Efficiency Analysis of Malaysian General Insurance Companies Using Data Envelopment and Super-efficiency Approach

Abstract

Due to the phenomenal growth of the insurance sector, extensive research has been conducted to evaluate the insurers' efficiency at both domestic and international levels.  Thus, this paper illustrates the applications of Data Envelopment Analysis (DEA) to measure the relative efficiency of 18 general insurance companies that were operating in Malaysia in the year 2018.  The inputs included in this study are fees, commission, and management expenses while the outputs are net premium and generated investment income. The results reveal that the four general insurance companies can be identified as efficient units. The standard DEA method cannot discriminate efficient units. This study employs the super-efficiency DEA model to select the most efficient unit among them. This study makes a significant contribution to the financial industry especially for matters concerning insurance, as there is a lack of studies on exclusive efficiency analysis of general insurance companies in Malaysia. In addition, it has major implications for insurance decision makers, government agencies and emerging insurance markets. The information obtained from this study will benefit the insurance company’s top management in devising viable strategies to enhance the efficiency of the company.