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Does efficiency promote competitiveness of the insurance industry?

This paper contributes to the existing literature by examining the efficiency and competitiveness of the Takaful insurance. We employ the Data Envelopment Analysis (DEA) to compute the efficiency of Takaful operators, while Panzar-Rosse (P-R) H-statistic method is used to evaluate the degree of comp...

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Main Authors: Lee, Hui Shan, Cheng, Fan Fah, Md Nassir, Annuar, Ab Razak, Nazrul Hisyam
Format: Article
Language:English
Published: VGTU Press 2018
Online Access:http://psasir.upm.edu.my/id/eprint/15065/1/Does%20efficiency%20promote%20competitiveness%20of%20the%20insurance%20industry.pdf
http://psasir.upm.edu.my/id/eprint/15065/
https://journals.vgtu.lt/index.php/JBEM/article/view/5547
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spelling my.upm.eprints.150652019-05-09T01:07:34Z http://psasir.upm.edu.my/id/eprint/15065/ Does efficiency promote competitiveness of the insurance industry? Lee, Hui Shan Cheng, Fan Fah Md Nassir, Annuar Ab Razak, Nazrul Hisyam This paper contributes to the existing literature by examining the efficiency and competitiveness of the Takaful insurance. We employ the Data Envelopment Analysis (DEA) to compute the efficiency of Takaful operators, while Panzar-Rosse (P-R) H-statistic method is used to evaluate the degree of competition. The findings indicate that the inefficiency in Takaful’s operations is affected by the scale of operations but not by inefficiency in managerial practice. Actuaries need to pay attention to estimating provisions for outstanding claims, as this factor is negatively influencing the efficiency of Takaful insurance. Additionally, the managers are cautioned not to overspend on commissions paid to the agents because this will reduce the profit of the Takaful operators. The findings to a very large extent indicate that improvement in efficiency will increase the entry of a more viable competitor to participate in the Takaful industry. The regulators need to implement prudent monitoring of the operations of Takaful insurers because improvements in efficiency will make Takaful operators more competitive. The implications further shed light on the motivation for insurance firms to improve efficiency that enable them to charge lower price to enhance competition which may benefit both the firms and customers. VGTU Press 2018 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/15065/1/Does%20efficiency%20promote%20competitiveness%20of%20the%20insurance%20industry.pdf Lee, Hui Shan and Cheng, Fan Fah and Md Nassir, Annuar and Ab Razak, Nazrul Hisyam (2018) Does efficiency promote competitiveness of the insurance industry? Journal of Business Economics and Management, 19 (4). pp. 566-591. ISSN 1611-1699; ESSN: 2029-4433 https://journals.vgtu.lt/index.php/JBEM/article/view/5547 10.3846/jbem.2018.5547
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description This paper contributes to the existing literature by examining the efficiency and competitiveness of the Takaful insurance. We employ the Data Envelopment Analysis (DEA) to compute the efficiency of Takaful operators, while Panzar-Rosse (P-R) H-statistic method is used to evaluate the degree of competition. The findings indicate that the inefficiency in Takaful’s operations is affected by the scale of operations but not by inefficiency in managerial practice. Actuaries need to pay attention to estimating provisions for outstanding claims, as this factor is negatively influencing the efficiency of Takaful insurance. Additionally, the managers are cautioned not to overspend on commissions paid to the agents because this will reduce the profit of the Takaful operators. The findings to a very large extent indicate that improvement in efficiency will increase the entry of a more viable competitor to participate in the Takaful industry. The regulators need to implement prudent monitoring of the operations of Takaful insurers because improvements in efficiency will make Takaful operators more competitive. The implications further shed light on the motivation for insurance firms to improve efficiency that enable them to charge lower price to enhance competition which may benefit both the firms and customers.
format Article
author Lee, Hui Shan
Cheng, Fan Fah
Md Nassir, Annuar
Ab Razak, Nazrul Hisyam
spellingShingle Lee, Hui Shan
Cheng, Fan Fah
Md Nassir, Annuar
Ab Razak, Nazrul Hisyam
Does efficiency promote competitiveness of the insurance industry?
author_facet Lee, Hui Shan
Cheng, Fan Fah
Md Nassir, Annuar
Ab Razak, Nazrul Hisyam
author_sort Lee, Hui Shan
title Does efficiency promote competitiveness of the insurance industry?
title_short Does efficiency promote competitiveness of the insurance industry?
title_full Does efficiency promote competitiveness of the insurance industry?
title_fullStr Does efficiency promote competitiveness of the insurance industry?
title_full_unstemmed Does efficiency promote competitiveness of the insurance industry?
title_sort does efficiency promote competitiveness of the insurance industry?
publisher VGTU Press
publishDate 2018
url http://psasir.upm.edu.my/id/eprint/15065/1/Does%20efficiency%20promote%20competitiveness%20of%20the%20insurance%20industry.pdf
http://psasir.upm.edu.my/id/eprint/15065/
https://journals.vgtu.lt/index.php/JBEM/article/view/5547
_version_ 1643825822426988544
score 13.211869

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