Insurance Development and Economic Growth : Evidence from India
DOI:
https://doi.org/10.17010/ijf/2019/v13i3/142268Keywords:
Insurance Density
, Insurance Penetration, Causality, Economic GrowthG2
, G22, O1Paper Submission Date
, June 14, 2018, Paper sent back for Revision, January 23, 2019, Paper Acceptance Date, February 20, 2019Abstract
Insurance as a component of the financial structure can be a vital element in the growth of economic activities as well as can enable an increase in the economy's size, employment, managed assets, etc. In light of this expected role played by insurance, the current study looked at how the development of insurance in an economy fosters its growth as well as factors contributing to the evolution of India's insurance market. For this purpose, we studied insurance development indicators, that is, insurance density and penetration and investigated their link with GDP growth. Later, we checked the role of demographic factors such as age dependency ratio, urban population growth, life expectancy, and adult literate population in explaining insurance density and penetration. Using Toda Yomamoto VAR Granger causality framework, the study found two-way causality between insurance development and economic progress supporting a feedback hypothesis on two-way association between insurance development and economic growth. Further, using ARDL bounds approach, we found a long run causality between life expectancy and insurance development. The study concluded by pointing the role of risk aversion caused by life uncertainty in promoting insurance development. It also brought out the importance of insurance development in economic growth, with scope of further research on similar lines by considering the role of insurance and its broader investigations.Downloads
Downloads
Published
How to Cite
Issue
Section
References
Adams, M., Andersson, J., Andersson, L. - F., & Lindmark, M. (2009). Commercial banking, insurance and economic growth in Sweden between 1830 and 1998. Accounting, Business and Financial History, 19 (1), 21 - 38. DOI : https://doi.org/10.1080/09585200802667139
Beck, T., & Webb, I. (2003). Economic, demographic, and institutional determinants of life insurance consumption across countries (English). The World Bank Economic Review, 17( 1), 51 - 88.
Browne, M. J., & Kim, K. (1993). An international analysis of life insurance demand. Journal of Risk and Insurance, 60 (4), 616 - 634. DOI: 10.2307/253382
Chakraborty, J. (2016). Market concentration and firm performance: Evidences from the Indian life insurance industry. Indian Journal of Finance, 10 (9), 30 - 52. DOI: 10.17010/ijf/2016/v10i9/101477
Chakraborty, J. (2017). Financial soundness of Indian life insurance firms : An investigation based on the CARAMELS framework. Indian Journal of Finance, 11(11), 7-29. DOI: 10.17010/ijf/2017/v11i11/119339
Chang, T., & Caudill, S. B. (2005). Financial development and economic growth: the case of Taiwan. Applied Economics, 37(12), 1329-1335. DOI : http://www.tandfonline.com/doi/abs/10.1080/0003684042000338702
Chang, T., Lee, C. - C., & Chang, C. - H. (2014). Does insurance activity promote economic growth ? Further Evidence based on bootstrap panel Granger causality test. The European Journal of Finance, 20 (12), 1187 - 1210. DOI : https://doi.org/10.1080/1351847X.2012.757555
Dolado, J., & Lutkepohl, H. (1996). Making Wald tests work for cointegrated VAR systems. Econometric Review, 15(4) 369 - 386.
Esho, N., Kirievsky, A., Ward, D., & Zurbruegg, R. (2004). Law and the determinants of property - casualty insurance. Journal of Risk and Insurance, 71(2), 265 - 283.
Fischer, S. (1973). A life cycle model of life insurance purchases. International Economic Review, 14 (1), 132 - 152.
Guochen, P., & Wei, S. C. (2012). The relationship between insurance development and economic growth: A cross-region study for China. China International Conference on Insurance and Risk Management, July 18-21, 2012, Qingdao, China.
Haiss, P. R., & Sumegi, K. (2008). The relationship between insurance and economic growth in Europe: A theoretical and empirical analysis. Empirica, 35(4), 405 - 431. DOI : http://hdl.handle.net/10.1007/s10663-008-9075-2
Hariharan, B. R., Sailaja, V.N., & Patel, K.V. (2017). A study of disclosure on risk management of life insurance companies in India. Indian Journal of Finance, 11 (1), 29 - 43. DOI: 10.17010/ijf/2017/v11i1/108959
Hwang, T., & Gao, S. (2003) The determinants of the demand for life insurance in an emerging economy - The case of China. Managerial Finance, 29 (5/6), 82 - 96.
Kugler, M., & Ofoghi, R. (2005). Does insurance promote economic growth ? Evidence from the UK. Money Macro and Finance (MMF) Research Group Conference. United Kingdom. Retrieved from http://repec.org/mmfc05/paper8.pdf
Lee, C. - C., Tsong, C. - C., Yang, S. - J., & Chang, C. - H. (2013). Investigating the stationarity of insurance premiums : International evidence. The European Journal of Finance, 19 (4), 276 - 297. DOI : https://doi.org/10.1080/1351847X.2011.653577
Lee, C. C. (2011). Does insurance matter for growth: Empirical evidence from OECD countries. The BE Journal of Macroeconomics, 11(1), 1 - 26.
Lee, C. C., Chang, C. P., & Chen, P. F. (2012). Further evidence on property - casualty insurance premiums: Do multiple breaks and country characteristics matter? Japan and the World Economy, 24 (3), 215 - 226.
Liedtke, P.K. (2007). What's insurance to a modern economy? The Geneva Papers on Risk and Insurance - Issues and Practice, 32 (2), 211 - 221.
Outreville, J. F. (1990). The economic significance of insurance markets in developing countries. Journal of Risk and Insurance, 57(3), 487 - 498.
Outreville, J.F. (1996). Life insurance markets in developing economies. The Journal of Risk and Insurance, 63 (2), 263 - 278.
Sen, S. (2008). An analysis of life insurance demand determinants for selected Asian economies and India (Working Paper 36/2008). Madras School of Economics, Chennai. Retrieved from http://www.mse.ac.in/ pub/working%20paper%2036.pdf
Sen, S., & Madheswaran, S. (2007). Are life insurance demand determinants valid for selected Asian economies and India? APRIA 11th Annual Conference - Asia-Pacific Risk and Insurance Association (pp. 1 - 27). Taipei: National Chengchi University.
Sherden, W. (1984). An analysis of the determinants of the demand for automobile insurance. The Journal of Risk and Insurance, 51 (1), 49 - 62.
Sinha, A. (2013). Financial soundness in Indian life insurance: A comparison between two leading private players. Indian Journal of Finance, 7 (4), 22 - 30.
Skipper Jr., H. (1997). Foreign insurers in emerging markets: Issues and concerns (Occasional Paper (1)), 97 - 92. Retrieved from http://www.iifdc.org/pubs/skipper.pdf
Toda, H.Y., & Yamamoto, T. (1995) Statistical inference in vector autoregressions with possibly integrated processes. Journal of Econometrics, 66 (1 - 2), 225 - 250. DOI : https://doi.org/10.1016/0304-4076(94)01616-8
Ward, D., & Zurbruegg, R. (2000). Does insurance promote economic growth? Evidence from OECD economies. Journal of Risk and Insurance, 67 (4), 489 - 506.
Ward, D., & Zurbruegg, R. (2002). Law, politics and life insurance consumption in Asia. The Geneva Papers on Risk and Insurance - Issues and Practice, 27(3), 395 - 412.
Webb, I.P., Grace, M. F., & Skipper, H. D. (2005). The effect of banking and insurance on the growth of capital and output. SBS Revista De Termas Financieros, 2 (2), 1 - 32.
Yaari, M. E. (1965).Uncertain lifetime, life insurance, and the theory of the consumer. The Review of Economic Studies, 32 (2), 137 - 150.
