Determinants of Financial Performance – A Comparative Analysis of Public Sector Non-Life Insurers in India
Financial Performance, India, Net Profit after Tax, Non-life Insurance, Return on Equity
JEL Classifications: G22, L25, N20
A well-developed and functioning insurance sector is a pre-requisite for an inclusive economy and growth of any country. The insurance sector has been growing steadily and gradually in India. Insurance is an essential financial service because it provides financial security to individuals and business persons. The efficiency of the insurance companies is measured by the techniques such as financial performance, technical, purely technical and scale efficiencies. This research work aims at analyzing the financial performance of public sector nonlife Indian insurance companies and the determinants of such performance. Commission, claims incurred, investment income, the net premium earned, management soundness and operating expenses are considered determinants of the financial performance of non-life insurance companies. Data are collected from the financial year 2009-10 to the financial year 2021-22 to determine financial performance. Data were checked for their normality and stationarity using EViews statistical software. Research results convey that New India Insurance Company Limited performs better in financial performance followed by United India Insurance Company Limited. Common determinants of net profit after tax of public sector non-life insurance companies are claims incurred and net premium earned.
Amanti, P. G., and Siregar, A. A. (2019). The efficiency of General Insurance Companies in Indonesia. Advances in Economics, Business and Management Research, 72(ICBMR 2018), 314–20. PMCid: PMC6668245. https://doi.org/10.2991/icbmr-18.2019.51 DOI: https://doi.org/10.2991/icbmr-18.2019.51
Ashraf, S. H., and Faiz, A. (2018). India’s Insurance Sector in post privatization period: Emerging financial issues. The Journal.
Bawa, S., and Ruchita, R. (2011). Efficiencies of health insurance business in India: An application of DEA. American Journal of Social and Management Sciences, 2(2), 237– 47. https://doi.org/10.5251/ajsms.2011.2.2.237.247 DOI: https://doi.org/10.5251/ajsms.2011.2.2.237.247
Bhatia, A., and Mahendru, M. (2021). Revenue efficiency evaluation of life insurance companies in India: Identification of leaders and laggards. Benchmarking, 29(10), 3133–62. https://doi.org/10.1108/BIJ-01-2021- 0051 DOI: https://doi.org/10.1108/BIJ-01-2021-0051
Chakraborty, J. (2017). Firm performances in Indian Life Insurance Industry: Non-Parametric Analysis. SCMS Journal of Indian Management, 14(4), 95–111. https:// search.proquest.com/docview/2232620437?accoun tid=150292
Chakraborty, K., and Harper, R. K. (2017). Dynamic Productivity Analysis of Insurance Firms-The Effect of Firm-Specific and Macroeconomic Characteristics. International Journal of Applied Economics, 14(2), 37-55.
Ilyas, A. M., & Rajasekaran, S. (2019). An empirical investigation of efficiency and productivity in the Indian non-life insurance market. Benchmarking, 26(7), 2343– 71. https://doi.org/10.1108/BIJ-01-2019-0039 DOI: https://doi.org/10.1108/BIJ-01-2019-0039
IRDAI. (2022). Annual Report - 2021-22. In IRDAI. https:// www.pvh.com/-/media/Files/pvh/investor-relations/ PVH-Annual-Report-2020.pdf
Kaur Bawa, S., and Chattha, S. (2013). Financial performance of Life Insurers in Indian Insurance Industry. Pacific Business Review International, 6(5), 44–52. Krishnamurthy, S., Mony, S. V., Jhaveri, N., Bakhshi, S.,
Bhat, R., Dixit, M. R., and Maheshwari, S. (2005). Insurance industry in India: Structure, performance, and future challenges. Vikalpa, 30(3), 93–119. https:// doi.org/10.1177/0256090920050308 DOI: https://doi.org/10.1177/0256090920050308
Mandal, S., and Ghosh Dastidar, S. (2014). A DEAinvestigation of efficiency of the Indian general insurance during recession. Journal of Advances in Management Research, 11(1), 115–36. https://doi. org/10.1108/JAMR-07-2012-0030 DOI: https://doi.org/10.1108/JAMR-07-2012-0030
Morara, K., and Sibindi, A. B. (2021). Determinants of financial performance of Insurance Companies: Empirical evidence using Kenyan Data. In Journal of Risk and Financial Management, 14(12), p. 566). https://doi. org/10.3390/jrfm14120566 DOI: https://doi.org/10.3390/jrfm14120566
Mulchandani, K., Sitlani, C. M., and Mulchandani, K. (2017). The determinants of financial performance in Life Insurance Sector in India. Asian Journal of Empirical Research, 6(10), 261–9. https://doi.org/10.18488/journal. 1007/2016.6.10/1007.10.261.269 DOI: https://doi.org/10.18488/journal.1007/2016.6.10/1007.10.261.269
Muthulakshmi, P. (2018). Are general insurance companies efficient in their performance? A comparison. Ushus - Journal of Business Management, 17(3), 1–7. https:// doi.org/10.12725/ujbm.44.1 DOI: https://doi.org/10.12725/ujbm.44.1
Mwangi, M., and Murigu, JW. (2015). The determinants of financial performance in general insurance companies in Kenya. European Scientific Journal, 11(1), 288–97.
Nikita, K. (2018). Underwriting efficiency of non-life insurance industry in India. International Journal of Economic Research, 15(2), 1–10. https://ssrn.com/ abstract=3362753
Ofori-Boateng, K., Ohemeng, W., Ahawaadong Boro, E., and Kwame Agyapong, E. (2022). Efficiency, market structure and performance of the insurance industry in an emerging economy. Cogent Economics and Finance, 10(1). https://doi.org/10.1080/23322039.2022.2068784 DOI: https://doi.org/10.1080/23322039.2022.2068784
Ray, S., Vasundhara, T., and Bandyopadhyay, K. (2020). India’s insurance sector: Challenges and opportunities Kuntala Bandyopadhyay. In Indian council for Research on International Economic Relations, 1(July).
Shieh, H. S., Hu, J. L., and Ang, Y. Z. (2020). Efficiency of life insurance companies: An empirical study in mainland China and Taiwan. SAGE Open, 10(1), 1–17. https://doi.org/10.1177/2158244020902060 DOI: https://doi.org/10.1177/2158244020902060
Siddiqui, S. A. (2020). Evaluating the efficiency of Indian life insurance sector. Indian Journal of Economics and Development, 16(1), 72–80. https://doi.org/10.35716/ ijed/19140 DOI: https://doi.org/10.35716/ijed/19140
Sinha, A., and Bandopadhyay, K. (2015). An analysis of efficiency of general insurance industry in India. Malaysian Management Journal, 19(January), 51–64. https://doi. org/10.32890/mmj.19.2015.9024
Sinha, R. P. (2007). Operating efficiency of life insurance companies: An assurance region model. Artha Vijnana: Journal of The Gokhale Institute of Politics and Economics, 49(3 and 4), 305. https://doi.org/10.21648/ arthavij/2007/v49/i3-4/115382 DOI: https://doi.org/10.21648/arthavij/2007/v49/i3-4/115382
Vijay, L. (2019). Financial Performance Analysis: A study of life insurance companies. Pramana Research Journal, 9(5), 970–4.
How to Cite
Copyright (c) 2023 P. Muthulakshmi, A. Muthumoni
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.