infonet-economy

This paper provides a comprehensive analysis of efficiency and productivity in the German
property-liability insurance industry, a market that has experienced significant
change in recent years. Using data envelopment analysis (DEA) and covering the period
1995-2006, we find that there is potential for the market to improve by about 15% in
terms of technical efficiency and about 45% in terms of cost efficiency. Furthermore, total
factor productivity and efficiency growth are revealed to be low, with growth rates of
1.3% and 0.6%, respectively, for 1995-2006. A major contribution of the paper is its
analysis of six efficiency determinants-firm size, distribution channels, ownership
forms, product specialization, financial leverage, and premium growth-using a novel
truncated regression and bootstrapping approach suggested by Simar/Wilson (2007) to
avoid invalid inference.