Assessing the Impact of Inflation on Insurance Sector Performance in India: An Empirical Analysis

Insurance sector in India witnessing significant growth since the establishment of Insurance regulatory and development authority of India (IRDAI) and inclusion of private players, Though the development of this sector has been influenced by various macro-economic indicators, this study aims to analyze the relationship between inflation rate and growth of Insurance sector in India. Insurance penetration rate has been taken for the measurement of growth in Insurance sector. The data for the variables are considered from the time period 2001-22 and collected from RBI and IRDAI publication, Auto regressive distributive lag model has been used to analyze the impact of inflation on insurance penetration rate. The result suggests a significant and positive relationship between moderate inflation rate and insurance penetration rate in India, it shows that a moderate inflation rate can drive the demand for insurance products as during inflationary condition consumer seek protection against economic uncertainty. Diagnostic tests has been applied to check the applicability of the model, the results shows no issues of autocorrelation, heteroskedasticity, or instability over time. Thus, from the finding we can conclude that a controlled moderate level of inflation positively influences the growth of the insurance sector in India.