SPATIAL ANALYSIS OF THE LIFE INSURANCE MARKET CONVERGENCE IN THE EUROPEAN UNION
Assist. Prof. PhD. Mare Codruta, Babes-Bolyai University, Cluj Napoca
Assist. Prof. PhD. Dragos Simona Laura, Babes-Bolyai University, Cluj Napoca
Prof. PhD. Dragota Ingrid Mihaela, Academy of Economic Sciences, Bucuresti
PhD. Student Muresan Gabriela Mihaela, Babes-Bolyai University, Cluj Napoca
Due to interactions that exist in the European Union, convergence processes have been emphasized in many areas of the economic life in the form of β-convergence. Starting from this idea, we have implemented a range of Spatial Econometrics methods to assess the occurrence of absolute, conditional or club β-convergence on the life insurance market in the European Union member states. For this, the life insurance density was used as a proxy. Due to data availability, were considered 27 members, except Croatia, on the period 2002 – 2014. The absolute β-convergence was accepted by the spatial regression analysis. The coefficient of the initial life insurance density shows that this process is valid and is stable, its value being negative and lower than 1 in modulus. Additionally, several control variables were considered in order to see if this convergence process is dependent on different aspects of the member societies. Hofstede’s cultural dimensions and the Index of Economic Freedom were taken into account because life insurance products are characterized by uncertainty and ambiguity, and consumers are more likely to react according to their cultural prescriptions. Additional spatial influences were accounted for by using the longitude and latitude as exogenous variables, together with the spatially lagged variable for the dependent. Out of the control variables used, only uncertainty avoidance proved to be statistically significant. The model obtained with this variable is the most significant, as shown by the information criteria values. The positive value of the coefficient shows a direct influence upon the growth rate of life insurance density in the European Union. This means that countries that have a higher level of uncertainty avoidance will experience higher growth rate. Transposing this on the insurance market, we can state that insurance companies, especially those focused on life related products should construct their development strategies with emphasis on such economies that have a high level of uncertainty avoidance. These countries usually manifest a high level of anxiety facing new technologies and their population reacts negatively at new brands entered on the market, whose names are not known. Some cultures accepts the innovation process going to risk assumption (Denmark, Ireland), while other cultures tries to avoid risk at the highest level (Greece, Portugal).
„This work was supported by a grant of the Romanian National Authority for Scientific Research and
Innovation, CNCS – UEFISCDI, project number PN-II-RU-TE-2014-4-0745”.