Decision Making in Personal Insurance: Impact of Insurance Literacy

Sampath Sanjeewa Weedige, Hongbing Ouyang, Yao Gao and Yaqing Liu
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Sampath Sanjeewa Weedige: School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China
Hongbing Ouyang: School of Economics, Huazhong University of Science and Technology, Wuhan 430074, China
Yao Gao: School of Social Sciences, University of Manchester, Manchester M13 9PL, UK
Yaqing Liu: School of Medicine and Health Management, Huazhong University of Science and Technology, Wuhan 430074, China

Sustainability, 2019, vol. 11, issue 23, 1-24

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.

Keywords: insurance literacy; personal insurance; trustfulness on insurance; perceived value; middle-class consumers; decision making in insurance; insurance knowledge; insurance education (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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