Low Demand for Life Insurance Among Common People of Bangladesh

Topics: Insurance, Actuarial science, Social security Pages: 36 (8757 words) Published: November 12, 2008
1Background of the study
The most significant measure of an industry or an activity is its contribution towards employment generation, strengthening linkages with other sectors of the economy in promoting growth and stability, and creating a sizeable impact on the national income of a country. In developed countries, the Insurance industry is a necessary part of daily life and serves all the above mentioned purposes as opposed to developing countries where insurance is still dependent upon an individual’s net disposable income, religious beliefs and government policies. Hence the economic significance of insurance as measured by the total gross premiums to GDP is very high in developed countries in contrast to developing countries. Generally, insurance companies help businesses and individuals in managing risks which can severely impact their economic well-being. Moreover, insurance companies are also termed as the largest investors in capital markets, in addition to being characterized as the sole suppliers of insurance business to reinsurance companies. Life insurance in Bangladesh is very small in comparison to the economy of Bangladeshi Bangladesh the average revenue generated by life insurance constitute only a small (nearly .23%) of the GDP. Bangladesh has also a low per capita income in life insurance business compared to the other countries in the south Asia region. However the market has been steadily growing but not in a rate as it should be. Economic growth, expansion of infrastructure, industries, trade and commerce is leading to the expansion of the insurance market. Although Bangladesh has opened up its economy considerably in recent years with various reforms aimed at creating favorable investment environment, there are many barriers to encourage both foreign and domestic investment in the insurance sector. In Bangladesh the social security system or simply the security system is not so strong and life is highly in threat for many reasons including natural and man made reason. But it is found that life insurance demand is low in Bangladesh and people are fond to be indifference about life insurance. This is the area of research.

1.1Brief discussion on the secondary Research
Factors affecting the life insurance purchase have been the focus of insurance research for many studies. Studies have looked at numerous variables that might be significant in explaining the demand for life insurance. Many studies find conflicting result with previous research. Life insurance consumption is complex because country’s social structure, consumer attitude toward insurance and social security system play significant roles Demand for life insurance (Hwang & Greenford, 2005). In many studies it is found that the relationship between income and life insurance demand is positively related (Browne & Kim, 1993; Outreville, 1996) .There is no consistent finding concerning the effect of the level of education on the demand for life insurance (Browne & Kim, 1993; Outreville, 1996). Several studies suggested that highly educated people are willing to accept that life insurance provides economic security for the family and thus tend to spend more on life insurance (Truett & Truett, 1990; Browne & Kim, 1993).On the other hand Anderson & Nevin, 1975; found that income and life insurance demand are negatively related for middle income families and positively related for low and high income families. The effect of social security on the life insurance demand varies from country to country due to social security system (Hwang & Greenford, 2005). It is found that the more the social security the less the need for the life insurance (Anderson & Nevin, 1975). Industrialization and social structural transformation are directly related to shift in the concentration of the population to the urban area. The decline in the mutual support resulting from decline in the agricultural sector and the decline in the...
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