Abstract:
The study focuses on investing the various determinants that are affecting demand for
the Takāful and Conventional insurance in selected Asian countries. Through
extensive literature review of articles and reports of international bodies like World
Bank, SECP, Swiss-Re on Takāful and conventional Insurance, this research has
identified three macroeconomic variables (Per capita Income, Inflation and Saving
rate) and four demographic variables (dependency ratio, Life expectancy,
Urbanization and Education) as key determinants that are affecting Takāful and
Conventional insurance demand.
For the study we selected 14 Asian countries in which both Takāful and Conventional
insurance companies are operating for the time period of 2005-2012 resulting 112
annual observations of panel data. We applied descriptive statistics firstly and then
Hausman specification test (1978) for the selection of fixed and random affect
regression models for panel data analysis. Urbanization and education were found to
be significant demographic variables affecting demand for both Conventional
insurance and Takāful. Whereas per capita income and inflation were found to be the
significant macroeconomic variables affecting both Takāful and Conventional
insurance demand.
It was recommended that both Conventional insurance and especially the Takāful
operators should focus on creating awareness among general public as evident from
the Education and Per capita income results. As inflation was found to be affecting
significantly so Takāful and Conventional insurance operators need to focus on
providing micro-Takāful and insurance products for small and medium enterprises.
There is dire need to extend the distribution channels for both Takāful and
Conventional insurance to provide easy to access products and disseminate quick and
relevant information through the electronic media.
