Life insurance and income growth: the case of Sweden 1830-1950

In this paper we provide an analysis of the life insurance market in Sweden from the early nineteenth century to the mid-twentieth century. We consider determinants put forward in the financial history literature to explain the growth of life insurance. The paper shows that income elasticity of demand gives a fairly good approximation of the development in the twentieth century, while the development of risk and insurance innovation among other things need to be taken into account to explain the growth of life insurance in the nineteenth century. The price of life insurance, measured as the overhead-to-premium-income ratio, remained fairly constant during the second half of the nineteenth century, while the risk, as indicated in terms of crude mortality rates and its volatility, did decline. This probably improved the return on life insurance savings and further helped the entry of new firms. The average premium size was reduced to enable the diffusion of life insurance to workers.