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1.1 BACKGROUND

Insurance is the pooling of risks by policyholders with the aim of indemnifying them from unforeseen risks. The primary function of insurance is to act as a risk transfer mechanism. The basic principle of insurance is that the losses of the few are paid by the many. Its underlying purpose is to provide protection against the risk of financial loss, thus giving peace of mind to the policyholders. Life insurance is also a means of creating an immediate estate fro one's dependants.

According to Sneyd, (1996) life insurance is a pooling plan; an economic device through which the risk of premature death is transferred from the individual to the group. Sneyd, (1996) asserts that, the contingency insured against has certain characteristics that make it unique. Sneyd, (1996) further states that, security and protection against losses or contingencies have existed in most societies. Life insurance has existed in most societies. Furthermore, various forms of insurance products have been included over time to serve as some of the principle means of providing protection and security. Life insurance has been in existence in Britain for more than 400 years. As early as 300 BC It is recorded that Chinese merchants utilized the technique of sharing risk. Furthermore about the year 2500BC the great code of Hammurabi provided for the transfer of the risks of loss from the merchants to the moneylenders. (Vaughan, 1982)

However, according to Skipper, (1998) the insurance business has historically divided itself between companies that sell insurance on the person, known as life insurance, and those that sell insurance to protect property referred to as non life insurance. Nonetheless, life insurance in Kenya has been controversial and misunderstood. Researchers like Maingi, (1999) indicate in his study that life insurance is a fairly new phenomenon in Kenya, having been around for only about half a century. According to the central bureau of statistics (1995) it is in record that out of the estimated population of about 25 million Kenyans in 1993, only about 260,000 had active life insurance policies.

In 1982, it was revealed that life insurance contributed Kshs. 29, 735,000 to the public and 888,000 to the private sectors. This suggested that the magnitude of the benefits could increase if life insurance is run properly. As beneficial as it is, it is strange that in 1986, very few Kenyans held Life Insurance policies. It is in record out of 20 million Kenyan in 1986 only 250,000 had active life assurance policies i.e. 1.25% of the population.

1.2 STATEMENT OF THE PROBLEM

Many changes that have occurred have occurred in Kenya's economic environment under which most businesses operate, they have created opportunities and also posed challenges and threats to these business organizations. Life insurance being one of the most important sectors has not been spared either, and as it is now, there has been a steady decline of the number of people taking life insurance policy

The few research papers carried out in the Kenyan insurance industry on "Attitudes toward insurance" (Maingi 1999, Laimaru 1997) have concluded that many held negative attitudes towards insurance companies and particularly life insurance. Nonetheless, this study aims to address possible satisfaction and / or dissatisfaction amongst selected life policyholders in the Alico Kenya Ltd.

1.3 THE GENERAL OBJECTIVE OF THE STUDY

This study explored the attitude of Kenyans towards life insurance, amongst life policyholders. The study also aimed at determining the level of satisfaction of these policyholders. This therefore made it imperative to target current life policyholders.

1.4 RESEARCH QUESTIONS

A great research is a building block for the development and advancement of society. It looks into the major aspects of a given field of study in a thought provoking manner and is therefore an eye opener. This research was an attempt to go that route and in so doing the following research questions will be pertinent;

1. To look at the social and demographic characteristics of life insurance policyholders.

2. To gauge the perception of Kenyans towards life insurance.

3. To ascertain the satisfaction levels of the policyholders with regards to service delivery the insurance companies.

1.5 JUSTIFICATION OF THE STUDY

This study will be important because the findings from the study could be used for further research on the same in future and it will also unearth the perception of the respondents towards life insurance policy. And lastly, it will be able to reveal as to why there is decline in life insurance policy holding.

1.6 SCOPE AND LIMITATIONS

The study will concentrate on consumers of life insurance policies of Alico Kenya. The nature of the study will be such that it covers all types of life insurance holders, mainly: whole life insurance, term life insurance, universal life insurance and endowment life insurance.

The study was faced by a lot of difficulties owing to the fact that some of the information the researcher required was confidential e.g. age and salaries. Many life policyholders were not willing to divulge intimate questions that were vital for the study.

The population under consideration will be broken into a sample of ninety people. This was an attempt to minimize the potential for errors, which could arise when handling a bigger sample. Consequently a smaller sample did enable the researcher to be more focused and screen the research problems more comprehensively.

Negotiating access to the case study setting was demanding, nonetheless prior permission from the Insurance companies was to be obtained and respondents advised in advance.

1.7 DEFINITION OF TERMS.

Actuary - A technical expert in life insurance, particularly in mathematics . a person in this job applies the theory of a probability to calculate mortality rate , morbidity rates , premiums , policy reserves and other values.

Agents: Somebody on behalf of another. For instance case/she is legally the agent of the insured. However, he/she is remunerated by the life insurance Company, through payment of commissions on insurance business submitted.

Beneficiaries: one for whose benefit in an insurance contact is made and consequently the one to whom the benefits of the insurance is payable