CHAPTER TWO

LITERATURE REVIEW

2.1. Conceptual Review

2.1.1. Concept of Life assurance patronage

Life assurance patronage refers to the level of acceptance, utilization, and sustained participation

of individuals or organizations in life insurance products. It encompasses both the initial

purchase decision and the continued maintenance of life assurance policies by policyholders.

According to Akinlo (2023), life assurance patronage represents the degree of public trust and

engagement in the insurance sector, which is crucial for mobilizing long-term funds for

economic growth. In developing countries like Nigeria, patronage reflects not only the economic

capacity of individuals but also their awareness, perception, and confidence in insurance

institutions.

Scholars generally agree that life assurance patronage is influenced by several socio-economic

and psychological factors. For instance, Aduloju and Olowokudejo (2022) argue that individual

awareness, income level, and perceived value of life assurance products determine the likelihood

of purchase and renewal. Consumers who perceive insurance as beneficial and trustworthy are

more likely to maintain their policies over time. Conversely, low awareness and negative past

experiences with insurers often discourage patronage. In this regard, public education and

transparent operations are critical in shaping consumer behavior toward life assurance.

Life assurance patronage also depends heavily on the socio-cultural environment. In Nigeria,

cultural beliefs and religious perceptions play a dominant role in influencing how people view
insurance. Some individuals consider life assurance policies as a sign of mistrust in divine

protection or as an invitation to misfortune. As noted by Osaghae and Izedonmi (2025), this

mindset significantly limits the uptake of life assurance products, particularly in rural and semi-

urban areas. Thus, cultural orientation remains one of the key non-economic barriers to life

assurance patronage in sub-Saharan Africa.

Economic factors such as income level, employment type, and inflation also shape the extent of

life assurance patronage. Households with higher disposable income and stable employment are

more likely to purchase life assurance policies than those in informal or irregular work sectors.

Olaleye and Adegoke (2022) observed that the Nigerian insurance market is dominated by

salaried workers in formal employment, leaving a large informal sector unserved. This uneven

distribution suggests that life assurance is perceived as a luxury rather than a necessity among

low-income earners, further contributing to low penetration rates.

Another determinant of life assurance patronage is the perceived performance of insurance

companies, especially regarding claim settlement. Consumers are generally discouraged when

claims are delayed or denied without justifiable reasons. According to Oke (2023), the efficiency

and fairness of claim processing strongly affect customer satisfaction and retention in the

insurance industry. Frequent cases of poor service delivery and lack of transparency in Nigeria

have therefore eroded public trust and reduced patronage. Restoring confidence requires

improved customer relationship management, prompt settlement of claims, and effective

communication.

The level of financial literacy within the population also plays an important role in determining

life assurance patronage. Many Nigerians have limited understanding of insurance products and
how they function as financial instruments. Eze and Okoye (2023) noted that a lack of financial

education is one of the major reasons for poor engagement with formal financial services,

including life assurance. Individuals who do not understand the benefits of life assurance are less

likely to participate or sustain their policies. This calls for stronger collaboration between

insurance firms, government agencies, and educational institutions to promote insurance literacy

across the country.

From a marketing perspective, product design and distribution strategies greatly influence the

adoption of life assurance. Traditional marketing methods such as agent-based selling are

gradually being replaced by digital platforms that can reach younger, tech-savvy consumers.

However, many Nigerian insurers have been slow to adopt these innovations. As Olaleye and

Adegoke (2021) argue, modernizing insurance marketing through mobile platforms, online

payments, and flexible product offerings can improve accessibility and increase patronage,

especially among millennials and informal sector workers.

Trust and reputation are also crucial in determining life assurance patronage. The history of

mismanagement, insolvency, and unethical practices in the Nigerian insurance industry has left a

legacy of skepticism among consumers. Aduloju and Olowokudejo (2024) emphasize that public

trust can only be rebuilt through accountability, effective regulation, and consistent delivery of

promises. NAICOM’s efforts to enforce solvency standards and improve disclosure practices are

therefore essential to revitalizing consumer confidence and stimulating broader participation in

life assurance schemes.

Demographic factors such as age, education, and gender also affect life assurance patronage.

Studies have shown that older and more educated individuals are more likely to appreciate the
benefits of life assurance and to view it as an investment rather than a cost (Osaghae &

Izedonmi, 2025). In contrast, younger populations, especially those with unstable income, may

prioritize short-term consumption over long-term planning. This demographic disparity suggests

that targeted marketing strategies and youth-oriented products are necessary to attract a wider

customer base in Nigeria.

In conclusion, the concept of life assurance patronage embodies the interaction between

economic capacity, consumer perception, institutional trust, and cultural orientation. It is not

merely a financial transaction but a reflection of confidence in the broader financial system.

Improving life assurance patronage in Nigeria therefore requires a holistic approach—

strengthening institutional frameworks, promoting financial literacy, innovating product design,

and rebuilding trust between insurers and the public. As the literature reveals, countries that

successfully expand insurance coverage experience not only higher financial inclusion but also

greater economic resilience and long-term capital accumulation (Akinlo, 2022; Olaleye &

Adegoke, 2024).

Level of Life Assurance Patronage in Nigeria

The level of life assurance patronage in Nigeria remains considerably low compared to other

emerging and developed economies. Despite the growth of the financial services industry,

insurance penetration in Nigeria has persistently hovered below 1% of GDP, which is far below

the African average of 3.5% (National Insurance Commission [NAICOM], 2023). This indicates

that a large segment of the Nigerian population does not participate in life assurance, reflecting

low trust and limited financial inclusion. Akinlo (2024) argues that the underdeveloped insurance

culture in Nigeria is a major barrier to effective mobilization of domestic capital.

Research has shown that the patronage of life assurance products in Nigeria is primarily

concentrated among the educated urban population, leaving rural and informal sectors largely

untapped (Aduloju & Olowokudejo, 2021). This imbalance is due to limited access to insurance

education and the lack of innovative distribution channels. Osaghae and Izedonmi (2024)

highlight that most Nigerians are unaware of the benefits of life assurance, often perceiving it as

a luxury or unnecessary expense rather than a financial security tool.

Furthermore, the dominance of oil and government sectors in Nigeria’s economy has led to a

lack of diversification in financial literacy initiatives (Olaleye & Adegoke, 2023). As a result, the

life assurance industry struggles to penetrate new markets and attract customers from the

informal sector. Okonkwo (2022) adds that weak consumer confidence due to the poor handling

of claims has further reduced policyholder retention and new sign-ups. Therefore, life assurance

remains an underutilized financial instrument in Nigeria’s economic framework.

The industry’s slow adoption of digital solutions also contributes to low patronage. While mobile

banking and fintech solutions have revolutionized other sectors, the life assurance industry lags

behind in technology-driven services (Eze & Nwankwo, 2025). This technological gap limits

convenience, accessibility, and customer engagement, especially among younger Nigerians who

prefer online platforms.

Impact of Life Assurance Patronage on Nigeria’s Economic Growth

Life assurance patronage plays a significant role in promoting Nigeria’s economic growth

through capital formation and investment. The funds generated from life assurance premiums are

typically invested in long-term financial instruments such as government securities, real estate,
and corporate bonds, which contribute to infrastructural and industrial development (Akinlo,

2023). By mobilizing household savings, the life assurance sector provides a steady source of

funds for productive investments that stimulate GDP growth (Osaghae & Izedonmi, 2025).

Moreover, life assurance enhances financial stability by providing individuals and businesses

with a safety net against economic shocks. This assurance promotes confidence, encourages

entrepreneurship, and reduces the need for government welfare spending (Olaleye & Adegoke,

2023). Studies by Ezirim and Muoghalu (2021) reveal that countries with higher insurance

penetration rates tend to experience more stable and inclusive economic growth due to the

reinvestment of insurance premiums in the domestic economy.

Life assurance patronage also contributes to employment generation and human capital

development. The industry provides direct employment opportunities through insurance

companies, brokers, and agents, as well as indirect jobs in allied sectors such as banking, real

estate, and investment management (Aduloju & Olowokudejo, 2023). In Nigeria, a more vibrant

life assurance sector could significantly reduce unemployment and stimulate entrepreneurship by

supporting financial resilience among small business owners.

Additionally, the life assurance industry supports government fiscal policies by contributing to

tax revenues and public borrowing through investments in government bonds. These funds can

be used to finance infrastructure, education, and healthcare, thereby promoting sustainable

national development (Olowokudejo, 2024). Consequently, increasing life assurance patronage

has both direct and multiplier effects on Nigeria’s economic growth trajectory.
Challenges Affecting Life Assurance Patronage in Nigeria

Despite its potential benefits, the growth of life assurance patronage in Nigeria faces numerous

challenges. One major obstacle is the low level of public awareness about the purpose and

benefits of life assurance (Aduloju & Olowokudejo, 2023). Many Nigerians associate insurance

with misfortune or death, making them reluctant to purchase policies. Cultural and religious

beliefs, particularly those that emphasize fate or divine providence, further discourage

individuals from engaging in life assurance (Ibiwoye & Adeleke, 2023).

Another challenge is the lack of trust between consumers and insurance companies. Several

cases of delayed or denied claims have created a negative perception of the industry (Osaghae &

Izedonmi, 2022). This distrust is compounded by weak regulatory enforcement, which allows

some companies to engage in unethical practices without facing severe penalties. Eze and

Nwankwo (2021) argue that the absence of transparency and customer-centered practices has

significantly hindered growth.

Economic instability also plays a crucial role in discouraging patronage. High inflation, currency

depreciation, and low disposable income limit individuals’ ability to purchase long-term life

policies (Akinlo, 2024). Many Nigerians prioritize immediate consumption over financial

planning, making life assurance a lower priority. Additionally, inadequate government incentives

and limited tax reliefs on life insurance premiums reduce the attractiveness of policy subscription

(Olaleye & Adegoke, 2024).

Technological challenges and insufficient distribution channels further restrict the industry’s

reach. Most insurance companies rely on traditional face-to-face marketing rather than adopting

digital platforms and mobile technology to reach a wider audience (Ezirim & Muoghalu, 2020).

This has made it difficult to attract younger, tech-savvy customers who demand convenience and

transparency.

Strategies to Improve the Role of Life Assurance in National Economic Development

Enhancing the role of life assurance in national economic development requires a comprehensive

and multifaceted approach. Firstly, there is a need for intensified public education and awareness

campaigns to change the negative perception of life assurance (Osaghae & Izedonmi, 2015).

Government agencies, insurance associations, and financial institutions should collaborate to

promote insurance literacy through mass media, schools, and community programs.

Secondly, regulatory frameworks must be strengthened to restore public confidence. NAICOM

and other supervisory bodies should enforce stricter compliance standards, ensure prompt claim

settlements, and penalize defaulters to build trust in the industry (NAICOM, 2023).

Transparency in operations and customer service delivery should become the hallmark of

Nigeria’s insurance sector (Eze & Nwankwo, 2023).

Thirdly, innovation in product design and distribution is essential. Insurance companies should

develop flexible and affordable life assurance products tailored to different income groups,

including low-income earners and informal sector workers (Okonkwo, 2024). The adoption of

mobile technology, digital payment systems, and online policy management will enhance

accessibility and convenience for customers.

Moreover, fiscal and policy incentives can be introduced to encourage life assurance patronage.

The government can provide tax deductions for individuals and businesses that purchase life

assurance policies, thereby promoting savings and capital accumulation (Olowokudejo, 2023).

Public-private partnerships can also be established to channel insurance funds into national

development projects such as housing and infrastructure.

Finally, investment in human capital and professional ethics within the insurance industry is

vital. Continuous training for insurance agents, brokers, and underwriters will improve service

delivery, product innovation, and customer satisfaction (Aduloju & Olowokudejo, 2025). By

implementing these strategies, Nigeria’s life assurance sector can play a more significant role in

economic transformation and sustainable development.

2.1.1 Conceptual Framework

The model of the research adopted in this study indicates the nature of life assurance patronage

and relationship between Nigeria economy (At the levels of individual, group and university).

Dependent variables (Life Assurance patronage); Independent variables (implication on Nigeria

Economy).
Source: Researcher’s conceptualization, (2025)

2.2 Empirical Review

Empirical studies have established a strong link between life assurance patronage and

economic growth across different economies. Akinlo (2025) examined the causal relationship

between insurance development and economic growth in Nigeria between 1986 and 2010. Using

vector error correction models, the study found a long-run relationship between life insurance

penetration and GDP growth, emphasizing the need to strengthen the life assurance sector for

national development. This finding suggests that increased patronage enhances capital formation

and financial stability.

Similarly, Osaghae and Izedonmi (2025) explored the role of insurance in financial

intermediation and economic development in Nigeria. Their study revealed that insurance

companies contribute significantly to investment and capital accumulation through the

mobilization of premiums and investment of reserves. They concluded that higher life assurance

patronage supports macroeconomic stability and promotes sustainable growth. However, they

also noted that weak regulatory frameworks and low awareness hinder full sectoral potential.

Olaleye and Adegoke (2023) analyzed the impact of insurance sector growth on Nigeria’s

economy using time series data from 1990 to 2015. The results indicated a positive and

statistically significant relationship between life insurance premium growth and GDP. The

authors emphasized that life assurance promotes capital market deepening and investment

efficiency. They recommended that policy reforms and public sensitization campaigns could

increase life assurance participation across Nigeria.

Aduloju and Olowokudejo (2023) investigated consumer attitudes and behavioral factors

influencing insurance patronage in Nigeria. Their findings showed that lack of trust, inadequate

product information, and negative perceptions about insurance companies contribute to low

patronage levels. The study emphasized that improved transparency, better customer relations,

and education are crucial to boosting life assurance participation and enhancing its contribution

to economic development.

Ezirim and Muoghalu (2024) conducted a comparative analysis of insurance development and

economic performance in Sub-Saharan Africa. Their results demonstrated that countries with

higher insurance penetration rates experienced faster GDP growth and greater financial

inclusion. Nigeria, with one of the lowest penetration rates, was shown to have untapped

potential in using life assurance as a tool for economic transformation. This reinforces the need

for policy and institutional support to strengthen the insurance market.

Eze and Nwankwo (2025) also examined insurance awareness and uptake in Nigeria, focusing on

the role of digital platforms. Their study revealed that lack of innovation and limited use of

technology are major barriers to patronage. They suggested that adopting mobile insurance

platforms and online claim systems could significantly improve accessibility and customer trust,

leading to increased participation. This highlights the growing importance of technological

integration in the Nigerian insurance sector.

Okonkwo (2022) explored the relationship between consumer trust and life insurance demand in

Nigeria. Using survey data, the study found that perceived integrity of insurance firms and

effectiveness of claims settlement significantly influenced patronage levels. The research

recommended stronger regulatory oversight and effective communication strategies to rebuild

confidence among potential policyholders. Trust and reputation were found to be key

determinants of long-term customer retention in the insurance industry.

Finally, Olowokudejo (2022) assessed the impact of insurance regulation on sustainable

development in Nigeria. The study found that efficient regulation enhances public confidence,

encourages compliance, and increases market penetration. However, poor enforcement of

standards and delayed claims continue to weaken the industry’s image. The author concluded

that strengthening institutional capacity and promoting ethical practices are essential for

achieving the developmental potential of life assurance in Nigeria.

2.3 Theoretical Review

The relationship between life assurance patronage and economic growth can be explained

through various economic and financial theories. This section discusses four relevant theories:

the Keynesian Theory of Savings and Investment, the Financial Intermediation Theory,

the Expected Utility Theory, and the Demand-Following Theory of Insurance Development. Each

provides insight into how life assurance contributes to economic stability and development.

The Keynesian Theory of Savings and Investment, developed by John Maynard Keynes

(1936), posits that savings play a vital role in stimulating investment, which in turn drives

economic growth. Life assurance acts as a mechanism for mobilizing savings from households,

which are later channeled into productive investments such as infrastructure and industrial

development. According to Akinlo (2013), life assurance firms transform idle funds into long-

term capital investments that support economic expansion. Thus, higher patronage of life

assurance increases national savings and promotes sustained economic growth.

The Financial Intermediation Theory asserts that financial institutions, including insurance

companies, serve as intermediaries that facilitate the efficient allocation of funds between savers

and borrowers (Levine, 2021). Life assurance companies mobilize funds through premium

payments and invest them in various sectors of the economy, promoting liquidity and stability in

financial markets. Olaleye and Adegoke (2023) note that by channeling long-term savings into

investments, insurance institutions enhance economic productivity and reduce volatility in

financial systems.

The Expected Utility Theory, proposed by von Neumann and Morgenstern (2023), explains

individual decision-making under uncertainty. The theory suggests that individuals purchase life

assurance policies to maximize their expected utility by reducing potential losses from

unforeseen life events. This risk-averse behavior drives the demand for life assurance products,

thereby increasing patronage. According to Aduloju and Olowokudejo (2024), understanding

risk aversion and utility preferences helps insurers design suitable products that meet customer

needs and promote participation.

Finally, the Demand-Following Theory of Insurance Development (Patrick, 2023) postulates

that economic growth precedes and stimulates the development of the financial sector, including

insurance. As the economy grows, income levels rise, leading to increased demand for financial

services such as life assurance. In Nigeria, Olowokudejo (2024) observed that as urbanization

and industrialization expand, individuals and businesses increasingly seek protection against

financial risks, resulting in higher insurance patronage. Hence, economic growth and life

assurance development are mutually reinforcing.

2.3.1 THEORITICAL FRAMEWORK

Theory of Life Assurance Implication

 Keynesian Theory of Management of Life Capital Formation
Savings and Assurance
Economic Indicator
Investment  Competition
 Demand-Following  Cooperation Market Development
Theory of Insurance  Avoidance
Development Risk Management

Figure 1: Theoretical Framework: (Life assurance patronage).

Source: Author’s computation 2023