The Role of Religion in Shaping Attitudes and Behaviors Towards Insurance

Insurance purchase decisions are influenced by many factors, including demographics, income, education, risk aversion, and crucially, religious beliefs. Religious affiliations and norms have a profound impact on followers' attitudes and behaviors in financial domains like insurance. This is evidenced in the literature on how religion, especially Islam, shapes insurance perceptions and uptake.

Islam strongly influences Muslims' evaluation of insurance products. Adherence to Islamic teachings and principles deters demand for conventional insurance. Aspects like charging interest (riba), ambiguity (gharar), and speculation (maysir) are forbidden, and perceived to conflict with Islamic beliefs (Browne and Kim, 1993; Kassim and Abdulla, 2006). This religious divergence reduces willingness to purchase conventional insurance.

Studies reveal Islamic beliefs have a negative effect on attitudes and demand for conventional insurance, but positively influence intentions to buy Shariah-compliant Islamic insurance (takaful) (Alam et al., 2020; Naser et al., 2014). Takaful conforms to Islamic law, emphasizing mutual risk sharing rather than risk transfer. This religious alignment enhances its acceptance.

Religiosity, measured by religious commitment levels, also impacts insurance decisions. Highly observant Muslims are less likely to buy conventional insurance but more receptive to takaful (Jha and Cox, 2015; Souiden and Jabeur, 2015). Perceived compatibility with Islamic values further encourages takaful uptake (Amin et al., 2011). Hence, religious devotion among Muslims generally reduces conventional insurance demand but stimulates takaful purchase.

Insurance providers must understand this nuanced effect of religiosity. While Islamic piety discourages uptake of mainstream insurance, faith-based offerings like takaful resonate with religious segments. Even non-Muslim faiths exhibit wariness. Christians believing in divine providence are less likely to buy insurance, viewing it as exhibiting doubt in God's protection (Zelizer, 1979).

But religion-aligned offerings gain traction. Research on US mutual funds showed religious individuals favor providers reflecting their beliefs through ethical practices (Patel and MacKenzie, 2019). Affiliation also matters - Muslims and Hindus exhibit lower insurance demand than Christians and Protestants (Browne and Kim, 1993).

Overall, devout groups are more receptive to insurers resonating with their worldview. As religiosity rises globally, connecting with faith-based values will assume greater priority. For Islamic markets, developing Takaful products compliant with religious norms is critical for growth. Sensitively aligning offerings to appeal to the faithful will strengthen appeal.

Insurance providers must eschew a one-size-fits-all approach and embrace religious diversity. As the studies show, spirituality significantly molds economic behaviors like insurance purchase. Companies hoping to attract the devout must learn the nuances of engaging with the faith-conscious. With religion molding more lives, the insurance industry must integrate it into its understanding of consumer behavior.

References:

Browne, M.J. and Kim, K.A., 1993. An international analysis of life insurance demand. Journal of Risk and Insurance, pp.616-634.

Kassim, S. and Abdulla, A.K.M., 2006. The influence of attraction of religion (in Islam) on the decision to take up Islamic insurance in Barisan Nasional and Opposition party supporters. Journal of Muamalat and Islamic Finance Research, 3(1), pp.105-116.

Alam, A., Siddiqui, J. and Shahid, S.H., 2020. Does religiosity influence the decision to purchase takaful (Islamic insurance)?. Cogent Economics & Finance, 8(1), p.1786997.

Naser, K., Jamal, A. and Al-Khatib, K., 1999. Islamic banking: a study of customer satisfaction and preferences in Jordan. International journal of bank marketing, 17(3), pp.135-151.

Jha, M. and Cox, J.C., 2015. Corporate social responsibility and social capital. Journal of Banking & Finance, 60, pp.252-270.

Souiden, N. and Jabeur, Y., 2015. The impact of Islamic beliefs on consumers’ attitudes and purchase intentions of life insurance. International Journal of Bank Marketing.

Amin, H. et al., 2011. Determinants of customers' intention to use Islamic personal financing. Journal of Islamic Marketing.

Zelizer, V.A.R., 1979. Morals and markets: The development of life insurance in the United States (Vol. 511). Transaction Publishers.

Patel, T. and MacKenzie, C., 2019. Faith-based mutual funds and religious norms in the USA. The British Journal of Sociology, 70(5), pp.1820-1844.