Efficiency and Productivity of Ethiopian Insurance Industry

No Thumbnail Available



Journal Title

Journal ISSN

Volume Title




This paper attempted to analyze efficiency and productivity growth of Ethiopian insurance industry in the period 1996-2005. Towards this aim, a three-stage analysis is carried out. Firstly, a Data Envelopment Analysis (DEA) approach is used to estimate technical efficiency scores. Secondly, DEA-based Malmquist indices are calculated to analyze productivity of the industry. Thirdly, a Tobit regression analysis is carried out to identify the reasons for the differences existing among the insurers in terms of technical efficiency. The inputs used are labor, business service and material, dept capital and financial capital. The outputs used are earned premium and investment income. The results indicate that the overall technical efficiency of the general insurance market was found on average 80.50 and 93.20 percent under assumption of constant return to scale and variable return to scale. The average scale efficiency for the sample . period was 85.50 percent. The result of Malmquist productivity analysis revealed that the industry analysis showed that the industry the industry experienced productivity deterioration over the sample period, with an average decline of about 5 percent. The productivity decreased due to technological regress. Finally, a second-stage analysis highlights that technical efficiency appeared to be closely related to the company size, loss ratio and solvency ratio, partly explain inter-company differences in efficiency. To improve efficiency and productivity of the industry human resource development, revising minimum capital requirement and prudential regulation of supervisory authority could be important.



Ethiopian Insurance Industry