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

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.