The Effects of Economies of Scale and Diversification on the Cost Structure of the Malaysian Non-life Insurance Industry
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Choo Yap Yin
Using a sample of Malaysian non-life insurers over the period 2000-2007, I develop and test a model that explains the expense ratio as a function of output level, line-of-business diversification and other variables. Using various proxies for scale and line-of-business diversification, the empirical results show the existence of an interactive and non-linear relationship with cost. The findings suggest that there is no single minimum efficient scale level for all insurers; rather, it is contingent on the insurer's degree of line-of-business diversification and vice versa. I also find that costs for newly consolidated insurers and motor insurance are relatively higher and fail to find evidence that foreign-owned insurers or foreign joint venture insurers are more cost efficient.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Featured Article
- Comparison between Financial Theory and Cooperative Game Theory in Risk Capital Allocation
- The Dynamic Interactions between Risk Management, Capital Management, and Financial Management in the U.S. Property/Liability Insurance Industry
- The Effects of Economies of Scale and Diversification on the Cost Structure of the Malaysian Non-life Insurance Industry
- Effects of Disability-Based Underwriting Prohibitions on the Labor Market
- The Cost of Delay in a Mortgage/Credit Loan Portfolio
- Commentary Piece
- Some Comments on Catastrophe Risk Management and Insurance
Articles in the same Issue
- Featured Article
- Comparison between Financial Theory and Cooperative Game Theory in Risk Capital Allocation
- The Dynamic Interactions between Risk Management, Capital Management, and Financial Management in the U.S. Property/Liability Insurance Industry
- The Effects of Economies of Scale and Diversification on the Cost Structure of the Malaysian Non-life Insurance Industry
- Effects of Disability-Based Underwriting Prohibitions on the Labor Market
- The Cost of Delay in a Mortgage/Credit Loan Portfolio
- Commentary Piece
- Some Comments on Catastrophe Risk Management and Insurance
