yes)if the organization has a homepage, offers an online quote, communi-cates by e-mail with its customers, and uses e-mail as a communicationtool among employees and/or agents. The classification table obtained

through logistic regression analysis shows that 70 out of 107 firms canbe considered as firms that conduct their business partly or totally on-line. Thirty-seven firms do not satisfy at least one of the four conditionsof the e-business definition in the context of this study.

Results of logistic regression are shown in Table 4. The method ofvariable entry was backward: LR,which allows allvariables to enter theregression equation in the initial step, and classifies them in terms ofpower to predict the dependent variable based on the significance oftheir associated Wald statistic. Logistic regression analysis in this studycompleted eight iterations. One variable was dropped in each iteration,in the following order: Website Age, Business Integration, IT StaffSkills, Website Security, Organization Support, Having e-BusinessPlan, and Customer Pressure.

A test of the full model with all the predictors was statistically reliablewith 2 (12, N = 107) = 27.913, p < .001, indicating that the predictors,as a set, reliably distinguished between firms that adopt the web-basedbusiness or not. According to Wald criterion, the predictors that explainthe likelihood to adopt the web-based business are IT Flexibility,Company Age, Degree of Integration, and Website Availability. Al-though it remains in the final iteration, the predictor Employee has aWaldstatistic equal to2.263,which isnot significant at the level p > .132.

Adoption Decision Factors

Interestingly, this study found that all the participating firms haveestablished their company homepages on the Internet, which is consid-

ered the initial or information stage of website development. In thecontext of this study, we were interested in identifying firms that notonly inform, but also communicate and sell through their websites, and



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the factors that pushed those firms in their decision. Logistic regressionresults suggested that website availability, flexibility of existing hard-ware and software, the level of organizational integration, and the com-

pany age affected the decision of insurance firms to conduct theirbusiness online (See Table 5).Results of logistic regression support Hypothesis H1 and show that

the most significant factor is Infrastructure Flexibility (Wald = 8.331,p < .01). Results obtained for the significant effect of infrastructureflexibility support Duncans (1995) findings that infrastructure flexibil-ity can be considered a strategic resource that organizations should le-verage and use it in new strategic decisions that will yield competitiveadvantage. Website availability (H3) is the second technological factoridentified as significant in the decision of adopting or not adoptingweb-based applications (Wald = 4.061, p < .05). These results supportthe discussion in the IS community that website availabilityhas a strongpositive effect on the online benefits that firms obtain such as revenues,

customer satisfaction and loyalty, and company image (Awad, 2000).Interestingly, website security is not considered as a significant fac-

tor that impacts the web-based adoption decision; therefore H4 is


TABLE 4. Results of Logistic Regression

Variables B S.E. Wald df Score Sig.

Variables in equation

Website Availability .921 .457 4.061 1 .044

Infrastructure flexibility 1.665 .577 8.331 1 .004

Degree of Integration 1.155 .469 6.079 1 .014

Organization Size .000 .000 2.263 1 .132

Company Age .011 .005 6.193 1 .013

Constant .942 1.875 .252 1 .615

Variables not in the equation

Website Security .141 .708IT Staff Skills .012 .911

Having e-Business Plan .816 .366

Organization Support .003 .958

Customer Pressure 1.093 .296

Business Integration .001 .971

Website Age .020 .887


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rejected. Companies seem to understand the importance of online secu-rity and appropriate measures have already been implemented. Anotherimportant technical variable, IT Staff Skills (H2) fails to explain theadoption decision, and as a result should not be considered as an impor-tant variable to adopt new technology. These results may be related to

the recent outsourcing trends where companies are trying to delegatesome of the IT functions offshore and they can outsource the ITexpertise that may be needed.

The degree of business integration within the organization (H6) had anegative relationship to the likelihood to adopt the web-based technol-ogy (B =1.155, p < .05), which suggests that insurance firms that donot communicate intensively via other communication channels aremore likely to adopt the web-based technology, because it facilitatescommunication via their website. These results support what Lucas andBaroudi (1994) suggest that new technology is shaping the design oforganizations.

Company age has a positive regression coefficient value, which sug-

gests that mature companies are more likely to adopt web-based activi-ties. These companies are trying to combine the traditional paper-basedtransaction and web-based business to a multi-channel approach.


TABLE 5. Results of Hypotheses Test

Internet Adoption Factors Hypotheses Results

Technological Factors

Flexibility and adaptability of HW, SW,and networking technologies

H1 Supported

IT staff knowledge H2 Rejected

Website availability H3 Supported

Website security H4 Rejected

Organizational Factors

Organizational support H5 Rejected

Integration level in the organization H6 Supported

Strategic plans for e-commerce H7 Rejected

Integration with business processes H8 Rejected

External Factors

Customer pressure for existing products H9 Rejected


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Younger firms are more aggressive in conducting their business onlinerather than in the traditional, paper-based way.

The other variables including in this study were shown as not impor-tant to affect the adoption decision. Organizational variables such asOrganizational Support (H5), Having a Strategic e-Business Plan (H7),Integration with Business Processes (H8) and the external variable Cus-tomer Pressure for Existing Products (H9) are not significant enough toexplain the decision whether or not to adopt web-based applications. Itappears that many insurance firms are adopting web-based applicationsmainly because it is the industry trend rather than based on organiza-tional strategies.

CONCLUSION

Insurance firms aremaking progress toward theconcept of paperlessinsurance. Previous polls and surveys showed that customers like toshop online for insurance, especially auto and life coverage. However,insurance firms were not responding to customer pressure, because theinsurance product in its own nature is complicated and paper based, andthus online sale was not perceived as appropriate. Results of the presentstudy show that today insurance firms are considering new ways of do-ing business in the Internet era, and most are currently utilizing onlinetechnology totally or partly in their business processes, not only as an

information and communication channel but also as a sales channel.The primary contribution of this study is identifying the adoption de-cision factors of online activities of service industries, specifically theinsurance industry. The results of this study make positive contributionsto both the academic community and the practitioners.

First, this study contributes to the Technological Innovation Modelliterature by augmenting the Technology Innovation Framework withnetworking factors as significant elements that impact adoption of theInternet technology. Second, it helps practitioners, particularly manag-ers of insurance firms, by identifying the factors where their energiesand resources should be focused to ensure successful implementation oftheir online activities. Third, this study is one of the first attempts to in-vestigate technology issues in the insurance industry. Banking and on-

line banking have been the focus of many studies and research, whileonline insurance is almost unexplored. The findings of this study helpsclear the mist on what is happening in the insurance industry, and will



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support future research in this particular sector of the financial servicesindustry.

The major limitation of this study is the sample size. As mentionedpreviously, the population of auto and life insurance firms is limited,and the possibilities to secure a larger sample size were very restricted.Insurance firms were contacted by e-mail and by traditional (pa-per-based) mail to increase thestudys response rate. Another limitationis generalizing the study to other countries. Data collected for this studyare entirely from American insurance firms, so the decision factorsidentified in this study may not apply to insurance firms in Europe,Asia, and other continents.

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