The estimation of efficiency for life insurance industry: The case in Taiwan

Using 23 years of data, (1977-1999), we estimate the translog cost function for 26 life insurance companies. We employ the distribution free approach (DFA) and Battese and Coelli (DFP) model to estimate inefficiency. We then test the constants or residuals to see if they are related to the so-called X-efficiencies, because of market share, diversification of product strategy, scale efficiency, and market growth ratio. Results show that the efficiency relates to the occurrence of market share, diversification products strategy, and scale efficiency.