Empirical Investigation of Institutional Factors That Inhibit Members of the Public Attitudes Towards Life Insurance Consumption

Empirical Investigation of Institutional Factors That Inhibit Members of the Public Attitudes Towards Life Insurance Consumption

Chapter One of Empirical Investigation of Institutional Factors That Inhibit Members of the Public Attitudes Towards Life Insurance Consumption

INTRODUCTION

Background of the study

Since the end of Second World War, The insurance industry the world over has experienced   remarkable growth.  Concurrent with this growth has been significant changes within the industry.  The Nigerian insurance industry is not unaffected by this general growth malady. The growth of multiple line transition, introduction of package policies, the universal banking system, grassroots insurance, the variable annuity, growth life insurance, universal life policy, changes in regulatory framework, continued expansion of the social security system and the involvement of government as a provider of private insurance are all part of the challenges with which the insurance industry must contend with (Ibok, 2006, Soon, 1996).

Although the future of insurance industry in Nigeria appears bright, a number of unresolved problemsstill exist; of particular interest is the attitude of the public towards life insurance system, which has affected the consumption of insurance products.  In Nigeria, this problem seems to be even more pronounced because of the level of literacy of the Nigeria populace.

Insurance has remained one of the least purchased itemswithin the financial market.  Records reveal that about only 10 percent of the Nigerian population have insurance of any sort (Mordi, 1990; Wilson, 2004; and Oworen, 1991). In general, this negative marketability of insurance products has become a problem not only to the insurance industry, but has also affected economic development.

The problem has existed for a long time and has increased somewhat with the sophistication of the Nigerian society which has grown knowledgeable in recent years (Ibok, 2006).

However, the increased importance of insurance as a provider of financial services and of investment funds in the capital market is especially pronounced in developed economies whereas insurance consumption in many developing countries is still very low (Ebitu E. T., Ibok N. I. &Mbum P. A. (2012). Little does one wonder what will be the future of this all important industry if these problems continue unabated?

The focus of this proposal is to examine and evaluate attitudes of the public towards life insurance consumption in Nigeria, using Lagos state as a case study.

Statement of Problem

The large variation in consumer’s attitudes towards life insurance consumption across different economies of the world raises some important questions about what are the causes of this variation and thus, what factors have affected life insurance consumption? By assessing its role as a major financial intermediary, life insurance has become a key source off long term capital, encouraging the growth of capital markets (Catalan et al, 2000; Impavido and Musalem, 2000).

Indeed, several studies have found sufficient evidences to suggest that, the development of insurance industry is related to economic growth (Ward and Zurbruegg, 2000; and Soon 1996).

Life insurance has taken on an increasing importance as a means for individuals and groups to manage their income risks (Osaka, 1992 and Njogu, 1991).

Moreso, empirical studies on changing life insurance marketing on the on hand, and consumption of life insurance products on the other hand in Nigeria appears to be inadequate.

As Mordi (1990) has rightly pointed out, figures are yet to be available in many activity areas of insurance. There are even questions of adequacy of such empirical data. Lack of available data and information invariably means lack of awareness and interest on the part of the consuming public. Therefore, despite its apparent role in risk management and transfer, relatively few people in Nigeria appear to be appreciating this role. Some who buy insurance (especially motor vehicle insurance) do so because it is made compulsory by law. So far, studies on life insurance marketing and consumption in Nigeria have focused on the entire country. Little effort is made to disaggregate performance across the different states or geopolitical zones of the country to determine if there are location specific problems, differences or regional factors that could influence public’s attitude to life insurance consumption. This explains why the present study is concerned with identification of the key marketing and consumption attitude inhibitors in Nigeria with particular reference to Lagos State. It is within this context that this study attempts an empirical investigation of those institutional factors that inhibit members of the public attitudes towards life insurance consumption in Lagos State.