The determinants of the demand for life insurance in an emerging economy – the case of China

In the past two decades, many emerging economies have been witnessed the strong growth of their life insurance industry. While research in the demand for life insurance has attracted much attention since the 1960s, most studies have focused on cross-country studies or well-established markets in developed countries. As a result of cross-national variations in life insurance consumption, it has been argued in the literature that factors shaping the demand for life insurance are complex and varied from one country to another. This paper aims to examine key determinants of the demand for life insurance in China with a view to explaining the rapid growth of the life insurance industry in China since its economic reform in 1978. Empirical investigation using a time series data analysis has shown that the main factors which have influenced people in China to purchase life insurance products are directly associated with the successful economic reform leading people to progress to higher layers of economic security, the increase in the level of education and the change in social structure. However, this research has not found a negative effect of inflation on life insurance consumption, even China experienced high inflation in the mid-1990s