An Empirical Analysis On Cost Efficiencies And Its Influencing Effects Of Property And Casualty Insurance Companies In China

The issue of efficiency is one of the core problems which economics deals with. As far as the efficiency of property and casualty insurance industry is concerned, it means effective allocation of the resources when insurance companies carry out risk to transfer, the economy compensate. Efficiency comprises the abilities of market competiong and sustainably developing.Based on the developmental facets of property and casualty insurance industry in China, combined with the related researches native and abroad, this paper introduces the insurance efficiency basic connotation and its importance. With Stochastic Frontier Approach (SFA) and the BC(95) model, the paper evaluates the cost efficiencies of Chinese property and casualty insurance companies and analyses the key determinants of cost efficiency. The analysis is applied to a balanced panel of 16 insurance companies over the period from 1999 to 2005. The results show that:Firstly, the cost efficiencies of the native property and casualty insurance companies is lowly currently. The insurance resources are allocated unreasonably and made use of insufficiency. Most of companies stay around the extensive management and have great space to improve.Secondly, the cost efficiencies of foreign insurance companies are higher than that of the native insurance companies. With the opening of the Chinese insurance market, the cost efficiencies of native insurance companies had improved greatly, but that of foreign companies had improved slightly.Thirdly, employee's character and personal insurance premium contain positive influence on the cost efficiencies; the companies property scale and the proprotion of the fixed assets have negative influence on cost efficiencies; the ratio of auto insurance business usually have no influence.At last, the paper puts forward the major channels to promote the insurance industry efficiency of our country, such as broadening the industry entry restrict, raising insurance companies' information-based level, developing elitist and so on.