The Moderating Role of Innovation on Institutional Components and Life Insurance Penetration: Evidence from Sub-Saharan Africa

A well-functioning insurance market benefits the economy by promoting efficient capital allocation, liquidity, savings, and risk reduction. However, in most Sub-Saharan African (SSA) countries, risk protection uptake is sketchy compared to other regions. For instance, data shows that insurance penetration in Africa stood at 2.78% in 2019, lower than the global average of 7.23%. Hence, this study aims to determine the moderating effect of innovation on institutional components and life insurance penetration in 35 SSA nations between 2009 and 2020. The study employs data from the Financial Development and Structure Database (FDSD), Worldwide Governance Indicators (WGI), and World Intellectual Property Organization (WIPO) for life insurance penetration, the institutional components, and the global innovation index. The study uses the panel corrected standard errors (PCSEs) estimation technique. The study establishes that innovation promotes life insurance penetration by enhancing voice and accountability, the rule of law, and government efficacy mechanisms. The study concludes that innovation is an essential catalyst for performance efficiency through which weak institutional factors can be improved to stimulate insurance uptake. This study adds to the scant body of knowledge on insurance advancement in Africa by examining the previously underexplored function of innovation via the pathway of institutional components. The findings may assist policymakers, managers, and other stakeholders in coordinating innovation plans with institutional mechanisms to boost insurance coverage in the SSA region.