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

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  • Benjamin Lorent

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.

Suggested Citation

  • Benjamin Lorent, 2010. "The Link between Insurance and Banking Sectors: An International Cross-Section Analysis of Life Insurance Demand," Working Papers CEB 10-040, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:2013/61021
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    References listed on IDEAS

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    Cited by:

    1. Relwendé Sawadogo, 2021. "The relationship between insurance and banking sectors in Sub-Saharan African: Does globalization matter?," Economic Change and Restructuring, Springer, vol. 54(1), pages 101-119, February.
    2. Jiří Šindelář, 2016. "Quantitative Forecast of Demand for Life Insurance in CR in 2015-2018: Macroeconomic Growth versus Industry Restructuring [Kvantitativní prognóza poptávky po životním pojištění v ČR v letech 2015-2," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2016(1), pages 5-23.
    3. Chien-Chiang Lee & Tie-Ying Liu, 2017. "Insurance development, banking activities, and regional output: evidence from China," Empirical Economics, Springer, vol. 53(3), pages 1059-1081, November.
    4. Pradhan, Rudra P. & Arvin, Mak B. & Nair, Mahendhiran & Hall, John H. & Gupta, Atul, 2017. "Is there a link between economic growth and insurance and banking sector activities in the G-20 countries?," Review of Financial Economics, Elsevier, vol. 33(C), pages 12-28.
    5. Lee, Chien-Chiang & Chiu, Yi-Bin & Chang, Chi-Hung, 2013. "Insurance demand and country risks: A nonlinear panel data analysis," Journal of International Money and Finance, Elsevier, vol. 36(C), pages 68-85.
    6. Lee, Chien-Chiang & Chang, Chi-Hung, 2015. "Financial policy and insurance development: Do financial reforms matter and how?," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 258-278.

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    More about this item

    Keywords

    Life Insurance; Insurance Demand; Bancassurance; Cross-section Analysis;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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