Firm Specific Factors and Profitability of Indian Life Insurers

Abstract

In the present competitive scenario, profit plays a major role in the survival and growth of every business enterprise in all sectors. Companies operating in the life insurance sector also face profitability contention with their rivals, especially among the private players who have entered the Indian market in a large number after the liberalization of the economy. The profitability of companies is affected by multiple factors which include firm-specific factors as well as external factors. In a competitive scenario, insurers having proper management of the controllable factors, i.e., the firm-specific factors may show better performance than others. Thus, the present paper tries to analyse the association of firm specific variables with the performance of life insurance companies operating in India. The impact of underwriting risk, company size, liquidity, volume of equity capital and tangibility on the performance of Indian life insurers have been analysed. A total of six life insurers operating in the Indian market have been taken as samples and annual statements for ten financial years, i.e., from 2010- 11 to 2019-20 have been used. Apart from basic descriptives, Correlation and Multiple Regression analysis have been used as statistical tools in the study. The findings reveal a positive relationship between Underwriting risk, Liquidity and Size of the company with profitability while Tangibility and Equity Capital have a negative relationship with profitability. Except for tangibility, the significant influence of all the firm-specific factors on the profitability of insurers has been observed in the study.