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Determinants of Insurance Penetration in West African Countries: A Panel Auto Regressive Distributed Lag Approach

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  • Odunayo Olarewaju

    (Department of Management Accounting, Faculty of Accounting and Informatics, Ritson Campus, Durban University of Technology, Durban 4000, South Africa)

  • Thabiso Msomi

    (Department of Management Accounting, Faculty of Accounting and Informatics, Ritson Campus, Durban University of Technology, Durban 4000, South Africa)

Abstract

This study analyses the long- and short-term dynamics of the determinants of insurance penetration for the period 1999Q1 to 2019Q4 in 15 West African countries. The panel auto regressive distributed lag model was used on the quarterly data gathered. A cointegrating and short-run momentous connection was discovered between insurance penetration along with the independent variables, which were education, productivity, dependency, inflation and income. The error correction term’s significance and negative sign demonstrate that all variables are heading towards long-run equilibrium at a moderate speed of 56.4%. This further affirms that education, productivity, dependency, inflation and income determine insurance penetration in West Africa in the long run. In addition, the short-run causality revealed that all the pairs of regressors could jointly cause insurance penetration. The findings of this study recommend that the economy-wide policies by the government and the regulators of insurance markets in these economies should be informed by these significant factors. The restructuring of the education sector to ensure finance-related modules cut across every faculty in the higher education sector is also recommended. Furthermore, Bancassurance is also recommended to boost the easy penetration of the insurance sector using the relationship with the banking sector as a pathway.

Suggested Citation

  • Odunayo Olarewaju & Thabiso Msomi, 2021. "Determinants of Insurance Penetration in West African Countries: A Panel Auto Regressive Distributed Lag Approach," JRFM, MDPI, vol. 14(8), pages 1-15, July.
  • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:8:p:350-:d:605251
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    References listed on IDEAS

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    Cited by:

    1. Mwambuli Erick & Tumwindike Ephraim, 2022. "What Drives the Development of Life Insurance Sector? Empirical Evidence from Tanzania," World Journal of Business and Management, Macrothink Institute, vol. 8(2), pages 35-49, December.
    2. Mamadou Bah & Nelson Abila, 2024. "Institutional determinants of insurance penetration in Africa," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 49(1), pages 138-179, January.
    3. Seyed Farshid Ghorashi & Maziyar Bahri & Atousa Goodarzi, 2024. "Developing and comparing machine learning approaches for predicting insurance penetration rates based on each country," Letters in Spatial and Resource Sciences, Springer, vol. 17(1), pages 1-29, December.

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