How Profit Efficient is Indian Life Insurance Industry: A DEA Study

Abstract

The cost and profit efficiency of all Indian life insurance businesses is examined in this article using the data development analysis technique for the years 2017 through 2021. The Tobit regression is also used in this study to look into how well life insurance performs in relation to company factors. Cost efficiency scores were higher than profit efficiency ratings, as shown by the study. According to this, one of the most important inefficiencies for Indian life insurance is revenue inefficiency. In addition, state-owned life insurance firm in India is more profitable and economical than private ones, according to this study. In general, joint life insurers are more cost-effective than domestic life insurance companies, whereas domestic life insurance companies are more profit-efficient than joint venture insurers. The profitability and cost-effectiveness of life insurers are positively impacted by the claims ratio. While there are favorable effects of the distribution ratio and market share, respectively, effects on profit and cost-effectiveness. During the study period, the Indian life insurance businesses were relatively cost and profit efficient, according to empirical evidence. This study is the first to examine the profit and cost efficiencies of all Indian life insurance businesses. Decision-makers, top management, regulators, and other industry stakeholders will all gain from the research.