Life insurance uptake in predominantly informal economies: a case of Zimbabwe.

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.