Damian Ward

DOES INSURANCE PROMOTE ECONOMIC GROWTH? EVIDENCE FROM OECD COUNTRIES

This article examines the short- and long-run dynamic relationships exhibited between economic growth and growth in the insurance industry for nine OECD countries. This is achieved by conducting a cointegration analysis on a unique set of annual data for real GDP and total real premiums issued in each country from 1961 to 1996. Causality tests are also conducted, which account for long-run trends within the data. The results from the tests suggest that in some countries, the insurance industry Granger causes economic growth, and in other countries, the reverse is true. Moreover, the results indicate that these relationships are country specific and any discussion of whether the insurance industry does promote economic growth will be dependent on a number of national circumstances.

Stimulating the Demand for Insurance

This article acts as a review and also a guide to policymakers who are interested in understanding the determinants of insurance demand and how it affects general economic development. By providing a synopsis and evaluation of existing empirical research on the development of insurance markets, this article provides a discussion of the factors that promote insurance market development. This article then highlights certain issues that both insurance companies and policymakers can utilize further in their own markets to design future policies that can be geared to promote insurance market development.

Law, Politics and Life Insurance Consumption in Asia

This paper investigates the determinants of consumption for one of the fastest growing financial products in Asia. We find evidence that increased provision of civil rights and political stability leads to an increase in life insurance provision. However, by utilizing various estimation procedures, a number of differences between the more developed insurance markets and those in Asia are illustrated. In particular, the estimated income effect is found to be far higher in Asia than in other countries. However, the size of this difference is reduced once political and legal factors are controlled for, suggesting that future insurance market growth in Asia may not exceed that in the rest of the world.

The costs of distribution in the UK life insurance market

The cost of direct and independent distribution in the UK life insurance sector over the period 1990–1997 is examined. This is a novel contribution to the literature that until now has focused almost solely on distribution in the non-life sector. Unlike the non-life sector the distribution of life insurance is complicated by the existence of investor protection policies. Which in the UK are believed to have increased the use of independent agents. Using a pooled data set of 44 companies between 1990 and 1997, this study finds little evidence for such a view. Cost benefits are found for firms focusing in one mode of distribution. From a modelling of the distribution decision this finding maybe attributed to firms choosing distribution systems which match the transactional problems associated with their product mix and/or mode of corporate governance.

Performance criteria of corporate option and long‐term incentive plans: a survey of 150 UK companies 1994‐1998

A substantial number of companies now operate long‐term incentive schemes as a means of motivating executive directors to improve corporate financial performance and thus align their interests more closely with those of the company’s shareholders. This paper presents an empirical study of the option/long term incentive plans (LTIP) performance criteria used by a sample of UK companies to illustrate current practice and provides details of the importance of performance‐related remuneration in overall executive remuneration packages.

Measuring the value of product characteristics in the UK monthly savings market

This paper seeks to measure the returns to various product characteristics in the UK monthly savings market. Exploiting recently available data from the Financial Services authority, hedonic pricing models and data envelopment techniques are used to estimate the returns to different product characteristics in the UK unit trust and endowment markets. The approach highlights how it is possible to identify important drivers of value and also identify product offerings that are (sub)optimally differentiated.

Consumer attributes and the UK market for private medical insurance

Purpose – This paper seeks to investigate the determinants of private medical insurance (PMI) consumption in the UK.Design/methodology/approach – A unique combination of panel data estimators, reduced from equations and instrumental variables, applied to six waves of the British Household Panel Survey, 1996‐2002.Findings – Results from previous studies are compromised by their failure to use appropriate estimation techniques. Furthermore, a clear distinction between being covered by PMI, having purchased PMI; and having an employer provide PMI is important.Research limitations/implications – Controlling for endogenous variables, such as income and the use of panel data estimators, should be a necessary research method in this area.Practical implications – This study provides a robust analysis of the determinants of PMI consumption in the UK, enabling product providers to identify and target potential customers in different segments of the PMI market.Originality/value – This paper breaks new ground in conc...

An assessment of mortgage interest inflation measurement bias in the UK

This article recognizes the highly differentiated nature of UK mortgages. Applying hedonic pricing models in the generation of interest quality adjusted indices this study would suggest the need for a 0.24 percentage point increase in the retail price index (RPI) (which, at an average RPI of 3%, represents a measurement error of 9%). Moreover, this study finds that lenders tend to restrain increases in observable initial interest rates, but more than recoup this restraint through quality adjustments. These findings question the practice of removing mortgage interest repayments from macroeconomic inflationary target measures. This indicates the need to recognize the indirect inflationary impact of base rate rises on the price of highly differentiated debt based products.

South and East Asian insurance market growth and development

Recent economic research, notably by King and Levine (1993a, 1993b), Levine and Zervos (1998), Levine (1999), Levine, et al. (2000), and Beck, et al. (2000), indicates that financial services and its various components, including insurance and banking, have substantial potential for spreading positive externalities throughout the commercial sector of an economy. Such benefits can stem from improved access to capital by firms, better allocation of capital to investment projects, greater risk management, and enhanced portfolio diversification and liquidity for individual investors. While existing economic research shows the development of financial services is generally important for economic growth, a number of previous studies by Outreville (1990) and Ward and Zurbruegg (2000) provide empirical evidence that insurance market development in its own right can promote economic development. The importance of the insurance industry to the wider economy is seen to stem from the relative size of the insurance industry to GDP in many developed economies, the transfer of risks, and the scale of insurance companies’ financial intermediary functions.