Comparison of Private Life Insurance Companies An Application of DEA

Abstract

Today there are 24 general insurance companies and 23 life insurance companies operating in the country. The insurance sector is a huge one and is growing swiftly at 15-20%. Group new business underwritten as at September 2010 being 14399.64 cr premium collected and 22728948 lives insured and individual new business underwritten as on same date being 10933949 no. of policies and 22447.82 cr premium collected. . It becomes a matter of concern how this money is utilized by the insurance companies and whether it is generating enough returns for the company. Are the insurance companies working efficiently? Which companies are the most efficient? Answer to these questions forms the crux of this paper. Data envelopment analysis (DEA) provides and excellent way of analyzing the efficiency of insurance industry. The paper first describes the life insurance industry in India followed with the meaning and utility of data envelopment analysis. The third section of the paper reviews the efficiency of the insurance sector in the global and Indian scenario. The last section analyses the efficiency of the selected private sector life insurance companies in India followed with the discussion of analysis and conclusion drawn on the basis of the same. Fourteen private sector life insurance companies are analyzed over a period of 5 years ranging 2005-2010. Further, Mann-Whitney U test is used to examine the effect of size, market share and integration with bank network on the efficiency of the insurance companies.