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Cost efficiency of insurance firms in Ghana

Author

Listed:
  • Michael Danquah
  • David Mensah Otoo
  • Amoah Baah†Nuakoh

Abstract

The huge infrastructural deficit in Africa requires the establishment of an efficient insurance industry in the pursuance of economic development. Unfortunately, global statistics reveal low patronage of insurance in developing countries, thus making its impact limited in the region. To position the industry for economic development, this study utilizes the stochastic frontier technique to undertake a thorough analysis on the cost efficiency of insurers from the perspective of developing economies using Ghana as a case study. The results on the 30 insurers studied from 2005 to 2014 indicate that insurers in Ghana operate with about 53.8% average cost inefficiency. This stands to confirm the long existed low performance perception of Ghanaians about the industry. Factors identified to explain the cost inefficiencies were firm size, market share, capitalization, reinsurance, regulation, and business type. Several policy recommendations that can help boost the cost efficiency of insurers were derived from the results.

Suggested Citation

  • Michael Danquah & David Mensah Otoo & Amoah Baah†Nuakoh, 2018. "Cost efficiency of insurance firms in Ghana," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 39(2), pages 213-225, March.
    • Handle: RePEc:wly:mgtdec:v:39:y:2018:i:2:p:213-225
    DOI: 10.1002/mde.2897
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    Cited by:

    1. Kwaku Ohene-Asare & Jones Kofi Anyimadu Asare & Charles Turkson, 2019. "Dynamic cost productivity and economies of scale of Ghanaian insurers," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(1), pages 148-177, January.
    2. Aslam, Faheem & Hunjra, Ahmed Imran & Ftiti, Zied & Louhichi, Wael & Shams, Tahira, 2022. "Insurance fraud detection: Evidence from artificial intelligence and machine learning," Research in International Business and Finance, Elsevier, vol. 62(C).
    3. Pius Babuna & Xiaohua Yang & Amatus Gyilbag & Doris Abra Awudi & David Ngmenbelle & Dehui Bian, 2020. "The Impact of COVID-19 on the Insurance Industry," IJERPH, MDPI, vol. 17(16), pages 1-14, August.
    4. Davide Lanfranchi & Laura Grassi, 2021. "Translating technological innovation into efficiency: the case of US public P&C insurance companies," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 565-585, December.

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