An Analysis of Efficiency-Profitability Relationship

One of the aims of the liberalization, privatization and globalization of the insurance market was to improve the performance of the public general insurers. After more than a decade to the introduction of the reforms, it is essential to study whether these have provided the desired results or not. The present study is an endeavour in this direction. It is unique in itself as it has explored the relationship between technical efficiency (TE) and profitability in the Indian public general insurers before and after the Liberalization Privatization Globalization (LPG) era. Four public general insurance companies are taken as the sample size and the study covers the time period of 21 years, that is, 1991–1992 to 2011–2012. The entire time period is further segregated into two parts as 1991–1992 to 1999–1900 as the “pre-reform era” and 2000–2001 to 2011–2012 as the “post-reform era.” The results of the “efficiency–profitability matrix” of Indian public general insurers reveal that the position of these insurers was comparatively better in the pre-reform period as the percentage of wastages of resources was less in this period.