Economic, Demographic, and Institutional Determinants of Life Insurance Consumption across Countries

Life insurance has become an increasingly important part of the financial sector over the past 40 years, providing a range of financial services for consumers and becoming a major source of investment in the capital market. But what drives the large variation in life insurance consumption across countries remains unclear. Using a panel with data aggregated at different frequencies for 68 economies in 1961--2000, this article finds that economic indicators--such as inflation, income per capita, and banking sector development--and religious and institutional indicators are the most robust predictors of the use of life insurance. Education, life expectancy, the young dependency ratio, and the size of the social security system appear to have no robust association with life insurance consumption. The results highlight the importance of price stability and banking sector development in fully realizing the savings and investment functions of life insurance in an economy.

This study examines some of the key factors affecting life insurance consumption in mainland China, Hong Kong, and Taiwan. It also attempts to gain an understanding of the different characteristics of the market in life insurance in each territory. Income and life insurance consumption are found to be strongly correlated, which is consistent with previous studies. Education is a significant factor. Price is found to be insignificant, largely conflicting with previous studies. Levels of social security are not significantly related. The onechild policy in mainland China has a negative effect on life insurance consumption. Differences in the level of economic development reveal a variation in life insurance consumption. Generally, the more advanced the economy, the greater the life insurance consumption. However, mainland China, which is a low-income country, shows the greatest potential.

Insurance Development and Economic Growth
This paper will investigate the relationship between insurance development and economic growth by employing GMM models on a dynamic panel data set of a sample of selected

economies for the period 2002–2011. Insurance density is used to measure the development of insurance. Controlled by a simple conditioning information set and policy information set, we can see the correlation of insurance development and economic growth. The sample is then divided into developed and developing economies.

Empirical analysis on the effect of insurance development on economic growth in Ethiopia The casual relationship between finance development and economic growth has received extensive attention in the academic community. The role of insurance industry, although growing in importance in financial intermediation, has not been studied as extensively as the role of the banking sector. Since the policy of reform, both our life insurance and non-life insurance have experienced a rapid development including the sharp increase of new market players and the increasing benefits. China has gradually become one of the fastest growing countries in insurance. By 31st December 2009, total premiums have reached 1113.73 billion Yuan, compared with 460 million Yuan in 1980. Chinese insurance industry has encountered a severe challenge in the progressing course of American subprime mortgage crisis which impacts Chinese economy deeper and deeper. In order to reduce the impact on Chinese economy, evaluating the impact of insurance development on economic growth is of great significance both in theory and practice for how to push forward economic growth healthily and stably and how to go through the financial crisis smoothly by making full use of the insurance function of risk management and loss compensation, optimizing the allocation of resources and enhancing the efficiency of fund application. Therefore, more attention has been put on the impact of insurance development on economic

growth recently. Because of the variation of theoretically models, study methods, sample sizes and so on, economists hold startlingly different opinions regarding the importance of the insurance system for economic growth. By employing Non-linear STR model of time series and panel threshold regression model, this paper empirically analyses the effect of insurance development on economic growth in China, from both national and regional levels. Firstly, we evaluate the intrinsic influence mechanism of insurance development on economic growth by employing the non-linear STR model. The empirical results indicate that (1) The impact of insurance development on economic growth take on threshold effect. When the economy in one lag period increases rapidly or slowly, namely dlngdp(-1)<0.06737 or dlngdp(-1)>0.1726, a decreases or increase in one standard deviation in the growth rate of current premiums would imply a decreases or increases of 0.95641 percent in the economic growth; when the economy in one lag period increases moderately, the growth rate of current premiums increases one percentage point would increase the economic growth rate by 0.15567 percentage point. The insurance development will reduce the economic fluctuations and smooth the economic cycle to some extent. (2) The insurance development in current period significantly promotes economic growth with the typical gradual and non-linear characteristics. For 1980-1992, the impact of insurance development on economic growth takes on a non-linear characteristic significantly, while it takes on linear characteristic obviously for 1993-2007. From 2008 to the present, the non-linear characteristic is significant again. (3) To some extent, the insurance development in one lag period restraints the economic growth. The possible reasons are that the insurance funds utilization in China exists certain hysteresis and the investment channels are tightly restrained. Secondly, we examine and estimate the

threshold effect of regional insurance development on economic growth by employing the panel threshold regression model. The empirical results show that (1) The economic development level is a significant threshold variable which influence the effect of regional insurance development on economic growth. (2) The impacts of both regional life insurance and regional non-life insurance development on economic growth take on double-threshold effects. In the provinces with’ low level of economic development’, both the life and non-life insurance development in one lag period has a negative and significant effect on economic growth. In the provinces with’ moderate level of economic development’, the life insurance has a positive effect comparing with the non-life insurance development has a negative effect on economic growth, but both of them are not significant. In the provinces with ‘high level of economic development’, both the life and the non-life insurance development has a positive and significant effect on economic growth. (3) The threshold for regional life insurance development to promote economic growth is obviously higher than that of regional non-life insurance development. By 2008, the per capita GDP in all of the 30 provinces except Gansu and Guizhou has reached 10082 Yuan, which indicates that the non-life insurance development has begun to improve economic growth in about 90% of the 30 provinces. On the other hand, there are only 10 provinces whose GDP per capita has reached 23219 Yuan, which reflect that the life insurance development has begun to improve economic growth only in about 30% of the 30 provinces.From the empirical analysis we can get a visual and accurate understanding of the historical stage and development space of China’s insurance industry, and then predict the trend of insurance development to provide supporting data and theoretical basis for the industry policy

enactment, the adjustment of the product structure and the development planning of insurance industry.

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