.1 Similar studies

In this section we
will show the importance of what the past literature has studied with regards
to the relationship of life insurance and its effects on the economy of various
countries.

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It is important to note that
researcher in the field such as (Campbell 1980),(Outreville 1996) and (Ward and Zurbruegg 2000) have all identified the significant positive impact that the level of
income has on the economy of a country. For instance, (Campbell 1980) claims that the force that drives consumers to purchase life insurance
is because they feel the need to protect the life of dependents.

If we look at comparison of specific
countries, for instance the study by (Truett 1990) whereby they compare the consumption growth pattern of life insurance specifically
in Mexico and United States during the periods of 1964 to 1984. There
assumptions were based on the argument that abstract level demand depends on
factors such as insurance prices, level of individual
income, availability of substitutes, among other individual and environmental characteristics.
They even further investigated with demographic variables such as education
level, age of individuals and size of population with age ranging from 25 to
64. They were able to conclude that the higher income inelasticity of demand
for life insurance was present in Mexico at low income levels. As a matter of
fact, age, income and level of education were important factors to be
considered as they affect the demand for life insurance in both Mexico and
United States.

(Outreville
1996)
on the other hand, considers a wide array of countries and analyses data from
1986 covering a range of 48 countries in order to examine the relationship
between financial development and the development of the life insurance sector.
Outreville indicates that there is a significant positive relationship between
the development of the life insurance market and financial development. His
findings also indicate that the relationship becomes negative in the case of
another financial development variable for instance GDP.

Furthermore, studies reveal that there is a negative
relationship between life expectancy and life insurance. Hence, higher
mortality rate should result in higher life insurance activity. On the other
hand, (Outreville 1996)
and (Ward and
Zurbruegg 2000)
studies reveal that there is a positive relationship between life expectancy
and life insurance premiums.