An efficiency comparison of the non-life insurance industry in the BRIC countries

We analyze the efficiency of non-life insurance companies in four of the fastest-growing markets in the world—the BRIC (Brazil, Russia, India, China) countries. An innovative feature of this paper is its incorporation of uncontrollable variables in the efficiency analysis using multi-stage data envelopment analysis (DEA). This approach captures cross-country differences, such as the political and economic environment, and allows distinguishing between managerial inefficiency and inefficiency due to environmental conditions. We find that the environment affects the efficiency of non-life insurers operating in the BRIC countries. Furthermore, in a regression of firm characteristics on efficiency scores we identify four drives of efficiency: Size, profitability, solvency, and ownership form. The results further our understanding of the insurance industry in the BRIC countries in regard to its efficiency and the environment in which it operates.

► First paper to focus on efficiency of non-life insurers from the BRIC countries. ► A new feature of this analysis is the incorporation of uncontrollable variables. ► The environment strongly affects the efficiency of non-life insurers in BRIC. ► Second-stage truncated regression of efficiency determinants on DEA scores. ► Size, profitability, solvency, and ownership form are four drivers of efficiency.