.1 Similar studies In this section wewill show the importance of what the past literature has studied with regardsto the relationship of life insurance and its effects on the economy of variouscountries. It is important to note thatresearcher in the field such as (Campbell 1980),(Outreville 1996) and (Ward and Zurbruegg 2000) have all identified the significant positive impact that the level ofincome has on the economy of a country. For instance, (Campbell 1980) claims that the force that drives consumers to purchase life insuranceis because they feel the need to protect the life of dependents.If we look at comparison of specificcountries, for instance the study by (Truett 1990) whereby they compare the consumption growth pattern of life insurance specificallyin Mexico and United States during the periods of 1964 to 1984. Thereassumptions were based on the argument that abstract level demand depends onfactors such as insurance prices, level of individualincome, availability of substitutes, among other individual and environmental characteristics.They even further investigated with demographic variables such as educationlevel, age of individuals and size of population with age ranging from 25 to64.
They were able to conclude that the higher income inelasticity of demandfor life insurance was present in Mexico at low income levels. As a matter offact, age, income and level of education were important factors to beconsidered as they affect the demand for life insurance in both Mexico andUnited States.(Outreville1996)on the other hand, considers a wide array of countries and analyses data from1986 covering a range of 48 countries in order to examine the relationshipbetween financial development and the development of the life insurance sector.Outreville indicates that there is a significant positive relationship betweenthe development of the life insurance market and financial development. Hisfindings also indicate that the relationship becomes negative in the case ofanother financial development variable for instance GDP.
Furthermore, studies reveal that there is a negativerelationship between life expectancy and life insurance. Hence, highermortality rate should result in higher life insurance activity. On the otherhand, (Outreville 1996)and (Ward andZurbruegg 2000)studies reveal that there is a positive relationship between life expectancyand life insurance premiums.