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Antecedents of Efficiency: Empirical Evaluation of the Life Insurance Sector in India

In: Handbook on Data Envelopment Analysis in Business, Finance, and Sustainability Recent Trends and Developments

Author

Listed:
  • Aparna Bhatia
  • Megha Mahendru

Abstract

The purpose of this chapter is to identify the attributes affecting the cost, revenue, and profit efficiency of life insurance companies in India from 2013–2014 to 2018–2019. A two-phase analysis is applied in the study. In the first phase, the cost, revenue, and profit efficiency scores of all the life insurance companies are calculated using the technique of data envelopment analysis. In the second phase, a panel tobit regression model is run to estimate the antecedents of efficiency. The results of the study emphasize that capital adequacy, asset quality, reinsurance and actuarial issues, management soundness, and liquidity have a positive relationship with cost, revenue, and profit efficiency. However, “earning and profitability” has a negative impact on all the efficiency scores, depicting that Indian life insurance companies are not getting much return from their investments, which is their major source of revenue. Low revenues do not seem to be sufficient to cover the cost of insurance and, consequently, generate low profits. In order to improve efficiency, insurers should focus on balancing the input–output mix, taking into consideration their prices. Also, modern virtual platforms should be adopted, which can lead to cost savings and higher profitability.

Suggested Citation

  • Aparna Bhatia & Megha Mahendru, 2024. "Antecedents of Efficiency: Empirical Evaluation of the Life Insurance Sector in India," World Scientific Book Chapters, in: Sabri Boubaker & Thanh Ngo (ed.), Handbook on Data Envelopment Analysis in Business, Finance, and Sustainability Recent Trends and Developments, chapter 13, pages 401-426, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9781800615786_0013
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    More about this item

    Keywords

    Data Envelopment Analysis; Business; Finance; Banking; Accounting; Sustainability; Efficiency; Performance; Productivity; Total Factor Productivity; Frontier Analysis;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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