The Link between Insurance and Banking Sectors: An International Cross-Section Analysis of Life Insurance Demand

Benjamin Lorent ()

No 10-040, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Life insurance has become an increasingly important part of the financial sector. The past ten years have witnessed significant changes of the market conditions faced by the insurance industry. Two trends are especially crucial: the assimilation of banking-sector type activities by life insurers and the consolidation of financial services (e.g. bancassurance). This article identifies the factors determining consumption for life insurance products across 90 countries for the year 2005. We introduce new factors to account for the increased link between bank and insurance sectors. Using a larger dataset, our results confirm the existing literature by showing that countries with higher income, better developed financial system, better educated population and higher old ratio spend more money on life insurance products whereas life expectancy tends to decrease life insurance demand. Moreover, institutional, religious and legal factors are found to be important. The levels of inflation and interest rates, the young ratio and the size of the social security system appear to have no robust association with life insurance consumption. The set of new variables introduced: bancassurance and banking efficiency appear significant, with a negative impact on life insurance consumption. Restricting our sample to developed countries confirm previous results for banking efficiency and bancassurance. The results highlight that the increasing blurring of the boundaries between insurers and banks impact life insurance demand.

Keywords: Life Insurance; Insurance Demand; Bancassurance; Cross-section Analysis (search for similar items in EconPapers)
JEL-codes: C31 G22 (search for similar items in EconPapers)
Pages: 37 p.
Date: 2010-08
New Economics Papers: this item is included in nep-ban and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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