Operational Efficiency Analysis Of Companies In China Non-life Insurance Industry Based On Modified SORM-DEA

As an important part of the modern finance system, non-life insurance industry plays a big role in the areas of the country's society and economics. And the operational efficiency analysis of non-life insurance companies in China will do help to the management and competiveness of these companies.On the base of literatures review and analysis of the non-life insurance companies'business, this paper use the labors, capital and expenses as the input, while the premium and total profit as the output, this paper analyzed 25 companies'operational efficiency (16 Chinese-funded companies and 9 Foreign-funded companies) in China Non-life Insurance Industry from 2005 to 2008 with Data Envelopment Analysis(DEA)in the angle of Pure Technical Efficiency(PTE). As there is negative data in the total profit's observed values of the sample, this paper introduces the SORM-DEA as the tool of the empirical analysis, which is a new method to deal with the negative data in the input and output of DEA. This paper also modifies the SORM and uses it in the empirical analysis. The result shows that the modified SORM is of good performance. The result also shows that the average operational efficiency of Chinese-funded insurance companies is lower than that of Foreign-funded insurance companies, and the average operational efficiency of the non-life insurance industry is descending over the sample period.Through the analysis of improved target for inefficient non-life insurance companies, this paper finds that: the redundancy problem of labors and expense with the shortage problem of premium income and total profit become more and more serious in the operation of non-life insurance companies. As for the direct reasons leading to the low efficiency, redundancy of labors,overmuch expense, shortage of premium income and total profit are the main direct reasons for the Chinese-funded insurance companies, while Foreign-funded companies'main problem is shortage of premium income. In consideration of the above problems, this paper puts forward the countermeasures of non-life insurance company to improve the efficiency and competitiveness.