Must Urbanization Promote the Development of Life Insurance Industry? Heterogeneity Analysis Based on Human Development Index

Shi Xiaojun, Yan Zhu

Journal of Finance and Economics Vol. 43, Issue 06, pp. 105 - 117 (2017)  DOI:10.16538/j.cnki.jfe.2017.06.009

Abstract

Based on the analytical background that 95% of the increase in global urbanization population growth in future 50 years and resulting huge demand for human capital risk guarantee, this paper uses an extended model of classical life insurance demand proposed by Campbell's (1980) model, to classify urbanization types into two different modes, namely human-development enabling urbanization providing supporting facilities vs. human-development disenabling urbanization. And using the panel data of 151 countries from 1990 to 2012, it empirically tests the core hypothesis that only human-development enabling urbanization promotes life insurance demand, and makes a solution to inconsistent evidence of the promotion role of urbanization in life insurance demand in existing literature. It arrives at the conclusions as follows:firstly, 1 percent increase in unclassified urbanization results in 2.3 percent increase in life-insurance depth globally; secondly, the promotion role of human-development enabling urbanization in life-insurance depth has an increase of 31.2% over the one of human-development disenabling urbanization, while human-development disenabling urbanization even has a negative impact on life-insurance depth; thirdly, the test of mediating mechanism confirms that people-oriented urbanization advances the development of life insurance industry by promoting the accumulation of human capital; finally, in the process of urbanization, the growth of life insurance industry presents a S-shape rule, showing a golden state with accelerated development. Based on the research conclusions, it suggests that developing countries enlarge the development of human capital in the urbanization process, and seize the golden stage of the development of life insurance industry to provide adequate human capital risk guarantee.

Keywords

urbanization; life insurance; human development; human development index; human capital