The Impact of Economic Growth on Insurance (Growth)

ABSTRACT This paper investigates the impact of economic growth on insurance (growth), focusing on the outflow side of the insurance activity, as captured by benefits (including commissions and expenses). The findings provide evidence that economic growth does exert a positive, statistically significant impact on the benefit side of insurance (growth) for all relevant metrics (claims, commissions and expenses) and all insurance branches (total, life and non‐life), which constitutes the main novelty of the paper and its contribution to the extant literature. At the same time, it reaffirms that economic growth posts a positive, statistically significant effect on the acquisition side of insurance (growth) for all pertinent variables (total, life and non‐life premia, total, life and non‐life penetration). The results remain robust for pre−/post‐ and during the 2008‐crisis periods, the pre−/post‐ and during the 2020‐pandemic periods, as well as the pre‐ and post‐ Solvency II era and different county‐income tranches (lower, upper, and higher). The same holds true when economic policy uncertainty and geopolitical risks are considered. All these are also fresh discoveries of the paper and additions to the existing research. Consumption and R&D are shown to work as transition mechanisms between economic growth and insurance growth, while they also receive support from panel causality tests. This constitutes the primary theoretical innovation of the study. The findings imply that policymakers need to address key economic and financial economic matters to facilitate insurance growth.