30

obvious activity, as is life insurance, etc. On a societal level, the USA has the ability to think
about a defence for such far-away, unlikely risks as being hit by an asteroid. As a contrast, in
Ethiopia, the provision of every day sustenance for the widest social classes presents the
longest time horizon that they can foresee.
* * *
In the following, we will examine more closely some of the above factors (for example
material wealth, age, marital status) involved in the planning of the life cycle. But first we
want to find out why it is that we are dealing with the issue of the planning of the life cycle at
this particular time in our history.20
2.2. THE HUMAN LIFE CYCLE THROUGHOUT HISTORY
If we take a look at the changes of life expectancy in the western world in the last few
th
decades, the gradual, and, in the 20 century, highly accelerated growth of life expectancy is
very apparent. This tendency is shown in the following table as well.21

Country 1750- 1800- 1850- 1880 1900 1930 1950 1987

1759 1809 1859
England 36,9 37,3 40,0 43,3 48,2 60,8 69,2 74,5
France 27,9 33,9 39,8 42,1 47,4 56,7 66,5 76,1
Sweden 37,3 36,5 43,3 48,5 54,0 63,3 72,3 77,2
Germany - - - 37,9 44,4 61,3 66,6 74,8
Italy - - - 35,4 42,8 54,9 65,5 75,9
Netherlands - 32,2 36,8 41,7 49,9 64,6 71,8 76,8
Soviet Union - - - 27,7 32,4 42,9 64,0 69,4
USA (white population) - - 41,7 47,2 50,8 61,7 69,4 74,8
Australia - - - 49,0 55,0 65,3 69,6 76,0
Japan - - - 35,1 37,7 45,9 59,1 78,5

Table 2.1.: Life expectancy in various western countries (1750-1987)

Among some other things, one of the main reasons behind this increase in life expectancy
is the decline in the previously high rates of infant and child mortality. The historian Imhof
says the following about this issue based on a graph of XVIII-XIX. century statistics (also
outlined in his book):
The computer graph22 shows those who died each year in three dimensions, based on
their absolute age. The first thing that jumps out at the observer is the large black wall in the
background, which stands for the huge infant and child mortality of the time. Out of the
39251 people who died, no less than 12193, or almost a third were infants below the age of
one. If we add to this the number of deaths of children below the age of eight, we've already
reached half the total number of deaths (50,6%). The remainder is then pretty much evenly
distributed among the 9 to 90 year olds.

20
Todat, certain insurance companies are involved in the financial planning of the life cycle (see: M. Rimay
Andrea: Pnzgyi tervezs a nyugdjas vekre Megelzet az letsznvonal cskkense Npszabadsg,
1999. december 15.). Some support their sales of life insurance with complete life-planning programs, or with
acquisitional materials of such a nature (see. The satellite group of MBIT, or the acquisitional Ariadn fonala
(Ariadnes yarn)!), others with demonstrative figures based on life cycles (see, for example, the figure Emberi
lethelyzetek (Human life situations)on the website Hungria Biztost Rt.!).
21
Massimo Livi-Bacci: A vilg npessgnek rvid trtnete, Osiris Kiad, Budapest, 1999. p. 138.
22
Unfortunately this cannot be shown here.

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At no other point in time in the later life was there a grouping of deaths even nearly as
large. One person lived to twenty years of age, another to forty, the third to sixty, eighty, or
23
even ninety or older.
The observable increase in life expectancy beginning in the middle of the 18th century fits
into a more general trend, according to Livi-Bacci: "from chaos towards order". From this
time on "the order of mortality dictated by age became more stable. As opposed to the
chaos of earlier times, which were characterized by random and unforeseeable death, the
24
life processes started to become more orderly.
What do we mean by "orderly life processes"? First of all: children generally die later, than
their parents as opposed to the tendencies experienced up until the beginning of the 19th
century. Secondly: death has its own place, it does not occur randomly during a lifetime due
to war, epidemics, starvation, etc., but rather at the end of a "normal", we could say
"standardized" life cycle. By standardized life cycle we mean that a person experiences
within their own lifetime all the main stages of a life cycle (child, adult, and elderly stages).
The formation of the standardized life cycle was made possible by the increase in the
lifespan. The life expectancy at birth became sufficiently long during the 20th century such
that it became highly probable (in Hungary the probability that a newborn will live to age sixty
was 70% for men and 87% for women in 1998) that an infant born would reach elderly age,
or 60 years.
The evolution of a standardized life cycle had a major role in the starting of the planning of
individual life cycles. It is impossible to plan an individual life cycle without some certainty
about the basic frame of the life cycle. As long as death was uncertain, the "planning" of the
survival of the community (the greater family, earlier the village community, even earlier the
clan) was more characteristic than individual planning.
Accordingly, the planning of the life cycle as a separate financial service only appeared in
the last few decades in the western countries, and in Hungary it is just beginning to gain
ground nowadays.
2.3. LIFE PLANNING AND WEALTH
From the previous points, it is obvious that the ability for foresight is dependent, among
other things, on the degree of wealth. Experience shows two conclusions which can be seen
in large numbers:
1. The wealthier a country, the better foresight its citizens have
2. Within a country regardless of its economic situation -, the higher the status (and
thus the wealthier) the social class we look at, the more signs of foresight (and
future planning) we can observe.
According to one survey25 there is a strong correlation between the amount spent on
insurance and the level of the GDP.

23
Arthur E. Imhof: Elvesztett vilgok Hogyan gyrtk le eleink a mindennapokat s mirt boldogulunk mi
ezzel oly nehezen, Akadmiai Kiad, Budapest 1992. p.214-216. The quoted graph: The distribution of deaths
by age in the area of Berlin-Dorotheenstadt between 1715-1875.
24
Livi-Bacci: p. 134.
25
Dr. Kovcs Erzsbet: A biztosts fejlettsge Magyarorszgon, Biztostsi Szemle, 1999. Issue 11-12.,p.36-45.

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3000

2500 Japn

2000
letbiztostsi djbevtel/f ($)

USA
1500 Dni

1000
Ausztrlia

Magyarorszg
500

0
0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000
GDP/f ($)

Figure 2.1.: The relationship between GDP per capita and the amount of life insurance
per person in the OECD countries (with the exception of Luxembourg) in 1995
In figure 2.1 we can clearly see that:
The wealthier a country (so the higher its GDP per capita), the greater the
expenditure on life insurance per capita
The higher the GDP, the higher the fraction of it spent on life insurance26.
Some further examples of the ratio of life insurance/GDP: in 1995 the percentage of the
GDP spent on life insurance was 0.1% in Turkey, where the GDP per capita was 2747 USD,
in Hungary this was 0.72% with a GDP per capita of 4273 USD, and in Switzerland, where
the GDP per capita was 43 000 USD, this number was 6.66%.
We can regard the amount of life insurance as something that is positively correlated with
the degree of foresight.

26
This cannot be seen directly, but it can be calculated quite easily!

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In addressing the low ratio of insurance in the countries with low GDP, we can say that
while a country is relatively poor, the pressure to fulfil the primary needs (sustenance,
clothing, shelter) is so strong, that there are no resources left for higher-level needs, and we
can regard the security of older age as such a higher need. So the opportunity for
foresight/planning decreases at an increasing rate as wealth decreases. In the poorest
countries and social classes we can simply see people living from one day to another,
without any kind of foresight.
2.4. VARIATIONS OF THE LIFE CYCLE
Based on what was stated above: the basis for the planning of the life cycle is the evolution
of a standardized life cycle that is expected to be rather long, comprised of all the possible
life stages, as well as a population with a significant ratio of sufficiently wealthy people or
the development of a sizeable middle class.
In the planning of a concrete life cycle we must consider other important factors beyond the
lifespan and sufficient wealth, namely the family situation, which is related to age as well.
The following figure27shows the main variations schematically:

27
Source: Bauer-Bercs: Marketing p. 54. (based on Murphy-Saples [1979], p.12-22.!)

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> Middle-aged divorced, no

children

Young, divorced, no ^
children

>
^ > Middle-aged couple with no
children
>

>

>
Middle-aged
Middle-aged
> Young, married with > Young couple > > couple with no > Elderly > Elderly,
Young, single couple with
no children with children dependent couple single
children
children
^ ^ ^ ^
>

>

>
Middle-aged,
Middle-aged,
Young, divorced divorced with no
divorced with
with children dependent
children
children

>
Middle-aged, single

Figure 2.2.: Variations of the life cycle

JZSEF BANYR: LIFE INSURANCE