An Empirical Study on Factors Affecting the Demand of Life Insurance Policies in Colombo District
Abstract
The life insurance market is a significant factor that affects the growth of an economy in any country. In developed countries, the life insurance market grows at a fast pace and stimulates the economy. However, most developing countries including Sri Lanka show a low growth rate in the life insurance market. This study focused on identifing the factors for the low demand for life insurance policies in the Colombo district. Primary data were collected using a structured questionnaire and the two-stage cluster sampling technique was utilized to select a sample size of 384. Based on the analysis result of the logistic regression, it was identified that age, family size, monthly income, awareness about policies, and subjective norms of respondents are significant variables that affect demand for life insurance. Moreover, it was revealed that people whose monthly income was more than Rs 90,000 were four times more likely than people with monthly incomes below Rs. 30,00 to be a life insurance policy holder. Also, it was discovered that people aged 50 years or above were three times more likely than the people of age between 20 and 29 years to be a life insurance policy holder. Furthermore, the study found that the awareness of people especially, among the non-policyholders in the Colombo district regarding life insurance, was at a low level, and a considerable number of responds had an unsatisfactory level of confidence about life insurance companies. Thus, it is necessary to take action to establish trust among the people about the insurance company and their policies. It is suggested that awareness programs about the importance of having life insurance in high-risk situations in the modern world and benefits of the life insurance for ordinary people to increase the demand for life insurance should be made available.
