The openness of China’s insurance industry and the efficiency of domestic vs. foreign life insurers

Wenlong Bian and Xiangnan Wang

Asia-Pacific Journal of Accounting & Economics, 2019, vol. 26, issue 6, 731-746

Abstract: We study the cost and profit efficiencies of life insurers in China from 2009 to 2013, a period when China fully opened its insurance market to foreign insurers. Further, we compare efficiency disparities between domestic and foreign life insurers and study the influences of firm characteristics on them. We find that foreign life insurers are more cost efficient than domestic life insurers, whereas mean profit efficiency of the former is slightly lower. In addition, domestic life insurers are advised to decrease the rate of scale expansion and to recruit more highly educated employees in order to narrow down the cost-efficiency disparity. Meanwhile, foreign life insurer advantages in terms of product diversification, employee quality, and equity adequacy do not help them achieve higher profit efficiency. We recommend that foreign life insurers expand their scale through merges and acquisitions and Internet platform in order to reap the benefits of the revenue scale economy.

Date: 2019
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DOI: 10.1080/16081625.2017.1404919

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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