DETERMINANTS OF DEMAND FOR LIFE INSURANCE IN ETHIOPIA

Abstract

The study is intended to identify the major determinants of demand for life insurance in Ethiopia. It focuses on identifying the crucial relationship between demand for life insurance and five selected independent variables such as (GDP per capita, inflation, real interest rate, life expectancy and dependency ratio. A quantitative research approach and an explanatory research design were adopted for the study. The researcher used secondary sources of data with time series type for periods from 1980-2015. Multiple linear regression models were used to analyze data. The result indicated that about 95 percent of demand for life insurance in Ethiopia was explained by the five independent variables included in the model. GDP per capita is the most important factor that influenced demand for life insurance followed by dependency ratio. Real interest rate and inflation are the least important factor in influencing demand for life insurance. Among findings of this research paper, the most determining factors of demand for life insurance in Ethiopia are GDP per capita, life expectancy, and dependency ratio and the least ones are inflation and which are removed from the model due to multicollinearity problem. Based on this finding, the researcher recommended that the government tries to give much emphasis in increasing real income of the people which in turn increases life expectancy and dependency ratio.