Abstract
This study examines the demand for life insurance in a rapidly developing economic environment in South East Asia, focusing on Malaysia. The study extends the Elaboration Likelihood Model (ELM) by introducing a mediating variable ‘Persuasion’ in examining the demand for life insurance among policy buyers. Fuelled by the recent COVID-19 pandemic, the life insurance market is expected to grow significantly and the role of the state and regulatory body to regulate this process would be pivotal. Given the increasing significance of this industry both before and after the epidemic, this study identifies seven research variables from previous literature sources related to finance and international insurance, including financial literacy, saving motives, religiosity, risk aversion, agent, persuasion and purchase intention of life insurance. A causal research design is used to formulate research framework and testable hypotheses for this study. Data collection encompasses face to face interviews with 385 life insurance policy holders between May 2019 and March 2020 by using a survey questionnaire. Data analysis is mainly based on PLS-SEM method by using SPSS and Smart PLS statistical software packages. Results reveal persuasion as an important construct that explains the demand for life insurance, while agent is found to have the highest impact towards persuasion. The study also finds a full mediation effect of persuasion in the demand for life insurance for risk aversion and agent. These findings add new insights to the body of knowledge in life insurance literatures. Furthermore, research is useful for policy makers including government, finance, and insurance agencies;and recommends relevant strategies to further improve life insurance penetration in the population.
Highlights
Insurance sector has developed alongside with the other important financial sectors to overcome the uncertainties of the volatile economy (Diebold et al, 2015)
Both genders are almost represented in this study with 45.5% of the respondents coming from male and 54.5% of the respondents coming from female. 43.9% respondents from the age group of 23-37 formed the data of this study which is a normal distribution given the entry age for young adults to the working world in Malaysia is around the age of 23
This study collectively analysed the effects of financial literacy, saving motives, religiosity, risk aversion, agent and persuasion towards the demand for life insurance which was sparse in the previous literatures
Summary
Insurance sector has developed alongside with the other important financial sectors to overcome the uncertainties of the volatile economy (Diebold et al, 2015). Among the various insurance products, life insurance policies have become of special focus and interest due to the pandemic outbreak of COVID-19. One important demand driver is a considerable increase in risk awareness Consumers felt they are under insured and demanded for more comprehensive life insurance coverage. Consumers in China, the first market to face the pandemic and recover from the health catastrophe, are more likely to buy new insurance once their lives return to normal in 2021 than they were a year ago (Swiss Re Institute, 2021b). According to surveys conducted by Swiss Re Institute (2021a) in Asia Pacific markets in 2021, during the pandemic, 30-40% of respondents acquired supplementary life and health insurance and 25% to 50% of people still plan to get new insurance plans. Consumers have swiftly acclimated to internet channels and are increasingly preferring to transact digitally at all points of contact with insurance companies
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