Research On The Influence Of Market Concentration And Competition On Property Insurance Company Efficiency

As one of the three main pillars of the financial industry,the insurance industry plays a very important role in the social and economic development.Among them,property insurance,as a major part of insurance industry,has also made great contributions to economic development and social progress.China gradually resumed its insurance business from 1979.At the beginning of the resumption,property insurance took the absolute advantage and developed rapidly,and the market size and total premium income were steadily growing under the protection of the ever-improving legal system.At the same time,the entire industry has undergone many changes,and the most obvious one is the change in market structure.As more and more small and medium-sized insurance companies join the market,the concentration of China’s insurance industry has been declining,and the insurance industry is moving forward towards a diversified and intelligent competition system.Therefore,it is significant to study the effect of market concentration and competition on the efficiency of property insurance companies.This thesis uses data envelopment analysis(DEA)to calculate the efficiency values of 18 property insurance companies in China from 2015-2019 to measure the efficiency of the companies,while the Boone index is selected to measure the market competition and the Herfindahl index to measure the market concentration,and the fixed effects model is used to empirically study the relationship between concentration,competition and efficiency of companies in China’s property insurance industry.The conclusions of this thesis are as follows.The first conclusion is that the profit efficiency and cost efficiency levels of China’s property insurance companies are on the rise year by year.Although the overall concentration of the property insurance market is still high,it is decreasing every year.The degree of competition in the market is increasing.The second observation is that both the concentration and competition in China’s property insurance market have a negative impact on the efficiency of property insurance companies.In other words,the increase in both market concentration and competition is not conducive to improving the efficiency of the companies.The last argument is that in the sample of large property insurance companies,or in markets with greater monopoly power,concentration has an inverse relationship with competition.Lastly,through the results of the empirical study above,the thesis makes relevant recommendations to both the regulatory authorities and property insurance companies for improving efficiency of property insurance companies.