A Critical Evaluation of the Premium Structure of Individual Non-Term Life Insurance in Ethiopia

Abstract

The life insllrance market in Ethiopia is almost entirely an untouched market. The share of life insllran ce in total annllal gross premillm income has been low in both pre-and pos t-rationalization periods. Of the  problellls that might  been encollntered in expilnding the lifeinsurana basiness in tile cOllntry, the price (premillm) factor needs to be carefllyexanined Imined. Under the present premillm stmctllre for individual non-term I If' policies (mainly Endowment and Wlrole LIfe), no coll sciolls person will h ly Endowmen t or lNJrole Life policies If he l1Iakes a proper cos t-ben efit analysis. Crea ter benefit will be deriued by adopting Il strategy that lI1ay be labeled as"Buy Term and Invest the Difference" . TllCrefore, it is necessary for EIC to make a qll ick revielU of its life in sllrance pricing in lig!lt of tile changes taking place in the environment, principally in view of tile rise in bank saving deposit ra te from 6% to 10%.