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The S-Curve Relation Between Per-Capita Income and Insurance Penetration


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  • Rudolf Enz

    (Swiss Re, Economic Research & Consultiing, Zurich, Switzerland. E-mail

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    Models that assume a constant income elasticity of demand for insurance have the unrealistic implication that insurance penetration grows without constraint. This article introduces a logistic function that allows income elasticity to 0vary as the economy matures. Econometric estimations yield a so-called S-curve, for which the income elasticity of demand is equal to one at specific low and high levels of income, but may reach two or more at intermediate income levels. Long-term forecasts for insurance premiums based on GDP projections are possible for countries that either conform to the S-curve model or deviate consistently from it. Analysing deviations from the S-curve allows the identification of outlier countries, in which factors other than GDP drive insurance demand. The Geneva Papers on Risk and Insurance (2000) 25, 396–406. doi:10.1111/1468-0440.00072

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    Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance.

    Volume (Year): 25 (2000)
    Issue (Month): 3 (July)
    Pages: 396-406

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    Handle: RePEc:pal:gpprii:v:25:y:2000:i:3:p:396-406

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    Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK

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    Cited by:
    1. Huang, Wei & Eling, Martin, 2013. "An efficiency comparison of the non-life insurance industry in the BRIC countries," European Journal of Operational Research, Elsevier, Elsevier, vol. 226(3), pages 577-591.
    2. Yasuyuki Sawada, 2007. "The impact of natural and manmade disasters on household welfare," Agricultural Economics, International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 37(s1), pages 59-73, December.
    3. Udaibir S. Das & Richard Podpiera & Nigel Davies, 2003. "Insurance and Issues in Financial Soundness," IMF Working Papers, International Monetary Fund 03/138, International Monetary Fund.
    4. Chen, Sen-Sung & Cheng, Shu-Ching & Pan, Guochen & Wu, Tsung-Pao, 2013. "The relationship between globalization and insurance activities: A panel data analysis," Japan and the World Economy, Elsevier, Elsevier, vol. 28(C), pages 151-157.
    5. Lee, Chien-Chiang & Chiu, Yi-Bin & Chang, Chi-Hung, 2013. "Insurance demand and country risks: A nonlinear panel data analysis," Journal of International Money and Finance, Elsevier, Elsevier, vol. 36(C), pages 68-85.
    6. Hiroyuki Nakata & Yasuyuki Sawada, 2007. "Demand for non-life insurance: A cross-country analysis," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-461, CIRJE, Faculty of Economics, University of Tokyo.
    7. Lee, Chien-Chiang & Chiu, Yi-Bin, 2012. "The impact of real income on insurance premiums: Evidence from panel data," International Review of Economics & Finance, Elsevier, Elsevier, vol. 21(1), pages 246-260.
    8. J. François Outreville, 2011. "The relationship between insurance growth and economic development - 80 empirical papers for a review of the literature," ICER Working Papers, ICER - International Centre for Economic Research 12-2011, ICER - International Centre for Economic Research.
    9. World Bank, 2013. "Lebanon - The Insurance Sector : A Market and Risk Based Review," World Bank Other Operational Studies 16685, The World Bank.


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