| This study examines the determinants of demand for life insurance in Canada. Lewis (1989) model is used to identify the determinants of life insurance demand. Various attempts by multivariate OLS regressions yielded statistically insignificant results. This raised questions of possible spurious regression, based on the findings by Stock and Watson (1988). Given that the outcomes were statistically insignificant as we predicted, we proceeded to test for cointegration. The Johansen cointegration methodology was applied. The results confirm that education, income, inflation, social security, interest rates, dependency ratio, financial development and life expectancy have long term equilibrium relationship with life insurance. While this study does not produce a definitive demand model for life insurance, the results provide a valid basis for government and other life insurance policy makers to focus on certain key variables as potential drivers of demand for life insurance. |
