Building Resilience Through Insurance: Implications for Inclusive Human Development

ABSTRACT Insurance is often viewed as a financial safety net against risks, but its broader role in fostering inclusive human development is still insufficiently understood. This paper assesses the impact of insurance penetration on inclusive human development using a sample of 123 countries over the 2010–2020 period. The empirical strategy is based on IV Tobit to account for reverse causality. Results show that insurance penetration improves IHDI score in the global sample. This result remains consistent when distinguishing between life and non‐life insurance, although there is a greater impact of non‐life insurance as compared to that of life insurance. However, this effect is heterogeneous across income groups. While insurance development promotes inclusive human development in low‐ and high‐income countries, a negative effect is found for middle‐income countries. Furthermore, results of mediation analysis identified investments and digital technologies as potential channels through which insurance influences IHDI. Policymakers, particularly in middle and low‐income countries, should prioritize policies aiming to expand the insurance sector. This may include easing entry barriers and encouraging insurers to broaden affordable micro and nano‐insurance products to reach low‐income and informal actors often excluded from formal protection systems for better inclusive human development.