Demand for Life Insurance in Malaysia: An Ethnic Comparison Using Household Expenditure Survey Data

• Published in: Asia-Pacific journal of risk and insurance 2014-07, Vol.8 (2), p.179-204
• Main Authors: Tan, Andrew K. G., Yen, Steven T., Hasan, Abdul Rahman, Muhamed, Kamarudin
• Format: Article
• Language: English
• Subjects: Consumer protection; Economic growth; Ethnicity; Expenditures; GDP; Gross Domestic Product; Health insurance; Households; Insurance industry; Insurance policies; Insurance premiums; Islamic countries; Life insurance; Malaysia; Minority & ethnic groups; Population; Sociodemographics; two-part model
• ISSN: 2194-606X; 1793-2157; 2153-3792
• DOI: 10.1515/apjri-2013-0007

This study examines the socio-demographic determinants of household expenditures on life insurance in Malaysia. Cragg’s two-part regression model is applied to data of 20,313 sample households from the 2009–2010 Malaysian Household Expenditure Survey to examine the determinants of purchase decisions and expenditure level for life insurance. Results of marginal effects, segmented by ethnicity, suggest that while socio-demographic factors are important determinants of life insurance demand, the effects vary across ethnic groups in Malaysia. For instance, wealth and education levels are associated with purchase likelihoods and amount of life insurance premiums purchased across ethnic groups. However, household size, regional location, urbanicity, and occupation type are associated with life insurance demand within certain ethnic groups only. Based on these results, several observations are noted vis-à-vis the life insurance market in Malaysia.