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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
Affiliation:
College of Business Administration, Seoul National University, Gwanak-gu, Seoul 151-916, Republic of Korea, Phone: +82-2-880-8085, E-Mail: [email protected]
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: [email protected].

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.

Type
Research Article
Copyright
Copyright © International Actuarial Association 2012

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