Document Type : Original Research Paper
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Abstract
BACKGROUND AND OBJECTIVES : The insurance industry is one of the key sectors of the economy and a financial tool for managing risks in life and businesses. Insurance provides risk coverage for investors, various industries, and individuals to ensure their assets are protected. In a country with high uncertainty and risks, individuals have a greater demand for insurance products to preserve the value of their assets. In this context, this leads to the expansion of this industry in the economy and an increase in the insurance penetration rate. Therefore, the main objective of this study is to examine the impact of macroeconomic uncertainty shocks on the insurance penetration rate in Iran.
METHODS: The macroeconomic uncertainty index is a comprehensive and new index that is estimated from seven groups of the most important macroeconomic variables. Additionally, the study period spans from 1990 to 2020, and the econometric model used in the research is a structural vector autoregression to analyze the shocks of the variables on the insurance penetration rate.
FINDINGS: The macroeconomic uncertainty index has a positive and significant impact on the insurance penetration rate, and its shocks will lead to an increase in the insurance penetration rate in the long term. Additionally, the variance decomposition results in the tenth period show that macroeconomic uncertainty explains 21.25 percent of the changes in the insurance penetration rate. On the other hand, economic sanctions and political risk have a negative and significant impact, while foreign direct investment, oil price uncertainty, and human capital have a positive and significant effect on the insurance penetration rate.
CONCLUSION: The results of the study show that macroeconomic uncertainty has a positive and significant effect on the insurance penetration rate and its shocks in the long run lead to an increase in the insurance penetration rate in Iran. Because in conditions where macroeconomic uncertainty dominates the economy of a country, individuals, companies, businesses and investors are more inclined to buy insurance. In a way, they buy more insurance products to protect and secure their assets and to be safe from economic fluctuations and various risks. In conditions of high economic uncertainty, people are more inclined to purchase insurance products because insurance is a tool for managing risk, protecting individuals' assets against unexpected events and economic fluctuations.
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