Premium
Insurance and inequality in Sub‐Saharan Africa: policy thresholds
Author(s) -
Asongu Simplice A.,
Odhiambo Nicholas M.
Publication year - 2019
Publication title -
international social science journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.237
H-Index - 43
eISSN - 1468-2451
pISSN - 0020-8701
DOI - 10.1111/issj.12223
Subject(s) - life insurance , gini coefficient , economics , inequality , index (typography) , economic inequality , income protection insurance , econometrics , demographic economics , actuarial science , insurance policy , general insurance , mathematics , mathematical analysis , world wide web , computer science
Abstract In this study, we examine how insurance affects income inequality in Sub‐Saharan Africa, using data from 42 countries during the period 2004–2014. Three inequality variables are used, namely: the Gini coefficient, the Atkinson index and the Palma ratio. Two insurance premiums are employed, namely: life insurance and non‐life insurance. The empirical evidence is based on the Generalised Method of Moments (GMM). Life insurance increases the Gini coefficient and increasing life insurance has a net positive effect on the Gini coefficient and the Atkinson index. Non‐life insurance reduces the Gini coefficient and increasing non‐life insurance has a net positive effect on the Palma ratio. The analysis is extended to establish policy thresholds at which increasing insurance premiums completely dampen the net positive effects. From the extended analysis, 7.500 of life insurance premiums (percentage of GDP) is the critical mass required for life insurance to negatively affect inequality, while 0.855 of non‐life insurance premiums (percentage of GDP) is the threshold required for non‐life insurance to negatively affect inequality. Policy thresholds are provided at which insurance penetration decreases income inequality in Sub‐Saharan Africa.