Decision Making in Personal Insurance: Impact of Insurance Literacy

Abstract

Financial illiteracy and underinsurance have been revealed to be critical issues in the financial sustainability and well-being of families. However, studies show that financial literacy does not necessarily translate to insurance literacy, and more specialized education can improve insurance literacy. Little is known about the impact of insurance illiteracy on the inclination to seek and retain insurance. Considering this gap, our study aimed to investigate the direct and indirect effect of consumers’ insurance literacy on purchasing decisions of personal insurance. The study sample consists of middle-class consumers in Sri Lanka. A total of 300 valid questionnaires were collected and analyzed using a variance-based structural equation modeling. The results revealed that insurance literacy directly, and through its mediators of trust, perceived benefits, and favorable attitudes towards insurance, impacts the behavioral intention, significantly and positively. The cognition-based trust affected the purchase intention only through its mediators. Additionally, there is a significant difference between those who are having and not having insurance in terms of insurance literacy, trustfulness, and perceived value of insurance. This study is relatively a pioneer study, and findings will be of great interest to academicians and policymakers to encourage personal insurance as a tool in achieving financial security and well-being

Predicting the Intention and Purchase of Health Insurance Among Malaysian Working Adults

“…Five items on perceived behavioral control were retrieved from Berkman et al (2011) and Al-Swidi et al (2014). Six items were adopted from Berkman et al (2011), and Weedige et al (2019) to evaluate the intention to purchase health insurance and the purchase behavior of health insurance. Perceived product risk was assessed using four items adapted from Weedige et al (2019).…”

“…This study is an extension of the literature that had looked into insurance literacy, financial literacy, and financial systems (Lin et al, 2019; Weedige et al, 2019; Williams et al, 2021). This present research work examined the impact of insurance literacy on working adults in Malaysia, so as to inform the health insurance policymakers.…”

Household, personal, and financial determinants of surrender in Korean health insurance

“…The analysis would be more elaborate if we could further observe well-known determinants of surrender such as the insured's age and contract age in combination with variables used in this study. Future research could study the effect of insurance literacy on surrender, as Weedige et al (2019) investigated such an effect on insurance purchase. It could also conduct long-term longitudinal surveys and combine them with time series data on market interest rates, stock market indices, and insurance business cycles to provide a more accurate understanding of how far our findings can complement the increasingly popular emergency fund hypothesis.…”

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“…At the same time, in the conditions of increasing competition in the insurance market, these are psychographic factors that require close attention to and necessitate control exerted by the insurer. There are some factors to be emphasized that influence the behavioral intentions and the adoption of a positive decision by the insurance consumer: trust, perceived benefit, and favorable attitude (Weedige et al, 2019).…”