Individual Risk Preference and Insurance Buying Behaviour: Empirical Study on Insurance Industry in Sri Lanka

Abstract

Low life insurance penetration rate evidence that life insurance business in Sri Lanka has not yet matured and there is enormous potential to develop the industry. Insurance companies use different marketing strategies to identify and sell their products to the customers. Peoples’ readily available demographic information does not reflect the attitudes and psychological motives of such peoples towards the life insurance buying decision. The objective of the study was to identify the association between individual risk preference and Life Insurance Buying Behaviour. A structured questionnaire was administered to get the views of randomly selected 105 respondents and five-point Likert scale was used to measure the risk preference and attitudes of them. During the study, respondents were categorized into three groups as risk takers, risk averse and risk neutral using their interest to joint with a risky game which gives them choices and the returns they expect to obtain from them. Correlation analysis and regression analysis were used to analysed the data using statistical software package SPSS. The study results revealed that there is a significant positive relationship between risk averse peoples and the willingness to buy a life insurance policy. Further, it was revealed that educated young peoples of the risk neutral group who has exposed to unexpected risky events in their history are also much interest in life insurance purchasing. Findings show that respondents’s Age and family background have moderated the impact of risk preference on life insurance buying decision. The study result will assist insurance marketers in designing effective marketing strategy and training programs.