Financial Instability and Life Insurance Demand

The purpose of this research is to discuss Japanese financial instability and both private life insurance and public life insurance (Kampo) demand. At the same time, we also consider Kampo’s main role and what Kampo should be as an insurance service provider in the future. From empirically estimating private life insurance and Kampo demand functions using household-level data provided by the Postal Services Research Institute, the authors find that differences in income, children, pension and knowledge affect households’ decisions on the purchase of life insurance products. Income and financial assets also appear to have significant effect on the purchase of private life insurance products and Kampo. However, pension and bankruptcy experience appear to have an impact only on Kampo, while age (less than 40) and occupation (public official) factors affect only private life insurance. Dummy variables representing insurer comparison, knowledge and bankruptcy experience are not found to have any significant effect on decisions concerning private life insurance. The authors also conducted simultaneous estimations to examine the reasons why households with private life insurance products additionally purchase Kampo and vice versa. The results indicate that differences in income, children and bankruptcy experience variables do not affect the decision-making process, and that a knowledge dummy has a negative impact on additional purchases.