An Empirical Research On Decisive Effecting Factors Of Domestic Life Insurance Industry

Domestic life insurance industry has been rapidly developed since it was reestablished in 1982. However, life insurance industry suffered a series of problems from 1998 as a low growth rate of premium and later unsteadiness, which manifested the contradiction of scant demand of life insurance. Therefore, decisive effecting factors of domestic life insurance industry is chosen as a topic in this paper and it makes a great theoretical and practical sense to a steady increase of domestic life insurance premium.The paper selects causal relationship between kinds of indicators and insurance premium, and establish ECM model to empirically analyze the decisive factors on effectual demand of domestic life insurance industry. By these analysis results, evaluation of domestic life insurance industry and relating policy suggestions are all elaborated. The paper is of five parts.Chapter 1 reviews domestic and overseas development courses of life industry theories, and some representative concepts and achievements are proposed.Theoretical analysis on life insurance demand can be traced back to 1927, when American economist S.S.Huebner promoted his"value of life theory". Yaari Model is the originator of life insurance demand. Israeli economist Yaari published his"Uncertain Lifetime, Life Insurance, and the Theory of the Consumer", which is always considered the start of research on life insurance demands. Canadian economist Lewis (1989) tried his own method to make an insurance demand investigation from the standpoint of spouse and children, and he believes insurance purchasing is closely related to additional premium factors, unwillingness of risks and the quantity of their heritages. Insurance purchasing behavior is investigated by the point of family dependants.Foreign theoretical researches on life insurance can be concluded into the following points: (1) Combining analysis method of quality and quantity and regression equations are made to analyze the relativity and notability of effecting factors on life insurance demand. (2)Analysis are mostly based on lateral statistical data of a certain year, but less depended on longitudinal time sequence to get a dynamic analysis results of life insurance demand in different time. (3)Most research documents consider the combination of special economy, culture and society.Though domestic research on life insurance demand seems later than over the board, by the source of referring research findings, our domestic researches in this field still make great progress, especially in recent years popular combining research methods of quality and quantity are always used, and empirical research becomes more and more important. However, researches in this field all over the world has the same weak point: analysis are mostly based on lateral statistical data of a certain year, but less depended on longitudinal time sequence to get a dynamic analysis results of life insurance demand in different time.Chapter 2 mainly elaborates the definition of life insurance classification, and analyzes influencing factors qualitatively.Effecting factors are concluded from economic, society and political system respects and includes the following points: economic development situation, disposal income, balance of savings deposit, expected inflation rate, interest rates, financial deepening, population, dependency rates, education background, tax policy, social security system and institutional changes. All these factors are of different effectiveness in different country condition and development stage.In chapter 3, several common model of life insurance are presented, using these math models it analyzes factors relating to life insurance purchasing such as wealth, risk preference, future consumption, interest rates, self-insurance fund, inflation, population and education status.Chapter 4 is the part of positive analysis of this paper. Firstly, it introduces the developing condition of domestic life insurance industry, indicating selection principles and methods. Life insurance premium quantity is taken to be the total amount index, and analyze by the following 12 indicators: GDP,Per Capita Disposable Income of Urban Residents (PC),Deposit of Citizen and Country Inhabitant(DCCI),Expected Inflation(EI),Interest Rates(IR),Financial Deepening(FD),Market Concentration Rate(MCR),Urbanization Index(UI),Youth Dependency Ratio(YDR),Aged Dependency Ratio(ADR),Gross Enrollment Rate of Higher Education(GER),Marketization Index(MI). To avoid spurious regression, ADF is applied to analyze the stationarity. Decisive factors on insurance demand are described by an ECM model to illustrate the codependency between life insurance demand and effecting factors. Granger causality tests is put into use to each effecting factor and insurance premium, and especially mutual Granger causality test is used for factors of marketization index and economic development.Chapter 5 mainly analyzes and concludes the positive model analysis of Chapter 4 and interrelated suggestions and policies are proposed.Model ECM shows that between GDP,Per Capita Disposable Income of Urban Residents (PC),Aged Dependency Ratio(ADR),Financial Deepening(FD),Gross Enrollment Rate of Higher Education(GER),Marketization Index(MI) and demand of life insurance there exists a long-term equilibrium, of which GDP, as a reflection of general economic strength, on a broad view, greatly boosts the quantity of life insurance demand. The increase of disposable income also enlarges the consumer demand in a deep level. Effecting factor ADR indicates that aged tendency of population increases the uncovered insurance quantity which leads to the increase of total premium. Effecting factor of financial deepening indicates that financial policy reform influences life insurance industry more and more intensively and extensively. Between education level and demand of life insurance there exists an obvious positive correlation, which indicates that in new-rising insurance market, education takes a more positive role on income and risk awareness than in personal financing ability. Between interest rates, young dependency ratio, expected inflation and life insurance premium there exists a long-term equilibrium, but they are not the Granger causes of life insurance premium, and they also can not enter the model to draw the short-term impact.Bilateral Granger tests shows a mutual result between premium of life insurance and economic development level, economic system reform, i.e. economic level and relating reforms, may promote the increase of life insurance premium. Meanwhile, life insurance industry also contributes to the economic development and deepens economic reforms.