To investigate the link between the insurance sector development and economic growth of Malaysia and to fill a gap in the current finance-growth nexus. Research Based.

2. According to the finance-growth nexus theory, financial development
promotes economic growth through channels of marginal
productivity of capital, efficiency of channeling savings to investment,
saving rate and technological innovation (Levine, 1997).
Financial
intermediaries
companies such as
insurance realized
economic growth.
They play an
important role in
economic growth as
they are the risk
management tool for
individuals and
companies.
In line with the
increasing share in
the aggregate
financial sector in
almost every
developing country,
the importance of
insurance is growing
compared from the
past.
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3. Widening income disparity and globalization are
the issues that increase possibleimpact on the
economic development as insurancecompanies
are one of the biggest institutional investors in
stock, bond and real estate markets.
Besides that, it is important for the stability of the
economy to have access on insuranceservices and
this can make the business participants accept
aggravated risk.
Insurance companies are playing an important role
by enhancing internal cash flow at the assured and
by creating large amount of assets placed on the
capital market.
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4. As we all know, insurance
sector is one of the industries
that contributingto Malaysia
since1988.The aim is to
support the economythrough
the financial systembesides
providingMalaysian
consumerswith world class
product and services.
According to BNM, the market penetration
increasedsignificantlyfromthe total
insurance fund assets and average asset base
per insurance fund increasedby 545.9% and
521% respectivelyduringthe period from
1988 to 1999.It shows that insurance sector
has played a role in expandingeconomic
activitiesand growth.
However,there is still lack of
clear viewon the impact,
rationale,and relationship
betweenthe sector and
Malaysia’seconomy. This
study was emphasizingon the
relationand focusing the
matter specificallyin
Malaysia.
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5. The main objective of this study is to investigate
the link between the insurance sector
development and economic growth of Malaysia
and to fill a gap in the current finance-growth
nexus.
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6. To define the purpose
of insurance sector in
Malaysia
To identify whether the
development of the
sector help economic
growth
To know how the
sector development
give impacts towards
economic growth
To know the relevancy
of the sector
development for
coming years
To determine the ways
to encourage the sector
development
effectively
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7. What are the
purposes of
insurance sector in
Malaysia?
Does the
development of the
sector help
economic growth?
How does the sector
development
influence economic
growth?
Should government
continuethe sector
development?
What are the ways
to develop the
sector in more
effectively?
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8. It is expected that all the
explanatory variables
except inflation rate (INF)
should be positively related
to GDP while inflation rate
(INF) is expected to be
negative in relation to GDP
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9. Hughes
(1996)
The impact of
unemployment
insurance on
unemployment
duration.
The
unemployment
insurance benefit
give more impact
to high wage
group as
compared to
counterpart.
The study reveals
that individual
with high wage
experience
shorter
unemployment
period.
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10. Ward and
Zurbruegg (2000)
•Granger causality toanalyze the relationships betweeninsurance
premiums and economic growthfrom nine OECD countries from1961
to 1996.
•The relationships betweeninsurance market andeconomic growthis
dependent oncountry and whether the insurance industry promote
economic growthdepends on a number of national circumstance.
Lim and
Haberman (2003)
•The interest rate for savings depositsandprice is significant inthe
equation.
•The positive signfor the interest rate puzzles the authors. This couldbe
in line withfindings of Webb et al. (2002) whofoundthe best results
when insurance andbanking sector are combinedinthe estimates.
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11. Arena and
Marco (2006)
• They used the average rate of real per capita GDP growth.
• Life and non-life insurance premium has a positive and
significant impact on the economic growth.
• In the case of life insurance the impact on economic
growth is only experience by high-income countries only.
The result is also being the same for the non-life
insurance.
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12. Marijuana et al. (2009)
•Examinedthe relationshipbetween
insurance sector development and
economic growthin 10 transition
EuropeanUnion member countries.
•Three different insurance variableswere
used;life, non-life andtotal insurance and
other control variables like education,
openness, inflation, investment, bank
credit, stock capitalization.
•insurance sector development positively
and significantly affectseconomic growth.
Oke and Ojo (2012)
•Examinedthe short and long-run
relationshipsbetweeneconomic growth
and insurance sector developmentinthe
Nigerianeconomy.
•Gross domestic product (GDP) was usedas
proxy for the level of economicgrowth.
•The result shows that insurance sector
growthand development positively and
significantly affects economicgrowth.
•However, fromthe Granger causality test,
it shows that the influence of insurance
sector growthoneconomic growthwas
limiteddue tocultural, attitudinal traits
and values in the country.
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13. SNH ©

14. GDP
ASSET OF
LIFE
INSURANCE
INFLATION
RATE
ASSET OF
NON-LIFE
INSURANCE
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15. SNH ©

16. GDP=f (ALI,
INF, NLA)
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17. GDP= Bo +
B1ALI + B2INF
+ B3NLA + μ
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18. We estimate standardgrowthequationusing adataset over
the period 2000-2010.
Basedfrom the main journal that we have studied, the
model adopted gross domestic product (GDP) growthas
dependent variable while life, non-lifeandtotal
insurance as independent variable.
The model usedis modifiedby using gross domestic product
(GDP) at market price as the dependent variable, furthermore
the insurance assets is dividedintoassets of life andnon-life
insurance. Inflationrate is chosenas the control variable.
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19. GDP LFE GNRL INF
Mean 22756.23 83815.95 19155.19 2.150909
Median 23388.50 79739.55 18689.23 1.685000
Maximum 25008.00 153877.2 26975.62 8.200000
Minimum 19849.92 33950.00 13944.00 -2.000000
Std. Dev. 1476.065 35850.97 3936.271 1.789125
Skewness -0.770812 0.307370 0.419243 1.248944
Kurtosis 2.294566 1.888529 2.012071 6.636015
Jarque-Bera 5.269441 2.957668 3.078281 35.67675
Probability 0.071739 0.227903 0.214565 0.000000
Sum 1001274. 3687902. 842828.4 94.64000
Sum Sq. Dev. 93687011 5.53E+10 6.66E+08 137.6416
Observations 44 44 44 44
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20. GDP LFE GNRL INF
GDP 1.000000 0.711388 0.681082 0.317363
LFE 0.711388 1.000000 0.997031 0.172067
GNRL 0.681082 0.997031 1.000000 0.153563
INF 0.317363 0.172067 0.153563 1.000000
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21. All variables exceptthe
inflation rate (INF) are
positivelycorrelated
with the gross domestic
product (GDP)
There is a relationship
betweenlife insurance
total assets and
generalinsurance total
assets with gross
domesticproduct
where the value for
lifeinsurance total
assets is 0.711and the
value for general
insurance total assets
is 0.681
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22. Dependent Variable: GDP
Method: Least Squares
Date: 11/22/12 Time:
15:10
Sample: 2000Q1 2010Q4
Included observations: 44
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23. Variable Coefficient Std. Error t-Statistic Prob.
LFE 0.208745 0.051407 4.060603 0.0002
GNRL -1.647054 0.466764 -3.528664 0.0011
INF 98.55762 80.27478 1.227753 0.2267
C 36597.70 4699.812 7.787056 0.0000
R-squared 0.653196 Mean dependent var 22756.23
Adjusted R-squared 0.627186 S.D. dependent var 1476.065
S.E. of regression 901.2635 Akaike info criterion 16.53198
Sum squared resid 32491037 Schwarz criterion 16.69418
Log likelihood -359.7036 F-statistic 25.11297
Durbin-Watson stat 0.523075 Prob(F-statistic) 0.000000
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24. The R-squaredis 0.6531 which
shows that 65.31% of the GDP can
be explainedby the 3 independent
variables.
The t-Statistic for lifeinsurancetotal asset
is 4.060 whichindicate that the variable is
significant. Same goes togeneral insurance
total asset, the value of t-Statistic is -3.528.
The negative signof the value can be
ignored. However the t-Statistic for
inflationrate is less than2.0, therefore the
variable is not significant.
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25. The Durbin Watson statistic
falls on 0.523which indicates
a rejectH0 with the evidence
of positive correlations
betweenthe variables
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26. Using the data of the total asset
of both lifeand non-life
insurance from the period of
2000-2010,we examinedthe
insurance sector contribution
towards the economicgrowth in
Malaysia
Results of the analysis are
consistentwith our hypothesis,
and consistentwith previous
studies who study the impact of
insurance on economicgrowth in
Nigeria
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27. More study should be done to
get the exact accurate data of
the insurance sector contribution
towards the economic growth
This shall include the insurance
services provided by banks or
formerlyknown as
bancassurance and mayalso
include takaful sector as a whole
The variables used may also be
diversified to accommodate the
current changes of the economic
growth
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28. • Adeyemi M (2005). “An Overview of the Insurance Act 2003”. Issues in Merger and Acquisition for
the Insurance Industry. pp. 61-78 (ED) Ezekiel. O.C. BeingProceeding of the 2003 NIA Workshop on
Insurance ACT 2003. Nigeria Insurance Association.
• Ćurak, Lončar and Poposki (2009). “Insurance Sector Development and EconomicGrowth in
Transition Countries”. InternationalResearch Journal ofFinance and Economics- Issue 34 (2009).
• Kjosevski (2011). “Impact of Insurance on EconomicGrowth:The Case of RepublicMacedonia”. Pp.
34-39. Volume 4, 2011. Stopanska BankaAD, Skopje, RepublicofMacedonia
• Levine R (1997). “Financial development and EconomicGrowth:views and agenda”. J. Economy. Lit.,
35(2): 688-726.
• Oke, Ojo (2012) “Insurance Sector Development and EconomicGrwoth in Nigeria” pp. 7016-7023,
Vol. 6(23), 13 June 2012, African Journal of BusinessManagement
• Skipper, H. D., 1997, Foreign Insurers in Emerging Markets: Issues and Concerns, Occasional Paper
• 97-2, Center for Risk Management and Insurance.
• Retrieved fromhttp://www.kooagency.com.my/about_insurance_history.htm
• Retrieved from
http://www.fstep.org.my/media/File/Overview%20Week%20Notes/En%20Eddy_Evolution%20of%
20Malaysian%20Insurance%20Industry_150411_Lonpac.pdf
• Retrieved from
https://editorialexpress.com/cgibin/conference/download.cgi?db_name=ACE10&paper_id=35

29. 
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