ISSN: 2222-6990
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Gulf Cooperation Council (GCC) countries have both Takaful and conventional insurance players. Past studies indicate that when there are many players in a particular market it leads to competition and when there is a competition it promotes efficiency. This study therefore aims to investigate the relationship between competition and efficiency for Takaful and conventional in the GCC insurance industry over the study period of 2015 to 2020. The variables employed are labor, total fixed assets, capital equity and business services as inputs and premium and investment income as output. Lerner index method is employed to measure market power which represents the inverse degree of competition, while Data Envelopment Analysis (DEA) is used to estimate the efficiency index. To test the relationship, Granger causality test is employed. The empirical results show that conventional firms are marginally efficient in terms of technical, pure technical and scale efficiency whereas Takaful is performing better in terms of cost and allocative efficiencies. Takaful in UAE and Saudi Arabia are efficient in terms of pure, scale and allocative efficiencies. For conventional Bahrain and Qatar reflecting higher technical, pure and scale efficiencies. Overall, both Takaful and conventional firms are efficient and that there is a positive relationship between competition and efficiency. The institutional reform, standardizing Takaful regulations, utilizing resources efficiently and competitive industry are the key policy implications.
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(Ahmed et al., 2024)
Ahmed, A., Ab-Rahim, R., & Shah, H. A. (2024). Efficiency and Competition of GCC Insurance Industry. International Journal of Academic Research in Business and Social Sciences, 14(6), 1486–1496.
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