Efficiency of Life Insurance Companies: An Empirical Study in Mainland China and Taiwan

Abstract

The study employs metafrontier and four-stage data envelopment analysis (DEA) to measure the overall and individual efficiency of life insurance companies in mainland China and Taiwan, after applying the slack-based measure (SBM)-DEA model to adjust the differences in the operating environment across production units. The empirical findings show the following: (a) The environmental factors significantly affected the efficiency of all life insurance companies. After the adjustments, the efficiency score of life insurance companies in mainland China and Taiwan drops for 14.01% and 26.64% in regional frontier, and 38.31% and 12.22% in metafrontier frontier. (b) Before 2008, the life insurance companies in Taiwan are more efficient than those in mainland China.