THE RELATIONSHIP BETWEEN RELIGION AND PROCUREMENT OF
INSURANCE: EVIDENCE FROM NIGERIA
By
Folake Olowokudejo
Department of Insurance and Actuarial Science
University of Lagos
[email protected]
Abstract
The insured stands to gain a lot of benefits from insurance but the attitude of Nigerians over the
years still remains negative towards insurance. This paper examines the effect of religion on the
procurement of insurance in Nigeria. Chi-Square test is used to test the various hypotheses. It
was found that many Nigerians are aware of the existence of insurance and the various services
provided by insurance companies though they do not have insurance polices; that most of the
religion being practice by the public allow them to have dealing with insurance company but
most people believe that insurance cannot satisfy their need as they desire and therefore
generally prefer to put their solace in God. It was recommended among other things that the
stake holders should be educated on the difference between insurance and God’s protection and
the benefits that could accrue to them through insurance.
Key words: Religion, life insurance, non- life insurance, Christianity, Islam, belief
1
INTRODUCTION
The option of divine protection has always been one foisted on people either out of lack of
resources to finance the luxury of insurance or the superstitious belief that taking insurance may
translate to an invitation to the unwanted into their lives and homes, especially if such calamities
has been a rarity in the family line.
In some parts of Africa, there are strong religious objections to idea of insurance (especially life
assurance) on the ground that it is immoral, wrong and therefore contrary to religious doctrines
for a person to benefit from the proceeds of insurance. In Nigeria many individual do not
recognize the need for an assurance cover as they generally prefer to bear their risks rather than
entrusting them to insurance firms.
There had been a rise of interest in the study of how religion affects aggregate economic
outcomes but although belief in God as a stronghold, or fortress in times of danger and
misfortune is well known in the scriptures, the effect of religion on the procurement of insurance
policy has surprisingly received only limited attention, especially in economics. This paper
examines the effect of religion on insurance business from life assurance and non-life insurance
perspective and also finds out why despite all the benefits an insured stand to get from insurance
firm, the attitude of Nigerians over the years still remains negative towards insurance business.
The research is important because it enable the insurer and the public at large to gain an insight
into the impact of religion on the procurement of life assurance and non-life insurance policies.
The paper consists of 5 Parts: the introduction, the literature, data and methods, conclusion and
recommendation.
LITERATURE
Religion is a set of coherent answers to the core existential questions that confront every human
group. Religion is therefore, primarily concerned in the task of enjoining what is right and
forbidding what is evil (Berger, 1969 in Scheve and Stasavage, 2006b). It is a product of an
earliest attempt of the human mind to achieve a sense of security in the world (Scheve and
Stasavage, 2006a). The religious who believes to be spiritually “insured” against the negative
psychological effects may therefore be reluctant to take insurance policies.
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The primary economic explanation for religious behavior in the classic model of Azzi and
Ehrenberg (1975) is the utility from expected after life rewards that individuals derive from
participation in church based activities. Two alternative explanations for the consumption of
religion are; utility from (1) the “consumption of religion” either related to inherent religious
beliefs or for social reasons, or (2) the benefits stemming from increased business success.
Both alternatives give good reasons for religiousity in Nigeria. The prominent religions in
Nigeria are Christianity and Islam which is more commonly embraced in northern Nigeria as a
diversification and conversion of opinion, (Babatope, 1998).
Insurance is founded on recognized need by a community to lighten the burden of Individual
members in period of adversity by co-operative efforts. It is very well known that the pooling
together of resource for the protection of members of the community against possible financial
and social hardship was encouraged in many communities even before the emergence of the
modern practices in insurance.
Life assurance and non-life insurance business play a vital role in the economy by providing for
the future of an individual as Christianity has encourage in the bible in the book of 1 Timothy 5:8
“But if any provide not for his own and socially for those of his house, he denied the faith and is
worse than an infidel” but there are strong religious objections to the idea of life assurance on
the ground that is morally wrong and therefore contrary to these religious doctrines for a person
to benefit from the proceeds of insurance. Gumi, (1976) in Babatope (1998) stated that Islam
abhors life assurance. He concluded by stating that other forms of insurance are allowed by Islam
other than life assurance. Several other religious leaders have also spoken against life assurance
policy because they view it as a kind of gambling
Disposable income, the marginal propensity to save and individual’s attitude however plays a
major role in religiosity and the procurement of insurance policy. Piketty (1995) argues that
differing beliefs about the extent to which income is dependent on individual effort are an
important determinant of individual attitudes. Subsequent empirical evidence has supported this
claim, demonstrating that differing beliefs about the determinants of economic success are
correlated with individual preferences. While the model in Piketty (1995) emphasizes how past
personal experience influences beliefs about the “importance of effort”, Benabou and Tirole
(2006) have suggested that certain individuals may find it useful to maintain a belief that the
3
world is just (in the sense that hard effort is well rewarded) even when faced with contrary
evidence (Azzi, Corry and Ehrenberg, 1975). Maintaining a “belief in a just world” helps people
with imperfect willpower to motivate themselves. Drawing on Benabou and Tirole’s
contribution, one might argue that it is likely that individuals with religious beliefs have a
particularly high propensity to believe the world is just. This does not imply that economic
beliefs held by religious individuals are necessarily inaccurate (it may be that non-religious
individuals have more biased beliefs), but it does suggest a further mechanism through which
religion might influence attitudes toward insurance procurement.
According to Scheve and Stasavage (2006), individuals who are religious are no less demanding
of insurance against adverse events than are other people, but because members of religious
congregations receive material, financial and emotional support directly from their churches,
they express less demand for insurance. Several recent papers including Hungerman (2005),
Chen and Lind (2005), and Dehejia, DeLeire, Luttmer, and Gattiet (2005) have used U.S.
evidence to explore whether membership in religious congregations involves a form of monetary
insurance where individuals give monetary contributions and members of congregations who
suffer adverse events like unemployment receive tangible benefits from their church. The most
direct mechanism for insurance is through charitable spending by churches. Hungerman (2005)
shows that for members of the U.S. Presbyterian church, charitable contributions have been
negatively correlated with levels of state welfare spending. Dehejia et al. (2005) show that the
consumption effects of shocks to household income are attenuated for members of religious
congregations
Religiosity provides some of the same psychic benefits as does being in a “good” state in terms
of health, employment, or retirement income for members of any religious congregations.
Religion may help insure individuals against adverse life events for several reasons. For one,
people who are religious may derive psychic benefits from having a network of friends from
their church, mosque, or synagogue, and such associations are likely to provide comfort during
times of difficulty in the same way as would friends within the workplace. But this type of
psychic benefit should logically exist for any type of collective leisure activity. Religiosity may
also have more profound psychic benefits that make it exceptional, if not unique, in influencing
the way individuals “appraise” adverse events like job loss or ill health (Pargament 1997, Smith,
McCullough, and Poll 2003, Park, Cohen, and Herb 1990). So, for example, religious individuals
may be more likely to judge that such events do not pose challenges to their self-esteem, their
4
overall beliefs or life goals, and they may even see adverse events as a challenge offering
opportunities for spiritual growth. In an extensive study Pargament (1997) demonstrates how
religiosity also influences the different “coping” mechanisms that individuals use to confront
adverse life events. In making such arguments these authors draw on the theory of stress,
appraisal, and coping developed by Lazarus and Folkman (1984). While Lazarus and Folkman
did not themselves emphasize the importance of religiosity for appraisal, it can be argued that
religious beliefs might have an important influence on the cognitive appraisal which is a process
through which the person evaluates the relevance of a particular encounter with the environment
to his/her well-being
These ideas of contemporary psychologists about religion as a buffer against external forces are
also consistent with classic work in the field of psychology. So, although Freud (1927(2001))
took a negative view of religion, he too emphasized its role in providing individuals with a
mental buffer against external forces.
In addition to the strong theoretical arguments, there is clear empirical evidence to support the
idea that religion has positive effects on the psychological state of individuals, and that it helps in
responding to adverse life events. A number of studies have demonstrated that individuals who
describe themselves as being religious tend to have higher subjectively measured levels of life
satisfaction (Ellion,1991; Ellison, Gay and Glass, 2004) and a lower incidence of depression
(Benabou and Tirole,2004). In addition to the above empirical evidence, it is important to note
that Clark and Lelkes (2004) have shown that individuals who are religious suffer from
significantly lower estimated losses in subjective utility . Burnett and Palmer (1984) and Scheve
and Statavage (2006) found that people who describe themselves as being religious tend to
purchase significantly less life insurance than do non-religious people, this directly supports
hypothesis 1 which states that Religion does not encourage the procurement of life assurance
policies.
DATA AND METHODS
Data is gathered using the questionnaire and the respondents are members of the two major
religions that are practiced in Nigeria.
a)
Christianity
b)
Islam
The frequency distribution of the responses are stated below
5
Table 1: Frequency distribution of respondents by sex
Sex
Frequency (f)
Percentage (%)
Male
46
46
Female
54
54
Total
100
100
Table 2: Frequency distribution of the respondents by occupation
Occupation
Frequency (F)
Percentage(%)
Teacher
31
31
Civil-servant
8
8
Student
16
16
Photographer
2
2
Contractor
3
3
Technologist
2
2
Clerical officer
1
1
Electrician
1
1
Business
2
2
Missionary
6
6
Chief Imam
3
3
Self employed
7
7
Trading
2
2
Fashion designer
1
1
Others
15
15
Total
100
100
Table 3: Frequency distribution by Qualification
Qualification
Frequency (f)
Percentage (%)
Degree
38
38
N.C.E
13
13
O.N.D
15
15
H.N.D
16
16
G.C.E
15
15
Diploma I
3
3
Total
100
100
Table 4: Frequency Distribution by Religion
Religion
Frequency (f)
Percentage (%)
Christianity
50
50
Islam
50
50
Total
100
100
6
Table 5: Frequency distribution by marital status
Status
Frequency (f)
Percentage (%)
Single
37
37
Married
53
53
Windowed
3
3
Divorced
7
7
Total
100
100
Table 6: Frequency distribution on the awareness of the existence of Insurance
Frequency (f)
Percentage (%)
Yes
100
100
No
0
0
Total
100
100
Table 7: Frequency distribution of the policy familiar with
Frequency (f)
Percentage (%)
Life insurance
48
48
Motor insurance
47
47
None
3
3
Pension solution
1
1
General Business
1
1
Total
100
100
Table 8: Frequency distribution according to reason for taking insurance policy
Reason
Frequency (f)
Percentage (%)
Investment
21
21
Protection
75
75
Status Upliftment
4
4
Total
100
100
Table 9: Frequency distribution of whether religion allows insurance
Frequency (f)
Percentage (%)
Yes
96
96
No
4
4
Total
100
100
Table 10: Frequency distribution as to whether the respondents are policies holders
Frequency (f)
Percentage (%)
Yes
63
63
No
37
37
Total
100
100
7
Table 11: Frequency distribution as per whether insurance is encouraged by the respondent religion
Frequency (f)
Percentage (%)
Strongly Agree
6
6
Agree
4
4
Undecided
7
7
Disagree
33
33
Strongly Disagree
50
50
Total
100
100
Table 12: Frequency distribution as per whether insurance is a form of gambling for protection
Frequency (f)
Percentage (%)
Strongly Agree
4
4
Agree
2
2
Undecided
1
1
Disagree
28
28
Strongly Disagree
65
65
Total
100
100
Table 13: Frequency distribution of as per whether fanatism will reduce the sales of life insurance.
Frequency (f)
Percentage (%)
Strongly agree
33
33
Agree
28
28
Undecided
20
20
Disagree
13
13
Strongly disagree
6
6
Total
100
100
Table 14: Frequency distribution as per whether religion has improved perception of insurance.
Frequency (f)
Percentage (%)
Strongly Agree
21
21
Agree
41
41
Undecided
19
19
Disagree
15
15
Strongly disagree
4
4
Total
100
100
TEST OF HYPOTHESIS
Results of test carried out on the hypothesis are given below
Chi-Square test will be used to test the various hypothesis
X2  
0  E 2
E
8
where, O= Observed value
E= Expected value
Decision Rule
If calculated X2 is less than the tabulated at 5 level of significance, the Null Hypothesis is
accepted otherwise the Alternative Hypothesis is accepted and the Null Hypothesis rejected.
The expected value is gotten with the formula
Rt x Ct
Gt
Where:
Rt
=
Row total
Ct
=
Column total
Gt
=
Grand total
Hypothesis 1
Ho:
Religion does not encourage the procurement of life assurance policies.
H1:
Religion encourages the procurement of life assurance policies.
Using data from table 11 and 12, let (X1) and (X2) represent table 11 and 12 respectively
therefore, observed frequencies are tabulated below:
SA
A
UN
D
SD
Total
X1
6
4
7
33
50
100
X2
4
2
1
28
65
100
Total
10
6
8
61
115
200
SA
A
UN
S
SD
X1
5
3
4
30.5
57.5
X2
5
3
4
30.5
57.5
Therefore X2 cal =
O
E
(O E)2
O E
(O  E ) 2
E
6
5
1
1
0.2
4
3
1
1
0.33
7
4
3
9
2.25
33
30.5
2.5
6.25
0.20
50
57.5
-7.5
56.25
0.98
4
5
-1
1
0.2
2
3
-1
1
0.33
1
4
-3
9
2.25
28
30.5
-2.5
6.25
0.20
65
57.5
7.5
56.25
0.98
X2 cal = 7.92
9
Decision Rule
Since calculated X2 (which is equal to 7.92) is lesser than tabulated X2 at 5% level of
significances (which is equal to 9.49), the alternative hypothesis is rejected. Therefore, Religion
does not encourage the procurement of life assurance policies.
Hypothesis 2
H0:
The sales of life assurance policies will not increase with a reduction in fanatism in
religion.
H1:
The sales volume of life assurance policies will increase with a reduction in fanatism in
religion.
Using data from table 13 and 14, let (X1) and (X2) represent table 13 and 14 respectively
therefore, observed frequencies are tabulated below:
SA
A
UN
D
SD
Total
X1
33
28
20
13
6
100
X2
21
41
19
15
4
100
Total
54
69
28
28
10
200
SA
A
UN
D
SD
X1
27
34.5
19.5
14
5
X2
27
34.5
19.5
14
5
Therefore, X2 cal =
O
E
O E
(O E)2
(O  E )
E
33
27
6
36
1.33
28
34.5
-6.5
42.25
1.22
20
19.5
0.5
0.25
0.01
13
14
-1
1
0.07
6
5
1
1
0.2
21
27
-6
36
1.33
41
34.5
6.5
42.25
1.22
19
19.5
-0.5
0.25
0.01
15
14
1
1
0.07
4
5
1
1
0.2
2
E
5.66
10
Decision Rule
Since calculated X2 (which is equal to 5.66) is less than tabulated X2 at 5% level of significance
(which is equal to 9.49) hence, the alternative hypothesis is rejected. Therefore the sales of life
assurance policies will not increase with a reduction in fanatism in religion.
CONCLUSION
The art of modern living is associated with various kinds of risks. Insurance performs the
function of minimizing costs of risks bearing for the individual insured through its mechanism of
spreading the assumed risks among the pool of insured, thus releasing resource to be employed
in more productive areas.
The average Nigerian is highly religious and they tend to live their lives by faith. They do not see
the need for the purchase of insurance products. They therefore believe that misfortune will not
come their way and when they do, their God will see them through.
This research has shown that a good number of Nigerians are aware of the existence of insurance
and the various services provided by insurance companies though they do not have insurance
polices; that most of the people that take out insurance policies do so for protection purposes, or
for investment and rarely as status statement; That most of the religion being practice by the
public allow them to have dealing with insurance company but most people believe that
insurance cannot satisfy their need as they desire.
RECOMMENDATION
A major barrier to the procurement of insurance (especially life insurance) in Nigeria is the
attitude of the public especially the Muslims. These attitudes arise out of lack of sufficient
knowledge of what insurance is all about how it operates. There is need to change such attitude
for the growth of insurance in the society.
For the average Nigerian to understand that an insurance policy differs from divine protection
from God, the government and the insurance companies should make concerted effort to educate
the public on the usefulness of insurance.
Insurance as we know is a specialized business, so it should be done proficiently, marketing of
life assurance should be carried out by professionals and be assisted by other trained personnel
11
who understand the difference between religious protection and insurance protection. Insurance
companies and their marketing staff should understand and appreciate the various religious
backgrounds of their clients and must take these into account when approaching prospective
clients for insurance cover.
In particular, the insurance industry should educate, the priests, Pastors, Reverend, Bishops,
Alfas, Imams and other opinion leaders in the importance of insurance as a whole so that they
can pass the message down to their subject.
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