DEA evaluations of the efficiency of organizational forms and distribution systems in the US property and liability insurance industry

Abstract

The efficiency effects of different forms of ownership (stock versus mutual) and types of marketing system (agency versus direct) are studied using 1989 data for the US property-liability insurance industry. Data envelopment analysis (DEA) results are obtained from the recently developed RAM (Range Adjusted Measure) model and then extended for comparison with studies by others. Using agency theory (and like approaches) these studies assume that operations all occur only on the efficient frontier. The need for that assumption is obviated by using operations provided by DEA to project all observations onto their efficient frontiers. A use of (non-parametric) rank-order statistics then produces results which differ from these other studies.