Search results

The purpose of this paper is to analyse the performance of the Indian non-life (general) insurance sector in terms of efficiency, productivity and returns-to-scale economies. In addition to this, it identifies the determinants of efficiency.

This study employs a two-stage data envelopment analysis (DEA) bootstrap approach to estimate the level and determinants of efficiency. In the first stage, the DEA bootstrap approach is employed to estimate bias-corrected efficiency scores. In the second stage, the truncated bootstrapped regression is used to identify the effect of firm-level characteristics on the efficiency of insurers. Moreover, the bootstrapped Malmquist index is used to examine the productivity growth over the observation period 2005–2016.

The bootstrapped DEA results show that the Indian non-life insurance sector is moderately technical, scale, cost and allocative efficient, and there is a large opportunity for improvement. Moreover, the results reveal that the public insurers are more cost efficient than the private insurers. It is also evident that all the insurers irrespective of size and ownership type are operating under increasing returns to scale. Malmquist index results divulge an improvement in productivity of insurers, which is attributable to the employment of the best available technology. Bootstrapped DEA and bootstrapped Malmquist index results also show that the global financial crisis of 2008 has not severely affected the efficiency and productivity of the Indian non-life insurance sector. The truncated regression results spell that size and reinsurance have a statistically significant negative relationship with efficiency. It also shows a statistically significant positive age–efficiency relationship.

The results hold practical implications for the regulators, policy makers, practitioners and decision makers of the Indian non-life insurance companies.

This study is the first of its kind that comprehensively investigates different types of robust efficiency measures, determinants of efficiency, productivity growth and returns-to-scale economies in the Indian non-life insurance market for an extended time period.

The purpose of this paper is to examine the impact of the regulatory-driven market structure on firm pricing behaviour by testing the structure-conduct-performance (S-C-P) hypothesis for both life and non-life insurance markets in Ghana.

Using a panel data on 14 life and 22 non-life insurers from 2007 to 2011, the authors employed the Herfindahl Hirschman Index and concentration ratio as proxies for the S-C-P hypothesis while efficiency scores were estimated using the data envelopment analysis technique to proxy for the efficient structure (ES) hypothesis. The dependent variable, profitability was measured as return on assets while controlling for size, underwriting risk, leverage, GDP growth rate and inflation. The models were estimated using the panel corrected standard errors of Beck and Katz (1995) and random effects estimations.

The results from the empirical estimation provide ample evidence in support for ES hypothesis for both life and non-life insurance markets. While conflicting results was found for SCP hypothesis in the non-life insurance market, it was rejected in the life insurance market. The findings also point to an increasing level of competition in both life and non-life insurance industry in Ghana though they still remain concentrated with the life insurance sector having high levels of efficiency compared to the non-life sector.

The findings of the study will enhance the understanding of firm behaviour in the new markets created to shape regulatory and competition policies of the regulator to promote consumer welfare while ensuring a stable industry to enhance its role in economic development.

This is the first study to test the market power and efficient hypotheses on the insurance industry in Ghana. To the best of the author’s knowledge, this study is the first to examine the determinants of profitability in the non-life insurance market.

The purpose of this paper is is to identify the main determinants of insurance profitability on life and non-life segments to obtain which variables affect in each market of the Ecuadorian insurance sector.

The authors use a large panel data set with financial information from 2001 to 2017 and estimate the determinants through a panel corrected standard errors regression.

The authors found that net premiums, technical reserves, capital ratio and score efficiency are micro-determinants in the life insurance sector, whereas in the non-life sector, the micro-determinants include also claim level and liquidity ratio; moreover, the authors found that HHI is a determinant of profitability only in the life insurance. Among the macro determinants set, the authors found that the interest rate has also a significant impact both in the life and non-life insurance.

The authors analyze a dollarized emerging country, which is the first time in this kind of studies. The authors also include the structure-conduct-performance and relative market power paradigm as well as the ES hypothesis, calculated through the data envelopment analysis, as determinants of insurance profitability. Finally, this is the first research to examine the determinants of profitability in Latin American and Caribbean insurers.

The purpose of this paper is to transfer the concept of market‐consistent embedded value (MCEV) from life to non‐life insurance. This is an important undertaking since differences in management techniques between life and non‐life insurance make management at the group level very difficult. The purpose of this paper is to offer a solution to this problem.

After explaining MCEV, the authors derive differences between life and non‐life insurance and develop a MCEV model for non‐life business. The model framework is applied to a German non‐life insurance company to illustrate its usefulness in different applications.

The authors show an MCEV calculation based on empirical data and set up an economic balance sheet. The value implications of varying loss ratios, cancellation rates, and costs within a sensitivity analysis are analyzed. The usefulness of the model is illustrated within a value‐added analysis. The authors also embed the MCEV concept in a simplified model for an insurance group, to derive group MCEV and outline differences between local GAAP, IFRS and MCEV.

The analysis provides new and relevant information to the stakeholders of an insurance company. The model provides information comparable to that provided by embedded value models currently used in the life insurance industry and fills a gap in the literature. The authors reveal significant valuation difference between MCEV and IFRS and argue that there is a need for a consistent MCEV approach at the insurance‐group level.

The paper presents a new valuation technique for non‐life insurance that is easy to use, simple to interpret, and directly comparable to life insurance. Despite the growing policy interest in embedded value, not much academic attention has been given to this methodology. The authors hope that this work will encourage further discussion on this topic in academia and practice.

The purpose of this paper is to examine the empirical effect of competition on cost and profit efficiency in the South African non-life insurance market in a three-stage analysis.

Using annual firm level data on 80 non-life insurance companies from 2007 to 2012, the authors first employ the stochastic frontier analysis (SFA) to estimate cost and profit efficiency scores. In the second stage, the authors measure insurance market competition using the Panzar-Rosse (P-R) H-statistics. In the final stage, the authors estimate a fixed-effects panel regression model which controls for heteroskedasticity to examine the effect of competition on the estimated efficiency scores. Firm size, diversification, age, risk, reinsurance and leverage are employed as control variables.

From the SFA, the authors find average cost and profit efficiency of 80.08 and 45.71 per cent, respectively. This suggests that non-life insurers have high levels of efficiency in cost and low efficiency in profit. The annual estimates of the P-R H-statistics also suggest that firms in the market earn revenues under conditions of monopolistic competition. The authors find a positive effect of competition on cost and profit efficiency to validate the “quiet-life” hypothesis which posits that competition improves efficiency.

Regulatory policies should be directed towards enhancing competition to improve on the low profit earning potential of firms in the non-life market.

To the best of the authors’ knowledge, this study presents the first application of a non-structural measure of competition to examine the empirical relationship between competition and efficiency in insurance markets.

This paper aims to measure the change and the sources of change in total factor productivity (TFP) of the Indian non-life insurance sector over the period 2005–2016.

This study employs the bootstrapped Malmquist index (MI) to assess the changes in the TFP and adopts a decomposition approach proposed by Balk and Zofío (2018). Moreover, it utilises truncated regression to identify the determinants of the TFP. In addition, it employs Wilcoxon-W test and t-test to scrutinise the difference between the state-owned and the private insurers in terms of variations in TFP and its various components.

The results divulge a miniature improvement in TFP of the insurance sector, which is primarily attributable to the improvement in scale efficiency (economies of scale). The results also reveal that there are no significant TFP differences across the ownership. However, private insurers have better scale efficiency and lower input-mix efficiency than state-owned insurers. In addition, the results unveil that size, diversification and reinsurance have a negative impact on the TFP, while age has a positive impact on it.

The results may help the policymakers to frame new consolidation policies. Moreover, the findings may guide the decision-makers of the Indian non-life insurance companies to abate inefficiency and improve TFP.

This study estimates bias-corrected changes in TFP and efficiency in the non-life insurance sector. Moreover, it adopts an elaborated decomposition of the MI to identify the true sources of change in the TFP.

This study explores the mediating effects of relationship marketing orientation (RMO) and service quality orientation (SQO) on market orientation, selling orientation, and policyholder retention in non-life insurance services. Additionally, it offers important recommendations for non-life insurers in Taiwan for policy development and improving policyholder retention.

Data were collected from a sample of policyholders belonging to the top five non-life insurance companies in Taiwan. The data were then analyzed with structural equation modeling.

RMO and SQO mediate the effects of the salesperson’s market orientation on policyholder retention. Thus, RMO and SQO are key factors influencing policyholder retention. Consequently, high levels of market orientation should be maintained to increase RMO and SQO, strengthening the retention rate of non-life insurance policyholders.

The main limitation of this study is its cross-sectional nature. In the future, researchers should collect data from other countries and service industries (e.g. banks, securities, and other financial institutions), expand to different insurance contexts (e.g. life insurance), and conduct longitudinal studies or experimental research.

The results of this study can act as a guide for providers of non-life insurance services. Based on the research results, we recommend decision-makers pay increased attention to increasing policyholder retention rates by strengthening their firm’s RMO and SQO.

Few studies have investigated the relationships among market orientation, selling orientation, RMO, SQO, and policyholder retention in non-life insurance services within Asian contexts in general and specifically in Taiwan. Thus, this study’s theoretical contributions, managerial implications (especially for decision-makers), and the proposed future research directions represent timely and valuable additions to the literature.

The purpose of this paper is to examine the risk management practices of life assurance firms and non‐life insurance firms.

Through a comparative case study methodology, the study assesses the state of risk management in both life assurance companies and non‐life insurance firms to determine whether they exhibit different or similar risk management practices. The results of the survey were also analyzed and compared to the principles of good practices in financial risk management.

The findings of the study revealed some differences and similarities in the risk management practices of life and non‐life insurance firms. Almost all the life companies have stated their risk appetite levels, which enable them to identify which risks to absorb and which ones to transfer. But non‐life insurance firms have not laid down their risk tolerance levels explicitly. The results further revealed that the industry lacks sufficient personnel with the requisite risk management skills and that the sector does not manage risks proactively, rather they do so in a reactive response to regulatory directives.

Effective management of risks by insurers will increase the penetration of insurance in Ghana.

Risk management is a crucial issue, not only for the survival and profitability of the insurance industry, but also for the socio‐economic growth and development of the whole economy. As major risks underwriters, insurance companies need to adopt good practices or quality measures in the management of financial risk. This is important, more so, as the industry prepares to re‐position itself to underwrite the risks in the emerging oil and gas industry of Ghana.

Research into financial risk management in the insurance industry from the Ghanaian perspective is rare. This study is therefore timely and its findings are invaluable for the efficient management of financial risk in the insurance industry.

This study aims to investigate the role of information and communication technology (ICT) in modulating the effect of governance on insurance penetration in 42 Sub-Saharan African countries using data for the period 2004-2014.

Two insurance indicators are used in the analysis, namely, life insurance and non-life insurance. The three ICT modulating dynamics used include mobile phone penetration, internet penetration and fixed broadband subscriptions. Six governance channels are also considered, namely, political stability, “voice & accountability”, regulation quality, government effectiveness, the rule of law and corruption-control. The empirical evidence is based on generalized method of moments.

The following main findings are established. First, mobile phone penetration does not significantly modulate governance channels to positively affect life insurance while it effectively complements “voice & accountability” to induce a positive net effect on non-life insurance. Second, internet penetration complements governance dynamics of political stability, government effectiveness and rule of law to induce positive net effects on life insurance and corruption-control for an overall positive effect on non-life insurance. Third, the relevance of fixed broadband subscriptions in promoting life insurance is apparent via governance channels of regulation quality, government effectiveness and the rule of law while fixed broadband subscriptions do not induce significant overall net effects on non-life insurance though the conditional effects are overwhelmingly significant.

To the best of the authors’ knowledge, studies on the relevance of ICT in promoting insurance consumption through governance channels are sparse, especially for a region such as Sub-Saharan Africa where insurance penetration is low compared to other regions of the world.

The objective of writing this case study is to allow management students to engage with the complexities of mergers and acquisitions (M&As) in the insurance sector in an emerging economy like India. Upon completion of this case study, the students will be able to critically evaluate the business environment of the insurance sector of a developing economy like India, analyse the impact of M&As on the insurance industry of India, appraise the post-merger consequences and strategies to deal with these consequences, assess the applicability of market power and growth theories in the context of M&As and develop a strategic action plan for handling post-merger challenges.

On 3 September 2021, the Insurance Regulatory and Development Authority of India (IRDAI) approved the “Scheme” related to the merger of the non-life insurance division of Bharti AXA General Insurance Company Limited (“Bharti AXA”) with ICICI Lombard General Insurance Company Limited (“ICICI Lombard”). Earlier, on 21 August 2020, the boards of the companies had approved entering into definitive agreements through a scheme of arrangement. The merger received approvals from different regulatory bodies as mandated (Gandhi et al., 2023). Bhargav Dasgupta, managing director and Chief Executive Officer of ICICI Lombard, stated, “This is a landmark step in the journey of ICICI Lombard, and we are confident that this transaction would be value accretive for our shareholders” (FE Bureau, 2020). However, the merger posed a dilemma for Dasgupta and the management regarding crop insurance owing to its impact on profitability. Crop insurance historically had high claim ratios nearing 135% for ICICI Lombard for financial year 2018. The company ceased to underwrite this product from 2019 onwards (TNN, 2019). However, ICICI Lombard had to fulfil the three-year commitment made by Bharti AXA to the state governments of Maharashtra and Karnataka towards crop insurance. It was a scheme initiated by the Government of India, covering farmers against losses due to cyclonic rains, rainfall deficits and other unforeseen calamities. Dasgupta faced a challenge in managing the interests of the farmers and the company’s shareholders while balancing profitability, which had already been impacted by the COVID-19 pandemic. This case study delves into post-merger complexities in the financial sector non-life insurance industry in emerging countries like India.

This case study is suitable for undergraduate and post-graduate management students and executives from the insurance industry.

Teaching notes are available for educators only.

CSS 11: Strategy.