Sustainable Development and the Insurance Industry: Factor Analysis and Forecasting in the Georgian Market

Abstract

The insurance industry is crucial to the formation of a flawless financial market system.  Excessive risks have emerged in several areas, including financial market institutions, due to the expanding scope of globalization. Risk awareness hinders not only the development of a particular business entity, but also the retrograde business entities associated with this entity. In actuality, the continuity chain, which is essential for maintaining market share and competition in a market economy, has been broken. Aside from insurance, no other mechanism has been created in modern times to guarantee prompt compensation for losses caused by risks.

This paper investigates the insurance industry's impact on economic growth and the barriers to its progress. In order to accomplish the objective, the comparison procedure was implemented. Indicators of the development of the insurance industry in Georgia have identified, in accordance with data pertaining to the insurance sectors of OECD nations, the obstacles to the sector's progress. The United States, the United Kingdom, Germany, France, and South Korea were chosen because their life and non-life insurance premiums are the highest among developed countries. The widespread use of life insurance is a defining feature of these states. The volume of non-life insurance premiums in the same countries is between 1.7 and 3.4 times smaller than the volume of life insurance premiums.

An empirical data-based statistical analysis method was employed to conduct an in-depth analysis. In order to assess the impact of specific independent variables—namely insurance market density, insurance market loss index, consumer price index, and gross domestic product per capita—the following null hypotheses were developed:

1.H0 - The percentage of GDP per capita that is unrelated to insurance industry development;

2.H0 - The insurance industry remains unaffected by fluctuations in the consumer price index;

3.H0 - The growth of the insurance industry is not impacted by the density of the market;

4.H0 - The insurance industry's progress remains unaffected by the decline of the insurance market.

The statistical significance and rejection of the null hypotheses pertaining to the parameters of each variable were outcomes of the research employing the regression method. The formulation of conclusions and recommendations ensued from the process of forecasting.

Due to the inconsistency between current economic processes and economic regularities, the influence of the selected variables on the profitability of the insurance market is of average quality.

The underdevelopment of accumulative and returnable life insurance, which prevents insurance companies from fulfilling their investment function and causes them to significantly lag behind the insurance markets of developed nations, is expected to contribute to a sharp decline in the growth of the insurance market in 2026.

Keywords: Insurance, Economic, Risk, Predict