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Profit Efficiency of Indian General Insurance Companies: A Ratio-Based Approach

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  • Ram Pratap Sinha

Abstract

While there are several studies regarding the technical efficiency of Indian general insurance companies, the field of profit efficiency remained relatively unexplored. The present study seeks to fill this gap. In the present article, two alternative ratio-based approaches have been adopted for the estimation of profit efficiency of Indian general insurers. The profit efficiency scores so derived are then decomposed in to revenue and cost efficiency components. In the final stage, the impact of several contextual variables on the efficiency scores are analysed. The data set for the present study includes information pertaining to 15 general insurance companies for the period 2011–12 to 2016–17. The outcome shows that the public sector insurers have done well in terms of revenue efficiency but needs to be concerned about cost efficiency. Further, the application of pooled ordinary least squares regression show that solvency ratio is an important explanatory variable of profit efficiency. Significance of the impact of return on equity on profit efficiency is, however, contingent on the model chosen. JEL Classification: C-61, D-22, G-23

Suggested Citation

  • Ram Pratap Sinha, 2022. "Profit Efficiency of Indian General Insurance Companies: A Ratio-Based Approach," Journal of Infrastructure Development, India Development Foundation, vol. 14(1), pages 45-62, June.
    • Handle: RePEc:sae:jouinf:v:14:y:2022:i:1:p:45-62
    DOI: 10.1177/09749306221100282
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    References listed on IDEAS

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    1. Santanu Mandal & Surajit Ghosh Dastidar, 2014. "A DEA-investigation of efficiency of the Indian general insurance during recession," Journal of Advances in Management Research, Emerald Group Publishing Limited, vol. 11(1), pages 115-136, April.
    2. McDonald, John, 2009. "Using least squares and tobit in second stage DEA efficiency analyses," European Journal of Operational Research, Elsevier, vol. 197(2), pages 792-798, September.
    3. Santanu Mandal & Surajit Ghosh Dastidar, 2014. "A DEA-investigation of efficiency of the Indian general insurance during recession," Journal of Advances in Management Research, Emerald Group Publishing Limited, vol. 11(1), pages 115-136, April.
    4. Santanu Mandal & Surajit Ghosh Dastidar, 2014. "A DEA-investigation of efficiency of the Indian general insurance during recession," Journal of Advances in Management Research, Emerald Group Publishing Limited, vol. 11(1), pages 115-136, April.
    5. Hoff, Ayoe, 2007. "Second stage DEA: Comparison of approaches for modelling the DEA score," European Journal of Operational Research, Elsevier, vol. 181(1), pages 425-435, August.
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