# Research on China insurance demand forecasting: Based on mixed frequency data model

## TL;DR

This paper uses a mixed-frequency data model to forecast China's insurance demand, showing it performs well, especially in the short term.

## Contribution

The study applies the MIDAS model to China's insurance demand forecasting with mixed-frequency indicators.

## Key findings

- MIDAS models show good forecasting performance, especially for short-term insurance demand.
- Consumer confidence is the main factor influencing insurance demand during the pandemic.
- China’s insurance demand is expected to return to pre-COVID levels by 2023Q2.

## Abstract

In this paper, we introduce the mixed-frequency data model (MIDAS) to China’s insurance demand forecasting. We select the monthly indicators Consumer Confidence Index (CCI), China Economic Policy Uncertainty Index (EPU), Consumer Price Index (PPI), and quarterly indicator Depth of Insurance (TID) to construct a Mixed Data Sampling (MIDAS) regression model, which is used to study the impact and forecasting effect of CCI, EPU, and PPI on China’s insurance demand. To ensure forecasting accuracy, we investigate the forecasting effects of the MIDAS models with different weighting functions, forecasting windows, and a combination of forecasting methods, and use the selected optimal MIDAS models to forecast the short-term insurance demand in China. The experimental results show that the MIDAS model has good forecasting performance, especially in short-term forecasting. Rolling window and recursive identification prediction can improve the prediction accuracy, and the combination prediction makes the results more robust. Consumer confidence is the main factor influencing the demand for insurance during the COVID-19 period, and the demand for insurance is most sensitive to changes in consumer confidence. Shortly, China’s insurance demand is expected to return to the pre-COVID-19 level by 2023Q2, showing positive development. The findings of the study provide new ideas for China’s insurance policymaking.