Culture Matters: Long-Term Orientation and the Demand for Life Insurance
A large body of literature addresses the determination of the economic, financial and institutional factors that significantly influence variations of life insurance demand across countries. Chui and Kwok (2008) included four cultural variables developed by IBM psychologist Hofstede and demonstrated that culture has a profound impact on life insurance consumption. We extend Chui and Kwok's work by analyzing the fifth Hofstede cultural dimension: Long-Term Orientation, a variable that scores countries based on adherence to Confucian principles such as perseverance and thrift, respect of tradition and family values, and honoring of parents and ancestors. After building a database that includes values of 17 variables for 27 countries over a period of 9 years, we apply an unbalanced panel GLS regression model to prove that Long-Term Orientation has a strong positive influence on life insurance demand. Additionally, two new variables, not used in previous life insurance literature, are also found to impact life insurance demand: a modified Herfindahl index and the use of a Common Law legal system. Several robustness tests confirm the importance of Long-Term Orientation, leading to the conclusion that life insurance consumption is bound to increase rapidly in Asia, as its GDP per capita increases.
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Volume (Year): 5 (2011)
Issue (Month): 2 (July)
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- Mansour Javidan & Robert J House & Peter W Dorfman & Paul J Hanges & Mary Sully de Luque, 2006. "Conceptualizing and measuring cultures and their consequences: a comparative review of GLOBE's and Hofstede's approaches," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(6), pages 897-914, November.
- Donghui Li & Fariborz Moshirian & Pascal Nguyen & Timothy Wee, 2007. "The Demand for Life Insurance in OECD Countries," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(3), pages 637-652.
- Sojung C Park & Jean Lemaire & Choong Tze Chua, 2010. "Is the Design of Bonus-Malus Systems Influenced by Insurance Maturity or National Culture? — Evidence from Asia," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(S1), pages 7-27, December.
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