Performance analysis and benchmarking of general and health insurance companies of India: a three stage DEA study

Purpose - This paper analyses and benchmarks the performance of the general and health Insurance companies in India, considering their production, capital allocation and investment efficiencies as three distinct stages. Design/methodology/approach - A three stage Data Envelopment Analysis (DEA) methodology has been used with three years of data of the health and general insurance companies. Findings - In addition to production and investment efficiencies, the capital allocation efficiency of an insurance firm significantly impacts its financial performance. The study shows that notwithstanding the efficiency scores in production and investment, general insurance firms with superior capital allocation efficiencies are the ones that have been able to translate their efficiencies into better business performance. Practical implications - The study provides deeper understanding of the importance of capital allocation decisions and its linkages to production and investment efficiencies to help insurance firms to make better operational and financial decisions. The standalone health insurance players in spite of their reasonably high capital allocation efficiency scores have not been able to translate their efficiencies into superior financial performance. Originality/value - While the existing literature at best has only considered production and investment decisions as the two stages, the present study has added another stage relating to the allocation of financial resources of the insurance firms. The paper is also distinct in terms of its analysis of linkages between efficiency scores of the three different stages with key financial performance measures.