Market structure and financial effectiveness of life insurance companies

Abstract

PURPOSE: The objective of the article is to invistigate how market structure influenced the financial effectiveness of life insurance companies (Branch I).

DESIGN/METHODOLOGY/APPROACH: A critical review of literaturę is undertaken, contens of factors which influence financial effectiveness of insurance companies are analysed, and econometric methods are applied. A panel model is constructed and results of its estimation are analysed.

FINDINGS: The research assumed the existence of a relationship between the share in the insurance market and the financial efficiency of life insurance companies. ROE (Return On Equity) was adopted as the dependent variable (explained feature) measuring the financial efficiency of insurance companies. The share in the insurance market, measured by gross written premium, was considered one of the explanatory variables. The results of model’s estimation indicated that all independent variables are statistically significant and the signs are in accordance with theory and hypothesis. The main variable which influence the variability of ROE is share in the market measured by gross written premium.

PRACTICAL IMPLICATIONS: The results may be taken advantage of life insurance companies. They indicate factors of financial effectiveness life insurance companies.

ORIGINALITY/VALUE: The paper contains the authors’ original research into a representative group of life insurace companies, that can be generalised to the entite population. The study will contribute to the developmet of theories concerning factors of the financial effectiveness of insurance companies.