The purpose of this study is to shed light on the dynamics at play in Indonesia’s life insurance market by analyzing the interplay between key variables like financial literacy, trust and insurance demand. Relevant theories and existing literature in the field guide it. To ensure the validity and reliability of the research instrument, a set of criteria is used to evaluate the variables used in this study.
Partial Least Squares Structural Equation Modeling is used in this study to test the relationships between consumer trust, financial literacy and insurance demand. The objective is to facilitate simultaneous analysis of multiple independent variables. Thus, this research adopts a quantitative approach to gather data and provide valid responses to the survey questions. The sampling process involved respondents aged 18–60 years residing in various major cities across Indonesia.
This study’s findings indicate that the demand for life insurance in Indonesia is significantly influenced by the level of financial literacy, risk aversion and the degree of trust among consumers and key institutions. Finally, this finding suggests that enhanced public education efforts by government and industry leaders are needed to stimulate greater interest and demand for life insurance within the nation.
This study provides valuable insights for insurance providers and industry associations to enhance the public’s understanding of insurance and increase the demand for life insurance. By focusing on improving financial literacy, trust-building and empowering individuals to make independent decisions, insurance providers and relevant stakeholders can effectively meet the needs of the public and contribute to long-term growth in the insurance industry.
The findings of this study may interest regulators, policymakers and the insurance industry. This study’s results suggest that more financial education and programs are necessary to improve citizens’ knowledge of personal finance and encourage greater participation in the country’s insurance market. Governments can raise awareness about the importance of understanding and managing personal finances by launching public awareness campaigns, such as those focusing on insurance education.
This research adds to the existing body of literature by providing empirical evidence of the connection between financial literacy, trust, social influence and the demand for life insurance in the context of Indonesia’s growing insurance market.
