Behavioral Biases and Life Insurance Purchase Decisions in Nepal
A Moderated Mediation Approach
DOI:
https://doi.org/10.32674/fpp4sd27Keywords:
Behavioral biases, life insurance, herding behavior, institutional trust, risk perceptionAbstract
Purpose: The study examines the influence of behavioral biases on life insurance purchase decisions in Nepal using an integrated moderated mediation model examining the mediating role of risk perception and the moderating role of institutional trust.
Design/methodology/approach:This study employs a quantitative design, using a cross-sectional survey to collect data from 404 economically active individuals in Nepal through stratified and convenience sampling. Structural equation modeling (SEM) was used to test measurement and structural models and the proposed moderated mediation relationships.
Findings: The results reveal that behavioral biases significantly influence life insurance purchase decisions both directly and indirectly through risk perception. Risk perception partially mediates the relationship between behavioral biases and purchase decisions, with a positive moderated effect of institutional trust.
Conclusion: Behavioral biases have a meaningful effect in shaping financial protection decisions, shaping a subjective sense of vulnerability; however, their decision to purchase life insurance depends heavily on their confidence in insurers and the regulatory environment.
Practical Implications: The findings suggest that insurers and policymakers should adopt behaviorally informed strategies to enhance insurance penetration. Efforts to enhance public risk awareness and strengthen institutional trust through transparent claim processes and consumer protection can significantly increase life insurance adoption in emerging markets.
Originality/value: The study offers an integrated moderated mediation model to examine how behavioral biases influence insurance policy purchase decisions. This study contributes to the behavioral insurance literature by integrating behavioral biases, risk perception, and institutional trust within a moderated mediation framework.
JEL Classification: D91, G22, G41, G52
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Copyright (c) 2026 Prakash Kumar Gautam, Kapil Khanal (Author)
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