Investigating the effect of privatization of the insurance industry on the asset structure and investment of insurance companies

Dissertation for Master's degree

(M.A(

Treatment of business management - insurance

Abstract:

In this research, an attempt has been made to answer these questions, how will the composition of assets and investments of insurance companies change in the transition from the government environment that governs the country's insurance industry to a competitive environment, and in other words, the expansion of privatization and providing opportunities for liberalization in this industry. In this research, it is assumed that the liberalization and facilitation of regulations is provided for the presence of private insurance companies, and we are looking for changes in the composition of assets and investments. In this research, after stating the concepts of privatization and its goals, we reviewed the performance of the state insurance companies of Iran, Alborz, and Dana, and also examined the privatization business in the selected countries Investing in high-yield plans, lack of interest in government investment, interest in independent investments, lack of interest in buying government bonds and interest in a stronger presence in the stock market can be seen.

Key words: insurance industry, privatization, asset structure, investment

Chapter 1: General research

1-1- Introduction

Privatization of the insurance industry in Iran started in 2000, but Privatization started in 2009 through the sale of assets or transfer of ownership. One of the effects of privatization is the supply of new services to the insurance market, which seeks diversity in the insurance industry. In recent years, the state-owned insurance companies in Iran operated in a centralized and traditional way by offering services such as fire, health and third party insurance. While recently, credit, oil and energy insurances have received special attention compared to 2001 and before. In addition, 17 new liability insurances, 4 life insurances, 6 health insurances and most of the new insurances have been added to the previous insurance coverages (Central Insurance of Iran, 2009: p. 87).

The variety of insurance activities can be analyzed with the centralized index of insurance activities. It can be claimed that privatization has influenced the diversity of insurance services to some extent over many years. Many efforts have been made to develop it, it still does not have a suitable position, the wide supply of insurances in order to promote and improve the level of social welfare - as it deserves - due to the existence of vast capacities and capabilities in the country, faces many obstacles. The extensive scientific and technological progress of the modern era has also helped humans to curb some natural hazards, but it has brought new hazards that require protection.

There are so many obstacles and problems that threaten human life every day that solutions and actions must be taken to prevent any possible hazards and damages. The goal is to create perfect competition conditions, increase efficiency, increase investment and generally to achieve various economic goals. In a general view, the privatization of the insurance industry is a process to achieve a balanced state in the insurance activities of the public sector with the market mechanism. It can be claimed that a large share of insurance activities in Iran is in the hands of state-owned companies. In the state mode, in addition to the profit criterion that is of interest to the private sector, the social benefits of economic activities are also considered. With this description, if government insurance companies with the current structure want to become private, of course, the management of the investments of these companies will be completely different from the government mode. Therefore, huge funds from the sold insurance premiums will always remain with them. According to the statistics, the average balance and bank deposits of insurance institutions during the years 2016-2016 was more than 60%. This means that more than 60% of the balance with insurance institutions is deposited in the banking system in the form of current accounts or savings for any reason, which are often given very small profits.On the other hand, the government structure obliges insurance companies to buy bonds that often do not yield any productivity. In the best case, insurance companies are able to invest in the shares of other companies, and in this case, they receive a little profit after tax deduction, and they have not been able to play an important role in the capital market in terms of capital and investment.

The entry of a private insurance company that benefits from independent asset management and investments will be effective on the volume of investments and operations in the capital market, so that the allocation of funds through private insurance companies is considered a useful experience for government insurance companies. In order to continue their existence in competitive conditions, such companies will need a general review of how to allocate their available funds and commit to future payments.

In this research, an attempt is made to determine the best combination of assets and investments of insurance companies in private mode. Insurance institutions receive money from them for the assurance they sell to their customers, and these amounts remain with the insurance companies until one of the customers has an accident. That is, the booming economy requires the powerful intervention of the government. In this era, governments provide the welfare of the society by investing in non-profitable sectors that are necessary and necessary for the life of the society, and it creates the necessary ground for creating stability and social security, which itself is a necessary condition for attracting investments. In most of the developing countries, due to the weakness of the government structure and the general weakness of the economic structure, the governments cannot carry out the policies of privatization and strengthening the private sector correctly and with reasonable results. In our country, according to experts, the lack of suitable areas for the privatization process has made its implementation difficult at different stages. However, at the same time, increasing competition and economic efficiency and optimal use of productive resources and thus achieving higher economic growth requires the privatization of the country's industries. It will be, in fact, the few funds that are overflowed by the insurers to the insurance companies, constitute huge sums that turn the big economic wheels. The government ownership and management of Iran's insurance companies and non-motivational factors have caused a major share of these funds to be transferred to the banking system with low interest rates. Also, due to the fact that the necessary platforms are not ready, it is not possible to directly privatize state insurance companies.

In this situation, operationalizing the entry of private insurance companies and giving a field to this company and helping to create a healthy competitive environment between private and state insurance companies will affect the asset structure and investments of state insurance companies, and will add color to the role of the insurance industry along with the two markets, the stock market and the bank, which form the vertices of the financial triangle of every society.

1-4- Research objectives

Finding an optimal combination of assets and investment in the private state of insurance companies

Providing a type of investment management in insurance companies that have been privatized

1-5- Research hypotheses

1) The composition of the asset portfolio of insurance companies changes in the transition from public to private form.

2) The rate of return on investments of insurance companies in The transition from public to private form increases. 1-6- Research method The statistical method used to test research hypotheses is the single-sample t-test, which is performed to test a hypothesis according to the average of the community. The analysis of the questionnaire data was done with the help of SPSS software, and all inferential information was extracted through this software. Need to test research hypotheses, a questionnaire has been prepared in the form of 24 questions, which was distributed at the level of senior managers of public and private insurance companies.