Financial inclusion, market concentration and underwriting performance: Empirical evidence from Central Eastern and Southeastern European countries

Synergies or trade-offs may arise between financial inclusion and financial stability conditional on the type of financial market and the level of market competition. The growing systemic relevance of insurers brings forward the question whether financial inclusion has impact on insurance markets. We focus on the less inclusive and less competitive Eastern European (EE) and former Soviet Union (FSU) non-life insurance markets and examine firstly, the link between financial inclusion and insurers’ underwriting performance, and secondly, whether the insurance market concentration affects the inclusion-performance nexus. We find that more inclusive markets have better aggregate underwriting performance. The positive effects of financial inclusion on insurers’ performance are stronger in more competitive insurance markets. The results suggest that the policy efforts for more inclusive insurance markets would generate improved outcomes for consumers, insurers, and regulators.