QUEENS’ COLLEGE

SCHOOL OF GRADUATE STUDIES

DEPARTMENT OF BUSINESS ADMINISTRATION

BUYERS’ ATTITUDE TOWARDS LIFE INSURANCE PURCHASE, A CASE

STUDY OF ETHIOPIAN INSURANCE CORPORATION (EIC) IN ADDIS
ABABA ETHIOPIA
A THES IS SUBMITTED TO QUENNS COLLEGE SCHOOL OF GRADUATE
STUDIES IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF MASTERS OF BUSINESS ADMINISTRATION (MBA)

BY

DAGMAWI GETANEH

ADVISOR

Dr. Tsegaye A (Associate Professor)

JULY 2023

ADDIS ABABA,

ETHIOPIA
 QUEENS’ COLLEGE

SCHOOL OF GRADUATE STUDIES

DEPARTMENT OF BUSINESS ADMINISTRATION

BUYERS’ ATTITUDE TOWARDS LIFE INSURANCE PURCHASE, A CASE

STUDY OF ETHIOPIAN INSURANCE CORPORATION (EIC) IN ADDIS
ABABA ETHIOPIA

BY

DAGMAWI GETANEH

APPROVED BY BOARD OF EXAMINERS

Dean, Graduate Studies Signature & date

Advisor Signature & date

External Examiner Signature & date

 Internal Examiner Signature & date

Declaration
I, Dagmawi Getaneh, hereby declare that this research paper entitled “Buyers Attitude Towards Life
Insurance Policy Purchase a Case of Ethiopian Insurance Corporation (EIC)” is my original work
and has not been used for any other requirements in any other university/college and all sources of
information in the study have been appropriately acknowledged.

Student: Dagmawi Getaneh

Signature: _________________________

Date: _____________________________
 ENDORSEMENT

This thesis has been submitted to Queens College School of Graduate Studies for examination with my
approval as a college’s advisor.

Dr. Tsegaye A. (Associate Professor) ------------------------------------

Advisor Signature & Date

 Acknowledgements

First of all, I would like to praise and thank the Almighty God for being with me in all endeavors of
my life. I feel a deep sense of gratitude to my advisor Tsegaye A (PhD), whose valuable guidance, time,
constructive comments and advice has contributed to the development of this research report. I only
pray that “May the blessings of God follow you.”

I highly appreciate and thank the EIC life insurance underwriting and marketing division staffs.

I also would like to extend thanks to my lovely wife W/o Samrawit Woldesenebet for her support,
patience and understanding during my study period.

Last but not least, my warmest appreciation and thanks goes Ato Antenanie Befekadu, who supported
and encouraged me to succeed in this project progress.

Dagmawi Getaneh

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 LIST OF ACRONYMS & ABBREVIATIONS

IRDA Insurance Regulatory and Development Authority

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 TABLE OF CONTENTS
ACKNOWLEDGEMENT.........................................................................................................................i
LIST OF ACRONYMS & ABBREVIATIONS.......................................................................................ii
ABSTRACT..............................................................................................................................................vii
CHAPTER ONE........................................................................................................................................1
1. INTRODUCTION.................................................................................................................................1
1.1 Background of the study.........................................................................................................1
12. statement of the problem …………………………………………………………………..3
1.3. Basic Research Questions.......................................................................................................4
1.3 Objectives of the study...........................................................................................................5
1.3.1 General Objective...................................................................................................................5
1.3.2 Specific Objectives.................................................................................................................5
1.4.3 significance of the study…………………………………………………………………….5
1.4 Scope of thestudy....................................................................................................................6
1.5 Limitations of the study..........................................................................................................6
1.6 Organization of the Study.......................................................................................................6
CHAPTER TWO……………………………………………………………… ……… ……………...8
2. REVIEW OF RELATED LITERATURE.............................................................................................8
2.1 Introduction ............................................................................................................................8
2.2. Thoughts of Insurance............................................................................................................8
2.3. Life Insurance Concepts.........................................................................................................8
2.4. Drivers of Consumers in making decision............................................................................13
2.5. Knowledgestage....................................................................................................................15
2.6. Buyers Attitude to Life Insurance……………………………………………………………...17
2.7. Historical Development of Insurance Concept in Ethiopia……………………………………19
2.8. Definition and Concepts of Life Insurance ……………………………………………………21
2.9. Types of Life Insurance………………………………………………………………………..22
2.10. Unique Principles of Life Insurance………………………………………………………….25

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 2.11. Operational and Theoritical Frame Work.............................................................................27
2.11.1. Socio - Cultural Factors…………………………………………...…………………………27
2.11.2 Economic Factors.................................................................................................................29
2.11.3 Legal and Political Factors…..………………………………………………………………..29
2.11.4. Social Factors……………………………………………………………………………….29
2.11.5. Demographic Factors………………………………………………………………………….30
2.11.6 Organization Factors……………………………………………………….…………………31
2.12. Empirical Review……………………………………………………………………………….33
2.13. Conceptual Framework………………………………………………………………….………34
CHAPTER THREE.................................................................................................................................35
3. METHODS OF THE STUDY.............................................................................................................35
3.1 Research Approach..........................................................................................................................34
3.2. Research Design…………………………………………………...…………………………….35
3.3. Target Population………...………………………………………………………………………35
3.4. Sample Size……………………………………...……………………………………………….36
3.5. Sampling Technique...……………………………………………………………………………36
3.6. Source of Data…………..………………………………………………………………………..35
3.7. Methods of Data Collection………………………………………………………………………38
3.8. Methods of Data Analysis………..………………………………………………………………38
3.9. Validity and Reliability…………………………………………………………………………..38
3.10. Ethical Consideration……...………………..…………………………………………………..39
CHAPTER FOUR...................................................................................................................................40
4. DATA PRESENTATION ,INTERPRETATION AND ANALYSIS.................................................40
4.1. Introduction.....................................................................................................................................40
4.2. Response Rate…………………………………………………………………………………….40
4.3. Demographic Characteristics of Respondents…………………..……………………….……….41
4.4. Descriptive Statistics of the assessment of buyer’s attitude towards life insurance purchase in
EIC, Addis Ababa………………………………………………………………………………………42
4.4.1 The association of buyer’s attitude towards life insurance purchase with demographic

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Factors…………………………………………………………………………………………………43

4.4.2 The association of buyer’s attitude towards life insurance purchase with socio cultural factors
…………………………………………………………………………………………………………46.

4.4.3 The association of buyer’s attitude towards life insurance purchase with economic
factors………………………………………………………………………………………………......47

4.4.4 The association of buyers’ attitude towards life insurance purchase with political and legal
factors ………………………………………………………………………………………………….48
CHAPTER FIVE………………………………………………………...……………………………52
5. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS…………………………………52
5.1. Introduction………………………………………………………………………………………52
5.2. Summary of Major Findings……………………………………………..………………………49
5.3. Conclusions…………………………………………………………………………..…………..54

5.4. Recommendation ……………………………………………...……………………………….55

Reference…………………………………………………………………………………..…………56
Annex I: Questionnaire to respondents………………………………………………………………59
Annex II: Main Questionnaire………………………………..………………………………………60
Annex III: Interview Guide………..…………………………………………………………………61

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 LISTOFTABLES

Table 3.1: Reliability Cronbach’s alpha…….………………………………………………………….39

Table 4. 1 Response Rate........................................................................................................................40
Table 4. 2 Demographic Characteristics of Respondants........................................................................42
Table 4. 3 Weighted Average for 5 – point Likert Scale……………………………………………….43
Table 4. 4 Association of Buyers attitude towards Life Insurance Purchase With Demographic Factor
.................................................................................................................................................................44
Table 4.5 the Association of Buyers Attitude towards Life Insurance Purchase with a Socio Cultural Factor…46
Table 4.6 the Association of Buyers Attitude towards Life Insurance Purchase with Economic Factor…..……47
Table 4.7 the Association of Buyers Attitude towards Life Insurance Purchase with Organizational
Factor……………………………………………………………………………………………………………..48
Table 4.8 the Association of Buyers Attitude towards Life Insurance Purchase with Political and Legal
Factor……………………………………………………………………………………………………………..50
Table 4.9 Summary of the association of some factor with buyers attitude towards Life Insurance
purchase…………………………………………………………………………………………………………..51

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 LISTOFFIGURES

Figure 1 Conceptual Framework.............................................................................................................34

Figure 2 Response Rate...........................................................................................................................40

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 ABSTRACT

The purpose of this research is to investigate the factors affecting buyers’ attitude towards life
insurance purchase in the case of Ethiopian Insurance Company. The study is based on the fact that
Life Insurance purchase in Ethiopia as a whole and in Ethiopian Insurance Company in particular is
very low and tried to identify the main barriers in purchasing of life insurance specifically related to
attitude.. Primary data have been collected through questionnaire. Data were collected from 240
participants, tabulated, interpreted and analyzed. Questions that are much related to the insurance
experience of the respondents have been prepared. There were also opinion survey type questions
that help the participants to exhaustively provide their perception of Life Insurance experience.
Statistical tools such as factor analysis represented by graphical measure and tabular presentations,
mean and standard deviation are used for analysis. The demographic, socio-cultural, economic,
organizational as well as political & legal factors have been studied whether they affect the attitude of
buyers in the purchase of life insurance. Demographic factors particularly gender, sexual orientation,
family size, family cycle and religion, Economic factors like Income level and organizational factors
such as occupation, service quality, customer satisfaction, values and perception of the insurance
agent as well as ethnic community related to political and legal factors are found to have significant
effect in decision making towards purchasing life insurance. Recommendation based on the analysis
and conclusion has been provided. It is hoped that Ethiopian Insurance Company uses this research-
based recommendations to improve the overall purchase of life insurance by its target population.

Key words: Buyers’ attitude, Life Insurance, factors.

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 CHAPTER ONE
INTRODUCTION

1.1 Background of the Study

An attitude is a learned predisposition to respond to a given object or class of objects in a
consistently favorable or unfavorable way. The widespread view is that attitudes are complex
systems made up of three components. These are; cognitive component referring to the
person’s thoughts, affective component referring to person’s feelings, and the cognitive
component referring to the person’s behavioral tendencies (Ajzen I. and Fishbein M., 1980)

In marketing context, it is stated that consumers can develop attitudes to any kind of product or
service, or indeed to any aspect of the marketing mix, and these attitudes will affect need
indirectly through intention to consume (Brassington and Stephen Pettitt, 2003)

Most people in the insurance industries agree that life insurance business has a high growth rate
potential in Ethiopia. On the other hand, relatively low penetration of the sector indicates that
there is still a considerable unexploited potential.

Life Insurance consists of a range of advantages as other investment modules have. Financial
security is the prime advantage of life insurance. It assists to smooth the progress of economic
movements. The life insurance companies to gather large funds collect the premiums from
multiple investors. This money finances trade and other financial development activities. It is
also useful for tax payment reduction. Policyholders can claim income tax exemptions for the
payment of premiums amount (Berti AXA, 2009)

In the present time, life insurance could be utilized as an investment alternative, because a
security for loan and for other demands also. As a life insurance plan bought inconspicuously
with due concern could be regulated to assist the variety of requirements of a policyholder.
Nowadays, life insurance has become substantial in a world where pension plans, social security
benefits, and family savings turn insufficient to respond the financial demand of the complete
family, cover wellness prices or to hold a certain life-style, on the off chance of the death of the
worker Nida, 2012).

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Variable life insurance is the mixture of savings aspects of whole life insurance and the traditional
protection with the growth potential of investment funds. It is comprised of two different elements: the
general account and the separate account. The general account is the insurance provider’s reserve
account, and it is not assigned to the individual policy.

The separate account consists of different investment funds within the insurance company’s portfolio,
like a money market fund, an equity fund, a bond fund, or some combination of these. Because of this
core investment trait, the cash value and death benefit may vary; therefore it is known as “variable life
insurance” (Pareto, Life insurance and Group personal Accident (Pareto GPA), 2014)

The purchasing level has been attributed to a number of factors among them buyers attitude towards
life insurance is the major one.

Some studies shows in relation to buyers’ attitude to purchase life insurance are that thinking of it as a
“regular” expense. When something is considered as an expense, generally the public avoid having that
thing. A person who purchases policy can’t enjoy the benefits of life insurance before the completion
of the tenure of the policy. In this situation he/she may feel paying premiums as an expense. In some
instances, people may not have trust on insurance companies regarding payback of their premiums at
the end of policy (Ahuja, 2016)

It is believed that a large proportion of community has some specific religious beliefs about the
authenticity of life insurance in a way of understanding that purchasing life insurance leads towards
gaining security from manmade provision rather than divine protection.

Less awareness about life insurance plans may be considered as a barrier in purchasing a life insurance
policy, a reasonable proportion of community is actually unaware of real benefits and privileges that
they could get by purchasing life insurance policy. Additionally, education level of common
community is not as high as to understand the perks of life insurance policy accordingly (Sigma, 2014)

Life insurance plan is the safest and the most secure way to protect family or dependents against
financial contingencies that may arise post the unfortunate event of a person’s untimely demise. Under
the life insurance contract, the insurer assures to pay a definite sum to the policyholder’s family on his
demise during the policy term.

Life insurance is an agreement between an insurance company and a policyholder, under which the

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insurer guarantees to pay an assured sum of money to the nominated beneficiary in the unfortunate
event2 of the policyholder’s demise during the term of the policy. In exchange, the policyholder agrees
to pay a predefined sum of money in form of premiums either on a regular basis or as a lump sum. If
included in the contract, some other contingencies, such as critical illness or a terminal illness can also
trigger the payment of benefit. If defined in the contract, some other things, such as funeral expenses
might also be a part of the benefits.

Following the nationalization in 1975, the state owned Ethiopian Insurance Corporation emerged as a
sole insurer transacting life and non-life insurance. After the partial liberalization of the sector allowing
domestic private investors to engage in insurance business in 1991, 16 insurers have so far come to
existence with a combined branch network of 264 as of June 2012. Nine of these companies are
composite (offering both life and non-life insurance services), while the remaining transact only non-
life insurance (Tsegaye, 2013)

In the eyes of life insurance marketers, the Ethiopian economy with its 85 million plus predominantly
young population presents lucrative and diverse business opportunities. Similar to all sectors, insurance
in general and life assurance in particular needs to be correlated with the country’s development plan
as a corollary to the emerging middle class and educated society. However, the intricacies that make up
life insurance market in the country are not very well known to most, including to those engaged in the
business. This makes the study of the Ethiopian insurance industry appealing as it presents untapped
market. But it needs a sound understanding of the dynamics of the markets.

1.2. Statement of the Problem

Despite its potential benefits, insurance business in general and life assurance in particular has not yet
developed in Ethiopia. This can further be explained by low level of insurance per capita and
penetration. A thematic paper presented by (Yared Mola, 2018) indicated that unlike other developed
and developing nations Ethiopians consider insurance to be something purchased for material property
and don’t see the other benefits of insurance. By drawing practical data from 2015 fiscal year, Yared
said that Kenya was, for example, able to generate more than USD 602 million from life insurance
businesses, while Ethiopia collected only USD 13.7 million. Likewise, the share of the life insurance
business in Kenya has risen about 36.2% whereas Ethiopia’s is limited to 5.5% (Yared Mola, 2018)
this implies that the life insurance business is, despite lucrative opportunities like the growing middle

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class, playing a less important role in the national economy. Based on this data, Ethiopia stood as the
least in the world whilst there is progress and matured market in other African countries.

According to the study conducted by (Zecharias, 2010) while selling is concerned with creating
demand for the products that have already been decided, marketing is directed towards identifying the
needs and wants of consumers and planning to satisfy those needs. Hence, in this context, the necessity
of understanding the needs and want of consumers to marketing could be taken to the bone, the tendon,
and the ligament of businesses without which no articulation can take place (Zecharias, 2010)

Zecharias explains that the importance of marketer to understand the factors affecting buyers’ and
prospects attitude towards life insurance policy purchase, which in turn affects need and wants to their
offerings in order to be able to take informed marketing-related decisions (Zecharias, 2010)

It is important to notice that, when you purchase life insurance, you are providing for the future-
perhaps the fulfillment of promises to loved ones to maintain a lifestyle, to have the necessary funds
for a college education, to be able to comfortably pay off bills, even a mortgage, or to provide the edge
to help the continuation of your business by providing funds to help cover outstanding loans, or to
make a gift to your favorite charity (Zecharias, 2010)

This study will try to answer the question about the attitudes of consumers towards purchase of life
insurance by describing the characteristics of buyers and their purchasing intention in the case of
Ethiopian Insurance Company.

The purpose of this research is to describe the characteristics of life insurance buyers that refer to those
groups of society where life insurance is understood and purchased. This will help insurance
companies to view their policy packages to accommodate the group of people who are not currently
covered but have potential to consume life insurance if study based policy is designed. This study tries
to recommend feedback that can be considered by insurance companies to increase their customer
bases which in return contribute its share to the country’s economy.

1.3. Basic Research Questions

The study attempts to address the following basic research questions:

1. Do buyers’ demographic factors affect buyers’ attitude towards life insurance purchasing?

2. Do buyers’ Socio cultural factors affect buyers’ attitude towards life insurance purchasing?

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 3. Do buyer’s organizational factors affect buyer’s attitude towards life insurance purchasing?

4. How do these factors affect buyers’ attitude in the processes of life insurance policy purchase

1.4. Objectives of the study

1.4.1. General Objective

The study sought to describe buyers’ attitudes towards life insurance purchase in the
case of Ethiopian Insurance Company.

1.4.2. Specific Objectives

Specific objectives of this study are:

1. To examine buyers’ attitude towards life insurance purchase in terms of demographic factors
2. To study buyers’ attitude towards life insurance purchase in terms of socio cultural factors
3. To examine buyers’ attitude towards life insurance purchase in terms of organizational factors
4. To understand how these factors affect buyers’ attitude in the processes of life insurance policy
purchase

1.4.3. Significance of the study

The importance of life insurance in modern economies has been recognized much earlier. It is the
essential means by which a disaster to an individual or a community is shared by many. Great
catastrophes are thereby lessened, and, it may be, repaired. Apart from the benefit it bestows to the
policy owner and beneficiaries upon the occurrence of certain events, such as untimely death, terminal
illness, critical illness of a bread winner or maturity depending on the type of contract, life insurance
plays a vital role in a country’s socio-economic development. This can be achieved through saving
mobilization it embraces the national economic development via development of the financial market,
creation of employment opportunity and overall enhancing the socioeconomic development of the
country. This in turn will enhance the supply of long-term financial products, thereby triggering a
series of effects on the development and structure of the financial markets.

In this regard, the study shall make the following contributions:

(i) The study shall contribute knowledge in the area of consumer behavior for
insurance firms to identify the nature of buyers’ attitudes towards life insurance among
non-users so that appropriate marketing strategies can be developed.

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 (ii) The study shall contribute to the existing wealth of knowledge and thus stimulate
further research in consumer behavior.

1.5. Scope of the study

The study will focus on buyers’ attitude towards life insurance in the case of Ethiopian Insurance
Corporation (EIC) in relation to demographic, socio cultural, political, organizational factors. It is
highly dependent on the data collected from the buyers of life insurance from Ethiopian Insurance
Corporation (EIC). Life insurance policy purchase is being performed mainly in Addis Ababa where
the head quarter is located and our geographical scope is limited to Addis Ababa. It also provides
highlights on general overview of consumer intentions or attitudes in the case of Ethiopian Insurance
Corporation (EIC). The research will not examine whether the buyers’ attitude determine the
consumption intention of life insurance and will not also try to analyze the characteristics that
contribute to buyers attitude. In addition, this paper will not address other factors like performance and
organization issues of the organization and government policies that might affect the buyers’ attitude.

1.6. Limitations of the study

There were external (Uncontrollable) variables that deter the smooth implementation of the project in
addition to the limitations of the research design itself. For instance, finding and locating
buyers/respondents, the lack of cooperation of the respondents and their commitment to complete
filling the questionnaires, lack of sufficient time by the researcher to include the effects of
organizational marketing practice and other macro variables on buyers’ attitude to purchase of life
insurance. Moreover, the time pressure faced by the researcher is also the other constraint to undertake
wide survey in Ethiopia with respect to buyers’ attitude towards life insurance. The lack of relevant
and up to date literature, lack of localized previous research papers in the area of the study were also
major constraints in this study.

1.7. Organization of the Study

The first chapter of this study it has been tried to provide brief introduction about the background of
the study followed by statement of problem with basic research questions where the study tries to
answer. This chapter also includes objectives of the study with its significance and indicates the scope
that the study bounded in limitations is also explained in this chapter.

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In the second chapter, detail review of literatures are explained to provide sufficient knowledge to the
readers where many journals, books, published research papers are exhaustively presented in the areas
of life insurance.
The third chapter explains what type of methodology has been used in different stage of the study from
data collection to analysis. Chapter four devotes to presentation, analysis and interpretation of the data
generated from various sources. The last chapter or part five comprises the findings, conclusion and
recommendation.

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 CHAPTERTWO
REVIEW OF RELATED LITERATURE

2.1. Introduction
This review will critically summarize the current knowledge in the area of life insurance and
identifying any major findings in previous studies. In addition, this review of literature will provide the
context within which to place this study. With this understanding, theoretical literature, empirical
review and conceptual model have been discussed. Buyers’ Attitude towards Life Insurance Purchase

2.2. Thoughts of Insurance

(Mehr and Cammack , 1976) agrees that Insurance is usually thought of as a product that spreads the
risk of serious, but low-probability, losses among a group of individuals, thus providing some financial
protection to each individual. (Kunreuther, 1979) said that his product makes good sense, particularly
when the protection is purchased against potential losses so large as to be catastrophic, such as total
destruction of one's home, a large accident liability judgment, or death of primary family breadwinner.
However, it has long been recognized that this sensible product is difficult to sell. (Kotler 1973)
considers insurance to be in the category of "unsought goods," along with products such as preventive
dental services and burial plots. He notes that unsought goods pose special challenges to the marketer.
(solnic, 1977) found that subjects were more likely to buy insurance against small, high probability
losses than insurance against large, low probability losses. (Kunreuther, 1979) “It is not the magnitude
of a potential loss that inspires people to buy insurance voluntarily; it is the frequency with which a
loss is likely to occur”. (Kahneman &Tversky, 1979) reported a risk-averse individual, therefore,
should avoid nearly all types of risk. Empirical evidence, however, suggests most people are risk
averse for gains and risk seeking for losses. (Kahneman &Tversky, 1979) stated indeed, repeated
demonstrations have shown most people lack an adequate understanding of probability and risk
concepts (Dhar (1997), Greenleaf and Lehmann (1995); and Tversky and Shafir (1992) (EIC) , 2003)
have shown that offering more options can generate decision conflict and preference uncertainty,

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leading to decision deferral.

2.3. Life Insurance Concepts

According to policy document of Ethiopian Insurance Corporation (EIC) The Ethiopian Insurance
Corporation renders more than 15 types of polices in the life Insurance Sector. Life insurance policies
can be bought individually and in-group, which enable the insured to get various benefits. The benefit
gained from these insurance policies depends on the choice of the customers (EIC product and service
manual)

Term life insurance is usually the least expensive course of protection for people interested in life
insurance. Some individuals on restricted incomes purchase term life insurance for the basic insurance
protection for their families and, as their salaries rise, they convert the term life insurance policy to
different forms of life insurance policies. Another type of whole life insurance is a permanent
insurance or a universal life insurance policy. Unlike term insurance policies, permanent life insurance
has no specified term of coverage for individuals. Flexible premium or Universal Life Insurance is a
life insurance policy designed as a permanent policy for the covered individual(s), but it is different
from traditional term life insurance policies because it allows the policy owner to vary the amount and
timing of premium payments. The policy also allows the policy owner to increase or decrease the death
benefit. Monetary values will accumulate based on premium payments that are selected during the
selection of the policy. Usually monthly deductions are subtracted from this fund for the expenses and
cost of insurance.

The interest is added to this fund afterwards. In some cases the interest rates are stated by the company
and vary from time to time depending on the policy. Under federal law, guidelines are defined for
policies to maintain status as life insurance under the internal revenue code. This law puts a cap on
total payments to the contract and provides a minimum relationship of death benefit to cash value.
Permanent life insurance is subject to a different set of policy conditions normally. A permanent life
policy requires for premiums to be paid for as long as the insured individual lives and a permanent life
policy accumulates a set cash value during the covered period. If the individual insured were to pass
away then the death benefit is payable to the beneficiaries listed on the policy. But the policy can be
turned in before the insured individual were to pass away, then the net worth is payable to the insured
individual. Another aspect of this policy allows for loans to be made from the insurance company

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against the monetary value of the policy at a rate of return promised in the policy as security.

The maximum loan rate guaranteed in the insurance policy may be much lower than that available
from a bank or other financial institution. Regardless of where the loan is secured from, if the insured
individual where to pass away prior to the loan being repaid, the amount of the loan and any interest
due must be repaid from the death-benefit amount before the beneficiaries will receive any
compensation. Variable life insurance is also a type of permanent insurance but you decide how the
premiums are invested instead of the insurer. Variable universal is a combination of variable and whole
life insurance policies. These plans allow for variable premiums and the ability to choose your own
investments of premiums. Variable/Adjustable: much like universal insurance except it links your
death benefits and premiums directly to your investment’s performance. You’ll also have more control
over how the premiums are invested. Life insurance is a good bet but you must know what you need
and what you hope to achieve by it. Good research and proper planning can accomplish several
different options and goals; it is your choice to want to secure a better financial future in case of death
or just to have a partial cash saving and investment plan Bradshaw (2009).

People have to decide for themselves what is going to best for them and for their future. Understanding
which life insurance policy will be right for you entail setting one primary objective for yourself and
your family by answering two basic questions. First, do I simply need death protection in the event of
my death? Second, do I want both death protection and a savings element for my family and I to cover
retirement costs if I do not pass away before retirement (Benedek 2012)

There are three fundamental approaches to make this decision for most individuals:

1. The “Human Life Value” approach.

2. The “Human Needs” approach.

3. The “Retirement Needs” approach.

Since a person does not know whether they will live to retirement or pass away earlier, a good life
insurance policy will help provide for both the “human” and the “retirement” needs for survivors and
themselves. The “Human Life” approach When evaluating from this approach you should base your
decision on the thought that a person has an earning capacity that can be approximately calculated by
estimating annual net income (earnings minus all taxes), estimating the remaining years of wage
earning, and subtracting the interest that would be earned if all the income were received in a lump

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sum. This procedure allows a person to pin down how much money will be needed in the event of their
death to continue providing an equitable life for their survivors. Estimating your earning capacity is a
valuable asset in determining what kind of insurance you will need for when you pass away or retire.

The “Human Needs” approach using this approach will take into account the settlement costs of a
funeral, taxes, mortgages, and or car payments. It will also provide the income the family needs to
readjust to a new lifestyle, income for the family until the children leave the home, life income for the
surviving spouse, special needs of the family such as college education for the children, and other
needs that may arise from unforeseen circumstances. In adopting this approach to your evaluation,
income from all avenues of income such as social security, veteran’s benefits, or trust funds will be
subtracted from the total needs of the family once a person has passed away. The “Retirement Needs”
approach Utilizing this approach will require coordinating life insurance and/or annuity purchases with
other sources of income such as Social Security, pensions, or personal investments to be able to attain
prearranged retirement revenue. Once a person has decided what approach would best fit what he
attends to accomplish, he then must choose a type of life insurance. You can buy an individual policy
through a licensed life insurance information company, which evaluate insurance companies in
general. Individuals must keep in mind a life insurance information policy is only as good as the
company that wrote it. For this reason, choosing a good insurance company is at least as important as
selecting the right policy. There are five types of insurance available to individuals for different goals.
The Term life insurance coverage will provide protection for a limited, specific period of time
depending on the link of coverage selected. If the person covered by the policy should pass away
within the time restrictions on the policy, the face or total amount of the policy is payable to the
designated beneficiaries. Normally nothing will be paid to the beneficiaries if the individual insured
lives longer than the length of the term policy that was selected. Unlike other types of policies, term
insurance does not generate cash values (Benedek 2012)

The Use of Age, Sex, and Marital Status/sexual orientation/ as Rating Variables in Automobile
Insurance, The University of Toronto Law Journal, Vol. 39, No. 2, p. 149-210 .said that a typical life
insurance contract provides a package of options or rights to the policy owner that is not precisely
duplicated by any other combination of commonly available contracts. Viewed from this perspective,
life insurance enjoys a unique position in the field of investments and should be judged in this light.
An options viewpoint provides a more complete explanation of policy owner behavior towards life

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insurance than the conventional savings-and-protection view.

(Wiegers, 1986) told that the option's package view of the whole life insurance policy suggests that a
whole life policy is a package of options, each of which has value and is expected to influence the
price of the policy. This viewpoint implies the general hypothesis that price differences between whole
life policies can be explained by differences in policy contract provisions and differences in selected
company characteristics. As distinguished from term insurance, which provides short term protection,
whole life insurance is a policy that provides life time protection.

Diacon (2004) presents the results of a detailed comparison of the perceptions by individual consumers
and expert financial advisers of the investment risk involved in various UK personal financial services'
products. Factor similarity tests show that there are significant differences between expert and lay
investors in the way financial risks are perceived. Financial experts are likely to be less loss averse
than lay investors, but are prone to affiliation bias (trusting providers and salesmen more than lay
investors do), believe that the products are less complex, and are less cynical and distrustful about the
protection provided by the regulators. The traditional response to the finding that experts and non-
experts have different perceptions and understandings about risk is to institute risk communication
programmers designed to re-educate consumers. However, this approach is unlikely to be successful in
an environment where individual consumers distrust regulators and other experts.

(Girendelal, 2005) found that demographic risk, i.e., the risk that life tables change in a
nondeterministic way, is a serious threat to the financial stability of an insurance company having
underwritten life insurance and annuity business. The inverse influence of changes in mortality laws on
the market value of life insurance and annuity liabilities creates natural hedging opportunities.

Mills (1999) studied the insurance industry is rarely thought of as having much concern about energy
issues. However, the historical involvement by insurers and allied industries in the development and
deployment of familiar technologies such as automobile air bags, fire prevention/suppression systems,
and anti-theft devices, shows that this industry has a long history of utilizing technology to improve
safety and otherwise reduce the likelihood of losses for which they would otherwise have to pay. We
have identified nearly 80 examples of energy-efficient and renewable energy technologies that offer
“loss-prevention” benefits, and have mapped these opportunities onto the appropriate segments of the
very diverse insurance sector (life, health, property, liability, business interruption, etc.).

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Some insurers and risk managers are beginning to recognize these previously "hidden" benefits.

2.4. Drivers of Consumers in making decision

It is common known that the influence of society, of culture, of family and friends are not the only
factors that drives a consumer in making a market decision. The subliminal factors like psychological
ones and cognitive dissonance play a main role in what consumer perceive and decide in the insurance
world. (Solomon, 2008)

Insurances are intangible products that have some special features apart from the material good.
Insurances represent a service that cannot be touched, price standardization is not possible, there is no
ownership transfer and production and consumption are inseparable. The consumer is a part of the
production process so the delivery system must go to the market or the consumer must come to the
delivery system. Because the insurance is linked also to the value of risk is very important to analyze if
consumer of insurance is risk averse or not. The risk is evaluated before insuring to charge the amount
of share of an insured, consideration or premium. There are several methods of evaluation of risks. If
there is expectation of more loss, higher premium may be charged. So, the probability of loss is
calculated at the time of insurance. (Solomon, 2008)

The insurance serves indirectly to increase the productivity of the community by eliminating worry and
increasing initiative. The uncertainty is changed into certainty by insuring property and life because the
insurer promises to pay a definite sum at damage or death.

From a family and business point of view all lives possess an economic value which may at any time
be snuffed out by death, and it is as reasonable to ensure against the loss of this value as it is to protect
oneself against the loss of property. In the absence of insurance, the property owners could at best
practice only some form of self-insurance, which may not give him absolute certainty.

Having into consideration this aspect we can say that, the ultimate level beside the real utility of the
insurance product in the decision process is played by the perception of the insurance product.

Consumers can evaluate a product along several levels. Its basic characteristics are inherent to the
generic version of the product and are defined as the fundamental advantages it can offer to a
customer. Generic products can be made distinct by adding value through extra features, such as
quality or performance enhancements. The final level of consumer perception involves augmented
properties, which offer less tangible benefits, such as customer assistance, maintenance services,

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training, or appealing payment options. In terms of competition with other products and companies,
consumers greatly value these added benefits when making a purchasing decision, making it important
for manufacturers to understand the notion of a “total package” when marketing to their customers. For
example when acquiring an insurance, the consumer do not acquire only the risk protection
represented by the sum of money paid in case of a disaster but also the feeling of security and the
psychological comfort that can be offered by this exchange through the insurance policy.

Nevertheless, is obvious that some people are more risk averse and value more the insurance
protection, others like to take risk and the insurance will not appear so appealing.

Also, gender differences relating to risk behavior, the perception of insurances, the information
acquisition and reporting, information and moral hazard in financial decision-making together with the
importance of differing contextual instances in explaining such differences in building the stereotypes.
If some behavioral factors as gut feeling and emotion effect decision making and how the persons react
to those is the subject of our debate.

The insurance purchasing and marketing activities do not always produce results that are in the best
interest of individuals at risk. We will discuss such behavior with the intent of showing the difference
for the insurance interest decision making and the characteristics that influence both men and women.

2.5. Knowledge stage

An attitude satisfies a personal motive and at the same time, affects the shopping and buying habits of
consumers. Perner (2010) defines consumer attitude simply as a composite of a consumer’s beliefs,
feelings, and behavioral intentions toward some object within the context of marketing. A consumer
can hold negative or positive beliefs or feelings toward a product or service. A behavioral intention is
defined by the consumer’s belief or feeling with respect to the product or service.

Perhaps the attitude formed as the result of a positive or negative personal experience. Maybe outside
influences of other individuals persuaded the consumer’s opinion of a product or service. Attitudes are
relatively enduring (Schultz, 2005, p. 8) Attitudes are a learned predisposition to proceed in favor of or
opposed to a given object. In the context of marketing, an attitude is the filter to which every product
and service is scrutinized.

The functional theory of attitudes, developed by (Katz, 1973) offers an explanation as to the functional
motives of attitudes to consumers. Katz theorizes four possible functions of attitudes. Each function

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attempts to explain the source and purpose a particular attitude might have to the consumer.
Understanding the purpose of a consumer’s attitude is an imperative step toward changing an attitude.
Unlike Katz’s explanation of attitude as it relates to social psychology, specifically the ideological or
subjective side of man consumer attitudes exist to satisfy a function (Katz, 1973)

The utilitarian function is one of the most recognized of Katz’s four defined functions. The utilitarian
function is based on the ethical theory of utilitarianism, whereas an individual will make decisions
based entirely on the producing the greatest amount of happiness as a whole (Sidgwick, 1907) A
consumer’s attitude is clearly based on a utility function when the decision revolves around the amount
of pain or pleasure it brings.

In insurances case, we can assume that the consumer is thinking at and balance the chances that exists
that a risk occur in his/her field of activity and the consequences it brings. If the amount of pain and
financial loses is bigger than the pain felt of losing the premium amount of money that it is paid for the
insurance policy, this is to say that the consumer accepts the insurance and has a positive attitude in
which concerns the insurance.

Changing a consumer’s attitude towards a product, service or brand can be a challenge. Three attitude
change strategies include: changing affect, changing behavior, and changing beliefs (Perner, , 2010).
Classical conditioning is a technique used to change affect. In this situation, a marketer will sometimes
pair or associate their product with a liked stimulus. The positive association creates an opportunity to
change affect without necessarily altering the consumer’s beliefs. Altering the price or positioning of a
product typically accomplishes changing behavior. In insurance, the deductibles and the marketing
strategies in the domain have conditioned clients to be more opened to contract a policy of insurance
that is less costly or is comprehensive and include more risk in a single insurance and this lowers the
price making the consumer more inclined to subscribe to such contract.

In a review of the specific literature on gender differences in business decision-making, Johnson and
Powell (1994) argue that the research findings before 1980 were instrumental in establishing a
dominant view that substantial gender trait differences exist in the nature and outcomes of management
decisions involving risk. These studies suggest that women are more cautious, less confident, less
aggressive, and easier to persuade, and have inferior leadership and problem solving abilities when
making decisions under risk compared to men, reinforcing stereotypical views that women are less
able managers. Johnson and Powell (1994) re-examine the early business decision- making literature

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and conclude that the evidence on gender differences is no longer clear-cut.

Studies of insurance decision-making have also identified a lower degree of confidence amongst
women in their ability to make decisions and in the out-come of these decisions (Estes and Hosseini,
1988) Women had a lower risk preference and a higher degree of anxiety in financial decisions than
men, plus a stronger desire to use financial advisers.

In which concerns moral hazard the difference between genders is not important, maybe because of the
psychological factors like narcissism that make the person behave more irresponsibly. Suppose an
insured individual behaves in a manner, which increase the probability of a loss from what it was
before insurance was purchased. Furthermore suppose that the insurer cannot determine that the
policyholder has changed his behavior in this way. When there is this type of asymmetric information
between buyer and seller, then one has the condition known as moral hazard. There are good reasons
for the presence of moral hazard (Estes and Hosseini, 1988)

The risk aversion is related with risk perception and other psychological triggers that exist in the
decisional process of the consumer.

Mark J. Browne and (Kim, 1993 ) said that perception is another lead factor in the consumer insurance
decision. A perceptual set, also called perceptual expectancy or just Set is a predisposition to perceive
things in a certain way. It is an example of how perception can be shaped by "top-down" processes
such as drives and expectations. Perceptual sets occur in all the different senses. In insurance,
perception is determined by culture, social development, education and informational background.
That is why in poor country the perception of insurance is different by the one people having in
developed countries.

Majority of policyholders think that insurance companies are good at collecting premiums and once
one get into trouble they bring you a lot of issues in order to avoid paying claims. ‘Insurance
companies just collect your money. The perception is if one has an accident the company wants to get
a police report or inform that one’s policy does not cover this amount.

In the developed countries, people have a financial education and they are opened to having more than
one insurance policy.

But what happens about the young perception in insurance? The perception and the attitudes of young
people about the necessity of insurances it will be shown in the next survey.

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 2.6. Buyers’ Attitude to Life Insurance Purchase
Many scholars have questioned the existence of true "theory" in the so-called applied sciences such as
those taught in the typical school of business administration. Thus no large body of literature exists
under the caption, the "theory of marketing," "the theory of finance," "the theory of production," "the
theory of insurance," etc (Insurance, 1963), Vol. 30, No. 2 , 1963, pp. 165-182). This should not be
taken to mean that no true theory exists in these areas. It is an indication, however, that the various
business administration disciplines have not yet matured sufficiently to allow a well rounded body of
"scientific" literature to be developed. In many respects business is still more of an art than a pure
science.

Thus, an attitude may be defined as a learned disposition to behave in a consistently favorable or

unfavorable way with respect to a given object (Schiff man and Kanuk, 2000, pp: 247). Stated
differently, it positions people into a frame of mind of liking or disliking things, of moving toward or
away from them (Kotler, P. and Armstrong, G. , 2008) It is also acknowledged that people have
attitudes toward almost everything - religion, politics, clothes, music, and food (Kotler 1973)

In marketing context, it is stated that consumers can develop attitudes to any kind of product or service,
or indeed to any aspect of the marketing mix, and these attitudes will affect behavior (Brassington and
Stephen Pettitt, 2003) as cited in (Tajudeen Olalekan Yusuf, Ayantunji Gbadamosi, & Dallah
Hamadu, 2009)

According to life insurance marketing theory, buyers’ life insurance purchase behavior could be
influenced by many factors including personal characteristic. More over according to (TsaiChing Liu
and Chin-Shyan Chen, 2002), (2002, pp: 755–774) analyzed the effects of personal characteristics. On
the buyers’ purchase intention and attitude and purchase premium of life insurance.

Conceptually insurance is understood by most people to be critical to a well-functioning economy by

providing payment in the event of unexpected losses; insurance introduces security into personal and
business situation. It also serves as a basis of credit as no financial institution would lend money for
purchase of capital goods.

The main themes in the literature of attitude and perception of life insurance buyers have largely
focused on factors predicting these attitude (Skinner and Dubinsky, 1984); (Ozdemir and Kruse, 2004
purchase decision-making responsibility (Barron and Staten, 1995), consumers perceived value (Smith,

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2006) and satisfaction (Kuhlemeyer and Allen , 1999) as cited (Tajudeen Olalekan Yusuf, Ayantunji
Gbadamosi, & Dallah Hamadu, 2007). For example, in a survey of 1,462 families, Skinner and
Dubinsky found out that employment status of the wife and education of the husband discriminate
mostly between which family member(s) is responsible for (Wondaferaw, 2003) insurance purchasing
decision. Other significant variables include wife‘s educational level, husband‘s employment status,
family income, and husband‘s occupation.

Thus from all the above studies result and others more it is true that individual buyers’ attitude
theoretically is affected by the buyers’ demographic characteristics such as age, gender, monthly
income, educational status, employment status, religion and culture, etc which ,in turn , have some
relation with life insurance purchase .

2.7. Historical Development of Insurance Concept in Ethiopia

The Ethiopian insurance corporation (EIC) was established in 1976 by proclamation No.68/1975. The
corporation came in to existence by taking over all the assets and liabilities of the thirteen nationalized
private insurance companies with Birr 11 million paid up capital aiming the following objectives.

Engage in all classes of insurance business in Ethiopia.

Ensure the insurance services reach the broad mass of the people.

Subject to the provision of Article 18 of the Housing and Saving Bank establishment proclamation
60/1975, promote efficient utilization of both materials and financial resources. EIC was operating the
business for about nineteen years under protected monopolistic system as state owned-sole insurer.
After the demise of the Marxist regime in mid-1991 a fundamental change has taken place and there
was a shift in political, economic and social orientation from totalitarianism to that of liberalism.
Therefore, EIC was re-established as public enterprises under proclamation number 201/94 with Birr
61 million paid up capital. Upon re-establishment of the corporation in 1994 as state owned enterprise,
the law covers the following new objectives to the Corporation:

1. Engage in the business of rendering insurance service; and

2. Engage in any other related activities conducive to the attainment of its purposes.

Therefore, the life insurance department and division, is one of the major sections dealing with the
provision of different types of life insurance policy including endowment, term, and whole life and

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other types to the market. In line with this, therefore, this study attempts to investigate the buyer's
attitude towards life insurance policy by taking selected buyers from Ethiopian Insurance Company.
(EIC).

As there is no acceptable evidence as to where and when the service called “Insurance” begun in the
global history of human civilization, it is true for Ethiopia too. However, some scholars and
researchers in social systems speak affirmatively the existence in history, in the various form of
traditional institutions formed on family, religious, tribal, national and on other parochial lines in
Africa content meant to combat fortuitous accidents in daily life. Among these social welfare
Institutions in Ethiopia were “IDIR and IKUB” having some similarities with modern Insurance
service (Wondaferaw, 2003)

For instance, in the case of “Edir” people form an association where by each members contributes
affixed sum, normally to a common fund from which predetermined compensation are paid to
members up on occurrence of un foreseen events such as death of family members or relatives. The
compensations are meant to cover expenses that a member would incur as the result of the incidents.
The “Edir” also owns physical asset like tents, house hold goods like plates and drinking cups, chairs
and others were used during the periods of mourning. The other insurance type of association is
“EKUB’ where member contribute affixed sum of money weekly, or monthly to a pool of fund and
lots are cost where up on the winners receive the money so collided and uses for another member at a
premium, if something happens to a member, who had already taken the money, that would not enable
him to continue contributing to the fund, his guarantor will have to be held responsible or liable (Year
book of EIC, 2001). Although, people have been using these and others mutual associations, Insurance
in its modern form could hardly be traced beyond the 1920’s the first Insurance business was
transacted by the bank of Abyssinia (HABESH), which began operation in 1905 during the regime of
Minilik II, as an agent to a foreign company, whereby, covers given were for fire and marine risks.
Then after many foreign owned companies or in collaboration with other companies have exercised the
service Insurance in Ethiopia.

According to some researches year 1951, marked the beginning of a new chapter in the history of
Insurance industry in Ethiopia in that it witnessed the launching for the first time entirely owned by
Ethiopians called “Imperial Insurance Company” formed by the initiatives taken by some enlighten
Ethiopians and the expatriates, which brought significant development in financial sector of the

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economy lead to the coming in to existence some eighteen company in 1954 operating in different
parts of Ethiopia engage in offering coverage for life, marine, motor and fire or property Insurance
services. Proclamation No. 281/70 which was the first Governmental act on the supervision of
Insurance business in the country brought about a significant change, in that the government put the
governmental control in place for it feel the promotion and protection of the public Interest was timely
as the scope of Insurance business in the country expanded and Insurance registration license was setup
under the Minster of trade and Industry tourism. Consequently, January 1975, the Government of
“Dergue” Monopolized the service of Insurance under the title “Ethiopian Insurance Corporation
established by proclamation No. 26/1975 which brought the right for the government to confiscated the
13 private companies ownership and the control under it.

After the demise of the Marxist regime in mid-1991 a fundamental change has taken place and there
was a shift in political, economic and social orientation from totalitarianism to that of liberalism.
Therefore, EIC was re-established as public enterprises under proclamation number 201/94 with Birr
61 million (USD 7.13 million) paid up capital.

Upon re-establishment of the corporation in 1994 as state owned enterprise, the law covers the
following new objectives to the Corporation:

Engage in the business of rendering insurance service; and

Engage in any other related activities conducive to the attainment of its purposes.

As can be deducted from the above: Ethiopian Insurance Industry service development has been
experiencing many ups and downs in different contemporary governmental policies which the country
has experienced; however, the chance for the industry to exhibit immense growth was once lost during
the time which by many is understood it as “missed opportunity” in all aspects of Ethiopian Economic
life. In fact, the road transverse so far has been courses while the future seems holding a challenging
future whose fruits could be reaped only through determination to say good-bye-to stereotype models
of thinking added to visions for qualitative changes. However, the overall insurance industry
performance of the country exhibits increase of 2% in terms of gross written premium was observed
over the previous year’s performance though 15 compared with the achievement of the country’s GDP,
the growth in the sector of Insurance Industry was found to be minimal (EIC Annual report, 2006) .

As a result life insurance sector which is one of the major sections in EIC is responsible for insurance

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service dealing with the provision of different types of life insurance policy including endowment,
term, and whole life and other types to the buyers has a long age of experience but with no significant
development and achievement in market.

A supporting fact to the above statement is that the analysis of the life insurance business during the
year 1967 to 1972 indicates that the share of life insurance in total gross premium income of the
industry declined from 15, 1% in 1967 to 7.9% in 1972 (Zelke, 2007)

2.8. Definition and Concepts of Life Insurance Life insurance

Undertakes to protect the insured’s family, creditors, or others against financial loss growing out of the
death of the insured. The contract embodies an agreement in which the insurer undertakes to pay a
stipulated sum upon the death of the insured, or at some designated beneficiary. Legal status was given
long ago to the definition which indicates the life insurance agreement to be: “a contract by which the
insurer, for a certain sum of money or premium proportioned to the age, health, profession, and other
circumstances of the person whose life is insured engages that, if such person shall die within the
period limited in the policy, the insurer will pay the sum specified in the policy, according to the terms
thereof, to the person in whose favor such policy is granted (John H.Magee and David. L. Bickehaupt ,
1964)The above definition entails that like the general insurance, life insurance policy, has a
contractual nature, in addition the policy provides methods for payment of the proceeds in installments
or in some manner other than a lump sum; the choice is made by the insured, or by the beneficiary, if
the insured has not made a choice.

As a social and economic device life insurance is a method by which a group of people may cooperate
to ameliorate the loss resulting from the premature death of members of the group. The insuring
organization collects contributions from each member, invests these contributions, guarantees both
their safety and a minimum interest return, and distributes benefits to the estates of the members who
(S, 2005)die (Assefa, 2004)

From the above definition, for many people, the risk management tool that is most appropriate for
dealing with the exposure of premature death is life insurance .There are many different types of life
insurance, but the standard arrangement is contract specifying that upon the death of the person whose
life is insured, a stated sum of money (the policy’s face amount) is paid to the person designated in the
policy as the beneficiary.

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 2.9. Types of Life Insurance Policy
From a traditional or historical perspective, life insurance can be classified in to three categories: Term
life insurance, Whole life, and Endowment life insurance policy. However, today numerous variations
and combinations of these basic types of life insurance are available.

A. Term life insurance,

According to (Dorfman. Mark. S, 2005) when a life insurer sells a term life insurance policy, it promises to pay
the beneficiary if the insured dies within a specified period. If the insured outlives the period, the insurer makes
no payment. Thus, Term life insurance has several basic characteristics. First, it provides protection for a
temporary period, such as one, five, and ten or twenty years unless the policy is renewed, the protection expires
at the end of the period. Most term insurance policies are renewable, which means the policy can be renewed for
additional periods without evidence of insurability. The premium is increased at each renewal and is based on
the insured’s attained age .The purpose of the renewal provision is to protect the insurability of the insured.
However, this results in adverse selection against the insurer. Since premiums increase with age, insured’s with
a good health tend to drop their insurance, while those with in poor health will continue to renew, regardless of
the premium increase.

Therefore, to minimize the adverse selection, many insurers have an age limitation beyond which
renewal is not allowed such as age 70 or 80 most of the time and others still to an age of 100. Term life
insurance is similar to property insurance because if there is no loss to a home or automobile while the
policy is in force, the insurer makes no payment. Moreover, like property insurance policies, term
insurance does not build savings or cash value, as do other types of life insurance. Thus, term
insurance is often spoken of as providing” pure death protection”. Term life insurance is a relatively
simple type of insurance, and in part for this reason, it has been among the first insurance products
successfully sold on the internet market. However insurers sell several types of term life insurance
policies including decreasing term, increasing term, level term, renewable term or convertible term.

Term life insurance can prove useful in solving many financial problems. Usually it can be used when
the need for life insurance is temporary. It is also useful when people need the maximum coverage and
have limited financial resources as well as the price of term insurance is attractive to many people In
the event of premature death, the education fund need can be met by a level term policy. On the other

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hand, people often use term life insurance to repay debts as the need for term life insurance is
temporary and most debts are temporary. In same manner some or all the need for the income to
support dependents can be met by term insurance. The need for funds to support dependent children is
temporary until once the children become financially independent, the need for funds to support those
ends. However, if a child or a spouse is likely to be a Permanente dependent, perhaps because of a
physical problem, then term life insurance is unlikely to be the best choice to fund problems caused by
a premature death (Marka Deforman S, 2005)

At any age, term insurance premiums are lower than whole life insurance premiums. Therefore, term
insurance should be used when the need is for maximum life insurance protection especially if a
buyer’s life insurance income is limited. Term life insurance can be a valuable part of an individual’s
life insurance plans because these policies are flexible and initially have lower premiums than other
forms of life insurance. Term insurance cannot solve all life insurance problems; however, generally it
should not be used when the need for life insurance is permanent rather than temporary, as would be
the case with a burial fund. Nor can term insurance by itself provide a regular forced saving plan,
therefore, insuring permanent needs while accumulating savings requires a whole life insurance plan

B. Whole life insurance

As distinguished from term insurance, which provides short term protection, whole life insurance is a
policy that provides life time protection. Whole life insurance policies promise to pay the beneficiary
whenever death occurs and that is why mostly “till death do us part” is the insurer’s promise (Marka
Deforman S, 2005)

Moreover, Whole life policies also promise payment if the insured reaches age 100. When insurers
make a claim payment, they say the policy has matured. The insurer knows for a certainty it must
eventually pay a claim on every whole life insurance policy remaining in force (Ibid).

Therefore, whole life insurance in its saving value with its high premium is the basis of several
important contractual rights for the insured. That is for instance, policy owners (insured) can withdraw
all their cash value at once if they want to end the policy or they can use the cash value to purchase an
annuity at older ages when they need retirement income. More over still owners of whole life insurance
can borrow some or all of the cash from the insurer at any time as whole life insurance combines both
savings and life insurance protection.

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Hence according to (Marka Deforman S, 2005) the uses of whole life insurance policies are to meet
peoples need with permanent protection combined with savings. In this case permanent protection
needs include a burial fund and an income fund in cases in which a spouse, child or parent is
permanently dependent on the insured for financial support.

C. Universal Life Insurance

According to American insurance association Universal Life Insurance provides permanent life
insurance protection and access to cash values that grow tax-deferred at competitive interest rates. It is
adjustable life insurance that allows flexible premium payments—at a scheduled or unscheduled time,
but the policy will terminate at any time if the cash surrender value is insufficient to pay the monthly
deductions, whether due to insufficient premium payment, if loans or withdrawals are made, or if
current interest rates or charges fluctuate. It will pay the benefit if the insured dies before the maturity
date and pays the cash value if the insured is living at the maturity date. When a premium is paid, an
expense charge is immediately deducted and the balance is placed in a cash value fund to earn interest
at the current rate. Insurance expense charges necessary to keep the policy in force are paid internally,
monthly, from the cash value, regardless of whether or not premium was paid. The cost of insurance
increases each year, based on your age; dividends are not payable.
“A distinct characteristic of universal life insurance is the separation or unbundling of three
components: protection component, saving component and expense component” (E.Rejda, 2004)
From all the above definition it is possible to understand that universal life insurance provides life time
protection and flexible premium policy that unbundles protection and saving components.

D. Endowment life insurance

Another kind of life insurance policy is an Endowment policy, which pays the face amount of
insurance if the insured dies within a specified period; if the insured survives to the end of the
endowment period, the face amount is paid to the policy owner at that (Bickehaupt, 1964)time
(Assefa, Risk Management and Insurance, Mekle , 2004)
From the above definition it is possible to see that Endowment contracts provide death benefits for a
specified period of time, just as a term insurance does. However, unlike term insurance, endowment
insurance has a cash value, and the policy owner is paid the contract’s face amount at the end of the
protection period if the insured is still alive. Thus, Endowment insurance may be a useful way for
some persons to accumulate a specified sum over a stated period of time whether they live or die but

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most importantly the objective is to pay expenses during retirement, or to retire a debt. In general
according to the purpose and need of the writer, life insurance, can have different meanings, names of
classifications which may not be included in the above list but whatever the name and classification
they are given they all serve common goal that is protection of financial loss at the time of the
insured’s premature death or illness. For instance, the “annuity “type of life insurance is a newly type
which furnishes income protection during a period of old age when productive powers have a
diminished or disappeared.

2.10. Unique principles of Life Insurance Policy

The essential difference between life insurance and other forms of insurance designed solely to assume
the burden of an uncertain peril is that life insurance has, in addition to the function of protecting
against uncertainty , the function of accumulation. That is a considerable part of the premiums paid for
life insurance represents a contribution on the part of the insured to a fund for investment to be
administered by the insurer (John H.Magee and David. L. Bickehaupt , 1964)
A. Not a Contract of Indemnity

While the idea of indemnity is emphasized in writing life insurance, strictly speaking on cannot say
that the contract is one of indemnity (ibid). In buying life insurance an insured undertakes to
compensate his estate, dependents, or others to whom he is obliged for the loss occasioned in the event
of his untimely death. The life insurance contract, therefore, provides for the payment of a definite sum
regardless of whether the death of the insured is the occasion of a pecuniary loss to the beneficiary. In
fact, quite the contrary may be the case without providing reasons for denying liability on the policy or
settling a claim for an amount less than the policy face. Thus, in its essence the contract of life
insurance is an undertaking to pay a certain sum of money on the death of the insured person, without
regard to monetary loss. That is why life insurance has been held as “in no way resembling as a
contract of indemnity”.
B. Unique risk

The life insurance policy is a contract of insurance in part only because in other insurance contracts the
insurer, for an agreed consideration or premium, undertakes to indemnify the insured against loss or
damaged caused by the perils indicated in the policy. In all forms of insurance except life insurance,
the happening of unfavorable contingency which gives rise to the loss is uncertain. In life insurance the

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contingency insured against is death which is universal and certain. Here the uncertainty is the time of
its coming because the happening of contingency insured against is certain. Thus, life insurance
policies unless written only for a term, provide for certain payment and the uncertain element is the
time when such payment must be made.

C. Additional benefits

According to (John H.Magee and David. L. Bickehaupt , 1964) although the basic use of life insurance
is the protection of life values, life insurance contracts are so carefully drawn that they have found
additional uses. Particularly they are used holding and accumulating assets, and they may also be used
as a means for transferring ownership. Therefore, life insurance has primary function and secondary
use; however, in many instances the secondary uses supplement and merge with the primary use and
there is no conflict between the secondary uses and the primary function

2.11. Operational and Theoretical Frame Work

Marketing is the management process responsible for identifying, anticipating and satisfying customer
requirements profitably (Chartered Institute of Marketing,2000)., 2000) Marketing can also be defined
as the process of planning and executing the conception, pricing, promotion, and distribution of ideas,
goods, and services to create exchanges that satisfy individual and organizations’ objectives. In our
Context, Insurance services/products are categorized as unsought service/products; unsought products
are consumer goods that the consumer either does not know about or knows about but does not
normally think of buying. Most major new innovations are unsought until the consumer becomes
aware of them through advertising. By their very nature, unsought goods require a lot of advertising,
personal selling and other marketing efforts (Kotler, P. and Armstrong, G. , 2008)

Different literatures on insurance marketing dictate that there are several evidences of the
interconnectedness between insurance and culture. If the business of insurance is to protect people
against the financial consequences of unforeseen risks, the marketing aspect of that business depends
on dramatizing the risk in the minds of potential customers. Culture can be defined as those customary
beliefs and values that ethnic, religious, and social groups transmit fairly unchanged from generation to
generation (Luigi Guiso, 2006)

(Andy Chui, 2008) probed into the ways in which cultural traits of a nation affects consumption

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patterns of life insurance across countries. Life insurance is a service that is abstract, complex, and
focused on unsure future benefits. Because of the uncertainty and ambiguity inherent in the life
insurance product, consumers are more likely to respond according to their cultural prescriptions. Their
findings show that individualism indeed has a significant, positive effect on life insurance
consumption, whereas power distance and masculinity/femininity have significant negative effects.

2.11.1 Socio-cultural School

(Max Weber, 1924) theorized that people’s attitude towards insurance is the outcome of social action.
The social action theory explains that human actions are meaningful and that certain reasons push
people into various kinds of actions. To Weber, there are three kinds of action: traditional (based on
customs and habits); affective (based on the emotional state of the individual at a particular time); and
rational (based on a clear awareness of a goal) (Mike Haralambos 2004 as cited in Fatai Adesina
Badru, 2013). This also implies that certain factors tend to influence one’s behavior towards insurance.
People’s preference for insurance might be due to intuitive or cultural reasons. On the other hand,
people can rationally behave to have insurance policies for clearly economic reasons.
These days it is high time to look at ones whole business (people, processes and products) and tailor a
solution to align systems, services and customer touch points, so that consumers’ experience of our
product and service is seamless and consistent across all channels. It is as much about developing
streamlined system processes as it is about integrated marketing communication channels strategy and
delivery. Therefore it necessitates adopting a strategy called Holistic Marketing. The description of the
main characteristics of five key elements of holistic marketing in the insurance industry being
relationship marketing, integrated marketing, internal marketing, social responsibility marketing and
international marketing (Eva-Cristina Petrescu 2009 as cited in Fatai Adesina Badru,2013).
The globalization of the insurance market is a fact that cannot be contested, and an international
approach to the marketing activity becomes more and more pressing. There are two approaches to the
international marketing activity in the insurance sector: multicultural marketing and global marketing
(Keegan, 2008)
The multicultural marketing accounts for differences in consumers’ perception, attitudes and behavior
in different cultural areas. This is because of the increasingly sensitive consumer behavior which in
turn has called for the advent of the so called emotions marketing. Nowadays consumers are trying to
build an identity through various consumption activities, and consequently a consumer will choose the

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product / service / company brand that has an image in accordance with the ideas the person holds
about him/her. The choice being indicative of the type of image the consumer desires. Multicultural
marketing recognizes that the cultural heritage is a decisive factor for the success or failure on
international markets, and insurance companies should try to adapt their activity to the specific
consumer behavior (Stefan Mueller, 2004).

2.11.1. Socio-cultural factors

Marketing can also be defined as a societal process by which individuals and groups obtain what they
need and want through creating, offering, and freely exchanging products and services of value with
others. (Etzel, 1986) classified marketing activities as marketing mix tools of four broad kinds which
he called four Ps of marketing: viz. product, price, place and promotion usually applied to marketing of
tangible goods. However to capture the distinctive nature of service performances three more elements
associated with service delivery are considered physical environment, process, and people (Chopin and
Darrat , 2000). Thus, for effective marketing strategies of services all the seven P’s (product, price,
place, promotion, physical environment, process and people) play an important role
The following section discusses the existing related literature. Hussels S. (2005) identified the
determinants that encourage insurance demand as (i) economic, (ii) political/legal, and (iii) social
factors; he concluded that these factors affect the demand for insurance, life as well as property and
casualty.

2.11.2. Economic factors

Relation between income and life insurance consumption has been confirmed by the cross country
studies of Been stock et al. (1986), Truett and Truett (1990), Browne and Kim (1993), and
Outreville(1996). Been stock et al. (1988), indicate that a positive relationship exists between national
income in industrialized countries and spending on property–liability insurance

2.11.3. Legal and political factors

La Porta et al. (1997, 2000) and Levine (1998, 1999) show that legal environments which provide
good investor protection tend to encourage a higher degree of financial intermediation as well as
economic growth. Levine et al. (2000) highlights that countries with better creditors’ rights, more
rigorous law enforcement and better accounting information tend to have more highly developed

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financial intermediaries. This is particularly relevant to the insurance industry where consumers can be
at the risk of opportunistic behavior by insurance companies. For example, this could include
companies refusing to pay claims. Ward and Zurbruegg (2002) examined the impact of legal and
political determinants on life insurance consumption within Asia and OECD countries. They
highlighted that in Asia an improvement in the legal system has a significant and positive impact on
life insurance demand, with a 10% improvement in the functioning of the legal system generating a
5.5% increase in life insurance demand. An improvement in the legal system here would relate to
better enforcement and legal representation for individuals.

2.11.4. Social factors

Insurance can also be seen as a product that is valued subjectively by its customer. In fact, Hofstede
(1995) points out that the level of insurance within an economy depends on the national culture and the
willingness of individuals to use insurance as a means of dealing with risk. Douglas and
Wildavsky(1982) show that the demand for life insurance in a country may be affected by the unique
culture of the country to the extent that culture affects the degree of risk aversion. Using education and
the uncertainty avoidance index to approximate levels of risk aversion, Esho et al. (2004) confirms that
risk aversion has a significant impact on demand for property–casualty insurance. Another social
aspect analyzed by Zelizer (1979) is religion. He noted that historically religion has provided a strong
source of cultural opposition to life insurance with some religious groups believing that a reliance on
insurance represents a distrust of God’s protective care. In some Muslim dominated countries, the
religious beliefs inhibit those forms of insurance that facilitate speculation of future events, thereby
discouraging growth of the insurance sector. Wasaw and Hill (1986), Browne and Kim (1993), Ward
and Zurbruegg (2002) test whether countries with strong Islamic background have reduced demand for
life insurance consumption. Their result generally do confirm that consumers in Islamic nations
purchase less life insurance policies, which is reflected in the below global average life insurance
penetration in Muslim dominated countries, such as the United Arab Emirates, Qatar, Kuwait and
Saudi Arabia

The foregoing study highlighted the importance of the existence of a dynamic and well-functioning
insurance industry for the growth of an economy. The existing literature shows that the demand for
various types of insurance is affected by number of factors such as income and life insurance

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consumption. There is a relation between national income and spending on property–liability
insurance, between legal environment and demand for insurance, national culture and the willingness
of individuals to use insurance. Besides, risk aversion has significant impact on the demand for
property and casualty insurance. Education promotes an understanding of risk and hence aids insurance
demand

2.11.5. Demographic factors

The selling of insurance on a whim is rendering EIC not to be able to satisfy its customers adequately;
in fact the right Market segmenting strategy has not been practiced thus far in terms of Demographic
elements .Demographic segmentation consists of dividing the market into groups based on variables
such as age, gender, sexual orientation, family size, family life cycle, income, occupation, education,
religion, ethnic community and nationality (Kotler and Armstrong, 2005). Demographic factors are the
most popular bases for segmenting customer groups. One reason is that consumer needs, wants and
usage rates often vary closely with demographic variables. Analysis and understanding of prospective
buyers of life insurance according to their demographic characteristics in specific geographical regions
thus becomes important. This will enable the insurers to better prepare their marketing strategies as per
the requirements of the people in the region.

Burnett and Palmer (1984) in the study examined various demographic and psychographic
characteristics in terms of how well they relate to differing levels of life insurance ownership. Owners
of large amounts of life insurance are better educated, have larger families, have higher incomes, are
not opinion leader, are geographically stable, are greater risk takers, are not price conscious, are not
information seekers, are low in self-esteem, are not brand loyal and believe in community involvement
but they do not rely heavily on the government. They conducted extensive research using Multiple
Classification Analysis. Their study proved that demographic variables are important predictor
variables.

Truett and Truett (1990) showed that age, education, and level of income are factors that affect the
demand for life insurance, and that income elasticity of demand for life insurance is much higher in
Mexico than in the United States

Shotick and Showers (1994) augment the empirical literature on insurance demand by examining the
impact of selected economic and social factors on the purchase of insurance. Although income and

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number of earners are both positively related to the demand for insurance, the marginal effect from an
increase in income is greater for single earner households than for multi-earner households. Also, as
either family size or age increases, the marginal increase in insurance expenditure diminishes. They
examined that the size of the family and the number of earners in the household are positively related
with expenditures on insurance premium. They also tested the curvilinear relationship between demand
for life insurance and age

There is an argument that customers from different cultures may rely on different factors during the
process of relationship development with service providers (suh,et al.,2006).so given this ,cultural
factors might have prompted Ethiopians into exhibiting different reactions to insurance services.
Atmand (2003) asserts that where people below poverty line are high and per capita income is low, and
then insurance penetration is bound to be low .This suggests that there might be disparity between the
common behavioral response to insurance offerings and what prevails in the Ethiopian Business
environment

2.11.6. Organizational factors

Service is an activity or series of activities of a more or less intangible nature than normal, but not
necessarily takes place in the interaction between the customer and service employee and/or physical
resources or goods and/or system of service provider which are provided as a solution to customer's
problems Gronroos (2001).

Now a day’s customer service has become a distinct component of both product and service sectors
and with the developments in information technology many businesses find demanding and
knowledgeable customers (Agar, 1980)

Quality of services can make for the difference between success and failure in both service and
manufacturing organizations. Service quality, customer satisfaction and customer value have become
the main concern of both manufacturing and service organizations in the increasingly stiff competition
for customers in today's customer-centered era (Wang et aI., 2004).Therefore, many organizations are
paying increasing attention to improve service quality. In some manufacturing industries "service
quality" is taken as a more important order winner than "product quality" (Ghobadianet al., 1994).
Service quality improvements will lead to customer satisfaction and cost management that result in
improved profits (Stevenson, 2002).Service sector firms these days are compelled by their nature to

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provide excellent service in order to prosper in increasingly competitive domestic and global
marketplaces (Sultan and Simpson,2000). As service firms find themselves in an increasingly
competitive and complex business environment, they are bound to examine their service delivery
processes critically.

Babbie (1992) in his study found out that Standards of service delivery among many insurance
companies are still low and the focus on the customer has not yet been embraced fully in the industry
as it has in the competing financial services. Customer satisfaction therefore has remained low.

Another perception that emerged during a study by Blumler (1979) was that insurance agents are
thieves, liars, and conmen. All the insurance managers and agents interviewed acknowledged that they
had been confronted with such allegations. However, 47 percent of the general public respondents held
this opinion. Nonetheless, there was a marked relationship between this and the perception that
insurance sales agents sell policies before explaining adequately what the insured has paid for and what
to expect. That is to say, when an insurance agent does not understand the products well, chances are
that the prospect will either be sold a wrong product or may not be made to understand what is
expected of the policy

Severing and Tankard (1997) argues that some perceptions are held because people are striving to
maximize the rewards in their external environments and minimize the penalties. The misconception is
that once someone gets a cover, it includes all risks and what one needs to do is walk into the insurers
office with a claim and a cheque will be issued right away.

Those who hold this misconception, view insurance as a means of maximizing benefits. Such people
never expect any penalties to be associated with any cover and may treat even premiums for personal
accident cover as an investment and therefore make claims even if the insured event fails to take place
(Hessegrave, 1991)

The right communication strategy would therefore be rendering product knowledge empowerment as
was recommended by the general public respondents in a study carried out by (Jefkins, 1992). Nearly
all of them responded that insurance agents should provide full and fair disclosure of all the required
information regarding the policy before making the prospect to sign the proposal form.

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 2.12. Empirical Review
An attitude in marketing terms is defined as a general evaluation of a product or service formed over
time (Solomon, 2008)

Life insurance is a safeguard for family members if the major suppliers of income were to die and it
was to grievously upset the common means for providing the basics of life. This does not include the
burdens of financial expenses for burial, taxes, unplanned or emergency expenses, and furthered
educational expenses for children or to have the spouse go back to school to become the primary
breadwinner of the family. Life insurance is also not affordable when you are young and just starting
out with a family and not always a main concern for the young. Most young people to do not think
about death or their mortality, and hence, they do not see a necessity for life insurance. As we grow
older, our needs and wants to secure a financial future for our loved ones necessitate the need to
evaluate all options for achieving this goal. The cost and availability of features such as these could be
a key issue in deciding which policy to accept (Solomon, 2008)

Consumer’s attitudes are both an obstacle and an advantage in the decision process. Choosing to
discount or ignore consumers’ attitudes of a particular product or service, while developing a
marketing strategy, guarantees limited success of a campaign.

Differences in attitudes depend also by the gender of decedents. The different features between men
and women in the perception of risk and decisional process of making insurance. Women are more risk
averse than men. Over an initial range, women require no further compensation for the introduction of
ambiguity but men do. Differences appear also in which concerns risk taking, overconfidence and
information processing. Perhaps the attitudes formed as the result of a positive or negative personal
experience and by other psychological factors outside the common market manipulation (Solomon,
2008)

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 CHAPTER THREE
METHODS OF THE STUDY

3.1. Research Approach

Mixed research approach will be used for collecting and analyzing both quantitative and qualitative
methods. The basic assumption was the uses of both quantitative and qualitative methods, in
combination, provide a better understanding of the research problem and question than either methods
(Creswell, 2012).

Mixed methods research combines quantitative and qualitative approaches by including both
quantitative and qualitative data in a single study. The purpose of mixed methods research is to build
on the synergy and strength that exists between quantitative and qualitative research methods to
understand a phenomenon more fully than is possible using either quantitative or qualitative methods
alone.

3.2. Research Design

Descriptive research design method is used to meet research objectives and in order to test the
hypotheses proposed. Particularly a case study method is appropriate for this project because of its
relatively cost effectiveness and easy administration in locating buyers from EIC to investigate and

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describe buyers’ attitude towards life insurance.

To scope out the magnitude or extent of a particular phenomenon, problem, or behavior,

to generate some initial ideas (or “hunches”) about that phenomenon, or

To test the feasibility of undertaking a more extensive study regarding that phenomenon,

As mentioned earlier in the statement of the purpose of this project, the main purpose of this study is to
examine the attitude of the buyer towards the purchase of a life insurance policy by taking a sample
size 130 buyers

3.3. Target Population

As the aim of this research is to describe and investigate buyers’ attitude towards life insurance policy
purchase, therefore, the target population is six hundred (600) who have purchased life insurance from
EIC and aged 18 years or older . The age restriction is made to select that involves a kind of
independent decision

3.4. Sample Size

As mentioned earlier in the statement of the purpose of this project, the main purpose of this study is to examine
the attitude of the buyer towards the purchase of a life insurance policy by taking a sample size 240 individuals
from around Addis Ababa using Yamane’s or Slovin's sample size formula. Note that this is the least
accurate formula and, as such, the least ideal. You should only use this if circumstances prevent you
from determining an appropriate standard of deviation and/or confidence level (thereby preventing you
from determining your z-score, as well).

3.5. Sampling Technique (Sample Size Calculation):

As the purpose of this study is to describe and investigate the attitudes of buyers towards the purchase
of life insurance policies, the target population is defined as all buyers who have not purchased life
insurance from EIC and are 18 years of age or older. The age restriction was made to select only the
legal right to decide life insurance, which involves the same kind of independent decision making.

Data sources are broadly classified into primary and secondary data. In this research, both sources are
used. Primary data was collected from selected policy holders through questionnaires while the

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secondary data was collected from books, magazines, journals, IRDA annual reports, statistical
abstract and so on. Primary data was required to know the level of knowledge of sample policy
holders, about different schemes being offered by Ethiopia Insurance Company to know the impact of
knowledge for selection of a policy and so on to make this study qualitative. Secondary data was
required to study the nature, scope and various types of insurance policies being opted by
policyholders, global insurance practices, development of insurance sectors in Ethiopia and global
insurance practices in order to make this study quantitative. The research was designed to find out the
determinants of buying behavior from Addis Ababa where major source of primary data for this study.
The data was collected carefully as the data increases reliability, usefulness, validity, accuracy and
importance of statistical analysis.

Sample size is a statistical concept that involves determining the number of observations or replicates
(the repetition of an experimental condition used to estimate the variability of a phenomenon) that
should be included in a statistical sample. It is an important aspect of any empirical study requiring that
inferences be made about a population based on a sample. Essentially, sample sizes are used to
represent parts of a population chosen for any given survey or experiment. To carry out this
calculation, set the margin of error, ε, or the maximum distance desired for the sample estimate to
deviate from the true value. To do this, use the confidence interval equation above, but set the term to
the right of the ± sign equal to the margin of error, and solve for the resulting equation for sample size,
n.

The equation for calculating sample size is shown below: Calculating sample size sounds complicated
- but, utilizing an easy sample size formula and even calculators are now available to make this tedious
part of research faster! Therefore for this study a population of 600, with 5% margin of error was taken
to calculate the sample size using Yamane’s Formula or Slovin's Formula which is a very general
equation used when you can estimate the population but have no idea about how a certain population
behaves. The formula is described as:

Where:

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  e = precision level (margin of error)
 N = population size.
 Therefore Sample Size = N / (1 + N*e2)
600
 Sample Size (n) = / 1 + [600* 0.052 ]

o = [2.582 * 0.5(1-0.5)] / 0.052 / 1 + [2.582 * 0.5(1-0.5)] / 0.052 * 425]

o = 600 / 1 + [1.5]
o = 600 / 2.5
o = 240

3.6. Method of data collection

The preferred instrument for primary data collection in this study is self administered questionnaire.
This is because primarily it provides relatively simple and straight forward approach for investigation
of buyers’ attitude. Secondly it allows respondents relative freedom and thirdly it is efficient in
providing large amounts of data at relatively low cost in a short period. Structured questionnaires,
whose reliability and validity, in same title already tested by (Yusuf.TGbadamosi. A &Hamadu.D
2009) is used with some context modification to all selected sample. The first section consists of
regarding the profile aspect of the respondents and the second part of the questionnaire consists of 19
statements evaluated on a 1-5 Likert Scale, where ‘1’ indicates strongly disagree with the statement,
and ‘5’ refers to strongly agree with the statement. The third part of the questionnaire consists of
interview questions where the respondents were asked to describe the answers on the space provided
for personal responses and comments. Secondary data sources such as customer profile and records
were also used to support the study.

3.7. Methods Data Analysis

The data collected from the questionnaire is analyzed using descriptive and inferential or econometric
analysis. According to Duncan Kramer and Dennis Howitt (2004), descriptive data analysis focuses on
maximizing the value of the data by clarifying the process of describing and analyzing the data
collected. After proper editing, the data is coded and entered into the software and then ready for

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analysis. To achieve the objectives of the study, the collected data will be prepared and analyzed using
Statistical Package for Social Studies, (SPSS) version 22, descriptive statistics and descriptive design.
It helps to describe the characteristics of the collected data and to analyze and interpret the questions
one by one in depth to get meaningful results. In addition, the explanatory design chosen to examine
the relationship between dependent and independent variables. In the process of analysis, percentage,
frequency mean and standard deviation are used. In doing so, charts, graphs, and tables are used to
present the findings and make them easy to understand in order to reach certain conclusions.

3.8. Validity and Reliability

Mugenda and Mugenda (2003) define validity as the validity and meaningfulness of assessments based
on the research results. The two also define reliability as a measure of the degree to which a research
instrument produces consistent results or data after repeated testing. Therefore, the validity and
reliability of the research instrument used in the current study is based on the standard. The content
validity of the research instruments was established to ensure that they reflect the content of the
research concepts. In the first step, the researcher goes through the instruments to make sure that they
answer the set questions and contain all the information related to the objectives in comparison with
the set objectives. The tools are then based on 240 life insurance buyers from the same district.
Cronbach's Coefficient Alpha was calculated for the instrument. If a reliability ratio of 0.721 is
obtained, the instruments are taken for the study. A reliability coefficient of 0.7 or higher reflects the
internal reliability of the instruments (Fraenkel & Wallen, 2000).

A pilot study will be necessary to eliminate the ambiguity of the issues in question, to facilitate the
administration of the instruments, to test the data collection guidelines, to confirm the feasibility of the
study, to anticipate and correct any logical and methodological problems with the study, and to allow
preliminary data analysis

Table 3.1: Reliability Cronbach’s alpha

S/N Dimensions (Variables) N of Items Cronbach’s alpha

1 Demographic factors 7 0.834
2 Socio cultural factors 1 0.825
3 Economic factors 1 0.821
4 Organizational factors 6 0.824

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 5 Political and legal factors 3 0.822
Source: Own Survey, 2021

3.9. Ethical Consideration

According to Kothari (2004), a measuring instrument is reliable if it provides consistent results.
Cronbachs alpha is a coefficient of reliability.

It tells the extent to which results of a study are consistent over time and there is an accurate
representation of the total population understudy. According to Zikmund, Babin and Griffin (2010)
scales with coefficient alpha between 0.8 and 0.95are considered having very good quality, scales with
coefficient alpha between 0.7 and 0.8 are considered to have good reliability, and coefficient alpha
between 0.6 and 0.7 indicates fair reliability.

CHAPTER FOUR
RESULT, DISSCUSION AND INTERPRETATION

4.1. Introduction
This chapter explains information gathered from the Ethiopian insurance corporation through
questionnaires. These are analyzed to emphasize response from respondents using tables, graphs and
charts to enhance clearer and consistent understanding of the analysis. This chapter is also divided into
sub-headings to throw more light on questions asked on the field.

4.2. Response Rate

Here an analysis of the respondents who were responsive and non-responsive was illustrated in the
table 4.1 and on the below 3D pie chart.

Table: 4.1 Response Rate

Rating Frequency Valid Percent

non-respondent 18 7.5
Respondent 222 92.5
Total 240 100.00
Source: own survey, 2023

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 7.5

non-respondent
Respondent

92.5

Source: own survey, 2023

Fig 2. Response rate

The data collected from non buyers of life insurance using structured questionnaires. A total number of
two hundred forty (240) questionnaires were administered and out of them eighteen (18) were neither
returned nor retrieved. These valid questionnaires used for the analysis yielded 222/240*100=92.5% of
response rate. This indicates that, the response rate was high and reflects the entire views of the
population.
4.3. Demographic Characteristics of Respondents

The study captured different demographic characteristics of the respondents as shown in the table
below (Table 4.2). In terms of gender of respondents, the study included 72.5 % of males and 27.5 %
of females. Although more males however can be said to dominate the respondents when compared to
the females, the research has contribution of both sexes involving in the response of buyer’s attitude
towards life insurance purchase.

Regarding age distribution the majority of the respondents (59.9%) are between 18-25 years old and
11.3% of the respondents between 26.35 years old, 19.8% are between 36-45 years old and 9% of them
are above 45 years. This shows us different age groups included in the study.

Table 4.2 indicates that, all the respondents selected were almost well educated, it was found that,
majority of the respondents were holders of college diploma, which constitute 55.9%, first degree

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holders followed this, which also constitutes 20.7%. 16.2% whiles masters and above and 7.2% were
below diploma level. Educational level is a high priority for all organizations to pay maximum respect
to the level of qualification and the skills of the employee in the sense that this contribute immensely to
the achievement.

The respondents work experience were different, as shown in table 4.2, the work experience of the
professionals are, 12.6% below 1 year, again the others 59.5% from 3-5 years which is very high
number, and the rest (27.9%) were above 5 years. The work experience has impacts on the attitudes of
managing life insurance purchase.

Table: 4.2. Demographic Characteristics of Respondents

Variable Frequency Percent

Age Range
18 – 25 133 59.9
26 – 35 25 11.3
36 – 45 44 19.8
Above 45 20 9
Total 222 100
Sex
Male 161 72.5
Female 61 27.5
Total 222 100
Educational qualification
Below college diploma 16 7.2
College diploma 124 55.9
First degree 46 20.7
Masters degree and above 36 16.2
Total 222 100
Service
Below 1 year 28 12.6
3 to 5 years 132 59.5

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 Above 5 years 62 27.9
Total 222 100

4.4 Descriptive Statistics of the assessment of buyer’s attitude towards life insurance purchase in
EIC, Addis Ababa.

Consumers have certain attitudes and beliefs which influence the buying decisions of a consumer.
Based on this attitude, the consumer behaves in a particular way towards a product. This attitude plays
a significant role in defining the brand image of a product. Hence, marketers try hard to understand the
attitude of a consumer to design their marketing campaigns.

Here for this study, respondents were asked to rate their opinion. In descriptive data analysis, averages
(mean) were calculated for each construct in the Likert Scales, from Strongly Disagree=1 to Strongly
Agree=5. The numbers entered into the EpiData and SPSS version 25 thus represented the weight and
the weighted averages for the scales were calculated to understand the mean values. This was
accomplished by dividing the distances between the scale values (4 in a 5-point Likert Scale by the
number of values (5). Thus, the period length is 4/5=0.80, which is used to calculate the weighted
averages (Alfarra, W.A., 2009). The weighted average categories (mean value) is interpreted with the
degree of agreement for each factor calculated accordingly and its interpretation was made on the basis
of Alfarra, W.A., (2009) suggestion as weighted average between 1.00-1.79 interpreted as very un
influential, 1.80-2.59 as an influential, 2.60-3.39 as Neutral/do not know or undecided, 3.40-4.19 as
influential and 4.20-5.00 as very influential (please refer Table 4.3). in general the mean of the
respondents responses score for each variable illustrates the attitudes of buyers towards life insurance
purchase where as standard deviation illustrates the deviation from the central value.

Table 4.3: Weighted Averages for 5-point Likert Scales

Weighted Average Result Result Interpretation

1.00-1.79 SD (Strongly Disagree) Very un influential
1.80-2.59 D (Disagree) Un influential
2.60-3.39 N (Neutral) Neutral/do not know
3.40-4.19 A (Agree) Influential

42 | P a g e
 4.20-5.00 SA (Strongly Agree) Very Influential
(Source: Alfarra, W.A., 2009)

4.4.1 The association of buyer’s attitude towards life insurance purchase with demographic

Factors

Buyer’s attitude towards life insurance purchase could be affected by various means or conditions. The
purchase of life insurance might be influenced due to some factors but here on this study whether or
not demographic factors has association with attitudes of buyers towards life insurance purchase were
discussed under this category.

Factors which affects buyers attitudes towards life Response (N=120) De

insurance purchasing via
tio
Me
n
SD D N A SA an
Sta
DEMOGRAPHIC FACTORS
nd
ard
Buyers attitude towards life insurance purchase is affected 11
1 4
18 22 68 0 2.19 1.34
by age

2 Buyers attitude towards life insurance purchase is affected 17 23 15 52 115 4.00 1.30
by gender
Sexual orientation affects Buyers attitude towards life
3 9 25 38 27 123 4.0 1.24
insurance purchase
Buyers attitude towards life insurance purchase is affected
4 12 30 101 31 48 3.9 0.69
by family size
Family life cycle affects Buyers attitude towards life
5 2 7 37 46 130 4.3 0.92
insurance purchase
Religion affects Buyers attitude towards life insurance 14
6 15 13 23
2
29 3.7 0.99
purchase
Buyers attitude towards life insurance purchase is affected 11
7 8
17 17 48 22 2.3 1.52
by education level
Grand mean 3.48

Table 4.4: The association of buyer’s attitude towards life insurance purchase with demographic

43 | P a g e
factors

*1=SD=strongly disagree, 2=D=Disagree, 3=N=Neutral, 4=A=Agree, 5=SA=Strongly Agree

* Source: Own Survey, 2023

To understand whether demographic factors affect buyers attitude related to life insurance purchase,
seven items were developed in this research. The results are presented on table 4.4. Thus from the table
4.4, The respondents agreement on buyers attitude towards life insurance purchase is affected by age,
the composite mean is found to be 2.19 with standard deviation of 1.34. This implies that there was a
high number of respondent’s disagreement i.e. age variation has no association with buyer’s attitude
towards life insurance purchase based on weighted average result analysis.

However; according to the survey by Zakariase Mekonen (2010), the two categorical variables buyers’
age and buyers’ attitude towards life insurance policy purchase have statistical association (they are
dependent). Therefore more researches are needed to clear such ambiguity.

Regarding the statement buyer’s attitude towards life insurance purchase is affected by gender; the
mean and standard deviation were 4.0 and 1.30 respectively. This would mean that most of the
respondents were agreed on it i.e. being male is significantly associated with attitudes of buyers in life
insurance purchasing based on weighted average result analysis.

From the above table it can be noted that most of respondents agreed on the association of sexual
orientation with buyer’s attitude towards life insurance purchase with mean 4.0 and the standard
deviation of 1.24. Again this would mean that sexual orientation is strongly associated with buyers
attitude based on weighted average result analysis.

Regarding with the statement buyers attitude towards life insurance purchase is affected by family size,
the mean was found to be 3.9 with 0.69 standard deviation. This implies that the majorities of
respondents agreed as family size has significant association with buyer’s attitude in life insurance
purchasing based on weighted average result analysis.

As it is indicated on the association of family life cycle with buyer’s attitude towards life insurance
purchase, A very large number of respondents agreed with a mean of 4.3 and standard deviation of
0.92 which indicates as family size is very influential on attitudes of buyers in life insurance
purchasing based on weighted average result analysis.

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Regarding the statement buyer’s attitude towards life insurance purchase is associated with religion;
the mean and standard deviation were 3.7 and 0.99 respectively. This would mean that religion is
influential on deciding life insurance purchase related to buyers attitude based on weighted average
result analysis..

However According to some researches for example a survey conducted by Ghalib Jamal (2020), top
respondents said, “There is no need to buy life insurance because trust in God/Allah reduces life risk.
So again further studies are needed on this aspect

With regard to the association of educational level with buyer’s attitude towards life insurance
purchase, most of the respondents were not agreed with a mean of 2.3 and standard deviation of 1.52.

This is controversial, this result seems not similar with A survey by Adane Zeihun (2021) who revealed
that, the categorical variables buyers’ educational level indicates most life insurance buyers of EIC
are educated enough to understand the value of obtaining life insurance and the benefit they get out of
it. It is important to note that most of the respondents perceived or agreed as demographic factors
strongly affect buyers attitude towards life insurance purchasing with grand mean of 3.48.

Regarding the qualitative data found from the interview, the respondents reflected the following
opinions: “Demographic factors such as educational status, religious, ideology, marital status can all
have significant association with buyer’s attitude towards life insurance purchase. However, as some
Muslim respondents said. giving 10% from their assets to poor is also like purchasing a life insurance
from Allah so by this concept religion has no association with buyers attitude towards life insurance
purchase exceptionally for Muslims ”

4.4.2 The association of buyer’s attitude towards life insurance purchase with socio cultural
factors

Humans are social beings and they live around many people who influence their buying behavior.
Humans try to imitate other humans and also wish to be socially accepted in the society. Hence their
buying behavior is influenced by other people around them. These factors are considered as social
factors. Some of the social factors are: family, reference groups, roles and status.

A group of people is associated with a set of values and ideologies that belong to a particular
community. When a person comes from a particular community, his/her behavior is highly influenced
by the culture relating to that particular community. Some of the cultural factors are: culture, sub

45 | P a g e
culture and social class.

However; here on this study whether or not socio-cultural factors has association with attitudes of
buyers towards life insurance purchase were discussed under this category.

Table 4.5: The association of buyer’s attitude towards life insurance purchase with socio-cultural
factors
Factors which affects buyers attitudes towards life Response (N=120) De
insurance purchasing via
tio
Me
S S n
D N A an
SOCIO CULTURAL FACTORS D A Sta
nd
ard
Social cultural factors affects Buyers attitude towards life 13
1 13 11
1
57 9 3.17 0.82
insurance purchase
Grand Mean 3.17
*1=SD=strongly disagree, 2=D=Disagree, 3=N=Neutral, 4=A=Agree, 5=SA=Strongly Agree

* Source: Own Survey, 2023

As shown in the table 4.5, the majorities of respondents were not decided whether the buyers attitude
towards life insurance purchase has association with a mean score of 3.17 and standard deviation of
0.82.

The following qualitative data was obtained from the interviews with the respondents: “Socio-cultural
factors influence the attitude of buyers towards life insurance. Cultural factors including basic values,
needs, preferences and beliefs held by consumers affect buyer’s attitude related to life insurance
purchase”

4.4.3 The association of buyer’s attitude towards life insurance purchase with economic factors

The consumer buying habits and decisions greatly depend on the economic situation of a country or a
market. When a nation is prosperous, the economy is strong, which leads to the greater money supply
in the market and higher purchasing power for consumers. When consumers experience a positive
economic environment, they are more confident to spend on buying products. Whereas, a weak
economy reflects a struggling market that is impacted by unemployment and lower purchasing power.
Economic factors bear a significant influence on the buying decision of a consumer. Some of the
important economic factors are: personal income, family income, consumer credit, liquid assets etc

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Income in general has the ability to influence the buying behavior of a person. Higher income gives
higher purchasing power to consumers. When a consumer has higher disposable income, it gives more
opportunity for the consumer to spend on luxurious products. Whereas low-income or middle-income
group consumers spend most of their income on basic needs such as groceries and clothes.

Therefore; on this study whether or not economic factors has association with attitudes of buyers
towards life insurance purchase were discussed under this category.
Table 4.6: The association of buyer’s attitude towards life insurance purchase with economic
factors
Factors which affects buyers attitudes towards life Response (N=120) De
insurance purchasing via
M tio
S S ea n
D N A
ECONOMIC / INCOME FCTOS D A n Sta
nd
ard
Income level affects Buyers attitude towards life insurance
1 0 13 29 149 31 3.9 0.70
purchase
Grand Mean 3.9
*1=SD=strongly disagree, 2=D=Disagree, 3=N= Neutral, 4=A=Agree, 5=SA=Strongly
Agree
* Source: Own Survey, 2023

As shown in the table 4.6, the majorities of respondents with a composite mean of 3.9 and with 0.70
standard deviation agreed as economic factors such as income level affects buyers’ attitude towards
life insurance purchase. This implies that economic factors significantly affects buyers attitude in life
insurance purchasing based on weighted average result analysis.

4.4.4 The association of buyer’s attitude towards life insurance purchase with organizational
factors

Organizational Factor: These factors include organizational structure, size and resources such as
budget, staff availability and technology. The larger the organization is, the more complex its decision-
making process becomes due to the different stakeholders involved in making decisions.

Organizational behavior focuses on studying individual and group attitudes within an organization,
such as job satisfaction and commitment to organizational goals etc.

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Therefore this study tried to show the association of buyer’s attitude towards life insurance purchase
with organizational factors in this category.

Table 4.7: The association of buyer’s attitude towards life insurance purchase with
organizational factors
Factors which affects buyers attitudes towards life Response (N=120) De
insurance purchasing via
tio
Me
S n
D N A SA an
ORGANIZATIONAL FACTOR D Sta
nd
ard
Buyers attitude towards life insurance purchase is affected
1 2 12 121 55 32 3.46 0.83
by occupation
Service quality affects Buyers attitude towards life
2 insurance purchase 4 7 23 154 34 3.9 0.73

Customer satisfaction affects Buyers attitude towards life

3 3 6 15 44 154 4.5 0.84
insurance purchase
The values of customer affects Buyers attitude towards life
4 7 39 51 125 0 4.3 0.97
insurance purchase
Buyers attitude towards life insurance purchase is affected
5 6 5 36 152 23 3.8 0.75
by perception of insurance agent
Communication or information affects Buyers attitude
6 8 9 133 45 27 3.3 0.87
towards life insurance purchase
Grand Mean 3.9
*1=SD=strongly disagree, 2=D=Disagree, 3=N= Neutral, 4=A=Agree, 5=SA=Strongly Agree
* Source: Own Survey, 2023

As shown in Table 4.7, to the statement buyer’s attitude towards life insurance purchase is affected by
occupation, the majorities of respondents agreed with composite mean of 3.46 and standard deviation
of 0.83. Therefore based on weighted average result analysis, occupation is influential on buyers
attitude towards life insurance purchasing.

Regarding the issue of service quality association with buyer’s attitude towards life insurance
purchase, the majorities of respondents with 3.9 mean and standard deviation of 0.73 were agreed as
service quality is significant in deciding life insurance purchase related to buyers attitude based on
weighted average result analysis.

A large number of respondents agreed as Customer satisfaction is very influential with buyer’s attitude

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towards life insurance purchase with a mean of 4.5 and a standard deviation of 0.84.

Concerning the association of the values of customer with buyers’ attitude towards life insurance
purchase, the majorities of respondents agreed with mean 4.3 and standard deviation of 0.97. I.e. based
on weighted average result analysis, values of customers significantly affects buyers attitude in life
insurance purchasing.

Besides this large number of respondents also agreed as buyers attitude towards life insurance purchase
is strongly associated with perception of insurance agent with 3.8, mean and 0.75 standard deviation.

Regarding with the association of Communication or information with Buyers attitude towards life
insurance purchase, the majorities of respondents with 3.3 mean and 0.87 standard deviation preferred
not to decide.

It is important to note that most of the respondents perceived or agreed as organizational factors
strongly affect buyers attitude towards life insurance purchasing with grand mean of 3.9.

Coming to the qualitative data respondents provided information as follows, “Organizational

conditions affect the attitude of buyers, for example, their capacity or gap in promoting their services,
and their service delivery affects the attitude of buyers. Another thing is that a weak organizational
structure can affect the attitude of buyers due to gaps in the provision of professional services.”

4.4.5 The association of buyers’ attitude towards life insurance purchase with political and legal
factors

Political and legal factors have a major influence on buyers buying behavior. Government policies,
regulations and laws determine the terms of purchase for many organizations, such as labor laws and
environmental regulations. These factors can limit what an organization can buy or receive in terms of
goods/services as well as how much they can spend on certain items. Additionally, taxes, subsidies,
tariffs and other government incentives affect the cost of acquiring products from suppliers, which
impacts organizational buying decisions.

Political unrest or changes in government leadership also have a huge effect when it comes to decision-
making regarding purchasing patterns, as do ethical considerations about sourcing products from
different countries or regions (e.g., boycotts). Ultimately, political and legal forces shape an
organization’s or buyers’ ability to purchase certain items within their budget constraints and their
moral obligation to make ethical choices while doing so.

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Table 4.8: The association of buyer’s attitude towards life insurance purchase with political legal
factors
Factors which affects buyers attitudes towards Response (N=120) Deviati
life insurance purchasing on
S S Mean
D N A Standa
POLITICAL AND LEGAL FACTORS D A rd
Buyers attitude towards life insurance purchase is 15
1 10 10 37 8 3.6 0.81
affected by political legal factors 7

Ethnic community affects Buyers attitude towards 14

2 15 20 31 15 3.5 0.98
life insurance purchase 1

Nationality affects Buyers attitude towards life 12

3 19 26 35 19 2.6 1.1
insurance purchase 3

Grand Mean 3.23

*1=SD=strongly disagree, 2=D=Disagree, 3=N= Neutral, 4=A=Agree, 5=SA=Strongly Agree

* Source: Own Survey, 2023

Based on the result shown on table 4.8, the majority of respondents agreed to the statements
mentioned as buyers attitude towards life insurance purchase is associated with political and legal
factors as well as ethnic community with mean of 3.6/ 3.5 and standard deviations of 0.81/ 0.98
respectively. This would mean that political and legal factors as well as ethnic community have strong
association with buyers attitudes in life insurance purchasing based on weighted average result analysis
However; large number of respondents were neutral with the statement Nationality associated with
buyer’s attitude towards life insurance purchase with a mean of 2.6 and standard deviation of 1.1.

It is also better to note that most of the respondents were neutral regarding the statement of political
and legal factors affect buyers attitude towards life insurance purchasing with grand mean of 3.23.

Table 4.9: Summary of the association of some factors with buyer’s attitude towards life
insurance purchase
GRAND
FACTORS N
MEAN
Association of demographic factors with buyers attitude towards life
222 3.48
insurance purchase
Association of socio-cultural factors with buyers attitude towards life 222 3.17

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 insurance purchase
Association of economic factors with buyers attitude towards life 222
3.9
insurance purchase
Association of organizational factors with buyers attitude towards life 222
3.9
insurance purchase
Association of political & legal factors with buyers attitude towards life 222
3.23
insurance purchase

CHAPTER FIVE
5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1. Introduction
The final part of this research paper provides summary of the findings of the study, conclusions and
recommendations for the association of some factors related with buyers attitude towards life
insurance purchasing which were drawn from the findings and discussions of the data collected by
questionnaires and interview. The chapter is structured as follows: Summary, conclusion,
recommendations and suggestions for further research

5.2. Summary of Major findings

The purpose of this study was to assess the association of some factors with buyers’ attitude towards

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life insurance purchasing in Ethiopian Insurance Corporation in Addis Ababa, Ethiopian.

From the demographic characteristics of respondents’ the leading percentage were male (72.5%) and
the remaining (27.5%) were female respondents. About 59.5% of them have served more than 3 to 5
years in the insurance sector and this had its advantages to the study as measurement needs enough
knowledge and exposure of the sector. The majorities of the respondents, 55.9 % of them had college
diploma and around 20.7% had also first degree. As a result the validity of the research would increase
and the findings can describe the existing situation of the sector.

The sampling techniques used for this study were yamene (1967) sampling techniques. This sampling
technique was used to select Ethiopian Insurance Corporation found in Addis Ababa. In addition a
yamene (1967) sampling techniques was also used to select 240 samples of life insurance buyers or
consumers from 600 total populations. Therefore, the sample size for the study was 222 respondents.
I.e. a total of 240 questionnaires were distributed to life insurance buyers or consumers. Finally, 222
questionnaires were returned which represents nearly 92.5% of the total sample size.

The study was guided by the following research questions: What are the criteria’s set by the buyers to
choose insurance company for life insurance? What are the driving forces to get life insurance
protection? How do buyers rate the satisfaction level towards application process and claims handling
in terms of Life Insurance? What information do buyers think is reasonable for insurance company to
access their personal data? What do buyers think are the reasons for others like friends, family
members, work colleagues, not buying life insurance? Descriptive statistics was used to answers the
research questions posed.

Therefore the following summaries of major findings of the study are presented based on the analysis
and interpretation of collected data.

Demographic factors affecting buyers’ attitude towards life insurance purchase

The findings of the analysis shows that most of respondents with 3.48 grand mean strongly agreed or
reflect regarding with the association of demographic factors with buyers attitude in life insurance
purchasing in EIC.

Socio-cultural factors affecting buyer’s attitude towards life insurance purchase

Again it is indicated that respondents with grand mean 3.17 were neutral or not reflect their idea

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concerning with the association of socio-cultural factors with buyers attitude in life insurance
purchasing in EIC

Economic factors affecting buyer’s attitude towards life insurance purchase

Here large number of respondents with grand mean of 3.9 significantly agreed related with the
association of economic factors with buyer’s attitude in life insurance purchasing in EIC

Organizational factors affecting buyer’s attitude towards life insurance purchase

Again the majorities of respondents with grand mean 3.9 strongly agreed with the presence of
association of organizational factors with buyer’s attitude in life insurance purchasing in EIC.

Political & legal factors affecting buyer’s attitude towards life insurance purchase

Finally this study clearly indicated that with grand mean of 3.23, the respondents were not decided
regarding with the association of political & legal factors with buyers attitude in life insurance
purchasing in EIC.

5.3. Conclusions

As shown on some researches the Ethiopian insurance market remained at an embryonic stage of
development over the medium term, characterized with low levels of insurance penetration and
density. The market is dominated by non-life insurance, with life insurance only accounting for around
8% of total insurance premiums written. There are many factors which could affect the buyers decision
towards insurance purchase. On this regard attitude is one factor. Therefore, here, this study tried only
to assess the buyers’ attitude towards life insurance purchase related with some factors.

Therefore the purpose of this research is to investigate the association of buyers’ attitude towards life
insurance purchase with some factors in Addis Ababa.

Based on the findings of the perceived evaluation of the respondents the following conclusions are
drawn related to buyers’ attitude towards life insurance purchase with some factors, in Addis Ababa.:-

 Demographic factors significantly affect attitude of buyers towards life insurance purchase.

 Economic factors also affect attitude of buyers related to life insurance purchase significantly.

 Most of organizational factors significantly affect attitude of buyers related to life insurance

53 | P a g e
 purchase.

 Political and legal factors are influential in affecting attitude of buyers related to life insurance
purchase.

 Generally demographic, economic and organizational factors are influential towards attitudes of
buyers in life insurance purchasing.

5.4. Recommendation

From the above conclusions, we can infer some recommendations that can positively affect the buyers’
attitude and towards life insurance purchase.

 As demographical factors play considerable role of varying degrees on purchase of life

insurance policy, then it is necessary to suggest developing specific marketing strategy
targeting each group of life insurance policy purchasers.

 For Muslim religious and some other religious buyers, their purchase attitude is strongly
influenced by their religion, so it is recommended to find a new way for the EIC life insurance
marketing department, to work hard, to penetrate this group of buyers through mass media and
by give training to create awareness for influential individuals in this religion as well as adding
various additional benefits.

 Economic factor/Income level is an important factor in affecting buyer’s attitude in life

insurance purchase for those purchasers who have low income. Since life insurance has a nature
of saving from monthly income, on the other hand, applying marketing strategy, supporting
people who have low income by various means, working with the government to change the
life of these people and then creating awareness to bring them back for life insurance
purchasing are important.

 It is better for the EIC to assess its service quality, customer satisfaction, organizational values
and perceptions as well as updating its communication or information delivering strategies
thoroughly.
 Regarding with political and legal factor, since it is also one factor affecting buyers attitude in
life insurance purchase, therefore, the government should assure its citizens peace, safety,

54 | P a g e
 security and try to change the life of the people at large accordingly.

 Lastly in this study the researcher suggests that such area needs to be researched and
investigated more through other studies so that the sector’s business could have grown more
than its present status and other researchers can also exploit such opportunities.

REFERENCES
Ajzen I. and Fishbein M. (1980), Understanding of Attitudes and Predicting Social Behavior
Benedek (2012), Three Approaches of Life Insurance
Brassington and Stephen Pettitt (2003), Principles of Marketing,: Published by Financial Times
Management.
Dhar (1997), Greenleaf and Lehmann (1995), Tversky and Shafir (1992 ) Influence of Product
Variety on Brand Perception and Choice
Dorfman. Mark. S (2005). Introduction to Risk Management and Insurance, 8th Ed. Pearson

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 Education Inc, Upper Saddle River, New Jersey, U.S.A.
EIC product and service manual
Estes and Hosseini (1988). The Journal of Psychology, Interdisciplinary and Applied, Volume
122, issue 6
Fikru Tsegaye (2013), Life Insurance Consumption and Potential in Ethiopia Research Paper.
John H.Magee and David. L. Bickehaupt (1964).General insurance, 7th Ed, Homewood, Illinois,
Richard D. Irwin, Inc.
Kahneman &Tversky (1979), Prospect Theory: An Analysis of Decision under Risk.
Kotler (1973), Marketing Management 12thEdition
Kunreuther (1979), Decision Making Under Risk Applications to Insurance Purchase. Published
in Advances in Consumer Research Volume 19, P. 177-181.
Mark J.Browne and Kihong Kim (1993), An International Analysis of Life Insurance Demand,
The Journal of Risk and Insurance, Vol.60, No.4, P.616-634.
Mark J.Browne and Kihong Kim (1993), An International Analysis of Life Insurance Demand,
The Journal of Risk and Insurance, Vol.60, No.4, P.616-634.
Mehr and Cammack (1976), Buying Behavior of Consumer towards Life Insurance 6 th edition.
Pareto (2014), Life insurance and Group personal Accident (GPA) Insurance.
Schiff man, L.G. and Kanuk, L. S. (2000). Consumer Behavior, 7th Ed., New Jersey: Prentice-
Hall, Inc.
Sigma (2014), Life Insurance Awareness, Vol.2, No.3, P.61-89
Stuart Oskamp (2005), Attitudes and Opinions 3 rd edition.
Teklegiorgis Assefa (2004).Risk Management and Insurance, Mekle University, Faculty of
Business and Economics, Ethiopia
Truett, D. B. and Truett, L. J. (1990). The demand for life insurance in Mexico and the United
States: A comparative study, Journal of Risk and Insurance, Vol. 57, No. 2, p.321-328.
Zecharias (2010), Buyers’ Attitude Towards Life Insurance Policy Purchase.

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ANNEX I: BUYERS’ ATTITUDE TOWARDS LIFE INSURANCE POLICY
PURCHASE, A CASE OF ETHIOPIAN INSURANCE CORPORATION (ECI) IN
ADDIS ABABA ETHIOPIA

Verbal consent form

“Good day”. My name is DagmawiGetaneh

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First of all, I would like to thank you for your willingness to participate in responding this questioner
for the research. I am a final year MBA student at Queens College ofBusiness and Economics. I am
conducting research on “BUYERS’ ATTITUDETOWARDS LIFE INSURANCE POLICY
PURCHASE, a CASE OF ETHIOPIAN INSURANCE CORPORATION (ECI) IN ADDIS
ABABAETHIOPIA. The purpose of this study is to investigate the attitude of buyers in terms of life
insurance purchase. Since you are experienced of your institution, your ideas and information are
crucial for the research. The information you are giving will be used for the research and academic
purpose and it will be kept confidential.

Your participation is completely voluntary. You can refuse to answer any questions and/or withdraw
from the study at any time. All of the information collected is strictly confidential. No one other than
the research team will have access to your responses. Your personal identifiers such as your name and
that of your health facility will not be used. The principal investigator will not refer to individual
respondents or individual facilities in the report, but rather will describe the overall picture of all
facilities. Please try to give me only 10-15 minutes of your precious time.

Best Regards

Email: salsawitdagi2@gmail.com

Mob: +251912095258

Do I have your permission please?

Yes No If yes, please continue

Section I: Respondents Profile:

1. Age: 18-25 years 26-35 years 36-45 years Above 45 years

2. Sex: Male Female

3. Educational Qualification: Below college diploma College diploma

First Degree (BSc, BA) Master Degree and above

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4. Year of service in the current position:

Below 1 year 1 to 2 years 3 to 5 years Above 5 year

Section II: Main Questionnaire

Please indicate your choice by putting the check mark (x) on the appropriate cell. Where, 1 = Strongly
Disagree, 2 = Disagree, 3 = Undecided, 4 = Agree, 5 = Strongly Agree. Please indicate the degree to
which you agree with the following statements regarding the buyers’ attitude towards life insurance
purchase.
A. Buyers attitude towards life insurance purchase

S/N Questions Strongly Disagree Undecided agree Strongly

disagree agree
1 Buyers attitude towards life 1 2 3 4 5
insurance purchase is affected
by age
2 Buyers attitude towards life 1 2 3 4 5
insurance purchase is affected
by gender
3 Sexual orientation affects 1 2 3 4 5
Buyers attitude towards life
insurance purchase
4 Buyers attitude towards life 1 2 3 4 5
insurance purchase is affected
by family size
5 Family life cycle affects Buyers 1 2 3 4 5
attitude towards life insurance
purchase

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 6 Buyers attitude towards life 1 2 3 4 5
insurance purchase is affected
by income level
7 Buyers attitude towards life 1 2 3 4 5
insurance purchase is affected
by occupation
8 Religion affects Buyers attitude 1 2 3 4 5
towards life insurance purchase
9 Buyers attitude towards life 1 2 3 4 5
insurance purchase is affected
by education level
10 Ethnic community affects 1 2 3 4 5
Buyers attitude towards life
insurance purchase
11 Nationality affects Buyers 1 2 3 4 5
attitude towards life insurance
purchase
12 Economic factors affects Buyers 1 2 3 4 5
attitude towards life insurance
purchase
13 Buyers attitude towards life 1 2 3 4 5
insurance purchase is affected
by legal and political factors
14 Social factors affects Buyers 1 2 3 4 5
attitude towards life insurance
purchase
15 Service quality affects Buyers 1 2 3 4 5
attitude towards life insurance
purchase
16 Customer satisfaction affects 1 2 3 4 5
Buyers attitude towards life
insurance purchase
17 The values of customer affects 1 2 3 4 5

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 Buyers attitude towards life
insurance purchase
18 Buyers attitude towards life 1 2 3 4 5
insurance purchase is affected
by perception of insurance agent
19 Communication or information 1 2 3 4 5
affects Buyers attitude towards
life insurance purchase

Annex II: Interview Guide

1. Do demographic factors affect buyers’ attitude towards life insurance purchase?
If yes to #1 how could demographic factors affect buyers’ attitude in terms of life insurance
purchase?
2. Do socio cultural factors affect buyers’ attitude towards life insurance purchase?
If yes to #2 how could socio cultural factors affect buyers’ attitude in terms of life insurance
purchase?
3. Do social and organizational factors affect buyers’ attitude towards life insurance purchase?
If yes to #5 how could organizational factors affect buyers’ attitude in terms of life insurance
purchase?

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