Comparing with the Big Ones: Challenges for Insurance Companies in Cost Reduction
DOI:
https://doi.org/10.29201/peipn.v10i19.345Keywords:
Insurance, cost efficiency, DEAAbstract
This paper utilizes the decomposition of economic sources of cost variations to examine efficient firms' characteristics in the insurance industry in Mexico. In order to assure consistent comparison, this market was segmented into three groups according to their specialization, and one or more efficient companies of each group are presented in the benchmarking exercise. Following a model based on a non-parametric frontier analysis, the difference in cost, between efficient firms and their peers, is decomposed into: input price, scale, technical efficiency and allocative efficiency effects. In this way, advantages of more cost efficient insurers become evident. The cross-sectional analysis was applied to 2008-2012 data to observe evolution of efficient companies regarding their group during five years.
Downloads
References
Accenture (2014). Big opportunities in small-ticket insurance. Referencia 14-1126/11-7492. Banco de México (2012-2013). Reporte sobre el Sistema Financiero, México.
Barros, C.; N. Barroso y M. Borges (2005). "Evaluating the Efficieny and Productivity of Insurance Companies wirh Malmquist Index: A Case of Study for Portugal", The Geneva Papers, pp. 244-267.
Barros, C.; A. Iblwoye y S. Managl (2008). "Productivity Change of Nigerian Insurance Companies 1994-2005". African Development Review, pp. 505-528.
Ben-Shahar, O.; y K. D. Logue (2012). Outsourcing regulation: How Insurance re duces moral hazard. Michigan Law Review, vol. 111, No. 2, pp. 197-248.
Bernstein, J. (1999). "Total factor productivity growth in the Canadian life insurance industry 1979-1989", Canadian Journal of Economics, vol. 32, No. 2, pp. 500-517.
Borenstein, S. y J. Farrell (2000). "Is Cost-cutting Evidence of X-inefficiency?", American Economic Review, vol. 90, pp. 224-227.
Comisión Nacional de Seguros y Fianzas (2002). "Ley General de Instituciones y Sociedades Mutualistas de Seguros". Diario Oficial de la Federación, México.
Comisión Nacional de Seguros y Fianzas (2000-2011a). Anuario Estadístico de Seguros y Fianzas, México.
Comisión Nacional de Seguros y Fianzas (2000-2013b). Boletín de Análisis Sectorial, México.
Comisión Nacional de Seguros y Fianzas (2011c). Circular Modificatoria 6/11 de la Única de Seguros, México.
Cummins, D. y O. Mahul (2009), Catastrophe Risk Financing in Developing Countries. Washington, D.C: The World Bank.
Cummins, D. y M. Weiss (1993), "Measuring cost efficiency in the property-liability insurance industry", Journal of Banking and Finance, vol. 17, pp. 463-481.
___(1998). Analyzing Firm Performance in the Insurance Industry Using Frontier Efficiency Methods, Working paper, The Wharton School, University of Pennsylvania.
Diewert, W. (2005). "Index number theory using differences rather than ratios", American Journal of Economics and Sociology, vol. 64, pp. 311-360.
Fuentes, H. (1993). Análisis y perspectivas del sector asegurador mexicano. Universidad Panamericana, Escuela de Economía, México: Universidad Panamericana, Escuela de Economía.
Fuentes, H., Grifell-Tatjè E. y Perelman S. (2001). "A Parametric Distance Function Approach for Malmquist Productivity Index Estimation", Journal of Productivry Analysis, vol. 15, pp. 79-94.
___(2005). Product Specialization, Efficiency and Productivity Change in the Spanish Insurance Industry, Working paper, Université de Liège, Bélgica.
Fukuyama, H. y W. Weber (2001). "Efficiency and Productivity Change of Non-Life Insurance Companies in Japan". Pacific Economic Review, vol. 6, No. 1, 129-146.
Garg, M. y Deepti (2008). "Efficiency of General Insurance Industry in India in the Post-Liberalization Era: A Data Envelopment Approach". Journal of Risk & Insurance, vol. 1, pp. 32-49.
Grifell-Tatjé E. y K. Lovell (1999), "Profits and Productivity", Management Science, vol. 45, No. 9, pp.1177-1193.
___E. y C.A. Lovell (2000). "Costs and Productivity". Managerial and Decision Economics, vol. 21, pp. 19-30.
Hardwick, P. y W. Dúo (1998). "The Competitiveness of EU Insurance Industries". The Service Industries Journal, vol. 18, No. 1, pp. 39-54.
Huidobro, A. (2002), Economías de Escala y de Alcance en el Sector Asegurador Mexicano. México, tesis maestría en economía ITESM CCM.
Jameti, M. y T. Von Urgern-Sternberg (2005). "Assesing the Efficiency of an Insurance Provider-A Measurement Error Approach". The Geneva Risk and Insurance Review. vol. 30, pp.15-34.
Kader, H., M. Adams y P. Hardwick (2010). "The Cost Efficiency of Takaful Insurance Companies". The Geneva Papers, vol 35, pp. 161-181.
Kasman, A. y E. Turgutlu (2009). "Total Factor Productivity in the Turkish Insurance Industry", International Journal of the Economics of Business, pp. 239-247.
Kumbhakar, S. y K. Lovell (2003). Stochastic Frontier Analysis. Reino Unido: Cambridge University Press.
Lim, S. y K. Lovell (2008). "Short-Run Total Cost Change and Productivity of US Class 1 Railroads". Journal of Transport Economics and Policy. vol. 41, No. 1, pp. 155-188.
Lovell, K. (2008). "Production frontiers and productivity efficiency". En Fried et al. (2008) The Measurement of Productivity Efficiency, Techniques and Applications. EUA: Oxford University Press, pp. 3-67.
Mahlberg, B. y T. Url (2003). "Effects of the single market on the Austrian insurance industry". Empirical Economics, vol. 28, pp. 213-838.
MarketLine (2014). Life Insurance in Mexico. Referencia 0071-0976. Reino Unido.
Rai, Anoop (1996). "Cost Efficiency of International Insurance Firms", Journal of Financial Services Research, vol. 10, pp. 213-233.
Sahoo, B. y K. Tone (2009). "Radial and non-radial decompositions of profit change: With an application to Indian banking", European Journal of Operational Research., vol. 196, pp. 1130-1146.
Seiford, L.M. y J. Zhu (2002). "Modeling undesirable factors in efficiency evaluation", European Journal of Operational Reseach, vol. 142, pp.16-20.
Schlesinger, H. y E. Venezian (1986). "Insurance markets with loss-prevention activity: profits, market structure, and consumer welfare", Rand Journal of Economics, vol. 17, No. 2, pp. 227-238.
Trigo-Gamarra, L. y C. Growitsch (2010). "Comparing Single and Multichannel Distribution Strategies in the German Live Insurance Market: an analysis of cost and profit efficiency", Schmalenbach Business Revise, vol. 62, pp. 401-417.
Triplett, J. y B. Boswordth (2004). Productivity in the U.S. Services Sector: new sources of economic growth, Brookings Institution Press.
Turchetti, G. y C. Daraio (2004). "How Deregulation Shapes Market Structure and Industry Efficiency: The Case of the Italian Motor Insurance Industry", The Ge neva Papers on Risk and Insurance, vol. 29, No. 2, pp. 202-218.
Ugalde, U. (1993). La función de costos en el sector asegurador mexicano: una primera aproximación a la evidencia sobre economías de escala y economías de alcance, tesis de Licenciatura en Economía, IТАМ.
Varian, H. (1992). Microeconomic Analysis. Nueva York: W.W. Norton & Company.
Weiss, M. (1986). "Analysis of Productivity at the Firm Level: An Application to Life insurers", Journal of Risk Insurance, vol. 53, No. 1, pp. 49-83.
Wolff (1991). "Productivity Growth, Capital Intensity, and Skill Levels, in the U.S. Insurance Industry, 1948-86", The Geneva Papers on Risk and Insurance, pp. 173-190.
Zhu, J. (2009). Quantitative Models for Performance Evaluation and Benchmarking. EUA: Springer.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Panorama Económico
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
