Determinants of Life Insurance Demand in Ethiopia

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Date

2014-06

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Addis Ababa University

Abstract

The study is intended to investigate the major determinants of life insurance demand in Ethiopia. The study focuses on the relationship of life insurance with six selected independent variables (income, inflation, real interest rate, level of education, life expectance and dependence ratio). The researcher used a time series data from 1983- 2012. The approach for this study is quantitative research approach. To find the major determinant factors for life insurance demand, the researcher adapted a log linear model. The adjusted R squared for the model is 0.9656 which indicates that about 96.56 percent of demand for life insurance is explained by the selected six factors. The t-statistics and p-value show that explanatory variables such as GDP per capita, inflation, real interest rate, level of education and life expectance are statistically significant at 10 percent significance level. GDP per capita, real interest rate, level of education and life expectance are positively related with life insurance demand whereas inflation is negatively related with life insurance demand. Dependence ratio does not have a statistically significant relationship with life insurance. GDP per capita is the most important factor that influences demand for life insurance followed by life expectance and level of Education. Inflation is the least important factor in influence demand for life insurance. Key words: Life insurance, log linear model, Ethiopia

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Keywords

Life insurance; log linear model; ethiopia

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