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1ECONOMETRIC ANALYSIS OF THE INSURANCE MARKET BASED ON FACTORS AFFECTING THE SIZE OF GROSS INSURANCE PREMIUM
Head of the Department of Finance Mirzayev Bobur Soyibjonovich ALFRAGANUS UNIVERSITY ORCID: 0009-0002-6741-4606
Abstract. The article discusses the fact that insurance activity is an integral part of the financial infrastructure of the market economy and one of the important factors that ensure the stable development of the economy in its entirety, and the unique important role of insurance in ensuring the continuity of production in the conditions of the market economy and protecting the population from unpleasant events. An analysis of the factors influencing the change in the demand for insurance services has been carried out. Scientific studies of foreign research scientists on insurance market modeling have been studied. At the same time, an econometric analysis of the factors affecting the gross insurance volume was carried out. Accordingly, a number of macroeconomic indicators have been selected as the most influential factors in the development of the insurance market. On this basis, the insurance market of Uzbekistan is modeled econometrically. The level of significance of the constructed model was assessed using several econometric tests. Based on the quality model according to the test results, the volume of demand for insurance premiums in the insurance market of Uzbekistan is forecasted. The scenario method was used in forecasting and forecast values for 2023-2026 were given. Based on the results obtained as a result of modeling, the future development trend of the insurance market was assessed and an economic analysis was carried out.
Keywords. demand for insurance, gross insurance, insurance reserve, insurance coverage, insurance premium, investment, econometric model, model parameters.
INTRODUCTION
In the current period, insurance plays an important role in the system of financial and economic relations of the country's economy. The population, business entities, and other economic entities interpret insurance as economic systems that guarantee reimbursement of expenses associated with losses from natural disasters, unforeseen events, their own commercial activities, etc.
Insurance, ensuring the continuity of the production process, will be aimed at ensuring a high quality of life and level of income for people in the event of insured events (Shixov A.K. Insurance: Textbook for universities. M. : YUNITI-DANA, 2000). Providing insurance protection provides an opportunity for the creation of networks that increase risk, as well as for the successful functioning of learning networks.
Although insurance in the United States accounts for 11.8% of the country's GDP, in some markets where premiums are significantly lower, such as the United Kingdom ($399 billion), insurance has a higher balance in the economy, reaching 12.5 %. Six of the world's 15 largest insurance markets have double-digit insurance share of gross domestic product, highlighting the importance of insurance to their economies. Hong Kong makes up about 20% and is the leader in this ranking. In Taiwan and South Korea, this figure is 14.5% and, respectively, 10.7% (MAPFRE Economics). As can be seen from the information presented, the insurance sector of Uzbekistan occupies a very small share of the country's gross domestic product. At the same time, the insurance industry has enormous untapped potential.
According to Swiss Re Group, the largest insurance and reinsurance company in the world with its own research institute (Sigma 3/2021 - World insurance: the recovery gains pace. https://www.swissre.com/institute/research/sigma-research/sigma-2021-03.html), in 2022, global insurance premiums reached 6.9 trillion. US dollars. The leaders in the global insurance market are the USA, China, and Japan, whose market share exceeds 58%. According to a study by the Swiss Re Institute, the insurance market has regained its previous growth rates after the COVID-19 pandemic. The insurance market is expected to grow by 3.9% in 2023, according to a forecast by the Swiss Re Institute. As a result, by this year the insurance premium will exceed 7 trillion. US dollars. During this period, there was a significant increase in the volume of insurance in the Chinese state. According to
the annual report "The Global Risks Report - 2023" prepared by the World Economic Forum(The Global Risks Report 2022, 17th Edition, is published by the World Economic Forum. https://www3.weforum.org/docs/WEF_The_Global_Risks_Report_2022.pdf), global risks are mentioned that are more dangerous than the covid pandemic. Among them, it was noted that the risks of environmental change will cause great losses. Also safe risks for the insurance business include infectious diseases, economic crises and extreme natural events.
Despite the increase in insurance premiums from year to year, the volume of insurance premiums currently stands at 0.7 percent of the republic's gross domestic product. Globally, this figure averages 7.3 percent(https://tradingeconomics.com/united-states/life-insurance-premium-volume-to-gdp-percent-wb-data).
The capacity of the insurance market of the Republic of Uzbekistan is approximately 15 times less than the average capacity of the world insurance market, which indicates the need to develop the insurance market. Therefore, it is important to determine the factors influencing the development of the insurance market of the Republic of Uzbekistan and quantify their impact.
LITERATURE REVIEW
The ability to assess the progress of the process in advance is considered an important factor in ensuring the sustainable development of the insurance market. In this regard, it is advisable to analyze the process using mathematical and statistical methods, and use forecasting methods using econometric models.
Many literary sources analyze the factors influencing the development of the insurance market. Scientists conducted analysis from different perspectives, including micro and macroeconomic. (Arena, 2008:2) , (Lee W.B, 2006:45) and (Angelas et al., 2019:7) conducted a study on the relationship between insurance development and economic growth using data from different countries. (Hong et al., 2014:62) , (Tang, 2015:65) , (Gao, 2018:124) and (Wang, 2019:443) studied the relationship between insurance and economic growth in China. They found that economic growth significantly accelerates insurance development because economic growth affected the demand for insurance and the financial health of the population showed the ability to afford insurance services. (Zhou F.J, 2014:11) , (Yuan Y.M, 2015:278) , (Yang, R. and Zhu, J.M, 2019:45) conducted studies on the impact of monetary policy on the insurance market. According to their research, different forms of monetary policy have different effects on the development of the insurance industry. (Hu and Chen , 2012:67), (Wang , 2019:99) and (Paunika V.B, 2019:397) studied the impact of inflation on the development of the insurance industry, finding that inflation leads to a decrease in inflation expectations regarding price increases and a decrease in the demand for long-term term insurance. (Tian's, 2017:130) study is based on an empirical analysis of the development of the insurance industry in China. Their study found that national saving and fixed investment were important factors influencing the development of the insurance industry. Meanwhile, (Zhou, H. L., & Guo, J. L, 2012) and (Tian , 2017:511) found that there is a strong inverse correlation between per capita insurance expenditure and interest rate.
A study conducted by Chinese scientists L. Han, D. Li, Y. Tian and co-authors using the generalized moments model method, covering the period 1994-2005 and 77 countries, examined the relationship between insurance market development and economic development. The study divided countries into developed and developing. It was found that in the insurance market of developing countries, the importance of developing life insurance is higher, including in comparison with developed countries(L. Han, D. Li, 2010:189).
A study by other scholars (C. Yuan and Y. Jiang, 2015) argues that the rapid development of the insurance market was achieved as a result of reforms carried out in the Chinese insurance industry and the increased demand for insurance in recent years. They examined the factors influencing the demand for general and life insurance, based on data obtained by territory for the years 2000-2012.
Insurance companies, organized by French researchers (P. Picard and J. Pinquet, 2013:48-86) to insure the risks of companies belonging to the same group, were studied by large financial and industrial groups. Such insurance companies are engaged in the optimal distribution of risks between reinsurers of companies that are part of a financial and industrial group consisting of decentralized structural divisions.
A study by (Simona Laura Dragos and Cristian-Mihai Dragos,2014) assessed institutional demand for insurance in 31 European countries using a multiplicative regression model. In this study, they concluded that doing business in life insurance development is one of the most important indicators of freedom, tax burden and government spending.
RESEARCH METHODOLOGY
The indicator reflecting the development of the insurance market consists of assessing the impact of GDP per capita, inflation, trade openness index on insurance premiums using econometric methods. Study of research into factors influencing the development and development factors of the insurance market, comparative comparison of econometric methods for the development of the insurance market, economic comparison and analysis of assessments based on an econometric model, logical thinking, scientific abstraction, grouping of information, methods of analysis and synthesis, induction and deduction are widely used .
RESULTS.
Statistical research of the insurance market is based on the collection of information related to insurance activities. The process of statistical observation of the insurance market requires a thorough study of the influence on the material and spiritual interests of a particular society and individual groups within it of various social phenomena and processes associated with natural, man-made and human activities. That is, it is impossible to create a competitive insurance system without determining the impact of the occurrence of a particular event affecting an individual society on the likelihood of an insured event occurring among insurance objects and the degree of harmfulness of insured events.
The development of insurance activity is directly related to the proper organization of statistical research of the insurance market. Insurance activities are aimed at collecting insurance premiums from as many insurers as possible to fulfill their obligations by paying them guaranteed insurance payments upon the occurrence of certain insured events, in order to form insurance reserves necessary for making future insurance payments.
Currently, insurance organizations of the republic have problems that need to be solved when maintaining statistical reporting and preparing reports. Especially considering the specifics of insurance activities in our Republic, the study and analysis of their significance using statistical methods, bringing them into line with the requirements of a market economy are pressing problems. A positive solution to these problems ensures the economic development of insurance companies.
It should be noted that insurance companies have a positive impact on the effectiveness of social work, protecting the social and other interests of participants in the production process, taking on the risks of manufacturers of goods, as well as risks associated with production.
To achieve this, it will be necessary to properly maintain statistical reporting on insurance activities, make extensive use of advanced statistical methods in data collection, implement theoretical and practical experiments collected on a global scale, and organize a statistical study of insurance activities in Uzbekistan in accordance with the system of national accounts and international standards.
Statistical compilations do not provide separate information on insurance products, even if insurance activities are included in services.
When calculating insurance coverage at the national and regional level, market capacity is the first consideration. For this purpose, along with absolute indicators, relative indicators are used.
The main absolute indicators include:
1. number of insurance organizations;
2. insurance premiums (total, by network) (Table 2);
3. insurance payments (total, by network) (Table 3);
4. population size;
5. GDP;
6. income of the population.
The main relative indicators are macroeconomic indicators. Based on the macroeconomic indicators of Uzbekistan, we calculate the following indicators of the country's insurance market:
1. Insurance coverage ratio: Share of insurance
= Yinsuranceprerniurni = 62317
GDP (GRP) 888300
The share of insurance in GDP in 2023 will be 0.7%. Compared to 2019, growth increased by 0.3 points. But this is much less than the figures in the world. Insurance accounts for 5-6% of global GDP. Level of insurance coverage. 2. Insurance density: Insurance premiums per capita
Y Insurance premiums 6 231.7 „ „__ _
= ----=-=173 102,8
population 0.035
The insurance premium per capita is Rs 173,102.8. This estimate is equivalent to $15.25. The global insurance volume is $883.58.
Table 1
Dynamics of activity indicators of the insurance market of Uzbekistan in 2016-2022 (billion soums) (Note: the table is compiled based on data from the Ministry of Finance.)
Specification Года
2016 2017 2018 2019 2020 2021 2022
1. Insurance fee 692.6 927.4 1635.2 1727.55 1879.3 3732.02 6231.7
2. Insurance cover 130.5 269.9 460.8 284.09 737.6 1235.06 2596.9
3. Insurance 566.7 766 1112.2 1332 1439 1546 1884
reserve
4. Investments in 867.5 1482.5 2010.7 3018.7 3382.7 3746.7 4751.7
insurance
5. Gross product 1571.5 2339.3 3531.3 4681.96 4631.4 6350.66 8724.5
According to the concept of the "System of National Accounts", which represents statistics of a market economy, the gross product of insurance activity is calculated using the following formula:
Q = R - c + p ± N , (1)
where Q is the gross product; R - insurance premium; c - insurance coverage (roof); p - income from investment activities; N - change in the volume of insurance technical reserves. Clearly, N is added if it has a positive value and subtracted if it has a negative value.
The table above lists the main indicators of the insurance market of Uzbekistan in 2016-2022. When calculating the gross product (1) of insurance activity using the formula, investment income was taken as an average of 15 percent.
An analysis of the dynamics of the gross product of the insurance market shows that even though the country's growth rate is close to the GDP growth rate, its share in GDP did not exceed 0.51%. However, in developed countries this share is 8-10 percent.
Since insurance activity is inherently a relational system based on probability theory, when studying the relationships between phenomena, today the insurance process cannot be imagined without econometric modeling. There are two types of features or indicators involved in the analysis process: one is voluntary variables, the other is involuntary variables. Traits of the first category influence others, causing them to change, so they are called factorial traits, while traits of the second category are called indirect traits. For example, increased traffic within a city or lack of driving experience among drivers increases the likelihood of traffic accidents. In this regard, if the probability of road accidents is a sign of the result, then the factor signs may be the forces influencing it (city traffic, drivers' driving experience, the level of fines and penalties for violating traffic rules, etc.).
A correlation relationship is determined by a relationship in which each factor value in different conditions corresponds to different values of the resulting characteristic. A characteristic feature of the correlation relationship is that in conditions of economic liberalization, when prices change at
different rates under the influence of inflation or due to the lack of periodic observations, it is difficult to study indicators over time.
For example, based on the data in Table 1
ZnQ = 1.28 + 0.32 infi + 0.58/np a correlation-regression equation was obtained. The parameters of the equation indicate that a 1 percent change in insurance premiums in the insurance market will lead to a 0.32 percent change in gross output, while a 1 percent change in investment will lead to a 0.58 percent change in the gross insurance market product.
A standard test was used to determine the statistical significance of the parameters in the model. First, we determine the value of itabU(ar to perform a t-Tecra. According to the Student's distribution table, for this model itabU(ar = 2.57. The parameter in front of the insurance premium variable treai = 5.59. In order for the parameter to be significant, the condition treai > itabU(ar must be met. Thus, the parameter preceding the insurance premium variable is statistically significant. The investment variable is equal to treai = 8.04 of the previous parameters. This means that the effect of the investment variable on gross product is statistically significant.
We use the F-test to determine the quality of the model itself. For the model Freai = 573,26. F tabUiar is 4.1. Since the condition Freai> F tabU(ar is satisfied, the model is statistically significant.
The forecast values for the development of the insurance market in Uzbekistan were determined to increase by 40.1% compared to 2022. It was established that in 2023, insurance premiums in the republic will amount to 8,731,428.0 million soums. In the next four years, the growth trend in insurance premiums will average 53.7%, and in 2026, according to forecasts, the volume of insurance premiums will amount to 16,230,534.0 million soums.
Figure 1
Forecast of insurance premiums in the Republic according to three different scenarios for
2023-2026, (billion soums).
25000
20000
15000
10000
5000
2010
2012 2014 2016 2018 2020 2022 2024 2026 -----pessimistic -realistic -----optimistic
2028
0
According to the development trends of the insurance market of the republic, in 2017-2021, insurance premiums increased by 3.2 times. The forecast results for 2023-2026 showed that insurance premiums could increase by 2.7 times. This means that the trends in insurance development in the regions will continue in the coming years.
CONCLUSIONS.
The above forecasts are taken from the results of assessing the impact of economic indicators on the volume of insurance premiums for the main indicator indicating the degree of development of the insurance market. By studying the influence of key macroeconomic factors, we can determine how insurance premiums change depending on changes in the factors included in the target model.
Since insurance activity is a commercial sector, it is necessary to set the cost of insurance services provided by insurance organizations based on the level of risks they accept. An unexpected sharp increase in the probability of risk occurrence leads to the financial collapse of insurance organizations. To avoid such situations, insurance organizations must constantly engage in risk dynamics and analysis. For this reason, statistical research in insurance activities is carried out at a much broader and more scientifically advanced level than in other areas.
To ensure the profitability of their activities, insurance organizations are required to constantly maintain a database of customers and ensure the application of competitive insurance rates through high-quality econometric analysis.
Instead of a conclusion, we can say that the study of the activities of the insurance market using modern mathematical statistical methods allows us to study in detail many problems of insurance.
The economic importance of the insurance sector is mainly assessed based on the share of gross insurance premiums in GDP. Although this measurement cannot provide a complete picture of insurance services due to significant differences in the level of insurance premiums in different countries, the currency factor does not affect the estimate in this method. If in developed countries the volume of gross insurance premiums is 7-8% of GDP, then in developing countries it is less than 2%.
Deep penetration of the insurance market into the regions of the country is important for the sustainable development of the republic's economy. For this reason, it can also be said that a developed insurance market is based only on the presence of an efficiently functioning regional insurance market. A developed insurance infrastructure is the basis for insurance companies to operate financially stable, effectively manage the insurance network and develop comprehensively in the interests of the population as a whole, supporting investment activity. Today, one of the main conditions for the development of the insurance market is the establishment of clear and understandable relationships between insurers and their clients. In this case, the main factor in the development of the insurance market is the development of convenient, affordable and high-quality insurance services for the client and their use by the client in the event of a risk to the life and property interests of the client. When implementing the regional insurance market development program, it is necessary to take into account the strategy of each market segment.
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