Canadian life and health insurance productivity evaluation using data envelopment analysis

The three-year average of technical efficiency scores, employing Data Envelopment Analysis (DEA), are reported in this work as 0.82 and 2.02 based on the Canadian Life and Health insurers' production and investment performance, which is equivalent to {dollar}10.2 billion and {dollar}20.2 billion in savings, respectively. The evidence indicates that constant returns-to-scale technology operates in the Canadian insurance industry with a significant number of increasing returns-to-scale participants. Furthermore, the results show that firm efficiency is statistically related to their size as well as to conventional performance indicators. Efficiencies of alternative organizational forms, ownership types and distribution methods are investigated to conclude that insurer characteristics have no significant effects on DEA scores. The assessment of changes in efficiency and productivity over the 1996–1998 period using the Malmquist Index methodology indicates that insurers exhibited overall technical efficiency losses, technological progress and scale efficiency losses based on their production performance. However, only relatively minor improvements or deteriorations have taken place throughout the sample period in terms of the insurers' investment ability.