2.1. negative relationship was expected. They were

2.

1. INTRODUCTION:In this chapter Ihighlights the research works conducted in Pakistan as well as in some other developedcountries on the determinants of life insurance demand and i discuss thesummary of all literatures reviews in last.Yaari (1965) was the first to give a theoreticalframework to analyze the demand for life insurance.  Problem of uncertainty in the life insurancedemand was firstly explained by him. He introduced the model of life-cycleutility of a customer combined with removing the optimal consumption andoptimal saving plans of a customer and according to his study’s outcome personenhances his estimated utility by purchasing the insurance. In his researchstudy, he highlighted the lifetime uncertainty of a consumer in his model,ignored all other uncertainties which a customer ought to face (like anuncertainty of future income). His study results showed the uncertainty of alife expectancy determines the life insurance consumption.Mantise & Famer (1968) examined the demand forlife insurance in U.

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S in 1967.They used the U.C.L.A.

Biomedical 03R-MultipleRegression technique to analyze the life insurance demand by taking dependentvariables: the relative price of life insurance; number of marriages; number ofbirths; personal income; population and employment in their study. They foundthat marriages and life insurance demand are positively related while thenegative relationship was expected. They were expecting that married men demandmore life insurance than single men because they want to secure the death risksof their dependents family breadwinner. The empirical results might be explainedthat unmarried people have disposable income more and thus have more resourceto purchase life insurance than those married.

They recommended once this forecastcompleted less than one man day of skilled man will can judge that either this studywill be good estimate for companies or not. Fortune (1973) examined the Unified StatesInsurance market for the seven years starting from 1964 to 1971.The variableswhich are examined by him in his study were income level and real rate ofinterest. The investigation discovered that there is high level of relationshipbetween the consumption of life insurance, income and the real rate of interest.His work analyzed the expected utility theory of choice under uncertainty fordemand of life insurance. His investigation came with conclusion that theconsumption of life insurance is determined by income, non-human assets and theinterest rate.

Karni & Zilcha (1986) analyzed risk aversion in the theory of life insuranceby the Fisherian model in Jerusalem and made the use of the measure ofrisk aversion in their model. They used that model which was developed by Yaari(1965). They found that the person is free in gathering debt, its main role wasto improve the opportunities for borrowing and hence to increase the possibleconsumption set. They discussed the suggestions of differences in the degree ofrisk aversion for the optimal choice of life insurance and lifetimeconsumption.

Lewis (1989) analyzed the life insurance demand byusing the life insurance background already introduced by Yaari in 1965, hemakes the addition of the preferences of other members of the household in hismodel. According to his study, decision making about insurance depends on thedependent members of the family. Therefore, the aggregate sum of life insurancedemand by the policyholder (assuming a spouse is an essential worker) dependson expansion of the consumption of wife and off-springs (beneficiaries). Thus,they can boost their utility of the satisfaction by making the maximum level ofspending on life insurance.

His results indicated that purchases of lifeinsurance can maximize with the current value of consumption of policyholders,risk aversion and probability of insured’s (husband’s) death. Truett & Truett (1990) analyzed socialand demographic determinants of life insurance demand in Croatia which was a comparativestudy of life insurance demand in two countries Mexico and the United Statesfor time-period of twenty year. They collected their data from a sample of 95people.

They came out with outcome that the variables such as age, education,and level of income determined the demand for life insurance in both countries whilegender, marial status and number of family members do not affect the lifeinsurance demand and found that in Mexico the income elasticity of demand forlife insurance is much higher than in the United States. These results hadrecommendations on decision makers on level of both macroeconomic and insurancecompanies. On the level macroeconomic, decision makers ought to make thatpolicies which rise the employment and encourage the education to increase lifeinsurance demand especially in case of having lower pensions and less othersocial welfare provisions. on the other hand, life insurance companies shouldmainly focus on planning their distribution channels i.e., should utilize bancassurance more in distributing their products. The future researchers aresuggested to broad the elements of social and demographic factors for expectedlifetime, urbanization, and social welfare system.Browne and Kim (1993) did the examinationon the uptake of life insurance in six Islamic countries for time-period of 1980-1987.

The main variables which taken in their model were income, anticipatedinflation rate, education level, dependency ratio, life expectancy, religion,policy loading charge, price of life insurance and social security to find themain factors which influence life insurance consumption. The study found thatthere is a direct relationship between life insurance and Gross DomesticProduct (GDP) and social security and an inverse relationship with inflationand price of life insurance.  Gandolfi et al. (1996) examinedGender-Based Differences in Life Insurance Ownership To find the associationbetween macroeconomic variables and studied the general viewpoint of lifeinsurances in the US for the year of 1984. They found that income is the mostessential determinant of extra security utilization.

The other which were foundto have influence on demand for life insurance were age, instruction, home proprietorship,and size of family. They also found that life insurance consumption can beaffect by contributions to household production.Rubayah et al. (2000) examined thestability of relative efficiency in demand of life insurers and takafuloperators in Malaysia to studied the life insurance demand for a time-period oftwenty-six years from 1971 to 1997, by making use of the set of policies asdependent variable and set of macroeconomic indicators as independentvariables.

They found that income and life insurance demand had a directrelationship and there was statistically positive association between inflationand the consumption of life insurance. While personal savings, short-terminterest rate were indirectly related with demand for life insurance, but currentinterest rate had no strong influence on life insurance consumption. Theysuggested that government should force these factors to increase the lifeinsurance demand.

Bernheimet al. (2001) analyzed the issue of the linkage between the life insurancedemand and financial vulnerability of the households of an older age with thetopic: are life insurance holdings related tofinancial vulnerabilities?  Vulnerability demonstrates the level offamily affectability to the salary lost after death of a companion. Theyutilized 1995 survey of consumer finances already developed life-cycle modelsand concluded with different results: Bernheim et al. (2001) came withconclusion that demands for life insurance does not affect the financialvulnerability. They 

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