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Determination of the Product Mix and the Business Policy of an Insurance Company--A Portfolio Approach

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  • Yehuda Kahane

    (The Hebrew University of Jerusalem)

Abstract

This paper sets out a model which simultaneously determines the optimal composition of the insurance and investment portfolios of an insurance company using Sharpe's Single-Index Technique. This technique can be explained for management as follows: different product lines that a multi-product firm offers have different rates of return and different risks associated with those rates of return. Taking into account both risks and rates of return, what is the best mix of product lines for a firm to offer in the marketplace? This approach is especially suitable for insurance because of data limitations. This type of analysis can make a useful contribution in shaping the firm's product mix and marketing policy.

Suggested Citation

  • Yehuda Kahane, 1977. "Determination of the Product Mix and the Business Policy of an Insurance Company--A Portfolio Approach," Management Science, INFORMS, vol. 23(10), pages 1060-1069, June.
    • Handle: RePEc:inm:ormnsc:v:23:y:1977:i:10:p:1060-1069
    DOI: 10.1287/mnsc.23.10.1060
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    Citations

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    Cited by:

    1. Zhimin Huang & Susan Li, 2001. "Stochastic DEA Models With Different Types of Input-Output Disturbances," Journal of Productivity Analysis, Springer, vol. 15(2), pages 95-113, March.
    2. Martin Eling & Thomas Parnitzke, 2007. "Dynamic Financial Analysis: Classification, Conception, and Implementation," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 10(1), pages 33-50, March.
    3. Garg Ankur & Tiwari Apoorva & Dutta, Goutam & Basu Shankarshan, 2006. "A Stochastic Linear Programming Model for Asset Liability Management: The Case of an Indian Insurance Company," IIMA Working Papers WP2006-10-08, Indian Institute of Management Ahmedabad, Research and Publication Department.
    4. Terho, Harri & Halinen, Aino, 2007. "Customer portfolio analysis practices in different exchange contexts," Journal of Business Research, Elsevier, vol. 60(7), pages 720-730, July.
    5. Flapper, Simme Douwe P. & González-Velarde, José Luis & Smith, Neale R. & Escobar-Saldívar, Luis Jacob, 2010. "On the optimal product assortment: Comparing product and customer based strategies," International Journal of Production Economics, Elsevier, vol. 125(1), pages 167-172, May.
    6. Li, S. X., 1995. "An insurance and investment portfolio model using chance constrained programming," Omega, Elsevier, vol. 23(5), pages 577-585, October.
    7. Alireza Amirteimoori & Biresh K. Sahoo & Saber Mehdizadeh, 2023. "Data envelopment analysis for scale elasticity measurement in the stochastic case: with an application to Indian banking," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-36, December.
    8. Li, Susan X., 1998. "Stochastic models and variable returns to scales in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 104(3), pages 532-548, February.
    9. Li, Susan X. & Huang, Zhimin, 1996. "Determination of the portfolio selection for a property-liability insurance company," European Journal of Operational Research, Elsevier, vol. 88(2), pages 257-268, January.
    10. Maurer, Raimond H., 2003. "Institutional investors in Germany: Insurance companies and investment funds," CFS Working Paper Series 2003/14, Center for Financial Studies (CFS).
    11. Huang, Zhimin & Li, Susan X., 1996. "Dominance stochastic models in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 95(2), pages 390-403, December.

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