Do macro-economic factors drive life insurance growth An empirical analysis

Abstract

The Indian Economy is fast coping up with the global competition and making its mark in the world economy. In the past two decades, the Insurance Industry in India has registered its growth in terms of escalating penetration and density, but the growth is not at par its true potential. This calls for a need to elevate the visibility of the insurance sector and to identify the factors that influence its growth. This study is an attempt to identify the macro-economic factors that influence the Life Insurance sector in India. A time series analysis involving data for 39 years was considered using empirical methods including Engle-Granger co-integration, ordinary least square, and granger causality. The results indicated that FDI, inflation, interest rate and broad money (M2) plays a significant role in the growth of Life Insurance industry in India and, inflation and interest rate has causal relation with life insurance sector.