We systematically explore the time-series properties of life insurance demand using a novel statistical procedure that allows multiple unobservable (but interpretable) components to be extracted. This methodology allows the data to be modelled in new and innovative ways. We find univariate series decomposition allows us to more easily explain the behaviour of life insurance demand over the sample period (1981–2003), than would otherwise be possible. A multivariate model (including a number of variables thought to influence demand) produces quite pleasing results overall. A SUTSE model involving demand and each of the explanatory variables in turn shows evidence of common components in all cases but one. Finally, an out-of-sample forecast comparison shows the univariate model to outperform the multivariate model for accuracy.
Anderson, D. R., & Nevin, D.1975, ‘Determinants of young marrieds life insurance purchasing behaviour: An empirical investigation’, Journal of Risk and Insurance, vol. 42, pp. 375–87.
2.
Ashley, R., Granger, C. W. J. & Schmalensee, R.1980, ‘Advertising and aggregate consumption: An analysis of causality’, Econometrica, vol. 48, pp. 1149–67.
3.
Auerbach, A. T. & Kotlikoff, L. J. 1989, ‘How rational is the purchase of life insurance?’ National Bureau of Economic Research, Working paper no. 3063.
4.
Babbel, D. F.1981, ‘Inflation, indexation, and life insurance sales in Brazil’, Journal of Risk and Insurance, vol. 48, pp. 111–35.
5.
Beck, T., & Webb, I.2003, ‘Economic, demographic, and institutional determinants of life insurance consumption across countries’, The World Bank Economic Review, vol. 17, pp. 51–88.
6.
Blainey, G.1999, A History of the AMP 1848–1998, Allen & Unwin, St Leonards.
7.
Bowman, K. O., & Shenton, L. R.1975, ‘Omnibus test contours for departures from normality based on √b1 and b2’, Biometrika, vol. 62, no. 2, 243–50.
8.
Browne, M. J., & Kim, K.1993, ‘An international analysis of life insurance demand’, Journal of Risk and Insurance, vol. 60, pp. 616–34.
9.
Cargill, T. F., & Troxel, T. E.1979, ‘Modelling life insurance savings: Some methodological issues’, Journal of Risk and Insurance, vol. 46, pp. 391–410.
10.
Davis, K.1997, ‘The financial system: Financial restructuring in Australia’, Economic Papers, vol. 16, pp. 112–7.
11.
Duker, J. M.1969, ‘Expenditures for life insurance among working wife families’, Journal of Risk and Insurance, vol. 36, pp. 525–33.
12.
Edey, M. & Gray, B. 1996, ‘The evolving structure of the Australian financial system’, RBA Bulletin, Reserve Bank of Australia, July.
13.
Fitzgerald, J.1987, ‘The effects of social security on life insurance demand by married couples’, Journal of Risk and Insurance, vol. 54, pp. 86–9.
14.
Flaig, G. & Ploetscher, C. 2000, ‘Estimating the output gap using business survey data: A bivariate structural time series model for the German economy’, CES Info Working Paper No. 233.
15.
Gandolfi, A. S., & Miners, L.1996, ‘Gender based differences in life insurance ownership’, Journal of Risk and Insurance, vol. 63, pp. 683–94.
16.
Hakansson, N. H.1969, ‘Optimal investment and consumption strategies under risk, and under uncertain lifetime and insurance’, International Economic Review, vol. 10, pp. 443–66.
17.
Harvey, A. C.1985, ‘Trends and cycles in macroeconomic time-series’, Journal of Business and Economic Statistics, vol. 3, pp. 216–27.
18.
Harvey, A. C.1989, Forecasting, Structural Time Series Models and the Kalman Filter, Cambridge University Press, Cambridge.
19.
Hwang, T., & Gao, S.2003, ‘The determinants of the demand for life insurance in an emerging economy: The case of China’, Managerial Finance, vol 29, no. 5/6, pp. 82–97.
20.
Keneley, M. 2002, ‘Adaptation and change in the Australian life insurance industry’, School of Economics Deakin Working Paper.
21.
Lewis, D. F.1989, ‘Dependents and the demand for life insurance’, American Economic Review, vol. 79, pp. 452–67.
22.
Lim, C. C., & Haberman, S.2004, ‘Modelling life insurance demand from a macroeconomic perspective: The Malaysian case’, Research paper: The 8th International Congress on Insurance, Mathematics and Economics, Rome.
23.
Mantis, G., & Farmer, R.1968, ‘Demand for life insurance’, Journal of Risk and Insurance, vol. 35, pp. 247–56.
24.
Outreville, J. F.1996, ‘Inflation and saving through life insurance’, Journal of Risk and Insurance, vol. 63, pp. 263–78.
25.
Rafe, B.1997, Overview of the Australian Life Insurance Industry, Woodrow Milliman Insurance International, Trowbridge.
26.
Reserve Bank of Australia, 1999, ‘Demutualisation in Australia’, RBA Bulletin, July.
27.
Rubayah, Y., & Zaidi, I.2000‘Prospective insurance’, Utara Management Review, vol. 1, pp. 69–79.
28.
Showers, E. V., & Shotick, A. J.1994, ‘The effects of household characteristics on demand for insurance: A Tobit analysis’, Journal of Risk and Insurance, vol. 61, pp. 492–502.
29.
Truett, D. B., & Truett, L. J.1990, ‘The demand for life insurance in Mexico and the United States: A comparative study’, Journal of Risk and Insurance, vol. 57, pp. 321–29.
30.
Yaari, M.1965, ‘Uncertain lifetime, life insurance and the theory of the consumer’, Review of Economic Studies, vol. 32, pp. 137–50.
31.
Zietz, E. N.2003, ‘An examination of the demand for life insurance’, Risk Management and Insurance Review, vol. 6, pp. 159–91.
