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The effect of microinsurance on the insurance market: evidence from Taiwan

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Abstract

Microinsurance is one of the fastest growing new markets for the billions at the bottom of the financial pyramid – low-income customers previously precluded from traditional insurance. Will insurers really benefit from serving a larger amount of customers? This paper attempts to provide answers by examining the performance of life insurers in Taiwan. Our results show that microinsurance dummy variables are negatively related to efficiency scores and premium income in both OLS and Tobit models. Providing microinsurance products will increase competition between micro and traditional insurance products and reduce market demand for traditional insurance. The efficiency and premium income of traditional insurers will decrease if the price of microinsurance is regulated at marginal cost.

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Notes

  1. https://www.fsc.gov.tw/en/home.jsp?id=74&parentpath=0,2&mcustomize=multimessage_view.jsp&dataserno=201611280001&aplistdn=ou=bulletin,ou=multisite,ou=english,ou=ap_root,o=fsc,c=tw&dtable=Bulletin

  2. The information infrastructure of the microinsurance business includes customer databases, product design, risk management systems and actuarial knowledge of microinsurance.

  3. https://www.investopedia.com/terms/r/returnonequity.asp

  4. There are four foreign life insurers in Taiwan, but they did not provid any microinsurance products between 2012 and 2017. In a previous version of this paper, we excluded these four foreign insurers and the regression results showed that the coefficients for the microinsurance dummy variables and numbers of microinsurance products were all significantly negative.

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Acknowledgements

We would like to thank the two anonymous reviewers and Wen Fu Lee and Shyh-Fang Ueng for their useful comments and suggestions about the paper.

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Authors and Affiliations

  1. Department of Economics, National Chengchi University, Taipei, Taiwan

    Shirley J. Ho & Hsiu-Hao Hsu

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  1. Shirley J. Ho
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  2. Hsiu-Hao Hsu
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Correspondence to Shirley J. Ho.

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Appendix

Appendix

Table 7 Inputs and outputs
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Table 8 Correlation coefficient matrix
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Table 9 Summary statistics
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Ho, S.J., Hsu, HH. The effect of microinsurance on the insurance market: evidence from Taiwan. Geneva Pap Risk Insur Issues Pract 46, 130–145 (2021). https://doi.org/10.1057/s41288-020-00175-6

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