The Estimation of Life Insurance Demand Function and its Income Elasticity: 1974-2007

Nowadays, technological development has made human beings life so complicated and makes his life prone to dangers like being disabled, unemployment or even death. In order to reduce these hazardous effects on human life, insurance has shown its effectiveness and acceptance in most countries around the world. Following survey aimed to study the life insurance demand function and its most effective factors (like annual income, inflation rate, dependency rate, education, and probability of head of household’s death) and their demand elastic ties. In this study, time series have been used and by deployment of OLS, each and every effective factor on life insurance demand has been studied; so the demand elasticity on each factor has been calculated. The survey findings showed that except education, the rest of the data were in the 5% level integrated from the degree one and there was no co-integration between them. After running the model on data, it illuminated that the income elasticity of life insurance demand was 0.112 and the demand elasticity of life insurance to the probability of head of household’s death, dependency rate, education and inflation rate were 0.221, 2.24, 0.211 and -1.33 respectively. There are positive relations between life insurance and gross national production, probability of head of household’s death, dependency rate and education. On the other hand, the relationship is negative between life insurance demand and inflation rate.