Abstract
This chapter applies a new variant of the data envelopment analysis model to examine the performance of Life Insurance Corporation (LIC) of India. The findings show a significant heterogeneity in the cost efficiency scores over the course of 19 years. A decline in performance after 1994–1995 can be taken as evidence of increasing allocative inefficiencies arising from the huge initial fixed cost undertaken by LIC in modernizing its operations. A significant increase in cost efficiency in 2000–2001 is, however, cause for optimism that LIC may now be realizing a benefit from such modernization. This will stand the corporation in good stead in terms of future competition. Results from a sensitivity analysis are in broad agreement with the main findings of this study.
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