Abstract:
This study examines the determinants of life insurance penetration and density in Zimbabwe’s largely informal economy. It addresses challenges often overlooked by traditional economic models and proposes a penetration model to enhance life insurance adoption. Using the life cycle hypothesis and human capital theory as theoretical foundations, it develops a model to assess the effects of macroeconomic, demographic, and institutional factors. A positivist philosophical stance and deductive approach guide the quantitative analysis, which employs the Autoregressive Distributed Lag (ARDL) technique on macroeconomic data from 1990 to 2022. The findings reveal a significant positive long-run effect of the informal sector on penetration (β = 0.427, p < 0.05) but a negative effect on density (β = –0.362, p < 0.01), highlighting the dual role of micro-insurance and income instability. Central bank independence (β = 0.571, p < 0.01) and financial development (β = 0.388, p < 0.05) are key long-term enablers, enhancing institutional trust and market access. However, financial development shows a short-run diversionary effect (β = –0.217, p < 0.1). Per capita income positively affects long-run penetration (β = 0.349, p < 0.05) and triggers short-term density gains (β = 0.298, p < 0.05). Insurance literacy increases penetration (β = 0.311, p < 0.05) but reduces density (β = –0.273, p < 0.05), indicating a shift toward lower-cost, informed consumption. Unemployment (β = –0.402, p < 0.01) and age dependency (β = –0.316, p < 0.05) emerge as significant long-term barriers. Life expectancy negatively influences short-run uptake but enhances long-term density (β = 0.394, p < 0.05). The study proposes a robust,evidence-based model to inform insurance policy, product design, and financial inclusion strategies, with emphasis on regulatory reform, flexible premiums, and digital innovation. Future research should explore behavioural dynamics and household-level data.
