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On the determinants of life insurance development in Sub-Saharan Africa: the role of the institutions quality in the effect of economic development

Listed author(s):
  • Samuel Guerineau

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I)

  • Relwende Sawadogo

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS - Université d'Auvergne - Clermont-Ferrand I)

This paper analyzes the determinants of life insurance development on a panel of 20 countries in sub-Saharan Africa over the period 1996-2011. It also highlights the role of the institutions quality on the effect of economic development on the life insurance. Controlling for the presence of a possible endogeneity bias using the instrumental variable technique, we find evidence that increased of per capita income leads to an increase in life insurance premiums. We show that the life insurance is a luxury good in SSA. The demographic variables such as life expectancy and the young dependency ratio influence negatively the life insurance development while the old dependency ratio has a positive effect. We also find that the protection of property rights and the government stability are positively associated to life insurance. The results are robust to the introduction of more variables. Furthermore, the marginal impact of the income per capita on the life insurance varies according to the quality of the legal and political environment. Finally, the marginal effect of the economic development on life insurance is less for french legal system countries compared to non-french legal system countries.

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Paper provided by HAL in its series Working Papers with number halshs-01178838.

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Date of creation: 21 Jul 2015
Handle: RePEc:hal:wpaper:halshs-01178838
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  1. Feyen, Erik & Lester, Rodney & Rocha, Roberto, 2011. "What drives the development of the insurance sector ? an empirical analysis based on a panel of developed and developing countries," Policy Research Working Paper Series 5572, The World Bank.
  2. Thorsten Beck & Ian Webb, 2003. "Economic, Demographic, and Institutional Determinants of Life Insurance Consumption across Countries," World Bank Economic Review, World Bank Group, vol. 17(1), pages 51-88, June.
  3. Chi-Hung Chang & Chien-Chiang Lee, 2012. "Non-Linearity Between Life Insurance and Economic Development: A Revisited Approach," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 37(2), pages 223-257, September.
  4. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/GMM estimation and testing," Boston College Working Papers in Economics 667, Boston College Department of Economics, revised 05 Sep 2007.
  5. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  6. Keefer, Philip & Knack, Stephen, 2002. "Polarization, Politics and Property Rights: Links between Inequality and Growth," Public Choice, Springer, vol. 111(1-2), pages 127-154, March.
  7. Markus Bruckner, 2011. "Economic Growth, Size of the Agricultural Sector, and Urbanization," School of Economics Working Papers 2011-16, University of Adelaide, School of Economics.
  8. Lewis, Frank D, 1989. "Dependents and the Demand for Life Insurance," American Economic Review, American Economic Association, vol. 79(3), pages 452-467, June.
  9. Knack, Stephen & Keefer, Philip, 1995. "Institutions and Economic Performance: Cross-Country Tests Using Alternative Institutional Indicators," MPRA Paper 23118, University Library of Munich, Germany.
  10. Beenstock, Michael & Dickinson, Gerry & Khajuria, Sajay, 1986. "The determination of life premiums: An international cross-section analysis 1970-1981," Insurance: Mathematics and Economics, Elsevier, vol. 5(4), pages 261-270, October.
  11. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/generalized method of moments estimation and testing," Stata Journal, StataCorp LP, vol. 7(4), pages 465-506, December.
  12. Neil Esho & Anatoly Kirievsky & Damian Ward & Ralf Zurbruegg, 2004. "Law and the Determinants of Property-Casualty Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(2), pages 265-283.
  13. Hakansson, Nils H, 1969. "Optimal Investment and Consumption Strategies under Risk, an Uncertain Lifetime, and Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(3), pages 443-466, October.
  14. Fortune, Peter, 1973. "A Theory of Optimal Life Insurance: Development and Tests," Journal of Finance, American Finance Association, vol. 28(3), pages 587-600, June.
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