Net demand for insurance products is linked to the cost of insurance, loss specification, and clients' income and levels of risk aversion. Insurance can be classed as a normal good, where the demand curve moves outward with increases in income, in only a small number of cases. Risk aversion, loss measures, and income elasticity of demand have an impact on whether demand rises or falls as income rises, and the range of prices over which this applies.

I. Introduction

The expected utility hypothesis predicts that, when the price of insurance is actuarially fair to the consumer, a ...

<)0 implies [Character no Conversion][s.sup.*]/[Character no Conversion] [I.sup.E]><1 and [Character no Conversion][s.sup.*]/[Character no Conversion][I.sup.E]><0, at the point of rotation [Character no Conversion][s.sup.*]/[Character no Conversion][I.sub/E] = 0 and below the point of rotation [Character no Conversion][s.sup.*][Character no Conversion][I.sup.E]><)0. These are the same as the conditions where [epsilon]><0). Friend and Blume[7] found evidence of increasing relative risk aversion but concluded that "Corrections for various deficiencies of the theoretical model, the econometric analysis and the sample data would on balance tend to make the results closer to constant proportional risk aversion" ([eta.sub.a] = 0). Siegel and Hoban[13], using a total wealth measure that was more comprehensive than the earlier studies and with a sample that contained more variation in wealth, found evidence of increasing relative risk aversion (fi,><)O, which is equivalent to [eta]><)1. The conditions for [epsilon]><) in terms of the arc income elasticity of absolute risk aversion ([tau.sub.a]) and [sigma] are: [epsilon]><)0 as [tau.sub.a] + [sigma]>