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Product diversification versus technical efficiency of conglomerate life microinsurance companies: evidence from India

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Abstract

We look at technical efficiency and productivity changes in the life microinsurance (LMI) portfolio of insurance companies in India. The central objective is to empirically examine the ‘tug of war’ between efficiency and product diversity in the Indian insurance market. The data used in this research is available in the Handbook on Indian Insurance Statistics (Insurance Regulatory and Development Authority of India). First, we emphasise that four-fifths of LMI insurers in our sample were technically inefficient. Second, through the use of the data envelopment approach (DEA), Malmquist total factor productivity index (MTFP), and Tobit regression analyses, we demonstrate that insurers could improve managerial ability by organising inputs in the production process more effectively. Finally, we provide empirical support for the strategic focus hypothesis by demonstrating that product diversification has adverse effects on the technical efficiency of insurers.

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Authors and Affiliations

  1. Centre for Advanced Research in Financial Inclusion, School of Management, Manipal Academy of Higher Education, Manipal, Karnataka, India

    Basri Savitha

  2. Queensland University of Technology Business School, Brisbane, Australia

    Subrato Banerjee

  3. School of Management, Manipal Academy of Higher Education, Manipal, Karnataka, India

    Ankitha Shetty

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  1. Basri Savitha
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  2. Subrato Banerjee
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  3. Ankitha Shetty
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Correspondence to Basri Savitha.

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Savitha, B., Banerjee, S. & Shetty, A. Product diversification versus technical efficiency of conglomerate life microinsurance companies: evidence from India. Geneva Pap Risk Insur Issues Pract 44, 527–547 (2019). https://doi.org/10.1057/s41288-019-00128-8

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