Developing Insurance Markets : Do Fiscal Incentives Help Long Term Life Insurance Development?

Life insurance lags non-life insurance in many nascent markets. In order to develop the life insurance market, insurance companies sometimes present the introduction of tax incentives to stimulate consumers’ willingness to commit to long term savin...

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Main Authors:	Shindo, Tetsutaro, Thorburn, Craig
Format:	Report
Language:	English
Published:	World Bank, Washington, DC 2021
Subjects:	LIFE INSURANCE TAXATION DISASTER RISK FINANCE TAX DEDUCTION EMERGING MARKET ECONOMIES
Online Access:	http://documents.worldbank.org/curated/undefined/900921632204589083/Do-Fiscal-Incentives-Help-Long-Term-Life-Insurance-Development http://hdl.handle.net/10986/36356

id	okr-10986-36356
recordtype	oai_dc
spelling	okr-10986-363562021-10-14T05:10:45Z Developing Insurance Markets : Do Fiscal Incentives Help Long Term Life Insurance Development? Shindo, Tetsutaro Thorburn, Craig LIFE INSURANCE TAXATION DISASTER RISK FINANCE TAX DEDUCTION EMERGING MARKET ECONOMIES Life insurance lags non-life insurance in many nascent markets. In order to develop the life insurance market, insurance companies sometimes present the introduction of tax incentives to stimulate consumers’ willingness to commit to long term savings associated with life insurance. This paper examines whether insurance premiums’ tax deductibility can affect life insurance penetration using regression analysis of a cross-country dataset. To complement the analysis, selected individual countries - Niger, Russia, Paraguay, and Lithuania were reviewed, looking at trends in life insurance penetration and gross domestic product (GDP) per capita in United States dollar (USD) before and after a policy change. The analysis did not conclusively demonstrate that life insurance premium fiscal relief was meaningfully correlated to life insurance penetration. On the other hand, GDP per capita is strongly correlated with life insurance penetration, which is consistent with findings of other studies. The country examples where a tax policy change was introduced in life insurance premium deductibility show mixed results. In Russia and Lithuania, premium deductions appear to have had some effect on life insurance penetration. In Niger and Paraguay, it was harder to see a meaningful impact. The impact of a premium deduction on consumers’ buying behavior appears to be more complex and depends on the country context such as institutional quality and overall financial market capacity. Even if the tax deduction of insurance premiums has some positive effect, it appears that it is not a panacea but just one of a number of factors motivating consumers. If a country is considering introducing a policy which allows the tax deduction of insurance premiums, it is recommended to combine it with other interventions. 2021-10-13T15:05:45Z 2021-10-13T15:05:45Z 2020-06 Report http://documents.worldbank.org/curated/undefined/900921632204589083/Do-Fiscal-Incentives-Help-Long-Term-Life-Insurance-Development http://hdl.handle.net/10986/36356 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Economic & Sector Work Economic & Sector Work :: Other Financial Accountability Study
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	LIFE INSURANCE TAXATION DISASTER RISK FINANCE TAX DEDUCTION EMERGING MARKET ECONOMIES
spellingShingle	LIFE INSURANCE TAXATION DISASTER RISK FINANCE TAX DEDUCTION EMERGING MARKET ECONOMIES Shindo, Tetsutaro Thorburn, Craig Developing Insurance Markets : Do Fiscal Incentives Help Long Term Life Insurance Development?
description	Life insurance lags non-life insurance in many nascent markets. In order to develop the life insurance market, insurance companies sometimes present the introduction of tax incentives to stimulate consumers’ willingness to commit to long term savings associated with life insurance. This paper examines whether insurance premiums’ tax deductibility can affect life insurance penetration using regression analysis of a cross-country dataset. To complement the analysis, selected individual countries - Niger, Russia, Paraguay, and Lithuania were reviewed, looking at trends in life insurance penetration and gross domestic product (GDP) per capita in United States dollar (USD) before and after a policy change. The analysis did not conclusively demonstrate that life insurance premium fiscal relief was meaningfully correlated to life insurance penetration. On the other hand, GDP per capita is strongly correlated with life insurance penetration, which is consistent with findings of other studies. The country examples where a tax policy change was introduced in life insurance premium deductibility show mixed results. In Russia and Lithuania, premium deductions appear to have had some effect on life insurance penetration. In Niger and Paraguay, it was harder to see a meaningful impact. The impact of a premium deduction on consumers’ buying behavior appears to be more complex and depends on the country context such as institutional quality and overall financial market capacity. Even if the tax deduction of insurance premiums has some positive effect, it appears that it is not a panacea but just one of a number of factors motivating consumers. If a country is considering introducing a policy which allows the tax deduction of insurance premiums, it is recommended to combine it with other interventions.
format	Report
author	Shindo, Tetsutaro Thorburn, Craig
author_facet	Shindo, Tetsutaro Thorburn, Craig
author_sort	Shindo, Tetsutaro
title	Developing Insurance Markets : Do Fiscal Incentives Help Long Term Life Insurance Development?
title_short	Developing Insurance Markets : Do Fiscal Incentives Help Long Term Life Insurance Development?
title_full	Developing Insurance Markets : Do Fiscal Incentives Help Long Term Life Insurance Development?
title_fullStr	Developing Insurance Markets : Do Fiscal Incentives Help Long Term Life Insurance Development?
title_full_unstemmed	Developing Insurance Markets : Do Fiscal Incentives Help Long Term Life Insurance Development?
title_sort	developing insurance markets : do fiscal incentives help long term life insurance development?
publisher	World Bank, Washington, DC
publishDate	2021
url	http://documents.worldbank.org/curated/undefined/900921632204589083/Do-Fiscal-Incentives-Help-Long-Term-Life-Insurance-Development http://hdl.handle.net/10986/36356
_version_	1764484998016008192

Developing Insurance Markets : Do Fiscal Incentives Help Long Term Life Insurance Development?

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