Relationship of Macroeconomic Variables and Growth of Insurance in India: A Diagnostic Study

Abstract

Insurance sector in India has played a vital role in development of Indian economy. IN the post liberalisation period, the insurance sector in India has grown at a fast rate. In the last decade, total premium grew at a CAGR of 25% and reached from----to a total of $67 billion in 2012. Indian Life insurance industry (which contributes 88% of total Life and General insurance premium in India) has emerged as the 9th largest life insurance market in the world. This growth in insurance sector is not the result of a single factor. A variety of macroeconomic factors such as Population, GDP, Per Capita Income, Inflation and Unemployment have put positive and negative impact on the growth in demand of life insurance. All these Macro economic variables have taken into account as explanatory variables to assess the growth of insurance sector during 1991-2012(study period). A significant relationship has been observed between various modern terms of insurance i.e. insurance penetration, insurance density and indicators of macroeconomics in this paper. It is observed from the results of above analysis that Population, GDP, Per Capita GDP, Inflation, and Unemployment are the main factors affecting growth of insurance penetration, insurance density growth and growth in total insurance premium in India. The results of correlation analysisreveal that population growth GDP growth and per capita gdp growth exhibit a positive relationship (pull factors) with insurance growth indicators while inflation and unemployment rate exhibit a negative relationship (restrictive forces) with insurance growth indicators.
Keywords: GDP, Insurance, Macroeconomic.