Hyperbolic Distance Stochastic Frontier Research And Its Application In The Evaluation Of The Efficiency Of Life Insurance Companies

The issue of efficiency is one of important themes of Economics. From the perspective of insurance company, the efficiency is the allocation of resources and its business operation practices, reflecting the insurer’s sustainable development prospects of input and output capabilities, market competitiveness and overall capabilities. Since the reform and opening up, China’s life insurance market has experienced rapidly growing for three decades, but the Chinese life insurance industry during this period has been using the extensive mode of operation, focus only on the speed and scale of development, ignoring the internal efficiency. With the growth of the life insurance industry and continuously increasing efficiency of enterprises, a series of drawbacks gradually exposed, such as the overall strength is not strong. Insurance market opening, China’s life insurance industry is facing fierce international competition, improve efficiency for the life insurance industry to increase the overall strength and market competitiveness of China’s insurance industry to achieve sustainable development is very important. Therefore, the analysis of the efficiency of the situation and identify the impact of efficiency of life insurance companies in recent years has a strong practical significance.We review the technical efficiency of life insurance companies in the past about the research literature and found that there are three issues never get the attention, in this article we will take into account these three points.First, the previous articles when using stochastic frontier life insurance companies to analyze the efficiency of insurance companies do not take into account the existence of an undesirable output in operating activities-surrenders. Surrenders refers to life insurance companies in the long-term business operations, the policyholder surrenders when raised for various reasons, in accordance with the provisions of the insurance contract surrender values paid to policyholders. Surrender will conduct the business of life insurance companies a great deal of adverse effects. Because the life insurance business of the company is in the medium and long-term use of insurance funds also invest, if able to receive timely renewal premium, then you can be in accordance with established investment strategy, but if the insured surrenders, especially a major scale collective surrender, the renewal premium will not receive, thereby affecting the company’s stated investment strategy to increase the company’s operational risks. So, in the daily operations of the life insurance company will take certain measures to try to avoid the occurrence of surrender behavior.Second, the macro has been considered a direct impact on technical efficiency factors in previous research. However, in practice these factors are not directly controlled by the insurance companies. We believe that these macro environment variables can affect the stochastic frontier life insurance companies and, indirectly, to influence the technical efficiencies and we conduct a new model to deal with these indirect factors affecting technical efficiency.Third, prior to the evaluation of the efficiency of most life insurance companies focused on the overall efficiency of the evaluation process of the insurance company’s operations as a "black box" and did not explore how the company’s investment is converted into output. Therefore we can’t study the internal transformation process or put forward suggestions for improvement. In order to further explore the operational efficiency of each stage of the life insurance company, we construct a two-stage hyperbolic distance stochastic frontier approach considered separately from the process of life insurance companies to attract capital and capital utilization efficiency of the process.In this paper, we use knowledge of economics and finance, apply statistical and econometric methods and stochastic frontier analysis software, combined with the actual qualitative research and quantitative analysis method to study the status quo of China’s life insurance companies, analyze the efficiency, and provide advice and management measures to improve the life.insurance company’s technical efficiency.