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A Time-Series Analysis of the Demand for Life Insurance Companies in Australia: An Unobserved Components Approach

Author

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  • Liam J. A. Lenten

    (Department of Economics and Finance, La Trobe University, Victoria, 3086.)

  • David N. Rulli

    (Department of Economics and Finance, La Trobe University, Victoria, 3086.)

Abstract

We systematically explore the time-series properties of life insurance demand using a novel statistical procedure that allows multiple unobservable (but interpretable) components to be extracted. This methodology allows the data to be modelled in new and innovative ways. We find univariate series decomposition allows us to more easily explain the behaviour of life insurance demand over the sample period (1981–2003), than would otherwise be possible. A multivariate model (including a number of variables thought to influence demand) produces quite pleasing results overall. A SUTSE model involving demand and each of the explanatory variables in turn shows evidence of common components in all cases but one. Finally, an out-of-sample forecast comparison shows the univariate model to outperform the multivariate model for accuracy.

Suggested Citation

  • Liam J. A. Lenten & David N. Rulli, 2006. "A Time-Series Analysis of the Demand for Life Insurance Companies in Australia: An Unobserved Components Approach," Australian Journal of Management, Australian School of Business, vol. 31(1), pages 41-66, June.
    • Handle: RePEc:sae:ausman:v:31:y:2006:i:1:p:41-66
    DOI: 10.1177/031289620603100104
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Subir Sen, 2008. "An Analysis of Life Insurance Demand Determinants for Selected Asian Economies and India," Finance Working Papers 22512, East Asian Bureau of Economic Research.
    2. Akhter, Waheed & Pappas, Vasileios & Khan, Saad Ullah, 2017. "A comparison of Islamic and conventional insurance demand: Worldwide evidence during the Global Financial Crisis," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1401-1412.
    3. Mouna Zerriaa & Mohamed Marouen Amiri & Hedi Noubbigh & Kamel Naoui, 2017. "Determinants of Life Insurance Demand in Tunisia," African Development Review, African Development Bank, vol. 29(1), pages 69-80, March.
    4. Liam J. A. Lenten, 2009. "Unobserved Components in Competitive Balance and Match Attendances in the Australian Football League, 1945–2005: Where is all the Action Happening?," The Economic Record, The Economic Society of Australia, vol. 85(269), pages 181-196, June.
    5. Waheed Akhter & Saad Ullah Khan, 2017. "Determinants of Takāful and conventional insurance demand: A regional analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1291150-129, January.
    6. Phyllis Asorh Oteng & Victor Curtis Lartey & Amos Kwasi Amofa, 2023. "Modeling the Macroeconomic and Demographic Determinants of Life Insurance Demand in Ghana Using the Elastic Net Algorithm," SAGE Open, , vol. 13(3), pages 21582440231, September.
    7. Ishtiaq Ahmad, 2017. "Do The Economic Indicators Influence Financial Performance Of Non-Life Insurance Sector In Pakistan?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 201-209, December.
    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 12-2011, ICER - International Centre for Economic Research.
    9. Md. Bokhtiar Hasan & SM Nahidul Islam & Abu N. M. Wahid, 2018. "The effect of macroeconomic variables on the performance of non-life insurance companies in Bangladesh," Indian Economic Review, Springer, vol. 53(1), pages 369-383, December.
    10. Subir Sen & S Madheswaran, 2013. "Regional determinants of life insurance consumption: evidence from selected Asian economies," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 27(2), pages 86-103, November.
    11. Simona Laura Dragoş & Codruţa Mare & Cristian Mihai Dragoş, 2019. "Institutional drivers of life insurance consumption: a dynamic panel approach for European countries," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(1), pages 36-66, January.
    12. J. François Outreville, 2013. "The Relationship Between Insurance and Economic Development: 85 Empirical Papers for a Review of the Literature," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 16(1), pages 71-122, March.

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