Financial access, governance and insurance sector development in Sub-Saharan Africa

Abstract

This study investigates the role of financial access in moderating the effect of governance on insurance consumption in 42 Sub-Saharan African countries using data for the period 2004- 2014.Two life insurance indicators are used, notably: life insurance and non-life insurance. Six governance measurements are also used, namely: political stability, “voice & accountability”, government effectiveness, regulation quality, corruption-control and the rule of law. The empirical evidence is based on the Generalised Method of Moments (GMM) and Least Squares Dummy Variable Corrected (LSDVC) estimators. Estimations from the LSDVC are not significant while the following main findings are established from the GMM. First, financial access promotes life insurance through channels of political stability, “voice & accountability”, government effectiveness, the rule of law and corruption-control. Second, financial access also stimulates nonlife insurance via governance mechanisms of political stability, “voice & accountability”, government effectiveness, regulation quality, the rule of law and corruption-control. This research complements the sparse literature on insurance promotion in Africa by engaging the hitherto unexplored role of financial access through governance channels.