Thai life insurer efficiency

Abstract

The study global objective is to provide an analysis of the efficiency of the Thai life insurance industry during 1990-1997. This research utilizes data envelopment analysis (DEA), a mathematical programming approach, to calculate efficiency. To investigate productivity changes, a Malmquist analysis is used to determine whether and the extent of efficiency changes. This study found that the Thai life insurance industry seems to have regressed in terms of efficiency after 1992. This drop in total efficiency was due to the inability of the average firm to keep pace with the best-practice life insurer as well as to loss in scale efficiency. This may be because Thailand did not adopt more liberal policies and maintained restrictive regulatory regimes. The evidence suggests that, during 1990-1997, productively growth was stimulated, particularly during 1995-1997. Productively growth in the Thai life insurance market was caused primarily by technological change due to an expanding production frontier rather than an improvement in technical efficiency. Study result is consistent with the view that a host –country insurers benefit from foreign investment. Study results, hence, provide some evidence supporting Thai regulatory changes that would enable host-country insurers to benefit from a more open market.