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The Empirical Analysis on Business Efficiency of China’s Property-Liability Insurance Companies

Author: MeiXiaoPing
Tutor: GuoCunZhi
School: Nanjing University of Finance and Economics
Course: Quantitative Economics
Keywords: Property-Liability insurance Business Efficiency Data Envelopment Analysis Malmquist Index
CLC: F224
Type: Master's thesis
Year: 2011
Downloads: 113
Quote: 0
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Abstract

Recently,the Property-Liability Insurance Industry of China has developed rapidly, but it is still relatively fallen behind the Life Insurance Industry,and compared with the international average level,there’s still some way to go.Meanwhile, the financial crisis has taken its toll on the the Property-Liability Insurance companies,As a result of the long-term attention to the speed and scale but neglecting of efficiency,they often conduct frail,when facing the crisis.As far as the efficiency of the Property-Liability Insurance industry is concerned,it means effective allocation of the resources, abilities of market competing, efficiency has already beacome the core problem of managent of Property-Liability insurance.It is realistic signifcance to increase efficiency of the Property-Liability insurance industry.The paper is sure to use DEA method on the base of presenting the efficiency theory of insurance industry and its measurement method,selects the data of 14 Chinese-funded Property-Liability insurance companies and 7 overseas-funded ones representative from 2005 to 2008, measures their business efficiency,including the technical efficiency(TE),the pure technical efficiency(PTE),the scale efficiency(SE), the cost efficiency(CE) as well as the allocative effects(AE),and surveys the Malmquist productivity index,inspects Total Factor Productivity change and its constitution,simultaneously analyzes the change of the business efficiency around the financial crisis.The resulit shows:The overall fluctuation of the TE is quite big,and it assumes the declining trend; PTE of the company owning market share is higher,and the average value of PTE of the overseas-funded Property-Liability insurance companies is bigger than the Chinese-funded Property-Liability insurance companies; SE of the overseas-funded Property-Liability insurance companies is lower than the Chinese-funded ones,and the size of the scale efficiency value has nothing to do with the scale reward;The difference of CE is quite big and low generally;The fluctuation of AE is big;Totolly,the production capability of China’s Property-Liability insurance companies is progressive, and the progress of productive roots in the technological advance and the efficiency progress,but their influences differ,the productive forces with steady steps and the swift growth originates from the efficiency progress.This article defines the influencing factors of efficiency, mainly including the external macro-economic environment factors,industrial factors and internal microcosmic factors,takes an empirical analysis on the influencing factors of efficiency,and shows that the rapid economic growth has brought about rapid development of the Property-Liability insurance companies,but does not improve their efficiency;Various efficiency values have the remarkable change around the financial crisis,the crisis hinder improvement on efficiency of Property-Liability companies; there is a negative correlation between interest rate and efficiency, and the impact on the technical efficiency and scale efficiency is obvious.On the property insurance profession, we analyse the influence factors by market concentration,and show that the size of efficiency has no reference to market concentration.On the inter basis,The Capital Adequacy exerts a slight influence on efficiency,the phenomenon of capital deficiencies is ubiquitous,the scale of the company is bigger,the capital adequacy is lower,which has no effect on the incease of returns ratio;The reinsurance development is advantageous in proposing the original insurance company’s business efficiency, but the result of this article is different from the conclusion;High-quality staff has the extremely vital role on promoting the overall efficiency of the Property-Liability insurance industry,the positive correlation between the human capital and efficiency confirms the above conclusion;The positive correlation is not remarkable between the loss ratio and the technical efficiency, the pure technical efficiency and the scale efficiency,as well as the negative correlation between the loss ratio and the cost efficiency and the allocative efficiency;Generally speaking,the stronger the profitability is, the higher the efficiecy level is,however, the conclusion is opposite in this article.We analyze how to enhance the efficiency of the Property-Liability companies from two aspects of the Property-Liability companies themselves and external forces. On the one hand, we may take steps by making positive efforts to promote technical innovations of the Property-Liability companies, paying attention to the balance between the scale and benefit, stressing in improvement of the staff’s overall quality and the level of risk management.On the other hand,the government should open up the entry regulation of the overseas-funded Property-Liability insurance companies, emphasize the balance development of the Chinese-fundedProperty-Liabilityinsurance companies and the overseas-funded ones, enhance the insurance regulation, and establish a sound legal risk prevention mechanisms as well as improving the insurance system for again.

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