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Is the Design of Bonus-Malus Systems Influenced by Insurance Maturity or National Culture? — Evidence from Asia

Author

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  • Sojung C Park

    (Department of Finance, Mihaylo College of Business and Economics, California State University, P.O. Box 6848 Fullerton, CA 92834-6848, U.S.A.)

  • Jean Lemaire

    (Department of Insurance & Risk Management, Wharton School, University of Pennsylvania, 3620 Locust Walk, 3404 Steinberg Hall-Dietrich Hall, Philadelphia, PA 19104-6218, U.S.A.)

  • Choong Tze Chua

    (Lee Kong Chian School of Business, Singapore Management University, 50 Stamford Road, #04-045, 178899 Singapore.)

Abstract

Most Asian countries have adopted bonus-malus systems (BMS) in automobile insurance. We evaluate the toughness towards consumers of 16 Asian BMS and its correlation with cultural and economic variables. We use principal components analysis to define a Maturity Index of insurance markets and find supporting evidence for a conjecture that, as markets become more mature and policy-holders more sophisticated, countries adopt tougher BMS. In addition, we find, using regression analysis, that using a Common Law legal system is a crucial factor in BMS design. Cultural variables, such as uncertainty avoidance, also influence BMS.

Suggested Citation

  • Sojung C Park & Jean Lemaire & Choong Tze Chua, 2010. "Is the Design of Bonus-Malus Systems Influenced by Insurance Maturity or National Culture? — Evidence from Asia," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 35(S1), pages 7-27, December.
    • Handle: RePEc:pal:gpprii:v:35:y:2010:i:1s:p:s7-s27
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    Cited by:

    1. Park Sojung & Lemaire Jean, 2011. "Culture Matters: Long-Term Orientation and the Demand for Life Insurance," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 5(2), pages 1-23, July.
    2. Mihail Petkovski & Kjosevski Jordan, 2014. "An Analysis Of Non-Life Insurance Determinants For Selected Countries In Central And South Eastern Europe: A Co-Integration Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 160-178, October.

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