FACTORS AFFECTING HOUSEHOLD'S CONSUMPTION OF LIFE INSURANCE: THE CASE OF ETHIOPIAN INSURANCE CORPORATION

Abstract

Life insurance is an important aspect of the social-economic development of the country. Despite its importance the consumption of life insurance in Ethiopia is very low compared to other countries. The main purpose of the study is to identify and investigate factors affecting household's consumption of life insurance in Ethiopian Insurance Corporation (EIC). Based on the reviewed literature "awareness", "income", "religion", "product variety" and "premium" were identified. The study employed descriptive and explanatory research design. The population of the study comprises of employees, agents and customers of EIC life unit. Out of two hundred thirty six questionnaires administered, two hundred twenty two usable questionnaires were obtained constituting 94.1% for analysis. Both primary and secondary data were collected. The study employed structured questionnaires as the main research instrument. Descriptive statistics was used to summarize the respondents’ demographic characteristics. Multiple regression analysis was used to explain the nature of the relationship between household’s consumption of life insurance and factors that influence it. Results of the study showed that all the factors except religion had significant relationship with life insurance consumption. Variables awareness, income, and product variety had positive relation with but premium had inverse relation with life insurance. The regression results also showed that 61% of the variation in household's consumption of life insurance can be explained by the changes in these identified factors. With these findings, this study provides many implications and if these are taken in to consideration by EIC and other insurance companies, households’ consumption of life insurance can be greater than before. The recommendations for future research and the limitations of the study are also noted.