Who chooses different types of insurance: econometric analysis

Abstract

The paper deals with the insurance behavior of Russians by modeling the choice of various types of voluntary insurance. Dataset used is Individual Russia Longitudinal Monitoring Survey – Higher School of Economics (RLMS-HSE) Round 26, 2017. Sample includes 10 318 individuals supplemented by household information. We estimated logit model for the life and accident insurance and biprobit models for motor insurance (except for CMTPLI) under condition of having a vehicle, apartment insurance under condition of apartment ownership, and country house insurance under condition of having one. Based on the estimation results, it is revealed that the selected group of factors has a different effect on the individual’s choice of voluntary insurance’s different types. In particular, we identified differences in the effects of age, gender, number of household members, marital status, education level, religion, type of settlement, attempts to start own business, and other types of financial behavior, such as loans, savings, savings at interest and money lending. Life satisfaction level and household income have a similar effect on the availability of different insurance policies. Members from higher income households are more likely to have voluntary health insurance policies. A separate analysis of the demand for different types of voluntary insurance revealed the differences in the influence of factors on the individuals’ strategies of insurance behavior. We revealed that types of insurance formally considered voluntary, in fact, are not. Insurance, therefore, does not appear to Russians as a well-used risk management method. It is either a compelled choice (similar to imputed insurance) or another type of financial behavior that is available to high-income households.

Keywords

• insurance behavior
• voluntary insurance
• types of individual voluntary insurance
• biprobit model
• logit model