FACTORS AFFECTING PURCHASING INTENTION OF CUSTOMERS TOWARDS LIFE INSURANCE: A CASE STUDY ON ETHIOPIAN INSURANCE CORPORATION (EIC)

Abstract

In an era marked by economic uncertainty and evolving financial landscapes, understanding the factors influencing individuals' purchase intentions of life insurance is of paramount importance. This study investigates the determinants of purchase intention of life insurance among Ethiopian Insurance Corporation (EIC) customers, focusing on the mediating roles of awareness about life insurance benefits and financial literacy. Specifically, the research examined the influence of demographic factors (age and stage of life, level of education), attitudinal factors (attitude towards life insurance), socio-economic factors (financial stability and income level), and trust in insurance providers on the purchase intention of life insurance. A comprehensive analysis was conducted using Partial Least Squares Structural Equation Modeling (PLS-SEM) on survey data collected from 278 EIC customers. Variables of the study were measured through five-point Likert scale of measurement. Convenience sampling technique was used to gather primary data from the customers of EIC. The study results revealed significant direct effects of age and stage of life, level of education, financial stability and income level, and attitude towards life insurance on purchase intention. Notably, trust in insurance providers had a statistically significant but negative direct effect on purchase intention (β = -0.684, p < 0.001), highlighting potential issues in customer perceptions or experiences with insurance providers. The study also examined the mediating roles of awareness about life insurance benefits and financial literacy. While awareness about life insurance benefits did not have a significant direct effect on purchase intention, financial literacy emerged as a significant mediator. Specifically, the path from trust in insurance providers through financial literacy to purchase intention was significant but also negatively affected purchase intention (β = -0.068, p = 0.022). This suggests that even as financial literacy improves, negative perceptions of trust in insurance providers can reduce purchase intentions. These findings underscored the importance of enhancing customer awareness and financial literacy to boost life insurance uptake. However, they also highlighted the critical need for insurance providers to build and maintain trust with potential customers. Insurers must address any trust-related issues through improved transparency, customer service, and communication strategies. This dual approach of education and trust-building is essential for fostering a more informed and insured populace. Future research should explore these relationships in different cultural and economic contexts to validate and extend the applicability of the findings