Abstract: In order to analyze the effect of legal environment on non-life insurance and life insurance, especially which is more likely to correlate with economic development, this paper selects 31 provinces in China from 1999 to 2011 as a sample. The empirical results demonstrate that, controlling some variables such as economic development and financial development, legal environment has a significantly positive effect on non-life insurance and life insurance development. And the effect of legal environment on non-life insurance industry shows a L-shape relationship with economic development, while for life insurance so is a U-shape. That makes more contributions to emphasis on the necessity and urgency of perfecting the legal system in these areas of lower economic development. Simultaneously, this paper solves simultaneous equations by three-stage least square methods to handle the hidden endogenous problem between insurance and economy. Finally, the result is very similar to before, supporting that legal environment affects regional insurance.