Distribution Systems and Efficiency of Life Insurers in Korea

Abstract

This study investigates technical efficiencies of all life insurance companies in Korea using data environment analysis (DEA) for the sample of 2006 – 2017. During the sample period studied, new life policy sales by cyber marketing and traditional face-to-face sales have significantly increased and sales by other distribution methods have parred or decreased. The estimates of average technical efficiency measures of Korean life insurers are about 18 percentage higher than those of foreign life insurers. Among competing regression models, a random effects model is found to be an appropriate model and shows that cyber marketing and tele-marketing have statistically significantly positive impact on insurers’ efficiency, while there is a statistically significantly negative relationship between the capital input and the efficiency. The findings of this suggests insurers should strive to increase their operational efficiency by reevaluating and restructuring their distribution channels.