Citation
Wong, Mei Foong
(2002)
Life Insurance Demand in Malaysia.
Masters thesis, Universiti Putra Malaysia.
Abstract
Malaysia has been identified as having the second highest saving in the world; however, less
than 30 percent of Malaysia's total population of about 6.4 million is insured in 1999. The
fact that a large section of the society remains uninsured means that any sudden loss of
property or any personal misfortune will suffered a reduction in living standard and poverty.
Besides that, savings generated by life insurance companies are crucial in providing long term
savings for sustainable economic development and growth of the nation. Nevertheless,
the life insurance industry in Malaysia has not been thoroughly investigated Therefore, the
objectives of this study are to identify the factors contributing individual purchasing
behaviour of life insurance in Malaysia, and to investigate the macroeconomic factors
influence on the aggregate demand of life insurance in Malaysia. Since the demand analysis
is an important component of an attempt to understand the forces driving industry growth -
its past and future prospects.
The empirical findings of individual purchasing behaviour of life insurance indicated
significant demographic variables including the presence of children in the household, the age of the consumer, and their income level. While, the empirical finding of the multivariate
Granger-causality test suggests that national income can be a stimulus to the life insurance
demand in the short-run. The results of Granger-causality test also indicate that there is bidirectional
causality between the price of life insurance and life insurance demand in
Malaysia. Furthermore, the empirical results also showed that the interest rate significantly
influence the life insurance demand in Malaysia. However, the causality tests of this study
did not detect a significant short-run direct causal relationship between inflation rates and life
insurance demand in Malaysia. Last but not least, the finding of the Data Envelopment
Analysis (DEA) approach indicated the demand for life insurance in Malaysia is closely
linked to the efficiency scores of insurance companies. Over the empirical years, most of the
local constituted insurance companies operate in inefficiency state compared to the foreign
Insurance companies.
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