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The nexus between the demand for life insurance and institutional factors in Europe: new evidence from a panel data approach

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  • Simona Laura Dragos
  • Codruta Mare
  • Ingrid-Mihaela Dragota
  • Cristian Mihai Dragos
  • Gabriela Mihaela Muresan

Abstract

We investigate the influence of institutional factors upon life insurance demand for 32 European countries, considering the socio-demographic and economic determinants as control variables. Using a panel data approach, we find that life insurance demand is influenced differently by institutional indicators from the Worldwide Governance Indicators database, in emerging and transition markets compared to developed ones. The sound legal environment of developed countries, where the level of the rule of law is very homogeneous and very high, makes it non-significant for life insurance demand. For developing countries the enforceability of contracts, the independence of justice and the time efficiency of the judicial process positively influence the decision of citizens to buy life insurance contracts. The effect of income distribution over life insurance density varies across these two categories of countries. For transition and emerging markets we find a positive relationship between life insurance density, income distribution and level of urbanisation. In developed countries, because of the high levels of income, life insurance became a common good, not a luxury one, which makes income distribution an insignificant factor. For emerging and transition countries policymakers should concentrate more on strengthening trust in the insurance sector for reducing the gap with developed countries.

Suggested Citation

  • Simona Laura Dragos & Codruta Mare & Ingrid-Mihaela Dragota & Cristian Mihai Dragos & Gabriela Mihaela Muresan, 2017. "The nexus between the demand for life insurance and institutional factors in Europe: new evidence from a panel data approach," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 30(1), pages 1477-1496, January.
    • Handle: RePEc:taf:reroxx:v:30:y:2017:i:1:p:1477-1496
    DOI: 10.1080/1331677X.2017.1325764
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    Cited by:

    1. 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.
    2. Ingrid-Mihaela Dragotă & Cosmin Octavian Cepoi & Lavinia Ştefan, 2023. "Threshold effect for the life insurance industry: evidence from OECD countries," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(4), pages 799-820, October.
    3. Cong Tam Trinh & Minh-Tri Ha & Nhut Quang Ho & Tho Alang, 2023. "National culture, public health spending and life insurance consumption: an international comparison," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-14, December.

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