Testing the co-integration relationship between auto insurance premiums and risk compensation amount

Abstract

This study investigates the influential economic factors impacting auto insurance premiums and explores the potential for a long-term equilibrium relationship. Monthly data from 25 branches of the National Insurance Company in the regional agency of Ouargla, Algeria, is analyzed using descriptive and case study methods. Through a thorough trend analysis and statistical model formulation, including co-integration tests, stability tests, and regression analyses, we assess the relationship between variables and the impact of independent variables on the dependent variable. The results reveal a statistically acceptable yet weak short-term connection, lacking evidence of common integration. This research provides insights into the complex dynamics of insurance premiums and compensation relationships, suggesting nuanced connections and guiding recommendations for adaptable premium structures and responsive strategies.

Keywords

• Insurance premium
• Material and bodily injuries
• Common integration
• Autoregression
• Co-integration tests
• Stability tests