Insurance Intermediary and Cost X-Efficiency of China´s Insurance Firms

The efficiency of insurance companies directly reflects their core competitiveness. This paper uses a stochastic frontier approach to investigate the cost efficiency levels and their evolution of 23 insurance companies in China from 2005 to 2008. The main objective is to assess whether insurance intermediary´s development affects cost X-efficiency. A one-stage regression model is applied to identify the significant variables influencing X-efficiency. The results show that insurance companies are operating 40-50% below the X-efficiency frontier on average and it appears that the insurance intermediary´s development and risk status has a notable impact on insurance company X-efficiency.