Study On The Risk-Adjusted Of Cost Efficiency In China’s Property Insurance Industry

Risk control and efficiency are two major themes of the insurance industry, butalso complement each other while the two aspects of mutual restraint. Throughmodeling, the risk factor included in the efficiency of China’s property insuranceindustry research framework in which to build a unified model of efficiencyevaluation, in order to address how to control risk while promoting the application ofefficiency improvements,which have great significance for China’s property insuranceindustry development.In this paper, using the stochastic frontier cost approach (SFA) measured the costefficiency of China property insurance industry, while the property insuranceindustry`s underwriting risk, investment risk and solvency risk to quantify, throughregression analysis to build the new risk variables into the stochastic frontier costfunction, conducted an empirical study of cost efficiency for China’s propertyinsurance company after considering the risk factors. This paper uses2005-2009China28major property insurance companies as a sample of the relevant financialdata, obtained without considering the risk factors and consider the risk factors in bothcases the cost-effectiveness estimates, and analysis the internal factors of the impactcost efficiency by regression. Finally, according to the size and organizational form ofproperty insurance companies in China are divided into three categories, thencomparative study and analysis of its efficiency value, the following three conclusions:1) Considering the risk factors reduce the value of cost efficiency in propertyinsurance companies.2) The cost efficiency of China’s property insurance industryshow a slow downward trend.3) the most contribution factor of the cost efficiency ofChina’s property insurance industry is the corporate form of organization, otherfactors in order of operating costs, human capital, profitability, fixed assets, companysize, risk management.