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Investigating the Efficiency of Insurance Companies in a Developing Country: A Data Envelopment Analysis Perspective

Author

Listed:
  • Katerina Fotova Čiković

    (Department of Economy, University North, Trg dr. Žarka Dolinara 1, 48000 Koprivnica, Croatia)

  • Violeta Cvetkoska

    (Faculty of Economics—Skopje, Ss. Cyril and Methodius University in Skopje, Blvd. Goce Delchev 9V, 1000 Skopje, North Macedonia)

  • Mila Mitreva

    (Faculty of Economics, Goce Delcev University, 2000 Stip, North Macedonia)

Abstract

Insurance companies play a pivotal role in the financial systems of developing countries, wielding substantial influence on systemic financial stability. Thus, understanding their efficiency, performance, and sustainability is paramount for policymakers and stakeholders alike. The aim of this paper is to evaluate the relative efficiency of insurance companies within the North Macedonian market spanning the years 2018 to 2022. Employing the input-oriented BCC DEA model, the study integrates capital and labour as inputs, while assessing risk-pooling/bearing services and intermediate function as outputs. Our findings underscore the fluctuating efficiency levels within North Macedonia’s insurance sector. Notably, the sector exhibited its peak efficiency in 2018 at 83.62%, dipping to its lowest point of 73.81% in 2020. Moreover, discerning between life and non-life insurers, we observe an average relative efficiency of 0.8067 for non-life insurers, contrasted with a higher average efficiency score of 0.9011 for life insurance companies over the examined period. This study contributes significantly on multiple fronts. Firstly, it pioneers empirical investigation of the efficiency on the North Macedonian insurance market, encompassing pre- and post-COVID efficiency metrics. This fills a notable gap in the literature, particularly within the context of emerging European markets. Secondly, our comprehensive approach facilitates a holistic evaluation of the insurance sector’s performance across a five-year span, offering insights into its overarching dynamics and efficacy. Thirdly, the implications of our findings extend to policymakers, regulators, and insurance company management, aiding in informed decision-making and strategic planning.

Suggested Citation

  • Katerina Fotova Čiković & Violeta Cvetkoska & Mila Mitreva, 2024. "Investigating the Efficiency of Insurance Companies in a Developing Country: A Data Envelopment Analysis Perspective," Economies, MDPI, vol. 12(6), pages 1-20, May.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:6:p:128-:d:1399395
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    References listed on IDEAS

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    1. William W. Cooper & Lawrence M. Seiford & Joe Zhu (ed.), 2011. "Handbook on Data Envelopment Analysis," International Series in Operations Research and Management Science, Springer, number 978-1-4419-6151-8, May.
    2. Emrouznejad, Ali & Yang, Guo-liang, 2018. "A survey and analysis of the first 40 years of scholarly literature in DEA: 1978–2016," Socio-Economic Planning Sciences, Elsevier, vol. 61(C), pages 4-8.
    3. Bulent Dervishi, 2020. "Investments and portfolio structure of private pension and insurance companies in North Macedonia," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(5), pages 227-234, September.
    4. Đurić Zlata & Jakšić Milena & Krstić Ana, 2020. "DEA Window Analysis of Insurance Sector Efficiency in the Republic of Serbia," Economic Themes, Sciendo, vol. 58(3), pages 291-310, September.
    5. Pervan Maja & Ćurak Marijana & Kramarić Tomislava Pavić, 2021. "Has Accession to the European Union Affected the Efficiency of Croatian Insurance Companies?," Zagreb International Review of Economics and Business, Sciendo, vol. 24(1), pages 67-98.
    6. Omrani, Hashem & Emrouznejad, Ali & Shamsi, Meisam & Fahimi, Pegah, 2022. "Evaluation of insurance companies considering uncertainty: A multi-objective network data envelopment analysis model with negative data and undesirable outputs," Socio-Economic Planning Sciences, Elsevier, vol. 82(PB).
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