Volume 8, Issue 2 (Summer 2025)
Iran J Health Insur 2025, 8(2): 132-147 |
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Ghafourboroujerdi M, Mousavi M H, Safarzadeh E, Safari A. Modeling Unobservable Variables in Life Insurance Demand in Iran. Iran J Health Insur 2025; 8 (2) :132-147
URL: http://journal.ihio.gov.ir/article-1-374-en.html
URL: http://journal.ihio.gov.ir/article-1-374-en.html
1- Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran
2- Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran ,hmousavi@alzahra.ac.ir
3- Department of Innovation and Development of New Businesses, Central Insurance of the Islamic Republic of Iran, Tehran, Iran
2- Department of Economics, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran ,
3- Department of Innovation and Development of New Businesses, Central Insurance of the Islamic Republic of Iran, Tehran, Iran
Abstract: (747 Views)
Introduction: Life insurance serves as a pivotal instrument for providing households with psychological and financial security against aging-related challenges and loss of breadwinners, while also functioning as a significant financial institution for large-scale economic investments. Effective planning and policymaking in life insurance require precise identification and analysis of demand determinants. These factors can be categorized into: a) Observable economic variables, and b) Unobservable factors such as risk aversion, preferences, culture and lifestyle, emotions, financial and insurance literacy.
Methods: To estimate the impact of unobservable variables, we employed the “underlying trend” concept within a Structural Time Series framework for modeling life insurance demand.
Results: Unobservable variables (underlying trends) exhibit statistically significant effects on life insurance demand in Iran; For the final year of the study, the significant trend level value is 13/23, and its constant slope is 0/085. Beyond premium prices and income, other significant variables include stock prices, free-market exchange rates, gold prices, and housing prices - all consolidated as a common factor termed Financial Conditions Index. The price and income elasticities are -0/83 and 0/68, respectively. Therefore, the demand for life insurance is inelastic with respect to both price and income.
Conclusion: Life insurance demand is influenced by unobservable factors. Sustainable market growth necessitates targeted policies aligned with socio-cultural characteristics. Ultimately, demand growth cannot be achieved solely through pricing mechanisms; it also necessitates the consideration of latent behavioral layers of consumers.
Methods: To estimate the impact of unobservable variables, we employed the “underlying trend” concept within a Structural Time Series framework for modeling life insurance demand.
Results: Unobservable variables (underlying trends) exhibit statistically significant effects on life insurance demand in Iran; For the final year of the study, the significant trend level value is 13/23, and its constant slope is 0/085. Beyond premium prices and income, other significant variables include stock prices, free-market exchange rates, gold prices, and housing prices - all consolidated as a common factor termed Financial Conditions Index. The price and income elasticities are -0/83 and 0/68, respectively. Therefore, the demand for life insurance is inelastic with respect to both price and income.
Conclusion: Life insurance demand is influenced by unobservable factors. Sustainable market growth necessitates targeted policies aligned with socio-cultural characteristics. Ultimately, demand growth cannot be achieved solely through pricing mechanisms; it also necessitates the consideration of latent behavioral layers of consumers.
Type of Study: Research |
Subject:
Special
Received: 2025/05/1 | Revised: 2025/10/19 | Accepted: 2025/08/13 | ePublished: 2025/09/30
Received: 2025/05/1 | Revised: 2025/10/19 | Accepted: 2025/08/13 | ePublished: 2025/09/30
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