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Determinants of Efficiency and Productivity in German Property-Liability Insurance: Evidence for 1995–2006

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  • Michael Luhnen

    (Institute of Insurance Economics, University of St. Gallen, Kirchlistrasse 2, St. Gallen 9010, Switzerland)

Abstract

This paper provides a comprehensive analysis of efficiency and productivity in the German property-liability insurance industry, a market that has experienced significant change in recent years. Using data envelopment analysis (DEA) and covering the period 1995–2006, we find that there is potential for the market to improve by about 20 percentage points in terms of technical efficiency and about 50 percentage points in terms of cost efficiency. Furthermore, the analysis shows moderate total factor productivity growth and low efficiency growth during the sample period. A major contribution of the paper is its analysis of six efficiency determinants – firm size, distribution channels, ownership forms, product specialisation, financial leverage and premium growth – using a truncated regression and bootstrapping approach to avoid invalid inference. The Geneva Papers (2009) 34, 483–505. doi:10.1057/gpp.2009.10

Suggested Citation

  • Michael Luhnen, 2009. "Determinants of Efficiency and Productivity in German Property-Liability Insurance: Evidence for 1995–2006," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 34(3), pages 483-505, July.
  • Handle: RePEc:pal:gpprii:v:34:y:2009:i:3:p:483-505
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    Citations

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    Cited by:

    1. Wanke, Peter & Barros, Carlos Pestana, 2016. "Efficiency drivers in Brazilian insurance: A two-stage DEA meta frontier-data mining approach," Economic Modelling, Elsevier, vol. 53(C), pages 8-22.
    2. Biener, Christian & Eling, Martin & Jia, Ruo, 2017. "The structure of the global reinsurance market: An analysis of efficiency, scale, and scope," Journal of Banking & Finance, Elsevier, vol. 77(C), pages 213-229.
    3. Huang, Wei & Eling, Martin, 2013. "An efficiency comparison of the non-life insurance industry in the BRIC countries," European Journal of Operational Research, Elsevier, vol. 226(3), pages 577-591.
    4. Roger Carrington & Tim Coelli & D.S. Prasada Rao, 2011. "Australian Private Health Insurance Productivity Growth: Is there Scope to Limit Premium Increases?," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 125-139, March.
    5. Aysen ALTUN ADA & Nilufer DALKILIC, 2014. "Efficiency Analysis in Islamic Banks: A Study for Malaysia and Turkey," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 8(1), pages 9-33.
    6. Biener, Christian & Eling, Martin & Wirfs, Jan Hendrik, 2016. "The determinants of efficiency and productivity in the Swiss insurance industry," European Journal of Operational Research, Elsevier, vol. 248(2), pages 703-714.
    7. Shao, Benjamin B.M. & Lin, Winston T., 2016. "Assessing output performance of information technology service industries: Productivity, innovation and catch-up," International Journal of Production Economics, Elsevier, vol. 172(C), pages 43-53.
    8. Schaper, Philipp, 2017. "Under pressure: how the business environment affects productivity and efficiency of European life insurance companiesAuthor-Name: Eling, Martin," European Journal of Operational Research, Elsevier, vol. 258(3), pages 1082-1094.

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