The Impact of Demographic Burden on Insurance Density

Elena Nebolsina

doi:10.1177/2158244020983024

Abstract

The article investigates the relationship between demographic burden and insurance market by employing panel vector autoregression models with six groups of endogenous variables to a dynamic panel data set of 25 economies for the period 1980–2016. Demographic burden is represented by dependency ratios measured in respect to the population younger than the age of 15 (young-age dependency ratio), population above the age of 64 (old-age dependency ratio) as well as males and females above the age of 64 being examined separately. As indicators of insurance market development, life insurance density, non-life insurance density, and total insurance density are used. The robustness of the results is verified across 10 subsamples of the main observation period. The conducted analyses show a heterogeneous impact of demographic burden on the insurance market. The impulse responses reveal that negative effects prevail in the long term, which may result from the negative impact of an increasing demographic burden on the economy. In the short term, growth in female and male old-age dependency ratios drives up life and non-life insurance density.

Highlights

Insurance as a financial loss risk transfer mechanism serves a number of valuable economic functions bringing many benefits to policyholders and society as a whole
As the subject of this article is the influence of demographic burden on the insurance market, I specify the results with components of the demographic burden with Lags 1 and 2 being the major reason
The purpose of this article is to determine the nature of the impact of the demographic burden on the insurance market

Summary

Introduction

Insurance as a financial loss risk transfer mechanism serves a number of valuable economic functions bringing many benefits to policyholders and society as a whole. With their long-term cash flows, insurance companies make long-term investments boosting growth of financial markets. Economic growth is fueled by insurance market progress. A number of studies prove the relationship between insurance demand and economic growth Chen et al, 2011; Haiss & Sümegi, 2008; Han et al, 2010; H. A number of studies prove the relationship between insurance demand and economic growth (Arena, 2008; Azman-Saini & Smith, 2011; P.-F. Chen et al, 2011; Haiss & Sümegi, 2008; Han et al, 2010; H. Lee et al, 2018; Nguyen et al, 2010; Pradhan et al, 2017)

Objectives

Methods

Results

Conclusion