Measuring the relative efficiency of insurance companies in Saudi Arabia: The case study of Takaful vs cooperative industries

Abstract

The aim of this paper is to measure the efficiency of insurance companies in Saudi Arabia using data envelopment analysis (DEA), to analyse the effectiveness of underwriting processes primarily inputs and outputs are determined. Moreover, this study aims at comparing the efficiency of Takaful and cooperative in the year 2014. Taking into account two main approaches of this technique and considering a sample of 23 insurance companies, we show that the results revealed that insurance companies do not operate efficiently. Also, a classification of companies allows to discover that on average, Takaful insurance are relatively more efficient than cooperative insurance companies. The main finding of this paper is the need for better resource allocation in the cooperative insurance companies' systems, because some Takaful insurance companies have resource surplus and in other cooperative ones it is observed a lack of resources.

Measuring the Managerial Efficiency of Insurance Companies in Saudi Arabia: A Data Envelopment Analysis Approach

“…Present research contributes to DEA and managerial efficiency by identifying the clear-cut market leader in terms of managerial efficiency. Consistent with recent research on efficiency of insurance companies in KSA (Akhtar Muhammad, 2018;Almulhim, 2019;Benyoussef & Hemrit, 2019;Hemrit, 2020), our findings earmarked the companies that are highly efficient in managerial efficiency. The major take-away from the current study could be summarized as follows.…”

“…A good amount of significant points have emerged from the current research. Firstly, the results resemble (or are in line with) other DEAbased efficiency studies in the same context like, Benyoussef and Hemrit (2019) and Almulhim (2019) who took different sets of inputs and outputs. Bupa Arabia has emerged as the undisputed market leader in terms of managerial and other efficiencies.…”

“…The study utilizes the two-stage DEA by adopting the three inputs, namely, equity, general and administrative expenses, and net claims incurred; and two outputs, namely, investment and management fee income and net earned premium. A similar kind of study was also made by Benyoussef and Hemrit (2019), but this study utilizes the one-stage DEA. While and Hemrit 2020 Sulphey and Naushad (2019) that also explored the services quality, profitability, and efficiency analysis of financial insurance and banking sectors in KSA.…”

“…However, in the last decade, researchers have also focused on measurement of efficiency in the insurance sector (Akhtar Muhammad, 2018;Masud, Rana, Mia, & Saifullah, 2019;Al-Amri, 2015;Almulhim, 2019;Barros et al, 2014;Eling & Luhnen, 2010;Hwang & Tong-Liang, 2006;Mandal, 2014;Nourani et al, 2017) as well. Most recent studies in KSA insurance sector (Akhtar Muhammad, 2018;Almulhim, 2019;Benyoussef & Hemrit, 2019;Hemrit, 2020) evaluated the general, pure and technical efficiencies of insurance companies operated in the kingdom. But it seems that managerial efficiencies of insurance firms still need to be explored.…”

Efficiency drivers of insurers in GCC: an analysis incorporating company-specific and external environmental variables

“…Several authors like ; Ariff and Can (2008); Cummins & Xie (2008); and Lai et al (2011) applied two stages to estimate relative efficiency scores, used DEA or SFA in the first stage to determine the comparable efficiency scores followed by multivariate analysis as the second stage with a set of contextual internal (company-specific) and external variables related to environment and economy. There are very few studies based on GCC insurers in the existing literature, like (Almulhim & McMillan, 2019;Benyoussef et al, 2019;Naushad et al, 2020) based on Saudi Arabian takaful insurers. Rao et al (2010) measured the managerial efficiency of insurers in the UAE.…”