Struktur pasaran, gelagat firma dan prestasi keuntungan firma insurans am di Malaysia pada tahun 1970 hingga tahun 2012

Abstract

The insurance industry in Malaysia has been increasingly competitive, especially following the economic crisis and financial liberalization process. In fact, most of the firms in the general insurance industry had suffered losses annually. Government intervention, through BNM, by introducing changes in policies and regulations, such as requirements on company solvency level, were targeted at increasing the confidence level among the insurance holders in the country. However, a large number of renowned insurance companies have taken action for sale or foreclosure due to financial difficulties or indebtedness of their companies. It is important that each company realizes that a high market share (market concentration) does not guarantee financial security or good performance. This paper empirically examines the determinants, such as market structure and profit performance of general insurance companies in Malaysia, to understand the underlying factors affecting their viability. The earlier part of this study discusses factors that measure changes in market structure, profitability and other associated variables. In the analysis part of this study, a two structure model, represented by two main functions, that is, market share function, and profitability function, is used. This model is based on the theory of industrial organization (IO), formally known as Structure, Conduct and Performance (SCP) theory. Time series data for the 40 year period is used for determining the model estimation on market structure and profitability of general insurance firms, using Two Stage Least Square (2SLS) method. There are four main hypotheses, namely the SCP hypothesis, the Relative Market Power (RMP) hypothesis, the Efficient-Structure (ES) hypothesis and the Market-Power (MP) hypothesis, were tested. The findings in this model show that general insurance firms' profit function has a positive and significant correlation with insurers' premium income, returns on investment and fixed assets turnover. As for the profit function of the firm, it has a negative and significant relationship with market share, turnover of total assets and insurance prices. Market share also has a positive and significant relationship with the level of productivity of the firm's management and market concentration ratio for the 10 largest firms. The results of this study are in acceptance of SCP hypothesis on the role of market concentration ratio and productivity of firms. In addition, the findings also support the RMP hypothesis on the role of prices, and ES hypothesis on the importance of productivity and efficiency of firms.