Efficiency of Non-life Insurance in Indonesia

Abstract

This paper evaluates the relative efficiency of 23 Non Life Insurance companies in Indonesia, using Data Envelopment Analysis (DEA) model. DEA is a management evaluation tool that assists in identifying the most efficient and inefficient decision-making units (DMUs) in the best practice frontier. Empirical results show that bigger insurance companies are found to be more efficient than smaller firms. Moreover, companies with captive market and the company's group with non-captive market have relatively the same result. These findings are new empirical contributions to efficiency literature of the insurance industry. The paper also provides policy implications for the Indonesian insurance sector.