Determinants of Efficiency and Productivity in German Property-Liability Insurance: Evidence for 1995–2006

Michael Luhnen
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Michael Luhnen: Institute of Insurance Economics, University of St. Gallen, Kirchlistrasse 2, St. Gallen 9010, Switzerland

The Geneva Papers on Risk and Insurance - Issues and Practice, 2009, vol. 34, issue 3, 483-505

Abstract: This paper provides a comprehensive analysis of efficiency and productivity in the German property-liability insurance industry, a market that has experienced significant change in recent years. Using data envelopment analysis (DEA) and covering the period 1995–2006, we find that there is potential for the market to improve by about 20 percentage points in terms of technical efficiency and about 50 percentage points in terms of cost efficiency. Furthermore, the analysis shows moderate total factor productivity growth and low efficiency growth during the sample period. A major contribution of the paper is its analysis of six efficiency determinants – firm size, distribution channels, ownership forms, product specialisation, financial leverage and premium growth – using a truncated regression and bootstrapping approach to avoid invalid inference. The Geneva Papers (2009) 34, 483–505. doi:10.1057/gpp.2009.10

Date: 2009
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