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The Impact of Culture on the Demand for Non-Life Insurance

Published online by Cambridge University Press:  09 August 2013

Sojung Carol Park  and
Jean Lemaire
Sojung Carol Park
Affiliation:
College of Business Administration, Seoul National University, Gwanak-gu, Seoul 151-916, Republic of Korea, Phone: +82-2-880-8085, E-Mail: sojungpark@snu.ac.kr
Jean Lemaire
Affiliation:
Wharton School, University of Pennsylvania, 3620 Locust Walk, 3404 Steinberg Hall-Dietrict Hall, Philadelphia, PA 19104-6218, U.S.A., E-mail: lemaire@wharton.upenn.edu.
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Abstract

Regression techniques are applied to an unbalanced panel data that includes 68 countries observed over a ten-year period, to explore the factors that affect non-life insurance demand across nations. While previous literature has discovered several significant economic, demographic, and institutional variables, little attention has been devoted to cultural dimensions. We find that non-life insurance consumption is adversely impacted in countries where a large fraction of the population has Islamic beliefs. Also highly significant are three of the cultural scores developed by Hofstede in a celebrated study: Power Distance, Individualism, and Uncertainty Avoidance. An important finding is that culture impacts non-life insurance more in affluent countries, with an adjusted R-square coefficient increasing by 11.7%, than in developing countries where the R-square coefficient increase due to cultural impacts is only 1.2%. These results have implications for multinational insurers seeking to enter a new market. Ceteris Paribus, these insurers should target countries, and population segments within these countries, that exhibit low Power Distance, and high Individualism and Uncertainty Avoidance scores.

Keywords

Non-life insurancecultural variableseconometric analysis
Type
Research Article
Information
ASTIN Bulletin: The Journal of the IAA , Volume 42 , Issue 2 , November 2012 , pp. 501 - 527
Copyright
Copyright © International Actuarial Association 2012

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