Impact of Culture on Insurance Penetration in Nigeria



1.1   Background to the Study

There is no gainsaying that man is a social being and his social nature begins with his incorporation into a society where he gains identity and recognition. Societies, on the other hand, are created from a cultural framework because culture is a man-made creation which informs the coming together of individuals in order to make a society. Durowade (2001) asserts that the things that make up culture are, therefore, created by man and a person absorbs many parts of a culture by living amongst it. Culture, according to Edward Tylor (1871) cited in Badru, Yusuf and Ishola (2013), refers to that learned complex of knowledge, belief, art, morals, law, custom and any other capabilities and habits acquired by man as a member of society.

Culture influences most of the activities of our daily lives including our dispositions, decisions and even our attitudes. Hence, understanding the consumer’s culture and attitude towards insurance and creating a demand for insurance policy is essential in facilitating the success of insurance services (Razak and Kasim, 2014).

In a closely related view, there is an argument that customers from different cultures may rely on different factors during the process of relationship development with service providers (Suh, et al., 2006). So, given this, cultural factors might as well prompt Nigerians into exhibiting different behavioural reactions to insurance services and the relevant strategies designed to marketing them. For example Liu et al (2007) noted cultures in China has made risk management and loss prevention a none priority, and there is no motivation for contractors to transfer risks to insurers as the government will reimburse any losses incurred. In a similar context, Atmanand (2003) asserts that where people below poverty line are high and per capital income is low, insurance penetration is bound to be low.

Nigeria serves as a social laboratory for understanding the role of culture in shaping the penetration of insurance growth in developing countries. In spite of being among the developing countries, Nigeria straddles the First and Third Worlds. It is a nation characterised by varying levels of development, vast income inequalities, and cultural diversity in terms of language, religion, ethnicity and resource control crises.

The performance of the Nigerian insurance industry has been one of sub-optimal. Insurance density stood at 6.9%, industry global ranking was 61 and the gross premium income was N180bn in 2008 (NAICOM, 2010). According to the National Insurance Commission (NAICOM, 2008), the industry has the potential to deliver N1.3 trillion (US$7.5bn) in Gross Premium by 2012 and N60 trillion (US$400.81bn) by 2020.

More so, a cursory look at the insurance penetration ratios in Africa as shown by the Swiss Re Sigma for the year 2012 reveals that, South Africa leads the continent with a 7.4% penetration ratio, Kenya is 3.1%, Ghana is 2% while Nigeria being the most populous and richest in the continent is having just 0.68%. This indicates while the insurance industry in Nigeria remains largely underdeveloped.

The foregoing thus suggests that culture may be responsible for the disparity in insurance penetration between the developed countries and the developing countries like Nigeria. Because, when people view something with a preconceived concept about it, they tend to take those concepts and see them whether or not they are there. This problem stems from the fact that humans are unable to understand new information, without the inherent bias of their previous knowledge. A person’s knowledge creates his or her reality as much as the truth, because the human mind can only contemplate that to which it has been exposed. When objects are viewed without understanding, the mind will try to reach for something that it already recognizes, in order to process what it is viewing (Razak and Kasim, 2014).

Hence, this research study will examine the impact of culture on insurance penetration in developing countries with a particular reference to Nigeria.

1.2   Statement of the Problem

Researches linking consumers’ culture with demand for insurance products in developing countries with Nigeria inclusive have shown that insurance services seem not to have been so accepted enthusiastically in developing countries. The abysmal level of consumers’ perception and culture are often held responsible for the low penetration of insurance. The role of culture in Nigeria is all pervasive that demand for insurance is grossly affected to the extent that it defines consumers risk aversion.

Religion is another drawback since it provides an insight into the individual’s behaviour; and understanding religion is an important component of understanding a nation’s unique culture. Religion historically has provided a strong source of cultural opposition to life insurance as many religious people believe that a reliance on life insurance results from a distrust of God’s protecting care. Until the nineteenth century, European nations condemned and banned life insurance on religious grounds. Even until now religious antagonism to life insurance still remains in several Islamic countries.

The significance of the insurance industry to the growth of the Nigerian economy cannot be overstated, but despite the role played by the insurance industry to individuals, businesses and economic development of the nation at large, it is well known that people have poor attitude towards ownership and patronage of insurance policies. When compared with the developed foreign countries, the Nigerian insurance industry has achieved only a little because of cultural cleavages, religious beliefs, perceptual errors and general attitude of the people towards risk.  

It is against this backdrop that this study seeks to examine the impact of culture on insurance penetration in developing countries with a particular reference to Nigeria.

1.3   Objectives of the Study

The study will be conducted with the following objectives:

1.      To examine the impact of cultural cleavages on penetration of insurance growth in developing countries.

2.      To assess the impact of religious beliefs on demand for insurance policy.

3.      To investigate the role of consumers’ perception in purchasing insurance products.

1.4   Research Questions

The research study will be guided by the following research questions:

1.      What is the impact of cultural cleavages on penetration of insurance growth in developing countries?

2.      What is the effect of religious beliefs on demand for insurance policy?

3.      What is the role of consumers’ perception in purchasing insurance products?

1.5    Research Hypotheses

Hypothesis One:

Ho:     There is no significant relationship between cultural cleavages and penetration of            insurance growth in developing countries.

Hypothesis Two:

Ho:     Religious beliefs do not have any effect on demand for insurance policy.

Hypothesis Three:

Ho:     There is no significant relationship between consumers’ perception and purchasing         of insurance products.

1.6    Significance of the Study