A Comparative Study On The Demand For Insurance In The United States, Japan And China

With the approach of income and coverage lines, this paper discussed comparatively the relationship between the demand for insurance and income (or economic development) in China with that in the United States and Japan. The study is based upon a theoretical framework specified for the supply and demand for insurance, in which premiums depend upon income. The literature is well endowed with empirical analyses on both total demands for insurance and demands for different lines.By obtaining marginal propensity to insure and income elasticity of demand for insurance of these countries, the primary purpose of this paper is to explain that: (1) In different countries, what differences are in the relationship between income and the demand for insurance? (2) How does the demand for insurance vary across different stages of economic development in one country? Are there any laws? (3) What differences in the influences of income upon life insurance consumption and that of non-life and different lines?This paper includes the following sections. The objective of this study is economical demand for insurance, i.e., effective demand for insurance. Premium per capita is used as the measure of the demand for insurance in this study.Chapter two is theoretical base of this article, in which the approach and the way of this study is described. The analysis is focusing on the influences of income on the demand for insurance. Empirical investigation is introduced by developing a simple model of how income and insurance premiums might be linked. The premium model reflects both demand and supply considerations. The concern is to present a basis for interpreting the empirical findings that are reported in the next sections. ModelV = f(Y|+, Π|?,r|?) suggests that income has a positive effect on insurance consumption.Quantitative analysis is combined with qualitative analysis in this paper. We use a time-series data model to test the preceding hypotheses in the theoretical framework mentioned above. Furthermore, regression analysis is conducted on non-life insurance premiums, life insurance premiums, and those of automobile insurance, property insurance and liability insurance.Chapter three and four are empirical contents of this article, which are divided into non-life part and life part. In chapter three, the demand functions are estimated using a current value of real GDP per capita and a three-year-period future value for this variable. The findings of regression analyses are the followings: (1) There is a positive relationship between income and the demand for non-life insurance. (2)The estimated income elasticity of demand for non-life insurance is much greater for China (1.315) than for the United Sates (0.39) and Japan (0.21). (3) The estimated marginal propensity for non-life insurance is the lowest for China, while it possesses the highest income elasticity.Following that, our study focuses on three lines of non-life insurance: automobile, property and liability. The author's analysis indicates that income significantly affects the demands for the three lines. Moreover, both short-run and long-run marginal propensity for automobile insurance are significantly greater than that for property insurance and liability insurance. Both short-run and long-run marginal propensity for automobile insurance and property insurance in Japan are greater than in China. The income elasticity of demands for the three lines is much greater for China than for Japan.In chapter four, we use a current value of real GDP per capita and a three-year-period future value for this variable as the independent variables to estimate the demand functions for life insurance. Discussion of the relationships found between the insurance measures and income for the three countries follows. (l)For all the three countries, income is positively correlated with life insurance consumption. (2) The estimated income elasticity of demand for life insurance is much greater for China (2.172) than for the United Sates (0.83) and Japan (0.72). (3) The estimated income elasticity of life insurance is the lowest for Japan, while it possesses the highest marginal propensity. It is just opposite for China. The author offers some explanations for these findings.In chapter five, we analyze main findings derived from the preceding study. The author is interested in the relative issues, for example, the changes in income have different effects upon the demand for insurance in different countries, or during different stages of economic development of a certain country, or in different lines ofnon-life insurance and life-insurance. Some conclusions are presented in this section, and further research is needed.