Study Of X-Efficiency Based On SFA In Chinese Insurance

The efficiency of insurance companies,not only directly reflects the core competitiveness of insurance companies,but also is a key concern of policy makers to encourage further development of the insurance industry.With the stock reform of state insurance companies and the establishment of many commercial insurance companies as well as the entry of foreign companies,the competition environment of insurance market in China becomes more and more fierce.Efficiency has been the reality that insurance companies can't avoid.We apply the SFA approach to investigate the cost and profit efficiency level and their evolution of 29 insurance companies in China from 2001 to 2006. The results of the empirical study show that:①In terms of profit efficiency,the trend of joint venture insurance companies'and foreign insurance companies'profit efficiency have substantially increased, state-owned insurance companies'and joint-stock insurance companies'profit efficiency declined.In terms of cost efficiency,the cost efficiency level of foreign insurance companies and joint-stock insurance companies were higher than the state-owned insurance companies,only the joint venture insurance company lower than the state-owned insurance company after 2002.②Sample period,the rising trend of Chinese insurance companies profit efficiency level were flat;Chinese insurance cost control mechanism has been continuously improved,the overall trend of cost effective level showed slight upward.③Whether before adjustment of risk or after adjustment of risk,the profit efficiency of property insurance companies is higher than life insurance companies before 2005,the profit efficiency of life insurance companies is higher than property insurance companies after 2005.At the same time,the cost-efficiency of property insurance or life insurance companies have increased,the level of cost effective of property insurance companies is higher than life insurance companies each year,and the gap is very marked.④The risk factors have a strong positive effect on the create profits capacity and cost control in Chinese insurance company.After the introduction of risk variable, the level of profit efficiency of insurance companies has reduced,and the trend of the cost effective level increased,which means that the cost of Chinese insurance companies changes can be attributed to carry out high-risk behavior regardless of their specific circumstances,and in high-risk cases,the profit of insurance companies must have been impacted,resulting profit efficiency declined.At last,some suggestions was given:①Continue to promote property rights reform of the insurance sector,in particular state-owned insurance companies; implementation of commercializing of insurance companies really,releasidng control and intervention from the government,formulating and implementing more effective corporate governance rules,making it the main competition really in the market as soon as possible,improving its internal operational efficiency;②For property insurance companies to improve profit efficiency on the basis of controling costs; and for life insurance to control operational costs on the basis improving profit efficiency.③Don't blindly carry out high-risk business for profit,should give careful consideration to the own situation of the company.