An Overview of Investment Efficiency of General Insurance Companies in India: A DEA

The study aims at finding out the efficiency of insurers in terms of their investment behaviour. Two models have been used in the data envelopment analysis (DEA) in order to measure their efficiency. For the first model, one input as investment under management and two indicators of output as net returns on investments to the shareholders and net returns on investments to the policyholders have been used. The results depict that the technical efficiency (TE) of the public sector has been 98.6%, which is quite high as compared with the private sector whose TE has been recorded at 56.9%. Among the public sector insurers, New India has been the most efficient of all the insurers. For the second model, two inputs, i.e. capital (including reserves and surpluses) and net premium income, and one output as investment under management have been used. The results of the second model also state that the TE of the public sector has been much more, i.e. 97.3%, as compared with the private sector, i.e. 79.1%, which state that the public sector has been more efficient as compared with the private sector in terms of investment efficiency. The United India Insurance Company has been the most efficient of all the insurers according to the second model. Moreover, the improvement space of the public sector is decreasing, which is a good sign for the public sector. In order to be more operative in the coming future, the private sector should give due emphasis on the improvement of the scale efficiency along with the managerial efficiency.