The Estimation of province–wise demand function for commercial insurance services (1002-1002)
Subject Areas : Financial EconomicsMohammad Reza Mirzaei Nejad 1 , Mehdi Mohammadi 2
1 - Assistant Professors in Economics, Islamic Azad University, Central Tehran Branch
2 - M.A. in economics.
Keywords: demand function, Commercial Insurance, Compensation Paid, inflation,
Abstract :
The development dynamics between various sectors of an economy exerts an effective force towards sustainable development. The potential role of service sector in this regard is outstanding since it constitutes a larger share in GNP. In this context, insurance industry, a key segment of service sector, play a cushioning role for other sectors as it provides financial and psychological support to the entire economy. Insurance activities in Iran, despite its century long existence and experience, have not exploited its potential role in business environment and have not fulfilled its expected role in the economy of Iran. This paper has aimed to estimate the demand function for commercial insurance across the country (province-wise demand function). Attempts have been made to measure statistically the effect of variable such as Income Per capita, premium, inflation, literacy rate and compensation paid, on the demand for commercial insurance in Iran. The author has applied Eviews software and Panel Data techniques to estimate the parameters. The time span covered it this study starts from March 20, 2110 to March 21, 2113. The findings of this research indicate that there is a positive and significant relationship between Income Per capita and the demand for commercial insurance in Iranian provinces. An increase of 01 in Income Per capita brings about 11031 increase in demand for insurance. Moreover, there is a positive and significant relationship between compensation paid and demand for commercial insurances in the provinces. The demand for insurance services would increase by 1171 in response to 01 increase in compensation paid. The relationship between premium paid and the demand for commercial insurances in the provinces, is found to be negative and statistically meaningful. In other words, one per cent increase in premium per insurance issued would contract demand for insurance by 11.. per cent