An Empirical Study Of Efficiency Based On Three-stage DEA Method In Chinese Insurance

Since reforming and opening, Chinese insurance industry developing at full speed has made important contribution to improve economic growth, fairly good function having brought the economy "shock absorber" and the "stabilizer" into play. However the insurance industry is still in the plight for the absence of the competition, and the lower efficiency and Profitability. From 2006 foreign insurance companies will have the citizen treatment. The challenge following participating in the WTO is approaching, and the domestic insurance companies will be threatened in many respects. Therefore, to measure insurance industry efficiency level and research insurance industry efficiency restriction factors and seek the ways to improve insurance industry efficiency has the extremely important theory and practice significance.Among the researches on the efficiency of insurance industry at academy, the most widely used method is the Data Envelopment Analysis (DEA) model. The most disadvantage of DEA is that management inefficiency and statistical noise can't be stripped. This paper gives an empirical study on the efficiency of 48 insurance companies (24 life insurance companies and 24 property-liability insurance companies respectively) in China during the period 2004-2007 by applying the three-stage DEA model.First of all, DEA is applied to outputs and inputs only, to obtain initial measures of insurance company. From the first stage we can know that inefficient SE is the most important reason to the inefficient TE. The TE,SE and PTE of the foreign insurance companies (joint venture firms) are lower than state insurance companies. But the most disadvantage of DEA is that management inefficiency and statistical noise can't be stripped, so, the efficient isn't reflect the insurance companies'TE,SE and PTE.Second, in the second stage, stochastic frontier analysis (SFA) is used to adjust to inputs and outputs, to strip management inefficiency and statistical noise.At last, DEA is used to re-evaluate adjusted inputs and outputs, and the efficiency of insurance industry is the efficiency which is stripped management inefficiency and statistical noise. The results show that:The PTE of Chinese insurance industry is higher. The SE of Chinese insurance industry is lower, and it leads to the low of TE. The PTE of state insurance companies is the lower than foreign insurance companies (joint venture firms), but there is no significant difference in the PTE of state and foreign insurance companies (joint venture firms). The SE of foreign insurance companies (joint venture firms) is the lower than state insurance companies, and the difference between them is quite significant.