A Cointegration Analysis of the Demand of Life Insurance in Malaysia

  • Natasha Najla Mohd Noor
  • Zahariah Mohd Zain
  • Masturah Ma’in
  • Nurul Ainun Ahmad Atory

Abstract

The expansion of the insurance industry has a profound impact on economic environments. History has shown that while the insurance industry's success is closely related to economic conditions, the life insurance sector has been able to thrive in many economic environments. The objectives of this paper are to examine the determinants and relationship of macroeconomics variables towards the demand of life insurance in Malaysia. Using time series data over the period 1988 to 2017, the empirical analysis shows that income per capita have a positive and significant relationship with the demand for life insurance in Malaysia. Savings rate and composite stock index have a negative and significant relationship with the demand for life insurance in Malaysia. However inflation rate is found to have no significant influence on the demand for life insurance in Malaysia. Engel Granger cointegration test reveals the existence of long run steady equilibrium. There is a long run co-integration relationship via Johansen-Juselius Cointegration test and Granger Causality test based on Vector Error Correction Model (VECM). This study also reveals the causality relationship among fundamental variables using VECM model. Insurance companies should be more involved in raising public awareness and knowledge of the insurance product to increase demand for life insurance in Malaysia. If the savings and investment aspect is made known, the promotional plan can become more successful rather than revealing the benefits after their death.

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Published
2020-03-31
How to Cite
MOHD NOOR, Natasha Najla et al. A Cointegration Analysis of the Demand of Life Insurance in Malaysia. International Journal of Advanced Research in Economics and Finance, [S.l.], v. 2, n. 1, p. 48-60, mar. 2020. ISSN 2682-812X. Available at: <https://myjms.mohe.gov.my/index.php/ijaref/article/view/8759>. Date accessed: 23 may 2024.
Section
English Section