The Macroeconomic Impact of the Austrian Insurance Industry
Insurance contracts offer simple and efficient instruments for compensating financial losses after the occurrence of predefined events. The direct effect of insurance on the utility of private households is to avoid large financial burdens by compensating for losses among the collective of policy holders. This allows consumption smoothing for private households or it stabilises the productive capacity of companies. From a macroeconomic perspective, insurance contracts allow for a higher degree of division of labour and thus have a productivity-enhancing effect. Other indirect effects of insurance arise from the incentives encouraging efficient risk management and the measures undertaken to prevent losses or reduce the potential loss. The demand for private insurance is strongly linked to public insurance systems. In an international comparison, Austria makes extensive use of property-casualty insurance, while demand for life insurance is below average.