Trust, Socioeconomic Factors, and Institutional Dynamics in Africa's Emerging Insurance Market
Abstract
The study investigates the causality link between trust and insurance market development and the influence of socioeconomic and institutional factors on trust in insurance in the emerging market context. Relying on dual theories of bounded rationality and opportunism, VAR Granger Causality Test and the Two-Stage Least Squares (2SLS) analytical approaches, and a contextualised understanding of Africa's insurance market, the study finds a unidirectional causal link from trust to insurance market development, which suggests that market activities are driven by trust in insurance. Additionally, results show that trust in insurance is driven by socioeconomic and institutional factors in Africa’s insurance market. Against expectation, however, income inequality increases trust in insurance. But as expected, corruption reduces trust in insurance and human capital development increases it. The paper recommends reforms targeted at increasing trust within the socioeconomic and institutional framework. The findings provide useful insights into the growth paths of emerging insurance markets, which adds significantly to extant knowledge on the connection between trust and financial exchanges.
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DOI: https://doi.org/10.24198/jaab.v7i1.49899
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