| Japan has the second largest non-life insurance industry in the world, and it is undergoing a steady transition into a liberalized market. Despite this, the Japanese non-life insurance industry has been rarely studied. A comprehensive analysis of its unique features such as savings-type insurance, keiretsu system, and labor-intensive marketing have not been conducted to date. This situation is partly remedied by this study, which investigates whether Japanese non-life insurers operate at the same level of efficiency and productivity as their counterparts in the US for the period of 1992 to 1995.; This study uses a nonparametric frontier approach (DEA) to obtain efficiency scores and Malmquist productivity indexes. ANOVA and rank order statistics are used to test for significant differences between the two industries in terms of efficiency scores and productivity changes. Tobit regression analysis is conducted to investigate the relationship between efficiency scores and firm specific features. Comparison between keiretsu and independent non-life insurers in Japan is based on the asymmetry information hypothesis that predicts keiretsu insurers would operate more efficiently than independent insurers due to the information advantage in doing commercial lines business with member companies.; This study finds that Japanese non-life insurers operate more closely to their own production frontier compared to their US counterparts. Insures in both countries experienced almost the same productivity growth and productivity change patterns during the sample period. The savings-type insurance is shown to have an insignificant impact on Japanese firms' efficiency despite its significant contribution to the firm size. However, the Japanese insurers suffered from over-utilization of labor inputs. This study also finds no statistically significant efficiency difference between Japanese keiretsu and independent non-life insurers. The asymmetry information hypothesis that favors keiretsu insurers is rejected.; To sum up, while it is not possible to directly compare the two industries, we can conclude that Japanese non-life insurers operate no worse than US insurers, given their own technology. While the different business mix such as savings-type insurance does not have significant impacts on firm efficiency, keiretsu and independent organizational forms also show insignificant differences in terms of efficiency scores. |
