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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 Rudolf_Enz@swissre.com)

Abstract

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

Suggested Citation

  • Rudolf Enz, 2000. "The S-Curve Relation Between Per-Capita Income and Insurance Penetration," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 25(3), pages 396-406, July.
    • Handle: RePEc:pal:gpprii:v:25:y:2000:i:3:p:396-406
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