ADDIS ABABA UNIVERSITY

COLLEGE OF BUSSINES AND ECONOMICS

SCHOOL OF COMMERCE

DEPARTMENT OF Marketing Management

ASSESSMENT ON INFLUENCE OF CULTURE IN BUYING DECISION OF LIFE

INSURANCE POLICY IN THE CASE OF ETHIOPIAN INSURANCE INDUSTRY.

BY: - TIRSIT SEIFU

DECEMBER 2019

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 Table of Content
1. CHAPTER ONE:- Introduction …………………………………...……...…. 1
1.1 Background of the study …………………………………...……...…. 1
1.2 Statement of the problem …………………………………...……...…. 2
1.3 Research Questions …………………………………...……...….…...…
3
1.4 Research Objectives …………………………………...……...….…...…
3
1.4.1 General objective …………………………...……...….…...….….…... 3
1.4.2 Specific Objective …………………………...……...….…...….….…... 3
1.5 Significance of the study …………………………...……...….…...….….…... 4
1.6 Scope of the study …………………………...……...….…....….…...….….…. 4
1.7 Limitation of the study …………………………...….…....….…...….….…. 4
1.8 Definition of Key terms …………………………...….…....….…...….….…. 4
1.9 Organization of the study ……………………...….…....….…...….….…. 5
2. CHAPTER TWO: LITERATURE REVIEW ……...….…....….…...….…...….…. 6
2.1 Theoretical Review ……...….…....….…...….…...…...….…...….….......…. 6
2.1.1 Aspects of Insurance ……...….…....….…...….…...….…...…....….…. 6
2.1.2 Concept and Benefits of Life Insurance …...….…...….…...…....….…. 6
2.1.3 History of Insurance in Ethiopia …...….…...….…...…...….…....….…. 8
2.1.4 Aspects of Culture …...….…...….…...…...….…....…….…....….…. 12
2.2 Empirical Review …...….…...….…...…...….…....……..…….…....….…. 13
3. CHAPTER THREE: RESEARCH METHODOLOGY ..……..…….…....….…. 16
3.1 Introduction ..……..…….…....….…...……..…….…....…..…….…....….…. 16
3.2 Research Method ..… …….…....….…...……..…….…....…..…….…....….…. 16

3.2.1 Research Approach ....….…...……..…….…....…..…….…....….…. 16

3.2.2 Research Design ....….…...……..…….…....…..…….…....….…. 16
3.2.3 Population and Sampling Techniques …..............…….…....….…. 16
3.2.4 Data source ....….…...……..…….….... …..……..…….…....….…. 17
3.2.5 Data Collection Procedure ....….…...…….….…....…..…….…....….…. 17
3.3 Ethical consideration ....….…...……. .…….…....…..…… .…….…....…..…….…....….

…. 17

3.3.1

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 CHAPTER ONE
Introduction

1.1 Background of the study

Life is full of uncertainties. Unexpected events can lower people‘s wellbeing; Insurance is
a device for the reduction of the uncertainty of one party called the insured through the
transfer of particular risks to another party called the insurer who offers a restoration at
least in part of economic losses suffered by the insured. The fundamental purpose of
insurance whether of people or of property, is protection against possible economic loss,
economic loss being simply defined as the unintentional and permanent loss of something
which has monetary value. The unique attributes of insurance is worth focusing on those
services that are not provided by other financial services providers and they spreading the
financial losses. For instance, the contractual savings features of whole or universal life
products, the indemnification and risk pooling properties of insurance facilitate commercial
transactions and the provision of credit by mitigating losses as well as the measurement and
management of nondiversifiablerisk.

According to Davieset.al.,(2003), There are two broad types of insurance. The first one is
a general insurance it offers financial protection for assets (Property) loss, damage, theft
and other liabilities. The second one is Life insurance. It is a contract that offers financial
compensation in case of death or disability or compensation after retirement. It is based on
the mortality (i.e), survival or disability of theinsured. Unlike the value of property, the
value of human being cannot be measured interms of money. But as far the total or partial,
temporary or permanent loss of his income represents an economic as insurance is
concerned, the economic value of a person is basically represented byhis income loss to all
those who are dependent on that income for their livelihood. Life insurance is a contract
between a policy owner and the insurer, where the insurer agrees topay a designated sum of
money upon the occurrence of the policy owner ‘ s disability due to accident or aging,
death or other events, and the policy owner agrees to pay a fixed amount to the insurer at
designated interval.

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 Culture is the total way of life. It is an integral part of any society and refers to the overall
identity of a particular group of people. It is reflected in the way of life of the people. It
could be through religion, language, attitude, dress codes, expression of feelings, system of
governance, and so on. Across societies, there are enormous agreed significance of culture
and its elements values and norms. Guiding the behavior of people, creating social bonds
that attaches people to society and providing a sense of belongingness and collective
identity are among the significances. The greatest asset that every country has is its people.
Culture and its elements,values and norms play a significant role to shape the people.
Culture gives people a sense of belonging, instructs them in how to behave, and tells them
what to think in particular situations and it gives meaning to the society (Andersen &
Taylor, 2005).

1.2 Statement of the problem

The significance of having a life insurance is to gain the “Peace of mind” that it brings
along.Having an adequate amount of life insurance effectively sets mind free of
someimportant questions like:Whatwill happen to my family financially after I die? How
will Iprovide for my family in case I lose my job after an accident? How do I ensure that I
am able tofund my child’s higher education? How do I ensure an income after my
retirement? In order tohave financially secured future life insurance is major instrument.

The insurance sector’s contribution in Ethiopia during the 2006/07 fiscal year was US$105
million.Domestic Product (GDP) of the country, it amounts to about 0.2 percent. A
breakdown of the above value showed that life insurance premiums constituted only US$6
million or 6 percent of total premiums, while general insurance premiums totaled US$99
million or 94 percent of total premiums (Smith and Chamberlain, 2010). This is relatively
small because life insurance policies encourage both public and private savings and
investment in the long-run (Beck and Web, 2003).

The researcher is then motivated to put her own contribution on the influence of culture on
the growth of life insurance business in Ethiopia. While taking in to consideration the

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 above studies and inquiry into the factors affecting the growth of life insurance, the
researcher attempts to work on such valuable empirical evidence in the country. Hence,
these are important issues to be investigated for the insurance managers, professionals,
regulators and policy makers to support the sector in achieving the excellence so that
required economic outcomes could be obtained from the help of the sector in Ethiopia by
understanding the impact of culture on the growth of life insurance.

1.3 Research Questions

a. What is the effect of religion on buying decision of life insurance?

b. Does cultural beliefs have influence on buying decision of life insurance?
c. What is the effect of cultural attitudes and values on buying decision of life insurance?
d. What is the effect of language on buying decision of life insurance?
e. Is there any effect of education on insurance uptake in in Ethiopian Insurance Industry?

1.4 Research Objectives

1.4.1General objective
The main objective of this study is to assess the influence of culture on buying
decision of life insurance policy in our country insurance market industry.

1.4.2Specific Objective
In order to achieve the general objective of the study, the researchers have identified the
following specific objectives;
i. To examine the effect of religion on buying decision of life insurance
ii. To assess the effect of cultural beliefs on buying decision of life insurance
iii. To examine effect of cultural attitudes and values on buying decision of life
insurance
iv. To establish the effect of language on buying decision of life insurance
v. To establish the effect of education on insurance uptake in in Ethiopian
Insurance Industry
1.5 Significance of the study

The study will help different stake holders including insurance companies to get the way
howto increase their place in the mind of their customer, To increase income generated
fromselling of life insurance policy, it would serve other researchers who wish to make a

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 study onthe same area as a reference and Finally it also gives the researcher the opportunity
to gaindeep knowledge in the area of life insurance.

1.6 Scope of the study

This Study tries to analyze the impact of culture on determining life insurance market in
Ethiopian Insurance industry. This study is conducted on nine insurance companies in
Addis Ababa which have license from National Bank of Ethiopia to give life insurance
cover.

1.7 Limitation of the study

In this research paper it is expected that lack of sufficient current literature on the subject of
life insurance in Ethiopian context makes this study difficult. The other Major limitation of
this study limited no. of available respondents.

1.8 Definition of Key terms

Insurance:- A method of sharing of financial loss of a few from a common fund formed out
of contribution of the `many’ who are equally exposed to the same risk or loss

Insurer:- One who provides financial compensation for the outcome of misfortune from
the accumulated common fund

Premium: the payment made to obtain insurance

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1.9 Organization of the study

This research paper will contain five chapters. The first chapter deals with introduction
ofthe research. Chapter two reviews different literature around the problem and previously
carried out researches. In chapter three, this research paper, focuses on the design
andmethodology selection. Chapter four is the analysis part of the paper. Finally
conclusionwill be drawn and recommendations will be given in chapter five.

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 CHAPTER TWO:

LITERATURE REVIEW

This chapter is composed of two parts. On the first part the researcher reviews related theoretical
and empirical literatures on the basic concepts of life insurance, life insurance demand and
culture. The second part of the chapter is the empirical review in which the researcher presents
different empirical researches written in the field of influence of culture on life insurance
demand and highlights the most relevant findings in the field and finally develop conceptual
framework of the study.

2.1 Theoretical Review

2.1.1 Aspects ofInsurance

The fundamental purpose of insurance, whether of people or of property, is protection

against possible economic loss.As one of major fields in the business area Insurance is
defined in many ways by different scholars. The followings are some of them:-

According to Pritchett, (1973,) insurance is a social device, in which a group of individuals

called insured transfer risk to another party called the “ insurer “ in order to combine loss
experiences , which permits statistical prediction of losses and provides for payments of
losses from fund contributed ( premiums ) by all /members who transferred risks. These
definition presents fundamental nature of insurance that there are at least two parties in an
insurance contract; the insured (beneficiary) and insurer; there is transfer of risk from one
party(insured) to another party (insurer); the payment of price (premium) is mandatory by
the insured for the transfer of risk; and the insurer, on its part pays a sum of money to the
insured in the event of occurrence of risk and creates a loss to the insured. Thus, while
payment by the insurer is conditional, the insured is reducing its uncertainty concerning the
financial consequences of the risk transferred through scarification of a small certain loss
(the premium). Therefore, from the viewpoint of the insured, insurance can be visualized as
a mechanism of substituting “uncertainty” with “certainty”.

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 Commercial Code of Ethiopia Art. 654. –states that An insurance policy is a contract
whereby a person, called the insurer, undertake, against payment of one or more premiums
to pay to a person, called the beneficiary, a sum of money where a specified risk materializes.

2.1.2 Concept and Benefits of Life Insurance

Life insurance is a very important and necessary way of protecting a family in case the
bread winner dies or is disabled and cannot generate income. It also used for saving
purpose and it pays the sum assured in case of maturity the insured can take loans from the
saved amount. (Tigist, 2018)

As cited by Roman G. 2011 Life insurance is a contract between a policy owner and the
insurer, where the insureragrees to pay a designated sum of money upon the occurrence of
the policy owner’s disability due to accident or aging, death or other events, and the policy
owner agrees to pay a fixed amount to the insurer at designated interval. While the main
objective of insurance companies is to mitigate insurable risks, in tandem they also play an
important role in development of the financial sector. They mobilize savings which can be
challenged for long term investments which help economic growth and development. The
risk spreading character of insurance has drawn attention to the fact that insurers would like
to spread risks in two directions namely, the over- time and between person(s) and
organization(s) at the point in time. While most insurance business is concerned with
spreading risk across individual entities at the point in time, life insurance is mainly an
overtime risk spreading mechanism. (Carter, 1979).

According to Emmett &Vuauohan (2008) Life insurance is an economic device whereby

the riskof premature death of individual is pooled to the group. Life insurance is unique in
that the insured against is an eventual certain, no one lives forever; It is not the possibility
of death insured rather the untimely death. The other unique feature is life insurance is not
a contract of indemnity; we cannot place a value for one’s life.

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 Life insurance is a risk-pooling plan, an economic device through which the risk of
premature death is transferred from the individual to the group. However, the contingency
insured against has certain characteristics that make it unique; as a result, the contract
insuring against the contingency is different in many respects from other types of
insurance. The event insured against is an eventual certainty. No one lives forever. Yet life
insurance does not violate the requirements of an insurable risk, for it is not the possibility
of death itself that is insured but rather, untimely death. The risk in life insurance is not
whether the individual is going to die but when, and the risk increases from year to year.
The chance of loss under a life insurance contract is greater in the second year of the
contract, as far as the company is concerned, than it was in the first year, and so on, until
the insured eventually dies.(Vaughan & Therese , 2008)

Life insurance plays an important role in an individual’s personal financial plan, as

suggested by most personal finance and financial planning books. Life insurance helps
individuals save money while protecting against personal risks in life. However, financial
planners and representatives of life insurance companies would attest that many individuals
are often reluctant to allocate funds in life insurance and fail to see its underlying benefits
as a personal risk management tool. (Mahdzan& Sarah, 2013) According to (Alhassan&
Nicholas , 2015) there is a long held view that insurance market activities promote
economic growth through the financial intermediation role of mobilizing long term funds
for financial markets.

2.1.3 History of Insurance in Ethiopia

As quoted by Kidst A. (2018) the first modern insurance service in Ethiopia was
underwritten by Bank of Abyssinia around 1905. This bank was transacting fire and marine
insurance. According to Economic Progress of Ethiopia (1955) as cited in Hailu (2007) the
first survey done by Ministry of commerce in 1954 revealed as there were 17 overseas
insurance companies operating in the country .Consequently the second survey which was
done in 1960, revealed as there were 33 overseas agents .The only local insurance company
at that time was Imperial Insurance.

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 The history of life insurance in Ethiopian dates back to1954 where the service was given by
the two foreign companies Central Assurance Company Limited and Groupement Francis
de Assurances located in Addis Ababa and Dire Dawa. During this time the insurance
service was regulated with the provisions of the Commercial code (1960) and there was no
specific proclamation to the insurance industry. The issuance of proclamation number
281/1970 which was aimed to regulate the insurance business in Ethiopia brought
remarkable change on the structure of the industry. The first responsible, independent body
to regulate the insurance industry, the insurance council and insurance controller office,
was created due to this proclamation. In respect to this proclamation the Ministry of
commerce. Trade and Tourism issued Regulation (Legal Notice No. 393/ 1971) aiming to
implement the proclamation and create conducive insurance market. The regulation
resulted in the licensing of fifteen domestic insurance companies, thirty six agents, seven
brokers, three actuaries and eleven assessors. In 1972 the number of insurance companies
goes down to thirteen. Among these companies, Ethiopian life insurance and American life
insurance companies were offering life insurance whereas Lion insurance was offering both
life and general insurance.

In 1974, just before the Ethiopian revolution, there were seventeen insurance companies,
four were giving life assurance, thirteen were giving marine insurance, eleven were giving
General Accident Insurance and all of them were giving Fire insurance. The revolution
brought a command economy with a socialist credo which resulted in the nationalization of
the private insurance companies. The then existed Government decided on January 1, 1975
to transfer the ownership of insurance companies to the Government, as a result those
insurance companies were all nationalized. In December 1975 the government issued
proclamation No 68/1975 to establish Ethiopian Insurance Corporation; made an
autonomous public enterprise effective from January 1, 1976.The insurance council and
office of insurance controller also dissolved. The 1976 proclamation (proclamation
99/19760 empowered national bank to supervise and regulate banks and other financial
institutions including insurance. EIC monopolized the insurance market till 1994 (Hailu,
2007) .

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 The collapse of the Marxist regime in 1991 resulted in a market economy. The new
proclamation (Proclamation Number 86/1994) issued and allowed the re-emergence of
private insurance companies and prohibited foreign insurers to operate in Ethiopia .And
also mandated the National bank of Ethiopia as the supervisory authority. In addition to
restricting the insurance business to domestic investors, it brought structural change to the
industry by classifying the business in two, namely the general insurance business and long
term insurance business. The long term insurance include life insurance, Health insurance,
pension and disability insurance where as the general insurance business is property and
causality insurance .The proclamation enforced to have a separate account for each class of
business (Hailu, 2007)

After the new proclamation (Proclamation Number 86/1994) issued the only company which
obtained its license from the National Bank of Ethiopia and commenced operation in October
2008 to transact only long term (Life insurance) is Ethio life insurance company. It continued to
be the only specialized company in the life insurance business in the insurance industry only
until August 2012. After that the company was registered by the name Ethio life and general
insurance share company and started providing life and non life insurance product. Ruth m
(2019).

As we can understand from the above explanation about history of modern insurance,
Ethiopia life assurance coverage is very limited compared to the General Insurance. The
number of life Insurance companies existed is less than -that of the General Insurance
companies. According to NBE, as of Dec 2017, there are 17 insurance companies operating
in Ethiopia from which only nine of them operate both life and non life insurance. The rest
are general insurance companies. There is no insurance company which operates only long
term insurance at all.

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 .
2.1.4 Table 1.1: Compare the Share of Life Insurance Premium to the General
Insurance Industry in Ethiopia

Development of gross premium in Ethiopia from 2005 to 2016

Share of life
% Growth % Growth % insurance
Years Non life in ETB Life in ETB Total in ETB in Non - in Life Growth Premium to
life insurance in Total the Total
insurance Premium in %
2016 6,148,457,280.00 322,609,009.00 6,471,068,305.00 - 5%
2015 5,269,455,252.00 281,954,299.00 5,551,411,566.00 17% 14% 17% 5%
2014 4,694,201,255.31 277,830,182.38 4,972,031,437.69 12% 1% 12% 6%
2013 4,521,806,555.32 299,882,135.63 4,821,688,690.95 4% -7% 3% 6%
2012 3,734,578,246.93 255,895,872.00 3,990,474,118.93 21% 17% 21% 6%
2011 2,432,919,797.08 160,303,821.44 2,593,223,618.52 54% 60% 54% 6%
2010 1,830,262,195.96 110,293,217.33 1,940,555,413.29 33% 45% 34% 6%
2009 1,375,996,485.19 91,797,963.87 1,467,794,449.06 33% 20% 32% 6%
2008 1,188,664,628.64 74,112,459.21 1,262,777,087.85 16% 24% 16% 6%
2007 972,188,754.26 52,181,897.00 1,024,370,651.26 22% 42% 23% 5%
2006 787,674,683.32 39,627,164.00 827,301,847.32 23% 32% 24% 5%
2005 641,532,031.09 32,082,275.00 673,614,306.09 23% 24% 23% 5%
Avarage 2,799,811,430 166,547,525 2,966,359,291 23% 25% 22% 6%

Source: National Bank of Ethiopia (2017) premium and earnings of insurance industry Tigsit D.
(2018)

The above table 1.1 shows the total gross written premium trend from insurance business
from 2005 to 2016 according to the above table life insurance gross written premium in
2016 is 322,609,009.00 and it has a 14% growth from year 2015 which was 281,954,299.
Even if life insurance business growth premium growing but the share of life insurance
business is remain 5% and it has been experienced low level of development in Ethiopia.
Despite the fact that the number of insurance companies gradually increasing and also the
efforts made by the insurance companies, the demand for life insurance is very low. Thus,
this study seeks to find out and analyze those factors that contribute behind the low demand
for life insurance in Ethiopia.

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 2.1.5 Aspects of Culture

As quoted by (WEGENE, M.2011) As is agreed by a number of intellectuals of different

disciplines culture is among themost difficult terms or concepts to be attributed a dogmatic
and single meaning. Despitethe controversies about what constitutes this term, various
scholars from different schoolsand disciplines attempted to develop a meaning that they
thought could connote culture.This difficulty of defining culture in a certain way is caused
by the width of the scopethat it covers. Though this happens to be the case, various thinkers
developed their ownnotion of culture. To mention some of them,

Zhu Majie indicated, the British anthropologist ClydeKluckhohn defined culture as:
“culture is that complex whole which includes knowledge,belief, art, law, moral, custom,
and habits acquired by man as a member of a society”(Yu, 2002)

For Clyde Kluckhohn, culture is a historically created system of survival types, dominantor
recessive, having tendencies shared by the whole group or by some particular part incertain
period of time. Kluckhohn has tried to show that culture is in history and serves asmeans of
survival.

Chris Jenks states, embraces a number of elements which enables it to be part of both our
everyday life and the academics. Talking about the role and place of culture “There is no such
thing as human nature independent of culture. Menwithout culture would not be the clever
savages of Golding`s Lord ofthe flies thrown back upon the cruel wisdom of their animal
instincts;nor would they be the nature`s noblemen of enlightenmentprimitivism or even, as
classical anthropology would imply,intrinsically talented apes who had somehow failed to
findthemselves. They would be unworkable monstrosities with very fewuseful instincts, few
recognizable sentiments, and no intellect: mentalbasket cases (Jenks, 1993:1)

According to Peter N. Gitau and Dr. Isabella Sile (2016) The culture in many African
countries has been a challenge. As quoted by Edgar Schein, “the only thing of real
importance that leaders do is to create and manage culture. If you do not manage culture, it
manages you, and you may not even be aware of the extent to which this is happening.”
Many life insurance policies pay at death yet this is a topic that many people do not want to
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 talk about. Many people want to buy investment related products leaving out pure risk
insurance products because of the fear of death. Because of this, it’s difficult selling pure
insurance risk products in most African markets, hence low penetration (Wairegi, 2004).
For instance, some cultures do not discuss the possibility of death because it is against their
African culture, or it could mean tempting fate. Another cultural aspect is the fact that there
is no sharing of information among spouses and other close family members. For example
there is no sharing of bank accounts and some other assets like plots and houses purchased
in singular names, and when one party especially the man passes away or is indisposed, the
wife and other dependants, particularly the children may not even learn of the assets. Such
assets may end up being taken up by the wrong parties through fraud (Wairegi, 2004).

2.2. Empirical Review

Yaari (2009) notes that religion historically has provided a strong source of cultural
opposition to especially life insurance; many religious people believe that a reliance on life
insurance results from distrust of God protecting care. Until the nineteenth century,
European nations condemned and banned life insurance on religious grounds. Yaari also
states that religious antagonism to life insurance still remains in several Islamic countries.

Wasaw (2006) tested the effect of Islam on life insurance consumption using an
international data set. The results of his study indicated that, ceteris paribus, consumers in
Islamic nations purchase less life insurance than those in non- Islamic nations. Therefore, it
is hypothesized in the study that life insurance consumption is less in predominantly
Islamic countries than in countries that are not predominantly Islamic. For the purposes of
this study, a country is considered predominantly Islamic if more than half of the
population follows Islam. Islamic nations included in the sample percent of population that
is Muslim, Egypt 94%, Iran 98%, Morocco 99%, Pakistan 97%, Tunisia 99.5%, Turkey
99% (Wasaw, 2006).
Burdwan Raj College et al (2017) Progress of insurance sector of a nation is influenced by
economical, religious, institutional and cultural elements. Culture is the set of some instinct
norms of human mind that differentiate one person from the other. This study tries to
establish a relationship between the cultural dimensions and the development of insurance
14
 sector of BIMS TEC (The Bay of Bengal Initiative for Multi-Sectorial Technical and
Economic Cooperation) and SAARC (South Asian Association for Regional Cooperation)
countries and also examine the appropriate cultural dimensions for the development of
insurance sector of these regions. Five years data (2010-2014) are collected from the
website of insurance sector and Hofstede that is converted into simple average for the
analysis. Hence, Pearson correlation coefficient is applied and it is observed that long term
orientation dimension is statistically significant. This study also reveals that long term
orientation and masculinity dimensions of cultural dimensions are appropriate for the
development of insurance sector in BIMS TEC and SAARC countries.

Peter N. Gitau and sabellaSile(2016) the purpose of this study was to establish the
effect of cultural factors that affect the uptake of insurance in Nairobi central business
district, Kenya.Methodology:The study employed a descriptive research design. Primary
data was used in the study and was gathered using a questionnaire. The target
population for the study was the existing and potential insurance customers within
the Nairobi CBD. The study targeted a population of 160 respondents and a sample of
100 respondents waschosen. The main sampling technique that wasused for this study is
stratified random sampling. Secondary data was collected from books, journals and the
internet. The primary data was first coded and organized into themes, categories and
patterns.Results: Based on the findings the study concluded that religion has a
negative effect on the uptake of insurance in Kenya. Further, cultural taboos and
beliefs, cultural attitudes and values language used by insurance sales agents,
education have a negative effect on the uptake of insurance in Kenya.Unique
contribution to theory, practice and policy: The study recommended thatIRA should
encourage insurance companies to sensitize the public on the different insurance
products available in the market on a regularbasis.The IRA and AKI should ensure
that all the agentstransacting the insurance business are properly trained, licensed and
motivated to help reduce the perception that insurance agents are conmen or
dishonest.The IRA should embark on a campaign to sensitize the public about the benefits
of insurance in a bid to change their attitudes towards taking up insurance covers

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 Fatai Adesina Badru ,et.al (2013)Risk occurrence is a phenomenon that affects human
lives. Risk avoidance helps individuals to cope with the tragedies of life. Insurance
patronage in sub-Saharan Africa (with the exception of South Africa) is abysmally poor.
Empirical studies on the impact of sociocultural factors on insurance patronage are slim.
Besides, meanings attached to modern insurance concepts such as ‘accident’ and ‘disasters’
are culturally constructed. This study, as an exploratory work, investigated some of the
socio-cultural variables that shape insurance patronage among Nigerians using Lagos State
as a focus. Such variables act as agents of socialization through which people receive the
norms and values that shape and modify their attitudes and behavior. The research design
was a cross-sectional survey, exploratory in nature, using structured questionnaires to
collect primary data. Variables were created for both univariate and bivariate data and
analyzed with the Statistical Package for SocialSciences (SPSS). Findings from the survey
suggest that many users of insurance in Lagos understood the language of insurance
policies, have positive values and norms, and that their religious persuasions do not impact
negatively on insurance patronage. It is thus possible to motivate Lagosians in particular
and Nigerians in general to patronize insurance services. Other feasible measures to boost
patronage were recommended for practitioners and policy-makers. This study is a platform
for broader research in future.

Chui and Kwok (2009) demonstrate that the inclusion of cultural factors in the set of
explanatory variables greatly improves the predictive ability of regression analyses. Using
an unbalanced panel data of 41 countries observed from 1976 to 2001, they include in their
models four cultural variables introduced by Hofstede (1980) namely, Individualism,
Power Distance, Masculinity and Uncertainty Avoidance. They find the first three variables
to be highly significant. The results prove to be robust, even after controlling for economic,
institutional, and demographic
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction

The researchers’ plan in this study is to evaluate the influence of culture on buying decision
of life insurance policies in Ethiopian Insurance Industry. This chapter discuss how the data
16
 will be collected to address the objectives stated in chapter one. It contains the
methodology of carrying out the study.

The chapter explains research design, the target population, sample design and sampling
techniques, research instruments, date collection, data analysis and presentation methods.

3.2 Research Method

3.2.1 Research Approach

Among the three different way of approaching a problem i.e. qualitative,

quantitative and mixed approach the researcher will use a quantitative research
approach For the purpose of this study,

3.2.2 Research Design

To achieve the objective stated on the previous chapter the researcher plan to
employ an explanatory design. Explanatory type of research design helps to identify
and evaluate the cause and effect relationships between the different variables under
consideration If the objective is to determine which variable might be causing a
certain behavior, i.e. whether there is a cause and effect relationship between
variables, explanatory research must be undertaken (Shields, 2013).

3.2.3 Population and Sampling Techniques

There are seventeen insurance companies in Ethiopia. Since the main objective of
this study is to evaluate The Influence of Culture on the buying decision of Life
Insurance among those seventeen insurance companies the target population of this
study is all nine insurance companies which have a license from NBE to give life
insurance cover.

The researcher plans to sample nine insurance companies and used purposive
sampling to identify the respondents. Through purposive sampling, nine senior
Marketing officers one from each, nine senior Opperation officers one from each,
Five Agents from each which will be 45, five insurance brocker, Three major clients
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 from each which will be 27 respondents. The sample will be 95. Questionnaires were
distributed to respondents of each company on random basis.

3.2.4 Data source

The researcher will use both primary and secondary data

3.2.5 Data Collection Procedure

The primary data will be collected by questionnaires and interview sample

respondents.

The secondary sources of the study will be different published books, internet
websites, journals, previous research papers & annual reports.

3.3 Ethical consideration

The researcher will be very careful to get informed permission of all participants before
starting the study. Respondents will be given a clear explanation about the nature of the study.
In addition participants will be informed about data colleting procedure and techniques. The
anonymity of the subjects will be protected and guaranteed by preventing to write their names
and providing clear instruction. Furthermore, the information obtained through the
questionnaire will only used for the research purpose and the confidentiality is maintained.
Therefore any information obtained from the survey will treated with strict confidentiality.

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