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Conversion and Efficiency Performance Changes: Evidence from the U.S. Property-Liability Insurance Industry

Author

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  • Lih-Ru Chen

    (Department of Risk Management and Insurance, Shih Chien University, Taipei, Taiwan.)

  • Gene C Lai

    (1] Department of Finance and Management Science, Washington State University, USA.[2] Risk and Insurance Research Center (RIRC), National Cheng-Chi University, Taipei, Taiwan.)

  • Jennifer L Wang

    (Department of Risk Management and Insurance, Risk and Insurance Research Center (RIRC), National Cheng-Chi University, Taipei, Taiwan.)

Abstract

This study investigates whether the conversion of U.S. property-liability insurers improves their efficiency performance before and after the conversion. We estimate relative efficiency of converting insurers and control insurers using data envelopment analysis. The Malmquist analysis is also used to measure changes in efficiency pre- and post-conversion. The evidence shows that converting insurers experience larger gains in cost efficiency and total productivity change than mutual control insurers before conversion. In addition, the empirical results indicate that converting insurers improve efficiency after conversion. These results are robust with respect to both the value-added and the financial intermediary approaches. The overall results support the efficiency hypothesis proposed by Mayers and Smith (1986).

Suggested Citation

  • Lih-Ru Chen & Gene C Lai & Jennifer L Wang, 2011. "Conversion and Efficiency Performance Changes: Evidence from the U.S. Property-Liability Insurance Industry," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 36(1), pages 1-35, June.
    • Handle: RePEc:pal:genrir:v:36:y:2011:i:1:p:1-35
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    Cited by:

    1. Jin Lung Peng & Lih Ru Chen & Jennifer L. Wang & Larry Y. Tzeng, 2017. "Diversification Versus Strategic Focus: Evidence from Insurance Intermediaries in Taiwan," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(3), pages 530-555, July.
    2. Mohammad Nourani & Qian Long Kweh & Wen-Min Lu & Ikhlaas Gurrib, 2022. "Operational and investment efficiency of investment trust companies: Do foreign firms outperform domestic firms?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-26, December.

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