Mechanism Of Insurance Industry Effect China’s Economy

In2007, as the U.S. insurance group AIG applied for bankruptcy protection, theU.S. secondary crisis appeared, and then evolved into a global financial crisis, whichthe insurance industry plays a crucial role, the importance of the insurance industry,gradually coming into view. The insurance industry as an important part of thefinancial industry, and its fundamental role is to reduce the society risk, thuspromoting the development of related financial industry, the manner of its operation isto raise the community’s low-risk funds which used to reduce high-risk minority eventof loss, but because it has the risk of uncertainty, the insurance industry is often notvalued by the people, the insurance industry has the advantage of decentralized socialrisks,but its development has also been restricted.This paper will first use the theory thinking and then demonstration. Theory thatthe insurance industry have the three major functions: the insurance risk management,financial intermediation and social management functions; also discusses how theinsurance industry to promote the growth of economics through these three functions,which is the insurance industry to promote economic growth mechanism.Followed byrelevant data and models,to use of econometric knowledge to empirical test theory iscorrect or not. Finally, according to findings in the insurance industry to promoteeconomic growth policy recommendations.This paper first use GRANGER causality test to prove insurance income andinsurance payments are the cause of economic growth GRANGER, then use ofdistributed lag models to detect earnings and economic growth and the insurancepremiums paid are positively correlated, it can be said, the insurance industry promotethe development of China’s economic development. In the distributed lag model, thecoefficient of premium income, the lag phase of the coefficient than the currentcoefficient, which can be interpreted as promoting economic growth in premiumincome in respect of the delay time, which is reflected in the late, while thecoefficient of the insurance payment is just the opposite, which can explain theinsurance payments for the economy to promote the role of direct and swift. Subsequently, the paper for the insurance industry to promote economic growth,were tested again using GRANGER causality and distributed lag model to analyze thechannels through which the insurance industry actually promoted economic growth.By the GRANGER causality test results can be seen: premium income, although notconsumer spending, exports and technology spending are GRANGER reasons, but itis investment in fixed assets are GRANGER reasons; insurance payments, althoughnot technology spending and investment in fixed assets are GRANGER reasons, but itis consumption and total exports are GRANGER reasons.Distributed lag model by the analysis of results: For the insurance industry’s totalexports, technology spending and investment in fixed assets has a catalytic role, butits role in promoting the consumer spending is not obvious.Can be seen that the two tests have different results, the reason is due todistributed lag model is the overall conclusion, and GRANGER causality test arerespectively paid by the conclusion. Based on the above conclusions, the insuranceindustry is through exports, technological progress and investment to promote China’seconomic growth.