A survey of life insurance efficiency papers: Methods, pros & cons, trends

Abstract

This survey research paper explores the methods most commonly used in over 190 studies determining life insurance efficiency. The purpose is to provide an overview of life insurance efficiency studies and guidance as to the (dis)advantages of the different techniques used plus their applicability to life insurance. An evaluation of the different approaches is undertaken plus an examination of the numbers and trends of methods and aspects of life insurance efficiency measurement. This paper also discusses the fundamental elements of life insurance efficiency estimation, such as the set-up and form of outputs and inputs. Findings include that the focus of life insurance efficiency studies considering individual nations has changed. Additionally data envelope analysis is the technique used most commonly with stochastic frontier analysis next. Another main result is that output proxies (akin to) premiums and investment income is utilized most. This study allows practitioners to determine the best techniques to employ in life insurance efficiency studies. Moreover an evaluation by regulators of the value and applicability of such studies is facilitated. This article builds upon those previous to enumerate and investigate the approaches most commonly used in over 190 papers determining life insurance efficiency and has described the advantages and disadvantages of these methods. Therefore an assessment of the overall results of efficiency studies is possible. In addition ideas for potential further research are discussed. Consequently this review will be useful to both practitioners and regulators concerned with this area.

Keywords

• Life Insurance
• Efficiency
• Inputs/Outputs
• Literature Review