The Empirical Research On Efficiency Of Chinese Life Insurance Company

The issue of efficiency is eternal theme of Economics. As far as insurance company concerned, efficiency is that commercial insurance companies are using combination of insurance resources and trying to make the society resources flowing to produce max of products or services. It is the generic term of input-and-output ability, competitive ability of market, the ability of sustainable development. The status of efficiency of Chinese insurance industry has been the core concerns of regulators, industry and theory studies. Improving efficiency is fully reflected in the development goal of bigger and stronger insurance industry. With full open for Chinese insurance industry, Chinese life insurance Co., Ltd. will face fierce international competition. The competitiveness of commercial insurance industry is the key to its sustainable development, and the efficiency is also the centralized embodiment of insurance competition. Thus, in the long term, the development of Chinese insurance industry is according to efficiency. Efficiency is important not only for enhancing national strength and competition of Chinese insurance industry but also for its sustainable development. Insurance efficiency studies have proliferated over the last few years abroad; however, there is a little study of the study of theory of insurance efficiency at home. Thus, studying on topic of insurance efficiency has crucial meaning both theoretically and practically. It's essential to study and analysis the efficiency in recent years. It's important to find out factors that affecting the efficiency and the ways to improve the efficiency.The dissertation studies the issues of efficiency of Chinese Life Insurance Co., Ltd. based on modern economics and financial theory, using method of statistics, econometrics, management and professional software, combination qualitative analysis and quantitative analysis. There are six chapters in this dissertation. In Chapter One, there is briefly introduction: the main content of the efficiency, western efficiency theory and efficiency of insurance. Then efficiency measurement methods are introduced in detail. Chapter Two is the core and basis of whole dissertation, there are empirical research on efficiency of Chinese life insurance Co., Ltd. based on DEA method. By using premium income and investment gains as the output variables, the number of capital and cost as input variables, author estimates the technical efficiency scores, pure technical efficiency scores, scale efficiency scores, super technical efficiency scores and NIRS efficiency scores for 40 Life Insurance Companies Limited in 2006 and 33 Life Insurance Companies Limited in 2005 separately by Lindo programs. Empirical research finds that efficiency scores are relatively low in China. The technical efficiency scores of Chinese-funded firms are higher than foreign firms and joint venture firms. The reason is that scale efficiency scores of Chinese-funded firms are higher than foreign firms and joint venture firms. Chapter Three compares and analyses relevant empirical research results. This chapter includes comparison of related empirical results of DEA method and comparison of empirical results of DEA method and SFA method. Empirical research finds that the input variables and output variables which author used in DEA estimation is relatively better than the others. The results for comparison of DEA method and SFA method are consistent with foreign researchers. In order to gain the information about efficiency of firms in different year, we use Malmqusit index to gain the full factor productivity from 2001 to 2006. From the Malmquist index we can see that the full factor productivity of life insurance had increased after China's accession to WTO. However, the life insurance companies limited improve the efficiency mainly because technical changes not technical efficiency changes. Chapter five studies about infection factors of efficiency of Chinese life insurance Co., Ltd. Author studies the factors from exogenous aspect and endogenous aspect. Empirical research finds that expanding competition can improve efficiency of the life insurance company. Company size, financial lever, the ratio of group premiums, the proportion of business cost are the main factors that affect the efficiency of Chinese life insurance companies. According to the analysis of previous chapters, author proposes that we can promote the efficiency of Chinese life insurance company from increasing premium and investment income and reducing running cost.The improvements and innovations of this dissertation are as followings:First, the sample included the insurance companies within one year opening in the test range will underestimate the efficiency of the life insurance companies. Before the Chinese insurance industry has fully opened, Chinese-funded life insurance companies, joint ventures life insurance companies, and foreign life insurance companies faced different external environment, put them on the same frontier to compare will also underestimated the efficiency of companies. Therefore, this paper only select year of 2005 (the company opening before the 2005) and the year of 2006 (the company opening before the 2005) to compare the efficiency of the Chinese-funded, joint ventures with foreign life insurance companies in horizontal. This will make the results relatively more accurate and fair.Second, Compared with foreign literature, we lack of comparative study that use various types of methods to calculate the efficiency scores. In this dissertation, I use DEA and SFA methods to measure the operating efficiency of life insurance companies, and I also use statistical methods to test the efficiency value and the ranks that calculate by the two kinds of methods.Third, the dissertation using the deflator data calculates Malmquist productivity index to study Chinese life insurance companies' efficiency changes after entry WTO. Study found that after the Chinese insurance industry opened up, the total factor productivity of life insurance companies has been improved.Fourth, the study analysis the main factors affecting the life insurance companies efficiency from the view of exogenous and endogenous point. Because of the DEA estimates is a value of relative efficiency, maximum is one, the parameters estimated by ordinary least squares regression will be biased and inconsistent. Using maximum likelihood estimate of Tobit model will consistent with the estimated value. Therefore, the dissertation use the Tobit model to empirically test the effect of competition; use the Panel Tobit model to analysis the factors that effect the technical efficiency, pure technical efficiency and scale efficiency of Chinese life insurance companies.