Identifying and Analyzing of Factors Contributing for Growth of Non–Life Insurance Gross Premium a Developing Country Perspective: Case of Insurance Industry in Ethiopia

Abstract

Ethiopian non-life insurance gross premium for the past 10 years has grown on average of 20.74% that doubles the economic growth of the country. Although the sector growth is rapid, penetration rate and density of insurance industry are at very low stage. In 2013/2014, Ethiopian insurance industry’s non life insurance premium penetration rate is below 1% and density is 52.00. The objective of this study is to identify and analyze the factors contributing for the growth of non life insurance gross premium. The study is done based on quantitative secondary data collected from National bank of Ethiopia, Ministry of Finance and Economics, Ministry of Trade and Industry, Central Statics Authority, World Bank and other source. The study used 10 years data from the period 2004/2005 to 2013/2014; it accommodates all insurance company in the study from the date of establishment to the current status. This study used correlation as a method of data analysis; a deductive approach is adopted by constructing an empirical model and hypothesizing its collinear relationship between the factor variables. The factors contributing for the growth of non life insurance gross premium are GDP, Investment Capital, Number of insurance Company, capital of insurance, Branch size of insurance company, Age of insurance company and Government policy. The finding shows that most factors have strong correlation to non life insurance gross premium. Government needs to promote the insurance sector as it is contributing for the economic growth, capital formation and employment generation