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Evaluating the Operational Efficiency of Life Insurance Companies in Taiwan¨C An Application of the Dynamic Network SBM Model

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  • Lee Chi-Ai
  • Shyu Ming-Kuang
  • Chiu Yung-Ho

Abstract

Using a Dynamic Network Slack-based Measurement model (Tone & Tsutsui, 2014), this study evaluated the operational efficiency of life insurance firms in Taiwan from 2006 to 2013. In contrast to previous research, we incorporated assets and liabilities management into the model and compared them against optimal efficiency values in order to determine whether firms are earning maximizing profit while ensuring long-term solvency. The life insurance industry in Taiwan has matured. We found that market competitiveness depends on firms size and business model. Financial holdings companies and large corporations are performing strongly, while small local firms and foreign-owned firms scored poorly in technical efficiency. Economies of scale contribute to the business performance of life insurance firms. Life insurance companies that had merged with or been acquired by financial holdings firms showed notable improvement in efficiency. However, change in term efficiency is a warning signal in long-term business performance of life insurance firms. Lastly, most companies achieved optimal carry-over efficiency, indicating that they place considerable emphasis on managing assets and liabilities in order to ensure future solvency.

Suggested Citation

  • Lee Chi-Ai & Shyu Ming-Kuang & Chiu Yung-Ho, 2017. "Evaluating the Operational Efficiency of Life Insurance Companies in Taiwan¨C An Application of the Dynamic Network SBM Model," Applied Economics and Finance, Redfame publishing, vol. 4(1), pages 18-33, January.
    • Handle: RePEc:rfa:aefjnl:v:4:y:2017:i:1:p:18-33
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    References listed on IDEAS

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    Cited by:

    1. Huang, Tai-Hsin & Lin, Chung-I & Wu, Ruei-Cian, 2019. "Assessing the marketing and investment efficiency of Taiwan’s life insurance firms under network structures," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 132-147.
    2. Kuan-Chen Chen & Chung-I Lin, 2020. "Studies on the Determinants of Efficiency in Taiwanese Life Insurance Industry - Application of Bootstrapped Truncated Model," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(1), pages 1-4.
    3. Mohammad Nourani & Qian Long Kweh & Irene Wei Kiong Ting & Wen-Min Lu & Anna Strutt, 2022. "Evaluating traditional, dynamic and network business models: an efficiency-based study of Chinese insurance companies," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(4), pages 905-943, October.

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    More about this item

    Keywords

    life insurance company; efficiency; productivity; carry-over; dynamic network SBM DEA;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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