WAII PROJECT (GROUP 3)

RISK PERCEPTION AND THE DEMAND FOR
INSURANCE IN WEST AFRICA
(A CASE STUDY OF THE GAMBIA)
A PROJECT WORK SUBMITTED IN PARTIAL FULFILMENT
OF THE REQUIREMENT FOR THE AWARD OF DIPLOMA IN
INSURANCE
AT
WEST AFRICAN INSURANCE INSTITUTE (W.A.I.I)
THE GAMBIA
JUNE 2013
1

CERTIFICATION
This project titled ‘RISK PERCEPTION AND THE DEMAND FOR
INSURANCE IN WEST AFRICA - A CASE STUDY OF THE GAMBIA’
Written by the following persons
1. VALERIA ISSAKA
2. AMBROSE BATU WUREH
3. SAMUEL ADOM BAIDOO
4. MAIMA BLAMAH JOHNSON
5. BOLATITO AKANJI GHAFAR
6. NELSON INEMESIT EKANEM
7. AYOBOLA T. OLUGBEMI
8. PATRICK HUSSAINI ATTAHIRU
9. SAINABU JOBE B.
10.PATRICIA AFUA MINTAH
Has been read and approved by the undersigned as meeting the requirement of the
West African Insurance Institute, The Gambia, for the award of Diploma
Certificate in Insurance.
……………………………….. …………………………………...
(Project Supervisor) DATE
……………………………….. …………
PROFESSOR PRINCE MIKE IKUPOLATI DATE
(DIRECTOR GENERAL, WAII)
2

DEDICATION
We wholeheartedly dedicate this project work to the Almighty God, for his grace
towards us throughout the period of this course, to our various companies, families
and the staff of W.A.I.I.
3

ACKNOWLEDGEMENT
Throughout the duration of this course, of which this project work is an integral part, we have
been privileged and fortunate to have the support and encouragement of many.
First and foremost, we wish to express our profound gratitude to the Almighty God, for all his
doings in our lives especially for seeing us to a successful end of this distinguished course.
Our gratitude goes to our project supervisor Mr Festus Ahaotu for his/her patience,
understanding and consideration.
We are equally grateful to Professor Prince Mike Ikupolati, the Director General of W.A.I.I.,
who has not only taught us but given us a treasure in our lives’ pursuit. We pray to God for
goodness and blessings for you immeasurably.
4

ABSTRACT
Risk perception is a global phenomenon. How products or services are perceived has effects on
the demand for those products and services in question. Would the perceived risk of failure cause
a student to study, that of theft or burglary cause households or organisations to put in place
security and central anti-burglary mechanism? Then, what effect would risk perception have on
the demand for insurance?
The principal objective of this paper is to investigate risk perception’s role in the demand for
insurance. Overall, this work represents analyses of risk perception and the demand for insurance
and the roles both insurance companies and the government can play to develop and improve an
environment that can stimulate a favourable risk perception towards insurance and thereby
increase the demand for insurance.
5

TABLE OF CONTENT
PAGE NUMBERS
CERTIFICATION ii
DEDICATION iii
ACKNOLEDGEMENT iv
ABSTRACT v
TABLE OF CONTENT vi
CHAPTER ONE
1.0 INTRODUCTION 1
1.1 GENERAL DESCRIPTION OF THE AREA OF STUDY 2
1.2 PROBLEM ANALYSIS 2
1.3 PURPOSE OF STUDY 3
1.4 RELEVANT RESEARCH QUESTIONS 3
1.5 STATEMENT OF THE HYPOTHESES 4
1.6 DEFINITION OF TERMS 5
1.7 DELIMITATION (SCOPE) OF STUDY 6
1.8 SIGNIFICANCE OF THE RESEARCH PROBLEM AND
JUSTIFICATION FOR INVESTIGATION 7
1.9 REFERENCES 8
CHAPTER TWO
2.0 REVIEW OF LITERATURE 9
2.1 HISTORICAL BACKGROUND 9
2.2 THEORIES 10
6

2.3 CURRENT LITERATURE BASED ON EACH OF THE
RELEVANT VARIABLES OF THE MODEL OR THEORY 12
2.3.1 INSURANCE AND DEMAND FOR INSURANCE 12
2.3.2 HISTORY OF INSURANCE 12
2.3.3 FACTORS AFFECTING DEMAND FOR INSURANCE 13
2.4 SUMMARY OF CHAPTER 17
2.5 REFERENCES 18
CHAPTER THREE
3.0 METHODOLOGY 20
3.1 BRIEF OUTLINE OF THE CHAPTER 20
3.2 RESTATEMENT OF THE RESEARCH QUESTIONS
AND HYPOTHESES 20
3.2.1 RESTATEMENT OF RESEARCH QUESTIONS 20
3.2.2 RESTATEMENT OF RESEARCH HYPOTHESES 21
3.3 RESEARCH DESIGN 22
3.4 CHARACTERISTICS OF STUDY POPULATION 22
3.5 SAMPLING DESIGN AND PROCEDURES 23
3.6 METHOD OF DATA COLLECTION 23
3.7 PILOT STUDY, TEST OF VALIDITY AND RELIABILITY
OF STUDY INSTRUMENT 24
3.7.1 PILOT STUDY 24
3.7.2 TEST OF VALIDITY 24
3.7.3 RELIABILITY OF STUDY 24
3.8 METHOD OF DATA ANALYSIS 24
7

3.8.1 TEST OF PROPORTIONALITY 25
3.9 LIMITATION OF THE METHODOLOGY 26
3.10 REFERENCES 27
CHAPTER FOUR
4.0 PRESENTATION AND ANALYSIS OF DATA 28
4.1 A BRIEF INTRODUCTION OF THE CHAPTER 28
4.2 RESPONDENTS’ CHARACTERISTICS AND CLASSIFICATION 28
4.3 PRESENTATION AND ANALYSIS OF DATA
ACCORDIND TO RESEARCH QUESTION 29
4.3.1 SECTION A: PERSONAL DATA 29
4.3.2 SECTION B: RESEARCH QUESTIONS 30
4.4 PRESENTATION AND ANALYSIS OF DATA ACCORDIND
TO TESTS OF HYPOTHESES 38
4.4.1 SUMMARY TO RESPONSE ACCORDING TO
THE TEST OF HYPOTHESES 38
4.5 REFERENCES 44
CHAPTER FIVE
5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 45
5.1 SUMMARY 45
5.2 CONCLUSIONS 46
5.4 RECOMMENDATIONS 47
5.5 SUGGESTION FOR FURTHER STUDIES 51
5.6 REFERENCE 52
8

CHAPTER ONE
1.0 INTRODUCTION
The insurance market in the Gambia has evolved over the years and is described as one of the
major players of economic growth in the country and international insurance business. However,
risk perception has been the reason for The Gambia and Africa as a whole, lagging behind in the
international insurance business. The insurance market is open, dynamic and competitive and
hosts a number of companies with varying sizes in the country. These companies have been the
key players for many years in the insurance and reinsurance markets.
The prevailing use of direct insurance on the domestic scene to provide the needed security for
any economic or industrial effort and the use of reinsurance to spread risk exposures worldwide,
serve to provide some assurance for developing countries in their bold undertaking to improve
upon the lives of their people.
The challenge faced by the insurance industry is that, it is now a buyer’s market and not a seller’s
market. Insurance products are therefore designed to meet the needs of consumers. People usually
purchase insurance when it is made compulsory. In most cases, they have no set expectations
because they purchase insurance infrequently. This is where educating the populace on insurance
plays a critical role. Ill- informed people are usually deprived of better service as they are
unaware of the benefits available to them.
A good education on risk and insurance is important for the people as their perception to risk is
diverse. A bad experience with an insurance provider can tarnish the image of the whole company
and diminish the expectation of getting more people to sign on to policies.

1.1 GENERAL DESCRIPTION OF THE AREA OF STUDY
The word ‘risk’ is a household name that one has been living with. Individuals and businesses are
exposed to different types of risks. This is because risk is not only the center of insurance but also
inseparable from life. Risk is defined in its simplest form as ‘uncertainty of loss’. Risk is therefore
evaluated as the deviation of future outcome from the expected or predicted values. According to
Ikupolati (2012), ‘Risk is concomitant to life. We cannot avoid risk. If we know all that will
happen each day in our lives, risk would not exist. However, we know better that each living day
is full of RISKS’. The importance of risk in one’s life has led to its different perception by
different individuals. Risk perception is the subjective judgment that people make about the
characteristics and severity of a risk. Risk perception has a great impact on the demand for
insurance.
However, demand for insurance is dependent on perception of some hazards which determine
valuation of risks. The theory of demand for insurance has been based on expected utility theory
and an assured preference for certain issues over uncertain ones of the same magnitude (Savage,
1972). Demand for insurance is a decision to purchase not only the apparent current condition of
the product but also its future conditions. Dionne, G. D. (2000). Research on demand for
catastrophe insurance finds that one reason insurance is not purchased is because those at risk are
ill-informed about the risk. For instance, Kunreuther et al. (1978), via in-person interviews, find
that individuals whose property has been damaged in the past in a natural disaster are more likely
than others to purchase flood insurance. These perceived risks can be financial, psychological,
performance or time risks. Moreover, laws of each country also influence how the citizens
perceive risk and its subsequent demand.
1.2 PROBLEM ANALYSIS
Demand for insurance in The Gambia is not appreciating as expected compared to the demand for
insurance in other countries. Many people in The Gambia are indifferent about the need for
insurance; this may be attributable to their perception of risk.

The Gambia is one of the smallest developing countries yet it is experiencing moderate growth in
the area of insurance.
The research questions will guide the researcher to provide answers to the problem that is being
investigated based on the purpose of study.
1.3 PURPOSE OF THE STUDY
The purpose of the study is to;
1. Find out the effects of perceived risks on the demand of insurance in the Gambia.
2. Know the basis for understanding and anticipating public perception of risks,
3. Aid in providing a communication of perceived risk information among laypeople, technical
experts, and policy makers.
4. Consumers’ view about Insurance in general.
5. To know about the types of insurance policies taken by consumer.
6. To find out the awareness level of insurance of the consumer and,
7. To recommend improvement in the insurance industry.
1.4 RELEVANT RESEARCH QUESTIONS
1. Does the thought of premature death have an effect on the demand for life assurance
products?
2. Does the thought of being involved in an accident have an effect on the demand for
accident policies?
3. Does the thought of fire damage to property have an effect on the demand for
fire/household content policies?
4. Does the thought of car theft, fire and accident have an effect on the demand for motor
insurance policies?

5. Does religion, level of income and previous claims experience with an insurance company
have an effect on the demand for insurance.
1.5 STATEMENT OF THE HYPOTHESES
Based on the above research questions, the following hypotheses have been drawn.
HYPOTHESIS 1
H0: The demand for life assurance products does not depend on the thought of premature death.
H1: The demand for life assurance products depends on the thought of premature death.
HYPOTHESIS 2
H0: The demand for life accident insurance policies does not depend on the thought of being
involved in an accident.
H1: The demand for life accident insurance policies depends on the thought of being involved in
an accident
HYPOTHESIS 3
H0: The demand for fire/household content policies does not depend on the thought of fire
damage to properties.
H1: The demand for fire/household content policies depends on the thought of fire damage to
properties.
HYPOTHESIS 4
H0: The demand for motor insurance policies does not depend on the thought of car theft, fire
and accident.
H1: The demand for motor insurance policies depends on the thought of car theft, fire and
accident.

HYPOTHESIS 5
H0: The demand for insurance does not depend on the level of income, religion and previous
claims experience.
H1: The demand for insurance depends on the level of income, religion and previous claims
experience.
1.6 DEFINITION OF TERMS
Insurance: It is a pool of risk or risk-transfer mechanism that ensures full or partial financial
compensation for the loss or damage caused by event(s) beyond the control of the insured party.
Characteristics of insurance
• Sharing of risks
• Cooperative device
• Evaluation of risk
• Payment on happening of a special event
• The amount of payment depends on the nature of losses incurred.
• Insurance business depends on the law of large number of people insured against similar
risk.
• Insurance is a plan, which spreads the risk and losses of few people among a large number
of people.
• The insurance is a plan in which the insured transfers his risk on the insurer.
• Insurance is a legal contract which is based upon certain principles of insurance which
includes utmost good faith, insurable interest, contribution, indemnity, proximate cause,
and subrogation.
Functions of insurance:
1. Provide protection: - Insurance does prevent the occurrence of the event, but can
compensate for the loss.

2. Collective bearing of risk: - Insurance is a device to share the financial losses of few
among many others.
3. Assessment of risk: - Insurance determines the probable volume of risk by evaluating
various factors that give rise to risk.
4. Prevention of losses: - Insurance cautions businessmen and individuals to adopt suitable
device to prevent unfortunate consequences of risk by observing safety instructions.
5. Small capital to cover large risks: - Insurance relives businessmen from security
investment, by paying small amount of insurance against larger risks and uncertainty.
6. Contributes towards development of industries.
7. Contribution to economic growth.
Risk: A possibility of something unpleasant happening.
Perception: The process of using the senses to acquire information about the surrounding
environment or situation.
Risk perception: Risk perception is the subjective judgment that people make about the
characteristics and severity of a risk.
Demand: The willingness and ability to pay a sum of money for some amount of a particular
goods and services.
Service: Any activity or benefit that one can offer to another to satisfy a need that is essentially
intangible.
Concomitant: Following or accompanying as a consequence.
1.7 DELIMITATION (SCOPE) OF THE STUDY
The research will be limited to life and non-life insurance products and how peoples’ perception
affects the demand for these products, a case study in the Gambia.

The choice of study was influenced by access to available relevant information and data with
ease.
The conclusion of the study concerning the Gambia will be brought by information and data
gathered on the effects of risk perception on the demand for insurance.
1.8 SIGNIFICANCE OF THE RESEARCH PROBLEM AND
JUSTIFICATION FOR INVESTIGATION
The research will help us find out why we need to know Gambians risk perception relating to
demand for insurance.
Growth in the insurance industry means more revenue for the country which brings about
employment and expansion among others. Knowledge of peoples’ perception in relation to
demand for insurance will help the country in effective planning of national insurances.
In addition, it is hoped that this study will serve as a basis for further research for the people with
similar aims and objectives.

1.9 REFERENCES:
1. Onafalujo, Akinwunmi Kunle; Abass, Olufemi Adebowale; Dansu, and Sewhenu Francis,
Effects of Risk Perception on the Demand for Insurance: Implications on Nigerian
Road Users
2. Professor Prince Mike Ikupolati, (2012), Unpublished Lecture Notes on risks
management.
3. Tian Zhou-Richter, Prof. Mark J. Browne, Ph.D. and Prof. Dr. Helmut Gründl, Risk
Perception and the Demand for Long-Term Care Insurance
4. www.accessgambia.com

CHAPTER 2
2.0 LITERATURE REVIEW
2.1 HISTORICAL BACKGROUND
IDENTIFICATION
The Republic of the Gambia is the official name the Gambia. It was named after the Gambia
River. It is the smallest country on the mainland Africa.
LOCATION AND GEOGRAPHY
The Gambia is very small and narrow country whose borders mirror the meandering Gambia
River. It lies between latitudes 13o
and 14o
N, and longitudes 13o
and 17o
W. It is surrounded by
Senegal, apart from a short strip of Atlantic coastline at its western end. The country is less than
48.2km (30.0mi) wide at its widest point, with a total area of 11,295km2
. Approximately
1,300km2
(11.5%) of the Gambia’s area is covered by water. It is the smallest country on the
continent of Africa. The climate is tropical. There is hot and rainy season, normally from June
until November, but from then until May there are cooler temperatures with less precipitation. On
18 February 1965, the Gambia gained independence from the United Kingdom. Banjul is the
Gambian capital, but the largest cities are Serekunda and Brikama.
DEMOGRAPHY
The population of the Gambia was estimated at 1.361 million at the 2003 population census. More
than 63% of Gambians live in rural villages (1993), although more and younger people come to
the capital in search of work and education. In 2003, urbanisation rate was estimated at 50.3%.
The UNDP’s Human Development Report for 2010 ranks the Gambia 151st
out of 169 countries
on its Human Development Index, putting it in ‘Low Human Development’ category.

ETHNICITY AND LANGUAGE
A variety of ethnic groups live in the Gambia, each preserving its own language and traditions.
The Mandinkra ethnicity is the largest, followed by the Fula, Wolof. Jola. Serahule, Serers and
the Bianunkas. English is the official language of the Gambia. Other languages are Mandinka,
Wolof, Fula, Serer, Krio and other indigenous vernaculars.
CURRENCY
The Gambia uses delasis (GMD). The denominations range from 5 to 50 notes. The delasis is the
legal tender within the country (Gambia) and not outside.
HISTORY OF INSURANCE IN THE GAMBIA
In 1972 there was only one insurance company operating in The Gambia market. This was the
Northern Assurance Co. Ltd., later joined by the Gambia National Insurance Company Ltd.
Presently there are 12 companies operating in the insurance sector of The Gambia with latest
addition being in December, 2007, of Takaful Insurance Company which is run on Islamic
(Sharia) principles.
2.2 THEORIES
Risk theory is the likelihood to experience catastrophic or economic loss which can be physical,
emotional harm of any kind. Dake (1991) defines risk as the variation in possible outcomes of an
event based on chance. This is similar with Vaughan & Vaughan (1996) who defined risk as a
condition in which there is a possibility of an adverse deviation from a desired outcome that is
expected or hoped for. The above definitions centre on the premise that individuals generally

attempt to avoid incurring risk through developing various ‘risk reducing’ strategies in areas of
lives.
Risk perception on the other hand, is the process by which an individual selects, organizes and
interprets stimuli into a meaningful and coherent picture of the world (Burn 1992).
However, from a social point of view, Wildavsky (1991) defines risk perception as
conceptualized and a contraction process which can be through different forms, like consumer’s
self-image, positioning of services, service environment and perceived quality of products which
can either be intrinsic that is physical characteristics of the product itself or extrinsic like pricing,
advertising and so on.
Basically, Douglas and Wildavsky (1983) and Slovic (2000) proposed different approaches
towards risk perception.
While Slovic (2000) concentrated on psychometric paradigm, Douglas and Wildavsky (1983)
proposed cultural approach. The psychometric concentrates on various characteristics or
dimensions to explain sometimes ‘irrational’ perception of lay persons. The major aim of this
approach was the unveiling of the cognitive structure of risk. It is believed that people’s
perception of risk in various sources is related to the factor of dread and unknown risk.
On the other hand, cultural theory places affiliation with social way of life and corresponding
world views in the centre of their theoretical concept of risk perceptions. Hierarchical fears
attached in social order, example: crime, the individualistic fear of regulation, (market
interventions by the state).
The egalitarian worries about environmental risk and the fatalistic is scared of almost everything
in social life, Douglas and Wildavsky (1993).
Several factors that may influence how risk is perceived include:
I. Characteristic of the risk sources itself (Slovic 2000)
II. Value attitude (Dake 1991)
III. Ethno-cultural and socio-economic background (Vaughan & Vaughan 1996 )

IV. Level of information
2.3 CURRENT LITERATURE BASED ON EACH OF THE RELEVANT
VARIABLES OF THE MODEL OR THEORY
2.3.1 INSURANCE AND DEMAND FOR INSURANCE
Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for
payment. It is a form of risk management primarily used to hedge against the risk of contingent,
uncertain loss.
The transaction involves the insured assuming guaranteed and known relatively small loss in the
form of payment to the insurer in exchange for the insurer’s promise to compensate the insured in
case of a financial loss.
2.3.2 HISTORY OF INSURANCE
In some sense we can say that insurance appeared simultaneously with the appearance of human
society. However, early methods of transferring (distributing) risk were practiced by Chinese and
Babylonian traders as far back as the third and second millennia BC respectively. Chinese
merchants travelling treacherous river rapids would redistribute their wares across many vessels
to limit the loss due to any single vessel capsizing. The Babylonians developed a system which
was recorded in the famous code of Hammurabi, C. 1750 BC and practised by early
Mediterranean sailing merchant. If a merchant received a loan to fund his shipment, he would pay
the lender an additional sum in exchange for the lender’s guarantee to cancel the loan should
shipment be stolen or lost at sea. Today, the idea or concept behind what pertained as insurance in
the olden days has not changed. But in modern insurance, there are different types of insurances
to cover every facet of human endeavour. It has been put in two broad categories;
1. Life insurance
2. General insurance

2.3.3 FACTORS AFFECTING DEMAND FOR INSURANCE
The theory for insurance has been based on expected utility theory and an assured preference for
certain issues over uncertain ones of the same magnitude (Savage 1972). Demand for insurance is
a decision to purchase not only the apparent current condition of the product but also its future
conditions of the produce, Dionne (2000).
1. Unavailability of desirable insurance products
The availability of insurance products is vital to satisfying consumer needs. Insurance providers
sell insurance services without tailoring the services to meet the needs of the consumer. Products
that have existed to the present day in the industry are categorised into:
 Life Assurance Products
 General Business Products
Life Assurance Products
These tend to focus on insurances of the person. Products such as Whole Life, Endowment,
Pensions and Group Life policies, have been offered in varied forms to the insuring public.
Insurance products have not been dynamic, and tend to have static life cycles. This has made
insurance marketers less innovative. These products, over the years have been adversely affected
by inflation, thus, leaving most consumers dissatisfied. The result is, low demand for insurance.
General Business Products

In the area of general business, products such as Fire, Motor, Burglary, Marine, Accident, and
Engineering insurances have been marketed by various companies in The Gambia. Most of these
products are technically obsolete and static in nature, for the understanding of the average
insurance consumer. Insurance companies have so far not been able to present their products
attractively or offered variations of their core products in line with changing needs of the
consumer.
Consequently, there is a yawning gap in terms of consumer needs and expectations and its
concomitant low demand for insurance.
2. Attitude towards risk and risk awareness
Individual decisions on whether to purchase insurance products are largely determined by the
characteristics of the individual risk aversion, expectation regarding the likelihood of loss and the
price of insurance products (Dionne Georges, Neil & Nathalic, 2000). Numerous studies have
shown that risk perception is linked to demand for insurance. Mc Clelland, Shulze and Hund
(1990) assert that some people are found to perceive risk as if no hazard exists while others rate a
low probability risk equal to more frequent risk exposure, as a matter of perception.
Also, being aware of a particular risk is another reason that affects demand for insurance. Some
people may not have insurance cover for a particular risk because they did not know such a
facility is available. Therefore, individual according to Camerer (1989) resort to having self-
insurance or protection. Self- insurance is a way of mitigation for cases when human actions
cannot affect the probability of risk but can influence the consequences of the risk.
3. Price of insurance
With the purchase of insurance services, Blincoe (1996) asserts that, a consumer widens his scope
of discretion and the opportunity of protecting themselves from financial loss in the event of a
loss. Therefore, the price of insurance is an essential determinant in the level of insurance demand
(Swiss Re, 1993).

However, the relationship between alternative prices on the current demand will determine the
demand curve. That is, demand and prices are inversely related. In standard economic theory, the
price of a product is the key determinant in the supply and demand of that product (Varian 1999).
Therefore, if insurers price insurance without taking into consideration the level of risk, age and
gender and offer everyone the same price relating to average risk, insurance becomes expensive.
Looking at the Gambian population, based on the 2003 estimates, 69% of the population are
living below the poverty line. Even though The Gambia has in recent years experienced increase
GDP growth rates averaging about 5.4%, poverty is on the increase. As a result, people based on
their risk perception can decide to or not to buy insurance.
4. Income and wealth
The demand for insurance grows (income sensitive), sometimes at a faster rate than income level,
that is, income elastic. Consumers can only purchase insurance if they have sufficient income to
do so. In the hierarchy of needs, people will first satisfy the basic needs such as food, clothing and
shelter before meeting other needs including insurance. Thus, as income grows, demand for
insurance grows as well. Also, as people become affluent, they tend to have more to insure.
Higher income means greater ability to acquire insurable assets and consequently an increase in
demand for insurance. Beenstock et al. (1988) made this observation using an internal dataset to
examine the relationship between property liability, insurance and income. He found out that
marginal propensity to insure that is, increase in insurance spending when income rises by 1
dollar. The Gambia is no different.
5. Public awareness of insurance
Despite the essential place of insurance in the society, the level of public awareness is still far
from satisfactory in The Gambia and the African continent as a whole.
This situation may be attributed to various factors including government’s attitude towards the
insurance industry, quality of the insurance personnel, finance, illiteracy and the economic status
of the country. The effect of public awareness of insurance can only be crippling to the insurance

industry and the economies of the nation, considering all of its benefits. Lack of public awareness
leads to low demand of insurance covers, which will result in the unavailability of insurance
products due to the low level of innovation and creativity in the industry. Ultimately the
availability of insurance services will lead to colossal economic losses or wastages which could
have been preventable or mitigated by insurance services. Generally, all benefits associated with
the practice of insurance are threatened by the lack of public awareness thus highlighting the
relevance of the relevance of the relationship between public awareness and the demand for
insurance.
Public awareness is unique in its importance since it provides the basis of market research,
guiding insurers on products to produce, since only an enlightened client can adequately identify
insurance needs, thus minimising time and procurement. Public awareness is the key to demand
for insurance, and it involves the communication between the industry and the public on
insurance products, services available and benefits. It can be achieved by the various methods, but
requires constant monitoring to determine public responses such as misconceptions, areas of need,
and misinformation, so as to ensure adequate reactions by the industry in either providing services
to satisfy the needs or information dissemination to correct misinformation. This simply implies
that the process of maintaining public awareness is a continuous process involving the integration
of all the parts involved in a communication process.
6. Religion
One other factor determining the demand for insurance is religion. In The Gambia, 90% of the
population are mostly ‘Sunni Muslims’, making them the largest religious group. Not only is The
Gambia mainly Muslim country, but it is also located in a strongly Muslim region. The influence
of Islam in the country can be dated back as far as the 7th
century, when the Berbers of North
Africa converted to Islam and plied West Africa for trading reasons.
Under common interpretations of Islamic law, conventional insurance is forbidden in Islam.
Scholars such as Sheikh Mohammed Al – Munaiid criticised the system of conventional insurance
as exploitative and unjust. They point out that paying money for something with no guarantee of

benefit involves high ambiguity and risk. One pays into the programme, but may or may not need
to receive compensation from the programme, which could be considered as a form of gambling.
Against this background, one can understand the reason for low patronage of insurance in The
Gambia.
In Muslim majority countries and in some Muslim countries, there is often an alternative to
insurance available called takaful. It is based on a cooperative, shared risk model – Ikupolati
(2013).
2.4 SUMMARY OF THE CHAPTER
Insurance has been in existence from the time of the appearance of human society. It has been used
from that time as a risk transfer mechanism.
Despite the advantages that go with insurance, there has been a low patronage of insurance
services in The Gambia in particular and West Africa as a whole. This is so because individual
differences in risk perception – risk lovers, neutral and risk averse.
Apart from the effects of risk perception of the people on demand for insurance, there are other
variables that have accounted for the low demand for insurance.
Price of insurance was one of the variables mentioned. It can increase or decrease the demand for
insurance. If insurers price insurance without looking at the level of risk, by age and gender, and
offer everyone the same price relating to average risk, insurance becomes expensive.
Income and wealth also determines demand for insurance. People can only purchase insurance if
they have sufficient income to do so.
Public awareness of risk and insurance services and policies will result in the development of
public confidence in the industry and therefore in the whole financial system. Policyholders should
be able to understand products and policies offered and to compare different companies to make
their choice hence demand for insurance.
Religion was also mentioned as one of the variables determining the demand for insurance.

2.5 REFERENCES
1. Onafalujo, A. K (2011) Effects of Risk Perception on the Demand for Insurance:
Implication on Nigerian Road Users.
2. Dake,K(1991). Disposition in the Perception of Risk: An analysis of Contemporary
Worldviews and Cultural basis, Journal of Cross – Cultural Psychology
3. Wildavsky, A. (1991). The Rise of Radical Egalitarianism. The American University
Press.
4. Schmidt, M (2004). Investigating Risk Perception: a short introduction.
5. Akhigbe, A. (1992). Promoting Insurance Awareness through Public Enlightenment
and Manpower Development, presented at the 19th
WAICA AGM & Educational
Conference, The Nigerian Institute of International Affairs, Victoria Island, Lagos,
Nigeria.
6. McCllelland G. H, Schulze W.D, & Hurd (1990). The Effects of Risk Belief on Property
Values: a case study of hazardous waste site, Risk analysis
7. Savage, L. J., (1978). The Foundation of Statistics, New York. Dover Publication.

8. Slovic , P., (2000). The Perception of Risk. London / Sterling.
9. Brun, W., (1992). Cognitive Components in Risk Perception Natural versus
Manmade Risks. Journal of Behavioural Decision Making 117 – 132.
10. Dionne, G. D., (2000). Adverse Selection in Insurance Markets. Handbook of
Insurance. London.
11. en.wikipedia.org/wiki/The_Gambia. History of the Gambia
12. www.accessgambia.com/information/population.html
13. www.about.com//Islam. What do muslims believe about insurance.
14. Varian, H (1999). Intermediate Microeconomics – A Modern Approach. 5th
ed. New
York.
15. Swiss Re (2000). Profitability of Non-Life Insurance Industry,its back to time. Swiss
Re economic research and consulting, Sigma No. 5/2001.

CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 BRIEF OUTLINE OF THE CHAPTER
This part will detail how the research objective will be achieved and it will also justify the choice
of method in the light of the research objective.
This chapter will focus on the description of the techniques adopted in this research work, the
identification of the data gathering techniques and data processing methods to be adopted, among
others, in extracting meaning from the data to be gathered in the course of the research work. The
limitations of the approaches adopted will also form an essential part of this chapter.
This project work will be based purely on the Deductive Approach due to the nature of the
population involved.

3.2 RESTATEMENT OF THE RESEARCH QUESTIONS AND
HYPOTHESES
3.2.1 RESTATEMENT OF RESEARCH QUESTIONS
products?
accident policies?
insurance policies?
have an effect on the demand for insurance?
3.2.2 RESTATEMENT OF RESEARCH HYPOTHESES
Based on the above research questions, the following hypotheses have been drawn.
HYPOTHESIS 1
H0: The demand for life assurance products does not depend on the thought of premature
death.
HYPOTHESIS 2
H0: The demand for life accident insurance policies does not depend on the thought of being
H1: The demand for life accident insurance policies depends on the thought of being involved
in an accident

HYPOTHESIS 3
damage to properties.
H1: The demand for fire/household content policies depends on the thought of fire damage to
properties.
HYPOTHESIS 4
H0: The demand for motor insurance policies does not depend on the thought of car theft, fire
and accident.
H1: The demand for motor insurance policies depends on the thought of car theft, fire and
accident.
HYPOTHESIS 5
claims experience.
H1: The demand for insurance depends on the level of income, religion and previous claims
experience.
3.3 RESEARCH DESIGN
To facilitate effective resolution of the central problem of this research work, adequate planning is
required. The strategy, the plan and the structure for the efficient conduct of the entire research is
the thrust of this section of the study.
To achieve the above task we will need data on the income level, education and religion and these
would be collected primarily through our questionnaire. The responses from the questionnaire
would provide the required data.

3.4 CHARACTERISTICS OF STUDY THE POPULATION
The Gambia, which is the study area of our research, has an estimated population of 1.361 million
as at the 2003 population census. The population is increasing at a rate of 2.8 percent a year
(Microsoft Encarta Encyclopedia, 2006 estimate).
As at 1993 more than 63% of Gambians lived in rural villages, although more and younger people
come to the capital in search of work and education. In 2003, urbanisation rate was estimated at
50.3%. The UNDP’s Human Development Report for 2010 ranks the Gambia 151st
out of 169
countries on its Human Development Index, putting it in ‘Low Human Development’ category.
Prospective buyers of insurance in this context are Individuals, Private and Public Corporations,
Institutions and the Government Agencies within The Gambia.
3.5 SAMPLING DESIGN AND SAMPLING PROCEDURE
The units of this research work are the insuring public which consist mainly of the urban
population for obvious reasons.
The population of the Gambia is mainly young with more than half (about 63.55%) below 25
years and the elderly persons of 65 years and above account for 2.8% of the population. The age
structure: The 0-14 age range makes up 43.9% of the population (males 382,385/females
378,853) and the 15-64 age range makes up 53.4% (males 459,315/ females 466,689). And the 65
years and above group represents 2.8% (males 24,303, females 23,919)- July 2008 estimate.
The research survey will concentrate on the adult population the major urban centres. The sample
size of seventy (70) will be drawn by random selection method from this population to whom the
questionnaires will be administered.

3.6 METHOD OF DATA COLLECTION
This part describes how the data are to be collected in order to answer the stated research
questions.
In this study, we made use of primary data obtained by means of questionnaires. The
questionnaire was made simple and easily understandable to a reasonable man consisting mainly
close-ended questions.
The questionnaire is made up of two sections – Sections ‘A’ and ‘B’. Section ‘A’ consists of four
items to elicit personal information about the respondents which include age, sex, marital status,
occupation, level of education, income, and religion.
Section ‘B’ was designed to find out the opinion and the risk perception of the people. The items
in this section were structured differently.
The questionnaires were distributed on the major streets around Serrekunda, Kanifing,
Senegambia, Brimkama, Kairaba Avenue, Banjul and retrieved immediately. The response from
the questionnaires was used for testing the various hypotheses.
3.7 PILOT STUDY, TEST OF VALIDITY AND RELIABILITY OF THE
STUDY INSTRUMENT
3.7.1 PILOT STUDY
A pilot study on the questionnaire was carried out through an interview with several persons. All
the respondents of this pilot study went through an interview and then discussion was held
concerning their perception of risk in relation to insurance.
3.7.2 VALIDITY

The validity aspect revolves on how well the questionnaire is able to measure what it is aimed to
measure. It is important that validity is good, because if the study does not measure what it is
supposed to measure, the results are useless. (Widersheim and Eriksson, 1997)
3.7.3 RELIABILITY
Reliability refers to the stability and consistency of the results derived from research: that is the
probability that the same results could be obtained if the measures used for the research were
replicated (Chisnall 1995). Reliability means whether the research instruments are neutral in their
effect, and can measure the same result when used on different occasions and applied on the same
subject; that is if someone else undertakes the same study, would the person arrive at the same
result as well as similar conclusion?
3.8 METHOD OF DATA ANALYSIS
Test of Proportion of Z-statistics was used to analyse the data for the purpose of logical and
meaningful presentation. The data collected was edited; the edited data was coded accordingly.
This enabled us to utilize simple percentages presented in a tabular form for the analysis of the
hypotheses.
3.8.1 TEST OF PROPORTION
Zcal = P – π
Where π = 50% (0.5)
P = Sample Proportion

q = 1-P
n = Sample Size
Zcal = Test Statistics (Calculated Value)
For the purpose of this study, a confidence level of 95% is used:
-1.96 ≤ Z ≤ 1.96
Decision Rule:
Accept the null hypothesis (H0) and reject the alternative hypothesis (H1), if the Z calculated value
falls within the defined acceptance region.
Reject the null hypothesis (H0) and accept the alternative hypothesis (H1), if the Z calculated value
falls outside the defined acceptance region (that is within critical).
To test the degree of acceptance, three questions have been grouped into one for the purpose of
testing the hypothesis.
3.9 LIMITATIONS OF THE METHODOLOGY
1. Time Constraint: the time taken to distribute and collect the questionnaires is a bit of a
problem due to the busy scheduled of the school programmes.
2. Unwillingness to divulge information: respondents viewed the questionnaire with some
suspicion, thus, they were reluctant to provide all the necessary information required.
3. Language Barrier: most of the respondents are illiterates or semi-illiterates thus making
communication in English or Wolof a problem. We had to use an indigene as an
interpreter to aid us.

3.10 REFERENCES
1. Boholm A.(1998). Comparative Studies of Risk Perception: A Review of Twenty Years of
Research. Journal of Risk Research 1: 135-164.
2. Chisnall (1995), “Online Buyers Say Yes To Banking And Consumer Products: No to
Insurance”.
3. Jeanne Hartley Consulting; Methods of Collecting Data; Mgt. 450
4. Litwin, M.S. (1995). How to Measure Survey Reliability and Validity. Thousand Oaks,
CA: Sage Publications.
5. Sjoberg L. (2000). “Factors in Risk Perception. Risk Analysis “: 1-11.
6. Widersheim and Eriksson (1997).”Revitalization Agents and Brokers”, Cambridge, MA;
Forest Research Institute.
7. Zikmund William, (2003) “Essentials of Marketing Research”, USA: Thomas South-
Western
8. Microsoft Encarta Encyclopedia (2007)

CHAPTER 4
4.0 PRESENTATION AND ANALYSIS OF DATA
4.1 INTRODUCTION
The main focus of this chapter is on data presentation and analysis, empirical findings and the
results of the survey on risk perception and the demand for insurance in The Gambia. The
structure of this chapter will be based on sequential order of the questionnaire in order to present
the data and the results of the survey.
This Chapter presents the answers to all questions cited in the questionnaire and the results of the
analysis of data collected from the study. The data were organised and presented in tables
showing frequencies and percentages. The percentage statistical method will be used to analyse
the data collected and interpretation will be made based on the results. The test of proportion
statistical method will be used to test the hypothesis.
4.2 RESPONDENTS’ CLASSIFICATION AND CHARACTERISTICS
Table 1: Summary of Administered Questionnaires
Items Total Number Percentage
Questionnaires administered 70 100%
Total no. of questionnaires received 70 100%
Questionnaires wrongly filled 7 10%
Questionnaires correctly filled 63 90%
The data was collected from the general public. A total of 70 copies of the questionnaires were
sent out, 70 were received, 63 were correctly filled and 7 were wrongly filled. This implies that
the questions were well understood by the individual respondents. The research analysis is based
on the 63 (i.e. 90%) completed questionnaires for this study.

4.3 PRESENTATION AND ANAIYSIS OF DATA ACCORDING TO
RESEARCH QUESTIONS
4.3.1 SECTION A: PERSONAL DATA
Table 2: Age Distribution of Respondents
Age Range No. of Responses Percentage
21 - 30 yrs 33 52%
31 - 40 yrs 14 22%
41 - 50 yrs 13 21%
51 and above 3 5%
TOTAL 63 100%
From the above table, 33 respondents representing 52% were within the age of 21-30, 14
respondents representing 22% were within the age range of 31-40, 13 respondents representing
21% were within the age of 41-50 and 3 respondents representing 5% were within the age of 51
and above. This gives a clear indication that majority of the respondents are within the working
class age and are independent.
Table 3: Occupation of Respondents
Occupation No. of Responses Percentage
Employed 49 78%
Self-Employed 9 14%
Unemployed 5 8%
TOTAL 63 100%
Table 3 above indicates that out of the 63 respondents, 49 were employed showing 78%, 9 were
self-employed showing 14% and 5 were unemployed showing 8%. This implies that the majority
of the respondents are gainfully employed.

Table 4: Income Level of Respondents
Income level (D) No. of Responses Percentage
Less than 5,000 30 48%
5,000 - 10,000 26 41%
10,000 - 20,000 7 11%
20,000 and above 0 0%
TOTAL 63 100%
Table 4 above shows that out of the 63 respondents, 30 has income level below D5,000
representing 48%, 26 has income level between (D5,000 – D10,000.00) representing 41%, 7 has
income level between (D10,000.00 – D20,000.00) representing 11% and nobody has income
above D20,000. This implies that majority of the respondents have average standard of living.
Table 5: Religion of Respondents
Religion No. of Responses Percentage
Christianity 5 8%
Islam 58 92%
Others 0 0%
TOTAL 63 100%
The result in table 5 above shows that out of the 63 respondents, 5 people practice Christianity
representing 8%, 58 people practice Islam representing 92% and nobody practices other religion.
This implies that majority of the respondents are Muslims.
4.3.2 SECTION B: RESEARCH QUESTIONS
Question 1: What does insurance mean to you?
The following responses were given by the respondents
a) Risk transfer (15 respondents)
b) Financial protection (5 respondents)
c) Family protection (28 respondents)
d) Means of saving/investment (10 respondents)
e) Gambling/ Fraudster (3 respondents)

f) No idea (2 respondents)
From the above data, it can be said that most of the respondents knew what insurance means to
them.
Question 2: Have you heard of the word “Risk” before?
Table 6
Types of Response No. of Responses Percentage
Yes 62 98%
No 1 2%
TOTAL 63 100%
The result in table 6 above shows that out of a total of 63 respondents, 62 answered Yes and 1
answered No representing 98% and 2% respectively.
Question 3: If “Yes” to question 2, do you agree that risk is part of our daily activities?
Table 7
Yes 62 98%
No 1 2%
TOTAL 63 100%
The result in table 7 shows that out of a total of 63 respondents, 62 answered Yes and 1 answered
No representing 98% and 2% respectively.
Question 4: Have you ever thought of premature /untimely death someday?
Table 8
Yes 61 97%
No 2 3%

TOTAL 63 100%
The result in table 8 shows that out of a total of 63 respondents, 61 answered Yes and 2 answered
No representing 97% and 3% respectively. This implies that people have thought about dying
prematurely.
Question 5: If “Yes” to question 4, do you have any insurance in place for protection of
your family?
Table 9
Yes 27 43%
No 36 57%
TOTAL 63 100%
The result in table 9 shows that out of a total of 63 respondents, 27 answered Yes and 36
answered No representing 43% and 57% respectively. This implies that majority of the
respondents has no form of measured in place for the protection of their family in case of
premature death.
Question 6: Would you take a Life Assurance Policy if it is recommended to you?
Table 10
Yes 52 83%
No 11 17%
TOTAL 63 100%
respondents would take a Life Policy for the protection of their family.

Question 7: Have you ever thought of being involved in an accident that would result into
permanent disablement and as a result you could not work to earn income?
Table 11
Yes 41 65%
No 22 35%
TOTAL 63 100%
Question 8: If “Yes” to question 7, do you have any measure in place which will provide
and alternative income?
Table 12
Yes 19 30%
No 44 70%
TOTAL 63 100%
respondents has no measure in place which will provide an alternative income.
Question 9: Would you take an Accident Policy if it is recommended to you?
Table 13
Yes 49 78%
No 14 22%

TOTAL 63 100%
respondents would take an Accident Policy if it is recommended.
Question 10: Do you have property (ies) [e.g. buildings, household contents, electronics,
personal effects etc.] and have you ever thought that someday they may be
damaged or destroy by fire?
Table 14
Yes 52 83%
No 11 17%
TOTAL 63 100%
The result in table 14 shows that out of total of 63 respondents, 52 answered Yes and 11 answered
No representing 83% and 17% respectively.
Question 11: If “Yes” to question 10, do you have any measure in place to transfer the loss?
Table 15
Yes 22 35%
No 41 65%
TOTAL 63 100%
answered No representing 35% and 65% respectively. This implies that majority has no measure
in place to transfer the loss.
Question 12: Would you take a Fire/Household Contents Policy to protect your home,
office/business against risk of fire damage?
Table 16

Yes 49 78%
No 14 22%
TOTAL 63 100%
answered No representing 78% and 22% respectively. This implies that majority of the people
would take a Fire/Household Content Policy to protect their homes, offices and businesses against
risk of fire damage.
Question 13: Do you have a car, have you ever thought that someday the car could be
stolen, involved in an accident or engulfed by fire?
Table 17
Yes 36 57%
No 27 43%
TOTAL 63 100%
Question 14: If “Yes” to question 13, do you have any measure in place to protect yourself
from loss?
Table 18
Yes 22 35%
No 41 65%
TOTAL 63 100%
respondents have no measure in place to protect themselves from the loss.

Question 15: Would you have a Motor Insurance Policy if it is recommended?
Table 19
Yes 58 92%
No 5 8%
TOTAL 63 100%
respondents would buy motor insurance policy to protect themselves.
Question 16: Generally, would you have taken an insurance policy for any risk not
mentioned above if you perceive/sense danger in the future?
Table 20
Yes 55 87%
No 8 13%
TOTAL 63 100%
respondents would take insurance cover for other related risk if they perceive danger in the future.

Question 17: Do you think your religion would prevent you from taking an insurance
cover?
Table 21
Yes 14 22%
No 49 78%
TOTAL 63 100%
answered No representing 22% and 78% respectively. This shows that religion would not affect
or prevent majority of the respondents from buying and insurance cover.
Question 18: Do you think your level of income will prevent you from taking an insurance
cover?
Table 22
Yes 22 35%
No 41 65%
TOTAL 63 100%
respondents are not affected by their level of income in buying insurance cover.
Question 19: Do you think your previous claims experiences or the experiences of your
friends or family members with an insurance company will prevent you from
taking an insurance cover?
Table 23

Yes 16 25%
No 47 75%
TOTAL 63 100%
The result in table 23 shows that out of a total 63 respondents, 16 answered yes and 47 No
representing 25% and 75% respectively. This implies that majority of the respondents are not
affected by previous claim experience involving themselves, friends or family members.
4.4 PRESENTATION AND ANALYSIS OF DATA ACCORDING TO TEST OF
HYPOTHESES
4.4.1 Summary of Responses According to Test of hypotheses (Questionnaire – Appendix
A)
Table 24
Question
No.
Total
Questionnaires
Correctly Filled
Yes No
Number Percentage Number Percentage
2 63 62 98% 1 2%
3 63 62 98% 1 2%
4 63 61 97% 2 3%
5 63 27 43% 36 57%
6 63 52 83% 11 17%
7 63 41 65% 22 35%
8 63 19 30% 44 70%
9 63 49 78% 14 22%
10 63 52 83% 11 17%
11 63 22 35% 41 65%
12 63 49 78% 14 22%
13 63 36 57% 27 43%
14 63 22 35% 41 65%
15 63 58 92% 5 8%
16 63 55 87% 8 13%
17 63 14 22% 49 78%
18 63 22 35% 41 65%
19 63 16 25% 47 75%

The table above shows summary of responses to questionnaire received from 63 respondents.
HYPOTHETICAL STATEMENTS
Hypothesis 1
death.
Table 25: Question 4, 5 and 6
Yes 47 75%
No 16 25%
TOTAL 63 100%
From the above table the Z calculated value at 5% significant level is 4.58 and the Z table value at
5% significant level is ± 1.96.
Decision:
Since the Z calculated value of 4.58 falls within the critical region, there is no enough evidence to
accept H0, therefore we reject H0 and accept H1.
Interpretation:

There is sufficient evidence at 95% confidence level to conclude that the demand for life
assurance products depends on the thought of premature death.
Please refer to Appendix B (i)
Hypothesis 2
H0: The demand for accident insurance policies does not depend on the thought of being
H1: The demand for accident insurance policies depends on the thought of being involved in
an accident.
TABLE 26: Question 7, 8 and 9
Yes 36 57%
No 27 43%
TOTAL 63 100%
From the above table, the Z calculated value at 5% significant level is 1.12 and the Z table value
at 5% significant level is ± 1.96.
Decision
Since the Z calculated value of 1.12 falls within the acceptance region, there is no enough
evidence to reject H0, therefore we accept H0 and reject H1.
Interpretation
There is sufficient evidence at 95% confidence level to conclude that the demand for accident
insurance policies does not depend on the thought of being involved in an accident.

Please refer to Appendix B (ii).
Hypothesis 3
damage to property.
H1: The demand for fire/ household content policies depends on the thought of fire damage to
property.
Yes 41 65%
No 22 35%
TOTAL 63 100%
From the above table the Z calculated value at 5% significant level is 2.50 and the Z table value at
5% significant level is ± 1.96.
Decision
Since the Z calculated value of 2.50 falls within the critical region, there is no enough evidence to
accept H0, therefore we accept H1 and reject H0.
Interpretation

There is sufficient evidence at 95% confidence level to conclude that the demand for fire/
household content policies depend on the thought of fire damage to property.
Please refer to Appendix B (iii).
Hypothesis 4
H0: The demand for the motor insurance policies does not depend on the thought of car theft,
fire and accident.
H1: The demand for the motor insurance policies depends on the thought of car theft, fire and
accident.
Yes 39 62%
No 24 38%
TOTAL 63 100%
From the above table the Z calculated value at 5% significant level is 1.9623 and the Z table value
Decision:
Since the Z calculated value of 1.9623 falls within the critical region, there is no enough evidence
to accept H0, therefore we accept H1 and reject H0.
Interpretation:

There is sufficient evidence at 95% confidence level to conclude that the demand for motor
insurance policies depends on the thought of car theft, fire and accident.
Please refer to Appendix B (iv).

Hypothesis 5
claim experience.
H1: The demand for insurance depends on the level of income, religion and previous claim
experience.
Yes 17 27%
No 46 73%
TOTAL 63 100%
From the above table the Z calculated value at 5% significant level is -4.11 and the Z table value
Decision:
Since the Z calculated value of -4.11 falls within the critical region, there is no enough evidence
Interpretation:
There is sufficient evidence at 95% confidence level to conclude that the demand for insurance
depends on the level of income, religion and previous claim experience.
Please refer to Appendix B (v).

4.5 REFERENCES
1. Asika, Nnamdi, Research Methodology in Behavioural Science, (Lagos, Longman Nigeria
Plc 1991)
2. Lucey, T.; Quantitative Techniques (Longman D. P. Publication, 1979)
3. Spiegel M, Statistics (New York, McGraw-Hill, 1961)
4. Prof. Prince mike Ikupolati, “Unpublished lecture Notes on Risk Management”, WAII
2012
5. Prof. Prince mike Ikupolati, “Unpublished lecture Notes on Quantitative Method”, WAII
2012

CHAPTER 5
5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 SUMMARY
“If risk is like a smoldering coal that may spark a fire at any moment, then insurance is our fire
extinguisher” (Beattie, 2010). Since the inception of insurance till now, insurance has been and
continues to be a vital part of our existence. Through the years insurance has maintained its
unwavering status by lessening the financial burdens placed on individuals and corporations as a
result of the damage to or loss of person or a property. Insurance is continuously evolving in order
to counter the many new and different risks we face every day. One thing is certain; the
importance of insurance cannot be over emphasized. In our part of the world, however, many of
us fail to see the essence of insurance in our lives and this gravely affects the demand for
insurance products. A person or a company’s demand for insurance may be attributed to many
factors. Some of these factors include; the level of income, compulsory insurance, the availability
of tax relief, the fear of the financial burden in the event of a loss, and so on. All of these factors
on their own do not guarantee a positive patronage of insurance unless they are accompanied with
a realistic perception of risk.
The overriding purpose of this study was to determine the relative importance of risk perception
and its subsequent demand for insurance in West Africa from The Gambia perspective. To
accomplish that purpose it became necessary to reach some prerequisite goals. Determining the
factors affecting the demand for insurance assumed a high degree of importance during the
literature review conducted for this dissertation. Related to that effort, it became necessary to
reach an understanding about the different ways in which individuals of different classes perceive
risk in connection with their circumstances. To provide for the possibility that risk perception
constitutes a vital component of the demand for insurance, it was important to develop a model
for proving this. Once these fundamental steps were achieved, this research was able to go
forward. This chapter reports the conclusions and recommendations that resulted from this study.

For our survey, a total of 70 copies close-ended questionnaires were sent out to a cross section of
the general populace of The Gambia. We received all 70 copies back, of which 63 copies were
filled correctly whiles 7 were wrongly filled. From the 63 copies received, it was clearly indicated
that the majority of the respondents were of the working class age, were gainfully employed, had
an average standard of living and were predominantly of the Islamic religion.
The questionnaire contained the following key research questions;
products?
accident policies?
insurance policies?
have an effect on the demand for insurance?
Through the use of the survey instrument developed for this study, data were collected which
addresses the research problems posed in the first chapter of this dissertation.
5.2.0 CONCLUSION
Our study yielded some conclusions which answered the research questions based on the findings
that were summarized in the previous section.
5.2.1 How the study answered the research questions:
a. From the study there was ample evidence to prove that the demand for life assurance
products depends on the thought of premature death.

b. From the findings, it can be concluded that the demand for accident insurance policies
does not depend on the thought of being involved in an accident.
c. It was also evident from the study that the demand for fire/household content policies
does not depend on the thought of fire damage to properties.
d. Furthermore, from the study, there was sufficient evidence to conclude that the demand
for motor insurance policies depends on the thought of car theft, damage caused to the
vehicle by fire and accident.
e. From the study, there was also enough evidence to confirm that the demand for insurance
5.3.0 RECOMMENDATIONS
Our recommendations are done in the order of the research questions asked. Based on our
findings and conclusion from the study, we recommend that;
1. With respect to life assurance,
a. There should be intensive promotion and awareness of life assurance. Insurance
companies as well as the government should make it a point to sensitize the general
public on the essence of the various life assurance products available. It is a fact that
people generally do not want to think about death and what will happen afterwards but
by continuously bringing this to their notice, their perception will gradually and

eventually shift in favour of life insurance. This could be done through advertisement
(radio, television, newspaper, internet, billboards and so on), education in schools,
seminars, workshops and symposia.
b. Insurance companies should carry out continuous market research on their customers
and potential customers in order to know their needs, the type of risks they are
exposed to and their level of income. This will give the company the advantage of
concentrating and directing their products to the market segment that needs their
product the most.
c. Also, with the information gathered from customers and potential customers, insurers
should make it a point to tailor their various products to suit the individual needs of
their customers. For instance, instead of selling separate life assurance products to one
customer who has the need for all of them, the company could creatively combine all
the products into one policy.
d. In the case of The Gambia where the population is predominantly Muslim, insurance
companies and the government must take a critical look into the introduction and
expansion of Family Takaful Insurance. Being Sharia compliant, Takaful Insurance
eliminates the issue of “Haram” (acts that are forbidden by God) in conventional
insurance and which is the main reason conventional insurance is not widely
patronized by the majority of Muslims. As well as serving its original intention of
insuring, Takaful also appeals to the religious conscious of Muslims by serving as a
medium of helping other Muslims that are in need.
2. With respect to Accident Insurance;

a. To encourage companies to patronize accident insurance policies, which goes a long
way to give employees and the general public a sense of security, the government
should make it a point to provide corporation tax relief to those entities who have
procured various accident policies such as employers' liability and group personal
accident policies. This will significantly boost the demand for accident insurance.
b. Also, accident insurance policies such as group personal accident policy and
employers’ liability policy should be made compulsory by the government.
c. Again, just like in the case of Life Assurance, there should be adequate awareness
created by the insurance companies and the government. Regular radio, television and
newspapers advertisement on the importance of Accident Insurance should be carried
out. Workshops, symposiums, seminars and debates, especially in schools, should be
held.
3. With respect to Fire/Household content Policies;
a. Again, like in the first two recommendations above, there should be intensive and
adequate awareness on the need for companies, building owners and house owners to
patronize fire/household content insurance policies. It is very important that the loss
that can be caused by fire be imprinted into the minds of these individuals.
b. Also, fire insurance for certain types of structure should be made compulsory and
should be rigorously enforced by the government. Making fire insurance compulsory
will have a ripple effect on the perception and demand for insurance. Ghana is a fine

example of the importance of making fire a compulsory insurance for commercial
buildings.
4. With respect to motor insurance;
a. Yet again we recommend that insurance companies as well as the government carry
out and promote thorough awareness on relevance of Motor Insurance. Even though
motor insurance has been made compulsory in The Gambia, there are still a significant
number of vehicle owners who feels reluctant to acquire motor insurance for their
vehicles. Awareness here could be done through radio, television and newspapers
advertisement with emphasis placed on injuries and the loss of lives due to motor
accidents, loss of or damage to vehicles as a result of accidents, fire and theft and the
benefits of a comprehensive policy over third party policy and third party fire and theft
policy.
b. Also, we recommend that insurance companies in The Gambia cultivate the practice of
providing incentives for customers who have proven themselves worthy in one way or
the other. These incentives could be in the form of ‘No Claim Discount’ for clients
who have a good claims record with the company, ‘Fleet Discount’ for clients who
insure a large number of vehicles with the company or even Long Term Agreements
for clients who intend to spend a long time insuring with that particular company.
5. With respect to level of income, religion and claim experience,
a. We recommend that insurers study their clients and potential clients and produce
insurance products that will fit into their consumption pattern. This requires time and
ingenuity.

b. Also, like the Family Takaful, insurance companies in the Gambia should explore and
venture into other Takaful avenues. Religion wise, this form of insurance appeal
greatly to believers of the Islamic Religion of which the bulk of the population of the
Gambia belongs.
c. Importantly, insurance companies should strive to acquire, improve and maintain their
image by promptly and efficiently settling claims. Insurers should always remember
that the reason they are in business is to settle the claims of their policy holders.
Acquiring the image of a prompt claim settler is a goodwill that goes a long way to
market the company without any effort.
5.4 SUGGESTIONS FOR FURTHER STUDIES
Risk perception and the demand for insurance is a very wide topic and there is therefore the need
for further research in the following areas:
1. How has peoples’ perception of risk increased their demand for insurance?
2. The effect of negative perception of risk on the demand for insurance?
3. The contribution of risk perception to the expansion of the insurance industry?

5.5 REFERENCE
Andrew Bettie…www.investopedia.com/article/08/history-of-insurance.asp

APPENDIX A
SURVEY QUESTIONAIRE
We are students of Insurance from the West African Insurance Institute (WAII),
The Gambia. As part of our research work for the completion of our academic
program, we are carrying out a study on the Gambian Insurance sector; with the
research theme:
“RISKPERCEPTIONANDDEMAND FORINSURANCEINWESTAFRICA,
ACASESTUDYINTHEGAMBIA”
SECTION A
1. Age 21-30( ) 31-40( ) 41-50( ) 51+( )
2. Occupation Employed( ) Self Employed( ) Unemployed( )
3. What is your level of income?
a) Less than D5,000 ( )
b) D5,000 – D10,000 ( )
c) D10,000 – D20,000 ( )
d) D20,000 and above ( )
4. What is your religion?Christianity ( ) Islam( ) Others( )

SECTION B
1. What does INSURANCE mean to you?
a) Risk Transfer ( )
b) Financial Protection ( )
c) Family Protection ( )
d) Means of Savings/Investment ( )
e) Gambling/Fraudster ( )
f) No Idea ( )
2. Have you heard of the word ‘RISK’ before? Yes( ) No( )
3. If the answer to question 2 is Yes; Do you agree that risk is part of our daily activities?
Yes( ) No( )
4. Have you ever thought of Premature/Untimely death someday? Yes( ) No( )
5. If Yes to question 4, do you have any measure in place for the protection of your family?
Yes( ) No( )
6. Would you have taken a Life Assurance Policy if it is recommended to you?
Yes( ) No( )
7. Have you ever thought of being involved in an accident that would result into permanent
disablement and as a result you could not work to earn income? Yes( ) No( )
8. If Yes to question 7, do you have any measure in place which will provide an alternative
income?
Yes( ) No( )
9. Would you have taken an Accident Policy if it recommended to you?
Yes( ) No( )

10. Do you have property(ies) [e.g buildings, household contents, electronics, personal effects etc]
and have you ever thought that someday they may be damaged or destroyed by fire?
Yes( ) No( )
11. If Yes to question 10, do you have any measure in place to transfer the loss?
Yes( ) No( )
12. Would you have taken a Fire/Household Contents Policy to protect your home, office/business
against the risk of fire damage? Yes( ) No( )
13. Do you have a car, have you ever thought that someday the car could be stolen, involved in an
accident or engulfed by fire? Yes( ) No( )
14. If Yes to question 13, do you have any measure in place to protect yourself from loss?
Yes( ) No( )
15. Would you have taken a Motor Insurance Policy if it is recommended to you?
Yes( ) No( )
16. Generally, would you have taken an insurance policy for any risk not mentioned above if you
perceive/sense danger in the future? Yes( ) No( )
17. Do you think your religion would prevent you from taking an insurance cover?
Yes( ) No( )
18. Do you think your level of income will prevent you from taking an insurance cover?
Yes( ) No( )
19. Do you think your previous experience or the experiences of your friends or family members
with an insurance company will prevent you from taking an insurance cover?
Yes( ) No( )

APPENDIX B
(i)
Hypothesis 1
death.
1. H0: π = 0.5
2. H1: π ≠ 0.5
3. Critical region at 95% confidence level i.e.
= 0.05
Z /2 = (from Normal Table)
4.
p = 0.75
q = 1 – 0.75 = 0.25
π = 0.5
n = 63
= 4.58
-1.96 1.960
Reject H0 Reject H0
Accept H0
4.588-1.96 1.960
Reject H0
Reject H0
Accept H0

Decision:
to accept H0, therefore we reject H0 and accept H1.
Interpretation:
There is sufficient evidence at the 95% confidence level to conclude that the demand for life
assurance products depends on the thought of premature death.
(ii)
Hypothesis 2
H0: The demand for accident insurance policies does not depend on the thought of being
H1: The demand for accident insurance policies depends on the thought of being involved in
an accident.
1. H0: π = 0.5
2. H1: π ≠ 0.5
= 0.05
4.
p = 0.57
q = 1 – 0.57 = 0.43
π = 0.5
n = 63
-1.96 1.960
Reject H0 Reject H0
Accept H0
1.12-1.96 1.960
Reject H0 Reject H0
Accept H0

= 1.12
Decision
Since the Z calculated value of 1.12 falls within the acceptance region, there is no enough
evidence to reject H0, therefore we accept H0 and reject H1.
Interpretation
There is sufficient evidence at 95% confidence level to conclude that the demand for accident
insurance policies does not depend on the thought of being involved in an accident.
(iii)
Hypothesis 3
damage to property.
H1: The demand for fire/ household content policies depends on the thought of fire damage to
property.
1. H0: π = 0.5
2. H1: π ≠ 0.5
= 0.05
-1.96 1.960
Reject H0 Reject H0
Accept H0

4.
p = 0.65
q = 1 – 0.65 = 0.35
π = 0.5
n = 63
= 2.50
Decision
Interpretation
There is sufficient evidence at 95% confidence level to conclude that the demand for fire/
household content policies depend on the thought of fire damage to property.
(iv)
Hypothesis 4
H0: The demand for the motor insurance policies does not depend on the thought of car theft,
fire and
accident.
H1: The demand for the motor insurance policies depends on the thought of car theft, fire and
accident.
1. H0: π = 0.5
2. H1: π ≠ 0.5
2.50-1.96 1.960
Reject H0
Reject H0
Accept H0
-1.96 1.960
Reject H0 Reject H0
Accept H0

= 0.05
4.
p = 0.62
q = 1 – 0.62 = 0.38
π = 0.5
n = 63
= 1.962
Decision:
Since the Z calculated value of 1.9623 falls within the critical region, there is no enough
evidence to accept H0, therefore we accept H1 and reject H0.
Interpretation:
There is sufficient evidence at 95% confidence level to conclude that the demand for motor
insurance policies depends on the thought of car theft, fire and accident.
(v)
Hypothesis 5
claim experience.
H1: The demand for insurance depends on the level of income, religion and previous claim
experience.
1.9623
-1.96 1.960
Reject H0 Reject H0
Accept H0
-1.96 1.960
Reject H0 Reject H0
Accept H0

1. H0: π = 0.5
2. H1: π ≠ 0.5
= 0.05
4.
p = 0.27
q = 1 – 0.27 = 0.73
π = 0.5
n = 63
= -4.11
Decision:
Since the Z calculated value of -4.11 falls within the critical region, there is no enough evidence
Interpretation:
0-4.11 1.96-1.96
Reject H0
Reject H0
Accept H0

There is sufficient evidence at 95% confidence level to conclude that the demand for insurance
BIBILOGRAPHY
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