The Differences in the Technology Efficiency of Taiwan's Life Insurance Companies - The Application of the Metafrontier DEA Model

This study assesses the efficiency analysis of the 25 Taiwan-based life insurance companies during the period 2003 to 2006 by examining three different subgroups, namely, old domestic companies, new domestic companies and foreign companies. The primary goal of the present study is to compare two procedures widely used to evaluate the relative efficiency of the life insurance companies. First, we use the Metafrontier DEA method to estimate each group's technical efficiency, metatechnology and metatechnology ratio (MTR). Second, we apply Tobit regression to explore the factors that may influence the technology efficiency and the sources of differences. The results show that the technology efficiency of the old domestic companies is high both in terms of metatechnology and the MTR. This implies that the old domestic companies not only operate with the highest efficiency, but also approximate to the technological level of metatechnology. In addition, we also find that the metatechnology values of old domestic companies and foreign companies have greater significance than those of the new domestic companies and the MTR of the old domestic companies are more significant than those of the new domestic companies. To this end, improving the professionalism and service quality of operators and increasing the competitiveness and profitability of the life insurance companies are critical factors in increasing metatechnology and reducing the technological differences through professional licenses, service experiences, educational level and market share.