Economic, Demographic, and Institutional Determinants of Life Insurance Consumption across Countries

Life insurance has become an increasingly important component of the financial sector over the last 40 years by providing a variety of financial services for consumers and becoming a major source of investment in the capital market. What drives the large variance in life insurance consumption across countries, however, is still unclear. Using a panel with data aggregated at different frequencies for 68 countries over the period 1961-2000, this study finds that economic variables, such as income per capita, inflation and banking sector development, as well as religious and institutional indicators are the most robust predictors of the use of life insurance. Education, young dependency ratio, life expectancy, and size of social security do not appear to be robustly associated with life insurance consumption. Our results highlight the role that price stability and banking sector development may have if the savings and investment functions of life insurance are to be fully realized in an economy.