DETERMINANTS OF NON LIFE INSURANCE PREMIUM GROWTH OF PRIVATE INSURANCE COMPANIES IN ETHIOPIA

Abstract

There are many reasons for non life insurance premium to increase or decrease. These influential factors and their degree of sensitivity differ from country to country and from period to period. In this study the researcher studied some of the influential factors that are assumed to be the most determinant factors. These influential factors that are assumed and studied are macroeconomic and firm specific factors. Among macroeconomic factors gross domestic product (GDP), foreign direct investment (FDI) and inflation were selected to be studied. Among firm specific factors, solvency, loss ratio, investment return, number of branches and dependency on intermediaries were taken to be studied. In the course of literature review the researcher found that extensive studies were not done in the determinants of non life insurance premium growth especially in Ethiopia. Moreover, according to the researcher, there was limited firm specific factors were studied in the quantitative research of the subject matter. The researcher suggests more research yet to be done in the field of study mentioned. The study contributes its part in narrowing the gap of research and would serve as a reference for future study to be conducted on the same topic. More importantly the researcher believes that the study result benefits insurance companies and other stakeholders to draw more attention in areas associated with determinants of non life insurance premium growth. This study is limited to the quantitative analysis. The population of the study was non life insurance premium of private insurance companies after the downfall of Derg regime. The sample taken for the study covered 14 years of data collected from 8 private insurance companies in Ethiopia. Statistical regression analysis is employed to confirm the determinant factors. Accordingly, generalized method of moments (GMM) model was used for estimation. As Ethiopia’s economy is emerging economy in the period under review, the study confirmed the determinant factors for non life insurance premium in such economic situation. Based on the study result gross domestic product (GDP), foreign direct investment (FDI), dependency on intermediaries and investment return were found positive influential factors of non life insurance premium of private insurance companies of Ethiopia for the period under review.