The Conceptual Framewok And Theoretical Studies Economics Essay

What is insurance? As per the definition stated in ( INVESTOPEDIA, 2012 ) Insurance is a contract ( Policy ) in which an person or entity receives fiscal or reimbursement against losingss from an insurance company. The Company pools clients hazard to do payments more low-cost for the insured.

The narrative behind the insurance is likely every bit old as the narrative of world. The grounds found that method of insurance were being practiced by the Chinese and the Babylonian bargainers by reassigning hazard as long ago as the 2nd and 3rd millenary BC.

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This industry has been evolved from 1000s of old ages and soon it plays critical function among the figure of industries operate in the economic systems of every state, Chiefly the insurance industry plays prevailing function in the fiscal market and capital markets which straight parts to hike economic development. Insurance industry impact on every economic system across the Earth is became a important factor. In similar, Insurance industry in Sri Lanka is one of turning fiscal intermediary which extremely volatile with macro economic conditions.

In Sri Lanka insurance concern has been enacted under the control of insurance act no 25 in 1962 and later several amendments were followed.Currently, insurance industry is regulated and supervised in footings of the commissariats of the ordinances of insurance industry act no 43 of 2000.

Publication on insurance by Insurance Board of Sri Lanka ( IBSL, 2011 ) stated that Insurance and its related merchandises are being marketed in Sri Lankan context quickly when comparing the last three old ages. There are two chief sectors could be indentified in the insurance market those are life ( long term insurance ) and general insurance. During 2010 aggregative gross written insurance premium ( GWP ) reported from long term and general insurance concern entering a important addition of 19.63 % comparison to twelvemonth 2009.Out of that growing of the long term GWP is more important around 31.07 % comparison to twelvemonth 2009.The growing in GWP for both long term and general insurance is

chiefly driven by the concern confident after the war, new markets in north and east and GDP growing of Sri Lanka in twelvemonth 2010.How of all time, growing impulse is reflected in the industry there are many issues in insurance industry which are interested and researchable subjects for analysing.How of all time in this survey, consideration will be limited to the factors influence on demand in life insurance industry and chief factor will be degree of consciousness, and in add-on to that two chiefly identified demographic factors viz. income degree and instruction degree and its impacts will be researched. In life insurances there are figure classs can be indentified such as decease insurances, pension programs, Investment plans with future returns at adulthood.But in current scenario most of insurances companies have made seamster made merchandises by uniting besides those properties into a one individual policy which give multiple benefits.

1.2 Objective of the research

One of the major critical challenge prevails in the current society is pull offing and commanding economic and life hazard which could paralyse and destroy whole lives of the families. In order to extenuate and pull off economic and life hazard, people use figure of insurance merchandises and its deliverables.

Life insurance plays a major function in persons, households fiscal lives since it unafraid loss of income after the decease of primary income earner. In 1965 Yaris proposed the usage of life insurance to see against life clip uncertainness ensuing for the mortality hazard of persons Since, most research expect that life anticipation to hold negative on the demand for life insurance, since the longer life anticipation associated with less chance of prematureness decease and lower demand of life insurance. Further some research findings shown that consequence of life anticipation on life insurance demand is equivocal.

As per the statistics available in decease rate of the Sri Lanka, it reveals that though the mortality hazard has been decreased the important growing shown in the insurance incursion in the current market content, Thus original proposal of Yarri is being challenged and deviated to different way. Further, as an case for the said fact that in 1960 decease rate in Sri Lanka is 9.06 % out of 1000 individuals and it has came down

to 5.83 % in twelvemonth 2005. ( NationMaster, 2012 ) every bit same as male big decease rate is 29.62 per 1000 male grownup in 2005 and it was prevailed higher as 214 per 1000 male grownup in 1970.

As per the above grounds petroleum decease has continued to worsen since 1970 in Sri Lanka but a significant addition in hospitalization was observed for hurt and toxic condition during the period from 1980 to 2000 and decease causes from ischaemic bosom diseases and diseases of liver show a steady addition. ( Prof.D.Lakshman, 2012 ) Therefore, the prevailing hazard on premature decease of individuals should non be underestimated within in Sri Lanka.

Premature decease of exclusive income proprietor of caput of household brings serious fiscal effects for the dependants since their beginning of income is stopped everlastingly and no alternate to run into their fiscal duties and dependants other demands such as refunding loans, kids instruction, medical disbursals ect. As describe and detailed by the German ( 2006 ) The life insurance allows persons and households to portion the hazard with many others and to divert from fiscal loss from the decease of chief income proprietor.

As detailed above one major facet of the survey is to mensurate grade of consciousness on possible life and economic hazard and insurance merchandises deliverables which incorporate to managed negative demand and positive demand of life insurance ingestion.

In add-on to the above chief factors of consciousness of life and economic hazard there are figure societal, psychological, economical and demographic factors can be identified which are affected upon being insured or consumer is being satisfied that his / her hazard conditions should be secured by the insurance merchandise deliverables or why should I acquire insurable, those are identified in the several research paperss as household size and birth order discrepancy, Income degree, Education, Marriage, medical demands, employer demand, bearer phase and ends, household depend on one income earner, love to the household, low leaning to devour, non needfully, scope of affordability or non handiness of appropriate insurance merchandises and services which resultant for insurance low or high incursion.

However, this research survey is undertaken merely to analyse the association of demographic factors such as instruction degree ( Demographic ) and income degree ( Economic Indicator ) of the consumers with the awareness life and economic hazard and insurance merchandise and analyze how those variables are impact on insurance ingestion demand. The survey will be conducted utilizing study methods and questionnaires will be prepared for roll uping the information and self disposal method will be used. 120 respondents from Matara country was selected as population descriptive and illative statistical methods was used to analyse the information in order to place behaviours of said two demographic factors and impact on being insured through consciousness on life and economic hazard

1.3 Research Problem

As describe above the life insurance demand increased quickly during last few decennaries chiefly as fiscal services suppliers to the consumers and to the capital markets. However, growing is non important in the same degree in the development, developed and industrial states. The big disparity on insurance demand across the states makes the inquiry the grounds behind the same and what are the determiners on life insurance demand.

As per the IBSL ( 2011 ) information which describe above, the life insurance industry is blooming on the Sri Lanka fiscal industry. There are 42 insurance brokering companies operates in Sri Lanka and out of that 34 companies are involved in life insurance concern. However in Sri Lankan context uncertainness and deficiency of trust on insurance merchandises and its deliverables are important hindrance factor which constrain life insurance incursion.

Further, research workers have observed the negative consumer perceptual experience has inhabited in every sector of the economic system irrespective of the demographic differences. The consumer perceptual experience on insurance merchandises and deficiency of consciousness on possible hazard and capablenesss of insurance deliverables has been assisted to make said scenario within the industry in Sri Lanka ( Saheed, 2011a ) . This is non limited to the Asiatic markets, this is signifies in the European and American context every bit good but non reflect as extremely important issue.

As per the statement issued by the Mr. Ramal Jayasinghe president of the Insurance Association of Sri Lanka There is a batch of ignorance, misconstruing and misconceptions of insurance merchandises in Sri Lanka ( Saheed, 2011a )

As per the intelligence article published by the same writer said that ( Saheed, 2011b ) The low insurance incursion of 10.4 % in Sri Lanka is due the deficiency of consciousness and hapless economic conditions. Most of life insurance policies laps along the manner due to insured individual finds hard to go on to pay premiums because of monetary jobs.

Harmonizing to the figure life insurance researches done in the Indonesia by research workers and universities, they are revealed that degree of insurance incursion is low and holding large market chances. Besides in findings they highlighted that Indonesia in general has non reached life insurance consciousness and cultural consciousness mindedness strong. ( Gunawan, 2003 )

( Anderson, 1975 ) conducted a research on variables associated with the sum and type of life insurance purchased which was based on socioeconomics, demographics and other variables are examined by the agencies of multiple categorization analysis. The respondents are sample of freshly married twosomes and out of the many consequence findings more important fact of the research is that sum of life insurance purchased ( which is the 1 dependable variable out of three considered variables ) is significantly explained by the six independent variables such as instruction, current house hold income, expected house hold income, net-worth of house clasp, Husband insurance before matrimony or married woman insurance before matrimony

Base on the available empirical grounds and theories, I investigate the 3 determiners of demand for life insurance in Sri Lankan insurance market. The three independent variables are indentified such as Awareness ( Social index ) House hold Income degree ( Economic index ) and Consumer Education ( Demographic index ) .

The paper is organized as follows, chapter I- Introduction, describe research epistasis and theories. Chapter-II- Showing the specific literature of the old surveies. Chapter III- describe informations and Methodology. Chapter IV- Data analysis, Summary and decision.


This chapter will be discussed of the theoretical background for identified variables which influence on demand for household demand for life insurance policy

Demand for life insurance -demand define as an economic principal that describe a consumers desire and willingness to pay a monetary value for a specific goods or service ( INVESTOPEDIA, 2012 ) .

Hazard Awareness- The consciousness is the province or ability to comprehend, to experience or to be witting of events, objects or centripetal forms.

In this survey see the grade of consciousness on life and economic hazard and consciousness on hazard extenuating capablenesss of the life insurance merchandises and its deliverables. Harmonizing to the several past research findings as stated above, it shows that there is a important and positive relationship among consciousness and ingestion demand for life insurance.

House hold Income degree – It describe the all gross income of families who are more than 18 old ages and individual house hold income will non be considered as house hold income. Further, the household chief income should be generated rewards and wages ( earned income ) The degree of income of the house clasp is the prominent variable which influence on demand for life insurance and it describe in several past research findings and journal articles published.Hence the undermentioned hypothesis is being developed. Finally as income additions, life insurance purchases become more low-cost.

Education degree – As describe above in old surveies, it is found that the vitamin E relationship is existed between instruction degree and demand for life insurance. Education degree is being measured by the grade, higher surveies level and sort of schooling. Education is an index of human capital within the families which associated with the life insurance demand. Peoples with higher instruction degree expect more income growing and they have better consciousness of life hazard and unsteadily of life. Due to the both facts they think necessity of life insurance policies.

In ( Yaari, 1965 ) was the foremost developed the theoretical faculty for analyzing the demand for life insurance. The life-cycle public-service corporation faculty was developed by him with sing the optimum ingestion and nest eggs program for a consumer. The consumer maximizes life clip public-service corporation topic to a flexibleness of existent involvement rates and monetary values of the constabularies and the faculty suggested that demand for life insurance to be a map of wealth, expected income over persons life clip, the degree of involvement rate, the cost of the life insurance policies and price reduction rates offered presently which affects in future. In 1989 Lewis used the frame work of the faculty developed by Yarri for his surveies and he included the penchant of the other members of the families. The old surveies was based on maximising the life clip public-service corporation of the person who purchases the life insurance policy. ( Primary pay earner ) . The Lewis ‘s suggested that life insurance to be purchased to fulfill the demands of subsisters. Further, his faculty is non depended on the primary pay earners holding a bequest motivation. ( Lewis, 1989 )

Lewis shows that entire life insurance demand can be written as follows.

( 1-1p ) F=max { [ 1-1/p ] 1/8 TC-W, }

1 ( 1-P )

Where 1 is the policy lading factor – the ratio of the costs of the insurance to its actuarial value – , p the chance of the primary pay earner ‘s decease, F the face value of all life insurance written on the primary pay earner ‘s life, 8 a step of the donees ‘ comparative hazard antipathy, TC the present value of ingestion of each offspring until he/she leaves the family and of the partner over his/her predicted staying life span ands W the family ‘s net wealth.

Milton Friedman was developed the lasting income hypothesis faculty and it describe that the ingestion form of the consumers non determined by the current income and but their long run income outlooks. In other words, it says that people makes ingestion and nest eggs determinations base on their long-term outlooks or future flows of income. Harmonizing to the lasting income hypothesis the income form of the consumers changing over the life clip and at the retirement age income expected to be lower. Hence, people demands to borrow from future and salvage the money ready for the retirement. In the faculty lasting income consist of value on non human assets every bit good as human capital returns in the from of future income as a consequence of instruction and experiences. The consumers are believed to do an estimation expected lifetime income base on said assets and to annuitize this present value over their life clip. The present value of pay earners human capital can be replaced by the insurance merchandise which provides ball amount to the donees and stand for the present value of the human capital of the primary pay earners at their prematureness decease. Since, it is describe that the human capital of the person, such as their instruction and employment position would act upon the life insurance demand. ( Friedman, 1957 )

Ando and Modigliani ( 1963 ) developed a life-cycle hypothesis which is described the relationship between current income and hereafter expected income of the consumers over their life clip. Similar to the lasting income hypothesis, the life rhythm hypothesis is based on the economy and ingestion determination of the consumers are driven by the present and future income. The life rhythm hypothesis describe that an single income depression at the beginning and end phase of the life and high during the in-between phase. Therefore, immature families with lover income may be given to purchase lower cost term life insurance and older families assume that they may hold lower hazard since they have already accumulated a certain sum of wealth and less demand for life insurance. ( Ando, 1963 )

Expected public-service corporation theory ( ETU ) is a theory of determination doing under hazard which is described by the Johan Von Neumann and Oskar Morgenstern. It stated that consumers make determinations based on two factors such as public-service corporation of the result and their several chance. Under ETU consumer chooses actions or schemes that maximize expected public-service corporation and public-service corporations besides determined under the penchant of the consumers. Since they have different penchant degrees against different hazard degrees, which is ensuing in different determination on whether to purchase life insurance, every bit good as the sum of life insurance needed. The more risk-averse family is willing to purchase more life insurances or purchase more life insurances to extenuate the hazard of prematureness decease of the primary pay earners in the family. ( Levin, 2006 )

As describe above the Yarri ( 1965 ) stated that an single additions expected public-service corporation by buying life insurance, Lewis ( 1989 ) describe that the life insurance is being selected for maximising the expected life-time public-service corporations of the subsisters. But before family devising determination to increase their expected life clip public-service corporation, they have to believe about and aware on what type and how much of life insurance they need.

As per the faculty of the Anderson and Nevin ( 1975 ) stated that the life insurance buying behaviour includes three parts such as Premium outgo ( the useful and equal cost information is a critical component to intelligent determination devising ) , sum of life insurance purchased ( should place the existent fiscal demands after the primary income earners dies and choose the appropriate sum and value of the insurance ) , Type of life insurance purchased. ( whether the household need merely the term insurance or hard currency value insurance or merchandise with multiple benefits ) ( Anderson, 1975 )

Today, life insurance merchandises are more abundant and complicated than in the yesteryear, the demand of recognizing the characteristics, benefits and restrictions of the merchandise is pre-requisite for buying an right type of life insurance for persons or to the families.

In position of the above detailed theoretical accounts and supported with other literature support, we have developed the under reference hypothesis.

H1 There is a positive and statistically important relationship is existed with consciousness of life and economic hazard and life insurance demand.

H2 There is a positive and statistically important relationship between income degree and demand for life insurance.

H3 There is positive and statistically important relationship between instruction degrees and demand for life insurance.

In order to examined and explore those identified variables in the proposed conceptual frame works, I refer to the relevant literature reviews to contract down the research job and operationalize the same. Three chief constructs have been identified and defined as above in the survey and the consequence on the dependant variable ( Demand for life insurance ) will be measured upon the influence on 3 identified independent variables such as consciousness on life and economic hazard, income degree and instruction degree.


How does awareness on life and economic hazard influence on negative or positive ingestion demand for life insurance?

What does the deciding factors influence on life insurance demand?

How make the demographic factors such as income degree and instruction degree respond on positive or negative life insurance demand?


The individual known as the male parent of life insurance Elizure Wright on his published book “ Traps Baited with Orphans ” ( Wright, 1877 ) has illustrated how does societal hazard became single hazard and ocean trip of life insurance and factors resultant to transform life insurance in the universe.


The construct of consumer demand for life insurance demand has been attracted attending in both academic and practicians in recent yesteryear. Experience in the insurance industry: the expletive of the upside -down client value proposition by ( Mandel, 2011 ) Who explained that there is a built-in struggle between insurance company and insured between the two point of position. Customer prefer insurance policy with more sensed value which gives frequent claims and benefits and insurance company prefer zero claim policies with less hazard.

The content of book named “ Comment cents in investings and insurance ” by ( Gerald, 1957 ) has explained how to use your hard currency value for insurance and addition of unrecorded insurance coverage and make your owned rente, this book besides base on client position.

It is noted the article published by Advice One Financial services company who provides solutions and counsel for personal insurance has explained the myths and facts on life insurance and has accent on affairs such as Expensiveness of life insurance, consumer attitude of I merely do non necessitate insurance, non giving claims by the insurance company and Nature of confusion of life insurance benefits ( Smyth, 2011 )

By Raj Arora and Charles Stoner published the research papers on “ The consequence of sensed service quality and name familiarly on the service choice determination ” ( Arora, 1996 ) It has been focused on step service quality and how buying determination is influence on merchandise or service quality and trade name image of the merchandise.

The study published in 2006 by Life Insurance Marketing and Research Association ( LIMRA ) explained that consideration of life insurance buying is a complex procedure and eight out of 10 find in hard to make up one’s mind how much and what type of life insurance to purchase or tantrums for his or her demands. The uncertainness on doing wrong determination becomes attendant to non purchasing life insurance. This issue creates involvement in scrutiny of the consumer demand for life insurance is aroused. It farther stated that life insurance booster should understand the consumer life insurance ingestion behaviour in order to supply with appropriate life insurance screen and they can be succeeded by turn toing both fiscal and emotional facets of the determination. ( LIMRA, 2006 )

The article published in the Journal of Consumer Marketing, the research has been conducted in order to determine influence of the state of origin image, merchandise cognition and merchandise engagement on consumer purchase determination and the empirical survey was bases on the two industries insurance and catering services. The survey revealed that all three above describe factors have a important positive consequence on consumer purchase determination and merchandise cognition has significantly positive consequence on consumer purchase determination under different merchandise engagement. ( Lin, 2006 )

The diary article published on the consciousness of holding life insurance policy in Nigeria, it examines the degree of consciousness of the of import of life insurance policy among the Nigerian Students utilizing Lagos State University where unexpected deceases reported due to incessant cult clangs rights. It was discovered through the simple descriptive study adopted for this survey that most pupils really cognizant of the important of life insurance policy specially the fiscal benefits receives for the donees, but monetary value was the hindrance fact. The study revealed that 71 % see speaking life insurance necessity, 22 % see speaking a life insurance compulsory and 7 % did non see to why person should see taking life insurance. Conclusively, it suggested that assorted interest holders should do excess attempt to aware the people of import of holding life insurance at the early phase ( Okunnu, 2008 )

The article published by the industry research house RNCOS E- services Pvt Ltd, under its intelligence study “ Middle East Insurance Forecast to 2012 ” said that the study published on the dorsum of turning population, extend expat abodes and increasing fiscal consciousness, the UAE life insurance sector is expected to turn significantly in between 2008 and 2012.As per the research workers the insurance sector in emerging phase as it took off really tardily in the state. As such portion of life insurance premium is undistinguished comparison to the non- life insurance sector. However, turning demand for life insurance is baked by lifting consciousness and turning exiles. Due to the good consciousness they expect the life insurance will lend over one-fourth of entire insurance premium by 2012. The “ Middle East Insurance Market Forecast to 2012 ” provides extended research and in-depth analysis on Middle East Countries their key merchandises and services. ( RNCOS, 2009 )

The life foundation of America has been introduced a life consciousness run in physique up to Valentine yearss in September under the subject of “ Insure Your Love ” Like the life insurance awareness months runs it comes in every Septembers, The run gives advisers to an chance to make out to the people to prosecute them in treatments about their life insurance demands. The full article describe the importance of increasing life insurance consciousness and selling constructs to be used and allow for out coming coveted consequence. ( Dressner, 2009 )

Refer to the LIMRA ‘s life insurance surveies ( LIMRA, 2012b ) there are figure of factors have been identified in the American market which consequence on life insurance incursion, the chief findings are many individual female parent chorus from life insurance due to fear of cost but really cost is manageable when analyzed, adult female slowdown behind in life insurance coverage, compared to the adult male adult female in same income does non holding proper insurance coverage but spread is being narrowed. Though the insurance coverage is high more Americans feel they are underinsured or non decently insured.

“ Customer purchasing behaviour with a focal point on marketing cleavage ” the study prepared for HDFC standard life insurance company Ltd and published in ( HDFC, n.d ) stated that the success of the good market portion is giving easy handiness to the consumers through proper distribution channel.

The article published in Money Management magazine in Australia under the subject of “ Consumers Ignoring Life Insurances ” , the article describes that the consumers progressively disregarding the life insurance due to high cost and they trust that super rente benefits is sufficient to run into the future fiscal duty. Further, they describe that the factors like decrease on household size, prolongation of life anticipation, a perceived high cost of insurance, and growing in ace rente nest eggs contributes to diminish the demand for insurance yesteryear two decennaries. However they illustrated that the insurance companies capitalized the fiscal exposure due to chances created under recent market meltdown, But the article stress that insurance companies has to better cognition and apprehension of life insurance merchandises and go on to simplify them. The study has been concluded the citing the position of IBIS universe study ( Independent Bankers Insurance Services ) that life insurance companies will be successful in their instruction and

consciousness runs and consumers will increase their insurance coverage. ( Chris, 2010 )

As per the study consequence published in Financial Adviser diary in England that Scots people are more likely to take insurance protection instead than the those populating south lodger besides they are more likely to hold a life insurance or critical insurance policy in topographic point than people populating in any portion of the UK. The study of 5148 UK grownups, revealed that 54 % of Scots have life insurance policy, 10 % higher than the UK norm and in Scotland 15 % of those surveyed besides had critical insurance screen, compare to UK norm of 12 % and 11 % of South and south east norm. Further, Simon Webster, pull offing manager of Kent-based Facts and Figures Financial Planners, said there might be grater consciousness of life insurance in Scotland because there have been many life companies based north of the boundary line. He besides warned that income protection was no less of import than life insurance. He besides mentioned that many people do non take out income protection because of cost and a deficiency of understanding. They feel that they will ne’er necessitate to do a claim and many erroneously believe their employers will pay them if they are ill. This article clearly said the miss- constructs among the consumers which affect for life insurance demand. ( Bradshaw, 2011 )

The article published in the Money Management Magazine in Australia under the subject of Mind the Insurance Gap, it reveals that as per the available statistic of the insurance industry in Australia that under insurance is the large issue among the Australian population, the 95 % of the Australian households do non hold equal insurance screens. This figure is dismaying state of affairs since one in five households will be affected by decease of a parent or a serious accident or unwellness that will render a parent unable to work. The industry of class, acknowledge the issue and assorted industry interest holders on a regular basis explore the barriers for obtaining the life insurance, they chiefly identified that a false sense of security, belief that supper rente policies offers equal hazard screen, deficiency of trust in the industry, merchandise complexness and cost confusion are issues for under insurance. The article says that in many instances the underinsurance job Cam merely be attributed to miss of consciousness and the “ she will be right ” attitude, farther it illustrated that consciousness and do apprehensible on positive effects of equal insurance and negative consequence of underinsurance on people ‘s lives and through that the encourage people to see the importance of life insurance and how it can assist them and their households at the fiscal troubles that can be resulted from unexpected event. However, the bridging the spread between the demand of life insurance and the “ it will ne’er go on to me ” attitude of many Australian can be hard. Since they suggested that utilizing simple facts may recognize the existent demand of insurance for the life such as the one tierce of adult female one-fourth of all adult male will endure a malignant neoplastic disease at some phase of their life and bosom deaths affects two tierce of Australian households.

Further, they stated that Australian can be either uninformed or ill informed about different facets and policies of life insurance. This can take to the incorrect policy being purchased or no policy at all. Since this scenario neither aid for the insurance industry which presently being under the microscope. ( Crosswell, 2011 )

Harmonizing to the extended researches done by the European Insurance Industry, ( CEA, 2011 ) they have recognize the importance of supplying fiscal instruction for the consumers which provides clear and critical information relation to the fiscal affairs, Financial consciousness aid consumers to develop their accomplishment and enhance confident on possible fiscal hazard and place the chances in grater extend. When analyzing from the insurance perspective fiscal instruction additions consciousness and let consumers to do appropriate concern determinations and do the better apprehension of insurance merchandises and its necessities for their development, for case The degree and period of insurance needed, place the appropriate insurance merchandise, The research workers further illustrated that hazard consciousness is a important component of fiscal instruction in the insurance position point and many of consumers do non aware of the possible hazards and necessity of insurance merchandises

By the papers published in the research diary ( Ravi, 2012 ) Research Journal on Social scientific discipline and direction topic on life insurance market in emerging markets Indian and China, it farther stated importance of consumer consciousness and attitudes towards openness, function of mediators trust and dependability, professionalism and accomplishment which affect quality of service, Rising cyberspace use and transparence and makes accessible more easy.

As per the article published in Business Standard Magazine in India, it describe that 60 % of the insured families were non holding clear understanding sing the coverage and benefits being offered under insurance policy which ensuing lower incursion of insurances. It further Emphasized that the major determine factor was the deficiency of consciousness across both rural and urban parts of the state. The most families willing to choose insurance if it links to the recognition installation and one tierce of the families indicated that they were willing to choose insurance, if it was customized their demands. As per the study that the topic a study indicates the most of import benefits consumers identified are as perceived against other signifiers of nest eggs, for exigency usage and grasp of value and revenue enhancement benefits. ( Business.Standards, 2012 )

The article published by the ( Shah, 2007 ) on “ Making Consumer Awareness on Life Insurance ” says that consumer consciousness as a construct is of cosmopolitan concern for all economic sciences of the universe, since life insurance market is being growing unprecedented velocity in India and across the Earth it would be interesting in analyzing the constructs related to life insurance market and the consciousness has been identified has the chief construct in life insurance and the chief determine factor of deficiency of consciousness has been pervades in urban population every bit good, non merely confined to the rural and semi rural sections of society. The article more describe that for life insurance companies to originate, spread out, turn and prolong by reacting to larger and larger volumes of demand emerging with grater consciousness. In emerging markets consumer consciousness becomes premier fact for addition incursion.

The recent study conducted by National Council of Applied Economic research under the sponsorship of Insurance Regulatory and Development Authority in India reveals that the of import of addition consciousness among the community is critical factor for insurance incursion. The study says that affordability and the topographic point of insurance is of import in the list of an single precedence, nevertheless few are uninsured strictly due to miss of consciousness approximately insurance as a protection tool and inside informations about the insurance merchandise deliverables which are possible. This study was based to transport out a pan Indian study about consciousness degrees about insurance among the uninsured and insured population. Further, it says that Indian consumers perceive life insurance a low hazard and high return investing, this being a perceptual experience driven by the consciousness of Life Insurance Companies public presentation and its record of presenting stable returns over the old ages. ( NCEAR, 2011 ) .Report concluded that as expected many uninsured families do non understand the constructs of the insurance, However insured families do understand insurance constructs better than who are uninsured. Further, as per their study the high proportion of families join the insurance with loss of life and non cognizant on other benefits of the insurance.

As per the beginnings of Max New York Life India and NCAER ( National Council of Applied Economic Research ) survey that the consciousness of life insurance stands at high of 78 % in India and more consciousness on urban population about 90 % which higher than rural population merely 73 % .They farther illustrated that degree of consciousness is increased on instruction, income degree and age, nevertheless ownership of the insurance merchandise is low at 24 % .The inclination is with the salaried category purchasing insurances followed by concern personal. Besides they mentioned that married twosome more prefer for being insured compared to others. ( MNYLI, 2008 )

As per the article published in Research diary of Social Science and Management, Chinese people still believe that insurance is unneeded and even they recognize that insurance is needed they still with deficiency of basic cognition. Further, most bulk of people selected most active participant in the part as their insurance company. The Indian insurance holders chiefly trust on the trade name name and trustiness when choosing a insurance policy. The following to the trade name most influential factor for life insurance is returns/fee and they have a perceptual experience of life insurance as a agency of wealth accretion and they have identified non-life insurance as an unneeded disbursal. ( Sharma, 2012 )


After the universe war II service sector has been increased significantly among that insurance sector accounted major impact and insurance industry has had one-year growing rate over 10 % since 1950.As per the article published in American Risk and Insurance Association as per the research consequence published by Mark J.Browne and Kihong Kim under the subject of An International Analysis of life insurance demand it identifies several factors that lead to fluctuations in the insurance demand across the state such as dependence ratio, National Income, authorities disbursement on societal security, rising prices, the monetary value of insurance and whether the Islam is the prevailing faith in a state. ( Mark, 1993 )

The research surveies done by ( Outreville, 1996 ) on demand for life insurance for the period of 1986 which base on cross sectional analysis of 45 developing states. The survey considered the variables like agricultural position of the state which represent present age of agricultural labor force, Health position of the state with a steps of entree to safe imbibing H2O and present age of labour force with higher instruction and the degree of fiscal development. The consequence shows that personal disposable income and degree of fiscal development significantly relates to insurance development

The article published in the diary called “ The diary of Risk and insurance ” in 1996, describe the influence of the income and value of the house clasp production on the sum of life insurance purchases of both hubby and married woman. In same research they examined whether the response of the life insurance purchases to said two factors differs by gender. The found that money income is the most important factor for buying determination of both hubby and married woman and grounds found that part to house clasp production besides influence the purchase of life insurance. ( Gandolfi, 1996 )

As per the research conducted covering 68 states of the universe by ( Beck, 2002 ) paying attending to the inquiry that what are the grounds for different attacks in life insurance ingestion between different states. They have considered 4 different steps of life insurance ingestion and incorporate assorted economic, demographic and institutional factors. They found that states with higher income per capita degree, more banking development, and lower rising prices positive related with consume big sum of life insurance. Besides life insurance demand positively influenced by private nest eggs rate and existent involvement rate. Further, instruction degree, life anticipation, and size of societal security appears non to hold any robust influence on the life insurance ingestion.

The intelligence article published by the Oxford University imperativeness in its diary The World Bank Economic Review under the subject of Economic Demographic and Institutional determinates of life insurance ingestion across the states. The information has been aggregated at different frequences for 68 economic systems in 1961-2000 and this article states that among the economic indicates rising prices, income per capita, banking sector developments and spiritual and institutional indexs are the most forceful variables of the usage of life insurance and no robust association with the indexs such as instruction, life anticipation the immature dependence ratio and the size of the societal security system. ( Deck, 2003 )

As per the study published on lasting life insurance benefits of all income degrees by the Life Insurance Marketing and research Association in USA, it revealed that the flush ( Households income of $ 100.000 or more and who represent the 19 % of the population ) holds 27 % out of the entire existing policies but who represent more than 55 % of the population ( define as who earns $ 25,000 – $ 99,999 ) holds merely 27 % of the bing policies. ( LIMRA, 2012a )

The Tobit analysis is used by Vince E Shower and Joycee A Shotick to analyse impact of the house hold characteristic on demand for entire insurance. This approached examined the fringy alteration in demand for insurance and alterations in chance of buying insurance. The concluding result reflected that demand effects are dominant by the fringy impacts from bing purchases of insurance. Further, income and figure of earners are positively impact for the insurance demand and fringy income consequence for individual earner families is grater than the multi earners families. ( Showers, 1994 )

The recent study conducted by National Council of Applied Economic research under the sponsorship of Insurance Regulatory and Development Authority in India and they researched on income position of the family who are insured and uninsured. On the footing of mean one-year per capita income, the families are divided into 4 categories. Households less than Rs.10,000/- , between Rs.10,000/- 16,000/- , between Rs.16,000/- to Rs. 27,000/= and above Rs 27,000/= . The study reveals that mean one-year income of the insured families ( Rs.110,128/- ) is much higher than that of uninsured families ( Rs.67,789/- ) .This is due to the fact that 38 % uninsured families are in the lowest income category as against merely 20 % of insured families. Further, merely 13 % represent in higher income category. As per the decision of the survey that the higher proportion of insured families acquiring sound income by salaried, regular pay earners or are self employed, the labours are the higher among the uninsured and the mean income, outgo and nest eggs of insured families are much higher than that of uninsured families. As such they have been given with figure of findings in different parametric quantities. ( NCEAR, 2011 )


The research survey conducted to place the determinates of the life insurance in 14 states in Central and South-Eastern Europe ( CSEE ) , they have used fixed panel theoretical account for the period 1998-2010 leting each cross-section unite to hold a different intercept term functioning as an unseen random variables that is potentially correlated with the ascertained reasoning backwards. They have selected two variables ( independent variables ) to mensurate life insurance demand which were life insurance incursion and life insurance denseness. The research reflects that higher, GDP per capita, rising prices, wellness outgo, degree of instruction and regulation of jurisprudence are the most robust forecasters for usage of life insurance and factors like existent involvement rate, ratio of quasi-money, immature dependence ratio, old dependence ratio, control of corruptness and authorities effectivity do non appears to be robustly for life insurance demand. ( Kjosevski, 2012 )

The surveies of ( Truett, 1990 ) , it has been discussed the growing form of life insurance market in Mexico and USA in a comparative frame work, during the period of 1964-1984. In their survey they assume that there is an abstract demand depends upon the monetary value of insurance, income degree, handiness of replacements and other single and environment specific features. The survey besides examined the relationship with demographic factors like age of single insured and size of population within the age group 25 to 64 and besides consideration is made to happen the instruction degree and insurance demand. Their consequence shows that age, instruction and degree of income affect the demand for life insurance and that the income snap of life insurance demand is much higher in Mexico than the USA.

The surveies of Hwang and Greenford in 2005 base on determinates of life insurance ingestion in China, Hong Kong and Taiwan. They besides attempt to happen and derive apprehension of the different features in the market topographic point in the life insurance in each state. The research findings reveals that the income and life insurance ingestion strongly correlated and instruction besides considered as important factor and monetary value is found to be undistinguished which mostly conflicting with old surveies further, they found that Social construction and one kid policy have negative impact on life insurance ingestion. In add-on that difference in the degree of economic development uncover a fluctuation in life insurance demand such as the more advanced economic system more demand for life insurance visa versa but they found contra verdict fact of the mainland China, which is a low-income state, shows the greatest potency. ( Hwang, 2005 )

Under survey conducted by ( Baek, 2005 ) utilizing Survey of Consumer Finance informations in 2001, they examined the consequence of human capital, bequest motivations, and hazard on term and hard currency value of life insurance purchased by the families. They explained the positive relationship with house clasp with higher instruction with demand for life insurance. Due to the fact that the families with grater instruction have potentially high incomes and if the caput of income earner dies their loss of human capital is grater value. Since the decease of such house hold brings more fiscal losingss to the household as compared with those with lower instruction. Therefore, the purchase of life insurance for those with grater instruction additions as the value of the lost human capital additions.

Under the surveies of ( Li, 2007 ) found a positive and important relationship with instruction and consumer demand for life insurance. They analyzed the life insurance ingestion by utilizing transverse subdivision informations for 30 OECD ( Organization for Economic Cooperation and development ) states for the period between twelvemonth 1993-2000. They found that income degree, figure of dependants, degree of instruction, fiscal development and grade of completion are positively related for life insurance ingestion. However, life anticipation, existent involvement rates decreases life insurance ingestion of the OECD states.


3.1 Research Approach and design

The chief aim of the research attack is to analyse and research, How does the identified variables which are besides theoretically and literally supported, ( Income, instruction and consciousness ) and other relevant factors are influenced on demand for life insurance. The survey was conducted utilizing the methods of descriptive analysis, illative and liner arrested development analysis.Mainly quantitative statistic were used to cut downing ambiguity through transforming perceptual experiences into pre-structured quantifiable classs and to get information. we used available statics and questionnaires. Statisticss were analyzed utilizing descriptive and illative types. In order to derive the echt and existent consequence on the survey, we realized that the choice of the population was a really critical and subjective in this survey. Thus, choice of population was done after rating every facet including economical, societal and instruction degrees of the country where the population is traveling to be selected or existed. We observed that there is important disparities and degrees in footings of economical status, societal status and instruction status in different territories in different degrees in Sri Lanka. If we take Uva Province it reflects high poorness and low literacy ratio and in Western state those factors are wholly different where reflect low poorness and high instruction degrees. In position of the above state of affairs, we realized that the Matara territory does non observed with important disparities among the degree of communities since most of installations and other factors are being every bit distributed by minimising the important disparities.

With the fulfilment of other factors as reference above, we selected the pay earners, families who are shacking in the Matara District as a population for the research Further, apart from the chief variables, we have measured the some of the relevant features of the respondents which we believe holding impact but non robust on demand for life insurance such as other income, age and gender, household size. The individual families are non being selected for the study and merely the married twosomes or households with or without dependants are included in the study. In order to carry through above said demands which are necessary for analysing and researching the influence from variables on demand for life insurance, identified the bomber groups from the population and respondents are selected indiscriminately from the each bomber groups.

Further, primary and secondary informations both are being used for the analysis of three variables income degree, instruction degree, and consciousness. Primary information is collected through study method and secondary informations is obtained from the published articles, diaries and authorities beginnings available within Sri Lanka in the Insurance trade.

3.2 Data aggregation Method

Survey method was used to roll up primary informations and the structured questionnaires used as the instrument for roll uping the same which cover all characteristic of variables. The secondary informations were collected from the available beginnings in the cyberspace, diaries, newspapers and paperss and one-year studies published by the authorities and non authorities establishments.

3.3 Sampling Plan

Stratified chance trying method was used for obtaining the primary informations. Besides the each bomber group has to be considered as two subdivisions one allocated for the life insurance policy holders and other was allocated for the non life insurance policy holders. We ab initio selected merely the 100 respondents, nevertheless sample size of the policy holders was non equal for the information analysis, therefore another 20 respondents who with bing policies were selected from the each bomber group on random choice footing. Finally, 120 respondents were selected through placing sub groups and indiscriminately selected the respondents. For the survey, we have identified 5 chief sub-groups such as Doctors attached to the general infirmary Matara, Leading attorneies in Matara, School instructors in Matara National schools, ( Three taking schools were selected ) Private Bankss employees excepting executive degree attached to the subdivisions in Matara and clerical employees attached to the pigment fabrication company called Silicone Coating pvt Ltd in Matara. The respondents were selected indiscriminately from the each bomber group.

3.4 Data Collection Tool

The inquiries were designed and after encephalon storming Sessionss and pre treatments with the troughs of three taking life insurance companies in Matara. The most of relevant influential factors were collected and identified through their practical experiences and which are relevant to the current content and Srilanka society. We observed close similarity with most of factors identified in Srilanka with the factors which were described in the Asian, European and USA markets in the referred literature reappraisals

Two set of questionnaires were designed for respondents who holding insurance policy and those does non holding life insurance policy ownership and each questionnaire was consisted with 3 subdivisions. In the first portion general information were questioned covering demographic factors like age, gender, educational backgrounds and income propositions and in the subdivision portion of the inquiries consumer consciousness was measured and in portion 3 consumer demand was being measured. Final portion 4 was designed for step the factors influence on the constructs of consumer demand.

Structured inquirer was delivered to the respondent location and was collected after sensible clip of one hebdomad period. The questionnaires obtained from the clerical staff of the private company and school instructors were filled by me after holding existent clip interview with them since I observed cognition spread is existed within the capable respondents and guaranting proper finishing the questionnaires without figure of mistakes and losing values. Data redaction, intervention of unsatisfactory consequences were done by the delegating the losing value since returning to the field is non executable. The inquiries were in two types, individual response multiple pick and rate inquiries. Most of inquiries with five point likert-scale which runing from high importance to extremely unimportant were used.

3.5 Data Analysis and methods

Collected statistical informations was cleaned and losing informations was assigned with impersonal values. Statistical package bundle SPSS-13 used to execute statistical techniques. Descriptive and Inferential statistical methods were used to prove analyze the statistical informations.Under descriptive statistics method, Statistics were analyzed through frequence distribution and means. The additive arrested development method was applied to happen correlativities of the variables and

ity decease and group factors of income loss holding positive correlativity with positive demand and staying group fact individual holding negative carbon monoxide relationship with positive demand. The important degree for factor one is acceptable which is 0.026 and other factors important degrees are non within the scope. Therefore, statistically analysis proves that the important correlativity with the 3 group factors and positive demand which describes clearly by under reference spread secret plan


The life insurance incursion and its part to the fiscal and capital market across the every economic system is a critical and doubtless accepted phenomena. Therefore finding, researching and measuring demand conditions ( negative or positive ) existed in the market and happening what are the factors influence for altering the demand towards the life insurance merchandises besides extremely important since the demand is describe as a desire and willingness to pay a monetary value for a specific goods or services. Besides in this survey the demand was being measured as two dimensions which are negative demand or negative position existed within the non insurance policy holders and positive position or positive demand of the individuals who already holds life insurance policies. Harmonizing the said out line my research was directed to happen out how does the life insurance demand is being changed? and what are the factors influences for the same? And base on the said facts my researched inquiries were aimed

In order to answer to the research inquiries which describes the needful aims, the descriptive research method was applied and found figure variables and factors which are correlativity with the demand. First literature support on theoretical surveies and empirical findings relevant for the demand was extracted in order to speculate the research findings and the primary information was collected through inquirer and secondary information was collected from different beginnings for operationalize the same. During research, I adopted some restrictions in order to deduce expected consequence and contract down the research faculty. The graded chance trying method was applied to analyses important discrepancies of the identified variables such as instruction and income degree. Besides those variables are reasonably contributed for the identified factors which influence on demand.

The two demand factors negative and positive has to be measured harmonizing to the demand conditions in the market, since two separate questionnaires were presented for the respondents harmonizing to the ownership of the life policy. Further, as per my findings through mentioning and analysing figure of research paperss and related diaries and articles, I do non observed important surveies which are conducted identifying negative and positive demand of the consumers. The most of surveies were analyzed merely insurance demand and it was non being categorized in to said two dimensions. Therefore, though there important figure researches were done on life insurance demand still there is needed or gap for analysing and stand foring the insurance demand in negative and positive demand status in the market topographic point. As per the most of referred paperss under insurance or in equal insurance was a critical factor of making un trust on insurance merchandises and its deliverables due to non receivable of claims. The most of insurance claims are non being met by the service suppliers due to the said fact of under insurance or hazard is non adequately covered.

The inquirer was structured merely in English since I found that interlingual rendition to the Sinhala medium tends to give different waies to the respondents, nevertheless that fact was non a hindrance for the research since selected respondents of the each subgroup is consist of higher instruction degrees except the employees in the private fabrication company. The capable respondents were answered to the inquiries under my counsel and accounts in Sinhala and truth of those informations was personally examined by me at the clip of the roll uping the questionnaires.

Base on the literature reviews, empirical findings, research theories and statistical informations reading my research consequence ended up with the following elaborate decision on factors and variables influence on life insurance demand.

Awareness variable

Among the figure of definition for the consciousness “ The consciousness is the province or ability to comprehend, to experience or to be witting of events, objects or sensory forms ” is described in grater length. The cognition is extremely incorporate with mensurating the degree of consciousness among consumers and their attitudes besides a important factor which effects on consciousness.

As per the figure of research findings and empirical consequences the relationship between consciousness and demand has been explained. The grade of consciousness is a outstanding variable which affects for the life insurance demand and those surveies are explained that positive relationship is existed. The research surveies conducted by ARORA, R. , STONER, C.1996, LEVIN, J. 2006, OKUNNU, M. A. , ADEYEMI, O.T. , . 2008, BRADSHAW, J. 2011 explained that there is positive and statistically important relationship between consciousness and life insurance demand and same has been accepted and describe in the numer of published diaries and articuls by the different writers.

The research findings of this research survey besides reflects similar consequences between consciousness and life insurance demand. It revealed that there is important carbon monoxide relationship is existed between two variables and consciousness in negatively related with the negative demand of life insurance. Which means that if the grade of consciousness is increased the negative demand for life insurance should be reduced.Also statistically analysis proves that in positive demand conditions ( policy holders ) the degree of consciousness is positively correlated with the life insurance demand. Since in the both state of affairss our premise is within the distribution and alternate hypothesis is acceptable.

The below reference option hypothesis which was assumed based on the literature and empirical findings is being proved and accepted.

H1 There is a positive and statistically important relationship is existed with consciousness of life and economic hazard and life insurance demand

Income variable

Income is really normally found as a variable with important correlativity with the insurance demand.This was systematically found in the old empirical surveies including the consequence of current income and consequence of future income outlooks of the families on life insurance demand. Intuitively if the income increases the life insurance purchase more low-cost than the old. When the income of the peculiar individuals increases his human capital value increases consequently.Hence the chance cost decease of capable individual is high to keep same life criterions for dependants. Hence they tend to buy life insurance policies or increase his value of the bing insurance merchandise. Under this survey the rewards or salaried income is chiefly considered and apart from the chief income other income besides taken into consideration. The consequence of current income on life insurance demand is examined in several surveies of TRUETT, D. , TRUETT, L.J. , . 1990, SHOWERS, V. E. , SHOTICK, J.A. , . 1994, OUTREVILLE, J. F. ( 1996 ) , BECK, T. , WEBB, I ( 2002 ) , Showers and Shoticks in 1994 used Tobit analysis to analyze the family features on the demand for entire life insurance. They explained that as income additions house holds tends to purchase life insurances since it is bought as a map of the income replacing needed.

Further, the our statictical study survey reveals that there is corelation and negative relationship betweeen negative demand ( Non policy holders ) of life insurance and income degree of the families. It means that when the income increaases negative demand tends to decrese. But statistically analysis proves that in positive demand conditions ( policy holders ) the degree of income is non positively correlated with the life insurance demand. Since the alternate hypothesis is rejected within the positive demand status and accepted in the negative demand status ( Non policy holders ) .

Finally, the false folllowing alternate hypothisis under negative demand consitions proved and accepted

H2 There is a positive and statistically important relationship between income degree and demand for life insurance.

Education variable

The instruction is a measuring of the human capital.within a house hold.If you have more instruction background it implies that your value of human capital is high. The high human capital associated with more income in future. Since due to high instruction degree families acceptableness for offering higer wagaes and publicities is high which resultant to increase future income. Thus the instruction degree of the families caput is hupothesizedto be positively associated with life insurance demand. In this survey we have categorized instruction degree in



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