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Competition reduces profitability: the case of the Indian life microinsurance industry

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  • Subrato Banerjee

    (Indian Institute of Technology - Bombay
    University of Melbourne
    Queensland University of Technology)

  • Basri Savitha

    (Manipal Academy of Higher Education)

Abstract

We aim to understand the effect of market and firm-level concentration on return on equity in the Indian life microinsurance industry (LMI). This research is one of the first attempts to empirically test structure–performance issues in India. Using data on 14 companies that remained active in the LMI market during 2009–2019, we demonstrate that firms in the Indian LMI market scored better on profitability measures whenever competitive pressures were lower. We calculate Herfindahl–Hirschman concentration indexes (HHI), market share and entropy measures and use panel data techniques to find a positive effect of concentration and a negative effect of market share. We conclude that LMI-specialised insurers in India perform better than diversified insurers.

Suggested Citation

  • Subrato Banerjee & Basri Savitha, 2021. "Competition reduces profitability: the case of the Indian life microinsurance industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(3), pages 383-398, July.
    • Handle: RePEc:pal:gpprii:v:46:y:2021:i:3:d:10.1057_s41288-020-00203-5
    DOI: 10.1057/s41288-020-00203-5
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    2. Sangyong Han & Kwangmin Jung, 2023. "CEO political orientation, risk taking, and firm performance: evidence from the U.S. property-liability insurance industry," Economics of Governance, Springer, vol. 24(1), pages 1-39, March.

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