The Relationship Between China’s Life Insurance Companies Ownership Structure And Efficiency

With the rapid growth of China’s insurance industry, the shareholding structure of China’s life insurance companies also experienced a series of reforms. At the same time, the contribution of the shareholding structure of China’s life insurance companies on efficiency has become an important issue of concern. Arrangements ownership structure will have a significant impact on the behavior and performance of economic agents. Therefore, it is of great importance to explore the relationship between China’s life insurance companies ownership structure and efficiency for it will provide a new perspective for the analysis of the efficiency of China’s life insurance companies.This paper tests the relationship between the insurance companies ownership structure and efficiency by applying SFA approach, and the sample includes247sets of data from30life insurance companies in the period of2003-2012.This paper uses the beyond translog cost function, and respectively establishes stochastic frontier cost efficiency model and profit efficiency by setting the inefficiency term of life insurance companies into a function of a series of efficiency-affecting factors and random factors to accurately analyze the effect of ownership structure of China’s life insurance companies on cost efficiency and profit efficiency. The main conclusions are as follows:(1) The empirical results of the model shows that, the nature of equity have a significant impact on the profit efficiency of China’s life insurance companies, and the joint nature have a positive impact on China’s life insurance companies profit efficiency with a higher significance level while the equity nature had no significant effect on the cost efficiency; Ownership concentration has a significant impact on both of cost efficiency and profit efficiency, which is positively affected by the equity nature of absolute control with a higher significance level.(2)The comparative analysis of the efficiency of different equity type of the life insurance company shows that state-owned life insurance companies in China have the highest average cost efficiency a lowest average profit efficiency, in contrast to joint venture life insurance company, and the advantages of average profit efficiency is getting more obvious. Last but not least, the average cost efficiency of private insurance is making a steady progress with the passage of time.(3)The comparative analysis of the efficiency of different ownership concentration of the life insurance company shows that in recent years the average profit efficiency of relatively controlled life insurance companies has surpass the absolutely controlled life insurance companies, thus taking the first place, and the average cost efficiency has increased; Average cost efficiency of absolutely controlled life insurance companies ranks the top but with larger fluctuations, and the average profit efficiency drops sharply to the lowest level; Average cost efficient of decentralized holding life insurance company has shown a obvious growing path.