Abstract
The study employs metafrontier and four-stage data envelopment analysis (DEA) to measure the overall and individual efficiency of life insurance companies in mainland China and Taiwan, after applying the slack-based measure (SBM)-DEA model to adjust the differences in the operating environment across production units. The empirical findings show the following: (a) The environmental factors significantly affected the efficiency of all life insurance companies. After the adjustments, the efficiency score of life insurance companies in mainland China and Taiwan drops for 14.01% and 26.64% in regional frontier, and 38.31% and 12.22% in metafrontier frontier. (b) Before 2008, the life insurance companies in Taiwan are more efficient than those in mainland China.
Highlights
In recent years, the global insurance industry faced the fierce many challenges including the ending of QE3, the U.S government funding and debt ceiling issues, the long-running low interest rates, and so on
We investigate whether there exists a gap on both sides of the insurance industry’s operating performance and try to understanding whether the Taiwanese insurance companies have the advantage to survive in mainland China market
After employing Tone’s (2001) slack-based measure (SBM)-data envelopment analysis (DEA) model to adjust the differences in the operating environment across production units, the study follows the framework of Battese et al (2004) and Fried et al (1999) to measure the metafrontier and subgroup efficiency of insurance companies of two economies
Summary
The global insurance industry faced the fierce many challenges including the ending of QE3, the U.S government funding and debt ceiling issues, the long-running low interest rates, and so on. According to the Swiss Re research report, due to part-year data indicates that there will be a substantial contraction in life premiums in mainland China, global life insurance premiums will grow by 1.6% in real terms (see Figure 1), slightly slower than the average annual growth rate of the last 5 years. The global premiums forecast to increase annual insurance premium growth of around 3% in real terms over the 2 years. Most demand will come from Asia, where premiums are forecast to increase at more than 3 times the global average rate. In both non-life and life, the emerging markets remain the main driver, in mainland China. Advanced market life premiums are expected to remain stable at current levels
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