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Returns to Scale in the Life Insurance Industry

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  • Randall Geehan

Abstract

In this paper the long-run cost curve for the Canadian life insurance industry is estimated with an output measure consisting of a weighted sum of activities. It is shown that previous studies of returns to scale in life insurance used biased proxies for output which led to exaggerated estimates of the degree of returns to scale. Statistically significant (but not economically significant) returns to scale appear to exist in the Canadian industry, but the evidence is not conclusive.

Suggested Citation

  • Randall Geehan, 1977. "Returns to Scale in the Life Insurance Industry," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 497-514, Autumn.
    • Handle: RePEc:rje:bellje:v:8:y:1977:i:autumn:p:497-514
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    Cited by:

    1. J. Cummins & Hongmin Zi, 1998. "Comparison of Frontier Efficiency Methods: An Application to the U.S. Life Insurance Industry," Journal of Productivity Analysis, Springer, vol. 10(2), pages 131-152, October.
    2. Killins, Robert N., 2020. "Firm-specific, industry-specific and macroeconomic factors of life insurers’ profitability: Evidence from Canada," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    3. Olivier DONNI & Valérie HAMENDE, 1993. "PERFORMANCE DES SOCIÉTÉS BELGES D'ASSURANCE Comparaison des formes institutionnelles," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 64(3), pages 419-438, July.
    4. Gardner, L. A. & M. F. Grace, "undated". "Efficiency Comparisons between Mutual and Stock Life Insurance Companies," Working Papers 012, Risk and Insurance Archive.
    5. Harvey R. Crapp, 1982. "Scale Economies in the N.S.W. Permanent Building Society Industry," Australian Journal of Management, Australian School of Business, vol. 7(1), pages 33-48, June.
    6. Hanweck, Gerald A. & Hogan, Arthur M. B., 1996. "The structure of the property/casualty insurance industry," Journal of Economics and Business, Elsevier, vol. 48(2), pages 141-155, May.
    7. Neil Doherty & Kent Smetters, 2005. "Moral Hazard in Reinsurance Markets," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(3), pages 375-391, September.
    8. Peter Praetz, 1981. "Returns to Scale in the Australian Life Insurance Industry," The Economic Record, The Economic Society of Australia, vol. 57(3), pages 269-276, September.
    9. Mamta Suri & R. K. Sinha, 2013. "An Indirect Approach to Construct Insurance Service Price Index," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 332-345, January.
    10. Gerard M. Brannon, 1991. "Public policy and life insurance," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 35, pages 199-238.
    11. Jeffrey I. Bernstein, 1992. "Information Spillovers, Margins, Scale and Scope: With an Application to Canadian Life Insurance," NBER Working Papers 3979, National Bureau of Economic Research, Inc.

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