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<p>India’s ongoing demographic transition, characterised by a rising median age, declining fertility, and lengthening life expectancy, is reshaping household saving behaviour and financial market structure. This study examines whether population aging drives expansion of India’s life insurance sector, measured by insurance density (individual new business premium per capita). Using a balanced state-level panel dataset covering 25 major Indian states across five time points from 2001 to 2023, we employ fixed-effects panel regression, instrumental variable estimation (IV-2SLS), rate decomposition, and structural equation modelling (SEM) to isolate demographic from socioeconomic effects. Results indicate that a one-year increase in the median age of the state population is associated with a 1.2% increase in insurance density, a relationship robust to controls for governance quality, infrastructure, income, urbanisation, and gender development. Rate decomposition further attributes approximately one-third of the observed growth in insurance density between 2001 and 05 and 2020–23 to the shift in age structure alone. SEM path analysis reveals that agriculture to non-agriculture workforce ratio serves as a dominant indirect channel linking demographic aging to insurance market expansion. These findings provide empirical support for the Second Demographic Dividend thesis in the financial services context and carry strategic implications for insurance firms adapting product portfolios to an aging Indian market from the Business Demographic perspective.</p>

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Population aging and life insurance density in India: linking age structure with financial markets using the business demographic approach

  • 期刊论文

  • 发表日期：

    2026年7月27日

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  • Laxmi Agarwal,
  • Srinivas Goli

摘要

India’s ongoing demographic transition, characterised by a rising median age, declining fertility, and lengthening life expectancy, is reshaping household saving behaviour and financial market structure. This study examines whether population aging drives expansion of India’s life insurance sector, measured by insurance density (individual new business premium per capita). Using a balanced state-level panel dataset covering 25 major Indian states across five time points from 2001 to 2023, we employ fixed-effects panel regression, instrumental variable estimation (IV-2SLS), rate decomposition, and structural equation modelling (SEM) to isolate demographic from socioeconomic effects. Results indicate that a one-year increase in the median age of the state population is associated with a 1.2% increase in insurance density, a relationship robust to controls for governance quality, infrastructure, income, urbanisation, and gender development. Rate decomposition further attributes approximately one-third of the observed growth in insurance density between 2001 and 05 and 2020–23 to the shift in age structure alone. SEM path analysis reveals that agriculture to non-agriculture workforce ratio serves as a dominant indirect channel linking demographic aging to insurance market expansion. These findings provide empirical support for the Second Demographic Dividend thesis in the financial services context and carry strategic implications for insurance firms adapting product portfolios to an aging Indian market from the Business Demographic perspective.