The Effect of liberalization and deregulation on life insurer efficiency / Thitivadee Boonyasai
xvi, 167 leaves : ill.
Insurance markets worldwide continue to undertake pro-competitive reform. As a consequence, dozens of countries have deregulated and liberalized their insurance markets. As used in this study, liberalization denotes a reduction of (primarily) government barriers to market access, and deregulation denotes a lessening of national regulation. The study global objective is to provide an analysis of the impact of liberalization/deregulation on the efficiency of the Korean, Philippine, Taiwanese and Thai life insurance industries. This research utilizes data envelopment analysis (DEA), a mathematical programming approach, to calculate efficiency. To investigate productivity changes after liberalization and deregulation, a Malmquist analysis is used to determine whether and the extent of efficiency changes. This study found that liberalization and deregulation of the Korean and Philippine life insurance industries seem to have succeeded in stimulating increases and improvements in productivity. In addition, liberalization and deregulation of these markets created more competitive markets as witnessed by life insurers' reactions to competitive pressures. Life insurers responded by improving efficiency; e.g., achieving cost savings and adjusting their scale of operation. However, liberalization of the Taiwanese and Thai insurance businesses has had little effect on increases and improvements in productivity. The overall findings suggest that liberalization and deregulation together promote competition among life insurers which not unexpectedly leads to some market dislocation. Study findings are consistent with the view that liberalization is a necessary but not a sufficient condition for contestable markets. Study results also are consistent with the view that in a restrictive regulatory environment, welfare gains will be minimal if deregulation does not closely follow liberalization.
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