This paper aims to measure the change and the sources of change in total factor productivity (TFP) of the Indian non-life insurance sector over the period 2005–2016.
This study employs the bootstrapped Malmquist index (MI) to assess the changes in the TFP and adopts a decomposition approach proposed by Balk and Zofío (2018). Moreover, it utilises truncated regression to identify the determinants of the TFP. In addition, it employs Wilcoxon-W test and t-test to scrutinise the difference between the state-owned and the private insurers in terms of variations in TFP and its various components.
The results divulge a miniature improvement in TFP of the insurance sector, which is primarily attributable to the improvement in scale efficiency (economies of scale). The results also reveal that there are no significant TFP differences across the ownership. However, private insurers have better scale efficiency and lower input-mix efficiency than state-owned insurers. In addition, the results unveil that size, diversification and reinsurance have a negative impact on the TFP, while age has a positive impact on it.
The results may help the policymakers to frame new consolidation policies. Moreover, the findings may guide the decision-makers of the Indian non-life insurance companies to abate inefficiency and improve TFP.
This study estimates bias-corrected changes in TFP and efficiency in the non-life insurance sector. Moreover, it adopts an elaborated decomposition of the MI to identify the true sources of change in the TFP.
