Firm Size and Efficiency in the Non-Life Insurers of Pakistan

The study applied non-parametric Data Envelopment Analysis (DEA) to estimate the technical efficiency of non-life insurance companies in Pakistan over the period of 2003 to 2007. The technical efficiency was further decomposed into pure technical efficiency and scale efficiency to ascertain the sources of technical efficiency in the non-life insurers. It was found that the non-life insurers in Pakistan were on average 82.4 percent technical efficient, 91.4 percent pure technical efficient and 89.9 percent scale efficient. Current study also investigated the technical efficiency based on size of non-life insurers and found that on average the large size non-life insurers were more technical efficient while medium size non-life insurers were less efficient than larger insurers with smaller insurers being the poorest performers. In addition, the analysis of scale economies in different size of non-life insurers suggested that most of the increasing return to scale were found in smaller non-life insurers