Influencing Factors of Life Insurance Premium Income at Home and Abroad

Abstract

This paper summarizes the influencing factors of life insurance premium income at home and abroad. Based on the data from 2000 to 2016, it establishes the income of life insurance premium and gross national product, per capita disposable income of urban and rural households, population quantity, consumer price index, urban and rural residents. Multivariate linear regression model of RMB savings deposit balance and other variables is used to empirically analyze the premium income of personal insurance. Based on the results of analysis, this paper will draw a conclusions and give some suggestions.

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Introduction

The premium income of life insurance policy is the most commonly used index to measure insurance demand. Insurance demand is the demand for insurance products under a certain price level and a certain rate level in a specific period of time. Insurance demand is an important factor that affects the development of insurance industry, the supply of insurance products and the development of insurance categories. Therefore, studying the influencing factors of insurance demand and predicting the future development trend of insurance demand have an important impact on the macro-control and development trend of insurance industry. Among them, premium income is an important index to measure insurance demand, and it represents the scale of insurance demand with premium income. In the case of fixed premium rate, the increase of insurance demand will lead to an increase in premium income of insurance policies.

Current Situation Analysis

China resumed life insurance business in 1982, and the life insurance business developed in an all-round way between 1982 and 2002. Foreign life insurance companies were allowed to enter the country. With the establishment and improvement of the social security system, life insurance has been growing rapidly. Since 2002, the life insurance business has been greatly developed. The growth rate of the proportion of the life insurance market in the insurance market is very high. The growth rate of the life insurance premium income in recent years is much higher than the growth rate of the GDP in the same period. It can be seen from this that the market capacity of the life insurance products is very large. It has great potential for development. Through the analysis of the historical data of life insurance premium income, the development potential of life insurance industry in China is great and it belongs to sunrise industry. Therefore, through empirical analysis and research to explore the reasons leading to the growth of life insurance premium income is conducive to predicting the future development trend of life insurance industry and helping the leadership to make decisions. Based on the qualitative analysis of the influencing factors of life insurance premium income, this paper constructs a multiple linear regression model to determine the specific influencing factors of life insurance premium income ,and puts forward some countermeasures and suggestions for the insurance company to formulate the development strategy and scheme of life insurance.

Literature Review

The life insurance premium income measures the personal insurance industry development level and the overall size. Based on historical data of China, insurance premiums are usually closely linked with an international or regional per capita GDP, per capita disposable income, population quantity, population bring-up ratio, degree of social security development, education level, social customs and other factors.

The analysis of Menahem and Yaari (1965) studied the demand for life insurance is the early study of influence factors of life insurance premium income. Their research results showed that the factors affecting life insurance demand are people's motivation to eliminate the uncertainty of life expectancy, because of the uncertainty of life span, people tend to consume now, and life insurance can eliminate the influence of life uncertainty on consumption habits. Since then, Hakansson (1969), Karni (1986), Fischer (1973)'s researches have shown that the main role of life insurance is to eliminate the risks caused by the uncertainty of life expectancy, and that life insurance is a means of saving and safeguarding, rather than investing through life insurance. Lewis's research shows that life insurance is also purchased to protect defendants, such as family members, so the risk preference of the family members also affects the income of life insurance premium.

In the study of the influencing factors of life insurance premium income, Dale_B.Truett and Lila.J.Ttuett (1990) found that there is a positive correlation between life insurance premium income and per capita GNP, and that countries with lower GNP has relatively high income elasticity of the demand for life insurance. Browne Mark J also found that national income and personal insurance premium income are positively correlated.

Sun Qixiang (1997) analyzed the total amount of bank deposits affecting insurance premium income, and established a linear regression model of insurance premium income and savings deposit balance to study the influencing factors of insurance premium income. Zhuo Zhi (2001) 's research studied the data of life insurance industry from 1986 to 1995, and established a linear regression equation, which showed that the level of economic development would affect the income of life insurance premium.

However, due to the difference of statistical caliber, research points and research tools, some research results have opposite conclusions. Therefore, on the basis of previous studies, this paper chooses several explanatory variables that have a significant impact on personal insurance premium income, to build a suitable linear regression model which fits china's current situation.

Analysis of Influencing Factors

The Choice of Dependent Variables

This paper chooses the value index of life insurance commodities--premium income, as the dependent variable to measure the demand for life insurance.

The Choice of Independent Variables

From the perspective of influencing factors of life insurance premium income, the main influencing factors include macroeconomic factors and population factors. Specifically, it includes the following factors:

The Level of Economic Development

Insurance is the product of the development of social productivity to a certain stage, and with the improvement of economic development level, the income level determines the development level of the insurance industry in a country. The growth of gross domestic product is a decisive factor in the demand for life insurance. The demand for life insurance is positively correlated with the level of economic development. The more GNP, the more insurance demand. Stable economic growth can better guarantee the higher demand for life insurance. This study selects GNP as a measure of economic development. It

Income Level

The higher the level of economic development, the higher people's disposable income, the higher the value of insurable subject matter, the stronger people's ability to pay, which leads to the increase of people's disposable income used for daily consumer goods, so that people can buy insurance with idle assets to meet the needs of security. On the other hand, when personal disposable income increases, people's savings increase so that they can accumulate wealth from insurance, thus reducing the demand for life insurance. Therefore, the relationship between premium income and income level of life insurance should depend on their strength. In this study, the per capita disposable income of urban households is selected as a measure of income level.

Population Size

Human life and physical body are the subject matters of life insurance. Population size and population structure are closely related to the demand of life insurance. When the population increases, the number of people who encounter accidental injuries or deaths or suffer from diseases will increase, thus increasing the demand for life insurance. On the other hand, with the increa se of population, the number of people with risk awareness and insurance awareness will also increase, which will also increase the demand for life insurance. Generally speaking, there is a positive correlation between the number of people and the demand for life insurance. Population structure also has an impact on the demand for life insurance. Specifically, the higher the dependency ratio of the elderly in a country, the higher the demand for life insurance. The population size is chosen as the measurement index in this study. It

Inflation Level

Because of the long-term nature of life insurance, the payment time of life insurance premium lags behind the payment time of insurance premium. Therefore, if inflation occurs, the depreciation degree of insurance premium will be greater than the depreciation degree of actual insurance premium, which will reduce people's demand for life insurance. On the other hand, because of inflation, the real value of assets held in people's hands will be reduced, which will lead to the reduction of real income at their disposal, thus indirectly leading to the reduction of people's demand for life insurance. Therefore, this paper chooses the fixed-base consumer price index as the measure index of inflation level, which is used to express the inflation rate.

Saving Deposits of Residents

On the one hand, the increase of residents' saving deposit balance means the increase of residents' disposable income, which correspondingly increases people's demand for life insurance products. On the other hand, With the same disposable income of residents, life insurance as an insurance product is a financial product, it has a certain substitution relationship with other types of financial products. Therefore, if the increase of residents' savings deposit balance means the replacement of life insurance products, people will increase their savings and reduce the demand for life insurance. The relationship between personal insurance premium income and resident savings deposit balance depends on the strength of the two party. In this study, the end-of-year balance of RMB savings deposits of urban and rural residents is selected as the measurement index of residents' savings deposit balance.

The Level of Social Welfare and Protection

Social security and life insurance are important components of the social and economic security system. The level of social security also has a certain impact on the demand for life insurance. The higher the level of social security development, means that the greater the security people get through social security, the lower the demand for personal insurance, that is, the more obvious the restrictive effect on the development of personal insurance. The expenditure of state finance for pensions and social welfare is the loss of workers due to old age, illness, the state and society provide basic living securities. On the one hand, the increase of state expenditure on pensions and social welfare will reduce the demand for life insurance, but on the other hand, obtaining state financial support will correspondingly increase the level of disposable income, thereby increasing the demand for life insurance. Therefore, the relationship between life insurance premium income and social welfare and security level should depend on the strength of the two. This study selects social security expenditure as a measure of social welfare and security level. Among them, social security expenditure includes pension and social welfare relief, social security subsidy expenditure and retirement expenditure of administrative institutions. Before 1996, retirement expenses were not covered by administrative expenses.

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