Multi-Directional Efficiency Analysis (Mea) Of The Performance Of Ghanaian Insurance Firms

ABSTRACT

The general objective of this study was to estimate the technical efficiency of the Ghanaian insurance firms and also to investigate the levels and patterns of these efficiencies over the study period. Annual reports were obtained from National Insurance Commission (NIC), the Ghanaian insurance regulator on a sample of insurance companies from 2007 to 2012. Basically, the study was quantitative in nature where an optimization technique was used. Specifically multi-directional efficiency analysis (MEA) also called potential improvement of data envelopment analysis (DEA).

The study discovered that in general, the Ghanaian insurance firms perform poorly on the inputs resources of gross premium, labour, equity capital and fixed assets. It concluded that for non-life insurance firms, Activa International and Enterprise Insurance perform very well during the study period, while Met Life Insurance and Capital Express Assurance did same in the life insurance sector over the study period. IGI Life Insurance Company on the average did very well as observed but data on this company was not available from 2010 onwards.

The study observed that there were clear differences in efficiency patterns between life and non-life insurance firms during the years 2009, 2010 and 2012.

The Mann-Whitney U statistic concluded that there is no significance difference in both DEA and MEA efficiency scores between the life firms and non-life firms in the years 2007, 2008, and 2011.

We recommend that as most financial services firms in the developed countries are increasingly using benchmarking techniques to identify areas of their operations that need continues improvement, the Ghanaian insurance industry should do same.