CHAPTER ONE:
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Life is full of risks and uncertainties, we are social human being and we have certain responsibilities too to minimize these risks. Nigerians are emotional and rational in their buying decision. They believe in future rather than the present and desire to have a better secured future. In this direction, life insurance services have its own values in terms of serving as savings, investment and risk protection. The growth of insurance in Africa is generally low and declining. Compared to the average global rate of 6.5 percent, Alhassan and Biekpe (2016) posit that Africa’s insurance penetration rate of 3.65 percent in 2012 is lower. Also, Swiss Re Sigma Report (2016) discloses a reduction in Africa’s insurance penetration rate from 3.65 percent in 2012 to 2.9 percent in 2015. In Ghana, the purchase of insurance policies is reported to be unencouraging (see inter alia,National Insurance Commission, 2013; Boadu et al., 2014; Abaidoo and Nwosu, 2016).Resultantly, insurance penetration[1] in the country (Ghana) remained less than 2 percent from2010 to 2013 (National Insurance Commission, 2013). In comparison with Africa’s average rate of 3.5 percent in 2013 (Swiss Re Sigma Report, 2014), Ghana’s insurance penetration rateremains low. This phenomenon threatens the existence of the insurance industry in Ghana,and thus, requires imperative measures to salvage the situation.Africa’s micro insurance is dominated by life insurance (Matul et al., 2010). Accordingly,life insurance premiums in Ghana contribute more to total insurance premiums than non-life insurance premiums (National Insurance Commission, 2013). Apart from the aforementioned, increased participation in life insurance will positively impact the country’s economic growth and development (Ghosh, 2013; Abaidoo and Nwosu, 2016; Alhassan andBiekpe, 2016; Kaushal and Ghosh, 2017). Life insurance policies are long-term financial investment products. Individuals purchase life insurance products with risk management and or saving mobilization motives (Beck and Webb, 2003; Mahdzan and Victorian, 2013). According to Loke and Goh (2012), uptake of life insurance is a rational economic decision;as the decision to purchase a policy is often made in the state of risk and uncertainty.Addressing the factors impeding the uptake of life insurance will therefore improve the country’s insurance industry at large.Several empirical studies have examined the determinants of life insurance in both developed and developing countries (see inter alia, Beck and Webb, 2003; Giesbert, 2010,2012; Sarkodie and Yusif, 2015; Guerineau and Sawadogo, 2015; Sulaiman et al., 2015).However, as indicated by Guerineau and Sawadogo (2015), majority of the existing papersobtained evidence from developed and emerging economies. This makes the current paper relevant which seeks evidence from Ghana, a developing country. Though thedeterminants of life insurance demand vary by gender (Gandolfi and Miners, 1996),the gender dynamics, especially in developing countries, is largely ignored in theliterature. Moreover, more men than women are reported in existing literature to be life insured (see inter alia, Giesbert, 2010, 2012; Sarkodie and Yusif, 2015; Luciano et al., 2015).According to Bortei-Doku and Aryeetey (1995) and Ankomah (1996), this could result from the fact that females in most developing countries, Ghana inclusive, are often excludedfrom accessing formal financial services and hence resort to informal strategies of managing risks and uncertainties (Giesbert, 2010, 2012). Explaining why women are lesslikely than men to purchase life insurance policies, Luciano et al. (2015) suggest that because women do not attach monetary value to their roles in the family, they do not monetize the risks associated with their demise. From the above-mentioned, policies basedon studies which fail to account for the probable gender disparities in the determinants of life insurance demand in such developing countries may be misleading. The purpose of this paper is to: provide some gender inquiry into the predictors of life insurance demand in developing countries by focusing on male and female household heads in Ghana; add to the dearth of available cross-sectional studies on the predictors of life insurance uptake in Africa and provide empirical evidence on life insurance demand to advance Ghana’s(life)insurance industry.The rest of the paper is organized as follows. In Section 2, the paper discusses some theoretical and empirical literature relating to life insurance demand. Section 3 presents the empirical method for analyzing the data. It also discusses the data source, as well as its measurement and description. Also, the empirical model adopted by the study is presented in this section. In Section 4, our empirical results are presented and discussed. Finally,Section 5 concludes the study with a summary of the relevant findings and implications