Life Insurance Purchasing Behavior in Non-High Income Countries: Case Study in Indonesia

Abstract

Background: Life insurance demand in Indonesia is still low, despite its positive contributions to the social and financial sectors, and income continues to grow. The increase in literacy and inclusion of insurance also cannot positively affect life insurance demand.
Purpose: This study analyzes the effects of economic and demographic factors on life insurance purchasing behavior, including income, interest rates, inflation, education, and life expectancy.
Design/methodology/approach: This study uses secondary data with annual frequency from 2002 to 2022 that obtained from Financial Services Authority, Bank Indonesia, and World Bank. This study employs ordinary least squares (OLS) to estimate data using Eviews 10 software.
Findings/Result: This study shows that income, inflation, education, and life expectancy have a positive effect on life insurance purchasing, while interest rates have a negative effect. Interest rates and life expectancy show significant effects. Demographic factors better explain life insurance demand than income factors, and the use of life insurance density provides better predictions than the use of penetration. This finding helps insurers in demand prediction and the government in developing life insurance policies.
Conclusion: Economic and demographic factors affect life insurance demand in Indonesia.
Originality/value (State of the art): Nowadays, there is a growing consensus to better use the term "non-high-income country" than "developing country" in country level analysis. This study is one of the first in a non-high-income country on the topic of life insurance purchases within the context of Indonesia.

Keywords: consumer purchase behaviour, determinant, Indonesia, life insurance, non-high-income country