Journal of the Korean Data and Information Science Society

The Korean Data and Information Science Society (한국데이터정보과학회)
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The cost efficiency analysis of Korean life insurance companies by data envelopment analysis

  • Kang, Jungchul (Department of Finance and Insurance, Dong-Eui University)
  • Received : 2015.07.27
  • Accepted : 2015.11.20
  • Published : 2015.11.30
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Abstract

We investigate the effect of introduction of the bancassurance system on cost efficiency in the Korean insurance industry between 1997 and 2012. Our estimation results indicate that introduction of this system contributed positively to efficiency of life insurance companies in Korea. Increase in a one standard deviation of bancassurance increases cost efficiency by 0.08 which is equivalent to 12 percent of mean cost efficiency. Recognising that the bancassurance system is a relatively new concept, our results indicate that the bancassurance system can be a policy measure to improve productivity in an emerging insurance market. The results illustrate that positive effects have accrued particularly to medium-sized companies and domestic companies, contrary to the prevailing perception that increased competition through bancassurance is more beneficial to large companies and foreign companies.

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