An Econometric Analysis of the Factors Affecting Insurance Product Premiums: An ARDL Approach

Abstract

Abstract

The development of the insurance market plays an important role in ensuring the financial stability of the economy, distributing risks efficiently, and strengthening the financial protection of the population and business entities. This study provides an econometric assessment of the factors that influence the volume of insurance premiums, which is treated as the dependent variable because it reflects the activity of the insurance market, its capacity to mobilise financial resources, and the confidence of market participants. The number of insurance companies, the volume of insurance claims (paid indemnities), the amount of charter capital, the share of insurance premiums in GDP, and insurance premiums per capita are considered as explanatory variables. Using quarterly data and an Autoregressive Distributed Lag (ARDL) framework, the Pesaran–Shin–Smith (PSS) bounds testing approach is applied to identify both short-run and long-run relationships. The Augmented Dickey–Fuller (ADF) unit root tests confirm a mixture of I(0) and I(1) variables, which justifies the use of ARDL. The error-correction term is negative and statistically significant, indicating that the system rapidly returns to long-run equilibrium, while the CUSUM and CUSUM-of-squares tests confirm parameter stability. The results show that a rise in the number of insurance companies and in charter capital is associated with a long-run decline in the volume of insurance premiums, reflecting an intensifying competitive environment and improved financial stability. Finally, scenario-based forecasts for 2025–2030 indicate a positive growth trajectory of insurance premiums under optimistic, baseline and pessimistic conditions.