International property-liability insurance consumption

During the 1980s and early 1990s, the world insurance market grew substantially. World insurance premiums in 1993 accounted for about 8 percent of world gross domestic product (GDP), compared to 4 percent in 1984. This article explains a substantial proportion of the variation in property-liability insurance consumption across countries belonging to the Organization for Economic Cooperation and Development (OECD). The study focuses on two lines of insurance: motor vehicle and general liability. The authors' analysis indicates that economic conditions affect the demand for insurance differently across lines of coverage. In particular, the authors' results suggest that income has a far greater effect on motor vehicle insurance consumption than on general liability insurance consumption. The authors find evidence that several factors are important in explaining the purchase of both kinds of insurance. These factors include income, wealth, the percent of a country's insurance market controlled by foreign firms, and the form of the legal system in the country.