Wireko income and the demand for life insurance

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Last updated: August 22, 2019

Wireko Daniel (2015) analyzed the determinants of thedemand for life insurance products in Ghana from consumers point of view andinvestigated the determinants by using one Logit regression model was estimatedto help investigate the determinants. The Statistical Package for SocialSciences (SPSS) 16.0 and STATA 5.0 version was applied for the analysis of theLogit regression model specified. His study’s Results illustrated that 61.

33%of the respondents give respond to Endowment policy and 26.33 % by Terminsurance policy and 12.33% by Whole life policy Consistent. He concluded thatthere is a positive association between level of income and the demand for lifeinsurance products and negative relationship between the market interest rateand level of savings and the demand for life insurance products. He found thatthere is no effect of Price of insurance (level of premium) on life insuranceconsumption and there is indirect relationship between Inflation and lifeinsurance consumption. Education, employment status and the age of consumershad direct effect on life insurance consumption.

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But there is statisticallyinsignificant positive relationship between family size and demand. Thus, he isconcluded with that life insurance demand can be analyzed better when theeconomic and socio-demographic factors are taken combined. It was suggestedthat additional examinations should be made on how portfolio diversification andinformation asymmetry influences profit levels on the insurance market. Theother researchers are recommended that Other aspects of life insurance thatmust also be taken in consideration like: Market forces, hindrances andchallenges confronting the growth of life insurance business in Ghana. It wassuggested to examine the condition of national policy and regulation on lifeinsurance activities in Ghana.

Ondrusuka (2016) examined personal, demographic andeconomic determinants of the life insurance consumption in Slovak Republic in2014. He used the classification tree method to identify the key determinantsof life insurance demand in small economy of Slovak Republic. the demographicindicators which were examined by him includes age, education and the economicindicators includes savings and to determine the life insurance demand by theanalysis of sample selected 870 respondents of the questionnaire survey. Hefound that age, education and savings and employment status are the mostimportant determinants to determine the life insurance consumption. Hesuggested that these results may assists the insurance companies to understandtheir consumers in better way that who buy and who do not buy private insurancewhich will help the policy makers to targets the state programs and others schemesof social security. Therefore, the researchers should examine other factorswhich helps to improve their acquisition and segmentation techniques.

Ondrusuka (2016) examined personal, demographic andeconomic determinants of the life insurance consumption in Slovak Republic in2014. He used the classification tree method to identify the key determinantsof life insurance demand in small economy of Slovak Republic. the demographicindicators which were examined by him includes age, education and the economicindicators includes savings and to determine the life insurance demand by theanalysis of sample selected 870 respondents of the questionnaire survey. Hefound that age, education and savings and employment status are the mostimportant determinants to determine the life insurance consumption.

Hesuggested that these results may assists the insurance companies to understandtheir consumers in better way that who buy and who do not buy private insurancewhich will help the policy makers to targets the state programs and othersschemes of social security. Therefore, the researchers should examine otherfactors which helps to improve their acquisition and segmentation techniques.Ghimire (2017) explored thereason of unwillingness to purchase life insurance policies by examining the perception of uninsured person towards theLife Insurance Policy in Nepal during the time-period 2004-2014. He made the differences on decisions of respondentsand their level of education, income, expenditure, and fixed asset by usingpurposive sampling method. He used A structured questionnaire to get theobservations of 300 uninsured respondents. He used Mode and Mann Whitney U testto examine the perception and difference on perception of respondents respectively.He found that both financial and non-financial problems influenced therespondents. That reasons were the dependency of the relatives during badtime-period, low bonus rate of life insurance, and sufficient property.

Furthermore,the non-financial reasons he found were mistrusting psychology over life insurance,perceiving the low-quality services of company, lack of convincing capacity ofagents, and complex claims settlement process. The results showed that that theperceptions of respondents were not influenced by level of education andexpenditure but assets and income had more effect on the perception of uninsuredsignificantly. It was recommended that the life insurance companies shouldincrease the social faith over insurance by awareness campaign, the investmentlinked type product introduction, the service quality improvement and thefinancial performance of the companies increment. Furthermore, Government mustought to give financial incentives to rise the demand of insurance product.

2.2. SUMMARY OF LITERATURE REVIEWS:By studying the different literatures, ithas been noticed that different researchers take different variables in themodel in order to explain the variety in demand for life insurance, which canbe summarized that GDP per capita, GDS (gross domestic savings) per capita,financial depth, urbanization, dependency ratio, adult literacy, population,life expectancy at birth, crude death rate, inflation, real interest rate andinsurance price are the main determinants of the demand for life insurance.According to the previous findings, life insurance consumption and income aresignificant positive related; Among the macroeconomic factors, income isconsidered as the most important factor that leads to more affordability andultimately higher demand for insurance products (Browne & Kim, 1993; Hammond,Houston, & Melander, 1967)., and financial development, gross domesticsavings are also positively related with life insurance demand, and negative toinflation.

Real interest rate was shown to be insignificant in a cross-countryanalysis. According to Beck and Webb (2002) results, life expectancy and young andold dependency ratio were significant, together with adult literacy rate andrate of urbanization. 2.3. CONTRIBUTION OF STUDY:By reviewing the literatureson demand for life insurance it has been observed that many studies have beendone on international level. Though these studies are significant contributionto the literature on demand for life insurance, but for that there have beenhuge differences in cultural, economic and legal environments between developedand developing countries therefore the applications of their results to othercountries may not be possible like Pakistan. This research study will expect to fill the gap in literature byidentification that factors which determines life insurance demand and willremove the hurdles in life insurance demand in Pakistan. An examination offactors that motivate life insurance purchaser will give new ideas fordeveloping, marketing, and the formulation of policy related to insuranceproducts and insurance business.

In course of new initiatives, numerousbenefits of insurance are anticipated to get in touch with a large part of thepopulation. 

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