ISSN: 2222-6990
Open access
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.
Abd Karim, M. Z. (2005). Cost efficiency and profitability in Thailand's life insurance industry: a stochastic cost frontier approach. International Journal of Applied Econometrics and Quantitative Studies, 2, 19-36.
Al-Amri, K. (2015). Takaful insurance efficiency in the GCC countries. Humanomics. 31 (3), 344-353.
Amanti, P. G., & Siregar, A. A. (2019) The Efficiency of General Insurance Companies in Indonesia. In 12th International Conference on Business and Management Research (ICBMR 2018) (pp. 314-320). Atlantis Press.
Andersen, P., & Petersen, N. C. (1993). A procedure for ranking efficient units in data envelopment analysis. Management Science, 39(10), 1261-1264.
Ansah?Adu, K., Andoh, C., & Abor, J. (2012). Evaluating the cost efficiency of insurance companies in Ghana. The Journal of Risk Finance, 13 (1) (2012), 61-76.
Bao, N. J., Ramlan, R., Mohamad, F., & Yassin, A. M. (2018). Performance of Malaysian insurance companies using data envelopment analysis. Indonesian Journal of Electrical Engineering and Computer Science, 11(3), 1147-1151.
Berger, A. N., & Humphrey, D. B. (1992). Measurement and efficiency issues in commercial banking. In Output measurement in the service sectors (pp. 245-300). University of Chicago Press.
Bank Negara Malaysia. (2016). Insurance and Takaful Sector. https://www.bnm.gov.my/documents/20124/856371/cp03.pdf
Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2(6), 429-444.
Cooper, W. W., Seiford, L. M., & Tone, K. (2006). Introduction to data envelopment analysis and its uses: with DEA-solver software and references. Springer Science & Business Media.
Cummins, J. D., & Weiss, M. A. (1993). Measuring cost efficiency in the property-liability insurance industry. Journal of Banking & Finance, 17(2-3), 463-481.
Eling, M., & Schaper, P. (2017). Under pressure: how the business environment affects productivity and efficiency of European life insurance companies. European Journal of Operational Research, 258(3), 1082-1094.
Farell, M. J. (1957). The measurement of productive efficiency. Journal of The Royal Statiscal Society, Série A, 120(3), 253-290.
Ghosh, A., & Dey, M. (2018). Performance Measure of Indian General Insurance Companies Using DEA and Super Efficiency Model. Journal of Economics & Business Research, 24(1).
Grmanová, E., & Strunz, H. (2017). Efficiency of insurance companies: 99Application of DEA and Tobit analyses. Journal of International Studies, 10(3), 250-263
IMF (2014). Malaysia: Publication of Financial Sector Assessment Program Documentation— Detailed Assessment of Observance of Insurance Core Principles. https://www.imf.org/external/pubs/ft/scr/2014/cr1498.pdf
Johnes, J. (2006). Data envelopment analysis and its application to the measurement of efficiency in higher education. Economics of Education Review, 25(3), 273-288. doi: 10.1016/j.econedurev.2005.02.005
Kaffash, S., & Marra, M. (2017). Data envelopment analysis in financial services: a citations network analysis of banks, insurance companies and money market funds. Annals of Operations Research, 253(1), 307-344.
LIAM (2019). Annual Report 2019. https://www.liam.org.my/pdf/AnnualReport2019_LIAM.pdf
PIAM (2019). Annual Report 2019. https://piam.org.my/wp-content/uploads/2021/04/3b_PIAM_people-at-the-heart.pdf
Saad, N. M., Majid, M. S. A., Yusof, R. M., Duasa, J., & Rahman, A. A. (2006). Measuring efficiency of insurance and Takaful companies in Malaysia using data envelopment analysis (DEA). Review of Islamic Economics, 10(2), 5.
Scheel, H. (2000). EMS: Efficiency Measurement System Users Manual, Version 1.3, Universität Dortmund, Dortmund, Germany. http://www.wiso.uni-dortmund.de/LSFG/OR/scheel/ems/.
Shieh, H. S., Hu, J. L., & Ang, Y. Z. (2020). Efficiency of Life Insurance Companies: An Empirical Study in Mainland China and Taiwan. SAGE Open, 10(1).
Wang, Z. L., Kim, J., Selvachandran, G., Smarandache, F., Abdel-Basset, M., Thong, P. H., & Ismail, M. (2019). Decision Making Methods for Evaluation of Efficiency of General Insurance Companies in Malaysia: A Comparative Study. IEEE Access, 7, 160637-160649.
Yusof, N. A. M. (2020). Analysing the technical efficiency of general takaful industry in malaysia: a non-parametric approach. Platform: A Journal of Management and Humanities, 3(1), 2-14.
Yunus. (2018). Malaysia. Governor’s remarks at the Malaysian Insurance Institute (MII) Summit-Innovation in a Disruptive Era.Governor's remarks at the Malaysian Insurance Institute (MII) Summit.
In-Text Citation: (Mahyideen et al., 2021)
To Cite this Article: Mahyideen, J. M., Aziz, N. A. A., Yaakob, H., Rusli, N. A. M., & Mohamad, W. N. (2021). Efficiency Analysis of Malaysian General Insurance Companies Using Data Envelopment and Super-efficiency Approach. International Journal of Academic Research in Progressive Education and Development, 10(3), 789–800.
Copyright: © 2021 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode