DRIVES OF LIFE INSURANCE DEMAND IN SOUTH ASIAN REGION

Abstract

The reform of socio-economic activities over the past three decades has made significant development in socio-demographic statues of the South Asian region. However, the life insurance sector is still one of the least developed segments in the region. Therefore, this study aims to analyze the determinants of life insurance demand of four (4) emerging insurance markets of South Asia for 1996 to 2017. The study used life insurance penetration and density as the measures of life insurance consumption and employed Fixed/Random-effect panel regression estimations. The Hausman statistics confirmed that the fixed effect model is appropriate for the data-set. The results show that life insurance consumption is better explained by demographic factors than financial factors in South Asia. While we find an increase in income, urbanization, life expectancy, dependency, and private health expenditure lead to a decline in life insurance demand, education and financial development are found to impact on life insurance consumption in the region positively. Overall, households in this region are more likely to evaluate the anticipated benefits of life insurance in terms of derived benefits conditional to the income earner’s death or permanent disabilities. This study improves the existing knowledge, first by identifying the region-specific determinant of life insurance consumption while it introduces the effect of consumers’ out of pocket health expenditure as a determinant of insurance consumption. The study findings would help inform policy decisions by considering the unique characteristics of the South Asian region.