Performance of the Chinese Insurance Industry under Economic Reforms

Performance of the Chinese Insurance Industry under Economic Reforms

Advances in Chinese Economic Studies series

Shuji Yao, Zhongwei Han and Dan Luo

The Chinese insurance industry has experienced rapid development during the past decade. This original book is the first English language study in the literature to address the efficiency issue of the Chinese insurance sector, and presents a comprehensive review on alternative methodologies for analyzing firm efficiency.

Chapter 9: Conclusion, Policy Recommendations and Further Research Directions

Shuji Yao, Zhongwei Han and Dan Luo

Subjects: asian studies, asian business, asian economics, business and management, asia business, international business, economics and finance, asian economics, money and banking

Extract

OVERALL CONCLUSION 9.1 This book is the first study in the English literature to address the efficiency issues of the Chinese insurance industry. We identify the most technically efficient insurance companies as benchmarks in the property-liability and life insurance sectors respectively. PICC and Hongkong Mingan achieve full efficiency consistently over six years in the property-liability insurance sector. In the life insurance sector, Xinghua and AIA outperform other insurers continuously. Domestic insurers enjoy scale advantages over foreign and joint venture insurers. With a wider network distribution and longer operation history, domestic insurers are able to generate more premium income and provide more risk sharing and bearing services to the public. However, these advantages will be weakened after the removal of geographic and operational restrictions on foreign or joint venture insurers. Facing tough competition, domestic insurance companies need to strengthen their performance in areas like investment income generation and asset–liability management. The results of SFA show that ownership structure does not affect the efficiency level of Chinese insurance companies. State-owned insurers have been transformed into modern enterprises with well-established corporate systems. Compared with capital resources, labour is a more important input in the insurance output production process. However, the educational background of the employees does not influence the efficiency significantly. A truly influential factor is the size of the insurance company. Both DEA and SFA models indicate that half of the insurers need to expand their scale in order to improve technical efficiency. Inefficient companies have three strategies they can use...

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