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Efficiency of Macedonian Insurance Companies: A DEA Approach

Received: 9 July 2015     Accepted: 23 July 2015     Published: 11 August 2015
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Abstract

The purpose of this paper is to estimate the efficiency of the insurance sector of Republic of Macedonia for the period 2009-2013. Technical, pure technical and scale efficiency of 11 Macedonian insurance companies have been measured using Data Envelopment Analysis (DEA), both CCR and BCC output-oriented model. The results from the analysis indicate an increase of the average efficiency during the almost whole observed period. The scale efficiency follows the same trend. When estimating the BCC model, the number of efficient insurance companies and the average efficiency for the sector is higher than in the CCR case, implying that the main source of inefficiency is due to scale inefficiencies. The average technical efficiency score of Republic of Macedonia in 2013 of 0.84387 indicates relatively high efficiency of the insurance sector. The efficiency problem of each insurance company has been specified particularly

Published in Journal of Investment and Management (Volume 4, Issue 2)
DOI 10.11648/j.jim.20150402.11
Page(s) 61-67
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Data Envelopment Analysis, Macedonia, Insurance Sector Efficiency, Scale Efficiency, Technical Efficiency, Pure Technical Efficiency

References
[1] Ayele, A. G. (2012): Factors Affecting Profitability of Insurance Companies in Ethiopia: Panel Evidence, Addis Ababa University, Addis Ababa, Ethiopia,available at: http://etd.aau.edu.et/dspace/bitstream/123456789/4326/1/Factors%20Affecting%20Profitability%20of%20Insurance%20Companies%20in%20Ethiopia.pdf, assessed on 12.05.2014.
[2] Barros, C., P. and Obijiaki, E., L. (2007), Technical Efficiency of Nigerian Insurance Companies, Working Paper 018/2007/DE/UECE, School of economics and management, Technical university of Lisbon, available at: http://www.iseg.utl.pt/departamentos/economia/wp/wp0182007deuece.pdf, assessed on 01.07.14.
[3] Borges, M. R., Nektarios, M. and Barros, C., P. (2008), Analyzing the Efficiency of the Greek Life Insurance Industry, European Research Studies, Volume XI, Issue (3) 2008.
[4] Diboky, F., and Ubl, E. (2007), Ownership and Efficiency in the German Life Insurance market: A DEA Bootstrap Approach, available at: http://www.aria.org/meetings/2007papers/VIB%20-%202%20-%20Diboky.pdf, assessed on 08.07.14.
[5] Eling, M. and Huang, W., (2011), An Efficiency Comparison of the Non-life Insurance Industry in the BRIC Countries, Working Papers on Risk Management and Insurance, No. 94 – November 2011, available at: http://www.ivw.unisg.ch/~/media/internet/content/dateien/instituteundcenters/ivw/wps/wp94.pdf.
[6] Eling, M. and Luhnen, M., Frontier Efficiency Methologies to Measure Performace in the Insurance Industry: Overview and New Empirical Evidence, available at: http://www3.imperial.ac.uk/pls/portallive/docs/1/48187710.PDF, assessed on 01.07.14.
[7] Insurance Supervision Agency: Insurance Industry Reports – Various editions, available at: http://www.aso.mk/index.php?option=com_sectionex&view=category&id=6&Itemid=72&lang=en.
[8] Jarraya, B. and Bouri, A. (2012), Efficiency concept and investigations in insurance industry: A survey, MPRA Paper No. 53544, Management Science Letters, Vol. 3, No. 1 (2013): pp. 39-54.
[9] Kumar, S., Gulati, R., (2008), An Examination of Technical, Pure Technical, and Scale Efficiencies in Indian Public SectorBanks Using Data Envelopment Analysis, Eurasian Journal of Business and Economics 2008, 1 (2), 33-69.
[10] Leverty, J., T. and Grace, M., F. (2008), Issues in measuring the efficiency of property-liability insurers, available at: http://www3.imperial.ac.uk/pls/portallive/docs/1/48217697.PDF, assessed on 08.07.14.
[11] Sarkis, J., (2002), Preparing Your Data for DEA, Productivity Analysis in the Service Sector with Data Envelopment Analysis, 2nd Edition, available at: www.clarku.edu/~jsarkis/SarkisChapter.doc, assessed on 22.07.13
[12] Shahroudi, K., Teleghani, M., Mohammadi, G. (2012), Application of Two-Stage DEA Technique for Measuring of Private Insurance Companies in Iran, International Journal of Applied Operational Research, Vol. 1, No. 3, pp. 91-104, Winter 2012.
[13] Sihna, R. P.,Chatterjee, B., Are Indian Life Insurance Companies Cost Efficient?,available at: http://www.igidr.ac.in/money/mfc-11/Sinha_Rampratap.pdf assessed on 11.07.14.
[14] Stavarek, D., Repkova, I., (2012), Efficiency in the Czech Banking Industry: a Non-parametric Approach, Actauniversitatisagriculturaeetsilviculturaemendelianaebrunensis, Volume LX, Number 2, 2012.
[15] Qui, S., and Chen, B. (2006), Efficiencies of Life Insurers in China – An Application of Data Envelopment Analysis, available at: http://www.ccfr.org.cn/cicf2006/cicf2006paper/20060130033345.pdf,assessed on 08.07.14.
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    Vesna Micajkova. (2015). Efficiency of Macedonian Insurance Companies: A DEA Approach. Journal of Investment and Management, 4(2), 61-67. https://doi.org/10.11648/j.jim.20150402.11

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    Vesna Micajkova. Efficiency of Macedonian Insurance Companies: A DEA Approach. J. Invest. Manag. 2015, 4(2), 61-67. doi: 10.11648/j.jim.20150402.11

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    AMA Style

    Vesna Micajkova. Efficiency of Macedonian Insurance Companies: A DEA Approach. J Invest Manag. 2015;4(2):61-67. doi: 10.11648/j.jim.20150402.11

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  • @article{10.11648/j.jim.20150402.11,
      author = {Vesna Micajkova},
      title = {Efficiency of Macedonian Insurance Companies: A DEA Approach},
      journal = {Journal of Investment and Management},
      volume = {4},
      number = {2},
      pages = {61-67},
      doi = {10.11648/j.jim.20150402.11},
      url = {https://doi.org/10.11648/j.jim.20150402.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20150402.11},
      abstract = {The purpose of this paper is to estimate the efficiency of the insurance sector of Republic of Macedonia for the period 2009-2013. Technical, pure technical and scale efficiency of 11 Macedonian insurance companies have been measured using Data Envelopment Analysis (DEA), both CCR and BCC output-oriented model. The results from the analysis indicate an increase of the average efficiency during the almost whole observed period. The scale efficiency follows the same trend. When estimating the BCC model, the number of efficient insurance companies and the average efficiency for the sector is higher than in the CCR case, implying that the main source of inefficiency is due to scale inefficiencies. The average technical efficiency score of Republic of Macedonia in 2013 of 0.84387 indicates relatively high efficiency of the insurance sector. The efficiency problem of each insurance company has been specified particularly},
     year = {2015}
    }
    

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    AB  - The purpose of this paper is to estimate the efficiency of the insurance sector of Republic of Macedonia for the period 2009-2013. Technical, pure technical and scale efficiency of 11 Macedonian insurance companies have been measured using Data Envelopment Analysis (DEA), both CCR and BCC output-oriented model. The results from the analysis indicate an increase of the average efficiency during the almost whole observed period. The scale efficiency follows the same trend. When estimating the BCC model, the number of efficient insurance companies and the average efficiency for the sector is higher than in the CCR case, implying that the main source of inefficiency is due to scale inefficiencies. The average technical efficiency score of Republic of Macedonia in 2013 of 0.84387 indicates relatively high efficiency of the insurance sector. The efficiency problem of each insurance company has been specified particularly
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Author Information
  • Integrated Business Faculty, Skopje, Macedonia

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