Macro Level Determinants of Life Insurance Purchasing Demand in Ethiopia

Life Insurance plays an important role to insure against lifetime uncertainty resulting for the mortality risk of individual. Although the performance of the insurance industry is closely linked to economic conditions, the life insurance business has been experienced low level of development in Ethiopia. This study aims to examine the macro level variables influencing life insurance policy purchasing demand in Ethiopia. It employs secondary data on seven independent variables for a period of 15 years from 2000/2001 to 2014/2015. The collected data were analyzed with multiple regression analysis by using SPSS version 16.0. In this study correlation analysis was carried out to show the direction of relationships among the dimensions included in the model. Moreover, regression analysis was conducted to determine the predictive values of the variables. The findings revealed that inflation, price of life insurance and age dependency ratio have statistically noticeable negative impact on the life insurance policy purchasing in Ethiopia. Results also show that the literacy rate, per capita income, life expectancy and financial development have statistically significant positive influence on life insurance demand in Ethiopia. Hence, it is recommended that a high consideration of revising insurance price decisions and developing best pricing strategies, provision of insurance education for all, reduce the dependents by creating more employment opportunities, promote health extension services to increase life expectancy, and build financially developed country in turn increase the per capita income of individuals are advisable to insurers, the policy makers of the central bank, the marketing directors of life insurance companies and government officials.