Comparative Study Of The Operating Efficiency Of Chinese-funded And Foreign-funded Companies In Chinese Life Insurance Industry

As an industry opening up the earliest and with the shortest open transition period in Chinese modern financial system, the status of insurance industry in the national economy is self-evident. Since December11,2004, Chinese insurance industry has experienced the development along with the prosperity and stability of economic, and also the turmoil along with the financial crisis. In a complex and changing market environment, whether Chinese insurance industry maintains a healthy development momentum and relatively high operating efficiency is a subject worthy of study. In Chinese insurance market, the operating efficiency between life insurance company and property insurance company is not comparable, because significant difference exists in the insurance period. In addition, the premium income proportion of life insurance company has been higher than property insurance company. Therefore, this article select only Chinese life insurance industry as research object to explore effective way to improve efficiency, by comparing the efficiency of Chinese-funded and foreign-funded life insurance company, and by analyzing internal and external factors that affect operating efficiency.Supported by efficiency theory and efficiency measures, this article first reviewed the development course of Chinese life insurance industry, and making macroscopic analysis on current situation of Chinese life insurance market from the aspects such as the competition between Chinese-funded life insurance companies and foreign-funded life insurance companies. Based on the panel data of32Chinese life insurers during the years of2006to2010, this paper analyzed the relationship between input and output indicators by canonical correlation analysis and established a set of input and output index system which can better reflect operating characteristics of life insurance industry, and select four environment variables. Since there were negatives in output indicators, this paper introduced the SORM model to improve three-stage DEA method to make it able to handle the existence of negative in input or output variables. Finally, this paper measured the life insurance companies’ technical efficiency, pure technical efficiency and scale efficiency with the improved three-stage DEA method, and compared Chinese-funded and foreign-funded life insurance companies, also investigated how the external environmental factors affect the efficiency.The conclusion include three aspects:(1)Current assets, fixed assets, operating expenses and commission expenses are the dominant indicators in reflecting the input level, so are with indemnity expenditure, premium income and investment income in reflecting the output level. The number of employees is not showing its importance sufficiently, that is contrary to many scholars’ opinion. Long-term investment, other investment and reserve value-added are suppressing variables, and their increase may reduce the operating efficiency.(2) The increase in the share of market and foreign assets will intensify inputs waste and reduce efficiency. There is no clear relationship between the business coverage and efficiency, so are with operating life and efficiency. The economic situation has a significant impact on the technical efficiency of Chinese life insurance industry.(3) Technology and management level of foreign-funded life insurance company is slightly higher than Chinese-funded company, and it brings huge technological impact to the latter. Scale efficiency of foreign-funded life insurance company is lower than Chinese-funded company, but the situation is inclined to be reversed in recent years. Foreign-funded life insurance company’s ability to resist financial crisis is weak. The influence of environment factors and random factors on Chinese-funded life insurance companies is greater than that on foreign-funded life insurance companies. Finally, this article put forward corresponding policy suggestions according to the mode of action and impact strength of internal and external factors of the Chinese insurance industry; Several insights come from the difference of technical efficiency and scale efficiency between Chinese-funded life insurance company and foreign-funded life insurance company.