The IUP Journal of Management Research
Efficiency Evaluation of Indian General Insurance Companies

Article Details
Pub. Date : Jan, 2020
Product Name : The IUP Journal of Management Research
Product Type : Article
Product Code : IJMR10120
Author Name : Mahesh Chand Garg, Swati Garg
Availability : YES
Subject/Domain : Management
Download Format : PDF Format
No. of Pages : 20



The aim of the present paper is to evaluate the efficiency of the Indian general insurance companies and to find out the reason for their inefficiency. The paper intends to rank these companies on the basis of their efficiency. 12 general insurers are studied using Data Envelopment Analysis (DEA) for a period of 12 years, i.e., from 2005-06 to 2016-17. The study is based on secondary data collected from annual reports of insurers and Insurance Regulatory and Development Authority of India (IRDAI). The study concludes that not more than one-third of the insurers are found to be technically efficient. Pure technical efficiency was observed for 50-75% insurers. This makes it clear that the main reason for inefficiency is the scale inefficiency. The same is reinforced by super-efficiency results. Public sector companies should reduce their scale dimension and private sector companies should work for the enhancement of their scale dimension, so that they can achieve the most productive scale size and become more efficient.


India is the second most populated country in the world. With a growing population, it displays its huge market potential for the insurance services. Indian insurance sector is divided into two main segments, i.e., life insurance and general insurance. General insurance sector includes all other insurances, except life insurance. With the opening up of Indian insurance sector to the private players in 2000, competition has gained momentum. Competition necessitates the survival of the fittest. Insurers have to make continuous efforts to improve themselves and to keep a regular check on their performance. And the scope for performance is very wide, including efficiency and productivity. Various parametric and nonparametric tools and techniques are used for finding out the efficiency and productivity of the companies. Data Envelopment Analysis (DEA) is a nonparametric technique widely used for evaluating efficiency and productivity, because of its simplicity and effectiveness. The present paper focuses on investigating the technical efficiency, the pure technical efficiency and the Scale Efficiency (SE) of the Indian general insurance companies. The study aims at calculating the super-efficiency scores of the companies to rank them on the basis of their efficiency.


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