A Comparative Study Of Easternasian Life Insurance Companies’ Operational Efficiency: Empirical Data From Japan, South Korea And China

Asian economy plays a significant role in promoting the development of universaleconomy. As the main bodies of Asia economy, Japan, South Korea and China which arelocated in the East Asia impose ineligible influences on the universal economy. Insurance isthe fundamental means in the risk management of modern life, and the insurance industryas one of the main industries in economy plays a very important role in the everydayoperation. Although the development of the insurance industries of Japan, South Korea andChina experienced different stages respectively, on the whole, they are more or less on thesame development level. A study of the insurance companies’ operational efficiency in theabove three countries is of vital significance to the development of Chinese insurancecompanies.This paper makes use of the DEA (Data Envelopment Analysis) Efficiency EvaluationSystem to carry out a comparative analysis on the operational efficiency of life insurancecompanies in Japan, Korea and China. Four most representative life insurance companies ineach country were selected. The CCR (Chames, Cooper&Rhodes,1978) model and BCC(Banke, Charens&Cooper) model were used to estimate the comprehensive technicalefficiency under constant return to scale and variable return to scale respectively. The SCRS(Anderen&Petersen,1993) model was used to calculate the super-efficiency index of theseinsurance companies. The paper use the above three indicators in the comparison ofoperational efficiency. Finally, according to DEA model’s projection theorem, theoptimization approaches for low operational efficiency companies were explored.Then, the following conclusions were summarized:1. South Korean life insurance companies had the highest average operationalefficiency, Japanese companies ranked the lowest; no significant differences were observedbetween life insurance companies in China and the ones in South Korea.2. Chinese life insurance companies varied greatly in the levels of operationalefficiency, the operational efficiency of medium-sized life insurance companies developedat a very fast speed.3. The super-efficiency level of South Korean life insurance companies showedobvious advantages over that of Japanese life insurance companies.4. Japanese life insurance companies’ investment channels should be more targetedand effective; the improvement of the operational efficiency should start with theinvestment tactics. The comparison on the operational efficiency among Japan, South Korea and Chinagave important references for the development of Chinese life insurance companies:1. The opening up the insurance market to foreign insurance companies would notprevent the development of domestic insurance companies. From the efficiency indicatorsobtained in this paper, it could be seen that the technical efficiency of Chinese insurancecompanies not only showed no disadvantage below international large insurance companies,but even performed better than some companies with a long history. The statement that theintroduction of foreign insurance companies would form a big impact on the domesticcompanies was just too negative.2. Domestic insurance companies should try to enter the international insurancemarket and develop to be competitive international large companies. The operationalefficiency of large domestic insurance companies is no less than that of the foreigninsurance companies; when the development of domestic insurance market was underdepressed circumstances, domestic insurance companies could actively explore theoverseas insurance markets and develop the overseas insurance business.3. Control the operation costs and increase return on investment. Compared with theSouth Korean insurance companies, a large gap still existed between insurance companiesin China and South Korea. Chinese insurance companies should make efforts to reduce thelabor costs and general operating expenses. At the same time, professional assetmanagement agencies could be set up to be in charge of the investment business so as toincrease the return.4. Small and medium-sized insurance companies should seize the opportunity andexpand rapidly. Comparisons between Chinese insurance companies stated that thetechnical efficiency of large insurance companies was no better than that of medium-sizedinsurance companies. Small and medium-sized insurance companies should make use ofexisting resources for rapid expansion, and actively compete with large insurancecompanies and foreign insurance companies.