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A cost efficiency analysis of the insurance industry in Mexico

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  • Ana María Reyna

    (GNP)

  • Hugo J. Fuentes

    (ITESM CCM)

Abstract

In Mexico, the low participation of insurance activity in national production, in contrast to similar Latin American economies, is a concern. Industry’s regulator promoted more intense competition at the dawn of the century. Was deregulation followed by improvements in the financial and economic performance of Mexican insurance firms? The purpose of this paper is to answer this question through a comprehensive analysis of cost variations in an intertemporal manner, by breaking them down into the economic sources that produce them, including productivity. Cost frontier estimation was grounded in a joint production technology of desirable and undesirable outputs, modeled in an input-oriented fashion. Our results demonstrate that even though some companies achieved cost reductions from technological progress or improvements in efficiency, the Mexican insurance market does not show signs of significant productivity gains.

Suggested Citation

  • Ana María Reyna & Hugo J. Fuentes, 2018. "A cost efficiency analysis of the insurance industry in Mexico," Journal of Productivity Analysis, Springer, vol. 49(1), pages 49-64, February.
    • Handle: RePEc:kap:jproda:v:49:y:2018:i:1:d:10.1007_s11123-017-0521-7
    DOI: 10.1007/s11123-017-0521-7
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    Cited by:

    1. Ana M. Reyna & Hugo J. Fuentes & José A. Núñez, 2022. "Response of Mexican life and non-life insurers to the low interest rate environment," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(2), pages 409-433, April.
    2. Sen Subir, 2020. "Analysis of Cost Efficiency of Indian Life Insurers: A comparison of Quantity vs Value based DEA Approach," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 14(1), pages 1-25, January.
    3. Molinos-Senante, María & Maziotis, Alexandros & Sala-Garrido, Ramón, 2020. "Changes in the total costs of the English and Welsh water and sewerage industry: The decomposed effect of price and quantity inputs on efficiency," Utilities Policy, Elsevier, vol. 66(C).
    4. Balk, Bert M. & Zofío, José L., 2020. "Symmetric decompositions of cost variation," European Journal of Operational Research, Elsevier, vol. 285(3), pages 1189-1198.
    5. Tai-Hsin Huang & Yi-Chun Lin & Kuo-Jui Huang & Yu-Wei Liao, 2022. "Comparing Cost Efficiency Between Financial and Non-financial Holding Banks and Insurers in Taiwan Under the Framework of Copula Methods and Metafrontier," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(4), pages 735-766, December.

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