An Analysis of Property-Liability Insurers Performance

The purpose of this paper is to analyze the efficiency and productivity of the property-liability insurance companies in korea using DEA(data envelopment analysis) model and MPI(Malmquist productivity indices), which are non-parametric measurement methods. To measure the efficiency and MPI of the ten property-liability insurance companies in korea. we use the time-series data for seven years from 1998 to 2004. The empirical results show the following findings. Firstly, total cost inefficiency shows that some of inefficiency exists on the property-liability insurance companies and it reveals that the cause for total cost inefficiency is due to allocative inefficiency rather than technical inefficiency. Secondly, the result of analysis MPI change indicates that some of productivity change exists on the property-liability insurance companies. It indicates that the productivity of the property-liability insurance industry for the analytical period increases because of TE(technical efficiency change) and TECH(technological change). Thirdly, the results show that total cost efficiency is positively related acquisition expense, collection expense and is negatively related operating expenses per employee. Finally, the large-sized insurers have advantage of over the small-medium size insurers from efficiency as well as productivity. We conclude that merger and alliancing with other insurers and other financial institutions may be a critical element for improving of property-liability insurers efficiency, especially, for small-medium size insurers.