Insurance literacy among older people in Japan: The role of socio‐economic status

• Published date: 01 June 2022
• Author: Yoshihiko Kadoya,Naheed Rabbani,Mostafa Saidur Rahim Khan
• Date: 01 June 2022
• DOI: http://doi.org/10.1111/joca.12448

RESEARCH ARTICLE

Insurance literacy among older people in Japan:

The role of socio-economic status

Yoshihiko Kadoya

1

| Naheed Rabbani

2

|

Mostafa Saidur Rahim Khan

1

1

School of Economics, Hiroshima

University, Hiroshima, Japan

2

Department of Banking and Insurance,

University of Dhaka, Dhaka, Bangladesh

Correspondence

Mostafa Saidur Rahim Khan, School of

Economics, Hiroshima University, 1-2-1

Kagamiyama, Higashi Hiroshima,

Hiroshima 739-8525, Japan.

Email: khan@hiroshima-u.ac.jp

Funding information

JSPS KAKENHI, Grant Number:

19K13739 and 19K13684; RISTEX, JST;

The Chugoku Regional Economic

Research Association Grant; and Grant-

in-aid from Aioi Nissay Dowa Insurance

Co., Ltd.

Abstract

Insurance literacy has received little attention in aca-

demic research despite its role in risk management,

particularly among older people, a population most in

need of a secure income and coverage for health care

expenses after retirement. Using data from the Survey

on the Economic Status of the Japanese Elderly con-

ducted by Hiroshima University, we examined how the

socio-economic status of older people in Japan was

related to the attainment of insurance literacy. We

found that the overall level of insurance literacy was

quite low among older people in Japan, particularly

among the oldest subgroup and women. Our regression

results show that older people who are men, married,

relatively younger, moderately educated, have a higher

balance of financial assets, and those who have work

experience in management, business, or finance are

more likely to be insurance literate. Our results indi-

cate that social learning plays an important role in

insurance literacy.

KEYWORDS

elderly people, insurance literacy, Japan, socio-economic status

Received: 5 August 2020 Revised: 14 January 2022 Accepted: 22 February 2022

DOI: 10.1111/joca.12448

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits

use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or

adaptations are made.

© 2022 The Authors. Journal of Consumer Affairs published by Wiley Periodicals LLC on behalf of American Council on Consumer

Interests.

788 J Consum Aff. 2022;56:788–805.

wileyonlinelibrary.com/journal/joca

1|INTRODUCTION

Knowledge about financial products and financial markets is an essential asset in today's com-

plicated financial marketplace. This knowledge not only enhances earnings capacity but also

protects existing assets from future uncertainty and risk. We have observed considerable pro-

gress in the studies of financial literacy and its association with savings, investment, wealth

accumulation, and managing anxiety in the elderly (Lusardi and Mitchell, 2011b,2014;

Sekita, 2011; van Rooij et al., 2011; Jappelli & Padula, 2013; Kadoya & Khan, 2018; Khan

et al., 2020). However, insurance literacy, which is an important component of the financial sys-

tem regarding the means to manage risk and uncertainties, is often overlooked or mixed with

financial literacy (Tennyson, 2011a). The need for a comprehensive study on insurance literacy,

distinct from financial literacy, arises because of the specialization and complexity of insurance

products. Previous studies have precisely documented the fact that financial literacy is different

from insurance literacy and that financial literacy is not sufficient to explain the acceptance rate

of insurance policies. Globally, there have been several studies on health insurance literacy

(Loewenstein et al., 2013; McCormack et al., 2009; Paez et al., 2014; Politi et al., 2016;

Tilley et al., 2018), but relatively fewer studies have investigated overall insurance

literacy including life insurance, property and casualty insurance, and health insurance

(Bristow & Tennyson, 2001; National Association of Insurance Commissioners [NAIC], 2010;

NCAER, 2011; Tennyson, 2011b; ANZ, 2015; Cude, 2018). Studies on overall insurance literacy

among older people are even more limited globally and are not available in Japan, although this

group comprises the most vulnerable section of society. We investigated the level of insurance

literacy among older people in Japan and delineated its association with demographic and

socio-economic factors. In this study, insurance literacy measures people's knowledge about the

principles and product features of insurance policies such as life, property and casualty, and

health insurance policies. This study contributes to the existing literature by providing evidence

on insurance literacy among older people in a country experiencing long-term aging, and will

thus have implications for other aging countries. The findings of this study will help

policymakers formulate strategies to encourage insurance literacy among older people so that

they can ensure their wellbeing, safety, and security in old age.

Japan is a leading aging country globally, and the need for financial and healthcare securi-

ties for older people has been an important public issue in Japan for many years

(Kadoya, 2018). Several economic, financial, and healthcare issues require that older people,

even more than others, understand insurance policies. First, the average life expectancy of

84.21 years (World Bank, 2020) against the retirement age of 60–65 years requires people to

secure income for a relatively longer life in older age. Second, the security of assets including a

house and an automobile is important for older people, who are more likely to live alone. Third,

older people's own pension and government's social safety net programs might not be sufficient

to cover livelihood and healthcare expenses (Kadoya, 2016; Kadoya & Khan, 2018; Ministry of

Health, Labour and Welfare, 2018; The Japan Times, 2019). For example, national long-term

care insurance covers 70%–90% of the long-term care expenses for people experiencing demen-

tia, while the remaining 10%–30% of the long-term care expenses (along with medical care

expenses, transportation costs, and frail-friendly house renovation costs) could be burdensome

for older people. Older people with limited and uncertain income, limited literacy, and existing

health conditions become even more vulnerable (Sudore et al., 2006; The Japan Times, 2015).

However, unfortunately, in many cases, older people are unaware of these issues and do not get

protection from unforeseen contingencies. To secure income for livelihood and healthcare

KADOYA ET AL.789