Explaining Life Insurance Demand in Macedonia: Economic, Demographic, and Institutional Perspectives

Abstract: This study examines the key demographic, economic, and institutional factors that shape life insurance density in Macedonia. The aim is to identify the main drivers of insurance demand and assess how structural conditions influence long-term financial protection. The analysis uses annual time-series data for the period 2003–2024. Stationarity is tested using the Augmented Dickey–Fuller procedure. Long-run relationships are estimated with Fully Modified Ordinary Least Squares and Dynamic Ordinary Least Squares to account for cointegration, endogeneity, and serial correlation. Life insurance density increases with income growth, urbanization, financial sector development, and political stability. Ageing also strengthens demand. Higher youth dependency and income inequality reduce insurance uptake. Inflation shows a positive association, reflecting precautionary behavior during periods of uncertainty. Institutional weaknesses, especially corruption, significantly limit market development. Policies that support income growth, strengthen financial inclusion, expand rural access to insurance services, and improve governance can accelerate life insurance market development. Reducing corruption and enhancing institutional trust remain essential for sustaining long-term participation in insurance schemes.