Life Insurance Demand and Borrowing Constraints

Srbinoski, Bojan and Poposki, Klime and Born, Patricia and Lazzari, Valter (2020) Life Insurance Demand and Borrowing Constraints. In: World Risk and Insurance Economics Congress (WRIEC).

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In the empirical macroeconomic research, the positive relationship between financial development and
life insurance development was taken for granted without delving into the complexity of the issue.
Financial development supports life insurance supply by providing confidence in the financial system,
more efficient payment systems and higher availability of financial instruments. However, financial
development reduces households’ needs to save by relaxing borrowing constraints, indirectly affecting
life insurance demand. We contribute by providing a demand-driven explanation of the negative
consequences of financial development on life insurance development. We find that more creditconstrained
countries have higher life insurance penetration on average. The effect is especially
pronounced within high-income countries. The role of borrowing constraints indirectly signifies the
importance of life insurance policies as a financing tool in case of realization of various background risks.
This study integrates the knowledge from life insurance theory, life insurance lapse, policy loans demand
and saving under liquidity constraints literatures and produces implications for researchers, policymakers
and life insurers.
JEL Classification: G22, G51, O16
Keywords: life insurance, borrowing constraints, financial development

Item Type: Conference or Workshop Item (Paper)
Subjects: Scientific Fields (Frascati) > Social Sciences > Economics and Business
Divisions: Faculty of Tourism and Hospitality
Depositing User: Mr Bojan Sekulovski
Date Deposited: 15 Oct 2020 09:33
Last Modified: 15 Oct 2020 09:33

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