Abstract:
. Introduction
Although life insurance offers crucial financial stability, Sri Lanka's life
insurance market has low density (USD 16 per capita) and penetration
(0.5% GDP in 2022). These figures highlight the challenges the country
faces in embedding life insurance as a mainstream financial tool. This study
explores the influence of socioeconomic factors such as urbanization, GDP
per capita, literacy rate, male life expectancy, and savings rate on life
insurance demand in Sri Lanka.
2. Research Methodology
The study employs a positivist approach, using secondary data spanning 23
years (2000–2022) from sources like the World Bank and IRCSL. Life
insurance density, measured as total life insurance premiums per capita,
serves as the dependent variable. An ARIMAX model, suitable for handling
time-dependent socioeconomic dynamics, was applied to analyse the data,
which was made stationary through the ADF test.
3. Findings and Discussion
The results suggest a significant positive impact on urbanization and GDP
per capita, showing the importance of urban expansion and economic
development. This indicates that life insurance density in Sri Lanka can
greatly increase with urbanization and economic growth. On the other
hand, the savings rate, male life expectancy, and literacy rate had less
pronounced or non-significant effects, indicating that policies promoting
economic growth can increase demand for insurance.
4. Conclusion and Implications
The demand for life insurance in developing countries is greatly influenced
by urbanization and GDP per capita. To improve insurance coverage, Sri
Lankan policymakers should encourage urbanization and increase public
knowledge. Future research should include additional demographic and
economic elements to further understand demand drivers
