Ghadir MAHDAVI - Assistant Professor, ECO college of Insurance, Allameh Tabatabaei University

The main logic behind the demand for life insurance is to hedge against the labor income uncertainty due to premature death of a wage earner. To derive the optimal life insurance demand, the expected utility function subject to stochastic wealth accumulation process is optimized. Examining a class of CRRA utility function, the effect of explanatory factors on the life insurance demand is discussed. In the practical part, the Japanese life insurance demand function is estimated and the effectiveness of different explanatory factors is examined. The practical work shows that the price of life insurance, GDP, dependency ratio, and social security have significant effect on the demand for life insurance in the Japanese marketplace. While the effects of education, real interest rate, inflation, and life expectancy are insignificant and negligible.This study gives a general example for the study of life insurance industry which can be used for investigating Iranian Life Insurance Industry. The theoretical method, the empirical work, the methodology and perspectives can be applied for Iranian life insurance market and help the industry in marketing policies as well as sophisticated research prospects

Life Insurance Demand, Uncertainty, Risk Aversion, and Stochastic Model