The Impact of Contextual Variables on Life Insurer Performance

The deregulation of Indian life insurance industry completed two decades, from 2000 to 2020. During the post-deregulation phase, competition in the insurance industry increased manifold. The regulatory environment also witnessed radical changes in this phase. Against this backdrop, the present study seeks to assess the impact of various idiosyncratic variables, economic growth, and competition on the efficiency performance of life insurance companies operating in India. Our study is based on observations relating to 22 life insurance companies doing business in Indian market and the period of observation is 2013–2014 to 2020–2021. For efficiency evaluation, we have applied the directional distance function approach. The observed life insurers have been ranked on the basis of their efficiency performance. Finally, the impact of several contextual variables (solvency ratio, asset size, insurer age, Hirschman-Herfindahl index, and gross domestic product [GDP] growth rate) on technical efficiency has been evaluated using panel data and Least Absolute Shrinkage and Selection Operator (LASSO) regression models. The results indicate that the role of asset size and GDP growth rate is crucial in determining life insurer performance.