EFFECT OF CONSUMER BEHAVIOR ON INSURANCE BUSINESS IN NIGERIA
1.1 Background of the Study
In a consumer behavioral perspective, many different psychological models within different disciplines have been proposed to explain consumer’s attitudes, motivation and consumption of insurance. The most popular theoretical models applied in products and services consumption studies are the theory of reason action (TRA) and the theory of planned behaviour (TPB) (Fishbein&Ajzen, 1975, 1980; Ajzen, 1991), behavioural perspective models Foxall (1990; 1999), and classical attitude-behaviour models.
The main advantage of these models is the inclusion of all person-, product-, and related situation factors in explaining variations of insurance consumption frequency.
An attitude is a learned predisposition to respond to a given object or class of objects in a consistently favourable or unfavourable way. The widespread view is that attitudes are complex systems made up of three components. These are; cognitive component referring to the person’s thoughts, affective component referring to person’s feelings, and the conative component referring to the person’s behavioural tendencies (Ajzen and Fishbein, 1980). In marketing context, it is stated that consumers can develop attitudes to any kind of product or service, or indeed to any aspect of the marketing mix, and these attitudes will affect consumption indirectly through intention to consume .(Brassington and Pettitt, 2003).
In addition to attitudes, consumers confront complicated financial decisions (insurance inclusive) in today’s demanding financial environment, which require financial literacy to interpret. Financial literacy is the ability to process financial information and make informed decisions involving numeracy, time value of money, interest compounding, and money illusion and inflation aspects of personal finance (Shawn cole&Nilesh Fernando, 2008). Increasingly, individuals are in charge of their own financial security and are confronted with ever more complex insurance policies.
Previous research has shown that both attitudes and financial literacy have significant impact on insurance consumption. However, the conclusions come mainly from the studies in developed countries and Western cultures, whereas preference and financial services choice insurance consumption being one of them is various across situations and cultures (Tajuden 2007). Lewis (1989) defines insurance consumption in terms of Insurance penetration, insurance density and insurance in force to GDP.