A Panel Regression Analysis of Macroeconomic Determinants of Life Insurance Companies in Asean Economic Community

Abstract

Life insurance has become an increasingly important component of the financial sector over the last 40 years by providing a variety of financial services for consumers. It has also become a major source of investment in the capital market. Although the life insurance industry in Asia has emerged from the financial crisis stronger than ever, it has not escaped unchanged. Among the three approaches of panel regression analysis, the fixed panel regression results showed that disposable income, government effectiveness, old dependency ratio and young dependency ratio were positively correlated and had a significant effect on life insurance penetration. Based on the regression results, the government sector of Asean Economic. Community must focus on strengthening trust in the insurance sector by improving the efficiency of the legal system and contract enforceability, also the government could provide workshop, training and seminars that will help the insurance sector to promote long term and uncertain risk investment. In addition, the government could develop a nationwide structural plan that stresses health promotion and disease prevention activities through hospital and health care expansion. Amendments of life insurance products that will be fitted in the budget and need of each Asean community can be addressed by the insurance companies. Also, they are advised to sponsor some school and university activities to increase public awareness about the importance of having a life insurance under the guidelines set by the Department of Education. This research is limited only to year 2000 to 2015 data, and few macroeconomic variables. Future researchers should focus on other macroeconomic factors which are not touched in this study. The researcher would like recommend to future researchers to include in their variable like savings, price of insurance, and pension to find out other significant factors that affect the life insurance penetration in Asean Economic Community.