Frontier Efficiency Methodologies to Measure Performance in the Insurance Industry: Overview, Systematization, and Recent Developments

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

The Geneva Papers on Risk and Insurance - Issues and Practice, 2010, vol. 35, issue 2, 217-265

Abstract: The purpose of this paper is to provide an overview on frontier efficiency measurement in the insurance industry, a topic of great interest in the academic literature during the last several years. We provide a comprehensive survey of 95 studies with a special emphasis on innovations and recent developments. We review different econometric and mathematical programming approaches to efficiency measurement in insurance and discuss the choice of input and output factors. Furthermore, we categorise the 95 studies into 10 different areas of application and discuss selected results. While there is a broad consensus with regard to the choice of methodology and input factors, our review reveals large differences in output measurement. Significant need for future research can be identified, for example, with regard to analysis of organisational forms, market structure and risk management, especially in the international context.

Date: 2010
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