University of California at Berkeley and The Wharton School, University of Pennsylvania. This study was suggested by David R. Klock and David Denslow. The author is indebted to James Wilcox, Richard Holton, Robert G. Harris, Joe Fields, Michael R. Haggerty, and especially J. D. Cummins, and an anonymous referee for helpful comments and suggestions on earlier versions of this manuscript. Steve Blough and Nicholas Economides provided able statistical assistance. Remaining errors are the sole responsibility of the author.
The Price Elasticity of Demand for Whole Life Insurance
Article first published online: 30 APR 2012
1985 The American Finance Association
The Journal of Finance
Volume 40, Issue 1, pages 225–239, March 1985
How to Cite
BABBEL, D. F. (1985), The Price Elasticity of Demand for Whole Life Insurance. The Journal of Finance, 40: 225–239. doi: 10.1111/j.1540-6261.1985.tb04946.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
In this study a real price index is created for whole life insurance sold in the United States from 1953 to 1979. New purchases of whole life insurance are shown to be negatively related to changes in this cost index, contrary to what has been widely accepted in the insurance literature, but consistent with economic theory. The existence of strong price elasticity of demand for whole life insurance does not ensure, however, that the insurance industry manifests a high degree of price competition.