Managerial Ability in Indian Life Insurance Companies: A Comparison Based on DEA and DEAGP

Although global life insurance industry experienced significant structural and technological changes over the past decade, it is expected to increase based on the next decade’s outlook. The performance of life insurance companies is influenced by several factors, and managerial ability is a key facilitator for the companies aiming to gain a leadership position in insurance market. Thus managerial ability evaluation is essential for retaining and rewarding capable managers. Nevertheless, managerial ability is an intellectual capability that could not be measured directly. The present study provides an indirect measure of managerial ability of 22 Indian life insurers for the period 2013–14 to 2019–20. For efficiency evaluation of the life insurers both data envelopment analysis and goal programming have been used. In the second stage, the efficiency scores are regressed on several contextual variables (solvency ratio, market share, insurer size and insurer age). The results indicate that the influence of size and insurer age is statistically significant. We have derived estimates of managerial ability for the two methods of evaluation and the results are quite similar. Finally, we have validated the estimates of managerial ability by regressing return on total asset (an important measure of insurer performance) on managerial ability measurers and the regression coefficients are statistically significant.