Efficiency: Mutual vs. Stock P-L Insurers

Siegfried Kafui Anyomi

Finance Research Letters, 2023, vol. 53, issue C

Abstract: This paper reviews evidence from the U.S. property-liability insurance industry that examines technical efficiency between mutual and stock organizational forms. I exploit a modified slacks-based measure data envelopment analysis methodology to estimate technical efficiency of a property-liability insurer relative to a reference set consisting of all such insurers with the same organizational form. Then, I distinguish relative technical efficiency between insurers’ capacity to maximize social capital (reputational efficiency) and to maximize investment returns (investment efficiency). I document statistically significant evidence that mutual insurers outperform stock insurers in terms of reputational and investment efficiencies. My findings thus reflect a newer appreciation of organizational forms in insurance and illuminate how households make key insurance decisions.

Keywords: Data envelopment analysis; Insurance organizational forms; Property-liability insurance (search for similar items in EconPapers)
JEL-codes: G22 G32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:53:y:2023:i:c:s1544612323000053

DOI: 10.1016/j.frl.2023.103631

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