The Differences in the Technology Efficiency of Taiwan’s Life Insurance Companies—The Application of the Metafrontier DEA Model

Abstract

This study assesses the efficiency analysis of the 25 Taiwan-based life insurance_x000D_ companies during the period 2003 to 2006 by examining three different subgroups,_x000D_ namely, old domestic companies, new domestic companies and foreign companies._x000D_ The primary goal of the present study is to compare two procedures widely used to_x000D_ evaluate the relative efficiency of the life insurance companies. First, we use the_x000D_ Metafrontier DEA method to estimate each group’s technical efficiency,_x000D_ metatechnology and metatechnology ratio (MTR). Second, we apply Tobit_x000D_ regression to explore the factors that may influence the technology efficiency and_x000D_ the sources of differences. The results show that the technology efficiency of the old_x000D_ domestic companies is high both in terms of metatechnology and the MTR. This_x000D_ implies that the old domestic companies not only operate with the highest efficiency,_x000D_ but also approximate to the technological level of metatechnology. In addition, we_x000D_ also find that the metatechnology values of old domestic companies and foreign_x000D_ companies have greater significance than those of the new domestic companies and_x000D_ the MTR of the old domestic companies are more significant than those of the new_x000D_ domestic companies. To this end, improving the professionalism and service quality_x000D_ of operators and increasing the competitiveness and profitability of the life insurance_x000D_ companies are critical factors in increasing metatechnology and reducing the_x000D_ technological differences through professional licenses, service experiences,_x000D_ educational level and market share.