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The Demand for Life Insurance in OECD Countries

Author

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  • Donghui Li
  • Fariborz Moshirian
  • Pascal Nguyen
  • Timothy Wee

Abstract

This article examines the determinants of life insurance consumption in OECD countries. Consistent with previous results, we find a significant positive income elasticity of life insurance demand. Demand also increases with the number of dependents and level of education, and decreases with life expectancy and social security expenditure. The country's level of financial development and its insurance market's degree of competition appear to stimulate life insurance sales, whereas high inflation and real interest rates tend to decrease consumption. Overall, life insurance demand is better explained when the product market and socioeconomic factors are jointly considered. In addition, the use of GMM estimates helps reconcile our findings with previous puzzling results based on inconsistent OLS estimates given heteroscedasticity problems in the data.

Suggested Citation

  • Donghui Li & Fariborz Moshirian & Pascal Nguyen & Timothy Wee, 2007. "The Demand for Life Insurance in OECD Countries," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(3), pages 637-652, September.
    • Handle: RePEc:bla:jrinsu:v:74:y:2007:i:3:p:637-652
    DOI: 10.1111/j.1539-6975.2007.00228.x
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