Does Fear Promote Life Insurance Consumption? An International Analysis

ABSTRACT In this paper, we empirically test the conventional belief that people increase their spending on life insurance when the level of fear increases. Using a self‐constructed fear index, based on murder rate, violent crime rate and early death rate, we find robust evidence from 28 developed countries consistent with a positive effect of fear on life insurance consumption. Similar analysis based on data from 25 developing countries, however, indicates a negative effect. Our findings indicate that people living in rich nations increase their spending on life protective measures to cope with intensifying risks in their lives, whereas those residing in poor nations simply choose to take those risks themselves. Results provide valuable inputs for not only multinational life insurers but also governments around the world, especially in less developed countries, to promote policies supporting low‐income earners so that they can afford life insurance to protect their families, especially during the time of need such as the COVID‐19 pandemic period.