Study On Managerial Effectiveness Evaluation Of Insurance Companies

As one of the three underpinnings of financial industry, insurance industry's healthy growth directly influences the stability and development of financial industry. Since resuming operation in 1980, Chinese insurance industry has been keeping a forceful increasing tendency; the average annual premium growth rate is close to 30%. But, the performance of insurance industry is quite different comparing with the high growth rate of premium. The rate of insurance profit to premium and the return on investment are low and unstable. Besides those objective reasons such as law, system, market structure and market mature level behind this situation, lower intensifies level of insurance operation and lacking efficient and effective management should be the major reasons. Quantitatively scoring insurance companies'managerial effectiveness is the precondition to upgrade their management level. However, existing literatures mainly use performance evaluation to study the operating management situation of insurance companies, since the difference in objective fundamental conditions will influence the fairness of managerial effect, results obtained can not fairly reflect the effective level of insurance company management. Aiming at the deficiency of existing studies, in order to provide theoretical and practice reference for upgrading the management level of insurance companies in China, this paper study the managerial effectiveness evaluation of insurance companies.The essence of insurance company managerial effectiveness evaluation is to quantitatively score the effective degree of insurer management by means of certain method. Quantifying the degree of effective effort is the key to study the managerial effectiveness of insurance company management, and the analysis on frontier surface is the foundation to study effective effort. This paper extends production effectiveness into managerial effectiveness, constructs management possibility set and management frontier surface, and put forwards the general style of managerial effectiveness: managerial effectiveness based on time angle and managerial effectiveness based on space angle. Based on above study, this paper performs following efforts, it is hopeful to provide new thought and method for future researches on insurance companies'managerial effectiveness evaluation.Insurance companies'performance evaluation is the basis to evaluate insurers'managerial effectiveness from time angle. Based on analyzing the operating characteristics of insurance companies, this paper constructs a performance evaluation indicator system of insurance companies from five dimensions of profitability, solvency, operating efficiency, operating stability and growth capability by means of system analysis method according to the design criteria of evaluation indicator system. After analyzing the deficiency of existing performance evaluation method, this paper put forward a synthesis insurer performance evaluation method that integrates nonlinear dimensionless fuzzy handling approach and variance coefficient method.Not only present performance but also previous performance (the objective fundamental conditions) of insurance companies should be considered when evaluating their managerial effectiveness. Let the performance of insurance companies in the period t-1 the input variable and the performance in period t the output variable, this paper constructs a managerial effectiveness evaluation model from time angle by means of data envelopment analysis (DEA). The method can eliminate the influence of difference in objective fundamental conditions, and the results can reflect the level of effective effort of insurance company management.Using data envelopment analysis as a tool and choosing the performance of insurance companies at different dimensions as reference index and current index respectively, this paper establishes models to measure managerial effectiveness of insurance companies from space angle. Two models are established, one for insurance business management, the other for investment management. This paper also puts forward a linear weight method to calculate the synthesized managerial effectiveness of insurance companies. The results indicate the level of effective effort of insurance companies in insurance business management and investment management, and provide more information for insurance companies to upgrade their management level.Last, by means of the proposed methods, this paper performs empirical studies on insurance company managerial effectiveness evaluation using 17 property insurance companies and 16 life insurance companies in China as samples. Empirical results indicate that the managerial effectiveness evaluation method based on time angle or space angle can eliminate the influence of difference in objective fundamental conditions to management effectiveness; the managerial effectiveness level of sample insurance companies is relatively low, and there exists certain space to improve. Results obtained indicate which field should be improved for insurance companies to upgrade their management level.