Performance measurement using the frontier efficiency methodology: a study of Indian general insurance sector

The wind of Liberalization, Globalization & Privatization has opened new vistas in the Indian insurance industry in the generation of intensely competitive environment. The present study compares 10 Indian General Companies comprising of 4 Public Sector Companies and 6 Private Sector Companies from the year 2002–03 to 2009–10 using the Data Envelopment Analysis for computing the Technical Efficiency, Pure Technical Efficiency and Scale Efficiency. The article uses the Claims incurred as the output and the Investment income as well as the Net premium income as the inputs to arrive at the efficiency level of both the sectors. It has been observed that among the public sector insurers National Insurance Company has been the most efficient company and New India Assurance Company has been the most inefficient company in most of the years under reference, whereas the private insurers have been depicting the increasing returns to scale over the years which has been a sign of the emergence of healthy competition in the Indian General Insurance market except the Bajaj General Insurance Company and ICICI General Insurance Company. It has also been reported that the overall technical efficiency results of general insurers have been showing an improvement over the period. On the other hand the sector wise performance analysis states that though the technical efficiency of the public sector insurers i.e.96% has been more than that of the private sector companies i.e. 89%., the improvement space and direction of the private sector has been reducing over the years.