Technical, allocative and cost efficiency in the Australian general insurance industry
Data envelopment analysis is used to calculate technical, allocative and cost efficiency indices for a sample of fifty-three Australian general insurers. The inputs used are labour, physical capital (in the form of both information technology and plant and equipment) and financial capital. The outputs are net premium revenues for housing-related insurance, transport-related insurance, indemnity-related insurance and other insurance, along with investment revenue. The results indicate that the major source of overall cost inefficiency would appear to be allocative inefficiency, rather than technical inefficiency, and that the largest twenty percent of insurers are significantly more efficient than the remaining firms. A second-stage analysis uses limited dependent variable regression techniques to relate efficiency scores to financial and non-financial information. Cost efficiency appears to be closely related to asset size, the proportion of non-premium income, and participation in compulsory third party (CTP) markets, but not to stock exchange listing or product range.
|Date of creation:||20 Feb 2000|
|Date of revision:|
|Contact details of provider:|| Postal: GPO Box 2434, BRISBANE QLD 4001|
Web page: http://www.bus.qut.edu.au/faculty/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- J. David Cummins & Sharon Tennyson & Mary A. Weiss, 1998.
"Consolidation and Efficiency in the U.S. Life Insurance Industry,"
Center for Financial Institutions Working Papers
98-08, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Cummins, J. David & Tennyson, Sharon & Weiss, Mary A., 1999. "Consolidation and efficiency in the US life insurance industry," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 325-357, February.
- J. David Cummins & Sharon Tennsyson & Mary A. Weiss, 1998. "Consolidation and efficiency in the U.S. life insurance industry," Working Papers 98-18, Federal Reserve Bank of Philadelphia.
- J. David Cummins & Jack VanDerhei, 1979. "A Note on the Relative Efficiency of Property-Liability Insurance Distribution Systems," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 709-719, Autumn.
- J. David Cummins & Hongmin Zi, 1997.
"Comparison of Frontier Efficiency Methods: An Application to the U.S. Life Insurance Industry,"
Center for Financial Institutions Working Papers
97-03, Wharton School Center for Financial Institutions, University of Pennsylvania.
- J. Cummins & Hongmin Zi, 1998. "Comparison of Frontier Efficiency Methods: An Application to the U.S. Life Insurance Industry," Journal of Productivity Analysis, Springer, vol. 10(2), pages 131-152, October.
- Gardner, Lisa A. & Grace, Martin F., 1993. "X-Efficiency in the US life insurance industry," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 497-510, April.
- Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
- Fare,Rolf & Grosskopf,Shawna & Lovell,C. A. Knox, 1993.
Cambridge University Press, number 9780521420334.
- Luigi Prosperetti, 1991. "Economies of Scale in Italian Non-Life Insurance*," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 16(3), pages 282-292, July.
- R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
- Jeffrey I. Bernstein, 1992.
"Information Spillovers, Margins, Scale and Scope: With an Application to Canadian Life Insurance,"
NBER Working Papers
3979, National Bureau of Economic Research, Inc.
- Bernstein, Jeffrey I, 1992. " Information Spillovers, Margins, Scale and Scope: With an Application to Canadian Life Insurance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S95-105, Supplemen.
- Philip Hardwick, 1997. "Measuring cost inefficiency in the UK life insurance industry," Applied Financial Economics, Taylor & Francis Journals, vol. 7(1), pages 37-44.
- Seiford, Lawrence M. & Thrall, Robert M., 1990. "Recent developments in DEA : The mathematical programming approach to frontier analysis," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 7-38.
- Forsund, Finn R. & Lovell, C. A. Knox & Schmidt, Peter, 1980. "A survey of frontier production functions and of their relationship to efficiency measurement," Journal of Econometrics, Elsevier, vol. 13(1), pages 5-25, May.
- Yuengert, Andrew M., 1993. "The measurement of efficiency in life insurance: Estimates of a mixed normal-gamma error model," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 483-496, April.
- Fukuyama, Hirofumi, 1997. "Investigating productive efficiency and productivity changes of Japanese life insurance companies," Pacific-Basin Finance Journal, Elsevier, vol. 5(4), pages 481-509, September.
- Andrew M. Yuengert, 1993. "The measurement of efficiency in life insurance estimates of a mixed normal-gamma error model," Research Paper 9308, Federal Reserve Bank of New York.
- Cummins, J. David & Weiss, Mary A., 1993. "Measuring cost efficiency in the property-liability insurance industry," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 463-481, April.
When requesting a correction, please mention this item's handle: RePEc:qut:dpaper:074. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angela Fletcher)
If references are entirely missing, you can add them using this form.