The Measurement And Optimization Of Efficiency In Chinese Non-life Insurance Companies

During nearly 30 years of revolution and development, non-life insurance industry in China has made remarkable achievements, which include forming initially a non-life insurance development and management system along with the socialist market economic development and engender a market pattern consisting joint-venture, foreign-owned and mixed economy as well. The internal revolution and innovation of non-life insurance industry has also made big progresses and ensured the development of companies, families and even society. In all, non-life insurance industry plays a more and more important role in both finance industry and the whole gross economy. However, at the same time, we are regretful to find these bad facts, that is, some non-life insurance industry only emphasis on size, enlarge and merge but does not care much about effect, management and development in a long run. These traditional ideas are because most of the managers of non-life insurance industry think size determines the success. In order to change this kind of thought, we should forward a good policy which requires a balance of efficiency, risk, size, market occupancy and change the idea from both mind and acts.At present, with the globalization and world economy, the revolution and development of socialist of China and the performance of WTO agreement, the environment of reform of non-life insurance industry has changed. New things, new ideas, new institutions and new risks are appearing, which give a big challenge to non-life insurance industry and require more on develop ideas, market stratagem, management ability and innovation. Therefore, non-life insurance industry should face these challenges with developed idea. And on the other side, in theoretical aspect, efficiency is the key point. In these years, researchers have many researches on this problem and have achieved many good conclusions and ways, which instruct the practices. In China, literatures show a few researchers get some fruits in this field, and still lack a systematic, practical research. Therefore, research on efficiency of non-life insurance industry is in emergency.Under this background, the paper selects the efficiency of non-life insurance industry as our research object, considers the environment in China, and relates to theory of economy, management, insurance and econometrics. The paper also uses the method of qualitative and quantitative, normative and empirical analysis to explore efficiency and related issues of non-life insurance companies, construct the framework of efficiency, choose the appropriate analysis approach, methods and models, measure efficiency of China's non-life insurance companies, discuses the relationship of development, efficiency and effectiveness and propose a series of views and ideas of efficiency improvements and optimization.The paper is composed by the introduction and seven chapters. The basic contents of each chapter are summarized as follows:The introduction summarizes the background and significance of this research, research scope and concepts definition, theories and research methods, paper structure and main contents, and contributions and further study.Chapter one reviews the literature on the efficiency, change of efficiency and factors affecting efficiency of general insurance companies at home and abroad. First, the paper summarizes the general methods to analyze efficiency of property insurance. Then, the paper reviews the literature and analyzes the input and output variables in the literature, as a reference for future variable selection. In the end, the paper comments on the recent literature of efficiency of general insurance companies.Chapter two analyzes efficiency from the perspective of economics theories. First, the paper defines the concept of efficiency and differentiates efficiency, profit and performance. Then, it reviews the development of efficiency theories and different arguments of various schools.Chapter three summarizes the general methods to measure the efficiency of general insurance companies. It focuses on the nature, basic assumptions and root of Data Envelope Analysis, CCR and BCC, and the application of Malmquist Productive Index.Chapter four first analyzes the present Chinese non-life insurance companies in terms of market development, business and financial status. Then, it has an in-depth analysis on the current efficiencies of non-life insurance companies. Furthermore, it analyzes the entry barrier, transaction cost, market structure, property right system of insurance industry and tries to find out the factors that affect the efficiency of general insurance companies, which provides theoretical guidelines for the further analysis.Chapter five has an empirical study on the efficiencies of Chinese non-life insurance companies with DEA method. First, it analyzes the production process of non-life insurance companies in underwriting and investment to determine whether two-stage DEA can be used to analyze the efficiency. Based on the analysis on sample companies, it compares the two-stage DEA and one-stage DEA and has a non-parametric test on whether there is a significant difference between different technological efficiencies of different attributes and in the different production stages. The results show that the two-stage method can better measure the efficiency of general insurance companies.Chapter six analyzes the results from the evaluation, with two-stage DEA method, on the efficiencies of various Chinese non-life insurance companies and the efficiencies changes. It focuses on the marketing and profiting efficiencies of the sample companies and analyzes the changes of marketing and profiting efficiencies of different periods with Malmquist Productive Index. In the end, it discusses the factors that affect the efficiencies and their changes with Tobit regression and OLS regression.Chapter seven puts forwards suggestions to improve efficiencies of Chinese non-life insurance companies. Based on the analysis of previous chapters, it explores the policy supports, institutional optimization and path selection to improve the efficiencies.The contributions of the research are as follows:1. Contributions on research system and analysis ideas. Firstly, the subject has important research value but limited in domestic research, measurement and Optimization of Efficiency in non-life insurance company, which is a novelty and timeliness of the insurance industry, which adapt to the changing environment requirements and changing times. Secondly, compared to the previous similar domestic research, the paper is on a more systematic and comprehensive, enhances scientific of the method selection, variables identify and the sample companies choose; Finally, the analysis relying on China's economy and the insurance industry practice, followed the rules of general insurance industry and the business activities, avoid the simple use of the theories and methods, So that research under the paradigm of raising questions - analyzing questions - solving questions, In short, this paper made a useful supplement and improve the efficiency theoretical framework of domestic research.2. Contributions on research characteristics and methods. The paper is the first study to divide the producing process of non-life insurance industry into marketing and profiting, use the empirical analysis on input and output of non-life insurance industry of China in 2005 and 2006 respectively, measure the efficiency and changes in different phases, and use the Tobit regression method and OLS regression to analysis the factors. Firstly, the paper compares the methods of financial ratio and Data Envelope Analysis, which are usually used as proxy of efficiency of non-life insurance industry and concludes that Data Envelope Analysis is more effective. Secondly, the paper divides the producing process into two phases, which conquer the shortcomings of analysis of one-phase. The method is helpful to measure the performance of different phases of non-life insurance companies, make further investigate the efficiency. Thirdly, the paper chooses the appropriate the variables, which makes the statistics more meaningful. Lastly, the paper relates the regression analysis and decision matrix, which is helpful to locate the companies in the whole industry and make the operating strategy more practical.3. Contributions on suggestions for optimizing the efficiency. The paper overcomes the traditional simple normative idea, relates the empirical results and puts forward practical suggestions for optimizing the efficiency based on the efficiency theory and characteristics of China environment. In macro aspect, there should be correct industry policy and supervise measures to support the sustaining development of non-life insurance industry because of the effect of insurance market structure and ownership structure. In micro aspect, the paper puts forward some suggestions based on the selection of path, which consist of correcting the inappropriate operation measures good to improve the efficiency and lower the risks, making more emphasis on innovations of new products and finance ways and strength the profitability. These suggestions are both supplements to theory and good value to practice.The paper can be improved if the following problems are solved:1. It is hard to collect parts of the data and some input variables are replaced by instrument variables. If more precise data can be collected to evaluate the efficiency, the research can be improved.2. This research does not consider qualitative data which would affect the efficiency, for example, the staff competency, market orientation, investment policy and so on.