Published Online:July 2025
Product Name:The IUP Journal of Applied Economics
Product Type:Article
Product Code:IJAE040725
DOI:10.71329/IUPJAE/2025.24.3.58-86
Author Name:Sampriti Das and Jetti Swaroopa
Availability:YES
Subject/Domain:Economics
Download Format:PDF
Pages:58-86
In the backdrop of a staggering market for life insurance in India, this paper explores the responsiveness of India’s aggregate demand for life insurance to key macroeconomic and demographic developments, over the period 1991-92 to 2021-22. Structured on the edifice of simple economic models and state-of-the-art techniques that undercuts the bias in extant studies, the results of the study unravel significant long-run relationships underlying both per capita and absolute demand for life insurance in the country. Among other things, the study finds household savings per capita to have an asymmetrical effect on this demand, in terms of both direction and magnitude. While savings and acquisition of funds make life insurance affordable and raise its demand, acquired funds, in the long run, also act as self-insurance, offsetting the very need for insurance altogether. Threat to this self-insurance is a prime driver of demand for market-based life insurance
What life insurance means to an individual is different from what it means to the nation at large. Individuals regard life insurance as a commodity or service, demand for which principally stems from their instinct of stability and concern over the uncertainty of leaving their loved ones deprived of the current standard of living (Hakansson, 1969; Lewis, 1989; Richard, 1975; Yaari, 1965). The nation, however, goes beyond to regard life insurance as a set of financial transactions that mobilize savings, fund capital markets, allow reallocation of resources and reinvestments in private and public sector projects (Beck & Webb, 2002; Ripoll, 1981). Indeed, studies have empirically ascertained the contribution of life insurance in the financial development and economic growth of the country in the long haul (Arena, 2008; Hou et al., 2012; Outreville, 2013; Ward & Zurbruegg, 2002).