Assessing the Efficiency of an Insurance Provider - A Measurement Error Approach

Mario Jametti () and Thomas von Ungern-Sternberg

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: The purpose of this paper is to compare the cost efficiency of private and public property insurance providers in Switzerland. The most commonly used measure for this kind of exercise is the Claims / Premium ratio. We argue that this measure may give strongly biased results. We develop a simple model to test whether the elasticity of premiums with respect to claims is less than unity. We address the fact that premium income is relatively stable across time, while claims are not, using estimation techniques that correct for measurement error. We develop tools to cope with heteroskedasticity in such measurement errors and apply the model to a data set on 19 firms in housing insurance markets in Switzerland. We show that the public insurance providers are about 20 % more cost efficient than their private counterparts.

Keywords: insurance; public and private; cost efficiency; C/P ratio; measurement error; CALS (search for similar items in EconPapers)
JEL-codes: C21 D21 L84 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2003-03
New Economics Papers: this item is included in nep-ecm and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in: The Geneva Risk and Insurance Review, vol.30 (1), pp. 15-34

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Related works:
Journal Article: Assessing the Efficiency of an Insurance Provider—A Measurement Error Approach (2005)
Journal Article: Assessing the Efficiency of an Insurance Provider—A Measurement Error Approach (2005)
Working Paper: Assessing the Efficiency of an Insurance Provider - A Measurement Error Approach (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:03.05

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