The German insurance market was liberalized in 1994 by the introduction of the ‘single passport’ allowing European insurers to operate throughout the entire European Union. The European directive put also an end to price and insurance contract terms regulation. These measures were meant for removing the obstacles to competition within and between the insurance markets of the member states aiming at an increased efficiency of the European insurance markets. We analyze to which extent this aim has been achieved in the German life insurance market. The development of market performance is measured by changes in technical cost and profit efficiency levels since the liberalization, as well as a measurement of technological change. Technical cost efficiency levels are estimated by applying a stochastic “true” fixed effects distance frontier (Greene, 2005). Non-standard profit efficiency is derived in a second step following Kumbakhar (2006). According to our results, the industry experienced positive total factor productivity (TFP) growth during the observation period, which is mainly driven by substantial positive technological change. Technical cost efficiency and profit efficiency remained stable on average, but significant positive scale efficiency change can be found indicating that market consolidation in the presence of increasing returns to scale led to efficiency gains of the firms.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.