Abstract

This paper discusses effects of inflation on life insurance. The purpose of this paper is not to debate pros and cons of inflation but rather to examine some of the available data in an effort to determine what, if any, empirical relationships exist between changes in the price level and the pattern of savings through life insurance. Three questions are considered for this purpose, the long-term relationship between the price level and savings through insurance, relationship that was held in the period 1946 to 1958 and the effect of inflation on the life insurance industry. It can be determined that there is no simple long-term relationship between the cost of living and the extent of savings through life insurance. In the post World War II period there has been a steady decrease in emphasis on savings through life insurance, which is partly a result of an adjustment from the abnormally high level of savings prevailing at the end of the war and partly due to a shift in the preference of insurance buyers to equity investments. Up to the present there is no indication that the life insurance industry has suffered as a result of the post-war inflation.