Impacts of Globalization on Productivity of Insurers in Malaysia: An Analysis of Technical Efficiency Change and Technology Change

Abstract

Insurance companies are dealing with big data of the individuals and historical data of claims, in particular with the rapid progress in data analytic learning conferred as a momentum to the growth of insurance. With the fact of insurance executes vital role to facilitate transactions in the economy with the efficient allocation of scarce resources, the issues linked with the underperformance in the insurance sector in Malaysia are particularly essential to be addressed. This study examines the determinants of insurers' productivity in. This study employs Data Envelopment Analysis to measure the productivity scores (Malmquist Productivity Index) of insurers and uses panel regression model to investigate the impacts of globalization on the productivity of insurers. It also examines the sources of productivity between non-life insurers and life insurers. The findings demonstrate that the main source of productivity progression is technological change. Life insurers demonstrate better productivity improvement than non-life insurers is mainly accredited to technological change. The implication of this suggests that the adoption of advanced technology in the operations of insurance services could improve their productivity. Furthermore, insurers could take advantage of the globalization trend by gaining additional knowledge related to international insurance products in order to improve productivity.