Insurance carriers play an essential role in our economy and society, offering support to businesses during difficult times while providing individuals with protection and sustainable investments.

Pirvu and Zhang (2012) examine an optimal investment, consumption and life insurance purchase problem of a wage earner with CRRA preferences in an incomplete market setting under incomplete market assumptions and provide closed-form solutions using HJB dynamic programming approach.

The Effects of Insurance on Investment

Insurance institutions are among the primary institutional investors in global capital markets, but their investment behavior has been altered by various influences that could negatively impact value creation functions. Long-term IIIs differ from pressure-resistant institutional investors (funds, social security funds, QFII and enterprise annuities) because their funds come directly from policy holders’ policy obligations rather than from any financial incentive to create value for businesses; also their investment horizons and durations must match with existing or potential commercial contracts for maximum performance.

Due to their relatively low shareholding ratios, insurance companies do not have as great an effect on company value as other institutional investors, yet it may serve as value selection in long-term holdings of listed firms. This paper tests this hypothesis and finds that long-term shareholdings by insurance institutions increase EPS of listed firms with greater business value; moreover, this effect becomes stronger over time.

This paper uses the FIFO method to regress a company’s earnings per share against its shares owned by insurance institutions and changes in their holding ratio over time. Furthermore, the model takes into account lag terms of variables in order to reduce endogeneity caused by changes in IIIs’ holding ratio over time; results showed significant lag terms at 10% level, demonstrating how FIFO model can explain relationship between long-term III shareholding ratios and company valuation.

Given the significance of IIIs, it is imperative that private companies understand their influence on long-term shareholdings by IIIs. Businesses should work toward strengthening their articles of association and management system, board of directors and independent director system, decision making process to avoid being taken over by IIIs without notice. Furthermore, businesses must take extra precaution when engaging with various insurance institutional investors to assess if these institutions possess positive value creation goals or not.

The Effects of Insurance on Consumption

Health insurance helps mitigate future expectations by eliminating the need for precautionary savings and reallocating those funds towards higher-level consumption instead, thus increasing consumption capability and driving economic growth. Furthermore, the impact of health insurance is stronger on developed economies than on emerging ones.

Studies on various aspects of health insurance’s effects may provide conflicting results, with these discrepancies possibly attributable to potential moderating variables or different research methodologies (notably difference-in-differences or regression models).

This research employs panel data to explore the dynamic impact of insurance on investments and consumption, with particular consideration for its effects on consumption and investment decisions. Panel data allows for a more dynamic analysis whereas cross-sectional data only collects information at one point in time. Furthermore, instrumental variable estimation was employed here to address model endogeneity.

The empirical results demonstrate that long-term shareholding insurance institutions possess a value selection function, with coefficients from their value selection model (A) positively correlating with company value. Conversely, value creation model (B) shows negative associations with company value indicating that FIFO insurance institutions lack such functions.

This study’s experimental results also confirm consumer knowledge as an integral factor in assessing the positive economic performance impacts of health insurance, and suggest that simplifying benefit structures could further expand this knowledge among consumers. Furthermore, families in experimental plans offering free care or single coinsurance rates had higher knowledge scores compared to others plan types. Finally, findings indicate that financial sectors should focus on expanding their industrial chain so as to provide more services such as pre-sale maintenance, daily maintenance and roadside assistance to improve customer contribution values and customer contribution values.