INS533LIFE & HEALTH INSURANCE

FACTORS AFFECTING LIFE AND HEALTH INSURANCE

CONSUMPTION( ECONOMIC FACTOR)

“Pushing Beyond Boundaries”Mohammad Nazaruddin bin Azmi

2012654618Asma Liyana binti Ja’afar2012241896Nur Fatehah binti Abdul Razak

2012255522

2

WHAT IS ECONOMY?

Study of production and consumption of goods and the transfer of wealth to produce and gain those goods.

Explains how people interact within markets to get what they want or achieve certain goals.

Driving force of human interaction.

3

WHAT IS ECONOMIC VARIABLES?

Elements that which any changes toward its will give significant impact toward economy.

May be direct or indirect. What the economic variable that you

know?

4

ECONOMIC VARIABLES

Income Per Capita Inflation

Insurance Sector

Development

Social Security System

5

1) INCOME PER CAPITAo Ratio of the total disposable income of

the country over the number of population.

6

CONT’ Relationship: Demand of insurance rise

with the level of income. Reason :

1. Individual consumption and financial strength increase along with income.

2. Life insurance may be a superior goods.

3. Reduction of overhead cost. Instrument for measurement : Nominal

GNI over Number of Population

7

2) INFLATION

o General rise in prices measured against a standard level of purchasing power.

8

CONT’ Relationship: Negative relationship with

life insurance consumption. Reason;

1. Insurance provide monetary benefit.

2. Unable to provide sufficient fund for investment.

Instrument for measurement : Customer Price Index (CPI).

9

3) INSURANCE SECTOR DEVELOPMENT

Relationship : Positive correlated with the life insurance consumption.

Reason;

1. Financial strength & stability of insurance company - ensure good return in policy holder investment.

2. The development through merging of local & foreign insurance company.

3. Well-functioning insurance company may increase the confidence of consumers toward insurance product and return.

10

4) SOCIAL SECURITY SYSTEM Definition: Welfare policies and practices in one country. Example ; Pension

Scheme for civil servant & Employee Provident Fund(EPF). Relationship : The size of the country’s social security gives negative impact

towards the demand of life insurance.

The size of social security system refer to the amount of contribution that government and private sector made to secure the continuity of earning for those who has retired.

Present contribution ; Pension – 50% of the last salary .

EPF – 11% from employee and 13% from employer.

2008 2009 20109,0009,500

10,00010,50011,00011,50012,000

10,022 10,146

11,515

TOTAL PENSION AND GRATUTIES

TOTAL PENSION AND GRATUTIES

No. of pensioners

Year

11

CONCLUSION

Tremendous effect toward the consumption of life insurance product and vice versa.

Responsibility of the insurance industry. Insurance as a provider of financial

service to customer.

12

REFERENCES

What Is Economics? A Definition Of Economics. Retrieve On 13th Oct 2012, From Http://Www.Whatiseconomics.Org/

MALAYSIA INFLATION RATE. RETRIEVED ON 13TH OCT 2012, FROM Http://Www.Tradingeconomics.Com/Malaysia/Inflation-cpi

Economic, Demographic, And Institutional Determinants Of Life Insurance Consumption Across Countries. Thorsten Beck And Ian Webb. Retrieved On 13th Oct 2012, From http://Www.Iifdc.Org/Pubs/Beck+webb.Pdf